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<TITLE>FORM 20-F</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

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<P align="center"><FONT size="4"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
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<DIV align="center"><FONT size="3"><B>Washington, D.C. 20549</B><BR>
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<DIV align="center"><FONT size="5"><B>Form&nbsp;20-F</B><BR>
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    <TD valign="top"><FONT size="3"><FONT face="wingdings">&#111;</FONT></FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)<BR>
OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD>
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<P align="center"><FONT size="2">OR
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    <TD valign="top"><FONT size="3"><FONT face="wingdings">&#110;</FONT></FONT></TD>
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF<BR>
THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD>
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<DIV align="center"><FONT size="2">For the fiscal year ended December&nbsp;31, 2002
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<P align="center"><FONT size="2">OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF<BR>
THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD>
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<DIV align="center"><FONT size="2">for the transition period from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to
</FONT></DIV>
<P align="center"><FONT size="2">Commission File Number 333-11910
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<DIV align="center"><FONT size="6"><B>MAXCOM TELECOMUNICACIONES, S.A. DE C.V.</B>
</FONT></DIV>
<DIV align="center"><FONT size="2">(Exact name of Registrant as specified in its charter)
</FONT></DIV>
<P align="center"><FONT size="6"><B>MAXCOM TELECOMMUNICATIONS, INC.</B>
</FONT>
<DIV align="center"><FONT size="2">(Translation of Registrant&#146;s name into English)
</FONT></DIV>
<P align="center"><FONT size="6"><B>UNITED MEXICAN STATES</B>
</FONT>
<DIV align="center"><FONT size="2">(Jurisdiction of incorporation or organization)
</FONT></DIV>
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<DIV align="center"><FONT size="2"><B>Guillermo Gonzalez Camarena No.&nbsp;2000<BR>
Colonia Centro de Ciudad Santa Fe<BR>
Mexico, D.F. 01210</B><BR>
(Address of principal executive offices)
</FONT></DIV>
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<DIV align="center"><FONT size="2"><B>Securities registered or to be registered pursuant to Section&nbsp;12(b) of the Act.</B>
</FONT></DIV>
<DIV align="center"><FONT size="2">None
</FONT></DIV>
<P align="center"><FONT size="2"><B>Securities registered or to be registered pursuant to Section&nbsp;12(g) of the Act.</B>
</FONT>
<DIV align="center"><FONT size="2">None
</FONT></DIV>
<P align="center"><FONT size="2"><B>Securities for which there is a reporting obligation pursuant to Section&nbsp;15(d) of the Act.</B>
</FONT>
<DIV align="center"><FONT size="2">Senior Notes due 2007<BR>
13&frac34;% Series&nbsp;B Senior Notes Due 2007<BR>
Series&nbsp;N2 Ordinary Participation Certificates
</FONT></DIV>
<P align="left"><FONT size="2"><B>Indicate the number of outstanding shares of each of the issuer&#146;s classes of capital or common stock as of the close of the period covered by
the annual report.</B>
</FONT>
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<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="83">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;A shares, no par value, common voting stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,276,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;A1 shares, no par value, common voting stock with preferred liquidation rights</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,088,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;B shares, no par value, common voting stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,226,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;B1 shares, no par value, common voting stock with preferred liquidation rights</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,848,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;N shares, no par value, without voting rights</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,065,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;N1 shares, no par value, preferred stock with limited voting rights</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">122,468,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;N2 shares, no par value, preferred stock with limited voting rights</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,867,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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<P align="left"><FONT size="2"><B>Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12&nbsp;months (or for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has
been subject to such filing requirements for the past 90&nbsp;days.</B>
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    <TD align="center" valign="top"><FONT size="2"><B>Yes </B>&#091;Y&#093;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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<B>No </B>&#091;&nbsp;&nbsp;&#093;</FONT></TD>
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<P align="left"><FONT size="2"><B>Indicate by check mark which financial statement item the registrant has elected to follow:</B>
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    <TD align="center" valign="top"><FONT size="2"><B>Item&nbsp;17 </B>&#091;&nbsp;&nbsp;&#093;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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<B>Item&nbsp;18 </B>&#091;Y&#093;</FONT></TD>
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<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

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<TR><TD colspan="9"><A HREF="#000">PART I</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">ITEM 3. KEY INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004">ITEM 4. INFORMATION ON THE COMPANY</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">ITEM 8. FINANCIAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">ITEM 9. THE OFFER AND LISTING</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">ITEM 10. ADDITIONAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AND USE OF PROCEEDS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">ITEM 15. CONTROLS AND PROCEDURES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#016">ITEM 16. RESERVED</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">ITEM 17. FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#018">ITEM 18. FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#019">Schedule II - Valuation and Qualifying Accounts</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#020">ITEM 19. EXHIBITS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#021">GLOSSARY OF TELECOMMUNICATIONS TERMS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#022">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="y87632exv1.txt">BY LAWS AS AMENDED</A></TD></TR>
<TR><TD colspan="9"><A HREF="y87632exv4wu.txt">DARK FIBER OPTIC PURSCAHSE AND SALE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y87632exv4wv.txt">TRANSACTIONAL LEASE TERMINATION AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y87632exv6.txt">COMPUTATION OF EARNINGS PER SHARE</A></TD></TR>
<TR><TD colspan="9"><A HREF="y87632exv7.txt">COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES</A></TD></TR>
<TR><TD colspan="9"><A HREF="y87632exv99w1.txt">CERTIFICATION OF CHIEF EXECUTIVE OFFICER</A></TD></TR>
<TR><TD colspan="9"><A HREF="y87632exv99w2.txt">CERTIFICATION OF CHIEF FINANCIAL OFFICER</A></TD></TR>
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<P align="center"><FONT size="2"><B>TABLE OF CONTENTS</B>
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    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Page</B></FONT></TD>
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    <TD valign="top"><FONT size="2">PART I</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">1</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 1.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">1</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 2.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">OFFER STATISTICS AND EXPECTED TIMETABLE
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">1</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 3.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">KEY INFORMATION
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">1</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 4.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">INFORMATION ON THE COMPANY
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">13</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 5.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">OPERATING AND FINANCIAL REVIEW AND PROSPECTS
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">35</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 6.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">54</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
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<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 7.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">61</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 8.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">FINANCIAL INFORMATION
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">66</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 9.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">THE OFFER AND LISTING
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">67</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 10.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">ADDITIONAL INFORMATION
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">68</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 11.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">98</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
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    <TD align="left" valign="top"><FONT size="2">
ITEM 12.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">98</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 13.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">98</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 14.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY<BR>
HOLDERS AND USE OF PROCEEDS
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">98</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 15.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">CONTROLS AND PROCEDURES
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">99</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 16.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">RESERVED
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">99</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">PART II</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">100</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 17.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">FINANCIAL STATEMENTS
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">100</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 18.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">FINANCIAL STATEMENTS
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">F-1</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
ITEM 19.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">EXHIBITS
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">E-1</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD colspan="3" valign="top" align="left"><FONT size="2">GLOSSARY OF TELECOMMUNICATIONS TERMS</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">G-1</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>






<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD colspan="3" valign="top" align="left"><FONT size="2">CHIEF
EXECUTIVE OFFICER CERTIFICATION</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">H-1</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD colspan="3" valign="top" align="left"><FONT size="2">CHIEF
FINANCIAL OFFICER CERTIFICATION</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">H-2</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>


</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise specified, all references to &#147;U.S. dollars,&#148; &#147;dollars,&#148;
&#147;U.S.$&#148; or &#147;$&#148; are to United States dollars, and references to &#147;Ps.&#148; and
&#147;pesos&#148; are to Mexican pesos. We publish our financial statements in pesos
that are adjusted to reflect changes in purchasing power due to inflation.
Thus, unless otherwise specified, our financial data is presented in constant
pesos of December&nbsp;31, 2002 purchasing power. Amounts presented in this annual
report may not add up or may be slightly inconsistent due to rounding.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise provided, this annual report contains translations of
peso amounts into U.S. dollars solely for the convenience of the reader based
on the exchange rate reported by the Federal Reserve Bank of New York as its
noon buying rate for pesos at December&nbsp;31, 2002, which was Ps.10.43 per
U.S.$1.00. The currency conversions should not be construed as representations
that the peso amounts actually represent such dollar amounts. Additionally,
these conversions should not be construed as representations that these peso
amounts have been or could have been converted into U.S. dollars at those or
any other rates of exchange.
</FONT>
<P align="center"><FONT size="2">i</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report contains forward-looking statements. Statements that
are not statements of historical fact, including statements about our beliefs
and expectations are forward-looking statements. The words &#147;anticipates,&#148;
&#147;believes,&#148; &#147;estimates,&#148; &#147;expects,&#148; &#147;forecasts,&#148; &#147;intends,&#148; &#147;plans,&#148;
&#147;predicts,&#148; &#147;projects,&#148; &#147;targets&#148; and similar words are intended to identify
these statements, which necessarily involve known and unknown risks and
uncertainties. Accordingly, our actual results of operations may be different
from our current expectations, and the reader should not place undue reliance
on these forward-looking statements. Forward-looking statements speak only as
of the date they are made, and we do not undertake any obligation to update
them in light of new information or future developments.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As used in this Form&nbsp;20-F, unless the context otherwise indicates, the
terms &#147;we,&#148; &#147;us,&#148; &#147;our,&#148; or similar expressions, as well as references to
Maxcom, mean Maxcom Telecomunicaciones, S.A. de C.V. and its consolidated
subsidiaries. Please refer to page G-1 of this Form&nbsp;20-F for a glossary of
telecommunications terms.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will provide without charge to each person to whom this report is
delivered, upon written or oral request, a copy of any or all of the documents
incorporated by reference into this annual report (other than exhibits, unless
such exhibits are specifically incorporated by reference in such documents).
Written requests for such copies should be directed to Maxcom
Telecomunicaciones, S.A. de C.V., Guillermo Gonz&#225;lez Camarena No.&nbsp;2000, Colonia
Centro de Ciudad Santa Fe, M&#233;xico, D.F. 01210, attention: Director, Investor
Relations. Telephone requests may be directed to 011-52-55-5147-1125.
</FONT>
<P align="center"><FONT size="2">ii
</FONT>

<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<!-- link1 "PART I" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center"><FONT size="2"><B>PART I</B>
</FONT>

<!-- link2 "ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS" -->
<DIV align="left"><A NAME="001"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 1. </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <B>IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<!-- link2 "ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE" -->
<DIV align="left"><A NAME="002"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 2. </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <B>OFFER STATISTICS AND EXPECTED TIMETABLE</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<!-- link2 "ITEM 3. KEY INFORMATION" -->
<DIV align="left"><A NAME="003"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 3. </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <B>KEY INFORMATION</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>A.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Selected financial data</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables present selected consolidated financial information
of Maxcom and its consolidated subsidiaries. We have derived this information
from our audited consolidated financial statements for the years ended December
31, 1998, 1999, 2000, 2001 and 2002, including the audited consolidated
financial statements as of December&nbsp;31, 2001 and 2002 and for the years ended
December&nbsp;31, 2000, 2001, and 2002 and accompanying notes appearing elsewhere in
this annual report. This data is qualified in its entirety by reference to, and
should be read in conjunction with, such consolidated financial statements.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements have been prepared in accordance
with Mexican GAAP, which differs in certain significant respects from U.S.
GAAP. Pursuant to Mexican GAAP, we have prepared the financial statements and
the selected financial data presented below in accordance with Bulletin B-10 of
the Mexican Institute of Public Accountants (&#147;MIPA&#148;), which provides for the
recognition of certain effects of inflation. See note 22 to the consolidated
financial statements for a description of the principal differences, other than
inflation accounting, between Mexican GAAP and U.S. GAAP applicable to us and
for a reconciliation of our net income and stockholders&#146; equity to U.S. GAAP.
</FONT>
<P align="center"><FONT size="2">1</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="23"><FONT size="1"><B>As of the year ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="23"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998 <SUP>(1)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999<SUP>(1)(2)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002<SUP>(4)</SUP></B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="23"><FONT size="1"><B>Thousands of constant December 31, 2002 pesos</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="23"><FONT size="1"><B>and thousands of U.S. dollars, except for shares and per share data<SUP>(3)</SUP></B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3" nowrap><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Statement of Operations Data:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Mexican GAAP</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">106,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">293,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">332,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">535,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">51,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating costs and expenses:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Network operating costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">52,693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">118,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">159,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">208,084</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling, general and
administrative</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">194,266</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">365,457</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">454,454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">428,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">89,298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">221,859</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">283,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">317,564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total operating costs and
expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">336,257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">706,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">897,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">954,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">91,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(230,208</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(412,625</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(564,936</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(418,437</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(40,118</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Integral cost (income)&nbsp;of financing:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55,673</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">441,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">451,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">207,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,908</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,079</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(108,095</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(81,142</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,472</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(428</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain on repurchase of debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(128,161</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exchange loss (gain), net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(95,962</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">206,612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain on net monetary position</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(23,981</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(99,431</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(87,368</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(100,618</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,646</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total integral cost of financing</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,092</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">245,685</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">58,662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">309,163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Nonrecurring charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(65,761</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other income (expense), net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">158</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(520</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(187</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asset tax and income tax</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,746</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(261,142</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(658,830</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(690,340</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(732,703</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(70,249</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss per share, basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(25.44</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(57.47</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(50.21</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(5.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.52</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted-average shares
outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,134,883</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,264,827</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,463,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,748,445</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">134,738,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">134,738,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>U.S. GAAP</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2"> (132,725</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(321,198</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(615,092</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(687,757</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(348,704</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(33,432</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss per share</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(16.32</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(31.29</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(53.66</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(50.02</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(2.59</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.248</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balance Sheet Data:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Mexican GAAP</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">465,676</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">184,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,183,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">182,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">115,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">11,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restricted cash</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,455</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">627,785</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">197,452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Working capital<SUP>(5)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43,627</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,061</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(70,355</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(39,974</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(17,995</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,725</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency rights, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">126,482</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">123,599</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">117,206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">110,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">104,420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telephone network systems and
equipment, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">297,969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">922,326</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,199,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,446,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,588,184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">152,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preoperating expenses, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">232,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">298,363</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">266,424</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">234,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">204,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,595</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intangible assets, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">357,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">316,603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">425,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Rent deposits and other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,168,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,726,652</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,843,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,651,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,648,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">253,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">252,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,058,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,356,404</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,853,475</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,047,589</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">196,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">882,963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">894,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,271,901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,031,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,685,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">161,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additional paid-in capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,529</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">135,549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">108,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated deficit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(261,142</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(919,973</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,341,773</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,085,547</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(104,078</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity (deficit)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">915,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">668,260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">487,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(201,894</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">600,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">57,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>U.S. GAAP</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2"> 705,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">398,393</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">261,316</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(425,472</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(2,771</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(265.6</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Other Financial Data:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Mexican GAAP</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EBITDA<SUP>(6)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2"> (155,534</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(140,909</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(190,767</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(281,158</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(100,872</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(9,671</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital expenditures<SUP>(7)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">482,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">855,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">747,535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">546,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">528,149</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Ratio of earnings to fixed
charges<SUP>(8)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2.45</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.39</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.48</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2.25</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2.25</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash flow used in operating
activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(154,125</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(858,013</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(355,754</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(340,135</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(32,611</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">2</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="23"><FONT size="1"><B>As of the year ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="23"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998<SUP>(1)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999<SUP>(1)(2)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002<SUP>(4)</SUP></B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="23"><FONT size="1"><B>Thousands of constant December 31, 2002 pesos</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="23"><FONT size="1"><B>and thousands of U.S. dollars, except for shares and per share data<SUP>(3)</SUP></B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>U.S. GAAP</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EBITDA<SUP>(6)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2"> (155,533</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(140,905</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(190,760</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(304,689</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">231,906</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">22,235</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash used in operating
activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(103,247</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(246,135</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(784,852</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(384,336</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(189,046</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(18,125</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash provided by financing
activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">944,939</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">944,971</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">2,719,074</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(39,189</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">609,995</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">58,484</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash used in investing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(826,756</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(826,784</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(830,718</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(528,499</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(405,650</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(38,892</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2"><B>Notes to Selected Historical Consolidated Financial Information</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">All amounts incurred in operations from February&nbsp;28, 1996 (date of
incorporation) to May&nbsp;1, 1999 (commencement of operations) were
capitalized as &#147;preoperating expenses&#148; under Mexican GAAP. Therefore, no
amounts are reported in the statement of operations for those periods.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We commenced commercial operations on May&nbsp;1, 1999. In accordance with
Mexican GAAP, our financial statements for that year reflect only eight
months of operations.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Pursuant to Mexican GAAP, financial data for all periods in the
financial statements have, unless otherwise indicated, been restated in
constant pesos as of December&nbsp;31, 2002. Restatement into December&nbsp;31,
2002 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&nbsp;31, 2002. The inflation
index used in this annual report for 1998 figures is 1.3505, for 1999
figures is 1.2024 for 2000 figures is 1.1035 and for 2001 figures is
1.0570.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Peso amounts were converted to U.S. dollars at the exchange rate of
Ps.10.43 per U.S.$1.00 reported by the Federal Reserve Bank of New York
as its noon buying rate for pesos on December&nbsp;31, 2002. 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 all.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(5)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Working capital is defined as current assets (excluding cash and cash
equivalents and restricted cash) less current liabilities (excluding
current maturities of long-term debt, which includes interest payable).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(6)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">EBITDA represents earnings before income and asset taxes, integral cost
of financing, other income (expense), nonrecurring charges, and
depreciation and amortization. We have included information concerning
EBITDA (which is not a measure of financial performance under Mexican or
U.S. GAAP) because we believe it is a standard financial statistic
commonly reported and widely used by analysts and other interested
parties. We understand that EBITDA is also used by investors as one
measure of an issuer&#146;s ability to service or incur indebtedness. We also
understand that EBITDA may be defined differently by other companies that
disclose a similarly titled account. You should not construe EBITDA as an
alternative to operating income or as a measure of liquidity or cash
flows from operating activities.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(7)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Capital expenditures include frequency rights, telephone network
systems and equipment, intangible assets and other assets. Investing
activities in the consolidated statements of changes in financial
position are net of dispositions.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(8)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Our earnings have been insufficient to cover fixed charges since we
started incurring debt in 1998. 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
for the years ended December&nbsp;31, 1999, 2000, 2001 and 2002 amounted to
Ps.279.3&nbsp;million, Ps.749.6&nbsp;million, Ps.695.6&nbsp;million and Ps.725.8
million, respectively. Since there is no statement of operations for
the year ended December&nbsp;31, 1998, the information has not been included.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">3</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P align="center"><FONT size="2"><B>EXCHANGE RATES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, the period-end,
average, high and low noon buying rates, in each case for the purchase of U.S.
dollars, all expressed in nominal pesos per U.S. dollar. The noon buying rate
at June&nbsp;26, 2003 was Ps.10.458 per U.S.$1.00.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="15"><FONT size="1"><B>Noon Buying Rate<SUP>(1)</SUP></B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="15"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Period End</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Average<SUP>(2)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>High</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Low</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1998</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">9.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">9.152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">10.63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">8.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1999</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.553</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.745</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">January 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">February 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">March 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">April 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">May 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Source: Federal Reserve Bank of New York.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="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.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>B.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Capitalization and indebtedness</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>C.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Reasons for offer and use of proceeds</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>D.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Risk factors</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Factors relating to Maxcom</B>
</FONT>

<P align="left"><FONT size="2"><I>We anticipate that we will have negative operating cash flow until we develop a
sufficiently large customer base</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The development of our business and the installation and expansion of our
network, services and customer base require significant expenditures. These
expenditures, together with operating expenses, will adversely impact our cash
flow and profitability until an adequate customer base is established. We have
generated negative cash flows from operating activities since our incorporation
in 1996 and expect to generate insufficient cash flows to cover our fixed
charges through 2003. This is so even though our fixed charges have decreased
significantly as we restructured our financial indebtedness in April 2002 and
do not have to make any interest payments on most of our indebtedness until
September&nbsp;1, 2006. We cannot assure you that we will be able to establish an
adequate customer base to generate sufficient positive cash flows from our core
operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we cannot generate significant revenues, achieve and sustain
profitability or generate positive cash flows from operating activities in the
future, we will not be able to meet our debt service or working capital
requirements, and the value of our securities, as a result, would be materially
reduced.
</FONT>
<P align="center"><FONT size="2">4</FONT>
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<P align="left"><FONT size="2"><I>Our auditors have indicated in their report that there is substantial doubt
about our ability to continue as a going concern under current conditions</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PricewaterhouseCoopers, S.C. in its Report of Independent Accountants
dated February&nbsp;19, 2003 has stated that we are highly leveraged and have
suffered recurring losses from operations that raises substantial doubt about
our ability to continue as a going concern. We believe that if our financial
situation does not improve and we do not attract new capital, we will be unable
to service our debt and operate as a viable company and we may qualify for
dissolution or liquidation under Mexican corporate law.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, our accumulated losses were nearly the equivalent of two-thirds
of our capital stock. In the first quarter of 2003, our accumulated losses
exceeded such threshold. According to the Mexican Companies Law (<I>Ley General
de Sociedades Mercantiles</I>), an interested party may file a claim for
dissolution and force us to liquidate our assets if the accumulated losses
exceed two-thirds of our contributed capital during any fiscal year.
</FONT>
<P align="left"><FONT size="2"><I>We expect to incur net losses through at least 2003</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cash flow from operations for the year 2002 was insufficient to cover
our fixed charges. Even with the consummation of the exchange offer and the
private equity investment, we expect to continue to incur net losses through at
least 2003.
</FONT>
<P align="left"><FONT size="2"><I>We may need additional financing</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may require additional financing in the future to service our
indebtedness and fund our operations. Our budgeted capital expenditures for
2003 of U.S. $11.8&nbsp;million are premised on our ability to obtain financing for
the majority of such amount. We cannot assure you that we will have sufficient
resources and that, if needed, any financing will be available in the future or
on terms acceptable to us. In addition, our ability to incur additional
indebtedness will be restricted by the terms of the indenture governing the new
notes.
</FONT>
<P align="left"><FONT size="2"><I>We may be unable to build out our network in a timely manner or without undue
cost</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to achieve our strategic objectives will depend, in large
part, upon the successful, timely and cost-effective buildout of our network.
Factors that could affect such buildout include, among other things:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our inability to obtain permits to use public rights of way;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our inability to obtain future financing necessary for such buildout;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">unforeseen delays, costs or impediments relating to the
granting of state and municipal permits for our buildout;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">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</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">regulatory and political risks relating to Mexico, such as
the temporary seizure or permanent expropriation of assets, import
and export controls, political instability, changes in the
regulation of telecommunications and any future restrictions on the
repatriation of profits or on foreign investment.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we believe that our cost estimates and buildout schedule are
reasonable, we cannot assure you that the actual construction costs or time
required to complete the buildout will not substantially exceed current
estimates. Any significant cost overrun or delay could materially affect our
cash flow and our ability to repay our debt.
</FONT>
<P align="center"><FONT size="2">5</FONT>
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<P align="left"><FONT size="2"><I>We have experienced significant turnover in our executive ranks, which has
affected our ability to develop and execute our business strategies</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are managed by a small number of key management personnel,
the loss of whom could materially affect our operations. In June and July
2000, our then chief executive, chief operations and chief marketing officers
resigned. In April 2001, our then chief financial officer resigned. We
appointed new officers to all these positions during 2001 and 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, between January and April 2003, our then chief executive officer,
chief marketing officer, chief commercial operations officer and vice president
of corporate communications and public relations also resigned. We have since
appointed a new chief executive officer who was our former chief operating
officer. As part of our cost-reduction efforts and more efficient operations,
we have initiated a search for a single executive to head both the marketing
and commercial operations areas, and have eliminated the office of vice
presidency of corporate communications and public relations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The significant turnover we have experienced in our management has
affected our ability to develop and execute our business strategies. The
success of our company depends in part upon our ability to hire and retain
highly skilled and qualified management personnel. The competition for highly
qualified management personnel in the telecommunications industry is intense
and, accordingly, we cannot assure you that we will be able to hire or retain
the management personnel necessary for our success.
</FONT>
<P align="left"><FONT size="2"><I>We may not have sufficient administrative, operational or financial resources
to grow as rapidly as we would like</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our expected growth will place a significant strain on our administrative,
operational and financial resources. We anticipate that continued growth will
require us to recruit and hire a significant number of new managerial, finance,
sales and marketing, accounting and support personnel. If we are unable to
attract and retain personnel who can manage our growth effectively, our growth
may be limited and the quality of our service may be impaired. This occurrence
could adversely affect our results of operations and financial condition.
</FONT>
<P align="left"><FONT size="2"><I>We depend on Telmex for interconnection</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Telmex exerts significant influence on all aspects of the
telecommunications market in Mexico, including interconnection agreements. We
use Telmex&#146;s network to service virtually all of our customers. Our
interconnection agreement with Telmex expired on September&nbsp;15, 2002. However,
due to a &#147;continuous application&#148; clause this agreement is still under full
force and effect. We are currently negotiating with Telmex a new
interconnection agreement. Telmex has requested substantial changes to
existing terms and conditions, such as the allowed percentage of imbalance of
traffic for the &#147;bill and keep&#148; procedure and the interconnection rate. We
cannot assure you that we will be able to obtain the services we require from
Telmex on new terms and conditions that permit us to offer services at
profitable and competitive rates.
</FONT>
<P align="left"><FONT size="2"><I>Our high leverage could affect our ability to service our debt</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are highly leveraged. In 2002, our earnings were insufficient to cover
fixed charges by an amount equal to Ps.725.8&nbsp;million (U.S.$69.6&nbsp;million), even
though we do not have to make any interest payments on most of our financial
indebtedness until September&nbsp;1, 2006 due to our April 2002 debt restructuring.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to meet our debt service requirements will depend on our
future performance, which is subject to a number of factors, many of which are
outside our control. We cannot assure you that we will generate sufficient cash
flows from operating activities to meet our debt service and working capital
requirements. In addition, our high leverage could affect our access to credit
or our ability to pursue business opportunities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The indenture governing the new notes issued pursuant to the exchange
offer limits but does not prohibit our incurrence of additional indebtedness.
We expect to incur additional indebtedness in the future. However, our
significant level of indebtedness may impair our ability to raise additional
indebtedness on commercially reasonable terms when required or with terms that
will not limit our ability to develop our business.
</FONT>
<P align="center"><FONT size="2">6</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, our significant leverage could adversely affect:</FONT>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our ability to fund capital expenditures, acquisitions or
operating losses or to refinance existing indebtedness;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our flexibility in planning for, or reacting to, changes in
our business and market conditions; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our ability to compete in our markets.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><I>We are and will be subject to restrictive covenants</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms of the new notes, impose significant operating and financial
restrictions. These restrictions will affect, and in many respects
significantly limit or prohibit, our ability to, among other things:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">borrow money;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">pay dividends on our capital stock;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">purchase stock or repay subordinated indebtedness;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">make investments;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">restrict the ability of our subsidiaries to pay dividends;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">use assets as security in other transactions;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">sell assets; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">consolidate or merge into other companies.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we do not comply with these restrictions, we could be in default even
if we are able to service our debt. If there were a default, holders of the
notes could demand immediate payment of the aggregate principal amount and
accrued interest on the notes outstanding. This could lead to our bankruptcy
or reorganization for the benefit of our creditors or to our inability to pay
our obligations.
</FONT>
<P align="left"><FONT size="2"><I>We may not be able to finance a change of control offer</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will be required to offer to repurchase all of the new notes if a
change of control, as such term is defined in the indenture governing the new
notes, occurs. However, it is possible that we will not have sufficient funds
at the time of the change of control to make the required repurchase.
</FONT>
<P align="left"><FONT size="2"><I>If we do not successfully upgrade and operate accounting, billing, customer
service and management information systems, we may not be able to achieve
desired operating efficiencies</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sophisticated information and processing systems are vital to our
operations and growth and our ability to monitor costs, render monthly invoices
for services, process customer orders, provide customer service and achieve
operating efficiencies. We intend to upgrade the accounting, information and
processing systems necessary to provide services efficiently. However, we
cannot assure you that we will be able to successfully upgrade or operate such
systems or that they will perform as expected.
</FONT>
<P align="left"><FONT size="2"><I>Our operations are dependent upon our ability to protect and maintain our
network infrastructure</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are dependent upon our ability to protect our network
infrastructure against damage from fire, earthquakes, floods, power loss, and
similar events and to construct networks that are not vulnerable to the
</FONT>
<P align="center"><FONT size="2">7</FONT>
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<P align="left"><FONT size="2"> effects of such events. The occurrence of a natural disaster or other
unanticipated problem at our facilities or at the sites of our switches could
cause interruptions in the services we provide. The failure of a switch would
result in the interruption of service to the customers served by that switch
until necessary repairs are effected or replacement equipment is installed.
The successful operation of our network and its components is highly dependent
upon our ability to maintain the network and its components in reliable enough
working order to provide sufficient quality of service to attract and maintain
customers.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any damage or failure that causes interruptions in our operations or lack
of adequate maintenance of our network could have a material adverse effect on
our business, financial condition and results of operations.
</FONT>
<P align="left"><FONT size="2"><I>We could be negatively affected by the &#147;by-pass&#148; traffic</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to regulations of the Federal Telecommunications Commission
(<I>Comisi&#243;n Federal de Telecomunicaciones</I>), which we refer to as &#147;COFETEL,&#148; the
only legal way to transport international long distance calls in Mexico is
through the international settlement rate system. However, alternative ways to
route and terminate international long distance calls at a lower cost in
countries that exchange a significant amount of traffic with Mexico exist.
Some estimates show that, given the disparity between international settlement
rates and domestic interconnection rates that would be payable under an
alternative arrangement, an increasing portion of the long distance market
between Mexico and the United States is being served by entities that &#147;by-pass&#148;
the international settlement rate system. This practice is deemed illegal by
COFETEL.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maxcom complies with all relevant regulations relating to local and long
distance services and cannot confirm whether any of its high-volume customers
is engaging in &#147;by-pass&#148; activities. Under Mexican legislation, Maxcom is not
required to investigate whether any such high-volume customers are engaged in
&#147;by-pass&#148; activity. Maxcom is required, however, to obey any COFETEL formal
order to disconnect a customer deemed to be engaged in &#147;by-pass&#148; activity by
COFETEL.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexican regulatory authorities have announced their intention to conduct
more rigorous audits of persons or companies engaging in &#147;by-pass&#148; activity.
In December 2000, some of the major Mexican long distance carriers signed a
cooperation agreement to combat &#147;by-pass&#148; in Mexico. If, as a consequence of
such actions, the regulatory authorities determine that any of our high-volume
customers are engaged in &#147;by-pass&#148; activity, Maxcom&#146;s revenues could be
negatively affected.
</FONT>
<P align="left"><FONT size="2"><I>Our telecommunications network infrastructure has several vulnerabilities and
limitations</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our telecommunications network is the source of all our revenues. Any
problem with or limitation of our network may result in a reduction in the
number of our customers and our revenues. The development and operation of our
network is subject to problems and technological risks, including:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">physical damage;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">power loss;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">capacity limitations;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">software defects as well as hardware and software obsolescence;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">breaches of security, whether by computer virus, break-in or otherwise;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">denial of access to our sites for failure to obtain required
municipal or other regulatory approvals; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">other factors which may cause interruptions in service or
reduced capacity for our customers.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">8</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A failure to achieve current specifications for, or future upgrades of,
our network may materially and adversely affect our results of operations and
financial condition.
</FONT>
<P align="left"><FONT size="2"><I>Our results are negatively impacted by high levels of churn</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We experience a high rate of residential and business customer lines
attrition, or &#147;churn.&#148; Churn may be impacted by:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our customer delinquency;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our limited coverage area that restricts our ability to
continue providing service when a customer moves;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our failure to meet service levels required by our customers;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">promotional and pricing strategies of our competitors; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">economic conditions in Mexico.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2002, we churned 36,047 lines, of which 28,951 lines were voice
lines (residential and business customer lines) and 7,096 were wholesale lines.
This resulted in an average monthly churn rate of 2.7% for voice lines. See
&#147;Item&nbsp;5. Operating and Financial Review and Prospects&#148; for a fuller
description of voice and wholesale lines.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A high rate of churn increases our cost of operations and reduces our
revenues.
</FONT>
<P align="left"><FONT size="2"><B>Factors relating to the Mexican telecommunications industry</B>
</FONT>
<P align="left"><FONT size="2"><I>We face significant increasing competition, which may negatively affect our
operating margins</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The telecommunications industry in Mexico is becoming highly competitive.
We compete with our rivals primarily on the basis of features, pricing and
customer service. We face significant competition from Telmex in all of the
areas where we operate. In particular, as the former state-owned
telecommunications monopoly, Telmex has significantly greater financial and
other resources than those available to us, a nationwide network and concession
and an established customer base.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also face significant competition from recent entrants, particularly in
Mexico City. Some of these recent entrants may have significantly greater
financial and other resources than us. In addition, we could face increased
competition if the Mexican government grants more concessions or if new,
competing technologies are developed. Competition may limit our ability to
grow or maintain our customer base or to implement price increases to keep pace
with inflation.
</FONT>
<P align="left"><FONT size="2"><I>If the Mexican government grants more concessions, the value of our concessions
could be severely impaired</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The telecommunications industry is regulated by the Mexican government.
Our concessions are not exclusive and the Mexican government could grant
concessions covering the same geographic regions and frequency bands to other
entrants. We cannot assure you that additional concessions to provide services
similar to those we plan to provide will not be granted and that the value of
our concessions will not be adversely affected as a result.
</FONT>
<P align="left"><FONT size="2"><I>We could lose our concessions if we do not comply fully with their terms</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms of our concessions require us to satisfy a number of technical,
buildout and financial conditions. In September 2002, we notified COFETEL of
our failure to provide coverage in certain towns and cities by such
date as required by our local and long distance concessions. In addition,
we believe we will not be able to meet
</FONT>
<P align="center"><FONT size="2">9</FONT>
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<P align="left"><FONT size="2">certain buildout obligations in certain
towns and cities along the Mexico City&#151;City of Quer&#233;taro corridor by September
2003. We are in the process of preparing a request for a modification to the
buildout requirements of the concessions from COFETEL. If granted, this
modification would allow us to be once again in compliance. However, we cannot
assure you that COFETEL will agree to such modification.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A failure to comply with any of the terms of our concessions or to obtain
a waiver or modification could result in the termination of any of our
concessions and the loss of up to Ps.43.3&nbsp;million in performance bonds that we
previously issued to the Ministry of Communications and Transportation, or SCT
(<I>Secretar&#237;a de Comunicaciones y Transportes)</I>. The Mexican government would not
be required to compensate us in case of such termination. If any of our
concessions were to be terminated, we could be unable to engage in our core
business and we would likely be unable to repay our indebtedness.
</FONT>
<P align="left"><FONT size="2"><I>Fraud increases our expenses</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fraudulent use of telecommunications networks imposes a significant
cost upon service providers, who must bear the cost of services provided to
fraudulent users. We suffer loss of revenue as a result of fraudulent use, and
also cash costs due to our obligation to reimburse carriers for the cost of
services provided to fraudulent users. Although technology has been developed
to combat this fraudulent use and we are installing it in our operations, this
technology does not eliminate fraud entirely. In addition, since we rely on
other long-distance carriers for interconnection, some of which do not have
anti-fraud technology in their network, we are particularly exposed to this
risk in our long distance service. In 2002, we incurred approximately Ps.3.0
million in expenses for the prevention and detection of fraud.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because of cost reduction measures, we may elect not to upgrade our
licenses relating to anti-fraud software or to cover maintenance fees. We have
also reduced our fraud monitoring personnel. This has reduced our ability to
detect fraudulent use of our services. See &#147;Item&nbsp;8. Financial Information&#151;A.
Consolidated statements and other financial information&#151;Legal
proceedings&#151;Significant unpaid receivable.&#148;
</FONT>
<P align="left"><FONT size="2"><I>The technology we use may be made obsolete by the technology used by our
competitors</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All companies in the global telecommunications industry must adapt to
rapid and significant changes in technology. While we have been installing
what we believe to be a technologically advanced fiber optic network with a
microwave overlay, we cannot assure you that this technology will not be
challenged by competition from new or improved digital or other technologies in
the near future. Technological changes may adversely affect our competitive
position, cause an increase in customer churn, require substantial new capital
expenditures and/or require write-downs of obsolete technology.
</FONT>
<P align="left"><FONT size="2"><I>The Mexican government could temporarily seize or permanently expropriate our
assets under certain circumstances</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican government has the authority to temporarily seize all assets
related to a telecommunications concession in the event of natural disaster,
war, significant public disturbance, threats to internal peace, economic
events, and for other reasons related to national security. In addition, the
Mexican government has the statutory right to permanently expropriate any
telecommunications concession and claim any related assets for reasons of
public interest. Mexican law provides for compensation in connection with
losses and damages related to temporary seizure or expropriation. However, we
cannot assure you that the actual compensation paid would be adequate or that
such payment would be timely.
</FONT>
<P align="left"><FONT size="2"><B>Factors relating to Mexico</B>
</FONT>
<P align="left"><FONT size="2"><I>If Mexico experiences future political and economic crises, our business could
be affected negatively</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a Mexican company with all of our operations in Mexico.
Accordingly, the political and economic environment within Mexico can have a
significant impact on our financial condition and results of operations.
</FONT>
<P align="center"><FONT size="2">10</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican government has exercised, and continues to exercise,
significant influence over the Mexican economy. Mexican governmental actions
concerning the economy and state-owned enterprises could have a significant
impact on Mexican private sector entities in general and on us in particular,
and on market conditions, prices and returns on Mexican securities, including
our securities. In July 2000, Mexico held national elections, which were won
by Vicente Fox, the candidate of the National Action Party (<I>Partido Acci&#243;n
Nacional</I>). This represents the first time in over 70&nbsp;years that the
Institutional Revolutionary Party (<I>Partido Revolucionario Institucional</I>) has
not won the Presidency and has not secured the absolute majority of the Mexican
Congress. We cannot predict the impact that this new political landscape will
have on the Mexican economy, particularly on the growth and deregulation of the
telecommunications industry.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, Mexico has experienced economic crises, caused by internal
and external factors, characterized by exchange rate instability, high
inflation, high domestic interest rates, economic contraction, a reduction of
international capital flows, a reduction of liquidity in the banking sector and
high unemployment. These economic conditions substantially reduced the
purchasing power of the Mexican population and, as a result, the demand for
telecommunications services.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Crises such as these could have a material adverse effect on our financial
condition and results of operations and on the market value of our securities.
</FONT>
<P align="left"><FONT size="2"><I>Changes in tax or other regulations could have an adverse impact on our
financial condition</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2002, the Mexican Congress expanded the scope of the
Sales and Use Tax Law (<I>Ley del Impuesto Especial Sobre Producci&#243;n y Servicios</I>),
whereby, among other things, a new 10% tax was imposed on the rendering of
certain telecommunications and supplementary services. An amendment to this
law, effective January&nbsp;1, 2003 confirmed that our core business (the offering
of local and long distances services) is not subject to this special tax.
Although we believe, based on the advice of our tax and regulatory advisors,
that certain other services that are part of our local service offerings, are
also not subject to such special tax, we cannot assure you that the tax
authorities may not interpret the law otherwise.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The operation of telecommunications systems in Mexico is subject to laws
and regulations administered by the Mexican Ministry of Communications and
Transportation (<I>Secretar&#237;a de Comunicaciones y Transportes</I>) and the Mexican
Federal Telecommunications Commission (<I>Comisi&#243;n Federal de Telecomunicaciones</I>).
These governmental agencies may take regulatory actions that could damage our
business.
</FONT>
<P align="left"><FONT size="2"><I>Foreign ownership restrictions limit our ability to raise equity capital</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexican law currently provides that no more than 49% of the full voting
stock of a Mexican corporation holding a concession to provide
telecommunications services, other than cellular services, may be held by
non-Mexicans. Non-Mexicans represent 49% of our full voting stock. In
addition, Mexican authorities have mandated that our limited voting shares,
which are also referred to as neutral investment shares, may not represent more
than 95% of our capital stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our current capital structure, we have limited flexibility to raise
equity capital from non-Mexican investors. As a result, any future sales of
equity securities, may require substantial participation by Mexicans or a
waiver or modification of Mexican foreign investment laws and regulations. We
cannot assure you that such a waiver or modification could be obtained.
</FONT>
<P align="left"><FONT size="2"><I>We may lose money because of peso devaluations</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While our revenues are almost entirely denominated in pesos, the majority
of our obligations, and all of our long-term debt, are denominated in U.S.
dollars. In addition, substantially all of our capital expenditures are
denominated in U.S. dollars. We are, and will be, exposed to peso devaluation
risk. The peso has devalued substantially against the U.S. dollar in the past
and may devalue significantly in the future. For example, the noon buying rate
rose from Ps.3.45 per U.S.$1.00 on December&nbsp;19, 1994 to Ps.5.00 per U.S.$1.00
on December&nbsp;31, 1994 and Ps.7.74 per U.S.$1.00 on December&nbsp;31, 1995,
representing a 124.6% devaluation of the peso relative to the U.S.
</FONT>
<P align="center"><FONT size="2">11</FONT>
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<P align="left"><FONT size="2">dollar. In 2002, the peso devalued 13.91% relative to the U.S. dollar.
In the first three months of 2003, the peso devalued 3.36% relative to the U.S.
dollar.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not currently have, nor do we expect to have, hedging arrangements
with respect to this risk because we do not believe them to be cost effective
for us. Further declines in the value of the peso relative to the U.S. dollar
could adversely affect our ability to meet our U.S. dollar-denominated
obligations, including the notes. In addition, any further decrease in the
value of the peso may negatively affect the value of Mexican securities such as
ours. The peso-to-dollar exchange rate may experience significant devaluations
in the future.
</FONT>
<P align="left"><FONT size="2"><I>Developments in other countries may impact the price of our securities</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot assure you that the price of our securities will not be
adversely affected by events elsewhere, especially in the United States and in
emerging market countries. Mexican financial and securities markets are, to
varying degrees, influenced by economic and market conditions in other
countries. Although economic conditions are different in each country,
investor reaction to developments in one country has had and can have
significant effects on the prices of securities of issuers in other countries,
including Mexico. Currently, the economic slow down in the United States, the
military conflict in Iraq, the threat of terrorism as well as political and
financial crisis in certain emerging markets have had a significant negative
impact on the financial and securities markets in many emerging market
countries, including Mexico. The effects of these crises may worsen, or new
crises may occur, which may negatively affect the price of our new notes and
CPOs or our financial condition and results of operations.
</FONT>
<P align="left"><FONT size="2"><I>Our financial statements do not give you the same information as financial
statements prepared under United States accounting principles</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We prepare our interim financial statements in accordance with Mexican
GAAP and only our annual financial statements are reconciled to U.S. GAAP.
Mexican GAAP differs in significant respects from U.S. GAAP, including in the
treatment of the amortization of frequency rights, the capitalization of
preoperating expenses, the capitalization of interest, the extinguishment of
debt, the restructuring of troubled debt and deferred income taxes and
employees&#146; profit sharing, and in the presentation of cash flow information.
In particular, all Mexican companies must incorporate the effects of inflation
directly in their accounting records and in published financial statements. We
cannot assure you that these will be the only differences in the future. See
note 22 to the consolidated financial statements for a description of the
principal differences between Mexican GAAP and U.S. GAAP applicable to us.
</FONT>
<P align="left"><FONT size="2"><I>You may suffer a U.S. dollar shortfall if you obtain a judgment against us or a
distribution in bankruptcy</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event you are awarded a judgment from a court enforcing our U.S.
dollar-denominated obligations under either our old or new notes or the
liquidation preference under our series N2 preferred stock, we will have the
right to discharge our obligations by paying you in pesos at the exchange rate
in effect on the date of payment of such judgment. Likewise, if we are
declared bankrupt, we will have the right to discharge our obligations by
paying our creditors in pesos at the exchange rate in effect on the date of the
declaration of such bankruptcy.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The exchange rate is currently determined by the Mexican Central Bank
(<I>Banco de M&#233;xico</I>) every banking day in Mexico and published the following
banking day in the Official Gazette of the Federation (<I>Diario Oficial de la
Federaci&#243;n</I>). As a result of such currency conversion, you could face a
shortfall in U.S. dollars. No separate actions exist or are enforceable in
Mexico for compensation for any such shortfall.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should also be aware that in the event we are declared bankrupt by a
Mexican court or if we are subject to a bankruptcy reorganization proceeding
(<I>concurso mercantil</I>) in such court, our debt obligations, including the new
notes and the old notes, if any, will cease to accrue interest and payment of
any of our debt obligations would depend on the outcome of the bankruptcy
reorganization proceedings, which are often very lengthy.
</FONT>
<P align="center"><FONT size="2">12</FONT>
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<P align="left"><FONT size="2"><I>We may not be able to make payments in U.S. dollars</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, the Mexican economy has experienced balance of payment
deficits and shortages in foreign exchange reserves. While the Mexican
government does not currently restrict the ability of Mexican or foreign
persons or entities to convert pesos to foreign currencies generally, and U.S.
dollars in particular, it has done so in the past and could do so again in the
future. We cannot assure you that the Mexican government will not institute a
restrictive exchange control policy in the future. Any such restrictive
exchange control policy could prevent or restrict our access to U.S. dollars to
meet our U.S. dollar obligations and could also have a material adverse effect
on our business, financial condition and results of operations. We cannot
predict the impact of any such measures on the Mexican economy.
</FONT>
<P align="left"><FONT size="2"><I>High inflation rates in Mexico may decrease demand for our services while
increasing our costs</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In recent years, Mexico has experienced high levels of inflation. The
annual rate of inflation, was 18.6%, 12.3%, 9.0%, 4.4% and 5.7% in 1998, 1999,
2000, 2001 and 2002, respectively. High inflation rates can adversely affect
our business and results of operations in the following ways:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">inflation can adversely affect consumer
purchasing power, thereby adversely affecting consumer demand
for our services and products; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">to the extent inflation exceeds our price
increases, our prices and revenues will be adversely affected
in real terms.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><I>High interest rates in Mexico could increase our financing costs</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexico also has, and is expected to continue to have, high real and
nominal interest rates. The interest rates on 28-day Mexican government
treasury securities averaged 24.8%, 21.4%, 15.2%, 11.3% and 7.2% for 1998,
1999, 2000, 2001 and 2002, respectively. Although we do not currently have any
peso-denominated debt, if we need to incur such debt in the future, it will
likely be at high interest rates.
</FONT>
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<P align="left"><FONT size="2"><B>ITEM 4. </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>INFORMATION ON THE COMPANY</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>A.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>History and development of the Company</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maxcom Telecomunicaciones, S.A. de C.V. is a limited liability company
(<I>sociedad an&#243;nima de capital variable</I>) with indefinite life, organized under
the laws of Mexico on February&nbsp;28, 1996. We were originally organized under
the name &#147;Amaritel, S.A. de C.V.&#148; We changed our legal name to &#147;Maxcom
Telecomunicaciones, S.A. de C.V.&#148; on February&nbsp;9, 1999. Our legal name is also
our commercial name.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal offices are located at Guillermo Gonzalez Camarena No.&nbsp;2000,
Colonia Centro de Ciudad Santa Fe, Mexico, D.F. 01210 and our general phone
number is (52)&nbsp;55-5147-1111. Our website address, the contents of which are
not part of, or incorporated into, this annual report, is www.maxcom.com. Our
agent in the United States is Puglisi &#038; Associates, 850 Library Avenue, Suite
204, P.O. Box 885, Newark, Delaware 19715.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February 1997, we were awarded Mexico&#146;s first competitive wireline
local and long distance telephony concession, covering the Federal District of
Mexico and over 100 cities and towns in the Gulf region for local service and
the whole nation for long distance service. This concession has a term of 30
years. The local telephony portion of our concession was expanded in September
1999 to cover most of the Greater Mexico City area and a wider area within the
Gulf region. In September 2001, our concession was further expanded to allow
us to provide nationwide wireline local telephony service.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October 1997, we were awarded seven nationwide point-to-point and three
regional point-to-multipoint microwave concessions. Each of these concessions
has a term of 20&nbsp;years.
</FONT>
<P align="center"><FONT size="2">13</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We commenced commercial operations on May&nbsp;1, 1999. We are currently
offering local, long distance and data services in Mexico City and the cities
of Puebla and Quer&#233;taro.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the three years ended December&nbsp;31, 2002, we invested approximately
Ps.1,593.3&nbsp;million in capital expenditures, primarily for the buildout of our
infrastructure.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For 2003, we plan to invest approximately U.S.$11.8&nbsp;million in capital
expenditures, mainly to continue to build out our network. Of this amount, we
had already spent approximately Ps.32.5&nbsp;million (approximately U.S. $3.0
million) by March&nbsp;31, 2003.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>B.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Business overview</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a growing facilities-based telecommunications company operating in
the competitive local exchange carrier market in Mexico. We are focused on
developing our network and support infrastructure required to provide local as
well as long distance and other value-added services to targeted small and
medium-sized businesses and residential customers within our concession areas.
In particular, we believe that the cities of Mexico Puebla and Quer&#233;taro, where
we currently operate, and certain other cities where we are planning to operate
in accordance with our nationwide concession, offer opportunities for growth in
telecommunications use as a result of the combination of a relatively large
population, low subscriber line penetration by international standards and
economic growth. We anticipate a large and growing demand for telephony
services in these regions. See below &#147;&#151;Our markets&#151;Concession areas&#148; for a
fuller description of the nationwide concession.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The construction of our telecommunications network is based on a
smart-build, customer-driven, modular platform that utilizes a combination of
fiber optic, copper wire and microwave transmission technology. This
methodology enables us to provide fast service to our target markets, reduces
the time lag between the incurrence of capital expenditures and the generation
of revenues and increases flexibility to accommodate a changing market
environment. To operate our network, we have constructed three central
switching offices located in Mexico City, the City of Puebla and the City of
Quer&#233;taro. We have a 170-kilometer fiber optic link connecting the cities of
Puebla and Mexico and a 266-kilometer fiber optic link connecting the cities of
Quer&#233;taro and Mexico, which is part of our new 2,011-kilometer long fiber optic
backbone connecting Mexico City and Laredo, Texas.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2002, we had in service three state-of-the-art Lucent
Technologies 5ESS switches.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August 2002, we acquired from Bestel, S.A. de C.V. two strands in a
2,011-kilometer fiber optic backbone covering the cities located between Mexico
City and Laredo, Texas. This fiber optic backbone includes a border crossing
with the United States.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the combination of our smart-build network construction
strategy, our position as a customer service-oriented provider, our focus on
quality and reliability and our state-of-the-art network and systems will allow
us to benefit from the expected growth of the Mexican telecommunications
industry.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We position ourselves as a full service telecommunications provider for
our customers. In addition to our existing local, long distance and data
services, we offer value-added products such as broadband (ADSL), high-speed
dedicated and dial-up Internet access. We are currently expanding our product
portfolio by adding other services, such as web-hosting and network-managed
security services (firewalls)&nbsp;through strategic alliances with third parties.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to our market research, our target customers value highly, among
other things, quality service, accurate billing and competitive pricing. Our
marketing strategy focuses on these key elements:
</FONT>
<P>
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    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">prices that are between 5% to 15% below current
market levels;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">&#147;one-stop-shopping&#148; service, such as our
&#147;all-in-one-bill&#148; feature (which allows our customers to
receive a single invoice containing all local, long distance,
data and Internet services together), and</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">14</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2"><FONT size="2">&#149; </FONT></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">state-of-the-art call center equipped with a
Customer Relationship Management Program (also known as CRM)
application software to receive all customer inquiries
including around-the-clock customer care availability.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Strategy</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to capitalize on our competitive strengths to become a leading
telecommunications provider in Mexico. We have been focused on executing a
strategy of growth in our existing markets and expansion in accordance with our
nationwide concession. This strategy includes the following components:
</FONT>
<P align="left"><FONT size="2"><I>Capture unmet demand for telephony services</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to capture unmet demand by targeting small and medium-sized
businesses and residential customers that are looking to expand their
telecommunications capacity or that do not currently receive the types of
products and services we offer. We believe that the potential for expansion in
the Mexican telecommunications market is significant given the low teledensity
rate, which was 14.6 telephone lines per 100 inhabitants as of December&nbsp;31,
2002 the increasing level of competition and the development of the Mexican
economy.
</FONT>
<P align="left"><FONT size="2"><I>Build our network on a demand-driven, modular basis</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We build our network based on customer demand. We first identify city
areas with the largest potential for new lines, which we refer to as
&#147;clusters,&#148; in the markets that we serve through various market research
techniques. We then carry out the network buildout in tandem with increased
sales and promotional efforts targeted at customers within the cluster. This
parallel track minimizes the time lag between the incurrence of capital
expenditures and the generation of revenues, and allows a choice of technology
and construction method based on the particular needs of the cluster. We refer
to this approach as our &#147;smart-build&#148; strategy.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also build our network on a customer demand basis to support small and
medium-sized enterprises in buildings or locations other than &#147;clusters.&#148; We
refer to these locations as &#147;single sites.&#148; When our corporate sales people
identify a potential opportunity we analyze its technical feasibility, the
costs associated with providing the service within such locations and the
potential revenues, in order to establish whether it is convenient to offer our
services there.
</FONT>
<P align="left"><FONT size="2"><I>Differentiate product offerings based on features and price</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we can differentiate ourselves from competitors by
offering a variety of quality products that meet the specific needs of our
customers. To that end, we seek to develop customer loyalty and brand
awareness by informing consumers about the telecommunications services that we
offer and by helping them to differentiate between the various
telecommunications services available in the market. We also seek to offer our
services at prices that are between 5% and 15% lower than the prevailing market
price in order to build our customer base. See &#147;&#151;Pricing.&#148;
</FONT>
<P align="left"><FONT size="2"><I>Deploy cost-efficient technology</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use a cost-efficient technology to deploy our network and serve our
customers. Our current network consists of optical fiber, copper lines and
microwave technology which we deploy to particular customers based on
deployment cost, time to market, time to revenue, time to profitability,
quality and reliability in our service.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our technology platform allows us to provide xDSL services, dedicated
Internet access lines, POTS and ISDN services, among others. In addition, due
to additional duct capacity in our current facilities we are able to deploy
fiber-to-the-home (FTTH)&nbsp;services whenever customer premises equipment
technology is available at reasonable prices. Our microwave rings allow us to
reach customers throughout our market in a cost efficient manner and allow us
to build network clusters that can reach generally from 1,500 to 6,000 lines.
</FONT>
<P align="center"><FONT size="2">15</FONT>
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<P align="left"><FONT size="2"><I>Capitalize on our nationwide local telephony concession</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September 2001, our local telephony concession was expanded, allowing
us to provide service to all of Mexico. This provides us with an opportunity
to target small and medium-sized businesses and residential customers within
our new concession areas who we believe are willing to evaluate other
alternatives as they look for better service, higher reliability and lower
tariffs. In September 2002, we acquired two strands in a 2,011-kilometer fiber
optic backbone from Mexico City to the city of Laredo, Texas. We believe this
acquisition is a key element for our nationwide expansion using our own
independent network. As part of this strategy, we have already expanded our
coverage area to the City of Quer&#233;taro, one of Mexico&#146;s fastest growing cities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we believe that the quality of our product and services
offerings gives us a competitive advantage in many regions within our
nationwide concession area, as experienced in the City of Puebla, where in 2002
our number of lines in service grew by 48.4% and where we installed almost 28%
of new net additions in the whole state of Puebla according to COFETEL.
</FONT>
<P align="left"><FONT size="2"><B>Our markets</B>
</FONT>
<P align="left"><FONT size="2"><I>Concession areas</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February 1997, we were awarded Mexico&#146;s first competitive local and
long distance telephony concession, covering the Federal District of Mexico and
over 100 cities and towns in the Gulf region for local service and nationwide
for long distance service. In September 1999, we received the approval of the
SCT and COFETEL to provide local telephony services in several municipalities
contiguous to the Federal District, which are part of Mexico City, as well as
in selected additional cities in the Gulf region. In September 2001, our local
service concession was expanded to cover all of Mexico. Under our concession,
we are required to start providing service to the cities of San Luis Potosi
during 2003; Veracruz and Toluca by 2004; Le&#243;n, Guadalajara and Tehuacan by
2005 and Oaxaca and Aguascalientes by 2006. We started operations in the City
of Quer&#233;taro in November, 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We commenced commercial operations in Mexico City in May 1999. Mexico
City has the nation&#146;s greatest concentration of service and manufacturing
industries and is also the center of Mexico&#146;s public and financial services
sectors. In 2002, Mexico City had a population of approximately 18.6&nbsp;million
people, according to the Mexican National Population Council (<I>Consejo Nacional
de Poblaci&#243;n</I>). Although the Federal District, which covers most of Mexico
City, has the highest teledensity rate in Mexico at approximately 37.3%
telephone lines per 100 inhabitants as of December 2002, we believe that
significant unmet demand for high-quality local telephony services in Mexico
City remains. As of December&nbsp;31, 2002, we had 69,795 lines in service in
Mexico City.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We commenced commercial operations in the City of Puebla in May 1999.
Puebla is the fourth largest city in Mexico, with a population of approximately
1.4&nbsp;million people as of December&nbsp;31, 2002. In the City of Puebla we have
expanded our market share in local telephony service from 2.5% in 2000 to 7.2%
in 2001 and to 9.5% in 2002. As of December&nbsp;31, 2002, we had 53,362 lines in
service, as compared to 36,108 lines in service as of December&nbsp;31, 2001.
According to COFETEL, these new lines represented 28% of all the new lines
installed in the whole state of Puebla during this period.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also commenced commercial operations in the City of Quer&#233;taro in
November 2002. Quer&#233;taro is the fourteenth largest city in Mexico, with a
population of approximately 687,000 people as of December&nbsp;31, 2002. In our
first two months of operations, we had 2,074 lines in service, representing
10.8% of all new lines installed in the City of Quer&#233;taro during this period
according to COFETEL.
</FONT>
<P align="left"><FONT size="2"><I>Clusters and single sites</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed a comprehensive marketing strategy that starts by
identifying city areas with the largest potential for new lines, which we refer
to as &#147;clusters.&#148; We use a variety of techniques to identify potential
clusters, including canvassing, plotting of potential clusters and database
marketing. Once a cluster is identified, a map of the geographic area is
produced and the cluster is defined. A cluster becomes the basis for network
design and deployment and for the launching of focused field sales and
marketing one-on-one efforts.
</FONT>
<P align="center"><FONT size="2">16</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cluster strategy is divided into three stages:
</FONT>
<P>
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<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B>Identify clusters </B>through market research. Our
market research is designed to identify small- and
medium-sized businesses and residential customers. Once we
identify potential customers within the clusters, we design
the deployment of the access network to cover them. We
perform a return on investment analysis for each cluster to
assure that the investment made in such cluster meets our
return benchmarks.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B>Deploy clusters </B>through the implementation of a
sales plan for each cluster based on our network deployment
schedule. We promote our services at the same time that we
build our network.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B>Fill in clusters </B>by offering our services to all
customers within the cluster.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also build our network on a customer demand basis to support small and
medium-sized enterprises in buildings or locations other than clusters. We
refer to these locations as &#147;single sites.&#148; When our corporate sales people
identify a potential opportunity we analyze its technical feasibility, the
costs associated with providing the service within such locations and the
potential revenues, in order to establish whether it is convenient to offer our
services there.
</FONT>
<P align="left"><FONT size="2"><B>Our network</B>
</FONT>
<P align="left"><FONT size="2"><I>Buildout strategy</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We build out our network on a modular basis. Once a cluster has been
identified in a joint effort by our marketing, engineering and sales
departments, we build our network in clusters varying generally from 1,500 to
6,000 lines. To ensure the highest quality service to our customer, we install
24-gauge copper wire and limit the distance between our backbone network and
the customer premises to four kilometers. These attributes also allow us to
provide to our customers voice and data services, such as ADSL services with
bandwidth of up to 4Mbps.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We standardize all our Lucent and Advanced Fiber Communications (also
known as AFC) equipment to assure consistent, cost efficient, high quality
service and also to enable us to use the same access equipment for all of our
services.
</FONT>
<P align="left"><FONT size="2"><I>Network backbone</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2002, our network backbone consisted of one owned
170-kilometer 24 strand fiber optic link between Mexico City and the City of
Puebla with three optical regenerators at halfway points and two strands in a
2,011-kilometer fiber optic link covering cities between Mexico City and
Laredo, Texas. This fiber optic backbone includes 13 cities (Laredo, Nuevo
Laredo, Monterrey, Saltillo, San Luis Potos&#237;, Aguascalientes, Le&#243;n, Irapuato,
Guadalajara, Celaya, Quer&#233;taro, M&#233;xico and Toluca) and six optical
regenerators. We are currently installing Digital Wavelength Division
Multiplexing (also known as DWDM) equipment, with a maximum capacity of 32
Lambdas, each with 2.5 Gbps capacity. We are installing 3 Lambdas that we
expect will be operational by July 2003. We have the capability with this link
to transmit synchrony links, LAN network links, long distance links and
dedicated links. We have also installed a Lucent Technologies 5ESS digital
switch in Mexico City and the cities of Puebla and Quer&#233;taro with a total
capacity of 141,000 trunks. Our switch in Mexico City is connected to four
different nodes in the city&#146;s public switched telephone network, some by our
own and some by leased fiber capacity. Our switch in Puebla is connected to
four different nodes in the city&#146;s public switched telephone network by our own
fiber ring. Our switch in Quer&#233;taro is connected to two different nodes in the
city&#146;s public switched telephone network by our own fiber. We also lease
capacity to connect to long distance networks.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June 2000, we finished constructing a lighted 144-strand, 57-kilometer
fiber optic ring in the City of Puebla. We also acquired six strands of dark
fiber for approximately 175 kilometers in metropolitan rings in Mexico City and
obtained an option for additional capacity in future fiber optic rings also in
Mexico City. In addition, the
</FONT>
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<P align="left"><FONT size="2"> infrastructure is in place to provide local telephony service to five
towns located along our Mexico City-City of Puebla fiber optic link.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use our own fiber optic rings to connect our microwave nodes to the
fiber rings in order to transport the telephone communications from our
customers to the telephone switch and from there back to our customers or to
the public switched telephone network. We also use this fiber to provide to
our customers dedicated links and dedicated Internet links that we connect
through our fiber and also by leased capacity to the Internet backbone.
</FONT>
<P align="left"><FONT size="2"><I>Last-mile connectivity</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The last-mile connectivity portion of our network is comprised of a mix of
wireline and wireless access technologies. We use point-to-point microwave
transmission technology for fast deployment to clusters and single site
locations. We have point-to-point frequencies in the 15 and 23 GHz band
forming a complex microwave network throughout Mexico City and the cities of
Puebla and Quer&#233;taro. We use microwave links to connect customers that cannot
be immediately connected to our own fiber network, provided the yield on the
capital expenditures required is in accordance to our investment parameters.
We also have a point-to-multipoint concession for the 10.5 GHz band, covering a
portion of the Gulf region.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also use wireline access to provide service to clusters. Clusters
generally have an area ranging between one and four kilometers in diameter. An
average of 50 kilometers of cable plant is required to provide last-mile
connectivity within the clusters.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use copper wire feeder and distribution facilities placed from the host
or remote site along rights of way with a mix of aerial and underground
construction. Aerial is our preferred and most used method because of its cost
of construction advantage. Underground cable is placed using either the open
trench or directional boring methods of construction. The size of the cable is
based on the anticipated number of customers in each cluster&#146;s influence area
as forecasted by our marketing research. We also integrate fiber optic and
Digital Subscriber Line Access Multiplexer (also known as DSLAM) facilities in

the distribution plant to allow us to provide broadband services.
</FONT>
<P align="left"><FONT size="2"><I>Switching</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a Lucent Technologies 5ESS digital switch in Mexico City, and in
the cities of Puebla and Quer&#233;taro. Our switch in Mexico City is currently
equipped for 86,000 trunks, and new switches will be installed as the maximum
capacity of the existing switches is reached. Our switch in the City of Puebla
is equipped for 37,000 trunks. Our switch in the City of Quer&#233;taro is equipped
for 18,000 trunks. Each trunk can generally carry between 1 and 3 lines,
depending on whether it serves a residential or a business customer. Our
equipment capacity is scaleable at incremental costs according to customer
demand.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The switches are capable of providing analog lines, E1 digital lines,
digital high-speed data services, centrex services and operator-assisted
services. In addition, they can provide private analog lines, private
clear-channel digital lines, data transmission and value-added services.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our switches also have a synchrony network that is designed to assure a
proper synchronization of every call that is made in the cities we serve and to
assure proper synchronization with the public switched telephone network as
well as any other carriers with whom we connect. We also have two STPs
(Signaling Transfer Point) in Puebla, four in Mexico City and two in Quer&#233;taro,
to assure the proper signaling in our interconnection with all other carriers.
</FONT>
<P align="left"><FONT size="2"><I>Operational support systems</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a network operations and control center in Mexico City which
oversees, administers and provides technical support to all service areas. Our
center, which uses Hewlett Packard hardware and Lucent Technologies software
controls and monitors, among other systems, all of our network, microwave,
fiber, access equipment, data equipment, synchrony, signaling and energy
systems. Our center allows us to manage a multi-vendor network with
</FONT>
<P align="center"><FONT size="2">18</FONT>
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<P align="left"><FONT size="2"> the greatest efficiency possible, and to identify problems early in order
to utilize available redundancy and repair the damaged part of the network.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operational support systems are designed to allow us to differentiate
ourselves in the marketplace by being able to:
</FONT>
<P>
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    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">offer a flexible, large selection of services;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">provide tailored service packages;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">quickly introduce products and services;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">deliver near real-time activation and disconnection;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">deliver a high quality of service;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">minimize activation errors; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">provide accurate and timely billing services.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our information technology strategy is to implement operational support
systems possessing a high level of functionality and flexibility from the
service order to the delivery of customer invoices. The systems include the
following functional features:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Spanish language support for invoices and documentation;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a high degree of integration between all operational support systems components;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">flow-through of information, provisioning and service activation;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">capabilities to monitor, manage and resolve network problems;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">allowance for growth on a modular scalable basis; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">support of administrative operations for financial controls.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Our services</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary focus of service is local telephony, particularly the
provision of high-quality, flexible last-mile connectivity to small and
medium-sized businesses and residential customers. We offer long distance
service as an integrated value-added service for our local telephony customers.
We do not offer our long distance service separately from our local telephony
service.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently provide value-added services such as: voice mail, speed
dialing, call waiting, call forwarding, three-way calling, call blocking,
caller identification and multi-line hunting. We also provide digital
high-speed connectivity, dial-up Internet access, dedicated Internet access and
Service Level Agreements (also known as SLA) for both voice and data services.
</FONT>
<P align="left"><FONT size="2"><B>Service products</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to offer high-quality telephony service products combining (1)
prices that are between 5% and 15% below current market levels, (2)&nbsp;a wide
range of value-added solutions and (3)&nbsp;superior customer service. The
following are the service products we currently offer to our customers.
</FONT>
<P align="center"><FONT size="2">19</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>LineaMax Residencial</I></B>. This is a service for
residential customers that provides a high-quality telephone
line. The features offered under this product include voice
mail, call waiting, call forwarding, three-way calling, call
blocking, speed dialing and unlisted numbers.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>LineaMax Comercial</I></B>. This service, which is
offered to business customers, is identical to LineaMax
Residencial, except that it also includes multi-line hunting.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>CentralMax</I></B>. This service provides business
customers with all the functions of a private branch exchange
using centrex technology, without having to acquire and
maintain equipment. 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, single digit access to attendant
and distinctive ringing. Optional solutions include voice
mail, music-on-hold, multi-line hunting and attendant
services.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>Larga Distancia Max</I></B>. This service provides
domestic and international long distance. We do not offer our
long distance service separately from our local telephony
service. See &#147;Supervision and Regulation of the Mexican
Telecommunication Industry&#151;Our concessions&#151;Long distance&#148; for
a description of significant special charges we would have to
pay Telmex if we decide to provide long distance service to
customers other than our local telephony customers.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>TroncalMax Digital</I></B>. 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 (also known as
PBX). This service is sold in groups of 10, 20 or 30 trunks.
The groups can be configured with direct inward dial (DID),
direct outward dial (DOD), caller identification or main
telephone number assignments.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>TroncalMax Anal&#243;gica</I></B>. This service, which is
offered to business customers, provides connectivity to analog
PBX or key systems. The features available with this product
are multi-line hunting, caller identification and call
barring.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>Internet Max</I></B>. This service uses a traditional
POTs line and modem to provide dial-up Internet access
allowing users to navigate on the Internet at speeds of up to
56 Kbps, depending on the number of users accessing the
Internet at the same time, since it is a shared service. We
provide this service to customers, regardless of whether they
have a Maxcom line or not.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>Speedy Max </I></B>(ADSL (128, 256 and 512 Kbps and 1 and
2 Mbps)). Asymmetric Digital Subscriber Line (also known as
ADSL) is a transmission service that turns ordinary telephone
lines into high-speed data connections. It is a digital data
service that provides telecommuting capabilities at speeds
much faster than standard modems. With ADSL it is possible to
have secure, dedicated links to the Internet or a company&#146;s
LAN at a high-speed transmission.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>AsistelMax</I></B>. This service, which we launched in
April 2002, provides basic telephone medical and home
assistance to our residential customers in case of emergency.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>1-800 Numbers</I></B>. This service is available for our
customers interested in receiving toll-free calls into their
call centers or businesses.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>Dedicated Internet Access</I></B>. This service offers
Internet access at high speed within a clear channel access to
the Internet backbone.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">20</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>Digital private lines</I></B>. This service provides
highly reliable dedicated circuits between two or more
physical locations. Digital private lines are designed to
integrate voice, data and video private networks over a single
physical link. Digital private lines are, in effect, leased
lines for exclusive/private use with no limitations in usage,
available 365&nbsp;days a year, with no restrictions in amount of
traffic.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of our product portfolio strategy, we are developing strategic
alliances with third parties in order to provide new services. These new
services include web services such as hosting web applications, managed network
security (firewalls)&nbsp;and domain name administration for small and medium-sized
business.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our products will help us capitalize on the significant
data applications growth expected in Mexico and help us increase our
participation in the small and medium-sized business market. In particular, we
believe that the combination of voice and data services constitutes an
attractive set of product services for those customers enabling us to compete
more effectively in such market.
</FONT>
<P align="left"><FONT size="2"><B>Pricing</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generally seek to maintain our prices between 5% and 15% below current
market levels. We offer pricing plans that are simple in order to assure
customers of the integrity of the billing process. Our pricing structure
rewards long-term commitments by increasing discounts in relation to the length
of the commitment. We also provide discounts to high-usage customers that are
likely to generate a significant outflow of calls.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We pay interconnection charges to other carriers on a per minute basis.
However, the common practice in the Mexican market is to charge customers on a
per-call basis for local service. We seek to minimize the risk associated with
this mismatch between our revenues and costs; for long holding time customers,
we have, in some cases, implemented a per minute charge plan to be consistent
with our interconnection fees that are on a per minute basis.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the second half of 2002, we introduced voice line and ADSL service
that for a fixed monthly charge includes the rental of the lines, unlimited
local calling, a specified amount of long distance and mobile minutes, and
high-speed Internet access. This offering is mainly targeted to small- and
medium-sized businesses.
</FONT>
<P align="left"><FONT size="2"><B>Marketing and sales</B>
</FONT>

<P align="left"><FONT size="2"><I>General</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to develop brand name recognition by using our corporate name,
logo and product names consistently to portray a unified image. We conduct
publicity drives within target clusters to small-and medium-sized businesses
and to residential customers. We seek to differentiate ourselves from our
competitors by our pricing, consistent quality and reliability of
first-to-market technology, one-stop shopping, comprehensive billing and speed
of line activation.
</FONT>
<P align="left"><FONT size="2"><I>Sales and distribution channels</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We focus our sales efforts within clusters using door-to-door sales and
telemarketing promotions. We promote our services primarily through
advertisements on radio, billboards, in-building promotions, press and
magazines. As we commence the deployment of our network within a cluster, we
intensify our promotion efforts through our direct sales force in such cluster.
</FONT>
<P align="left"><FONT size="2"><I>Our direct sales approach is to assign sales representatives or teams to
locations within a cluster or to single sites.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2002, we employed 22 internal salespeople and 182 external
sales agents. We assign our sales force based on territory, product or market
segment, depending on their background and experience. The compensation
structure for our sales force is tailored to attract and retain high achievers
by providing a base salary and a bonus component. Sales commissions are paid
only after the new line is installed.
</FONT>
<P align="center"><FONT size="2">21</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our sales force is recruited from other telecommunications providers and
systems integrators. Candidates for our sales force undergo extensive training
that covers the industry of telecommunications, our products, our internal
procedures and markets and sales. In its sales effort, our sales force uses,
among other things, multimedia presentation, corporate videos and corporate and
product brochures.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to our sales force, we are developing other distribution
channels, including store fronts, agents, distributors, outsourcing and
telemarketing.
</FONT>
<P align="left"><FONT size="2"><I>Customer service</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to differentiate ourselves by providing superior and consistent
customer service. Our customer service group is divided into three areas:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>centralized answering point</I></B>. This area responds
to calls to our customer care telephone numbers in Mexico City
and the cities of Puebla and Quer&#233;taro. Many prospective and
existing customers use our centralized answering point for all
types of queries, including queries regarding area codes,
rates, billing and line installation and changes. Our hours
of operation are 8:00 a.m. to 8:00 p.m. on Mondays through
Fridays and 9:00 a.m. to 6:00 p.m. on Saturdays.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>walk-in center</I></B>. We have two walk-in centers in
Mexico City, two in the City of Puebla and one in the City of
Quer&#233;taro for prospective and existing customers who wish to
make inquires in person regarding our services. Our hours of
operation are 9:00 a.m. to 6:00 p.m. on Mondays through
Fridays and from 9:00 a.m. to 2:00 p.m. on Saturdays.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>centralized trouble-shooting center</I></B>. This area
responds to calls in Mexico City and the cities of Puebla and
Quer&#233;taro. This center is available 24 hours a day, seven
days a week and handles technical problems, inquiries and
complaints.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customers may access their billing statements through our website and link
to the websites of two major Mexican banks to effect payment. In addition,
customers may pay their bills with their credit cards at the branches of three
of the largest Mexican banks or at our main office located in Santa Fe, Mexico
City or at our walk-in centers located in the City of Puebla. We also assist
our customers with new service requests and product information at our walk-in
centers.
</FONT>
<P align="left"><FONT size="2"><B>Credit, billing and collection</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We carry out credit checks on all our potential business customers that
request more than two lines using a leading Mexican credit bureau. Depending
on the result of the credit check, we may request a deposit, promissory note,
bond or standby letter of credit.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For business customers with an imperfect credit history we require a one
to three-month deposit, which is calculated based on the number of lines
contracted. For call centers and other high-usage customers we may require
higher deposits, collect on a prepaid or weekly basis and undertake a closer
monitoring of call activity. We do not perform credit checks for business
customers with one or two lines.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we do not perform credit checks for residential customers.
Our sales representatives are required to verify the identity and address of
our residential customers.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For our billing process, we use state-of-the-art technology including an
Ericsson/Hewlett-Packard billing mediation platform and a Kenan Systems/Arbor
billing platform interfaced with our customer service system.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We perform six billing cycles per month for our business customers and
five billing cycles per month for our residential customers. We invoice
customers monthly on a staggered basis, except in instances that customers
represent a greater credit risk in which case we may invoice weekly. For
regular customers we process and print our
</FONT>
<P align="center"><FONT size="2">22</FONT>
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<P align="left"><FONT size="2">bills within four days after the
close of each cycle. Customers then have twenty-one days to pay the bill after
the cut off date.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For customers with one to six lines, if a bill is past-due for more than
two days, we call the customer and leave a reminder message on its phone. If
the bill remains unpaid for five additional days, we restrict service to
incoming calls only. If the bill remains unpaid for 7 additional days, we
suspend the service. If the bill remains unpaid for another 7&nbsp;days, we again
allow in-bound traffic but only in order to contact our customer, negotiate and
collect the payment. After 30&nbsp;days past-due, unpaid and uncollected
receivables are assigned to collection agencies. If no payment is received
after ninety days, we disconnect the line. If the bill remains unpaid past
such period, we assign the receivables to another collection or legal agency.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For customers with more than six lines we use the same process to the one
described above, except that we do not assign unpaid bills to collecting
agencies. Instead, we use a personalized approach where we try to negotiate
payment terms before imposing any restriction, suspension or disconnection of
the link. We may suspend service when an invoice is at least 30&nbsp;days past due.
However, in the case of high-usage customers, we may suspend service when an
invoice is at least one day past due.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a CRM to support our business growth, which is focused on customer
service, collection, training sales force and enhance marketing. Our initial
investment for this program was U.S.$3.3&nbsp;million and our strategic partner in
this program is Siebel a software company. As part of our cost reduction
measures, we do not plan to invest additional resources to upgrade our CRM
program during 2003.
</FONT>
<P align="left"><FONT size="2"><B>Competition</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We primarily compete in the local telephony market on the basis of
customer service, value-added products and price. Our direct competitors are
wireline and fixed wireless local telephony operators, although we also face
competition indirectly from mobile wireless operators.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not compete directly in the long distance market. Although we
provide long distance service, we position such service as an integrated
value-added service for our local telephony customers. As a result, we do not
offer our long distance service separately from our local telephony service.
See &#147;&#151;Supervision and Regulation of the Mexican Telecommunications Industry&#151;Our
concessions&#151;Long distance&#148; for a description of significant special charges we
would have to pay Telmex if we decide to provide long distance service to
customers other than our local telephony customers.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our core strategy is to service underserved markets by targeting new
customers that do not currently receive the type of products and services that
we offer. In particular, our intention is to service markets with lower
teledensity rates that are also underserved by Telmex.
</FONT>
<P align="left"><FONT size="2"><I>Telmex</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our main local telephony competitor is Telmex, the incumbent carrier and
former government-owned telecommunications monopoly. Telmex has significantly
greater financial and other resources than those available to us. In addition,
Telmex has an established customer base, which represents substantially all of
the wireline local telephony lines in Mexico. Telmex customers still represent
the main destination of outgoing calls from our network, therefore local
interconnection with Telmex is critical to our operations.
</FONT>
<P align="left"><FONT size="2"><I>Other Competitors</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also face competition in local telephony from companies that were
awarded concessions in recent years. The more significant of these competitors
are Alestra, Avantel Servicios Locales S.A. (&#147;Avantel&#148;), Axtel, S.A. de C.V.
(&#147;Axtel&#148;), Megacable Comunicaciones de M&#233;xico, S.A. de C.V. (&#147;Megacable&#148;) and
Unefon.
</FONT>
<P align="center"><FONT size="2">23</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Avantel, in which MCI WorldCom Inc. is a shareholder, was awarded a long
distance service concession in 1996 and a local telephony concession in April
1999. Avantel offers nationwide long distance services and local services in
several cities, including Mexico City, Monterrey and Guadalajara.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Alestra, in which AT&#038;T Corp. is a shareholder, was awarded a long distance
service concession in December 1995 and a local telephony concession in June
2000. In addition, Alestra has a point-to-point microwave frequency concession
in the 15 and 23 GHz band range, a point-to-multipoint microwave frequency
concession in the 10.5 GHz band range and a point-to-point national wireless
telecommunications concession in the 7 GHz band range. Alestra offers
nationwide long distance services and local service in Mexico City, Monterrey
and Guadalajara.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Alestra and Avantel are using their local telephony concessions to service
primarily the corporate business segment. We believe they have recently
started to target the small-and medium-sized business agreement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Axtel, in which Bell Canada International is a shareholder, was awarded a
nationwide local telephony and long distance concession in June 1996, and fixed
wireless local loop frequencies in the 3.4 to 3.7 GHz band in May 1998. Axtel
commenced commercial services in the northern city of Monterrey in July 1999,
in Mexico City in May 2000, and in Guadalajara, Puebla, Toluca and Le&#243;n during
2001. Axtel targets the high-end residential and the small-and medium-sized
business segments. Axtel strategy includes packages with unlimited local calls
at a fixed rate.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other competitors such as Megacable, Marcatel and MetroRed that have local
telephony concessions have a market approach that is not massive but rather
seeks to offer services to specific customers within specified coverage areas.
We believe that Megacable, Marcatel and MetroRed do not represent strong
competition in the short term.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unefon won nationwide concessions for fixed wireless local loop
frequencies in the 3.4 to 3.7 GHz band and in the PCS 1.9 GHz band in May 1998.
Unefon began commercial operations using the 1.9 GHz band in Toluca in early
2000 and has initiated operations in Mexico City, Puebla, Monterrey and
Guadalajara, among other cities, but it has focused mainly on mobile
telephoning. We believe that Unefon will begin to focus on the fixed wireless
telephony market in the near future.
</FONT>
<P align="left"><FONT size="2"><B>Overview of the Mexican telecommunications industry</B>
</FONT>

<P align="left"><FONT size="2"><I>General</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The telecommunications industry involves the transmission of voice, data
and video communications from point of origination to point of termination.
The Mexican telecommunications industry has been undergoing rapid change in the
last decade due to the introduction of new technologies and the construction of
additional infrastructure, as well as market liberalization, which together
have resulted in increased competition and demand for telecommunications
services.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The modernization of the Mexican telecommunications infrastructure began
in 1990 with the privatization of Telmex, the former government&#151;controlled
telecommunications monopoly. Since privatization, Telmex and several
concessionaires have begun deploying modern fiber and wireless networks
throughout Mexico. To meet the demand for higher volume and higher quality
wireline services, new copper cables are being installed and backbones are
being replaced largely by fiber optic transmission systems that provide greater
capacity at lower cost with higher quality and reliability.
</FONT>
<P align="left"><FONT size="2"><I>Market liberalization</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, Telmex has dominated the Mexican telecommunications
industry. In December 1990, the Mexican government initiated the privatization
and deregulation of Telmex by selling a controlling portion of Telmex&#146;s equity
to a private consortium led by Grupo Carso, S.A. de C.V., a Mexican
conglomerate, as well as to subsidiaries of Southwestern Bell Corporation and
France Telecom S.A. Subsequently, the Mexican government
</FONT>
<P align="center"><FONT size="2">24</FONT>
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<P align="left"><FONT size="2"> opened the wireless market by granting nine regional cellular concessions
in Band &#147;A&#148; in order to allow concessionaires to compete with Telmex and its
mobile service provider affiliate, Radiom&#243;vil Dipsa, S.A. de C.V. (also known
as Telcel).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Local telephony market</I></B>. In connection with the privatization of Telmex in
1990, the Mexican government amended Telmex&#146;s nationwide concession, which
expires in March 2026, and granted Telmex a six-year implied monopoly over
local telephony services. The amended Telmex concession obligated Telmex to
expand and increase local telephony service at a rate of 12% per year beginning
in 1992 and to provide basic telephone service to all population centers of 500
or more inhabitants by 1995. The implied local service monopoly was eliminated
in mid-1996 when the Mexican Communications and Transportation Ministry
(<I>Secretar&#237;a de Comunicaciones y Transportes</I>), which we refer to as the &#147;SCT,&#148;
published regulations governing the licensing of local services on a
competitive basis.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to promote competition in the local telephony market, the Mexican
government granted several concessions beginning in 1997, including first the
regional concession awarded to us for wireline local telephony service and
later expanded to a nationwide concession. Each wireline local telephony
concession granted by the Mexican government generally has a 30-year term, and
authorizes, among other things, the provision of local telephony services and
value-added services in a specified region of the country.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Mexican government does not permit the unbundling of
local loop frequencies, requiring all telephone companies wishing to offer
local telephony service to build their own last-mile connectivity in order to
reach their targeted customers.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican government has also been conducting auctions of spectrum frequencies in the:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">450 MHz, 1.9 GHz (PCS)&nbsp;and 3.4-3.7 GHz (fixed wireless local loop) frequency bands;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">7, 15, 23 and 38 GHz frequency band for nationwide
point-to-point microwave transmission links; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">10.5 GHz frequency band for regional point-to-multipoint
microwave transmission service.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Four companies won nationwide concessions for fixed wireless local loop
frequencies, although one later forfeited its right for failure to pay
concession fees. In addition, six companies won concessions in the 1.9 GHz
(PCS)&nbsp;frequencies on either a nationwide or regional basis, although one also
forfeited its right for failure to pay concession fees. See &#147;&#151;Competition.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Long distance telephony market</I></B>. In connection with the privatization of
Telmex in 1990, the Mexican government granted Telmex an exclusivity period for
long distance telephony services of six years. In August 1996, the exclusivity
period expired and competition commenced in January 1997. According to Pyramid
Research, measured in terms of traffic, since the expiration of the exclusivity
period and the subsequent beginning of competition, Telmex has lost 26% and 31%
of the domestic and international long distance telephony market, respectively,
to new competitors.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to promote competition among domestic and international long
distance providers, the Mexican government granted several concessions,
including the national concession awarded to us, for domestic and international
long distance services, as well as value-added services. Each concession
generally has a nationwide scope and a 30-year term, and authorizes the
provision of domestic and international long distance services and value-added
services.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The long distance concessionaires include among others:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Alestra, S. de R.L. de C.V., in which AT&#038;T Corp. is a shareholder;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Avantel, S.A. de C.V., in which MCI WorldCom Inc. is a shareholder;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">25</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Axtel, S.A. de C.V., in which Bell Canada International is a shareholder; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Iusatel, S.A. de C.V., in which Verizon and Vodafone are indirect shareholders.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International liberalization trends will likely impact the flow of long
distance telephone traffic to and from Mexico. In particular, demand for long
distance services may be stimulated by reforms of domestic
access/interconnection charges and international settlement rates and recent
international trade negotiations. As such charges decline, overall demand for
international and local services increases.
</FONT>
<P align="left"><FONT size="2"><I>Mexican market characteristics</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Population and economic growth</I></B>. According to the Economic Commission for
Latin America and the Caribbean-CEPAL (<I>Comisi&#243;n Econ&#243;mica para Am&#233;rica Latina y
el Caribe</I>), Mexico is the second largest country in Latin America in terms of
population. In 2000, Mexico had an estimated population of 97.3&nbsp;million and a
population growth rate of approximately 1.3% for the period from 1995 to 2000.
In 2002, 32.2% of the population was under the age of 15, 62.9% between the
ages of 15 and 65 and only 4.9% was over 65. After a decline in 1995, Mexico&#146;s
real gross domestic product grew for five straight years, rising by 5.1% in
1996, 6.8% in 1997, 4.8% in 1998, 3.7% in 1999 and 6.6% in 2000. However in
2001, the real gross domestic product decreased by 0.3%. In 2002, the growth
of the real gross domestic product resumed as it increased by 0.9%.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Underserved telephony market</I></B>. In 1999, The World Bank ranked Mexico as
the 12th largest economy in the world. However, in terms of wireline
penetration, Mexico was ranked 69th in the world. This relatively low level of
wireline penetration evidences substantial unmet demand for fixed telephony
service. The following table presents telephone wirelines in service per 100
inhabitants for the United States and selected Latin American countries as of
December&nbsp;31, 2002.
</FONT>
<P align="center"><FONT size="2"><B>Selected Teledensity Rates</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="86%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Lines in service per</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Country</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>100 inhabitants <SUP>(1)</SUP></B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">United States</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Uruguay</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Argentina</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Chile</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Brazil</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Colombia</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">M&#233;xico</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Venezuela</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Peru</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><SUP>(1)</SUP></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Source: Pyramid Research</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to Pyramid Research, the wireline local telephony market
represents approximately 35% of Mexico&#146;s total telecommunications market, when
measured by revenues, and generated approximately U.S.$6.7&nbsp;billion of revenue
in 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Projected growth trends</I></B>. With the introduction of competition in the
Mexican telecommunications market, teledensity rates and line usage increased
substantially. According to Pyramid Research, between 2002 and 2007 fixed line
penetration in service in Mexico is expected to increase by 14.7%.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to Pyramid Research, local and domestic long distance services
revenues are expected to experience 7.6%, and 2.1% average annual growth rates
between 2002 and 2007, respectively. In contrast, internal long distance
services revenues are expected to experience a 0.2% average annual decrease
over the same period.
</FONT>
<P align="center"><FONT size="2">26</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total local wireline telephony revenues in Mexico are expected to increase
from U.S.$6.7&nbsp;billion in 2002 to U.S.$9.2&nbsp;billion in 2007. In contrast,
international long distance services revenues are expected to experience a 0.2%
average annual decrease over the same period. This growth is expected to
result from an increase in the number of lines in service combined with the
growth in the average usage per line. Despite the expected reduction in
international long distance revenues, it is expected that local usage revenues
will drive total market growth.
</FONT>
<P align="left"><FONT size="2"><B>Supervision and regulation of the Mexican telecommunications industry</B>
</FONT>

<P align="left"><FONT size="2"><I>General</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The telecommunications industry in Mexico is subject to the Federal
Telecommunications Law (<I>Ley Federal de Telecomunicaciones</I>) which was enacted in
1995. However, certain rules set forth under the General Means of
Communications Law (<I>Ley de V&#237;as Generales de Comunicaci&#243;n</I>), the
Telecommunications Regulation (<I>Reglamento de Telecomunicaciones</I>) and the rules
promulgated thereunder, generally remain effective and are referred to as the
Old Telecommunications Law.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Federal Telecommunications Law, the Mexican telecommunications
industry is regulated for administrative and operational matters by COFETEL
(<I>Comisi&#243;n Federal de Telecomunicaciones</I>). COFETEL was created in 1996 as an
autonomous entity from the SCT to regulate and promote the efficient
development of the telecommunications industry in Mexico. COFETEL is
responsible for, among other things:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">enacting regulations and technical standards for the telecommunications industry;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">ensuring that holders fulfill the terms of their concessions and permits;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">suspending operators without concessions;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">resolving interconnection controversies between competitors; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">maintaining a registry of applicable rates.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SCT retains the authority to grant all concessions and permits.
COFETEL makes recommendations to the SCT on major issues, such as amending
existing telecommunications laws, allocating spectrum frequencies, granting,
transferring, renewing or revoking concessions and applying penalties for
concession violations. The SCT has final decision making power on these
issues. Once a final decision is made, COFETEL implements the related
regulations.
</FONT>
<P align="left"><FONT size="2"><I>Concessions and permits</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>General</I></B>. To provide public telephony services in Mexico through a public
network, a service provider must first obtain a concession from the SCT.
Pursuant to the Federal Telecommunications Law, concessions for public
networks may not exceed a term of 30&nbsp;years, and concessions for spectrum
frequencies may not exceed a term of 20&nbsp;years. Generally, concessions for
public networks may be extended for a term equivalent to the term for which the
concession was originally granted. Concessions for spectrum frequencies will
be re-auctioned at least three years prior to their expiration date.
Concessions specify, among other things:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the type and technical specifications of the network, system or services that may be provided;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the allocated spectrum frequencies, if applicable;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the geographical region in which the holder of the concession may provide the service;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the required capital expenditure program;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">27</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the term during which such service may be provided;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">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; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any other rights and obligations affecting the concession holder.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to concessions, the SCT may also grant permits for the following:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">installing, operating or exploiting transmission-ground stations; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">providing telecommunications services as a reseller.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no legally mandated maximum term for these permits unless
specifically stated in the permit. Under the Federal Telecommunications Law, a
company needs to register with COFETEL the rates for the telecommunications
services that it wishes to provide in order to be able to provide them to the
public.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Mexican Congress enacted a law effective January&nbsp;1, 2002,
that expanded the scope of the sales and use tax to include additional
services, including services provided by telecommunications companies, at a
rate of 10%. An amendment to this law, effective January&nbsp;1, 2003, confirmed
that our core business (the offering of local and long distance services) is
not subject to the tax. Although we believe, based on the advice of our tax
and regulatory advisors, that certain other services that are part of our local
service offerings are also not subject to such tax, we cannot assure you that
the tax authorities may not interpret the law otherwise.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Ownership restrictions</I></B>. Under the Federal Telecommunications Law and the
Mexican Foreign Investment Law (<I>Ley Federal de Inversi&#243;n Extranjera</I>),
concessions may be granted only to:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Mexican individuals; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Mexican corporations in which non-Mexicans own 49% or less of
the full voting stock and that are not otherwise controlled by
non-Mexicans.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, in the case of concessions for cellular communications services,
foreign investment participation may exceed 49% of the voting stock with the
prior approval of the Mexican Foreign Investment Bureau of the Mexican Ministry
of Economy <I>(Secretar&#237;a de Econom&#237;a)</I>.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Foreign Investment Law, the Mexican Ministry of Economy
may also authorize the issuance of non-voting or limited-voting stock (also
known as &#147;neutral shares&#148;) that are not counted for purposes of determining the
foreign investment percentage of a Mexican corporation under the Mexican
Foreign Investment Law. Any share transfers resulting in a violation of these
foreign ownership requirements are invalid under Mexican law.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Transfer</I></B>. Concessions are transferable after the first three-year period
of the concession, if the SCT approves the transfer of the concession title,
the assignee agrees to comply with the terms of the concession and such a
transfer does not violate the foreign ownership requirements of the Federal
Telecommunications Law and the Mexican Foreign Investment Law.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Termination</I></B>. A concession or a permit may be terminated pursuant to the
Federal Telecommunications Law upon the following events:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">expiration of its term;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">resignation by the concession holder or the permit holder;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">28</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">revocation. A concession or a permit may be revoked prior to
the end of its term under certain circumstances, such as:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#060;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
failure to exercise the rights of the concession
within 180&nbsp;days of the grant;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#060;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
failure to provide interconnection services with
other holders of telecommunications concessions and permits
without just cause;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#060;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
loss of the concession or permit holder&#146;s Mexican nationality;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#060;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
unauthorized assignment, transfer or encumbrance of the concession or permit;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#060;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
unauthorized interruption of service;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#060;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
taking any action that impairs the rights of other concessionaires or permit holders;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#060;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
failure to comply with the obligations or
conditions specified in the concession or permit; and</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#060;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" align="left" valign="top"><FONT size="2">
The SCT may revoke a concession for violations in any of the
circumstances referred to in the first four instances above. Under
the last four instances above, the SCT would have to fine the
concessionaire at least three times for the same failure before
moving to revoke a concession.</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">expropriation. The Mexican government has the statutory
right to permanently expropriate any telecommunications concession
and claim any related assets for reasons of public interest. Under
Mexican law, the Mexican government is obligated to compensate the
owner of such assets in the case of a statutory expropriation. The
amount of the compensation is to be determined by appraisers. If
the party affected by the expropriation disagrees with the appraisal
amount, such party may initiate judicial action against the
government. In such a case, the relevant judicial authority will
determine the appropriate amount of compensation to be paid. We are
not aware of any instance in which the SCT has exercised its
expropriation rights in connection with a telecommunications
company; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">dissolution or bankruptcy of the concession holder or the
permit holder.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Temporary seizure</I></B>. The Mexican government, through the SCT, may also
temporarily seize all assets related to a telecommunications concession or
permit in the event of a natural disaster, war, significant public disturbance,
threats to internal peace or for economic reasons or for other reasons related
to national security. If the Mexican government temporarily seizes such
assets, except in the event of war, it must indemnify the concession holder for
all losses and damages, including lost revenues. We are not aware of any
instance in which the SCT has exercised its temporary seizure powers in
connection with a telecommunications company.
</FONT>
<P align="left"><FONT size="2"><I>Rates for telecommunications services</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before the Federal Telecommunications Law was amended, the SCT&#146;s approval
was required for setting the rates charged for all basic local, long distance
and certain value-added local and long distance telecommunications services.
Historically, the SCT permitted rate increases based on the cost of service,
the level of competition, the financial situation of the carrier and certain
macroeconomic factors. Carriers were not allowed to discount the rates
authorized by the SCT, although operators occasionally waived activation fees
on a promotional basis. Interconnection rates also required SCT approval.
Rates for private dedicated circuit services through microwave networks and
private networks through satellites were not regulated before the Federal
Telecommunications Law was amended.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Federal Telecommunications Law, rates for telecommunications
services (including local, cellular and long distance services) are now freely
determined by the providers of such services, except that such rates may not be
set below a service provider&#146;s long-term incremental cost.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, COFETEL is authorized to impose specific rate, quality and
service requirements on those companies determined by the Federal Antitrust
Commission (<I>Comisi&#243;n Federal de Competencia</I>) to have substantial
</FONT>
<P align="center"><FONT size="2">29</FONT>
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<P align="left"><FONT size="2">market power
pursuant to the provisions of Mexico&#146;s antitrust statute. All rates for
telecommunications services (other than value-added services) must be
registered with COFETEL prior to becoming effective. The Federal
Telecommunications Law prohibits telecommunications providers from
cross-subsidizing among their services and requires that they keep separate
accounting for each of their services.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican Antitrust Commission has found that Telmex has substantial
market power on the local, long distance and Internet and data transmission
markets, as defined under Mexico&#146;s antitrust statute. Based on this finding,
COFETEL issued a resolution in September 2000 regulating Telmex as a dominant
carrier, imposing special obligations regarding, among other things, quality of
services, tariffs and disclosure of information. Telmex has obtained an
injunction against potential COFETEL actions that intend to regulate Telmex by
imposing special obligations on Telmex regarding, among other things, quality
of services, tariffs and disclosure information. As a result of this
injunction, the Mexican Antitrust Commission must restart the administrative
procedures and prove again that Telmex has substantial power market on certain
services.
</FONT>
<P align="left"><FONT size="2"><I>Our concessions</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Local telephony</I></B>. We obtained our regional wireline local telephony
concession in February 1997. In September 2001, this concession was expanded
to a nationwide concession. The concession, which is not exclusive, grants us
the right to provide business, residential and public wireline local telephony
services all over Mexico. Our wireline local telephony concession has a term
of 30&nbsp;years and may be renewable for up to an equivalent period provided we
have complied with all its terms.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The concession expressly permits us to provide the following services:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">basic local telephony;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">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;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the purchase and lease of network capacity from other
carriers, including the lease of digital circuits;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">value-added services;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">operator services;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">data, video, audio and video conference services, except for
cable or other restricted television, continuous music or digital
audio;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">credit or debit telephone cards; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">public telephony.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The concession does not impose any limitations on the setting of our rates
other than the requirement that we file with COFETEL a notification of any rate
change prior to having it take effect.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The concession requires us to comply with service quality specifications
and, starting in September 2001, to install infrastructure on the basis of a
yearly schedule. According to this schedule, we must install at least an
aggregate of 376,000 lines in at least 394 cities and towns in Mexico by the
end of 2006.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we are currently in compliance with the requirement in our
concession for the number of lines installed, we are currently in default with
respect to the coverage obligations in certain cities and towns required by our
concession. In addition, we believe we will not be able to meet certain
buildout obligations in certain towns and cities along the Mexico City&#151;City of
Quer&#233;taro corridor by September 2003. We are in the process of preparing a
request for a modification to the buildout requirement of the concession from
COFETEL. If granted, this
</FONT>
<P align="center"><FONT size="2">30</FONT>
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<P align="left"><FONT size="2">modification would allow us to be once again in
compliance. However, we cannot assure you that COFETEL will agree to such
modification. See &#147;Item&nbsp;3. Key Information&#151;D. Risk Factors&#151;Factors relating
to the Mexican telecommunications industry&#151;We could lose our concessions if we
do not comply fully with their terms.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Failure to comply with the terms of the concession or to obtain a waiver
or modification could result in its revocation and the loss of the Ps.13.1
million performance bond that we previously issued to the SCT. The Mexican
government would not be required to compensate us for such revocation. See
&#147;&#151;Concessions and permits&#151;Termination.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;1, 2003, the level of fines, which are based on a multiple
of the Mexican minimum daily salary, ranged from Ps.87,300 to Ps.4.4&nbsp;million,
depending on the nature of the infraction. In the case of multiple recurring
infractions, these fines may be doubled.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Long distance</I></B>. We obtained our nationwide long distance concession in
February 1997, concurrently with our local telephony concession. Our
nationwide long distance concession has a term of 30&nbsp;years and may be renewable
for up to an equivalent period, provided that we have complied with all its
terms.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The concession expressly permits us to provide the following services:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the carrying of switched traffic between two different local
calling areas that requires the use of a dialing prefix for its
routing;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">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;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the purchase and lease of network capacity from other carriers; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">nationwide and international long distance telephony.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The concession expressly prohibits the following services:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">those which require a concession for frequency bands of the
radio electric spectrum for specific uses;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">those which require a concession to occupy and exploit
geostationary orbital positions and satellite orbits assigned to
Mexico;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">those which require a concession to operate radio or television broadcasting systems; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">cable or other restricted television.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The concession does not impose any limitations on our ability to set rates
other than the requirement that we file with COFETEL a notification of any rate
change prior to having it take effect.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The concession requires us to comply with service quality specifications
and to install infrastructure on the basis of the schedule for our local
telephony concession. According to this schedule, we must provide nationwide
long distance service in the same locations and at the same time in geographic
areas where we provide local telephony services. Of these areas, we must
provide service in 394 cities and towns in Mexico using our own or leased
infrastructure by the end of 2006.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we are currently in compliance with the requirement in our
concession for the number of lines installed, we are currently in default with
respect to the coverage obligations in certain cities and towns required by our
concession. In addition, we believe we will not be able to meet certain
buildout obligations in certain towns and cities along the Mexico City&#151;City of
Quer&#233;taro corridor by September 2003. We are in the process of preparing a
request for a modification to the buildout requirement of the concession from
COFETEL. If granted, this
</FONT>
<P align="center"><FONT size="2">31</FONT>
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<P align="left"><FONT size="2">modification would allow us to be once again in
compliance. However, we cannot assure you that COFETEL will agree to such
modification. See &#147;Item&nbsp;3. Key Information&#151;D. Risk Factors&#151;Factors relating
to the Mexican telecommunications industry&#151;We could lose our concessions if we
do not comply fully with their terms.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The failure to comply with the terms of the concession or to obtain a
waiver or modification could result in its revocation and the loss of the
Ps.13.4&nbsp;million performance bond that we previously issued to the SCT. The
Mexican government would not be required to compensate us for such revocation.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;1, 2003, the level of fines, which are based on a multiple
of the Mexican minimum daily salary, ranged from Ps.87,300 to Ps.4.4&nbsp;million,
depending on the nature of the infraction. In the case of multiple recurring
infractions, these fines may be doubled.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We service our long distance concession by reselling our long distance
traffic to other carriers with such capability. We currently do not intend to
provide long distance service to anyone other than our local telephony
customers (who use our own infrastructure for call origination) to avoid having
to pay significant special charges to Telmex. According to COFETEL
regulations, any long distance carrier that wishes to interconnect to Telmex&#146;s
local network must make a payment to Telmex on account of Telmex&#146;s investment
to upgrade its local infrastructure to allow long distance competition. In
December 2000, Avantel and Alestra negotiated with Telmex a one-time payment of
U.S.$13.6&nbsp;million as an infrastructure development charge and an
interconnection fee of U.S.$0.0053 per minute. Telmex adjusts the
infrastructure development charge at a 10% annual rate. COFETEL has implicitly
accepted that Telmex may require other long distance carriers to make similar
payments.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to the Mexican telecommunications regulations, all local
carriers must offer their customers the option to select the long distance
carrier of their preference; this practice is known as pre-subscription.
However, local carriers may request a waiver of this obligation from COFETEL.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;27, 2002, COFETEL granted us a waiver of the pre-subscription
requirement. With this waiver, our local telephony customers who are currently
using other long distance carriers may only change, if they wish to do so, to
our long distance service. New local telephony customers must use our long
distance service. This waiver is valid through May 2004 for Mexico City and
the City of Puebla, and for five years (calculated from the date we begin to
provide service) for anywhere else in Mexico including the City of Quer&#233;taro.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Microwave transmissions. </I></B>Point-to-point. In October 1997, we were
awarded seven nationwide point-to-point microwave concessions. These
concessions cover:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">two consecutive frequency segments in the 15 GHz band, with a 56 MHz bandwidth;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">three consecutive frequency segments in the 23 GHz band, with a 56 MHz bandwidth; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">two consecutive frequency segments in the 23 GHz band, with a 100 MHz bandwidth.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These concessions, which were issued in June 1998, have a term of 20
years. COFETEL will re-auction the frequencies covered by the concessions at
least three years before the expiration date of the concessions. The
concessions require us to provide available capacity to the general public.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are currently in compliance with all the material terms of the
concessions.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The failure to comply with the terms of the concessions could result in
their revocation and the loss of up to Ps.12.2&nbsp;million in performance bonds
that we previously issued to the SCT for all of our seven point-to-point
concessions. The Mexican government would not be required to compensate us for
such revocation. As of January&nbsp;1, 2003, the level of fines, which are based on
a multiple of the Mexican minimum daily salary, ranged from Ps.87,300 to Ps.4.4
million, depending on the nature of the infraction. In the case of multiple
recurring infractions, these fines may be doubled.
</FONT>
<P align="center"><FONT size="2">32</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These concessions do not impose any limitations on the setting of our
rates other than the requirement that we file with COFETEL a notification of
any rate change prior to having it take effect.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Point-to-multipoint. In October 1997, we were awarded three regional
point-to-multipoint microwave concessions covering Regions 3, 5 and 8, which
include states in the north and southeast of Mexico&#146;s Gulf region in the 10.5
GHz with a 60 MHz bandwidth.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These concessions, which were issued in April 1998, have a term of 20
years. COFETEL will re-auction the frequencies covered by the concessions at
least three years before the expiration date of the concessions. These
concessions require us to install a network and offer service to at least 30%
of the population in each region covered by the concessions by the end of the
second year after the issuance of the concession.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, together with 14 other concessionaires, have been unable to start
operations in some of our Regions because of lack of commercially viable
technological solutions and equipment for those frequencies. COFETEL initially
granted extensions until April 2000 and later extended them to October 2001.
In November 2001 and again in December 2002, we requested that COFETEL amend
our point-to-multipoint concessions in order to postpone the installation of
our network and the offering of our services until one year after the granting
of such request. We have knowledge that other concessionaires have made
similar requests.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot assure you that COFETEL will grant our request. The failure to
comply with the terms of the concessions or to obtain a waiver or modification
could result in its revocation and the loss of the Ps.4.5&nbsp;million performance
bond that we previously issued to the SCT for all of our three
point-to-multipoint concessions. The Mexican government would not be required
to compensate us for such revocation. As of January&nbsp;1, 2003 the level of
fines, which are based on a multiple of the Mexican minimum daily salary,
ranged from Ps.87,300 to Ps.4.4&nbsp;million, depending on the nature of the
infraction. In the case of multiple recurring infractions, these fines may be
doubled.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These concessions do not impose any limitations on the setting of our
rates other than the requirement that we file with COFETEL a notification of
any rate change prior to having it take effect.
</FONT>
<P align="left"><FONT size="2"><I>Interconnection</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with the Mexican telecommunications laws, all local
telecommunications carriers are required to provide interconnection to each
local, long distance and cellular carrier operating in Mexico.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All terms of interconnection (such as point of interconnection) are
negotiated between telecommunications carriers under COFETEL&#146;s supervision.
Should telecommunications carriers be unable to agree on the terms of
interconnection (including rates) after a certain period of negotiation, either
carrier may request COFETEL to resolve any interconnection term at issue.
Telecommunications carriers are prohibited from adopting discriminatory
practices in the application of rates or any other terms of interconnection.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Local interconnection</I></B>. In November 1998, we entered into an
interconnection agreement with Telmex. This agreement calls for reciprocal
interconnection rates for local-to-local services. The interconnection rate
was Ps.0.3220, Ps.0.1159 and Ps.0.0990 per minute for the months of December
2000, 2001 and 2002, respectively.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This agreement was amended in February 1999 to incorporate a &#147;bill and
keep&#148; feature through September&nbsp;15, 2002, provided we maintain a significant
percentage of residential users, and again in November 2000, retroactive to
March 2000, to exempt Internet service provider traffic from interconnection
fees.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the &#147;bill and keep&#148; arrangement, if the imbalance between calls
originated by Telmex and terminated by Maxcom and calls originated by Maxcom
and terminated by Telmex during a month does not exceed 70%, then no
interconnection fee amounts are payable by the net user of interconnection
services. If the imbalance exceeds 70% in any given month, the &#147;bill and keep&#148;
feature will not apply for that month.
</FONT>
<P align="center"><FONT size="2">33</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we fail to maintain a significant percentage of residential users, then
the &#147;bill and keep&#148; arrangement will be terminated and asymmetrical
interconnection rates may apply. COFETEL has not yet defined what constitutes
a &#147;significant percentage of residential users&#148; in this case, although in local
concessions granted to Alestra and Avantel it defines it to mean that at least
50% of the customers are residential.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our interconnection agreement with Telmex expired on September&nbsp;15, 2002.
However, due to a &#147;continuous application&#148; clause this agreement is still under
full force and effect. We are currently negotiating with Telmex a new
interconnection agreement. Telmex has requested substantial changes to
existing terms and conditions, such as the allowed percentage of imbalance of
traffic for the &#147;bill and keep&#148; procedure and the interconnection rate. We
cannot assure you that we will be able to obtain the services we require from
Telmex on new terms and conditions that permit us to offer services at
profitable and competitive rates.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through December&nbsp;31, 2002, no material interconnection fees have been
paid.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Mobile interconnection</I></B>. We have also signed reciprocal interconnection
agreements with Telcel, a wholly-owned subsidiary of Am&#233;rica M&#243;vil, which is a
spin-off of Telmex; with several subsidiaries of Iusacell and with Operadora
Unefon, S.A. de C.V. (&#147;Unefon&#148;) and Pegaso Comunicaciones y Sistemas, S.A. de
C.V., (&#147;Pegaso&#148;). Telcel and Pegaso are the first and second largest mobile
telephony service providers in Mexico, respectively. Telcel and Pegaso are
nationwide cellular operators. Iusacell provides cellular mobile services in
seven of the nine regions covering central Mexico. Unefon is a nationwide PCS
mobile operators.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The mobile to wireline interconnection fees with these carriers were
Ps.0.3220, Ps.0.1159 and Ps.0.0990 per minute for the months of December 2000,
2001 and 2002, respectively. The wireline to mobile interconnection fees under
the &#147;calling party pays&#148; mode was Ps.1.90 per minute for December 2000, 2001
and 2002. There is no interconnection fee for wireline to mobile
interconnection outside of the &#147;calling party pays&#148; mode. The interconnection
agreements provide that transit from Telmex may be used at a rate per minute
which was Ps.0.0626 for the month of December 2000, Ps.0.0278 for the month of
December, 2001 and Ps.0.0304 for the month of December 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Long distance interconnection</I></B>. Long distance carriers are required to
ensure call termination by providing transit and direct or indirect
interconnection. Since we view long distance services as a complement to our
core local telephony business, we started our operations giving our customers
the option to use our long distance services or those of other providers. As a
result, we granted long distance carriers the option to pick up calls at our
facilities. However, in May 2002, we obtained a waiver from COFETEL of the
obligation to offer such option to our customers See &#147;&#151;Our concessions&#151;Long
distance.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a company that provides local service, we have requested
interconnection from all long distance carriers. To date, only Telmex, Alestra
S. de R.L. de C.V. (&#147;Alestra&#148;), Bestel, S.A. de C.V., Operadora Protel, S.A. de
C.V. and Iusatel, S.A. de C.V., the long distance subsidiary of Grupo Iusacell,
have agreed to provide interconnection. We have filed a complaint with COFETEL
against four other long distance carriers who have refused to provide
interconnection. It is unclear when COFETEL will rule in this issue.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently provide our long distance service only to our local telephony
customers through our own network and leased facilities on a reselling basis.
</FONT>
<P align="left"><FONT size="2"><I>Municipal and other regulatory approvals</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our transmission antennas and telecommunication sites are located in sites
that may require municipal and federal approvals to operate. See &#147;Item&nbsp;3. Key
Information&#151;D. Risk factors relating to Maxcom&#151;Our telecommunications network
infrastructure has several vulnerabilities and limitations.&#148;
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>C.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Organizational structure</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maxcom has only two subsidiaries, Corporativo en Telecomunicaciones, S.A.
de C.V. and Maxcom Servicios Administrativos, S.A. de C.V., each a Mexican
limited liability company (<I>sociedad an&#243;nima de capital</I>
</FONT>
<P align="center"><FONT size="2">34</FONT>
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<P align="left"><FONT size="2"><I>variable</I>), that provide
corporate services to Maxcom. Maxcom owns all of the capital stock of the
subsidiaries, except for one share of each, which share is owned by the other
subsidiary. This organizational structure is due to the fact that Mexican law
requires that limited liability companies have a minimum of two stockholders.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>D.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Property, plant and equipment</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently lease the buildings and/or the land where our operations are
carried out and our microwave transmission equipment and switching centers are
located.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We lease space for administrative offices in Mexico City and in the cities
of Puebla and Quer&#233;taro. Our main headquarters are located in Santa Fe, Mexico
City in a building leased for a 5-year term that expires on February&nbsp;26, 2007
and that is renewable for two additional 5-year terms. This building is
comprised of 115,110 square feet.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2003, we reached an agreement with our landlord at our former
headquarters in Magdalena, Mexico City. Pursuant to this agreement, we
retained a leasehold interest through May 2013 on the first floor, where one of
our Lucent 5ESS switches is located, the roof-top, where we have three
microwave transmission antennas and a section of the basement, which will be
used for parking and to place some of our electric equipment that supports the
switch. We were also released from lease obligation on approximately 35,887
square feet plus parking space of the building originally running through
September&nbsp;30, 2013. In exchange for the new lease and the releases, we agreed
to prepay the full, ten-year lease obligations on the first floor, the roof-top
and basement, as well as pay past-due lease payments dating back from October
2002 through April 2003. All these payments amount in the aggregate to
U.S.$2.7&nbsp;million and will be payable in installments through May 2004.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our offices in the City of Puebla are leased for a 10-year renewable term
that expires on March&nbsp;25, 2008. These offices in Puebla are comprised of
14,100 square feet and hold one of our Lucent Technologies 5ESS switch. We
have a branch office in Puebla that is leased for a 5-year term that expires on
June&nbsp;1, 2004, renewable for one similar additional term. This building is
comprised of 1,350 square feet.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our offices in the City of Quer&#233;taro are leased for a 15-year renewable
term that expires on August&nbsp;1, 2017. These offices in Quer&#233;taro are comprised
of 13,186 square feet. We have a branch office in Quer&#233;taro that is leased for
a 15-year term that expires on June&nbsp;23, 2017. This branch office is comprised
of 12,015 square feet and holds one of our other Lucent Technologies 5ESS
switch.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a 96,900-square-foot industrial warehouse in Mexico City leased
for a 2-year term that expires on July&nbsp;31, 2003. We do not plan to renew this
lease, and we are looking for a smaller warehouse. In addition, we lease
approximately 131 other sites that are used as hosts or single-site buildings
and are located throughout Mexico City and the cities of Puebla. We believe
that our facilities are adequate for our present needs and are suitable for
their intended purposes.
</FONT>
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<P align="left"><FONT size="2"><B>ITEM 5.</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <B>OPERATING AND FINANCIAL REVIEW AND PROSPECTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>All peso amounts discussed in this annual report are presented in constant
December&nbsp;31, 2002 pesos in accordance with Mexican GAAP, except as otherwise
indicated. You should read the following discussion and analysis in
conjunction with the consolidated financial statements included elsewhere in
this annual report. Unless
otherwise indicated, all financial information in this annual report is
presented in constant pesos as of December&nbsp;31, 2002. The U.S. dollar
translations provided in this annual report are solely for the convenience of
the reader and are, unless otherwise indicated, calculated utilizing the noon
buying rate at December&nbsp;31, 2002, which was Ps.10.43 per U.S.$1.00 as reported
by the Federal Reserve Bank of New York. Sums may not add due to rounding.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion and analysis is intended to facilitate an
understanding and assessment of significant changes and trends in our
historical consolidated results of operations and financial condition and
factors affecting our financial resources. It should be read in conjunction
with the audited consolidated financial statements as of December&nbsp;31, 2001 and
2002 and for the years ended December&nbsp;31, 2000, 2001 and 2002 and related
notes.
</FONT>
<P align="center"><FONT size="2">35</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These consolidated financial statements, which appear elsewhere in this
annual report, have been prepared in accordance with Mexican GAAP, which
differs in certain significant respects from U.S. GAAP. See note 22 to our
consolidated financial statements for a description of the principal
differences between Mexican GAAP and U.S. GAAP applicable to us. Note 22 to
our financial statements also provides a reconciliation to U.S. GAAP of our net
losses for the years ended December&nbsp;31, 2000, 2001 and 2002 and of
stockholders&#146; equity as of December&nbsp;31, 2000, 2001 and 2002.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements have been prepared in accordance with Bulletin
B-10, &#147;Recognition of the Effects of Inflation on Financial Information,&#148; as
amended, issued by the Mexican Institute of Public Accountants (&#147;MIPA&#148;), which
provides guidance for the recognition of the effects of inflation and
translation of foreign currency transactions.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We restate our income statement to reflect the purchasing power of the
peso as of the most recent reporting date (December&nbsp;31, 2002), using a
restatement factor derived from the change in the national consumer price index
from the month in which the transaction occurred to the most recent year-end.
Except where otherwise indicated, financial data for all periods in the
consolidated financial statements and throughout this annual report have been
restated in constant pesos as of December&nbsp;31, 2002. References in this annual
report to &#147;real&#148; amounts are to inflation-adjusted pesos and references to
&#147;nominal&#148; amounts are to unadjusted historical pesos. In calendar years 2000,
2001 and 2002, the rates of inflation in Mexico, as measured by changes in the
Mexican national consumer price index, were 9.0%, 4.4% and 5.7%, respectively.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bulletin B-12, issued by the MIPA, specifies the appropriate presentation
of the statement of changes in financial position when the financial statements
have been restated in constant monetary units. Bulletin B-12 identifies the
sources and applications of resources as the differences between beginning and
ending financial statement balances in constant monetary units. The Bulletin
also requires that monetary and foreign exchange gains and losses not be
treated as non-cash items in the determination of resources provided by
operations.
</FONT>

<P align="left"><FONT size="2"><B>Recent developments</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;18, 2003, our board of directors elected Mr.&nbsp;Ren&#233; S. Sagastuy as
our new chief executive officer. Mr.&nbsp;Sagastuy was our Chief
Operating Officer for the past two years and replaced Mr.&nbsp;Fulvio del Valle who served
as our chief executive officer for the same period of time. See &#147;Item&nbsp;3. Key
Information&#151;D. Risk Factors&#151;We have experienced significant turnover in our
executive ranks which has affected our ability to develop and execute our
business strategies,&#148; for a description of risks associated with our
significant turnover at the executive level. For more information with respect
to our management please see &#147;Item&nbsp;6. Director, Senior Management and
Employer&#151;A. Directors and Senior Management.&#148;
</FONT>

<P align="left"><FONT size="2"><B>Debt restructuring and recapitalization</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;29, 2002, we consummated a debt restructuring and
recapitalization of Maxcom. The purpose was to reduce our debt service burden,
improve our liquidity and attract additional investment, in order to continue
the buildout of our infrastructure and the growth of our business. The
following actions were taken pursuant to the debt restructuring and
recapitalization:
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Holders tendered an aggregate of U.S.$259,410,000 in
principal amount of 13 3/4% series B senior notes due 2007 (which
we refer to in this annual report as the &#147;old notes&#148;) in exchange
for an aggregate of (i)&nbsp;U.S.$165,078,150 in principal amount of new
senior notes (which we refer to in this annual report as the &#147;new
notes&#148;) bearing 0% interest through March&nbsp;1, 2006, and 10% annual
interest in the last year, and (ii)&nbsp;26,459,820 series N2 convertible
preferred stock, with an initial liquidation preference of
U.S.$0.4927 per share and limited voting rights, in the form of
Mexican Trust Certificates known as &#147;CPOs,&#148; which represented in the
aggregate 15.2% of our then total capital stock;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Existing and new shareholders invested U.S.$66.2&nbsp;million and
received preferred stock (more fully described in &#147;Item&nbsp;7. Major
Shareholders and Related Party Transactions&#151;A. Major</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">36</FONT>

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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">shareholders and share ownership&#151;The capital restructuring&#148;), which represented
in the aggregate 77.0% of our then total capital stock;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Our capital structure was restructured as more fully
described in &#147;Item&nbsp;7. Major Shareholders and Related Party
Transactions&#151;A. Major shareholders and share ownership&#151;The capital
restructuring.&#148;</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April 2002, we cancelled U.S.$25,000,000 in principal amount of old
notes we had purchased in the secondary market prior to the debt restructuring.
In addition, on July&nbsp;25, 2002, we completed an additional exchange of
U.S.$4,000,000 in aggregate principal amount of old notes under the same terms
and conditions of the exchange offer consummated on April&nbsp;29, 2002. As of
December&nbsp;31, 2002, 95.8% of the total old notes were exchanged and or
cancelled, and new notes on an aggregate principal amount of U.S.$167,623,590
remained outstanding. Old notes representing an aggregate principal amount of
U.S.$11,590,000 remained outstanding as of the same date.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the debt restructuring, we will save U.S.$38.1&nbsp;million in
interest expense on an annualized basis from the date of issuance of the new
notes through February&nbsp;28, 2006. From March&nbsp;1, 2006 until March&nbsp;1, 2007, which
is the maturity date of the new notes, we will save U.S.$20.5&nbsp;million in
interest expense.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, as a result of the debt restructuring and in accordance with
Mexican corporate law, we recognized a capital stock issuance premium in an
aggregate amount of U.S.$82,548,690. This premium, as well as other items of
the capital stock, was applied to partially offset prior year&#146;s accumulated
deficits in capital stock at year end 2002.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>A.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Results of operations</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Overview of Maxcom</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a growing facilities-based telecommunications company operating in
the competitive local exchange carrier market in Mexico. We are focused on
developing our network and support infrastructure required to provide local as
well as long distance and other value-added services to targeted small and
medium-sized business and residential customers within our concession areas.
We position ourselves as a single-source provider of telecommunications
services to our customers.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We commenced commercial operations on May&nbsp;1, 1999 and currently provide
last-mile connectivity to small and medium-sized business and residential
customers in Mexico City and the cities of Puebla and Quer&#233;taro. In addition
to our existing local and long distance services, we offer value-added services
such as digital high-speed data connectivity, dial-up Internet access and other
broadband services.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated in February 1996 to take advantage of business
opportunities arising out of the liberalization of Mexico&#146;s telecommunications
industry. In February 1997, we were awarded Mexico&#146;s first competitive
wireline local and long distance telephony concession, covering the Federal
District of Mexico and over 100 cities and towns in the Gulf region for local
service and the whole nation for long distance service. This concession has a
term of 30&nbsp;years. Our concession was expanded in September 1999 to cover most
of the greater Mexico City area, and a wider area within the Gulf region. In September
2001, our wireline local telephony concession was expanded to cover all of
Mexico.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were also awarded seven nationwide point-to-point and three regional
point-to-multipoint microwave concessions in October 1997, each for 20&nbsp;years.
</FONT>
<P align="left"><FONT size="2"><B>Devaluation and inflation</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;20, 1994, the Mexican government responded to exchange rate
pressures by increasing the upper limit of the then existing free market
peso/U.S. dollar exchange rate band by 15% and, two days later, by eliminating
the band to allow the peso to fluctuate freely against the U.S. dollar. This
resulted in a major
</FONT>
<P align="center"><FONT size="2">37</FONT>
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<P align="left"><FONT size="2">devaluation of the peso relative to the U.S. dollar. Where
the noon buying rate had been Ps.3.45 per U.S.$1.00 on December&nbsp;19, 1994, by
December&nbsp;31, 1994 the noon buying rate had fallen to Ps.5.00 per U.S.$1.00,
representing a 44.9% devaluation. The peso continued to decline against the
U.S. dollar during 1995, closing at a noon buying rate of Ps.7.74 per U.S.$1.00
on December&nbsp;31, 1995, which represented a 54.8% devaluation relative to the
U.S. dollar for the year.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican economy began to recover in 1996 and 1997, as exchange rates
stabilized, inflation decreased and real gross domestic product grew by 5.3%
and 6.8%, respectively. However, the financial crises in Asia and Russia,
together with the weakness in the price of oil in 1998, which is a significant
source of revenue for the Mexican government, contributed to renewed weakness
in the peso, which devalued 22.7% relative to the U.S. dollar. From 1999 to
2000, the peso-to-dollar exchange rate remained relatively stable. In 2001,
the peso-to-dollar exchange rate showed a slight recovery of 4.8% from Ps.9.60
on December&nbsp;31, 2000 to Ps.9.14 on December&nbsp;31, 2001. However, in 2002, the
peso devalued 13.9% relative to the U.S. dollar. In the first three months of
2003, the peso devalued 3.4% relative to the U.S. dollar.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Peso devaluations contributed to sharp increases in inflation. Inflation,
which had been 7.1% in 1994, increased to 52.0% and 27.7% in 1995 and 1996,
respectively. After a reduction to 15.7% in 1997, inflation was 18.6% in 1998.
In 1999, 2000 and 2001, the inflation rate decreased to 12.3%, 9.0% and 4.4%,
respectively. In 2002, the inflation rate was 5.7%.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The general economic conditions in Mexico resulting from a devaluation of
the peso and the resulting inflation may have a negative impact on our results
of operations, primarily as a result of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the increase in the peso-carrying costs of our U.S.
dollar-denominated debt and capital expenditure requirements;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the ensuing decrease in the purchasing power of Mexican
consumers, which results in a decrease in the demand for telephony
services; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">our inability, due to competitive pressures, to increase our
prices in line with inflation.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Capitalization of preoperating expenses</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We commenced commercial operations on May&nbsp;1, 1999. As permitted under
Mexican GAAP, during our preoperating stage, we capitalized all of our general
and administrative expenses and our net integral cost of financing.
Accordingly, our financial statements do not include consolidated statements of
operations for the periods from February&nbsp;28, 1996 (our date of incorporation)
to April&nbsp;30, 1999.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning on May&nbsp;1, 1999, we were required to begin to amortize all
previously capitalized pre-operating cost. These capitalized preoperating
expenses, net, which amounted to Ps.266.4&nbsp;million at December&nbsp;31, 2000,
Ps.234.5&nbsp;million at December&nbsp;31, 2001 and Ps.204.4&nbsp;million at December&nbsp;31,
2002, are amortized on a straight-line basis for a period not exceeding ten
years.
</FONT>
<P align="left"><FONT size="2"><B>Voice, data and wholesale revenues</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning with the third quarter of 2002, we itemize voice, data and
wholesale service revenues in our reporting.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voice services are our core business. Revenues from voice services include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">installation charges of voice lines;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">monthly fees for the rental of voice lines, which include,
depending on the product, a certain number of free local calls;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">38</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">usage charges of voice lines, which can be local calls above
those already included in the monthly fees, long distance minutes,
as well as minutes to mobile numbers under the Calling Party Pays
modality; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">charges relating to value-added services such as voice mail,
call waiting, call forwarding, three-way calling and caller
identification.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We began to offer data services on a full basis in July 2002. Revenues
from data services include: Internet dial-up access, ADSL, dedicated Internet
access and digital private lines. We charge for these services on a bandwidth
basis.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Wholesale service revenues are related basically to the sale of bulk
minutes where the tariff per minute depends on the volume of traffic.
Customers include high-usage customers, Internet service providers and carriers
with whom we do not have &#147;bill &#038; keep&#148; agreements (such as long distance and
mobile carriers). We also include in this group other miscellaneous revenues.
</FONT>

<P align="left"><FONT size="2"><B>Results of operations</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, selected
statement of operations data calculated in accordance with Mexican GAAP and
expressed as a percentage of net revenue:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Year ended December 31</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating cost and expenses:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Network operating costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling, general and administrative expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">124</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">137</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">80</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">76</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">85</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">59</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total operating cost and expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">241</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">270</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">178</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">141</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">170</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">78</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Integral cost of financing</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">84</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">58</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Nonrecurring charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other expense, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">224</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">208</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">137</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2"><B>Year ended December&nbsp;31, 2002 compared to year ended December&nbsp;31, 2001</B>
</FONT>

<P align="left"><FONT size="2"><I>Net revenues</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net revenues primarily include monthly fees, usage fees, installation
charges, interconnection fees and the sale of telephone sets. See note 4.m. to
the consolidated financial statements included in this annual report for an
explanation of how we recognize revenues.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net revenues increased 61.3% in 2002 as compared to 2001, from Ps.
332.3&nbsp;million in 2001 to Ps.535.9&nbsp;million in 2002.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voice revenues increased by 125.5%, from Ps.213.1&nbsp;million in 2001 to
Ps.480.6&nbsp;million in 2002. This increase was primarily due to a more than
doubling of the number of average voice lines in service from 45,701 in 2001 to
96,521 in 2002, as we continued the buildout of our network infrastructure and
had more voice lines available. The increase in voice lines produced a 132.3%
increase in monthly fee revenues (from Ps.90.6&nbsp;million in 2001 to Ps.212.3
million in 2002) and a 132.0% increase in overall usage fees (from Ps.100.0
million in 2001 to Ps.231.9&nbsp;million in 2002).
</FONT>

<P align="center"><FONT size="2">39</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Wholesale revenues decreased by 61.8%, from Ps.119.2&nbsp;million in 2001 to
Ps.45.6&nbsp;million in 2002. This decrease was primarily due to (i)&nbsp;a reduction in
per-minute tariffs as a result of competitive pressures, and (ii)&nbsp;a 24.6%
decrease in the number of average wholesale lines (from 6,745 lines in 2001 to
5,085 lines in 2002) as a result of our strategy of focusing our sales efforts
in our core business rather than giving in to competitive pressures in this
market.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We started reporting revenues from data services in July 2002, when this
business became more relevant. Prior to that date, revenues from data services
were included under voice revenues. During 2002, revenues from data services
were Ps.9.7&nbsp;million.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents a breakdown of our revenues by source for
2001 and 2002:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Year ended December 31</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="7"><FONT size="1"><B>(in millions)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Voice<SUP>(1)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">213.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">480.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Data</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Wholesale</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">119.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">332.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">535.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><SUP>(1)</SUP></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes revenues only from July 2002. Data service revenues were
minimal before such date and were recorded under voice service revenues.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents a breakdown of our average revenue per line
(also known as ARPU) for 2001 and 2002.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="42%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="13"><FONT size="1"><B>ARPU</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="13"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>%</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="13"><FONT size="1"><B>(in U.S. dollars)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Business</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Monthly charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">25.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">23.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Usage</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">51.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Subtotal</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">75.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Non-recurring</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(24</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total business</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">75.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">79.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Residential</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Monthly charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">18.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">17.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Usage</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Subtotal</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Non-recurring</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(51</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total residential</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">37.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">33.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Monthly charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">20.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">18.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Usage</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Subtotal</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Non-recurring</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(45</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">48.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">42.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We calculate ARPU by dividing the total voice revenues for a given period
of time by the average number of voice lines in service during such period.
ARPU is a widely used standard in the telecommunications industry
</FONT>

<P align="center"><FONT size="2">40</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">and is used
to evaluate the performance of the voice business. Revenues from data and
wholesale services are reported separately and do not contribute to ARPU.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We calculate voice lines ARPU for our residential and business lines.
Overall ARPU is affected by our business/residential line mix as business lines
tend to generate more ARPU than residential lines.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Business ARPU increased 5.5% to U.S.$80 in 2002 from U.S.$75 in 2001, as a
result of a 17.5% increase in usage charges as a consequence of a higher number
of local, long distance and mobile outbound calls per line. This increase was
partially offset by: (i)&nbsp;a 23.8% reduction in installation fees per line, as we
waived installation fees in many cases during 2002 due to competitive
pressures; and (ii)&nbsp;an 8.6% decrease in monthly fees related to a change in
product mix, given that each product has different rates.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Residential ARPU decreased 10.9% to U.S.$33 in 2002 from U.S.$37 in 2001.
The decrease was mainly due to a 51.1% decrease in installation fees due to
waivers of such fees granted as a result of competitive pressures.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents a breakdown of our lines by type of customer
at December&nbsp;31, 2001 and 2002 and the percentage variation:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>At December 31</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>%</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Voice lines:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Business lines</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Residential lines</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">98,557</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">77</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Wholesale lines</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,690</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(21</FONT></TD>
    <TD nowrap><FONT size="2">)%</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total lines</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">77,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">125,231</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><I>Operating costs and expenses</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating costs and expenses include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">network operating costs which, until December&nbsp;31, 2000, were
comprised of long distance reselling costs, circuit leasing costs
and interconnection costs to carriers other than Telmex and,
thereafter, also included network technical expenses, installation
expenses, when applicable and disconnection expenses;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">selling, general and administrative expenses, which primarily
included salaries, wages and benefits; consulting fees, which
primarily related to temporary management and consulting services,
executive recruiting consultants and general legal and accounting
fees; leasing costs which primarily related to our headquarters,
warehouses, and other facilities; marketing expenses which primarily
related to the implementation of our branding campaign, general
advertising and promotions; and provisioning for bad debt; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">depreciation and amortization mainly related to preoperating
expenses, frequency rights, telephone network systems and equipment
and intangibles.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating costs and expenses were Ps.954.4&nbsp;million in 2002, a 6.4%
increase as compared to Ps.897.2&nbsp;million in 2001. This increase was primarily
due to:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a Ps.49.1&nbsp;million, or 30.9%, increase in network operating
costs resulting mainly from (i)&nbsp;a Ps.42.0&nbsp;million increase in
interconnection costs associated with significant increases in
local-to-mobile and long distance traffic, even as interconnection
tariffs for long distance decreased by an average of 23.3%, and (ii)
Ps.6.7&nbsp;million in costs related to new services launched during 2002
such as AsistelMax and Internet access. These increases were
partially offset by a Ps.10.3&nbsp;million, or 26.5%, reduction in
installation expenses (we record installation expense only when we
bill the</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">41</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">charge on installation fees, and during 2002 we waived
installation fees in many instances due to competitive pressures).
Through December&nbsp;31, 2002, when we waived installation costs to our
customers, installation costs were capitalized and amortized on a
straight-line basis over a period of 20&nbsp;years. Beginning in 2003,
when we will waive installation costs, we capitalize and amortize them on
a straight-line basis over a period equal to the remaining original
term of the microwave concessions, which expire in October 2017; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a Ps.33.8&nbsp;million, or 11.9%, increase in depreciation and
amortization related to a higher fixed asset base in 2002.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These increases were offset in part by a Ps.25.7&nbsp;million, or 5.7%,
decrease in selling, general and administrative expenses primarily due to the
implementation of cost-reduction measures such as (i)&nbsp;a Ps.37.7&nbsp;million, or
15.2%, reduction in salaries, wages and benefits through a reduction in
headcount, (ii)&nbsp;a Ps.10.7&nbsp;million decrease in general expenses and (iii)&nbsp;a
Ps.2.2&nbsp;million reduction in advertising expenses. We also experienced a
Ps.33.1&nbsp;million reduction in external advisors expenses due to the fact that in
2001 we had significant executive recruiting fees and had to rely on external
advisors while certain executive offices were vacant.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These savings were offset in part by (i)&nbsp;Ps.26.4&nbsp;million in costs related
to severance payments related to the reduction in headcount, (ii)&nbsp;a Ps.18.7
million increase in office and warehouse leasing costs, (iii)&nbsp;a Ps.7.3&nbsp;million
increase in sales commissions and (iv)&nbsp;a Ps.4.0&nbsp;million increase in bad debt
provisioning.
</FONT>
<P align="left"><FONT size="2"><I>Integral cost of financing</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican GAAP and in accordance with Bulletin B-10, we are required
to quantify all financial effects of operating and financing the business under
inflationary conditions. For presentation purposes, &#147;integral cost of
financing&#148; refers to the combined financial effects of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">net interest expense and interest income;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">net foreign exchange gains or losses;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">net gains or losses on monetary position; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">gain on repurchase of debt.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net foreign exchange gains or losses reflect the impact of changes in
foreign exchange rates on assets and liabilities denominated in currencies
other than pesos. A foreign exchange loss arises if a liability is denominated
in a foreign currency which appreciates relative to the peso between the time
the liability is incurred and the date it is repaid, as the appreciation of the
foreign currency results in an increase in the amount of pesos which must be
exchanged to repay the specified amount of the foreign currency liability.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The gain or loss on monetary position refers to the gains and losses
realized from holding net monetary assets or liabilities and reflects the
impact of inflation on monetary assets and liabilities. For example, a gain on
monetary position results from holding net monetary liabilities in pesos during
periods of inflation, as the purchasing power of the peso declines over time.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our integral cost of financing was Ps.309.2&nbsp;million in 2002, a 427.0%
increase as compared to Ps.58.7&nbsp;million in 2001. The increase in integral cost
of financing was primarily due to:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;a Ps.302.6&nbsp;million increase in foreign exchange loss as a
consequence of the effect of the devaluation of the peso as compared to
the dollar in 2002 on our dollar-denominated debt,</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;a Ps.128.2&nbsp;million gain associated with the early
extinguishment of U.S.$25.0&nbsp;million of debt in 2001, and</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">42</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;a Ps.76.7&nbsp;million decrease in interest income as a result of
a lower average cash position and lower interest rates during 2002.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These factors of financing costs were partially offset by a Ps.13.3
million gain in net monetary position.
</FONT>

<P align="left"><FONT size="2"><I>Asset tax</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded Ps.6.8&nbsp;million in asset taxes in 2002 as compared to Ps.0.8
million in asset taxes in 2001. The difference is primarily due to a
significant increase in our asset base in 1998, when we commenced the buildout
of our network, as compared to 1997, which are the respective years considered
for purposes of computation of the asset tax. Asset taxes are computed on the
asset base existing four years before the current tax year.
</FONT>

<P align="left"><FONT size="2"><B>Year ended December&nbsp;31, 2001 compared to year ended December&nbsp;31, 2000</B>
</FONT>

<P align="left"><FONT size="2"><I>Net revenues</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net revenues increased 13.2% in 2001 as compared to 2000, from
Ps.293.6&nbsp;million in 2000 to Ps.332.3&nbsp;million in 2001. This increase was
primarily due to a 77.3% increase in the average number of lines in service
from 25,222 in 2000 to 44,730 in 2001. The increase in net revenues was
partially offset by a 36.2% overall decrease in ARPUs from U.S.$97 in 2000 to
U.S.$62 in 2001.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The decrease in ARPUs was primarily due to:
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a significant shift in our customer mix towards residential
lines, which carry a lower ARPU, from 35% of total lines at December
31, 2000 to 71% at December&nbsp;31, 2001; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a lower percentage of high-usage customers, who carry high
ARPUs, but low profit margins, which resulted from the
implementation of our strategy to shift our focus from less
profitable lines. High-usage customers represented 55.2% of our net
revenues in 2000 as compared to 29.1% in 2001.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These two factors were offset in part by (i)&nbsp;a 6% increase in the monthly
fee we charge our residential customers beginning in September 2001; and (ii)
the adoption in July 2001 of a policy whereby we generally no longer waive
installation charges to most of our residential customers.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents a breakdown of our lines by type of customer
at December&nbsp;31, 2000 and 2001 and the percentage variation:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>At December 31</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>%</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Business lines</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Residential lines</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">495</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total lines</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,910</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">77,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">190</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2"><I>Operating costs and expenses</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating costs and expenses were Ps.897.2&nbsp;million in 2001, a 27.0%
increase as compared to Ps.706.2&nbsp;million in 2000. This increase was primarily
due to:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the 77.3% increase in the average number of lines in 2001 as
compared to 2000, which resulted in a Ps.18.6&nbsp;million increase in
interconnection costs, a Ps.23.6&nbsp;million increase in sales
commissions, and Ps.16.8&nbsp;million increase in maintenance expenses;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">43</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Ps.63.2&nbsp;million increase in one-time charges related to
consulting and executive recruiting fees, executive compensation and
incentive expenses and excess labor-related taxes; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Ps.43.3&nbsp;million increase related to installation expenses and
the recognition of bad debt allowance and inventory obsolescence
reserve.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These two factors were partially offset by a Ps.59.2&nbsp;million decrease in
long distance reselling costs, primarily due to improved traffic management
policies.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization increased by Ps.61.9&nbsp;million, or 28%,
primarily because of a larger asset base.
</FONT>
<P align="left"><FONT size="2"><I>Integral cost of financing</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our integral cost of financing before the gain on repurchase of debt was
Ps.186.8&nbsp;million in 2001, a 24.0% decrease as compared to Ps.245.7&nbsp;million in
2000. The decrease in integral cost of financing was primarily due to a
foreign exchange gain during 2001 of Ps.96.0&nbsp;million as compared to a loss of
Ps.11.8&nbsp;million during 2000. This gain is a consequence of the 5.0%
appreciation of the peso as compared to the U.S. dollar during 2001. In
addition, we recorded a gain of Ps.128.2&nbsp;million in 2001 due to the repurchase
of U.S.$25.0&nbsp;million (face value) of old notes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These two factors were partially offset in part by a 24.9% decrease in
interest income from Ps.108.1&nbsp;million in 2000 to Ps.81.1&nbsp;million in 2001, as a
result of a lower cash position combined with lower interest rates.
</FONT>
<P align="left"><FONT size="2"><I>Nonrecurring charges</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded Ps.65.8&nbsp;million in nonrecurring charges primarily related to
the write-off of fixed assets and installation expenses. Our management
evaluated and wrote off certain assets and recognized the cost of an overdue
maintenance contract, which no longer are useful to our revised business
objectives. In addition, installation costs that were originally capitalized
were reversed to the extent they related to customers who are no longer part of
our customer base. See note 14 to our consolidated financial statements.
</FONT>
<P align="left"><FONT size="2"><I>Asset tax</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded Ps.0.8&nbsp;million in asset taxes in 2001. According to Mexican
tax law, we were not liable for asset taxes in our first two years of
operations.
</FONT>
<P align="left"><FONT size="2"><B>Principal differences between Mexican GAAP and U.S. GAAP</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial information included in this annual report is prepared and
presented in accordance with Mexican GAAP, which differ in certain significant
respects from U.S. GAAP. See note 22 to the consolidated financial statements
for a description of the principal differences between Mexican GAAP and U.S.
GAAP applicable to us; for a reconciliation of our net income and stockholders&#146;
equity to U.S. GAAP as of December&nbsp;31, 2001 and 2002 and for each of the two
years then ended; and for a description of the principal differences in
classification between the statements of changes in financial position under
Mexican GAAP and the requirements under U.S. GAAP for statements of cash flows.
</FONT>
<P align="left"><FONT size="2"><B>Recent United States accounting pronouncements</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June 2001 the Financial Accounting Standards Board (&#147;FASB&#148;) issued SFAS
No.&nbsp;143 &#147;Accounting for Obligations Associated with the Retirement of
Long-Lived Assets.&#148; The objectives of SFAS 143 are to establish accounting
standards for the recognition and measurement of tangible long-lived asset
retirement obligations and their associated asset retirement costs. SFAS 143
is effective for fiscal years beginning after June&nbsp;30, 2002. The Company does
not expect that the adoption of this standard will have a material impact on
its financial position or results of operations.
</FONT>
<P align="center"><FONT size="2">44</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April of 2002, the FASB issued SFAS No.&nbsp;145 &#147;Rescission of SFAS No.&nbsp;4,
44, and 64, Amendment of SFAS 13, and Technical Corrections.&#148; As a result,
companies will no longer be allowed to classify gains and losses from
extinguishments of debt as extraordinary items unless they meet the criteria of
APB No.&nbsp;30. Gain and losses from extinguishments of debt that have been
classified as extraordinary in prior years that do not meet the criteria of APB
30 shall be reclassified on a go forward basis. In addition, SFAS 145
requires that capital leases that are modified so that the resulting lease
agreement is classified as an operating lease be accounted for under the
sale-leaseback provisions of SFAS 28 or 98, as applicable, instead of SFAS 13.
The provisions of this statement with regard to SFAS 4 will be effective for
fiscal years beginning after May&nbsp;15, 2002, and those for SFAS 13 will be
effective for transactions occurring after May&nbsp;15, 2002. The Company has
adopted SFAS 145 for the fiscal year beginning December&nbsp;31, 2002, and
accordingly the pre-tax gain of Ps. 121,249 regarding the extinguishment of
U.S. $25.0&nbsp;million during 2001 in debt through a repurchase has
not been classified as
an extraordinary gain.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June
2002, the FASB issued SFAS No.&nbsp;146, &#147;Accounting for Costs Associated
with Exit or Disposal Activities.&#148; This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF)&nbsp;Issue No.&nbsp;94-3, &#147;Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
on Activity (Including Certain Costs incurred in Restructuring).&#148; EITF Issue
No.&nbsp;94-3 required accrual of liabilities related to exit and disposal
activities at a plan (commitment)&nbsp;date. SFAS 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred. The provisions of this statement are effective for exit
or disposal activities that are initiated after December&nbsp;31, 2002. The Company
does not expect that the adoption of this standard will have a material impact
on its financial position or results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FASB Interpretation No.&nbsp;45, &#147;Guarantor&#146;s Accounting and Disclosure
Requirements for Guarantees,&#148; (FIN 45) was issued on November 2002. FIN 45
requires that a liability be recognized at the inception of certain guarantees
for the fair value of the obligation, including the ongoing obligation to stand
ready to perform over the term of the guarantee. Guarantees, as defined in FIN
45, include contracts that contingently require the Company to make payments to
a guaranteed party based on changes in an underlying asset that is related to a
liability or equity security of the guaranteed party, performance guarantees,
indemnification agreements or indirect guarantees of indebtedness of others.
This new accounting is effective for certain guarantees issued or modified
after December&nbsp;31, 2002. In addition, FIN 45 requires certain additional
disclosures. The Company does not expect that the adoption of this standard
will have a material impact on its financial position or results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SFAS 148, &#147;Accounting for Stock-Based Compensation-Transition and
Disclosure &#151; an amendment of SFAS No.&nbsp;123,&#148; was issued on December&nbsp;31, 2002.
SFAS 148 provides alternative methods of transition for a voluntary change to
the fair value-based method of accounting for stock-based employee
compensation. SFAS 148 also amends the disclosure requirements of SFAS 123,
&#147;Accounting for Stock-Based Compensation,&#148; to require
prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The Company does not expect
that the adoption of this standard will have a material impact on its financial
position or results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2003, the FASB issued Interpretation 46 &#147;Consolidation of
Variable Interest Entities, an interpretation of ARB No.&nbsp;51&#148; (FIN 46). FIN 46
provides a new framework for identifying variable interest entities (VIEs) and
determining when a company should include the assets, liabilities,
non-controlling interests and results of activities of a VIEs created after
January&nbsp;31, 2003 and is effective beginning in the third quarter of 2003 for
VIEs created prior to issuance of the interpretation. The Company is
presently evaluating the impact, if any, that this new standard will have on
its financial position or results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April 2003, the FASB issued SFAS No.&nbsp;149, &#147;Amendment of Statement 133
on Derivative Instruments and Hedging Activities.&#148; This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
133, &#147;Accounting for Derivative Instruments and Hedging Activities.&#148; This
statement is effective prospectively for contracts entered into or modified
after June&nbsp;30, 2003 and prospectively for hedging relationships designated
after June&nbsp;30, 2003. Management is still assessing whether this statement will
have a material effect on the Company&#146;s financial position or results of
operations.
</FONT>
<P align="center"><FONT size="2">45</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2003, the FASB issued SFAS No.&nbsp;150, &#147;Accounting For Certain
Financial Instruments with Characteristics of Both Liabilities and Equity.&#148;
This statement improves the accounting for certain financial instruments that,
under previous guidance, issuers could account for as equity, and requires that
these instruments be classified as liabilities in statements of financial
position. This statement is effective prospectively for financial instruments
entered into or modified after May&nbsp;31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after June&nbsp;15, 2003. This
statement shall be implemented by reporting the cumulative effect of a change
in an accounting principle for financial instruments created before the
issuance date of the statement and still existing at the beginning of the
interim period of adoption. Management is still assessing whether this
statement will have a material effect on the Company&#146;s financial position or
results of operations.
</FONT>
<P align="left"><FONT size="2"><B>Recent Mexican accounting pronouncements</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 2001, the MIPA issued the revised Bulletin C-9, &#147;Liabilities,
Provisions, Contingent Assets and Liabilities and Commitments&#148; (&#147;Bulletin
C-9&#148;), which establishes a methodology for valuation, presentation and
disclosure of liabilities and provisions, as well as for valuation and
disclosure of contingent assets and liabilities, and for disclosure of
commitments. The revised Bulletin C-9 states that (i)&nbsp;all contingent assets
that have a practically true realization must be accounted and disclosed in the
financial statements; (ii)&nbsp;contingent assets that have a probable realization
cannot be accounted for in the financial statements, but must be disclosed; and
(iii)&nbsp;contingent assets that do not have a probable realization cannot be
accounted for in the financial statements and are not required to be disclosed.
Bulletin C-9 requires disclosure of committed amounts when it represents
significant fixed asset additions. The provisions of Bulletin C-9 are required
to be applied beginning on January&nbsp;1, 2003, although early adoption is
recommended.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, in December 2001, the MIPA issued revised Bulletin C-8,
&#147;Intangible Assets&#148; (&#147;Bulletin C-8&#148;), which defines intangible assets as costs
incurred and rights or privileges acquired that will generate a future economic
benefit. Revised Bulletin C-8 states that preoperating costs should be expensed
as a period cost, unless they could be classified as development costs.
Bulletin C-8 requires that intangible assets, including previously existing
intangible assets, with indefinite useful lives should not be amortized, but
should be tested for impairment annually. Intangible assets with finite useful
lives should be amortized over their respective useful lives. The provisions
of Bulletin C-8 are required to be applied beginning on January&nbsp;1, 2003,
although early adoption is recommended.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not expect that the adoption of the above-mentioned accounting
pronouncements will have a significant impact on our financial
position or results of operations.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>B.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Liquidity and capital resources</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Financing sources and liquidity</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We financed our start-up costs through capital contributions and vendor
financing, as described below:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">U.S.$100.0&nbsp;million vendor financing facility from Nissho Iwai
American Corporation, bearing an annual interest rate of three-month
LIBOR plus 4.15% due August&nbsp;12, 2005. Funds from this facility were
used to purchase Lucent Technologies equipment. We used U.S.$72.3
million of proceeds from the sale of the old notes on March&nbsp;17, 2000
to repay all amounts outstanding in full and terminated this
facility.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">U.S.$20.0&nbsp;million vendor financing facility from Nissho Iwai
American Corporation, bearing an annual interest rate of three-month
LIBOR plus 4.15% due August&nbsp;12, 2005. Funds from this facility were
used to purchase NEC equipment. We used U.S.$13.9&nbsp;million of
proceeds from the sale of the old notes on March&nbsp;17, 2000 to repay
all amounts outstanding in full and terminated this facility.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">U.S.$18.7&nbsp;million vendor financing from Hewlett Packard de
M&#233;xico, bearing an annual interest rate of three-month LIBOR plus
4.15% due November&nbsp;25, 2005. We used U.S.$16.3&nbsp;million of</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">46</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2"><FONT size="2">&nbsp;</FONT></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">proceeds
from the sale of the old notes on March&nbsp;17, 2000 to repay all
amounts outstanding in full and terminated this facility.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">U.S.$70.0&nbsp;million raised from private equity investors since
inception through May 1998.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;17, 2000, we sold the old notes bearing an annual interest rate
of 13 3/4% due April&nbsp;1, 2007 in an aggregate principal amount of U.S.$300.0
million. Our debt service relating to the old notes for the first two years was
paid with U.S.$77.9&nbsp;million of the net proceeds of the offering of the old
notes that were deposited in the interest escrow account.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September 2000, our principal shareholders invested an aggregate of
U.S.$35.0&nbsp;million of new capital. This capital contribution was used primarily
to fund capital expenditures and working capital related to the buildout of our
network infrastructure.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2001, we financed our operations and capital expenditures with
remaining funds from the issuance and sale of the old notes and with the
remaining funds from the U.S.$35.0&nbsp;million capital contribution completed in
September 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;29, 2002, we consummated a debt restructuring and
recapitalization of Maxcom. The purpose was to reduce our debt service burden,
improve our liquidity and attract additional investment, in order to continue
the buildout of our infrastructure and the growth of our business. The
following actions were taken pursuant to the debt restructuring and
recapitalization:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Holders tendered an aggregate of U.S.$259,410,000 in
principal amount of old notes in exchange for an aggregate of (i)
U.S.$165,078,150 in principal amount of new notes bearing 0%
interest through March&nbsp;1, 2006, and 10% annual interest in the last
year, and (ii)&nbsp;26,459,820 series N2 convertible preferred stock,
with an initial liquidation preference of U.S.$0.4927 per share and
limited voting rights, in the form of CPOs, which represented in the
aggregate 15.2% of our then total capital stock;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Existing and new shareholders invested U.S.$66.2&nbsp;million and
received preferred stock (more fully described in &#147;Item&nbsp;7. Major
Shareholders and Related Party Transactions&#151;A. Major shareholders
and share ownership&#151;The capital restructuring&#148;), which represented
in the aggregate 77.0% of our then total capital stock;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Our capital structure was restructured as more fully
described in &#147;Item&nbsp;7. Major Shareholders and Related Party
Transactions&#151;A. Major shareholders and share ownership&#151;The capital
restructuring.&#148;</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April 2002, we cancelled U.S.$25,000,000 in principal amount of old
notes we had purchased in the secondary market prior to the debt restructuring.
In addition, on July&nbsp;25, 2002, we completed an additional exchange of
U.S.$4,000,000 in aggregate principal amount of old notes under the same terms
and conditions of the exchange offer consummated on April&nbsp;29, 2002. As of
December&nbsp;31, 2002, 95.8% of the total old notes were exchanged and or
cancelled, and new notes on an aggregate principal amount of U.S.$167,623,590
remained outstanding. Old notes representing an aggregate principal amount of
U.S.$11,590,000 remained outstanding as of the same date.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the debt restructuring, we will save U.S.$38.1&nbsp;million in
interest expense on an annualized basis from the date of issuance of the new
notes through February&nbsp;28, 2006. From March&nbsp;1, 2006 until March&nbsp;1, 2007, which
is the maturity date of the new notes, we will save U.S.$20.5&nbsp;million in
interest expense.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that funds from operating activities may not be sufficient to
meet our new, reduced debt service and our working capital and capital
expenditure needs through 2006, and that we may need additional financing to
meet these requirements. We are constantly looking for new sources of funds.
However, we cannot assure you that we will have sufficient resources and that,
if needed, any financing will be available in the future or
</FONT>

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<P align="left"><FONT size="2">on terms acceptable to us, in which case we will be unable to service our debt
and operate as a viable company. In addition, our ability to incur additional
indebtedness is restricted by the terms of the indenture governing the new
notes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future operating performance and ability to service and repay the new
notes and the outstanding old notes, will be subject to future economic and
competitive conditions and to financial, business and other factors, many of
which are beyond our control.
</FONT>
<P align="left"><FONT size="2"><B>Indebtedness</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our consolidated debt at December&nbsp;31, 2002 was Ps.1,848.1&nbsp;million
(including Ps.2.7&nbsp;million of debt discount related to the issuance of
detachable warrants), of which all was long-term debt. All of our consolidated
debt outstanding at December&nbsp;31, 2002 was denominated in U.S. dollars.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The U.S.$300&nbsp;million aggregate principal amount old notes accrued interest
at an annual rate of 13&frac34;%, representing an interest expense of U.S.$39.8
million per year. In May and June 2001, Maxcom purchased U.S.$25&nbsp;million
aggregate principal amount of old notes in the secondary market, which Maxcom
cancelled in April 2002. Pursuant to the April&nbsp;29, 2002 debt restructuring,
old notes in an aggregate principal amount of U.S.$259,410,000 were exchanged
for new notes in an aggregate principal amount of U.S.$165,078,150, as well as
for certain equity. The new notes bear 0% interest through March&nbsp;1, 2006, and
10% annual interest in the last year. On July&nbsp;25, 2002 we completed an
additional exchange of U.S.$4,000,000 old notes under the same terms and
conditions of the exchange offer consummated on April&nbsp;29, 2002. As of December
31, 2002, new notes in an aggregate principal amount of U.S.$167,623,590
remained outstanding while old notes in an aggregate principal amount of
U.S.$11,590,000 remained outstanding.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of this debt restructuring, we will save U.S.$38.1&nbsp;million in
interest expense on an annualized basis from the date of issuance of the new
notes through February&nbsp;28, 2006. From March&nbsp;1, 2006 until March&nbsp;1, 2007, which
is the maturity date of the new notes, we will save U.S.$20.5&nbsp;million in
interest expense.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The indenture governing the terms of the new notes restricts our ability
to incur indebtedness. In particular, in order to be able to incur additional
indebtedness, we must comply with a minimum consolidated leverage ratio of less
than 3.75 to 1.00 and a minimum fixed charge coverage ratio of 2.00 to 1.00, in
each case after giving effect to the proposed incurrence of indebtedness. We do
not, and are unlikely in the foreseeable future to, meet these ratios. However,
pursuant to certain exemptions, we are still able to incur up to U.S.$100.0
million of indebtedness to finance the cost of acquiring or constructing or
installing telecommunication assets, and up to U.S.$20.0&nbsp;million for working
capital purposes, in each case at any one time outstanding. The indenture
governing the old notes no longer has covenants restricting our ability to
incur indebtedness.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
indenture governing the terms of the new notes also provides that, if
certain events of bankruptcy, insolvency or reorganization of Maxcom
occur, the principal and interest on all of the new notes will become
immediately due and payable. In addition, if certain other events of
default occur and are continuing, the trustee appointed under the
indenture or our holders representing at least 25.0% in principal
amount of the then outstanding new notes, may declare all the new
notes to be due and payable immediately. These other events of
default include, among others, (i)&nbsp;a failure to pay interest or
any gross-up amount when due for thirty days; (ii)&nbsp;a failure to
pay principal when due, (iii)&nbsp;a failure to comply with certain
covenants (including financial, reporting, control, merger and other
covenants), representations, warranties and other agreements in the
indenture; (iv)&nbsp;a default under other indebtedness or a judgment
or decree for the payment of money, in each case in excess of
U.S.$5.0&nbsp;million, (v)&nbsp;the unenforceability or disaffirmation
of any subsidiary guarantee, and (vi)&nbsp;a failure to disclose an event of default. In
some of these events of default, a limited grace period applies
before the trustee or the holders can proceed to accelerate the new
notes.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
indenture governing the old notes provides that the trustee appointed
under the indenture or our holders representing at least 25.0% in
principal amount of the then outstanding old notes, may declare all
the new notes to be due and payable immediately if we fail to
(i)&nbsp;pay interest or any gross-up amount when due for thirty days,
(ii)&nbsp;pay principal when due, (iii)&nbsp;comply with certain
conditions in the event of a merger, or (iv)&nbsp;observe any
covenant, representation or agreement in the indenture for sixty days
after notice by the trustee.
</FONT>

<P align="left"><FONT size="2"><B>Changes in financial position</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, our cash generated from operating activities has not been
sufficient to meet our debt service, working capital and capital expenditure
requirements. We have relied on the capital markets for private equity, public
debt and vendor financing. For the years ended December&nbsp;31, 2000, 2001 and
2002, our earnings were insufficient to cover our fixed charges by Ps.749.6
million (U.S.$71.9&nbsp;million), Ps.695.6&nbsp;million (U.S.$66.7&nbsp;million) and Ps.725.8
million (U.S.$69.6&nbsp;million), respectively.
</FONT>
<P align="left"><FONT size="2"><I>Resources used for operating activities</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2002, net resources used in operating
activities amounted to Ps.340.1&nbsp;million compared to Ps.355.7&nbsp;million for the
year ended December&nbsp;31, 2001. The decrease in 2002 from 2001 was
mainly attributable to a Ps.53.8&nbsp;million decrease in losses from
operations and a Ps.31.2&nbsp;million reduction in
</FONT>
<P align="center"><FONT size="2">48</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> inventory as we have used it in
building out our infrastructure. These two factors were offset by a Ps.25.8
million increase in prepaid expenses primarily related to the advanced purchase
of radio advertising time from Operadora Plusgamma, a Ps.24.5&nbsp;million increase
in accounts receivable due to a higher customer base and a Ps.19.1&nbsp;million
decrease in short-term liabilities. See &#147;Item&nbsp;7. Major Shareholders and
Related Party Transactions&#151;B. Related Party Transactions&#151;Advertising.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net resources used in operating activities in 2001 were Ps.355.7&nbsp;million
compared to Ps.858.0&nbsp;million for 2000. This decrease was mainly attributable
to the release of the escrow account (Ps.556.8&nbsp;million) funded with proceeds
from the issuance of the old notes. This decrease was partially offset by the
non-cash gain on the repurchase of debt of Ps.128.2&nbsp;million.
</FONT>
<P align="left"><FONT size="2"><I>Resources provided by financing activities</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2002, net resources generated by financing
activities amounted to Ps.801.6&nbsp;million compared to resources used of Ps.98.8
million for the year ended December&nbsp;31, 2001. This change was attributable to
(i)&nbsp;Ps.749.8&nbsp;million of additional paid-in capital recorded in connection with
the debt capitalization resulting from the exchange of old notes for new
discounted debt and equity instruments pursuant to the debt restructuring
completed in April 2002, and (ii)&nbsp;Ps.784.2&nbsp;million of additional capital stock
related to the U.S.$66.2&nbsp;million private placement completed in April 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These two factors were offset in part by the use of (i)&nbsp;Ps.733.4&nbsp;million
as reduction of liabilities due to the exchange of the old notes, and (ii)
Ps.99.8&nbsp;million for the repurchase of old notes with an aggregate face amount
of U.S.$25&nbsp;million in 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2001, net resources used in financing
activities amounted to Ps.98.8&nbsp;million compared to resources provided of
Ps.749.8&nbsp;million for the year ended December&nbsp;31, 2000. The change was
attributable to the issuance of the old notes (Ps.784.2&nbsp;million) in March 2000
and the U.S.$35.0&nbsp;million capital contribution (Ps.733.4&nbsp;million) in September
2000. In 2001, we had no capital or debt infusion. Instead, we repurchased a
portion of our debt for Ps.99.8&nbsp;million.
</FONT>
<P align="left"><FONT size="2"><I>Resources used for investing activities</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2002, net resources used for investing
activities amounted to Ps.528.1&nbsp;million compared to Ps.546.3&nbsp;million for the
year ended December&nbsp;31, 2001. The decrease was mainly attributable to a
Ps.133.2&nbsp;million decrease in investment in telephone equipment and a Ps.42.5
million decrease in investment in other assets. These factors were offset in
part by a Ps.157.5&nbsp;million increase in investment in intangible assets
resulting mainly from our purchase of the irrevocable and exclusive right to
use two strands in a 2,011-kilometer fiber optic link covering cities between
Mexico City and Laredo, Texas. These variations reflect Maxcom&#146;s strategy of
prioritizing infrastructure growth at a time of financial constraints.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2001, net resources used for investing
activities amounted to Ps.546.3&nbsp;million compared to Ps.747.5&nbsp;million for the
year ended December&nbsp;31, 2000. The decrease was mainly attributable to debt
issuance costs in 2000 of Ps.299.6&nbsp;million, partially offset by higher capital
expenditures of Ps.312.1&nbsp;million in 2001.
</FONT>
<P align="left"><FONT size="2"><B>Other contractual obligations</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to our financial indebtedness, we are committed to make
certain payments under different lease arrangements. All of our
peso-denominated leases and some of our dollar-denominated site leases adjust
automatically to reflect any variances experienced by the Mexican and U.S.
consumer price index, respectively.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our new corporate headquarters are leased for a 5-year term, renewable for
two additional 5-year terms. Site leases generally run for five, ten or
fifteen year terms.
</FONT>
<P align="center"><FONT size="2">49</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2003, we reached an agreement with our landlord at our former
headquarters in Magdalena, Mexico City. Pursuant to this agreement, we
retained a leasehold interest through May 2013 on the first floor, where one of
our Lucent 5ESS switches is located, the roof-top, where we have three
microwave transmission antennas and a section of the basement, which will be
used for parking and to place some of our electric equipment that supports the
switch. We were also released from lease obligation on approximately 35,887
square feet plus parking space of the building originally running through
September&nbsp;30, 2013. In exchange for the new lease and the releases, we agreed
to prepay the full, ten-year lease obligations on the first floor, the roof-top
and basement, as well as pay past-due lease payments dating back from October
2002 through April 2003. All these payments amount in the aggregate to
U.S.$2.7&nbsp;million and will be payable in installments through May 2004.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents our minimum contractual operating lease
obligations denominated in Pesos for the periods indicated:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2007 &#038;</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2004</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2005</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2006</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>thereafter</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="19"><FONT size="1"><B>(in thousands of Pesos)</B></FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Facilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">5,997.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">2,457.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">2,298.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">2,298.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">9,629.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sites</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,878.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,641.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,535.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,687.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,828.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Poles</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,182.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Others</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">22,093.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">13,099.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">10,834.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">9,985.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">36,458.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents our contractual operating lease obligations
denominated in dollars for the periods indicated:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2007 &#038;</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2004</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2005</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2006</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>thereafter</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="19"><FONT size="1"><B>(in thousands of U.S. dollars)</B></FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate headquarters</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,503.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,503.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,503.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,503.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">417.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sites</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">56.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">83.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Poles</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Others</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">251.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">251.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">98.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,811.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,802.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,649.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,550.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">500.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents our minimum contractual operating maintenance
obligations denominated in Pesos for the periods indicated:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2007 &#038;</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2004</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2005</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2006</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>thereafter</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="19"><FONT size="1"><B>(in thousands of Pesos)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate equipment<SUP>(1)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">19.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Network<SUP>(1)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">504.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">523.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Renewal on an annual basis.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents our contractual operating maintenance
obligations denominated in dollars for the periods indicated:
</FONT>
<CENTER>
</CENTER>
<P align="center"><FONT size="2">50</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2007 &#038;</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2004</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2005</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2006</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>thereafter</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="19"><FONT size="1"><B>(in thousands of U.S. dollars)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telephone equipment<SUP>(1)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,557.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fiber optic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">844.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">844.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">844.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">844.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,208.0</FONT></TD>
    <TD nowrap><FONT size="2"><SUP>(2)</SUP></FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Network</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Software<SUP>(1)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">810.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,233.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">844.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">844.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">844.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">13,208.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Renewal on an annual basis.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Included until 2002.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Capital expenditures</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through December&nbsp;31, 2002, we have invested Ps.2,730.9&nbsp;million in the
buildout of our network operating support system and other capital
expenditures, excluding cumulative preoperating expenses and the expenses
related to the issuance of the old notes and the new notes and the U.S.$66.2
million private equity investment. This amount includes Ps.127.8&nbsp;million paid
to obtain all of our frequency rights.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For 2003, we plan to make capital expenditures of approximately U.S.$11.8
million, mainly to continue to build out of our network. Of this total amount,
we had already spent approximately Ps.32.5&nbsp;million (approximately U.S.$3.0
million) by March&nbsp;31, 2003. Our ability to make the remaining expenditures
hinges on our ability to obtain financing for them. We cannot assure you that
financing will be available or on terms acceptable to us.
</FONT>
<P align="left"><FONT size="2"><B>Dividend policy</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our current policy is to reinvest profits into our operations. In
addition, the indenture that governs the terms of the new notes allows us to
pay cash dividends only if we meet the following conditions:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a minimum consolidated leverage ratio of less than 3.75 to 1.00;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a minimum fixed charge coverage ratio of 2.00 to 1.00;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">no default (as defined in the indenture) must have occurred
and be continuing or result from the payment of the cash dividend;
and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the cash dividend payments do not exceed an amount determined
in the indenture based on, among other things, cash flow generated
from operations or equity offerings and consolidated interest
expense.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Critical accounting policies</B>
</FONT>

<P align="left"><FONT size="2"><I>Applications of critical accounting policies and estimates</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have identified certain key accounting policies on which our
consolidated financial condition and results of operations are dependent.
These key accounting policies most often involve complex matters or are based
on subjective judgments or decisions that require management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. We base our estimates on historical
experience, where applicable, and other assumptions that we believe are
reasonable under the circumstances. Actual results may differ from our
estimates under different assumptions or conditions. In the opinion of our
management, our most critical accounting policies under both Mexican GAAP and
U.S. GAAP are those that require management to make estimates and assumptions
that affect the reported amounts related to the accounting for the allowance
for doubtful accounts receivable, revenue recognition, installation revenues
and costs, valuation of long-lived assets, property, plant and equipment,
stock-based compensation and fair value of our common stock, and deferred
taxes. For a full description of all of our accounting policies, see Notes 4
and 23 to the Consolidated Financial Statements included in this Annual Report.
</FONT>
<P align="center"><FONT size="2">51</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are certain critical estimates that we believe require significant
judgment in the preparation of our consolidated financial statements. We
consider an accounting estimate to be critical if:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">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</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">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.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><I>Allowance of doubtful accounts receivable</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The allowance for doubtful accounts represents our estimate of losses
resulting from the failure or inability of our customers to make required
payments. Determining our allowance for doubtful accounts receivable requires
significant estimates. Due to the large number of customers that we serve, it
is impractical to review the credit-worthiness of each of our customers,
although a credit review is performed for business customers that request more
than two lines. We consider a number of factors in determining the proper
timing for the recognition of and the amount of allowance, including historical
collection experience, customer base, current economic trends and the aging of
the accounts receivable portfolio. From this analysis, our current policy is
to reserve 90% of the outstanding balance of a customer with at least one bill
past due 90&nbsp;days and 100% of the outstanding balance of a customer with at
least one bill past due 120&nbsp;days. We periodically review this policy to ensure
that it accurately reflects current collection policies.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, in order to mitigate collections risk, our collection
procedures include, but are not limited to, periodic reminder phone calls once
a customer is past due, suspension of service, use of a collection agency and
disconnection of service, if needed. Furthermore, within our network we have
systems to detect fraudulent call activity. If these systems fail to identify
any of this activity, we may have to recognize a higher degree of uncollectable
accounts. While we believe that our estimates are reasonable, changes in our
customer trends or any of the factors mentioned above could materially affect
our bad debt expense.
</FONT>
<P align="left"><FONT size="2"><I>Revenue recognition</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize revenues from telephone services provided to customers, from
the sale of customer-premise equipment, from services provided to other
telephone-service companies (such as interconnection services), and from
installation charges.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues are recognized when the service is provided or the product is
delivered. In addition, we have entered into agreements with several telephone
carriers with a &#147;bill and keep&#148; feature. Under this arrangement, if the
imbalance between local calls originated by the other carrier and terminated by
Maxcom and calls originated by Maxcom and terminated by the other carrier
during a month does not exceed a certain percentage, then no interconnection
fee amounts are payable by the net user of interconnection services. If the
imbalance exceeds the agreed percentage in any given month, the net user incurs
a liability per minute. If we fail to maintain a significant percentage of
residential users, then the &#147;bill and keep&#148; arrangement will be terminated and
asymmetrical interconnection rates may apply. Due to a timing lag, we must
estimate whether or not the agreed percentage threshold was exceeded for any
given month and record a corresponding receivable or payable. Based on
previous experience with these carriers, i.e. the threshold has never been
exceeded; we have not accrued for any potential revenue or cost.
</FONT>
<P align="left"><FONT size="2"><I>Installation revenues and costs</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Installation costs include labor, tools and materials. Through December
31, 2002, when we waived installation costs to our customers, installation
costs were capitalized and amortized on a straight-line basis over a period of
20&nbsp;years. Beginning in 2003, when we waive installation costs,
we will capitalize
and amortize them on a straight-line basis over a period equal to the remaining
original term of the microwave concessions, which expire in October 2017. When
we charge installation fees to our customers, we recognize this cost as an
expense and we do not capitalize or amortize it. Once service with a customer
is terminated, the capitalized estimated average cost per customer is
</FONT>
<P align="center"><FONT size="2">52</FONT>
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<P align="left"><FONT size="2"> expensed. Under U.S. GAAP, installation revenues and the related direct
installation costs are deferred and amortized over the expected customer&#146;s
relationship period. When installation costs are not billed to customers, the
related costs are expensed immediately.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not track capitalized installation costs on an individual customer
basis because to do so would not be efficient. Based on an analysis of
customer history including installation costs and cancellations, we have
determined an estimated average cost per customer and estimated customer life
and we use these estimates to calculate the amount of cost deferred and the
amortization period of such deferred costs and the related installation revenue
that is deferred and amortized over the customer relationship. As we have a
limited operating history, past history cannot be used as the only accurate
indicator of the average customer relationship period. Based on our limited operating history
and industry benchmarking, we have determined an average customer
relationship period to be of four years.
</FONT>

<P align="left"><FONT size="2"><I>Valuation of long</I><B><I>-</I></B><I>lived assets</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We review fixed, definite lived intangible and other long-lived assets
whenever events or changes indicate that the carrying amount of an asset may
not be recoverable. Impairment reviews require a comparison of the estimated
future undiscounted cash flows to the carrying value of the asset. If the
total of the undiscounted cash flows is less than the carrying value, an
impairment charge is recorded for the difference between the estimated fair
value and the carrying value of the asset. In making such evaluations, we
estimated the fair value of the long-lived assets as well as the undiscounted
cash flows. In determining our undiscounted cash flows we make significant
assumptions and estimates in this process regarding matters that are inherently
uncertain, such as estimating remaining useful lives and the possible impact
that inflation may have in our ability to generate cash flow since, with
inflation accounting, the carrying value is restated by inflation prior to the
impairment analysis. Although we believe that our estimates are reasonable,
different assumptions regarding such remaining useful lives could materially
affect the valuation of our long-lived assets.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also evaluate our operating leases for utilization. Spaces leased in
buildings with low occupancy have been reserved based on the contractual
penalty for early termination, which is calculated as the maximum amount that
would be paid upon termination of the contract.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon adoption of SFAS 142 we were required to reassess the useful lives of
our intangible assets, which primarily consist of Mexican government
telecommunications concessions. Upon reassessment, we
concluded that the useful lives of our concessions do not need to be modified.
We will periodically reassess the useful lives of the concessions.
</FONT>

<P align="left"><FONT size="2"><I>Property, plant and equipment</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We depreciate property, plant and equipment and other intangible assets
with a finite life using straight-line methods over the period of time we
estimate we will benefit from each asset.
</FONT>

<P align="left"><FONT size="2"><I>Stock-based compensation and fair value of our common stock</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have historically entered into various agreements with third parties
and our employees to exchange our warrants or our stock for services rendered
to us. The fair value of such transactions is based on various assumptions,
such as volatility, risk free interest rates and expected life of the options.
We contract a third party to assist in developing said assumptions. Different
assumptions regarding such estimations could materially affect our financial
position and results of operations.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As our common stock is not traded on the open market there is not a
readily determinable fair value. The fair value of our common stock is
essential for calculating stock compensation amounts and in the calculation of
the troubled debt restructuring as recorded under U.S. GAAP in 2002. To
evaluate the fair value of our common stock we contracted a third party who
used assumptions related to the Mexican telecommunications industry, general
market data, the current state and future operations of Maxcom, as well as
other pertinent factors.
</FONT>

<P align="center"><FONT size="2">53</FONT>

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<P align="left"><FONT size="2"><I>Deferred taxes</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of the process of preparing our consolidated financial statements,
we are required to estimate our income tax liability. This process involves
estimating actual current tax exposure together with assessing temporary
differences resulting from the different treatment for tax and accounting
purposes of several items, such as depreciation, amortization, and allowance
for doubtful accounts. These differences result in deferred tax assets and
liabilities that are included in our consolidated balance sheet. We must then
assess the likelihood that our deferred tax assets will be recovered from
future taxable income and, to the extent we believe that recovery is not likely
to occur, we must include an expense within the tax provision in the statement
of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant management judgment is required in determining our provision
for income taxes, our deferred tax assets and liabilities and any valuation
allowance recorded against our net deferred tax assets. The valuation
allowance is based on management projections of future financial results.
Accordingly, we have created a valuation account for the full balance of our
deferred tax asset as we feel it is unlikely we will use our net operating loss
carry forwards before they expire. If actual results differ from these
estimates or we adjust the projections in future periods, we may need to
materially adjust the valuation allowance.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>C.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Research and development, patents and licenses, etc.</B></FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Maxcom does not undertake research and development activities other than
market research.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>D.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Trend information</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The growth of competition has been substantial and we expect it to
continue. We are continuously improving our competitive position by
strengthening our voice and data products and services. The increase in
competition negatively affects our profit margins.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our current financial constraints (including the insufficiency of our
earnings to cover fixed charges and the uncertainty as to the availability of
financing) has and may continue to negatively affect our plans for growth,
including the buildout of our network. See &#147;Item&nbsp;3. Key Information&#151;D. Risk
Factors&#151;We may need additional financing.&#148;
</FONT>
<!-- link2 "ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES" -->
<DIV align="left"><A NAME="006"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>A.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Directors and Senior Management</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Directors</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors is responsible for the management of our business.
The current members of the Board of Directors were elected at a shareholders&#146;
meeting held on June&nbsp;10, 2003. Pursuant to the capital restructuring described
in &#147;Item&nbsp;7. Major Shareholders and Related Party Transactions&#151;A. Major
shareholders and share ownership&#151;The capital restructuring,&#148; our series A and
A1 shareholders, voting together as a class, appoint five directors. The
remaining four directors are appointed by our series B and B1 shareholders,
voting together as a class. Pursuant to the terms of the securityholders
agreement described in &#147;Item&nbsp;7. Major Shareholders and Related Party
Transactions&#151;A. Major shareholders and share ownership&#151;Securityholders
agreement,&#148; which became effective upon the consummation of the debt
restructuring and recapitalization, the four series B and B1 directors are now
selected from among nominees proposed by Nexus&#151;Banc of America Fund II, L.P., a
major shareholder which we refer to in this annual report as &#147;Nexus.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series&nbsp;N2 shareholders have the right to appoint an observer to our Board
of Directors for so long as the series N2 preferred shares represent at least
3% of the outstanding capital stock of the Company or, so long as any series N2
preferred stock remain outstanding and at least U.S.$17.5&nbsp;million aggregate
principal amount of the new notes remain outstanding. This observer, who is not
a member of the Board of Directors, has the right to attend meetings of the
Board of Directors but is not entitled to vote. In the event Mexican foreign
ownership restrictions
</FONT>
<P align="center"><FONT size="2">54</FONT>
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<P align="left"><FONT size="2"> are lifted, the series N2 shareholders will be entitled to appoint one
director, provided the series N2 shares represent at least 10% of Maxcom&#146;s
outstanding capital stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents information concerning our current directors
(ages as of December&nbsp;31, 2002):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="37%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Name</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Position</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Age</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Adri&#225;n Aguirre G&#243;mez</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Series&nbsp;A and A1 Director and Chairman of the Board
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">52</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Manuel Rubiralta Diaz</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Series&nbsp;A and A1 Director
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">58</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mar&#237;a Trinidad Aguirre G&#243;mez</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Series&nbsp;A and A1 Director
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">41</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Marco Provencio Mu&#241;oz</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Series&nbsp;A and A1 Director
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">44</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Rodrigo Guerra Botello</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Series&nbsp;A and A1 Director
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">60</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Roberto Chute</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Series&nbsp;B and B1 Director
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">29</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Jacques Gliksberg</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Series&nbsp;B and B1 Director
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">44</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Pedro Querio</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Series&nbsp;B and B1 Director
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">35</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Salvatore A. Grasso</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Series&nbsp;B and B1 Director
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">45</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Miguel Sep&#250;lveda Mart&#237;nez, Mar&#237;a Guadalupe Aguirre G&#243;mez, Mar&#237;a Elena
Aguirre G&#243;mez, Gilberto Solis Silva and Ra&#250;l Guijarro de Pablo are alternate
series A and A1 directors. Marco Viola, Michael Hajjar Jorge Cervantes and
Roberto Engels are alternate series B and B1 directors. Enrique Boillini is the
board observer for the series N-2 shareholders. Gonzalo Alarc&#243;n Iturbide is the
secretary of the Board.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adri&#225;n, Mar&#237;a Guadalupe, Mar&#237;a Trinidad and Mar&#237;a Elena Aguirre G&#243;mez are
siblings. Gilberto Sol&#237;s Silva is the spouse of Mar&#237;a Elena Aguirre G&#243;mez. Ra&#250;l
Guijarro de Pablo is the spouse of Mar&#237;a Trinidad Aguirre G&#243;mez. Miguel
Sep&#250;lveda Mart&#237;nez is the spouse of Mar&#237;a Guadalupe Aguirre G&#243;mez.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is a brief biographical description of our directors:
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Adri&#225;n Aguirre G&#243;mez </I></B>has been a series A, and after the capital
restructuring a series A and A1 director and Chairman of the Board of Maxcom,
since Maxcom&#146;s incorporation in February 1996. Mr.&nbsp;Aguirre also sits on the
Board of Directors of Corporativo en Telecomunicaciones, S.A. de C.V., a
subsidiary of Maxcom, Grupo Empresarial de Telecomunicaciones, S.A. de C.V.,
Operadora Plusgamma, S.A. de C.V. (formerly known as Recover, S.A. de C.V.) and
Fundaci&#243;n Telet&#243;n. He has been the Chairman of the Board since December 1992
for Operadora Plusgamma, S.A. de C.V. In addition, he has been a member of the
Consulting Board of UNICEF Mexico since 1997. Previously, Mr.&nbsp;Aguirre was CEO
of Grupo Radio Centro, S.A. de C.V. from November 1968 to May&nbsp;24, 1999 and a
Director until May 1999. Mr.&nbsp;Aguirre is a certified public accountant and holds
an undergraduate degree in accounting from the Instituto Tecnol&#243;gico Aut&#243;nomo
de M&#233;xico (ITAM).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Manuel Rubiralta Diaz </I></B>has been a series A, and after the capital
restructuring a series A and A1 director of Maxcom since June 2002. Mr.
Rubiralta is also the President and Chief Executive Officer of Bacard&#237;
Compa&#241;&#237;a, S.A. de C.V. Previously, Mr.&nbsp;Rubiralta was the Commercial Director
of Corporate Accounts of Grupo Maseca, S.A. de C.V. from 1999 to 2000 and
Vice-president of Grupo Televisa from 1996 to 1998. Mr.&nbsp;Rubiralta was the
President of Pepsico de Mexico from 1993 to 1996. Mr.&nbsp;Rubiralta was the
President of FEMSA in the United States from 1982 to 1991 and the Sales and
Marketing Vice-President for FEMSA&#146;s brewing operations in Mexico from 1975 to
1982. Mr.&nbsp;Rubiralta holds an undergraduate degree in business administration
from the Universidad Nacional Aut&#243;noma de Mexico (UNAM).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Mar&#237;a Trinidad Aguirre G&#243;mez </I></B>has been a series A, and after the capital
restructuring a series A and A1 director of Maxcom, since May 1998. She also
sits on the Board of Directors of Talento Arte Visual, S.A. de C.V., Promotora
de Radiodifusi&#243;n del Sureste, S.A. de C.V., Promotora de Publicidad del
Sureste, S.A. de C.V. and Publicidad y Promoci&#243;n del Sureste, S.A. de C.V.
Previously, Ms.&nbsp;Aguirre was an Alternate Director of Grupo Radio Centro, S.A.
de C.V. from March 1997 to May 1999. Ms.&nbsp;Aguirre holds an undergraduate degree
in communications from the Universidad Iberoamericana.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Marco Provencio Mu&#241;oz </I></B>has been a series A, and after the capital
restructuring a series A and A1 director of Maxcom, since May 2001. He is also
a partner and head of the public relations practice at the consulting firm MBD:
Mexico Business Development. During 2000, Mr.&nbsp;Provencio was the press secretary
and the spokesman for
</FONT>
<P align="center"><FONT size="2">55</FONT>
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<P align="left"><FONT size="2"> the then Mexican President Mr.&nbsp;Ernesto Zedillo. He served 14&nbsp;years in the
Ministry of Finance and Public Credit where he held various positions,
including Director General for International Financial Affairs. Mr.&nbsp;Provencio
worked also for three years for the Foreign Affairs Ministry, where he was
appointed under-secretary for Economic and Multicultural Affairs. Mr.&nbsp;Provencio
holds an undergraduate degree in economics from the Universidad Iberoamericana
and a masters degree in economics and public affairs from the Woodrow Wilson
School at Princeton University.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Rodrigo Guerra Botello </I></B>has been a series A, and after the capital
restructuring a series A and A1 director of Maxcom since June 2002. Mr.&nbsp;Guerra
is also the Head Dean of the Universidad Regiomontana in Monterrey, Mexico,
since September 2001. Mr.&nbsp;Guerra was the Executive President of CETRO (a
private trust for the development of small private business in Mexico), the
National Vice-President of COPARMEX and the General Director and Treasurer of
the Businessman Coordination Council. Mr.&nbsp;Guerra was also Director of Sidek
and Situr. Previously, Mr.&nbsp;Guerra worked for AT&#038;T Mexico from March 1995 to
January 1999 and served as President and Chief Executive Officer of IBM de
M&#233;xico from October 1980 to February 1995. Mr.&nbsp;Guerra holds an undergraduate
degree in Chemical Engineering from Universidad Tecnol&#243;gica de Monterrey.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Jacques Gliksberg </I></B>was a series N director of Maxcom from May 1998 until
April 2002, and has been a series B and B1 director since then. He also sits on
the Board of Directors of Acme Paging, L.P., Bank America International
Investment Corporation, Structured Intelligence LLP, Organizaci&#243;n Rescarven,
C.A. (Venezuela), Vesper Holdings, Velocom and Difusion Panoramica S.A. de C.V.
Mr.&nbsp;Gliksberg has been a managing partner of Bank of America Equity Partners
since 1994. Mr.&nbsp;Gliksberg holds a Bachelor of Arts degree in Economics and
Political Science from the University of Rochester and a master&#146;s degree in
business administration from the J. L. Kellogg Graduate School of Management of
Northwestern University, Chicago, Illinois.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Salvatore A. Grasso </I></B>was a series N director of Maxcom from May 1998 until
April 2002, and a series B and B1 director since then. He also sits on the
Board of Directors of Bachow and Associates, Inc. Mr.&nbsp;Grasso is currently
Managing Director and Chief Financial Officer of Bachow and Associates, Inc.,
Chief Financial Officer of Bachow Innovative Master Fund, Ltd. and Paul S.
Bachow Co-Investment Fund, LP. Further, he is the Vice-President of
Bachow/Coastel Operations, Inc., Bala Equity, Inc., Bachow Co-Investment, Inc,
Bachow 39 GHz, Inc., Bala Equity IV, Inc., Bachow Innovative Equity, LC,
Bachow/Coastal, LLC, Bachow/Coastal, Inc., Bachow Investment Partners III, LP,
Bachow Co-Investment, Inc., Bachow Strategic Partners, LLC. He is also a
Partner in Bala Equity Partners, L.P., Bachow Co-Investment, L.P., Bachow
Innovative Partners, L.P., Bachow Innovative Equity, L.P., Bachow Strategic
Partners, L.P. and Bachtel Development, L.P. Mr.&nbsp;Grasso holds a bachelor of
science degree in accounting from St. Joseph&#146;s University and is a certified
public accountant in the state of Pennsylvania.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Pedro Querio </I></B>has been a series B and B1 director since June 2002. He also
sits on the Board of Directors of Eki Discount (Argentina), Outdoor
Advertising, Microlending, Structured Intelligence and Difusi&#243;n Panor&#225;mica,
S.A. de C.V. Mr.&nbsp;Querio has been working since 1997 for Banc of America Equity
Partners-Latin America. Prior to that, Mr.&nbsp;Querio worked at Booz Allen &#038;
Hamilton in Buenos Aires, Argentina for one year, and for Merchant Bankers
Asociados also in Buenos Aires, Argentina for four years, where he received
extensive expertise in mergers an acquisitions and, corporate finance for
capital risk funds of the group. Mr.&nbsp;Querio holds a Bachelor of Arts degree
from the Universidad Cat&#243;lica de Argentina and a master&#146;s degree in management
from J.L. Kellog Graduate School of Management of Northwestern University,
Chicago, Illinois.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Roberto Chute</I></B>, has been a series B and B1 director since April 2002. Mr.
Chute sits on the Board of Directors of Difusion Panoramica, a Mexican outdoor
advertising company, and Eki Discount, an Argentinean discount store chain. Mr.
Chute has been an associate of Bank of America Equity Partners since September
2001. Previously, Mr.&nbsp;Chute worked for Goldman, Sachs, Techint and Strat
Management Consulting. Mr.&nbsp;Chute holds an industrial engineering degree from
the Instituto Tecnol&#243;gico de Buenos Aires, Argentina and a master&#146;s degree in
business administration from the J. L. Kellogg Graduate School of Management of
Northwestern University, Chicago, Illinois.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Mar&#237;a Guadalupe Aguirre G&#243;mez </I></B>was our series A, and after the capital
restructuring a series A and A1 director of Maxcom, from June 1999 until June
2002. She also sits on the Board of Directors of Sport and Terapy Center, S.A.
de C.V., Operadora Plusgamma, S.A. de C.V. (formerly known as Recover, S.A. de
C.V.). Previously, Ms.&nbsp;Aguirre sat on the Board of Directors of Majurame, S.A.
de C.V. and Cable Centro, S.A. de C.V. from February
</FONT>
<P align="center"><FONT size="2">56</FONT>
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<P align="left"><FONT size="2"> 1997 to April 1999 and was an Alternate Director of Grupo Radio Centro,
S.A. de C.V., from July 1998 to May 1999. In her capacity as Alternate
Director, Ms.&nbsp;Aguirre had both director and management responsibilities. Ms
Aguirre holds an undergraduate degree in communications from the Universidad
Iberoamericana.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Gilberto Sol&#237;s Silva </I></B>was our series A, and after the capital restructuring
a series A and A1 director of Maxcom, from February 2002 until June 2002.
Prior to that Mr.&nbsp;Sol&#237;s was an alternate series A director. He also is the
Secretary of the Board of Radiocomunicaci&#243;n Profesional, S.A. de C.V.,
Radiocomunicaci&#243;n Enfocada, S.A. de C.V. and Radiocomunicaci&#243;n Saltillo, S.A.
de C.V. Previously, Mr.&nbsp;Sol&#237;s was the Chief Executive Officer and member of the
Board of Directors of Grupo Radio Centro, S.A. de C.V. from 1990 to 1998. Mr.
Sol&#237;s holds an undergraduate degree in geological engineering from the UNAM.
</FONT>
<P align="left"><FONT size="2"><B>Executive officers</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have experienced significant turnover in our executive ranks over the
last three years. In June and July 2000, our then chief executive, chief
operations and chief marketing officers resigned. In April 2001, our then
chief financial officer resigned. We appointed new officers to all these
positions during 2001 and 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, between January and April 2003, our then chief executive officer,
chief marketing officer, chief commercial operations officer and vice president
of corporate communications and public relations also resigned. We have since
appointed a new chief executive officer. As part of our cost-reduction
efforts, we have initiated a search for a single executive to head both the
marketing and commercial operations areas, and have eliminated the office of
vice presidency of corporate communications and public relations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The significant turnover we have experienced in our management has
affected our ability to develop and execute our business strategies. The
success of our company depends in part upon our ability to hire and retain
highly skilled and qualified management personnel. The competition for highly
qualified management personnel in the telecommunications industry is intense
and, accordingly, we cannot assure you that we will be able to hire or retain
the management personnel necessary for our success.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our current executive officers (ages as of
December&nbsp;31, 2002):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Name</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Position</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Age</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Ren&#233; Sagastuy</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
President and Chief Executive Officer
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">42</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Enrique Corral</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chief Engineering Officer
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">44</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Eloisa Mart&#237;nez</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chief Financial Officer
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">43</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Ricardo Ar&#233;valo Ruiz</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chief Operating and Information Technology Officer
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">38</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Carlos Castro Paniagua</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Vice-President, Human Resources
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">51</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is a brief biographical description of each of our
executive officers not otherwise provided above:
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Ren&#233; Sagastuy </I></B>has been the Chief Executive Officer of Maxcom since March
2003, when he replaced Mr.&nbsp;Fulvio del Valle. Mr.&nbsp;Sagastuy was our Chief
Operating Officer from May 2001 until March 2003. Prior to joining Maxcom, Mr.
Sagastuy served for one year as Director of Operations for Johnson Controls in
Mexico, a U.S. public company with 19 manufacturing sites in Mexico. Mr.
Sagastuy also served as operations, strategic planning, manufacturing and
project manager and director of several companies in Mexico, including Avex
Electronics, AMP de M&#233;xico, S.A. de C.V. and the Jefferson Smurfit Group in
Mexico. Mr.&nbsp;Sagastuy holds a bachelor&#146;s degree in civil engineering from the
Universidad Iberoamericana in Mexico and a master&#146;s degree in Business
Administration form the Instituto Tecnol&#243;gico Aut&#243;nomo de M&#233;xico.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Enrique Corral </I></B>has been our Chief Engineering Officer, a newly-created
office, since April 2003. From December 2000 to March 2003, Mr.&nbsp;Corral was our
Director of Engineering. Prior to joining Maxcom, Mr.&nbsp;Corral was responsible
for telecommunications and new projects for Cablem&#225;s, S.A. de C.V., the third
largest Mexican operator of cable television. Previously, Mr.&nbsp;Corral worked
for AMCEL (Mexican Association of Cellular Carriers) as chief executive
officer. Mr.&nbsp;Corral has also served as commercial director for Baja Celular
Mexicana, S.A. de
</FONT>
<P align="center"><FONT size="2">57</FONT>
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<P align="left"><FONT size="2"> C.V. and Telecomunicaciones del Golfo, S.A. de C.V. Mr.&nbsp;Corral holds a
bachelor&#146;s degree in Business Administration from the Universidad
Iberoam&#233;ricana in Mexico City as well as a marketing diploma from the same
University and a telecommunications diploma from Technology Training in Miami,
Florida.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Elo&#237;sa Mart&#237;nez </I></B>has been Chief Financial Officer since June 2001. Prior to
joining Maxcom, Ms.&nbsp;Mart&#237;nez served for two years as Financial Planning and
Control Director and two years as Assistant to the Chief Financial Officer at
Iusacell. Previously, Ms.&nbsp;Mart&#237;nez worked for 12&nbsp;years at IBM Corporation in
Mexico and in the United States, where she held the positions of Controller,
Internal Audit Manager, Corporate Internal Auditor and Business Control and
Planning Analyst. Ms.&nbsp;Mart&#237;nez holds a bachelor&#146;s degree in Business
Administration from the Instituto Polit&#233;cnico Nacional in Mexico City and a
master&#146;s degree in Business Administration from the Instituto Tecnol&#243;gico de
Estudios Superiores de Monterrey.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Ricardo Ar&#233;valo Ruiz </I></B>has been our Chief Operation and Information
Technology Officer since April 2003. Mr.&nbsp;Ar&#233;valo was Chief Information Systems
Officer from April 2001 to April 2003. Prior to joining Maxcom, Mr.&nbsp;Ar&#233;valo
served as Vice-President, Information Systems and Chief Information Officer of
Iusacell from August 1997 to May 2001. Mr.&nbsp;Ar&#233;valo also served as Vice
President, Information Systems, as Chief Information Officer and as Director,
Systems Development of Grupo Iusacell Cellular during the previous two years.
Before then, Mr.&nbsp;Ar&#233;valo served as Director of Information Systems, Materials,
Logistics and Customer Service of AMP de M&#233;xico, S.A. de C.V. from May 1993
until August 1997. Mr.&nbsp;Ar&#233;valo was also the Information Systems Manager for
Tequila Cuervo, S.A. de C.V. from October 1990 until May 1993. Mr.&nbsp;Ar&#233;valo has
an undergraduate degree in computer sciences and a diploma in marketing from
the Instituto Tecnol&#243;gico y de Estudios Superiores de Monterrey.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Carlos Castro Paniagua </I></B>has been our Vice-President of Human Resources
since March 2001. Prior to joining Maxcom, Mr.&nbsp;Castro served as Director of
Human Resources at Gillette de M&#233;xico for twelve years and as Director of
Corporate Human Resources at Phillips Mexicana for two years. Mr.&nbsp;Castro also
served at Gillette de M&#233;xico as engineering manager and production manager. Mr.
Castro holds an industrial degree from the Centro Nacional de Ense&#241;anza T&#233;cnico
Industrial.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>F&#250;lvio V. del Valle </I></B>was the President and Chief Executive Officer of
Maxcom from April 2001 until March 2003. Prior to joining Maxcom, Mr. del
Valle was President of Iusacell since June 1997 and a member of its Board of
Directors since June 1998. From August 1996 until June 1997, Mr. del Valle
served as President of the non-wireline cellular companies in Regions 3
(Norcel) and 4 (CedeTel). For more than 20&nbsp;years prior, Mr. del Valle served in
senior Latin America region executive positions for several multinational
positions for several multinational corporations. Mr. del Valle was employed by
AMP Inc. as regional director, Latin America, from January 1996 through July
1996 and as President, Mexico, from August 1992 until December 1995. From
September 1986 until July 1992, Mr. del Valle served as Regional Director for
South America, Electronic Division, for DuPont Latin America Corp. and from
March 1980 through August 1986, he served as general manager, Latin American
North Region, for National Semiconductor Corp. Mr. del Valle holds an
undergraduate degree in electrical engineering from the Instituto Polit&#233;cnico
Nacional of Mexico and a master&#146;s degree in physics from Virginia Polytechnic
Institute.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Eduardo Patr&#243;n </I></B>was our Chief Marketing Officer of Maxcom from February
2001 until January 2003. Prior to joining Maxcom, Mr.&nbsp;Patr&#243;n served for 14
years as Marketing Director, Assistant General Manager and in several other
positions for Kraft Foods in Mexico, a subsidiary of Phillip Morris.
Previously, Mr.&nbsp;Patr&#243;n worked as Promotion and Merchandising Manager for Alfa
Alimentos, S.A. de C.V., a food company, and as an account executive for A. C.
Nielsen. Mr.&nbsp;Patr&#243;n holds an Industrial Engineering degree from the Universidad
Iberoamericana in Mexico.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Cesar A. Castillo Guerra </I></B>was our Chief Commercial Operations Officer from
May 2002 until January 2003. Prior to joining Maxcom, Mr.&nbsp;Castillo served at
Axtel, S.A. de C.V. as Vice-President for the North Region, Vice-President of
Mexico City and Vice-President of Sales and Service from February 2000 to April
2002. He also served as Director of Sales and Customer Care for the same
company from January 1999 to February 2000. From May 1998 to January 1999, Mr.
Castillo served at Iusacell where he was Director of Strategic Alliances and
Channels (Marketing). Mr.&nbsp;Castillo was Director of Strategic Alliances and
Alternate Channels for Alestra between May 1996 and April 1998. Mr.&nbsp;Castillo
holds a CPA degree from the Instituto Tecnol&#243;gico de Estudios Superiores
</FONT>
<P align="center"><FONT size="2">58</FONT>
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<P align="left"><FONT size="2"> de Monterrey - Monterrey Campus, as well as a master&#146;s degree in business
administration with specialization in marketing, from the same University.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Francisco Soroa de las Cuevas </I></B>was our Vice-President of Corporate
Communications and Public Relations from September 2001 until April 2003, when
he resigned and the office was cancelled. Prior to joining Maxcom, he held the
same position at Nissan Mexicana for two years and at Iusacell for three years.
Mr.&nbsp;Soroa has also served as Director of Public Relations for Pepsico de Mexico
and Director of Public Relations and Press Secretary of the State of Puebla.
Mr.&nbsp;Soroa de las Cuevas holds a bachelor&#146;s degree in International Relations, a
Business Management Communications degree from the Universidad de las Americas
and a Human Resources Management degree from Michigan University. He holds a
bachelor&#146;s degree in International Relations from the Universidad de las
Am&#233;ricas.
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>B.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Compensation</B></FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2"><B>General</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2002, our executive officers received an
aggregate compensation (including bonuses and severance payments but excluding
options) of approximately Ps.32.9&nbsp;million. Of this amount, Ps.26.2&nbsp;million was
recognized as selling, general and administrative expenses for 2002, which
represent 6.1% of our total selling, general and administrative expenses for
2002. The remaining balance was recognized as follows:
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Ps.3.5&nbsp;million as integral cost of financing,
because certain bonuses were paid to our executives as a
special compensation for the consummation of the
restructuring;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Ps.2.3&nbsp;million as capital expenditures, because
certain bonuses were paid to our executives in connection with
the execution of the Bestel capacity acquisition agreement.
&#147;See. Item&nbsp;4. Business Overview&#148; for a further explanation of
this transaction; and.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Ps.0.9&nbsp;million as deferred expenses, because
certain bonuses were paid as incentive to retain management.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 2002, our executive officers received a bonus in the
form of cash and options to purchase 462,936 series N shares at an exercise
price of U.S.$0.4927 per share. The executive officers used the cash to
exercise the options at the time of granting.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our executive officers also received options to acquire an aggregate of up
to 356,433 series N shares at U.S.$0.01 per share. We recorded in 2002 Ps.1.7
million in selling, general and administrative expenses in connection with such
options.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2002, members and the Chairman of the Board received options that
vest immediately to purchase up to 2,500 and 5,000 series N shares,
respectively, at an exercise price of U.S.$0.01 per share, for each time the
member attended a Board of Directors or any board committee meeting. We already
approved similar options incentives for the year 2003. There were five Board
of Directors meetings, seven Operating Advisory Committee meetings and two
Audit Committee meetings, during 2002. In 2002, we granted to our directors
and committee members options to purchase a total of up to 242,500 series N
shares at an exercise price of U.S.$0.01.
</FONT>

<P align="left"><FONT size="2"><B>Old executive stock option plan</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We implemented an executive compensation plan that included bonuses and
stock options on our C/N CPOs. Upon the completion of the capital
restructuring described in &#147;Item&nbsp;7. Major Shareholders and Related Party
Transactions&#151;A. Major shareholders and share ownership&#151;The capital
restructuring,&#148; beneficiaries under the plan will now receive series N shares
in exchange for their series C shares.
</FONT>

<P align="center"><FONT size="2">59</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We granted 142,250, 583,000 and 206,820 options in 1999, 2000 and 2001,
respectively for the services rendered during the years 1998, 1999 and 2000.
Options granted had exercise prices of U.S.$8.70, U.S.$10.45 and U.S.$12.55,
respectively, which were the then estimated fair market values. Of these
options, 256,094 had vested and 221,622 had been forfeited at December&nbsp;31,
2002.
</FONT>
<P align="left"><FONT size="2"><B>New executive stock option plan</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We implemented a new executive stock plan, covering services rendered
during the years 2001, 2002 and 2003. The plan is divided into four levels,
depending on the ranking of the different members of management. There were
initially 80 participants in the plan. Participants in the top three levels
are guaranteed a minimum number of options for series N stock. The granting of
options for the fourth level, which is comprised of the junior-most management,
is discretionary.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of options granted depends on certain revenue and operating
cash flow targets. There is a bonus portion of the plan that is allocated to
individual executives at the discretion of management and the Board of
Directors. Vesting is 20% upon allocation and 20% per year for the next four
years. Options were granted during the second quarter of 2002, and will be
granted during the second quarter of 2003 and 2004 at exercise prices of
U.S.$0.4927, U.S.$0.5912 and U.S.$0.7094, respectively.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of options granted under the stock option plan for our former
Chief Executive Officer, Mr.&nbsp;Fulvio del Valle depended on revenue and cash flow
targets, and other factors such as the success of the debt restructuring,
additional capital raising and the obtainment of certain regulatory approvals.
There was a vesting period of two years from the grant date with an exercise
price of U.S.$0.4927 per share for all shares. As part of his severance
arrangement, Mr. del Valle agreed to forego all rights to receive stock under
the plan.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our new Chief Executive Officer, Mr.&nbsp;Rene Sagastuy, received a signing
bonus of options to purchase 100,000 series N shares at an exercise price of
U.S.$0.01 per share.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The maximum aggregate number of shares of series N stock that can be
distributed under the new executive stock plan is 17,657,064&nbsp;million shares of
series N stock, which is equivalent to about 9.3% of our capital stock on a
fully diluted basis (excluding other options outstanding).
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>C.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Board practices</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The members of our Board of Directors are elected annually at our ordinary
general meeting of shareholders. All board members hold the positions for one
year and may be reelected.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors established an Operating Advisory Committee
responsible for advising the Board on, and overseeing, Maxcom&#146;s operations. The
Operating Advisory Committee is currently comprised of Adri&#225;n Aguirre, Jacques
Gliksberg, Salvatore Grasso, Roberto Chute and Rene Sagastuy.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors established an Audit Committee responsible for
advising the Board on, and overseeing, Maxcom&#146;s financial condition and matters
regarding accounting, taxation and release of financial information. The Audit
Committee is currently comprised of Marco Provencio, Adri&#225;n Aguirre, Salvatore
Grasso, Roberto Chute and Hugo Lara. Mr.&nbsp;Juan Manuel Ferr&#243;n, our statutory
auditor, and Gonzalo Alarc&#243;n, our general counsel and secretary of the Board,
are required to participate in each meeting, although they are not formal
members of the committee.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Mexican Companies Law (<I>Ley General de Sociedades Mercantiles</I>),
we are required to have at least one statutory auditor (<I>comisario</I>), who is
elected by our shareholders at the annual ordinary general shareholders&#146;
meeting. C.P. Juan Manuel Ferr&#243;n is our statutory auditor. Mr.&nbsp;Ferr&#243;n is a
partner of PricewaterhouseCoopers, S.C., who are our external auditors. The
primary role of the statutory auditor is to report to our shareholders at the
annual ordinary general shareholders&#146; meeting regarding the accuracy,
sufficiency and reasonable basis of the financial information presented to such
shareholders by the Board of Directors.
</FONT>
<P align="center"><FONT size="2">60</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our executive officers are appointed by the Board of Directors for an
indefinite term and may be removed by the Board at will, provided the
corresponding severance payments are made in accordance with Mexican labor law
and the applicable labor contract.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Members of the Board of Directors are not entitled to any benefits upon
termination.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>D.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Employees</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2002, we had 443 employees, a 33% decrease as compared
to the number of employees one year earlier. This decrease is due to a
combination of cost-cutting measures and efficiencies. Of our employees, 32
were unionized and covered by the terms of a collective bargaining agreement
that we entered into with the National Union of Telecommunications,
Communications, Cybernetics, Electric, Electronic and Similar Products Workers
of the Mexican Republic (<I>Sindicato Nacional de Trabajadores de
Telecomunicaciones, Telefon&#237;a, Comunicaciones, Cibern&#233;tica, Productos
El&#233;ctricos, Electr&#243;nicos, Similares y Conexos de la Rep&#250;blica Mexicana</I>). This
agreement is renewable every year and next expires on March&nbsp;31, 2004. We have
not experienced any strikes or work stoppages and believe that our relations
with our employees are satisfactory.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also had 182 sales representatives as of December&nbsp;31, 2002, compared to
236 sales representatives as of December&nbsp;31, 2001. As of December&nbsp;31, 2002, we
had 53 temporary employees.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share ownership</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Messrs.&nbsp;Jacques Gliksberg, Roberto Chute and Pedro Querio, a series B and
B1 Directors, are officers of Bank of America Equity Partners, manager of
Nexus-Holdings I, LLC, BASCF-Maxcom Holding I, LLC and BAS Capital Funding
Corporation, shareholders that hold, directly and indirectly 71.04% of our
capital stock. None of our other directors or officers owns more than 1% of
our shares, except for shares held by the Aguirre G&#243;mez family, which are
described below in &#147;Principal Shareholders.&#148;
</FONT>
<P align="left"><FONT size="2">The only agreements that we currently maintain for purposes of compensating our
employees with our capital stock our old and new executive stock option plans,
described above under &#147;&#151;B. Compensation.&#148;
</FONT>
<!-- link2 "ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS" -->
<DIV align="left"><A NAME="007"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>A.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Major shareholders and share ownership</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the equity structure and the major
shareholders of Maxcom as of the date of this annual report:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Shareholders</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Aguirre G&#243;mez</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Bank America</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Other</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Family<SUP>(1)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Equity Partners<SUP>(2)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

<TD nowrap align="center" colspan="3"><FONT size="1"><B>Investors<sup>(3)</sup></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Subtotal</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Series&nbsp;A Shares</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,276,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,276,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage owned</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"></FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD nowrap><FONT size="2"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Series&nbsp;A1 Shares</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,088,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,088,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage owned</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Series&nbsp;B Shares</B><SUP>(4)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,226,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,226,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage owned</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Series&nbsp;B1 Shares</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,554,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">293,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,848,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage owned</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">94.98</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.02</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Series&nbsp;N Shares</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">670,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,155,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,239,605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,065,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage owned</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.55</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26.15</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31.70</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">61</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Shareholders</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Aguirre G&#243;mez</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Bank America</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Other</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Family<SUP>(1)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Equity Partners<SUP>(2)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Investors(3)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Subtotal</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Series&nbsp;N1 Shares</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">116,223,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,245,01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">122,468,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage owned</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">94.90</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.10</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Series&nbsp;N2 Shares</B><SUP>(5)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,867,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,867,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage owned</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,035,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">124,933,122</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42,872,489</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">175,841,180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage owned</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.60</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">71.04</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24.37</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The shares of Maxcom controlled by the Aguirre G&#243;mez family are held
individually or through trusts or corporations.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The shares of Maxcom controlled by Bank America Equity Partners are
held through (i)&nbsp;Nexus-Maxcom Holdings I, L.L.C., which holds 60,888,979
shares, (ii)&nbsp;BASCF-Maxcom Holding I, which holds 60,888,979 shares, and
(iii)&nbsp;BAS Capital Funding Corporation, which holds 3,155,164 shares.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes, among others, Credit
Suisse First Boston Corporation, which received 92,575 series&nbsp;B
shares and 1,937,057 series N1 shares (valued at
U.S.$1.0&nbsp;million) as part compensation for its financial
advisory services in connection with our debt restructuring.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The series B shares represent 8.49% of the voting stock of Maxcom and
are controlled by CT Global, L.L.C., an assignee of CT Global
Telecommunications, Inc., our former operating partner.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(5)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The series N2 shares were originally issued to the bondholders who
participated in our debt restructuring. See &#147;Item&nbsp;5&#151;Operating and
Financial Review and Prospects&#151;Debt restructuring and recapitalization.&#148;</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we have options outstanding for the purchase of up to
26,837,315 series N shares. See &#147;Outstanding options and warrants.&#148;
</FONT>
<P align="left"><FONT size="2"><B>The capital restructuring</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;11, 2002 we obtained an authorization from the Mexican Foreign
Investment Bureau (<I>Direcci&#243;n General de Inversi&#243;n Extranjera</I>) to increase our
ability to issue neutral investment shares for up to 95% of our total capital
stock and to simplify our equity structure.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the capital restructuring, we liquidated the existing C/N CPO trust
and cancelled the corresponding C/N CPOs. Additionally, the series C stock was
converted at an exchange ratio of one&#151;to&#151;one into series N stock. As a result,
the holders of the C/N CPOs have become the direct holders of two shares of
series N stock for each C/N CPO. Series&nbsp;N shares are represented by common
stock without voting rights.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, we issued the following series of stock:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Series&nbsp;A1 common voting stock with preferred liquidation rights;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Series&nbsp;B1 common voting stock with preferred liquidation rights;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Series&nbsp;N1 preferred stock with limited voting rights; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Series&nbsp;N2 preferred stock with limited voting rights.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of our series A stock and series A1 preferred stock voting
together as a class have the ability to elect the majority of the Board of
Directors. All series A stock and A1 preferred stock are beneficially owned,
directly or indirectly, by several members of the Aguirre G&#243;mez family,
including Adri&#225;n Aguirre G&#243;mez, Mar&#237;a Guadalupe Aguirre G&#243;mez, Mar&#237;a Elena
Aguirre G&#243;mez, and Mar&#237;a Trinidad Aguirre G&#243;mez. Pursuant to our amended
by-laws, our amended series A stock and A1 preferred stock represent 51% of our
voting stock and may only be held by Mexican nationals.
</FONT>
<P align="center"><FONT size="2">62</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the Aguirre G&#243;mez family holds 51% of the voting stock through
the series A stock and A1 preferred stock, and has the power to elect the
majority of the Board of Directors, its ability to control Maxcom is
substantially limited by the terms of the securityholders&#146; agreement described
below under &#147;&#151;Securityholders agreement.&#148; The holders of our series B stock and
series B1 preferred stock voting together have the right to elect four
directors of our nine-member Board of Directors. However, pursuant to the terms
of the securityholders agreement, the series B and B1 director are elected from
among nominees proposed by Nexus.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of our series N2 preferred stock have the right to appoint an
observer to the Board of Directors for so long as (i)&nbsp;the series N2 preferred
shares represent at least 3% of the outstanding capital stock of Maxcom or (ii)
there is at least one share of series N2 preferred stock remain outstanding and
at least U.S.$17.5&nbsp;million aggregate principal amount of the new notes remain
outstanding. This observer, who is not a member of the Board of Directors, has
the right to attend meetings of the Board of Directors but is not entitled to
vote.
</FONT>
<P align="left"><FONT size="2"><B>Outstanding options and warrants</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this annual report, we have options and warrants
outstanding for the purchase of up to 26.3&nbsp;million series N shares. Each option
entitles the holder to purchase one series N share or a C/N CPO. The following
table presents information concerning the stock options and warrants authorized
and outstanding:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Percentage</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercise price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of options</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Name of option holder</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>options</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>per share</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>vested %</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Nissho Iwai American Corporation<SUP>(1)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">337,472</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">U.S.$10.87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CT Global Telecommunications, Inc. (operating services)<SUP>(2)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,105,779</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Bachow &#038; Associates, Inc. (strategic assistance services)<SUP>(3)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">442,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amsterdam Pacific LLC</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,426</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1998-2000 Executive Stock Option Plan</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">575,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">8.70 to 12.50&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2001-2003 Executive Stock Option Plan</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,657,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">0.49 to 0.71&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17.74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">UBS Warburg LLC<SUP>(4)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">89,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Donaldson, Lufkin &#038; Jenrette Securities Corporation<SUP>(4)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Predecessor old notes warrantholders<SUP>(5)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">764,938</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gian Carlo Pecchioni<SUP>(6)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adri&#225;n Aguirre<SUP>(7)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,626,959</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Signing bonus reserve for new officers</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">246,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BankAmerica International Investment Corporation
(management services)<SUP>(8)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">249,781</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LA Strategic Capital Partners II (management services)<SUP>(9)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Bachow &#038; Associates, Inc. (management services)<SUP>(10)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">277,535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Directors and committee members compensation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">756,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55.89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Rene Sagastuy<SUP>(11)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,313,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">These options were issued in 1998 as partial compensation for vendor
financing.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We authorized the issuance of options to purchase up to 250,000 series
N shares at U.S.$8.70 per share in May 1998 as compensation for operating
services. Pursuant to the capital restructuring, we authorized the
issuance of options to purchase up to an additional 855,779 series N
shares at an exercise price of U.S.$3.06 per share and to reduce the
exercise price of the original options to U.S.$3.06 per share as partial
anti-dilution protection. See &#147;&#151;B. Related party transactions&#151;Operation
services&#148; and &#147;&#151;Option grants to shareholders.&#148;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We authorized the issuance of options to purchase up to 100,000 series
N shares at U.S.$8.70 per share in May 1998 as compensation for strategic
assistance services. Pursuant to the capital restructuring, we authorized
the issuance of options to purchase up to an additional 342,312 series N
shares at an exercise price of U.S.$3.06 per share and to reduce the
exercise price of the original options to U.S.$3.06 per share</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">63</FONT>
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">as partial anti-dilution protection. See &#147;&#151;B. Related party
transactions&#151;Strategic assistance services&#148; and &#147;&#151;B. Related party
transactions&#151;Management services.&#148;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">These warrants were issued in March 2000 as partial compensation for
underwriting services related to the issuance of units comprised of our
predecessor old notes and warrants.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(5)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">These warrants were issued as part of the March 2000 offering of our
units comprised of our predecessor old notes and warrants.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(6)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Mr.&nbsp;Pecchioni is a former Chief Executive Officer of Maxcom. These
options, which are partial compensation for his services, have been
exercised; however, the issuance of the underlying shares is subject to
certain corporate and regulatory approvals.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(7)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We issued options to purchase up to 375,000 series N shares at a strike
price varying between U.S.$8.70 and U.S.$12.50 per share pursuant to the
old executive stock option plan described in &#147;Item&nbsp;6. Directors, Senior
Management and Employees&#151;B. Compensation&#151;Old executive stock option
plan.&#148; Pursuant to the capital restructuring, we authorized the issuance
of options to purchase up to 3,251,959 series N shares at an exercise
price of U.S.$0.49 and to reduce the exercise price of the original
options to U.S.$0.49 per share as partial anti-dilution protection.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(8)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We issued options to purchase up to 42,300 series N shares at U.S.$0.01
per share in May 2001 as compensation for management services provided
during 2000. Pursuant to the capital restructuring, we authorized the
issuance of options to purchase up to an additional 207,481 series N
shares at an exercise price of U.S.$0.01 per share as partial
anti-dilution protection. See &#147;&#151;B. Related party transactions&#151;Management
services.&#148;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(9)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We issued options to purchase up to 4,700 series N shares at U.S.$0.01
per share in May 2001 as compensation for management services provided
during 2000. Pursuant to the capital restructuring, we authorized the
issuance of options to purchase up to an additional 23,053 series N
shares at an exercise price of U.S.$0.01 per share as partial
anti-dilution protection. See &#147;&#151;B. Related party transactions&#151;Management
services.&#148;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(10)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We issued options to purchase up to 47,000 series N shares at U.S.$0.01
per share in May 2001 as compensation for management services provided
during 2000. Pursuant to the capital restructuring, we authorized the
issuance of options to purchase up to an additional 230,535 series N
shares at an exercise price of U.S.$0.01 per share as partial
anti-dilution protection. See &#147;&#151;B. Related party transactions&#151;Management
services.&#148;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(11)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We issued options to purchase up to 100,000 series N shares at
U.S.$0.01 per share in March&nbsp;19,2003 as part of Mr.&nbsp;Sagastuy&#146;s new
compensation package in connection with his appointment as our new chief
executive officer.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of his severance arrangement, Mr.&nbsp;Fulvio del Valle, our former
Chief Executive Officer, who resigned in March 2003 agreed to forego all rights
he had to options issued under the new executive stock option plan and in
connection with certain bonuses. These options had entitled Mr.&nbsp;Del Valle to
receive up to 11,687,765 series N shares at an exercise price ranging from
U.S.$0.01 to U.S.$0.49.
</FONT>
<P align="left"><FONT size="2"><B>Securityholders agreement</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;18, 2000, Maxcom executed an amended and restated
securityholders agreement with our shareholders to, among other things, reflect
the restructuring of our capital stock and to provide that the exchange of
series C stock and series N stock for CPOs may not adversely affect in any
manner the rights granted to the holders of the series N stock under the
original securityholders agreement.
</FONT>
<P align="center"><FONT size="2">64</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The securityholders agreement was again amended and restated in connection
with our recapitalization. All of the holders of series A stock, series A1
preferred stock, series B stock, series B1 preferred stock, series N stock and
series N1 preferred stock are parties to the securityholders agreement, which
sets forth certain corporate governance and the transfer or sale of such
securities. The primary purpose of the securityholders agreement is to confirm
the rights and obligations under the by-laws of each of the parties to such
agreement. Accordingly, with certain limited exceptions, the terms of the new
securityholders agreement are substantially the same as the terms of the
by-laws as applicable to the holders of series A stock, series A1 preferred
stock, series B stock, series B1 preferred stock, series N stock and series N1
preferred stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In particular, the new securityholders agreement provides that we are
managed by a Board of Directors composed of nine members and nine alternate
members. Five members are designated by holders of a majority of the series A
stock and the series A1 preferred stock, voting together as a single class, and
the remaining four members are designated by the holders of our series B stock
and series B1 preferred stock voting together. However, the series B and B1
directors are selected from among nominees proposed by Nexus.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the new securityholders agreement, Maxcom is required to
deliver to certain significant holders of series A, B and N stock and series
A1, B1 and N1 preferred stock financial statements and other information
reasonably requested by such shareholders.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the new securityholders agreement provides, among other
things, approval of key matters (which will require the affirmative vote of
both Nexus and the Board, inclusive the approval of at least one director
designated by Nexus), restrictions on transfers, rights of first offer,
participation rights, and rights and obligations with respect to public
offerings. For further description of corresponding provisions of the proposed
by-laws see &#147;Item&nbsp;10. Additional Information&#151;B. Memorandum and articles of
association.&#148;
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>B.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Related party transactions</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>General policy</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our general policy is that we will not, and will not permit our
subsidiaries to, enter into any contract or transaction with or for the benefit
of any affiliate (other than transactions between us and our subsidiary), which
is not at a price and on other terms at least as favorable to Maxcom or our
subsidiaries as those which could be obtained on an arm&#146;s-length basis from an
unaffiliated third party.
</FONT>
<P align="left"><FONT size="2"><B>Operation services</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;17, 1997, we entered into an operating agreement with CT Global
Telecommunications, Inc., one of our series B shareholders. This agreement was
amended in May&nbsp;21, 1998 and October&nbsp;1, 1999 and was terminated on December&nbsp;31,
2000. Under this agreement, CT Global was responsible, among other things, for
providing us with advisory consulting and supporting services in our start-up
phase.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the life of this Agreement, CT Global earned options to purchase
our shares as incentive compensation for meeting certain start-up and
operational targets. As part of the proposed capital restructuring described
in &#147;&#151;A. Major shareholders and share ownership&#151;The capital restructuring,&#148; we
authorized the issuance of options in favor of CT Global to purchase up to
855,779 series N shares at an exercise price of U.S.$3.06 per share and to
reduce the exercise price of the original options to U.S.$3.06 per share as
partial anti-dilution protection. See &#147;&#151;A. Major shareholders and share
ownership&#151;Outstanding options and warrants.&#148;
</FONT>
<P align="left"><FONT size="2"><B>Strategic assistance services</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;21, 1998, we entered into a strategic assistance agreement with
Bachow &#038; Associates, Inc., an affiliate of one of our current principal
shareholders. The agreement provided that Bachow would help us to:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">develop and implement a budget model template for our annual operating and capital budgets;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">65</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">evaluate and assist in the choice and implementation of a financial accounting system;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">develop a template for the monthly Board of Directors operational reporting package;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">evaluate and assist in the choice and implementation of a customer billing system;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">design a sales and marketing plan; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">provide training and guidance to our Chief Financial Officer.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This agreement expired on April&nbsp;1, 1999. Bachow received, in addition to
other compensation, options to purchase 100,000 series N shares at a strike
price of U.S.$8.70 per share. In accordance with the terms of the strategic
assistance agreement, Bachow may elect to have the Company finance up to 95% of
the exercise price with a seven-year term non-recourse loan that will be
secured by the stock. Pursuant to the capital restructuring, we authorized the
issuance of options to purchase up to an additional 342,312 series N shares at
an exercise price of U.S.$3.06 per share and to reduce the exercise price of
the original options to U.S.$3.06 per share as partial anti-dilution
protection.
</FONT>
<P align="left"><FONT size="2"><B>Advertising</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;9, 2002 we agreed to purchase U.S.$3.0&nbsp;million of advertising
time over the Grupo Radio Centro radio network from Operadora Plusgamma, a
company controlled by certain members of the Aguirre G&#243;mez family. Operadora
Plusgamma is an operator of a network of radio station located throughout
Mexico. The Aguirre G&#243;mez family used the U.S.$3.0&nbsp;million proceeds that were
received by Operadora Plusgamma from this agreement to purchase series A1 stock
pursuant to the private equity investment made at the time of the
recapitalization.
</FONT>
<P align="left"><FONT size="2"><B>Management services</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2001, Bank America International Investment Corporation, Bachow &#038;
Associates, Inc. and LA Strategic Capital Partners II, which are principal
shareholders (or affiliates of principal shareholders in the case of Bachow)
received options to purchase an aggregate of 94,000 series N shares at an
exercise price of U.S.$0.01 for management services rendered in 2000, during
the term of vacancies in the offices of Chief Executive Officer, Chief
Operating Officer and Chief Marketing Officer.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of the proposed capital restructuring described in &#147;&#151;A. Major
shareholders and share ownership&#151;The capital restructuring,&#148; we authorized the
issuance to the same partners of options to purchase 461,069 series N shares at
an exercise price of U.S.$0.01 per share partial anti-dilution protection. See
&#147;&#151;A. Major shareholders and share ownership&#151;Outstanding options and warrants.&#148;
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>C.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Interest of experts and counsel</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<!-- link2 "ITEM 8. FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="008"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 8. FINANCIAL INFORMATION</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>A.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Consolidated statements and other financial information</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Financial statements</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Item&nbsp;18.
</FONT>
<P align="left"><FONT size="2"><B>Legal proceedings</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are not currently party to any material legal proceedings other than as
described below.
</FONT>
<P align="center"><FONT size="2">66</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><I>Lease termination agreement</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September 2002, we commenced actions before the Lease Courts for the
Federal District of Mexico against Messrs.&nbsp;Zaga Romano, Zaga Buzali and others
(collectively, the &#147;landlord&#148;), seeking the termination of a 15-year lease
(expiring on September&nbsp;30, 2013) of 70,500 square feet plus parking space in a
building on Magdalena, Mexico City, which was our former headquarters. The
action was based on claims of miscalculation of lease payment amounts and
breaches of certain city compliance regulations. The landlord countersued
alleging failure to make lease payments.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2003, we reached an agreement with our landlord at our former
headquarters in Magdalena, Mexico City. Pursuant to this agreement, we
retained a leasehold interest through May 2013 on the first floor, where one of
our Lucent 5ESS switches is located, the roof-top, where we have three
microwave transmission antennas and a section of the basement, which will be
used for parking and to place some of our electric equipment that supports the
switch. We were also released from lease obligation on approximately 35,887
square feet plus parking space of the building originally running through
September&nbsp;30, 2013. In exchange for the new lease and the releases, we agreed
to prepay the full, ten-year lease obligations on the first floor, the roof-top
and basement, as well as pay past-due lease payments dating back from October
2002 through April 2003. All these payments amount in the aggregate to
U.S.$2.7&nbsp;million and will be payable in installments through May 2004.
</FONT>
<P align="left"><FONT size="2"><I>Significant unpaid receivable</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are in the process of initiating legal actions against Americana de
Sistemas, S.A. de C.V. for the failure to pay approximately Ps.6.6&nbsp;million in
telecommunications services. This service usage, which was incurred over
several days, was detected by our fraud prevention system but was not noticed
by our monitoring personnel, which has been significantly reduced as a result
of our cost-cutting measures. See &#147;Item&nbsp;3. Key Information&#151;D. Risk
factors&#151;Factors relating to the Mexican telecommunications industry&#151;Fraud
increases our expenses.&#148;
</FONT>
<P align="left"><FONT size="2"><B>Dividend policy</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our current policy is to reinvest profits into our operations. In
addition, the indenture that governs the terms of the new notes allows us to
pay cash dividends only if we meet the following conditions:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">minimum consolidated leverage ratio of less than 3.75 to 1.00;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a minimum fixed charge coverage ratio of 2.00 to 1.00;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">no default (as defined in the indenture) must have occurred
and be continuing or result from the payment of the cash dividend;
and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the cash dividend payments do not exceed an amount determined
in the indenture based on, among other things, cash flow generated
from operations or equity offerings and consolidated interest
expense.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>B.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Significant changes</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the debt restructuring and recapitalization described in &#147;Item
5. Operating and Financial Review and Prospects&#151;Debt restructuring and
recapitalization,&#148; no significant change has occurred affecting our results or
financial conditions since December&nbsp;31, 2002.
</FONT>
<!-- link2 "ITEM 9. THE OFFER AND LISTING" -->
<DIV align="left"><A NAME="009"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 9. THE OFFER AND LISTING</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>A.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Offer and listing details</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P align="center"><FONT size="2">67</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>B.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Plan of distribution</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>C.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Markets</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of Maxcom&#146;s securities are traded on any stock exchange.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>D.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Selling shareholders</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>E.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Dilution</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>F.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Expenses of the issue</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<!-- link2 "ITEM 10. ADDITIONAL INFORMATION" -->
<DIV align="left"><A NAME="010"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 10. ADDITIONAL INFORMATION</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>A.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Share capital</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>B.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Memorandum and articles of association</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>General</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maxcom was incorporated on February&nbsp;28, 1996, under the name &#147;Amaritel,
S.A. de C.V.&#148; as a variable capital corporation (<I>sociedad an&#243;nima de capital
variable</I>) established under the laws of Mexico. Maxcom was registered in the
Public Registry of Commerce of the Federal District of Mexico under folio no.
210585 on June&nbsp;11, 1996. Amaritel changed its name to &#147;Maxcom
Telecomunicaciones, S.A. de C.V.&#148; on February&nbsp;9, 1999.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maxcom was formed for the purpose of installing, operating and exploiting
a public telecommunications network granted by the Mexican federal government
for the provision of local and long distance telephone services.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maxcom&#146;s corporate purposes are found under Article&nbsp;Two of its by-laws.
The duration of Maxcom&#146;s existence under our by-laws is indefinite.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our capital structure as of December&nbsp;31,
2002:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>% of Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Capital</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Class of Stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of Stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Structure</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;A</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,276,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;A1 Preferred Stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,088,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;B</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,226,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;B1 Preferred Stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,848,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;N</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,065,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;N1 Preferred Stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">122,468,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series&nbsp;N2 Preferred Stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,867,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">175,841,180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">68</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;11, 2002 we obtained an authorization from the Mexican Foreign
Investment Bureau (<I>Direcci&#243;n General de Inversi&#243;n Extranjera</I>) to increase our
ability to issue neutral investment shares for up to 95% of our total capital
stock and to simplify our equity structure.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with our capital restructuring, we issued four new classes
of stock: the series A1, B1, N1 and N2 preferred stock. The series A1 and B1
preferred stock have full voting stock and the series N1 and N2 preferred stock
have limited voting stock. The series N1 and N2 preferred stock are not
computed for purposes of determining the foreign investment percentage under
the Mexican Foreign Investment Law and may be subscribed, paid for and held by
Mexican and non-Mexican investors. Our series N2 preferred stock have been
deposited into the CPO trust, which is administered by Banco Nacional de
M&#233;xico, S.A. who is also the holder of record of the series N2 preferred stock.
The trust is managed by a technical committee, a majority of the members of
which are designated by Maxcom. The technical committee has the authority to
direct the trustee to, among other things, waive preemptive rights otherwise
provided by Mexican law. Each CPO represents one series N2 preferred stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the capital restructuring, we liquidated the existing C/N CPO trust
and cancelled the corresponding C/N CPOs. Additionally, the series C stock was
converted at an exchange ratio of one-to-one into series N stock. As a result,
holders of C/N CPOs have became the direct holders of two shares of series N
stock for each C/N CPO.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our series A stock and series A1 preferred stock, which may only be
subscribed, paid for and held by Mexican investors, collectively represent
about 51% of our voting stock, and all of our series A and series A1 stock are
held directly or indirectly by members of the Aguirre G&#243;mez family. The series
B stock and the series B1 preferred stock represent 49% of our voting stock and
may be subscribed, paid for and held by Mexican and non-Mexican investors.
</FONT>
<P align="left"><FONT size="2"><B>Voting rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our amended by-laws, the holders of series A stock, series A1
preferred stock, series B stock and series B1 preferred stock are entitled to
vote on all matters submitted to a vote of the shareholders, with each share of
series A stock, series A1 preferred stock, series B stock and series B1
preferred stock being entitled to one vote. In addition, under our by-laws,
holders of series N stock have no voting rights and holders of series N1 and N2
preferred stock have limited voting rights.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of series N1 preferred stock will vote together as a separate
class in connection with:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any amendment to the by-laws that adversely and
disproportionately affects the economic characteristics (i.e.,
conversion right, liquidation right and dividend right) of the
series N1 preferred stock as compared to the series N2 preferred
stock; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any amendment to the section of the by-laws relating to the
voting rights of series N1 preferred stock.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, holders of series N2 preferred stock will vote together as a
separate class in connection with:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">determining whether a sale of all or substantially all of the
consolidated assets of Maxcom or a merger, recapitalization,
reorganization or consolidation of Maxcom, immediately after which
the shareholders of Maxcom beneficially own less than 50% of the
voting power or equity securities of the surviving entity will not
be deemed a liquidation event with respect to the series N2
preferred stock;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">69</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any amendment to the by-laws that adversely and
disproportionately affects the economic characteristics (i.e.,
conversion right, liquidation right and dividend right) of the
series N2 preferred stock as compared to the series N1 preferred
stock;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any amendment to the by-laws that adversely affects the right
of the holders of a majority of the series N2 preferred stock to
designate an observer (or, in the circumstance described below, a
member) to the board of directors;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any amendment to the by-laws that adversely affects the
rights of the observer designated by the series N2 preferred stock
to receive, subject to any restrictions imposed by applicable law,
copies of any written materials distributed to the holders of series
A and B stock and series A1 and B1 preferred stock simultaneously
with such holders;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">certain amendments to the by-laws that impose additional
transfer restrictions or conditions on the series N2 preferred
stock, except to the extent necessary to comply with applicable law;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any amendment to the by-laws that adversely affects the
co-sale rights or obligations of holders of series N2 preferred
stock;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any amendment to the by-laws that adversely affects the
forced sale rights or obligations of holders of series N2 preferred
stock; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any amendment to the section of the by-laws of Maxcom
relating to the voting rights of series N2 preferred stock.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146; meetings may be called by the Board of Directors, its
Chairman, Vice-Chairman or Secretary, the statutory auditor or Nexus or, in
certain cases, by a Mexican court of competent jurisdiction. In addition, the
Board of Directors or the statutory auditor must call a shareholders&#146; meeting
at the written request of any shareholder if no ordinary general shareholders&#146;
meeting has been held for two consecutive years or if the shareholders&#146;
meetings held during that period have not considered the items mentioned in
Article&nbsp;181 of the Mexican Companies Law. Notice of meetings must be published
in the Official Gazette of the Federation or in a newspaper of general
circulation in Mexico City or by written notice given to each shareholder of
record at least 15&nbsp;days prior to the meeting. In order to attend a
shareholders&#146; meeting, a shareholder must request and obtain an admission card
by depositing, at least 24 hours before the time set for holding the
shareholders&#146; meeting, such shares with Maxcom&#146;s corporate secretary or with a
Mexican bank or other qualified institution. If entitled to attend the meeting,
a shareholder may be represented by proxy or a power-of-attorney.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146; meetings may be ordinary, extraordinary or special.
Extraordinary general meetings are called to consider the matters specified in
Article&nbsp;182 of the Mexican Companies Law, and principally include increases or
reductions of capital stock, amendments to the by-laws, dissolution, issuance
of bonds or preferred stock, merger, spin-off, transformation from one type of
company to another, change in nationality and change of corporate purpose.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General meetings called to consider all matters other than those mentioned
above are ordinary meetings. An ordinary general meeting of the shareholders of
Maxcom must be held at least annually during the four months following the end
of each fiscal year to consider matters specified in Article&nbsp;181 of the Mexican
Companies Law, principally including the election of directors, the report of
the Board of Directors regarding the performance of Maxcom, containing the
financial statements of Maxcom for the preceding fiscal year and the
declaration of dividends, if any.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Special meetings for each class of stock may be held to elect the members
or observers of the Board of Directors representing those shareholders and to
address other matters relating to the relevant series.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our by-laws, the quorum on a first call, and each call thereafter,
for an ordinary general shareholders&#146; meeting is at least a majority of the
voting shares. The quorum on a first call for extraordinary
</FONT>
<P align="center"><FONT size="2">70</FONT>
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<P align="left"><FONT size="2"> shareholders&#146; meetings, and each call thereafter, is at least a majority
of the shares having a right to vote at such meetings. Except for purposes of
certain key matters to be voted upon as a separate class by each of the holders
of series N1 and series N2 preferred stock, series N stock, and series N1 and
N2 preferred stock are not considered voting shares for purposes of determining
the quorum at ordinary general or extraordinary shareholders&#146; meetings. The
quorum on a first call for special shareholders&#146; meetings, and each call
thereafter is at least a majority of the shares of the respective series for
which the special meeting is being held.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resolutions of ordinary general and special shareholders&#146; meetings may be
adopted by the affirmative vote of the majority of shares present at the
meeting, except as to certain matters described below. Resolutions of general
extraordinary shareholders&#146; meetings held on a first call, and each call
thereafter may be adopted by the affirmative vote of at least a majority of the
shares having a right to vote at such meetings.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, holders of 33% of Maxcom&#146;s outstanding capital stock
may have any shareholder action set aside by filing a complaint with a Mexican
court of competent jurisdiction within 15&nbsp;days after the close of the meeting
at which such action was taken, by showing that the challenged action violates
Mexican law or Maxcom&#146;s by-laws.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, an action for civil liabilities against a member or
members of the Board of Directors may be initiated by a shareholders&#146;
resolution. In the event shareholders decide to bring an action, the person or
persons against whom the action is brought will immediately cease to be members
of the Board of Directors. Additionally, shareholders representing not less
than 33% of the outstanding shares of Maxcom may directly take such action
against members of the Board of Directors, provided that:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">such shareholders have not voted in favor of a resolution
approved at the relevant shareholders&#146; meeting pursuant to which it
was resolved not to take any action against the directors who are to
be sued; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the claim in question covers the total amount of damages
alleged to have been caused to Maxcom as well as to the individual
plaintiffs&#146; interests.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any recovery of damages will be for the benefit of Maxcom and not the
shareholders bringing the action.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, any shareholder or director who has a conflict of
interests in connection with any matter must abstain from voting at the
relevant shareholders&#146; or board of directors&#146; meeting, respectively. Any
shareholder or director who votes on a business transaction where its interests
conflict with those of Maxcom may be liable for damages if the transaction
would not have been approved without such shareholder&#146;s or director&#146;s vote.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms of compensation of the members of the Board of Directors must be
approved at a shareholders&#146; meeting.
</FONT>
<P align="left"><FONT size="2"><B>Approval of key matters</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended by-laws provide that the approval of each of the key matters
described below will require the approval in advance of both Nexus, solely in
its capacity as a shareholder, and the board of directors; provided that the
approval of the board of directors will require the affirmative vote of at
least one director designated by Nexus.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Key matters generally include the following:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the incurrence or assumption by the company and/or any of its
subsidiaries of any indebtedness (including capitalized lease
obligations) or other liabilities exceeding U.S.$10,000,000;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the issuance of any equity securities of the company or any
of its subsidiaries;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the sale, transfer, exchange or other disposal of all or a
significant portion of the assets or equity securities of the
company or any of its subsidiaries;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">71</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any assignment by the company or any of its subsidiaries for
the benefit of creditors or the voluntary commencement of any
bankruptcy or insolvency proceedings;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the establishment by the company or any of its subsidiaries
of any non-wholly-owned-subsidiary or the making by the company or
any of its subsidiaries of any loans or advances to, guarantees for
the benefit of, or investments in, any person or entity other than a
wholly-owned subsidiary;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the declaration of dividends on, or the making of any other
distributions in respect of, any of its capital stock, other than
dividends and distributions by a direct or indirect wholly-owned
subsidiary of the company to its parent;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the acquisition of any equity securities of the company or any of its subsidiaries;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the entering into any transaction with any restricted persons;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the election, appointment or removal of the Chief Executive
Officer, the General Managers of any business units, the Chief
Operating Officer, the Chief Financial Officer, the Director of
Marketing and the Chief Engineer (or any other individual with a
similar or more senior title or position), and the approval of
salary, compensation and benefit or other similar plans for such key
executives;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the approval of the company&#146;s and its subsidiaries&#146; annual
business plan and annual budget for each fiscal year;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the entering by the company or any of its subsidiaries into
any new line of business (other than the main corporate purpose of
the company);</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any agreement that would restrict the company&#146;s or any of its
subsidiaries&#146; right or ability to perform the provisions of its
by-laws (Estatutos) or any agreements or instruments to which it is
a party;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the manner in which the shares or other interests of any
subsidiary or entity owned by the company shall be voted at
shareholders&#146; meetings called for key matters;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any amendments to the concessions/licenses granted by the
Mexican authorities, by-laws and certain other specified agreements;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the subdivision or combination, in any manner, of the
outstanding shares of one class or series of shares, unless the
outstanding shares of the other class or series of shares of the
company shall also be proportionately subdivided or combined in a
similar manner;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>

    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the grant to any person or entity of the right to request the company to register securities; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any commitment or agreement to do any of the foregoing.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Board of Directors</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors is composed of nine members, five of whom are
designated by the holders of series A stock and series A1 preferred stock and
four of whom are designated by the holders of series B stock and series B1
preferred stock. Pursuant to the terms of the securityholders agreement
described in &#147;Item&nbsp;7. Major Shareholders and Related Party Transaction&#151;A.
Major shareholders and share ownership&#151;Securityholders agreement,&#148; each series
B and B1 director must be elected from nominees selected by Nexus. One
alternate is also designated for each member of the Board of Directors.
</FONT>
<P align="center"><FONT size="2">72</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to the consummation of a qualified public offering, the holders of
series N2 preferred stock or the new class of voting preferred stock into which
the series N2 preferred stock is convertible are generally entitled to
designate one observer to the Board of Directors. With certain exceptions, the
observer has the right to attend meetings of the Board of Directors and receive
information distributed to the company&#146;s directors and copies of any written
materials distributed to the holders of series A and B stock and series A1 and
B1 preferred stock. The observer, who is not a member of the Board of
Directors, is also entitled to attend meetings of any committee of the Board of
Directors authorized to act on behalf of the full Board of Directors. The
observer has no right to vote at any meeting of the Board of Directors or any
committee of the Board of Directors. The holders of series N2 preferred stock
or the new class of preferred stock into which such series N2 preferred stock
is converted are permitted to designate an observer to the Board of Directors
for so long as either:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the series N2 preferred stock, or such other voting preferred
stock represents at least 3% of the issued and outstanding capital
stock of Maxcom; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">there are any shares of series N2 preferred stock outstanding
and at least U.S.$17.5&nbsp;million principal amount of the new notes
outstanding.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon a change in the applicable laws in Mexico permitting a majority of
our Board of Directors to be composed of non-Mexicans, the holders of series N2
preferred stock, or such other voting preferred stock into which the series N2
preferred stock is convertible, will be entitled to designate and elect a full
member of the Board of Directors (in lieu of the observer) for so long as
series N2 preferred stock, or such voting preferred stock, represents at least
10% of the total capital stock of the company then outstanding. If the series
N2 preferred stock, or such other voting preferred stock, declines below this
threshold, the class will again be permitted to designate an observer.
</FONT>
<P align="left"><FONT size="2"><B>Dividends</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the annual ordinary general meeting of shareholders of Maxcom, the
Board of Directors will typically submit the financial statements of Maxcom for
the previous fiscal year, together with a report by the Board of Directors, to
the general ordinary shareholders&#146; meeting for their approval. The holders of
series A and B stock and holders of series A1 and B1 preferred stock will
determine the allocation of Maxcom&#146;s net profits for such fiscal year. At least
5% of such net profits must be allocated to a legal reserve, which is not
available for distribution except as a stock dividend, until the amount of the
legal reserve equals 20% of Maxcom&#146;s paid-in capital stock. Additional amounts
may be allocated to other reserve funds as the shareholders determine. The
remaining balance of net profits, if any, is available for distribution as
dividends.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The series N2 preferred stock (on an as-converted basis) are entitled to
receive dividend payments, if any, and rank pari passu with the series A1, B1
and N1 preferred stock with respect to dividend rights. Maxcom will pay no
dividends on any class of capital stock that is junior to the series N2
preferred stock unless it also pays dividends to holders of series N2 preferred
stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maxcom does not anticipate that it will declare and pay dividends in the
foreseeable future.
</FONT>
<P align="left"><FONT size="2"><B>Liquidation rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that we are dissolved or liquidated, one or more liquidators
must be appointed at an extraordinary general shareholders&#146; meeting to wind up
our affairs. Except as provided below, all fully paid and outstanding shares of
capital stock will be entitled to share ratably in all assets remaining after
payment of liabilities. Partially paid shares will be entitled to participate
in a liquidation, dissolution or winding up in the same manner as they would in
a dividend or distribution.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, under our amended by-laws, upon any liquidation, dissolution or
winding up of Maxcom, holders of series N2 preferred stock will be entitled to
receive liquidation proceeds in preference to the holders of the series A, B
and N stock and pari passu with the holders of series A1, B1 and N1 preferred
stock on a pro rata basis in an amount equal to the greater of:
</FONT>
<P align="center"><FONT size="2">73</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">U.S.$0.4927 per share, as adjusted for stock splits, stock
dividends and similar events, plus the accretion of such amount at a
cumulative rate of 12% per year compounded semi-annually; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the amount that holders of series N2 preferred stock would
have received if they had converted all of their series N2 preferred
stock into series N stock (or, to the extent the series N stock has
been converted, to the class of stock the series N stock is
converted into) immediately prior to the liquidation event.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A sale of all or substantially all of the consolidated assets of Maxcom,
or a merger, recapitalization, reorganization or consolidation of Maxcom,
immediately after which the shareholders of Maxcom beneficially own less than
50% of the voting power or the equity securities of the surviving entity, will
be deemed to be a liquidation event with respect to the series N2 preferred
stock, unless the holders of at least a majority of the series N2 preferred
stock deem that such event does not constitute a liquidation event with respect
to their shares.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A waiver of this deemed liquidation event by holders of series N2
preferred stock will not impair the liquidation rights of holders of series A1,
B1 and N1 preferred stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The liquidation preference rights will not be retained in the event of an
optional conversion or mandatory conversion into common stock in connection
with a qualified public offering.
</FONT>
<P align="left"><FONT size="2"><B>Changes in share capital</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An increase of our capital stock may be effected through the issuance of
new shares for payment in cash or in kind, by capitalization of indebtedness or
by capitalization of certain items of shareholders&#146; equity. No increase of our
capital stock may be effected until all previously-issued shares of capital
stock have been fully paid. A reduction of our capital stock may be effected to
absorb losses, to redeem shares, or to release shareholders from payments not
made.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increases in capital may not result in the series N stock and series N1
and N2 preferred stock representing more than 95% in the aggregate of the
outstanding capital stock of Maxcom. The series N stock and the series N1 and
N2 preferred stock currently represent 91.8% of our outstanding capital stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fixed portion of our capital stock may only be increased or decreased
by resolution of an extraordinary general meeting of shareholders and an
amendment to our by-laws. The variable portion of our capital stock may be
increased or decreased by resolution of an extraordinary general meeting of
shareholders.
</FONT>
<P align="left"><FONT size="2"><B>Preemptive rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of a capital increase through the issuance of new shares for
payment in cash or in kind, as a matter of Mexican law, a holder of shares has
a preferential right to subscribe for a sufficient number of new shares to
maintain the holder&#146;s existing proportion of shares held.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders have a preemptive right to subscribe for shares, except:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">in connection with mergers or spin-offs;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">on the conversion of convertible debentures; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">issuances of shares pursuant to a public offering, if a
general extraordinary shareholders&#146; meeting called for such purpose
so approves and other requirements specified in Article&nbsp;81 of the
Mexican Securities Law are satisfied, including obtaining the
approval of the Mexican National Banking and Securities Commission.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">74</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, preemptive rights may not be waived in advance by a
shareholder, and cannot be represented by an instrument that is negotiable
separately from the corresponding share but may be waived at the moment of
issuance of such shares.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The series N2 preferred stock are held in a limited purpose trust
administered by Banco Nacional de M&#233;xico, S.A., who is also the holder of
record. The CPO trust is managed by a technical committee, a majority of the
members of which is appointed or designated by Maxcom, which has the authority
to direct the trustee to, among other things, waive any applicable preemptive
rights. See &#147;&#151;Description of the CPO trust&#148; below.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not be able to offer additional shares of capital stock to holders
of the CPOs pursuant to preemptive rights granted to our shareholders in
connection with any future issuance of stock, unless a registration statement
under the Securities Act is effective or an exemption from the registration
requirements is available. Whenever we are required to make a preemptive rights
offering to the holders of the series N2 preferred stock, we will evaluate the
costs and potential liabilities associated with any such registration
statement, the benefits to the holders of CPOs, and any other factors that we
consider appropriate and then we will determine whether or not to file such
registration statement. If we determine that we will not be able to offer the
holders of CPOs the right to subscribe for additional shares of capital stock,
we will direct the trustee of the CPO trust to waive its preemptive rights as
the holder of record of the series N2 preferred stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our by-laws and securityholders agreement provide that if the trustee of
the CPO trust waives the preemptive rights in connection with a share issuance,
the holders of series N1 preferred stock will also waive their preemptive
rights with respect to such issuance. Although the holders of series N1
preferred stock must waive their statutory preemptive rights, such holders will
be permitted to participate directly in the share subscription or if otherwise
permitted to do so.
</FONT>
<P align="left"><FONT size="2"><B>Optional conversion rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The series N2 preferred stock is convertible, in whole or in part, at the
option of the holder into series N stock at any time prior to the earlier of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the consummation of a public offering; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the elimination of certain foreign ownership restrictions
under Mexican law so as to permit the unrestricted ownership and/or
control of Maxcom by non-Mexicans.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon a public offering, the series N2 preferred stock (as well as new
voting preferred stock issued pursuant to a mandatory conversion related to the
elimination of certain foreign ownership restrictions under Mexican law) will
be convertible, in whole or in part, at the option of the holder into the same
class of equity securities offered in such public offering.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the series A1, B1 and N1 preferred stock are convertible, in
whole or in part, at the option of the holder, at such time, and on such terms,
as the series N2 preferred stock.
</FONT>
<P align="left"><FONT size="2"><B>Mandatory conversion</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon a qualified public offering, all, but not less than all, the series
N2 preferred stock (as well as new voting preferred stock issued pursuant to a
mandatory conversion related to the elimination of certain foreign ownership
restrictions under Mexican law) will be convertible at the option of Maxcom
into the same class of equity securities offered in such qualified public
offering.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, all, but not less than all, of the series A1, B1 and N1
preferred stock will be convertible at the option of Maxcom at such time and on
such terms, as the series N2 preferred stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon the elimination of certain foreign ownership restrictions under
Mexican law so as to permit the unrestricted ownership and/or control of Maxcom
by non-Mexicans, the series N2 preferred stock will automatically
</FONT>
<P align="center"><FONT size="2">75</FONT>
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<P align="left"><FONT size="2"> convert into a new voting preferred stock. This new voting preferred stock
will retain the same liquidation preference rights of the series N2 preferred
stock and the right to appoint either a member of the Board of Directors or, if
such new voting preferred stock represents less than 10% of the outstanding
capital stock of Maxcom, an observer to the Board of Directors.
</FONT>
<P align="left"><FONT size="2"><B>Anti-dilution protection and conversion price adjustments</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Maxcom issues any shares of common equity or securities convertible
into common equity (other than certain permitted issuances) for consideration
per share of less than either (i)&nbsp;the conversion price, which will initially be
U.S.$0.4927 per share, in effect immediately prior to that time or (ii)&nbsp;the
then fair market value of the stock sold, then, until December&nbsp;31, 2002, full
ratchet anti-dilution protection will apply, and, thereafter, institutional
weighted average anti-dilution protection will apply to the preferred stock, as
more fully described below. This anti-dilution protection will no longer be
available after the preferred stock is converted into common stock. Maxcom has
not issued any shares of common equity or securities convertible into common
equity since the adoption of this clause.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following permitted issuances will not trigger the anti-dilution
protections:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any rights, options and warrants granted or issued, or
authorized to be granted or issued, to certain employees, directors,
consultants and vendors of Maxcom and its subsidiaries, as of March
5, 2002, or under any management incentive plan approved by the
Board of Directors, including the affirmative vote of at least one
of the directors selected from Nexus appointees.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any securities issued pursuant to the private equity
investment and up to U.S.$3.8&nbsp;million of securities issued within
one year of the consummation of the private equity investment at or
above U.S.$0.4927 per share;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any shares issued upon the exercise or conversion of any of
the foregoing; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any of the capital stock issued in connection with a
conversion of any of the series A1, B1, N1 or N2 preferred stock.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Full-ratchet anti-dilution protection means that the conversion price will
be automatically reduced to the lowest consideration at which any share of
capital stock has been issued or sold.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Institutional weighted average anti-dilution protection means that the
conversion price will be reduced to the lower of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">an amount equal to (A)&nbsp;the sum of (i)&nbsp;the product derived by
multiplying the conversion price in effect immediately prior to such
issuance or sale by the number of &#147;common shares deemed
outstanding,&#148; as defined below, immediately prior to such issue or
sale, plus (ii)&nbsp;the aggregate consideration (expressed as a net
price per share), if any received by Maxcom upon such issue or sale,
divided by (B)&nbsp;the number of common shares deemed outstanding
immediately after such issue or sale; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the conversion price determined by multiplying the conversion
price in effect immediately prior to such issuance or sale by a
fraction, the numerator of which will be the sum of (i)&nbsp;the number
of the common shares deemed outstanding immediately prior to such
issue or sale multiplied by the then market value of the then fair
market value of the common stock of Maxcom then outstanding as of
the date of such issuance or sale plus (ii)&nbsp;the aggregate
consideration, if any, received by Maxcom upon such issuance or sale
and the denominator of which shall be the product derived by
multiplying the then fair market value of the common stock of Maxcom
by the number of common shares deemed outstanding immediately after
such issue or sale.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">76</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the purposes of the foregoing calculations, the term &#147;common shares
deemed outstanding&#148; means the currently outstanding capital stock of Maxcom
plus all shares of capital stock issuable upon the exercise of options and
warrants or conversion of convertible securities. Whenever Maxcom grants
options or issues securities convertible into the capital stock of the company,
the issue price will be the sum of the per share consideration received by the
company upon the grant or issue of the option or convertible security plus any
per share additional consideration that the company will receive upon exercise
or conversion of such option or convertible security.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Determinations of fair market value will be made in good faith by the
Board of Directors so long as the issuance is for cash consideration (and
without any associated service arrangements) and at least 70% of the shares
issued are to persons who are not then shareholders of Maxcom. Otherwise,
Maxcom at its expense will obtain the opinion of an internationally recognized
or nationally recognized in the United States financial advisory firm or
investment bank to be selected by Maxcom as to the fair value of the shares to
be issued and any non-cash consideration for such shares.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The conversion price will also be adjusted for any stock splits or
combinations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following any adjustment of the conversion price of the series N2
preferred stock, Maxcom will deliver notice to the CPO trustee of the
adjustment setting forth the calculation of the adjustment. In addition, upon
the written request of the CPO trustee, Maxcom will furnish or cause to be
furnished to the CPO trustee a certificate setting forth (i)&nbsp;a summary of all
adjustments and readjustments to the conversion price, (ii)&nbsp;the conversion
price for the series N2 preferred stock then in effect, and (iii)&nbsp;the number of
shares of capital stock into which the series N2 preferred stock is then
convertible.
</FONT>
<P align="left"><FONT size="2"><B>Right of first refusal</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except in connection with a sale of at least 50.1% of the total equity of
Maxcom, a public offering or a transfer to an affiliate or a certain other
permitted transferee, if a Maxcom shareholder other than certain significant
shareholders, who we refer to as the &#147;investors,&#148; intends to sell its capital
stock, then shareholders other than the investors and the holders of the series
N2 preferred stock (but only with respect to their series N2 preferred stock)
will have the right to purchase such capital stock. This right of first refusal
will terminate upon the earlier of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a sale or transfer of at least 50.1% of the total capital
stock of Maxcom or the sale of all or substantially all of the
consolidated assets of Maxcom in one or more related transactions to
an independent third party or parties, or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the elimination of certain foreign ownership restrictions
under Mexican law so as to permit the unrestricted ownership and/or
control of Maxcom by non-Mexicans.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Right of first offer</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except in connection with a sale of at least 50.1% of the total equity of
Maxcom, a public offering or a transfer to an affiliate or a certain other
permitted transferee, in the event any investor intends to transfer any series
A1, B1 or N1 preferred stock, or securities received in a conversion of such
preferred stock, such investor must offer to sell such securities to each other
investor holding more than one percent of the aggregate series A1, B1 and N1
preferred stock, or securities received in a conversion of such preferred
stock, then outstanding. This right of first offer will terminate upon the
earlier of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a qualified public offering;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the sale or transfer of any series A1, B1 or N1 preferred
stock involving at least 50.1% of the total capital stock of Maxcom
or a sale of all or substantially all of the consolidated assets of
Maxcom in one or more related transactions to an independent third
party or parties.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">77</FONT>
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<P align="left"><FONT size="2"><B>Co-sale rights and forced sale obligations</B>
</FONT>

<P align="left"><FONT size="2"><I>Co-sale rights</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If holders of series A1, B1 or N1 preferred stock intend to sell, alone or
together with any other shareholder of Maxcom, at least 50.1% of the total
capital stock of Maxcom in one or more related transactions to an independent
third party or parties, then holders of series N2 preferred stock will, except
in certain circumstances, have the right to participate in any such sale on a
pro rata basis with the sellers. Holders of series N2 preferred stock will be
entitled to sell such shares generally on the same terms and conditions as the
selling shareholder. This co-sale right will terminate upon the consummation of
the earlier of
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a qualified public offering; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the sale or transfer of any series A1, B1 or N1 preferred
stock involving a transfer of at least 50.1% of the total capital
stock of Maxcom or a sale of all or substantially all of the
consolidated assets of Maxcom to an independent third party or
parties in one or more related transactions.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with any sale or transfer of any of our equity securities,
debt securities with equity features or other securities convertible into
equity securities, shareholders other than holders of series N-2 preferred
stock may participate in such sale on a pro rata basis at a price and on terms
substantially the same as the selling securityholder. However, these co-sale
rights will not apply to a sale or transfer of no more than 7,000,000 shares of
preferred stock. This co-sale right will terminate upon the consummation of the
earlier of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a qualified public offering; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the sale or transfer of any series A1, B1 or N1 preferred
stock involving a transfer of at least 50.1% of the total capital
stock of Maxcom or a sale of all or substantially all of the
consolidated assets of Maxcom to an independent third party or
parties in one or more related transactions.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><I>Forced sale obligations</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Nexus desires to transfer at least two-thirds of the beneficial
ownership of the total capital stock of Maxcom then outstanding, in one or more
related transactions to an independent third party or parties, on terms and
conditions approved by Nexus, then all shareholders of Maxcom (including
holders of series N2 preferred stock) may be forced by Nexus to sell a
proportionate share of their series N2 preferred stock. Such shareholders will
be entitled to sell such shares generally on the same terms and conditions as
the selling shareholders.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Nexus desires to sell all or substantially all of the consolidated
assets of Maxcom in one or more related transactions to an independent third
party or parties on terms and conditions approved by Nexus, then all
shareholders of Maxcom (including holders of series N2 preferred stock) may be
forced by Nexus to vote in favor of, consent to and raise no objections against
such asset sale.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of series N2 preferred stock may not be forced to participate in,
or vote for, any of the foregoing transactions unless:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the consideration for such sale is paid in cash and/or freely
tradeable, exchange&#151;listed equity securities; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the value of such consideration on a per share basis is not
less than the then applicable liquidation preference for each share
of series N2 preferred stock.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These forced sale obligations will terminate upon the consummation of the earlier of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a qualified public offering; or</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">78</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the sale or transfer of any series A1, B1 or N1 preferred
stock involving a transfer of at least 50.1% of the total capital
stock of Maxcom or a sale of all or substantially all of the
consolidated assets of Maxcom to an independent third party or
parties in one or more related transactions.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><I>Other provisions</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In both the case of a co-sale and a forced sale, the holders of series N2
preferred stock will not be required to execute any ancillary documents.
However, to the extent the proceeds from any such sale will be subject to any
expense, escrow, holdback or indemnification obligation, the selling
shareholders assume this obligation on a pro rata basis. The amount of any such
obligation of each shareholder in connection with a participation in a sale or
a forced sale will be limited to the maximum amount of proceeds that the such
holder is entitled to receive. Shareholders participating in a sale or forced
to sell may provide the purchaser with different assurances or collateral for
their indemnification obligations. As a result, some shareholders may be
permitted to sign an indemnification agreement or give a guarantee while others
may be subject to a hold back of their sale proceeds.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is possible that both the participation rights and forced sale
obligations will be triggered by a single transaction. In this event, the
participation rights will not apply.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that the participation rights or forced sale obligations have
been triggered, we will prepare, and to the extent applicable, file with the
appropriate regulatory authority, with the advice of U.S. counsel, any notices
or offering material required by our by-laws or applicable Mexican and U.S.
federal and state securities laws to be delivered to the beneficial owners of
the series N2 preferred stock and to cause such documents to be delivered to
the CPO trustee in sufficient quantities for distribution to the beneficial
owners of the series N2 preferred stock.
</FONT>
<P align="left"><FONT size="2"><B>Rights and obligations with respect to public offerings</B>
</FONT>

<P align="left"><FONT size="2"><I>Registration rights</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nexus at any time and from time to time may request that Maxcom take all
requisite action, at its expense, to register one or more series of Maxcom&#146;s
equity securities under applicable Mexican securities laws, rules and
regulations or applicable U.S. federal and state securities laws. However, the
initial demand by Nexus shall be a public offering that is expected to yield
aggregate net proceeds of at least U.S.$10.0&nbsp;million.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of series N1 preferred stock and series A1 and B1 stock will have
the right to participate (piggyback)&nbsp;in any registration statement filed
pursuant to the Securities Act for a public offering other than an initial
public offering. However, the registration rights will be subject to customary
cutback provisions.
</FONT>
<P align="left"><FONT size="2"><I>Cooperation in connection with an underwritten offering</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the period commencing on Maxcom&#146;s initial public offering that is
not a qualified public offering and ending on the earlier to occur of eighteen
months after the consummation of such initial public offering or the
consummation of Maxcom&#146;s first qualified public offering, at the request of one
or more holders of series N2 preferred stock, or of any class of stock into
which the series N2 preferred stock has been converted, and at such holders&#146;
expense Maxcom will cooperate one time only with the efforts of such holders to
effect an underwritten offering of their stock, provided that such offering is
for at least U.S.$5.0&nbsp;million in net proceeds. In addition, the underwriter
must be reasonably acceptable to Maxcom and Maxcom may delay such underwritten
offering for up to six months if it is then separately in the process of
preparing a qualified public offering. Maxcom will not be obligated to prepare
any offering memorandum or registration statement in connection with such
offering.
</FONT>
<P align="left"><FONT size="2"><I>Listing rights</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After a public offering, at the request of any holder of series N2
preferred stock, or any class into which the series N2 preferred stock has been
converted, Maxcom will, at its expense, use commercially reasonable efforts, to
cause the shares into which the series N2 preferred stock has been converted or
is convertible, including any CPOs representing such shares, to be listed on
each securities exchange or the NASD automated quotation system, as
</FONT>
<P align="center"><FONT size="2">79</FONT>
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<P align="left"><FONT size="2"> applicable, on which similar securities of Maxcom, including certificates
of participation representing the beneficial ownership of such similar
securities are then listed. In connection with any such listing, Maxcom will,
if required, also register such securities with the National Registry of
Securities and Intermediaries of the National Banking and Securities Commission
of Mexico.
</FONT>
<P align="left"><FONT size="2"><I>Lock-up restrictions</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may, under certain circumstances, impose a limitation on the transfer
of series N2 preferred stock, which provides that such stock may not be
transferred after notice from Maxcom, which may not be more than 30&nbsp;days prior
to the expected effective date of Maxcom&#146;s first qualified public offering
until the 180th day after such effective date. Maxcom may not impose this
restriction on the transfer of series N2 preferred stock if more than 20% of
the securities being registered in connection with the qualified public
offering are for the account of Maxcom&#146;s shareholders. In addition, this
restriction on transfer may not be more restrictive than any restrictions
placed on all other shareholders.
</FONT>
<P align="left"><FONT size="2"><B>Transfer of CPOs and transfer restrictions</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The series N2 preferred stock and any shares of capital stock into which
series N2 preferred stock is converted is deposited in the CPO trust and may
not be transferred separate from the CPOs representing such securities. The
CPOs may be transferred without restriction under U.S. federal securities laws
by persons who are not affiliates of Maxcom. However, no market currently
exists for the CPOs and we do not currently plan to list the CPOs on any
exchange for trading. In certain circumstances we may be required to list the
CPOs on a securities exchange and to cooperate one time only with efforts of
holders of the CPOs to effect an underwritten offering. We may impose
limitations on the transfer of CPOs for a period after the consummation of a
qualified public offering. See &#147;&#151;Rights and obligations with respect to public
offerings.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until the earlier of a qualified public offering or a sale of the company,
no holder of series A, B or N stock and series A1, B1 or N1 preferred stock may
transfer such shares without the prior approval of both Nexus, solely in its
capacity as a shareholder, and the Board of Directors, which Board of Directors
approval will require the affirmative vote of at least one Nexus director.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until a qualified public offering, in the event that certain significant
holders of series A1, B1 and N1 preferred stock desire to transfer such shares,
such holders will be obligated to first offer to sell such shares to other
holders of series A1, B1 or N1 preferred stock at the same price, terms and
conditions offered to the initial proposed transferees.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon the effectiveness of changes in certain Mexican regulations, other
holders of series A, B and N stock and series A1, B1 and N1 preferred stock who
desire to transfer such shares will be obligated to first offer to sell such
shares to other series A, B and N stock and series A1, B1 and N1 preferred
stock at the same price, terms and conditions offered to the initial proposed
transferees.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are certain exceptions to the transfer restrictions in our bylaws.
These exceptions apply to (i)&nbsp;transfers by BAS Capital Funding Corporation or
BASCF&#150;Maxcom Holdings I, LLC with respect to any preferred share acquired by
them pursuant to our restructuring and private equity investment, (ii)
transfers as a result of inheritance, and (iii)&nbsp;transfers among shareholders
and their qualified affiliates.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During our annual ordinary and extraordinary shareholders&#146; meeting held on
June&nbsp;10, 2003, we amended our bylaws to include a new exception to the transfer
restrictions that allows Morgan Stanley Asset Management, one of the
shareholders who participated both in the private equity investment and the
exchange offer, to transfer its shares to any of its managed accounts.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our telecommunications concessions and by-laws, the SCT has 90&nbsp;days
to object to any transfer, subscription or conveyance of 10% or more of our
capital stock with the exception of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">transfers related to series N stock and N1 and N2 stock and
any successor stock; and</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">80</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">subscriptions made pursuant to the exercise of a
shareholder&#146;s preemptive rights, as long as the percentage
participation of the shareholders in our capital stock does not
vary.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Other provisions</B>
</FONT>

<P align="left"><FONT size="2"><I>Forfeiture of stock</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our amended by-laws, the current or future foreign shareholders of
Maxcom firmly undertake with the Ministry of Foreign Relations (Secretar&#237;a de
Relaciones Exteriores) to consider themselves as Mexican nationals with respect
to the stock of Maxcom that they may acquire or own, as well as with respect to
the properties, rights, concessions, securities or interests owned by Maxcom,
or the rights and obligations derived from the agreements entered with the
Mexican authorities to which Maxcom is a party. The current or future foreign
shareholders of Maxcom firmly undertake not to invoke the protection of their
government, under penalty of forfeiting such shares to the benefit of the
Mexican nation.
</FONT>
<P align="left"><FONT size="2"><I>Dissolution</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Mexican Companies Law and our by-laws, we may be dissolved
upon the occurrence, among other things, of any of the following events:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the impossibility of continuing with our current line of business;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the resolution of our shareholders at an extraordinary general shareholders&#146; meeting;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the reduction of the number of our shareholders to fewer than two; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the loss of two thirds of our capital stock.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><I>Shareholder conflicts of interest</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, any shareholder that has a conflict of interest in
connection with any transaction must abstain from voting at the relevant
shareholders&#146; meeting. A shareholder that votes on a business transaction in
which its interest conflicts with that of Maxcom may be liable for damages if
the transaction would not have been approved without such shareholder&#146;s vote.
</FONT>
<P align="left"><FONT size="2"><I>Director conflicts of interest</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, any member of the Board of Directors who has a conflict
of interest with Maxcom in any transaction must disclose such a fact to the
other members of the Board of Directors and abstain from voting on such matter
at the relevant meeting of the Board of Directors. Any member of the Board of
Directors who violates such a provision may be liable for damages caused to
Maxcom. Additionally, members of the Board of Directors may not represent any
shareholders at any shareholders&#146; meeting.
</FONT>
<P align="left"><FONT size="2"><B>Description of the CPO trust</B>
</FONT>

<P align="left"><FONT size="2"><I>General</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The series N2 preferred stock have been deposited by Maxcom in a limited
purpose trust which is administered by Banco Nacional de M&#233;xico, S.A. under a
trust agreement. We refer to the trust as the &#147;CPO trust&#148; and the trustee of
the CPO trust as the &#147;CPO trustee.&#148; The CPO trustee is the holder of record of
the series N2 preferred stock and any securities into which the series N2
preferred stock may be converted.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CPO trustee issued <I>Certificados de Participaci&#243;n Ordinarios</I>, or
&#147;CPOs&#148;, which are negotiable instruments under Mexican law that give their
holders the economic rights and voting rights of the series N2
</FONT>
<P align="center"><FONT size="2">81</FONT>
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<P align="left"><FONT size="2"> preferred stock or any other shares of capital stock into which the series
N2 preferred stock may be converted, which we refer to together as the
&#147;deposited securities.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CPOs are initially held in book-entry form through DTC, and a nominee
of DTC is the holder of record of a global CPO certificate. Our amended
by-laws provide that we will obtain all governmental approvals required in
connection with the conversion of the series N2 preferred stock held in the CPO
trust to other securities of Maxcom.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a description of (i)&nbsp;certain provisions included in the
CPO trust agreement and (ii)&nbsp;applicable provisions of the Law of Negotiable
Instruments and Credit Transactions (Ley General de T&#237;tulos y Operaciones de
Cr&#233;dito). This is a summary description and does not purport to be complete and
is qualified in its entirety by reference to the CPO trust agreement and the
provisions of Mexican law referred to in such description.
</FONT>
<P align="left"><FONT size="2"><I>Purpose</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The main purpose of the CPO trust is to have the CPO trustee, as record
holder of the deposited securities and upon the instructions of the technical
committee described below under &#147;Administrator of the CPO trust,&#148; waive or not
exercise any statutory preemptive rights that it may have from time to time to
subscribe for additional shares of our capital stock. As the record holder of
the deposited securities, the CPO trustee exercises certain rights attached to
such securities in order to preserve to the largest extent possible the
economic and voting rights that would otherwise be held directly by the
beneficial owners of the CPOs.
</FONT>
<P align="left"><FONT size="2"><I>Waiver of statutory preemptive rights</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The trustee of the CPO trust will waive statutory preemptive rights with
respect to deposited securities when, in the sole judgment of the technical
committee of the CPO trust, as described below, the exercise of such preemptive
rights would require that the shares so subscribed be registered pursuant to
the Securities Act, unless Maxcom decides to register such shares. If the
exercise of the preemptive rights is possible without registration under the
Securities Act (or Maxcom decides to carry out such registration) and the
holders of CPOs provide the CPO trustee with the necessary funds, the CPO
trustee will subscribe for the corresponding number of shares, which will be
held in the CPO trust, and deliver additional CPOs in respect of such
additional deposited securities to the subscribing CPO holders. Under Mexican
law preemptive rights may not be transferred separately from the underlying
shares.
</FONT>
<P align="left"><FONT size="2"><I>Voting and economic rights</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of CPOs are not entitled to directly exercise any voting or
economic rights with respect to the deposited securities. Such voting rights
are exercisable only by the CPO trustee pursuant to the instructions of the
holders of CPOs. The holders of CPOs will be entitled to receive dividend
distributions, if any, from Maxcom through the CPO trustee. DTC will receive
the distributions and will make distributions to the beneficial owners of the
CPOs. In the event of a forced sale the trustee of the CPO trust will cause the
series N2 preferred stock to be delivered in connection with any such sale and
will distribute to the record holder of the CPOs the proceeds from such sale
subject to any holdbacks required pursuant to the terms of any such sale. The
CPO trustee will also deliver deposited securities in connection with the
exercise of the co-sale rights and will distribute to the record holders of the
CPOs the proceeds from sale subject to any holdbacks required pursuant to the
terms of any such sale. See &#147;&#151;Co-sale rights and forced sale obligations&#148;
above.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a distribution by Maxcom consists of a dividend in shares, such shares
will be transferred to the CPO trustee, and held in the CPO trust, and the CPO
trustee will distribute to the holders of CPOs in proportion to their holdings,
additional CPOs to represent the additional deposited securities received by
the CPO trustee as such dividend.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders representing a majority of the outstanding CPOs will be
entitled to appoint the board observer, or in certain circumstances, a member
of the Board of Directors. See &#147;&#151;Board of Directors.&#148;
</FONT>
<P align="center"><FONT size="2">82</FONT>
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<P align="left"><FONT size="2"><I>Administration of the CPO trust</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CPO trust is administered by the CPO trustee under the direction of a
technical committee, which consists of three members, two members of which are
designated by Maxcom and one by the holders of CPOs.
</FONT>
<P align="left"><FONT size="2"><I>Common representative</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The majority of holders of CPOs have the right to appoint a common
representative, whose duties include, among others: verification of the due
execution and terms of the CPO trust agreement; verification of the existence
of the deposited securities; authentication, by its signature, of the
certificate evidencing the CPOs, exercise of the rights of the CPO holders in
connection with the payment of any dividend or distribution related to the
deposited securities to which such CPO holders are entitled; and undertaking of
any other action required to protect the rights, actions or remedies to which
CPO holders may be entitled to under the CPO trust.
</FONT>
<P align="left"><FONT size="2"><I>Transfer</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CPO holders may sell their interest in CPOs. Sales of CPOs may be subject
to Mexican taxes. Neither Maxcom nor the CPO trustee will have any liability in
connection with any such sale. CPO holders may not sell the deposited
securities separately from the CPOs.
</FONT>
<P align="left"><FONT size="2"><I>Term and termination</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The maximum term of the CPO trust is thirty years, but it may be
terminated at any moment by recommendation of the technical committee, in which
case the deposited securities will be delivered to the CPO holders.
</FONT>
<P align="left"><FONT size="2"><I>Fees</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fees of the CPO trustee for the administration of the CPO trust, and
the fees of the common representative for acting in such capacity, are paid by
Maxcom.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>C.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Material contracts</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Concessions</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February 1997, we obtained a concession to provide local telephony
services covering Mexico City and the Gulf region and long distance services
nationwide from the Mexican government. We also obtained a nationwide
point-to-point and three regional point-to-multipoint microwave concessions in
October 1997. In September 2001, our local telephony concession was expanded to
cover all of Mexico. For a description of our concessions, see &#147;Item&nbsp;4.
Information on the Company&#151;B. Business review&#151;Supervision and regulation of the
Mexican telecommunications industry&#151;Our concessions.&#148;
</FONT>
<P align="left"><FONT size="2"><B>Interconnection agreements</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 1998, we entered into a local interconnection agreement with
Telmex which currently we are renegotiating. We have also signed reciprocal
interconnection agreements with mobile telephony providers Telcel, Grupo
Iusacell and Pegaso. Finally, we have signed long distance interconnection
agreements with Telmex, Alestra, Bestel, Protel and Iusatel. For a description
of these interconnection agreements, see &#147;Item&nbsp;4. Information on the Company&#151;B.
Business review&#151;Supervision and regulation of the Mexican telecommunication
industry&#151;Interconnection.&#148;
</FONT>
<P align="center"><FONT size="2">83</FONT>
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<P align="left"><FONT size="2"><B>Lucent supply agreement</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;5, 1997, Maxcom executed a purchase and sales agreement with
subsidiaries of Lucent Technologies, Inc. pursuant to which Maxcom may purchase
from Lucent products, services and software. Through December&nbsp;31, 2002, Maxcom
has purchased approximately U.S.$62.6&nbsp;million.
</FONT>
<P align="left"><FONT size="2"><B>Metro Net capacity sales agreement</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;28, 2000, Maxcom executed a metropolitan network capacity sale
agreement with Metro Net, S.A. de C.V. (which was amended on December&nbsp;21, 2000)
for an aggregate amount of U.S.$7.2&nbsp;million pursuant to which Maxcom purchased
from Metro Net (i)&nbsp;the exclusive and unlimited right to use certain backbone
fiber optic capacity of 6 (six)&nbsp;fiber optic strands of Metro Net&#146;s metropolitan
rings in Mexico City, and (ii)&nbsp;an option to acquire the exclusive and unlimited
right to use additional backbone fiber optic capacity of 6 (six)&nbsp;fiber optic
strands.
</FONT>
<P align="left"><FONT size="2"><B>Bestel capacity acquisition agreement</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;13, 2002, Maxcom executed an agreement with Bestel, S.A. de C.V.
to acquire the irrevocable right to the exclusive use of two strands in a
2,011-kilometer fiber optic backbone covering the cities located between Mexico
City and Laredo, Texas for U.S.$10.9&nbsp;million. This fiber optic backbone
includes a border crossing with the United States.
</FONT>
<P align="left"><FONT size="2"><B>CPO trust agreement</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;25, 2002, Maxcom and its shareholders executed an irrevocable
trust agreement with Banco Nacional de M&#233;xico, S.A. acting as trustee for the
issuance of ordinary participation certificates, also known as &#147;CPOs,&#148; each
representing one series N2 share of the capital stock of Maxcom with
liquidation preference rights. For a description of this agreement, see &#147;Item
10. Additional Information&#151;B. Memorandum and Articles of
Association&#151;Description of the CPO Trust.&#148;
</FONT>
<P align="left"><FONT size="2"><B>Securityholders&#146; agreement</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;29, 2002, Maxcom executed an amended and restated
securityholders&#146; agreement with the shareholders of the Company to, among other
things, reflect the restructuring of the capital stock of Maxcom. For a
description of the securityholders&#146; agreement, see &#147;Item&nbsp;7. Major Shareholders
and Related Party Transactions&#151;A. Major shareholders and share
ownership&#151;Securityholders agreement.&#148;
</FONT>
<P align="left"><FONT size="2"><B>Indentures</B>
</FONT>

<P align="left"><FONT size="2"><I>Old Indenture</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;17, 2000, Maxcom and its subsidiaries, entered into an Indenture
with The Bank of New York, acting as trustee, which governs the terms and
conditions of the issuance by Maxcom of U.S.$300&nbsp;million
13&frac34;% senior notes
due April&nbsp;1, 2007. The Indenture restricted Maxcom&#146;s ability to incur
indebtedness by requiring that Maxcom meet minimum consolidated leverage and
fixed charge coverage ratios. In addition, the Indenture limited our ability
to pay dividends, repurchase subordinated debt, redeem our capital stock,
dispose of assets and make investments, among other things. All of these
restrictions were eliminated as a result of the exchange offer and
U.S.$11,590,000 aggregate amount of notes under this indenture remains
outstanding.
</FONT>
<P align="left"><FONT size="2"><I>New Indenture</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;29, 2002, Maxcom and its subsidiaries entered into an Indenture
with The Bank of New York acting as a Trustee, which governs the terms and
conditions of the issuance by Maxcom of U.S.$167,623,590 senior notes due 2007.
This Indenture has substantially the same restrictions the old indenture had
before they were eliminated pursuant to the exchange offer.
</FONT>
<P align="center"><FONT size="2">84</FONT>
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<P align="left"><FONT size="2"><B>Warrant agreement</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;17, 2000, Maxcom entered into a warrant agreement with The Bank
of New York, acting as warrant agent, pursuant to which Maxcom agreed to issue
warrants to purchasers of 13&frac34;% senior notes due April&nbsp;1, 2007 for the
purchase of up to 764,938 series N shares, convertible into 382,469 CPOs. The
exercise price for each warrant, which entitled the purchaser to receive
2.54979 series N shares, was U.S.$0.01. These warrants were offered as an
incentive to the purchasers of the notes.
</FONT>
<P align="left"><FONT size="2"><B>Lease termination agreement</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September, 2002, we commenced actions before the Lease Courts for the
Federal District of Mexico against our landlord, seeking the termination of a
15-year lease (expiring on September&nbsp;30, 2013) of 70,500 square feet plus
parking space in a building on Magdalena, Mexico City, which was our former
headquarters. The action was based on claims of miscalculation of lease
payment amounts and breaches of certain city compliance regulations. The
landlord countersued alleging failure to make lease payments.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2003, we reached an agreement with our landlord at our former
headquarters in Magdalena, Mexico City. Pursuant to this agreement, we
retained a leasehold interest through May 2013 on the first floor, where one of
our Lucent 5ESS switches is located, the roof-top, where we have three
microwave transmission antennas and a section of the basement, which will be
used for parking and to place some of our electric equipment that supports the
switch. We were also released from lease obligation on approximately 35,887
square feet plus parking space of the building originally running through
September&nbsp;30, 2013. In exchange for the new lease and the releases, we agreed
to prepay the full, ten-year lease obligations on the first floor, the roof-top
and basement, as well as pay past-due lease payments dating back from October
2002 through April 2003. All these payments amount in the aggregate to
U.S.$2.7&nbsp;million and will be payable in installments through May 2004.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>D.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Exchange controls</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The peso fluctuates freely against the U.S. dollar. The Mexican Central
Bank intervenes occasionally in the market to stabilize the exchange rate.
Mexico had an exchange control system from 1982 until November&nbsp;11, 1991. Under
this system, Mexican residents and companies were entitled to purchase, and
required to sell, foreign currencies for certain purposes at a controlled rate
of exchange that was established daily by the Mexican Central Bank (Banco de
M&#233;xico). Transactions to which the controlled rate applied included payments
for virtually all merchandise imports, revenues from virtually all merchandise
exports, royalty payments and payments of principal, interest and related
expenses with respect to indebtedness to foreign creditors registered with the
Mexican government. For all transactions to which the controlled rate did not
apply, foreign currencies could also be purchased, if they were available, at
the then prevailing domestic free market rate for the type of transaction.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From November&nbsp;11, 1991 to October&nbsp;20, 1992, the Mexican Central Bank
permitted a free market rate to fluctuate according to supply and demand within
a moving band. In late December 1994, the Mexican government responded to
exchange rate pressures first by increasing by 15% the upper limit of the
peso/U.S. dollar exchange rate band and then, two days later, allowing the peso
to fluctuate freely against the U.S. dollar. By December&nbsp;31, 1994, the
peso/U.S. dollar exchange rate, which had been Ps.3.47 to U.S.$1.00 on December
19, 1994 was Ps.5.00 to U.S.$1.00. The peso continued to devalue significantly
through 1998, closing at Ps.9.901 to U.S.$1.00 at December&nbsp;31, 1998. After a
period of stability and modest appreciation, in 2002, the peso devalued 12.18%
relative to the U.S. dollar. In the first three months of 2003, the peso
devalued 3.82% relative to the U.S. dollar. Although the peso/U.S. dollar
exchange rate has remained relatively stable in the last years, there may be
significant devaluations in the future.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the period from September through December 1982 during the
Mexican liquidity crisis, the Mexican Central Bank consistently has made
foreign currency available to Mexican private sector entities to meet their
foreign currency obligations. Nevertheless, in the event of a renewed shortage
of foreign currency, we cannot assure you that the Mexican Central Bank would
continue to make foreign currency available to private sector companies or that
foreign currency we need to service foreign currency obligations could be
purchased in the open market without substantial additional cost.
</FONT>
<P align="center"><FONT size="2">85</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the provisions of North American Free Trade Agreement, or
&#147;NAFTA,&#148; Mexico remains free to impose foreign exchange controls on investments
made in Mexico, including those made by U.S. and Canadian investors
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>E.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Taxation</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>United States Federal Income Tax Considerations</B>
</FONT>

<P align="left"><FONT size="2"><I>General</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a general discussion of the principal U.S. federal income
tax consequences resulting from the beneficial ownership of (1)&nbsp;the new notes
and CPOs received in the exchange consummated on April&nbsp;29, 2002, and (2)&nbsp;the
old notes (the old notes collectively with the new notes, the &#147;Notes&#148;) for
holders who did not participate in the exchange. In general, the federal
income tax consequences of ownership of the new notes and the old notes are
identical, except where discussed below. This summary is relevant to you only
if you are a U.S. holder holding your Notes and your CPOs (for holders of the
new notes) as capital assets within the meaning of Section&nbsp;1221 of the Internal
Revenue Code of 1986, as amended, or the Code. In general, you will be a U.S.
holder if you are:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">An individual citizen or resident of the United States;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a corporation or other entity taxable as a corporation
created in or organized under the laws of the United States or of
any political subdivision thereof;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">an estate, the income of which is subject to U.S. federal
income tax without regard to its source; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a trust, if a court within the United States is able to
exercise primary supervision over its administration and one or more
United States persons have the authority to control all of the
substantial decisions of such trust.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As used in this annual report, the term &#147;Non-U.S. holder&#148; means a
beneficial owner of a Note or CPO who is not a U.S. holder. In the case of a
holder of Notes or CPOs that is a partnership for U.S. federal income tax
purposes, each partner generally will take into account its allocable share of
income or loss from the Notes or CPOs and will take such income or loss into
account under the rules of taxation applicable to such partner, taking into
account the activities of the partnership and the partner.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This summary is based upon the Code, its legislative history, existing and
proposed regulations thereunder, published rulings and court decisions, all as
currently in effect and all subject to change at any time, perhaps with
retroactive effect. This discussion is for general information only and does
not describe all of the tax consequences that may be relevant to you in light
of your particular circumstances or if you are subject to special tax treatment
under the Code, including, without limitation, because you are:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a foreign person or entity;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a tax-exempt organization, a financial institution, an
insurance company, a regulated investment company or a dealer or
broker in securities or currencies;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a trader in securities or commodities that elects
mark-to-market treatment;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a person who holds the Notes, and with respect to a holder of
new notes, the CPOs, as part of an integrated investment such as a
straddle, hedge, constructive sale, conversion transaction or other
risk reduction transaction;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a person whose functional currency is not the U.S. dollar;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">86</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a partnership or other flow-through entity (including an S
corporation or a limited liability company treated as a partnership
for U.S. federal income tax purposes);</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a person subject to the alternative minimum tax; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a person who owns or will own directly, indirectly or by
attribution 10% or more (by voting power) of our voting stock or 10%
or more (by value) of our outstanding capital stock.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The summary does not include any discussion of the tax laws of any state,
locality or non-U.S. government that may be applicable to you. You should note
that no rulings have been or will be sought from the United States Internal
Revenue Service (or the IRS) with respect to any of the U.S. federal income tax
consequences discussed below, and we cannot assure you that the IRS will not
take contrary positions. You should consult your own tax advisors concerning
the application of U.S. federal income tax laws to your particular situation as
well as any consequences of the purchase, ownership and disposition of the
Notes or CPOs arising under the laws of any other taxing jurisdiction.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For holders who acquired the new notes and the CPOs in the 2002 exchange,
the U.S. federal income tax consequences of certain aspects of the 2002
exchange were unclear. Therefore, the summary discusses the various
alternative tax consequences of the new notes and the CPOs which may depend in
part on the results of the 2002 exchange. For more complete information on the
2002 exchange, we urge you to consult the section entitled, &#147;United States
Federal Income Tax Considerations&#148; on our Form&nbsp;20-F for the fiscal year ending
December&nbsp;31, 2001, which was filed on July&nbsp;1, 2002. You should also consult
your own tax advisors concerning the application of U.S. federal income tax
laws to your particular situation.
</FONT>
<P align="left"><FONT size="2"><I>U.S. federal income tax consequences to U.S. Holders of the Notes</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Payments of interest and additional amounts. </I></B>Generally, payments of
&#147;qualified stated interest,&#148; (as defined below in &#147;Original issue discount&#148;),
including Mexican withholding tax imposed on such interest, and additional
amounts (if any) would be taxable to you as ordinary income. Payments of
qualified stated interest and additional amounts (if any) on the Notes
generally are includible in your income as it accrues or is received, in
accordance with your regular method of accounting for tax purposes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Original issue discount. </I></B>The treatment of original issue discount in
respect of the Notes is highly complex. You are urged to consult with your tax
advisor concerning this issue.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, original issue discount on a note is equal to the amount by
which the &#147;stated redemption price at maturity&#148; of a note exceeds its &#147;issue
price&#148; by more than a de minimis amount (generally, the product of 0.25% of the
stated redemption price at maturity and the number of full years to maturity on
the instrument). A note&#146;s stated redemption price at maturity equals the total
amount of all principal and interest payments to be made on the note, other
than &#147;qualified stated interest.&#148; Qualified stated interest generally is
stated interest that is unconditionally payable at least annually at a single
fixed rate over the entire term of the note.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The new notes<B><I>. </I></B>The interest payments with respect to the new notes do not
constitute qualified stated interest because such payments are not made at
least annually.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The determination of the issue price of the new notes will depend on
whether the new notes or the old notes were &#147;publicly traded&#148; as of the date of
the 2002 exchange, and if not publicly traded, whether the interest rate of the
new notes is at least equal to or above the applicable federal rate, or AFR.
If on the date of the 2002 exchange, the new notes were &#147;traded on an
established securities market&#148; within the meaning of the applicable regulations
on or at any time during the sixty day period ending thirty days after the date
the exchange offer is consummated, then the issue price of such notes would
equal the fair market value established by such trading. If the new notes were
not so traded, but the old notes were so traded, then the issue price of the
new notes would equal the fair market value, established by such trading, of
the old notes. Under these rules, if either of the Notes were publicly traded,
the new notes will be treated as containing original issue discount if the
stated redemption price at maturity of the new notes exceeded the issue price
(i.e., the fair market value of the new notes) by more than the de minimis
amount.
</FONT>
<P align="center"><FONT size="2">87</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It could not be determined whether the new notes or the old notes were, at
the relevant times, traded on an established securities market within the
meaning of the applicable regulations. The relevant Treasury Regulations are
complex and highly detailed in defining the phrase &#147;traded on an established
market.&#148; For example, it is possible that the new notes would have been
treated as so traded not only if they were listed on an exchange, but also if
transfers of such new notes appear on a computerized quotation medium. You
should consult you own tax advisor with respect to whether your old notes or
new notes qualified for this purpose as &#147;traded on an established market.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that neither the new notes nor the old notes were traded on
an established securities market, the issue price of a new notes would equal
its stated principal amount if the interest rate on the new notes was equal to
or greater than the AFR for the month in which the new notes were issued. If
the interest rate was less than the AFR, then the issue price of a new note
would be equal to its imputed principal amount, which generally is the sum of
all payments due under the new note (including qualified stated interest)
discounted from the date of payment to the issue date of the new notes at the
AFR. Under these rules, if the new notes and the old notes were not traded on
an established securities market and, because the interest rate on the new
notes was less than the AFR for April 2002, the issue price of the new notes
would be the sum of all payments due under the note discounted at the AFR from
the date of payment to the new notes&#146; issue date. The new notes, therefore,
would be treated as having original issue discount because the new notes&#146;
stated redemption price at maturity (which is the total amount of all principal
and interest payments made on the note, other than &#147;qualified stated interest&#148;)
would exceed the issue price of the new notes by more than the de minimis
amount.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The old notes. The old notes were issued with original issue discount for
U.S. federal income tax purposes. If you were an original purchaser of an old
note, you also acquired a warrant as part of an &#147;investment unit&#148; for federal
income tax purposes. Our company allocated the issue price of a unit between
the old note and the associated warrant in accordance with our company&#146;s
determination of their relative fair market values on the issue date. Our
company determined that the issue price of each old note should be U.S.
$975.06. Although our company&#146;s allocation is not binding on the IRS, if you
were an initial purchaser of a unit, you had to use our company&#146;s determination
of the old note issue price for purposes of calculating original issue discount
unless you disclosed on your U.S. federal income tax return for the year in
which you acquired the unit that you planned to use an allocation inconsistent
with our company&#146;s allocation. As mentioned above, the stated redemption price
at maturity of a note equals the total amount of all principal and interest
payments to be made on the Note, other than qualified stated interest.
However, if the amount of original issue discount determined under this formula
is &#147;de minimis original issue discount,&#148; then the notes will be treated as if
there is no original issue discount. The old notes will have de minimis
original issue discount if the total amount thereof is less than the product of
0.25% of the stated redemption price at maturity and the number of full years
from the issue date to the maturity date of the note.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inclusion of original issue discount in income. You must include any
original issue discount on your Notes in income as ordinary interest income as
it accrues on the basis of a constant yield to maturity. Original issue
discount must be included in income regardless of whether cash is received in
respect of such income. The amount of original issue discount includible in
income by you is the sum of the &#147;daily portions&#148; of original issue discount
with respect to the Notes for each day during the taxable year or portion of
the taxable year on which you held such Note. The daily portion is determined
by allocating to each day in any accrual period other than the initial short
accrual period and the final accrual period an amount equal to the excess of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the product of the Note&#146;s &#147;adjusted issue price&#148; at the
beginning of such accrual period and its &#147;yield to maturity&#148;
(determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period)
over</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the amount of qualified stated interest payments, if any,
allocable to such accrual period.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The yield to maturity is the discount rate that, when applied to all
payments under a Note, results in a present value equal to the issue price.
The amount of original issue discount allocable to the final accrual period is
the difference between the amount payable at maturity and the adjusted issue
price of the Note at the beginning of the final accrual period. The amount of
original issue discount allocable to the initial short period may be computed
under any reasonable method.
</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The adjusted issue price of a Note at the beginning of the first accrual
period is equal to its issue price. A Note&#146;s adjusted issue price at the
beginning of any subsequent accrual period is equal to its issue price
increased by the amount of accrued original issue discount previously
includible in your gross income (and market discount, as discussed below) for
each prior accrual period and reduced by the amount of any payments previously
made on the note to you (other than payments of qualified stated interest, if
any).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, upon election, you may use the constant yield to maturity
method applicable to original issue discount to determine the timing of
inclusion of all qualified stated interest (if any) and original issue discount
on the new notes, subject to certain limitations. Such an election will apply
to all debt instruments held or acquired by you on or after the beginning of
the first taxable year to which the election applies and may not be revoked
without the consent of the IRS.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The above treatment assumes that the stated redemption price at maturity
for a Note does not include any additional amounts payable on the Notes. It is
possible that the IRS might disagree with this treatment and contend that the
stated redemption price at maturity should include the reasonably expected
amount of additional amounts payable on the Notes. In such case, the amount of
original issue discount on the Notes would be increased by such amount.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to the holders of new notes, the rules discussed below under
&#147;Premium and acquisition premium&#148; may reduce or eliminate the amount of
original issue discount you must include in your income. For example, if your
exchange of the old notes for new notes and CPOs qualified as a
recapitalization, your basis in the new notes may substantially exceed the
issue price of such new notes (depending on your basis in the old notes), and
you may be able to reduce or eliminate the amount of original issue discount
includible with respect to such old notes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should consult your tax advisor concerning the inclusion in your
taxable income of the original issue discount attributable to the new notes or
the old notes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Premium and acquisition premium. </I></B>The new notes. If you acquire new notes
for an amount (or with a basis) less than or equal to the sum of all amounts
payable on such new notes after the acquisition date (other than payments of
qualified stated interest, if any) but in excess of their adjusted issue price
(any such excess being acquisition premium), you will be considered to have
acquired the new notes at an acquisition premium. If you do not make the
election described below, you are permitted to reduce the daily portions of
original issue discount includible in your income by a fraction, (i)&nbsp;the
numerator of which is the excess of your adjusted tax basis in the new notes
immediately after their acquisition over the adjusted issue price of such new
notes and (ii)&nbsp;the denominator of which is the excess of the sum of all amounts
payable on such new notes after the acquisition date (other than payments of
qualified stated interest, if any) over the adjusted issue price of such new
notes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you acquire the new notes for an amount (or with a basis) greater than
the sum of all amounts payable on such new notes after the acquisition date
(other than payments of qualified stated interest, if any) you will be
considered to have acquired the new notes at a premium. In such a case, you
will not be required to include any original issue discount in your gross
income.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The old notes. Similarly, if you purchased your old notes for an amount
(or with a basis) greater than the sum of all amounts payable on your old notes
after the purchase date (other than payments of qualified stated interest, if
any) you will be considered to have purchased your old notes at a premium.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General. You generally may elect to amortize the premium, if any, on the
constant yield method. The amount amortized in any year will be treated as a
reduction of your interest income from the Notes. The election to amortize the
premium on a constant yield method, once made, applies to all debt obligations
held or subsequently acquired by you on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS. If you make this election, you will be required to reduce
your basis in the Notes to the extent that any amortizable bond premium is
applied to offset your interest income on the Notes. If you do not make this
election, the premium on your Note, whether on an old note or new note, will
decrease the gain or increase the loss otherwise recognized on disposition or
retirement of the Note.
</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Market discount. </I></B>If you purchased your Note at a price that is less than
its adjusted issue price, the excess of the adjusted issue price over your
purchase price will be treated as &#147;market discount.&#148; Such market discount,
however, will be considered zero if it does not exceed a &#147;de minimis amount&#148;
equal to 0.25% of the Note&#146;s stated redemption price at maturity multiplied by
the number of complete years to maturity from the date you purchased the Note.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General. Under the market discount rules, you generally will be required
to treat any partial principal payment on, and any gain realized on the sale,
exchange, retirement or other disposition of, a Note as ordinary income
(generally treated as interest income) to the extent of the market discount
which accrued but was not previously included in income during the period you
held such Note. In addition, you may be required to defer your deduction of
all or a portion of the interest expense on any indebtedness incurred or
continued to purchase or carry such Note until the maturity of the Note or its
earlier disposition in a taxable transaction.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, market discount will be considered to accrue ratably during
the period from the date of acquisition to the maturity date of the Note,
unless you make an irrevocable election (on an instrument-by-instrument basis)
to accrue market discount under a constant yield method. You may also elect to
include market discount on the Note in income currently as it accrues (under
either a ratable or constant yield method), in which case the rules described
above regarding the treatment as ordinary income of gain upon the disposition
of the Note and upon the receipt of certain payments and the deferral of
interest deductions will not apply. The election to include market discount in
income currently, once made, applies to all market discount obligations
acquired by you on or after the first day of the first taxable year to which
the election applies, and may not be revoked without the consent of the IRS.
Such currently included market discount will increase your tax basis in the
Note and generally is treated as ordinary interest income for U.S. federal
income tax purposes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The new notes. If you acquired your new notes as part of the 2002
exchange, whether the new notes will be treated as having market discount may
depend on whether the exchange was treated as a recapitalization for U.S.
federal income tax purposes, which is not entirely clear. If the exchange was
not treated as a recapitalization, your new notes will be considered to have
been acquired with market discount if the adjusted issue price of your new
notes at the time of the exchange exceeded your initial tax basis in the new
notes by more than the &#147;de minimis amount.&#148; As discussed below in &#147;Adjusted
tax basis of the Notes and the CPOs&#151;The new notes and CPOs,&#148; your initial tax
basis in the new notes will depend on whether the new notes are treated as
securities for U.S. federal income tax purposes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Code provides the authority for regulations to be issued by the
Treasury Department that would provide that any accrued market discount not
treated as ordinary income upon an exchange of market discount bonds in which
gain or loss is not recognized in whole or in part, such as the exchange of the
new notes and CPOs for the old notes (assuming: (a)&nbsp;such exchange is treated as
a recapitalization, (b)&nbsp;the old notes are market discount bonds, and (c)&nbsp;the
new notes are treated as securities for U.S. federal income tax purposes),
would carry over to the nonrecognition property received on the exchange. If
such regulations are promulgated and are applicable to this exchange, any
accrued market discount with respect to the old notes that was not treated as
ordinary income on the exchange would carry over to the new notes and CPOs
received in the exchange. On disposition of any such new notes or stock, any
gain recognized generally would be treated as ordinary income to the extent of
the amount of accrued market discount carried over thereto (unless, in the case
of the new notes, you had previously elected to include market discount in
income as it accrues, in which case the amount taxable as ordinary income on
disposition would be reduced by the amount of market discount previously
included in income). Although not free from doubt, it is likely that the above
characterization would be required under the Code even without the promulgation
of regulations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Sale, exchange or retirement of a Note. </I></B>General. Upon the sale, exchange
or retirement of a Note, you generally will recognize capital gain or loss
equal to the difference between (i)&nbsp;the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest
which are taxable as ordinary income) and (ii)&nbsp;your adjusted tax basis in the
Note, determined under the rules discussed in the following paragraphs. Such
capital gain or loss recognized on the sale, exchange or retirement of the Note
generally will be long-term capital gain or loss and subject to a maximum U.S.
federal income tax rate of 20% if you held the Note for more than one year
before sale. Recent legislation has reduced the maximum federal income tax
rate to 15% for capital gains taken into account from May&nbsp;6, 2003 through
December&nbsp;31, 2008. U.S. corporations, however, are
</FONT>
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<P align="left"><FONT size="2"> taxed on their net capital gains at the regular corporate income tax
rates. Gain or loss recognized by you in connection with the disposition of
the Notes generally will be treated as U.S. source gain or loss.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The adjusted tax bases and the holding periods of the new notes, the old
notes and the CPOs depend upon the tax consequences of the exchange of old
notes for new notes and CPOs. While the issue is not free from doubt, we
believe that the old notes are likely to be treated as securities for U.S.
federal income tax purposes and that there is a reasonable position that the
new notes also should be treated as securities for U.S. federal income tax
purposes. You are encouraged to consult your own tax advisor with regard to
this issue.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjusted tax basis of the new notes and the CPOs. If the 2002 exchange is
treated as a recapitalization for U.S. federal income tax purposes and the old
notes and the new notes qualify as securities, your aggregate tax basis in the
new notes and the CPOs will equal your tax basis in your old notes. Although
the method for allocating your tax basis in the old notes between the new notes
and the CPOs is unclear, the determination of the portion of your tax basis in
the old notes that should be allocated to the new notes and the CPOs should be
based on the issue price of the new notes (as determined under &#147;Original issue
discount&#148;) and the fair market value of the CPOs. Your holding period in the
new notes and the CPOs will include your holding period in the old notes you
surrender in the exchange.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If, however, the new notes do not qualify as securities, your tax basis in
the new notes should equal their issue price, and your tax basis in the CPOs
should equal your tax basis in your old notes, less the issue price of the new
notes, plus any gain recognized in the exchange. In addition, your holding
period in the new notes will begin on the day following the date of the
exchange and your holding period in the CPOs will include your holding period
in the old notes you surrendered in the exchange.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If, alternatively, the exchange is not treated as a recapitalization
because the old notes are not securities, then your adjusted basis in the new
notes will equal the issue price of the new notes, and your adjusted basis in
the CPOs will equal the fair market value of the CPOs. Your holding period in
the new notes and the CPOs will begin on the day following the date of the
exchange.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjusted tax basis of the old notes. If you did not tender your old notes
in the 2002 exchange, while the issue is not free from doubt, you should not be
deemed to have engaged in a taxable exchange for U.S. federal income tax
purposes and you should have the same adjusted tax basis and holding period in
your old notes after the exchange.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Foreign tax credit. </I></B>Interest, original issue discount and additional
amounts. Qualified stated interest, original issue discount and additional
amounts (if any) paid on the Notes will constitute income from sources outside
the United States, and, with certain exceptions, will be grouped together with
other items of passive income, for purposes of computing the foreign tax credit
allowable to you. If the payments of qualified stated interest, original issue
discount and additional amounts (if any) were to become subject to a
withholding tax imposed by a foreign country at a rate of 5% or more, the
qualified stated interest, original issue discount and additional amounts (if
any) may be considered &#147;high withholding tax interest&#148; for purposes of
computing the foreign tax credit. If you are predominantly engaged in the
active conduct of a banking, insurance, financing or similar business, the
payments of qualified stated interest, original issue discount and additional
amounts (if any) may be considered &#147;financial services income&#148; for purposes of
computing the foreign tax credit, provided that such amounts do not constitute
high withholding tax interest, as described above.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effect of Mexican withholding taxes. You will be required to include the
amount of Mexican withholding taxes, if any, imposed on payments on a Note
(including any additional amounts payable by our company) in gross income as
interest income. Such treatment will be required regardless of whether, as
will generally be true, our company is required to pay additional amounts so
that the amount of Mexican withholding taxes does not reduce the net amount
actually received by you as a holder of a Note.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to certain limitations, you may be entitled to a credit against
your U.S. federal income tax liability, or a deduction in computing your U.S.
federal taxable income, for the amount of Mexican taxes withheld by our company
(which, as described above, would include amounts withheld on additional
amounts paid by us with respect to Mexican taxes). However, Mexican taxes may
be deducted from your taxable income only if you do not
</FONT>
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<P align="left"><FONT size="2"> claim a credit for any Mexican or other foreign taxes paid or accrued in
that taxable year. You may be required to provide the IRS with a certified
copy of the receipt evidencing payment of such withholding tax imposed in
respect of payments on the Notes in order to claim a Mexican tax credit in
respect of such Mexican withholding tax.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since you may be required to include in your gross income original issue
discount on the Notes in advance of any withholding of Mexican income taxes
from payments relating to the discount (which would generally occur when such
discount is paid in cash), you may not be entitled to a credit or deduction for
these Mexican withholding taxes in the year the original issue discount is
included in your gross income for U.S. federal income tax purposes, and may be
limited in your ability to credit or deduct in full the foreign taxes in the
year those taxes are actually withheld by our company. In addition, under
certain U.S. Treasury Department guidance, foreign tax credits will not be
allowed for withholding taxes imposed in respect of certain short-term or
hedged positions in securities or in respect of arrangements in which your
expected economic profit, after non-U.S. taxes, is insubstantial. You should
consult your tax advisor concerning the availability and timing of a foreign
tax credit or deduction relating to the payment of Mexican withholding taxes.
</FONT>
<P align="left"><FONT size="2"><I>Certain U.S. federal income tax consequences of holding and disposing of the
CPOs</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Distributions. </I></B>In general, a holder of CPOs will be treated as the
beneficial owner of the series N2 preferred stock represented by the CPOs.
Subject to the &#147;passive foreign investment company&#148; rules discussed below,
generally, distributions of cash or property with respect to your CPOs
(including the amount of any Mexican taxes withheld on any such distribution)
will constitute ordinary dividend income to the extent of our company&#146;s current
and accumulated earnings and profits (as determined for U.S. federal income tax
purposes), which generally will be includible in your income on the day on
which the dividends are received by the CPO trustee, and will be treated as
foreign source dividend income (generally passive income) for foreign tax
credit limitation purposes. Any distributions in excess of such earnings and
profits will constitute a nontaxable return of capital and reduce your tax
basis in such CPOs. To the extent such distributions exceed your tax basis in
your CPOs, such excess will constitute capital gain. Dividends on the CPOs
will not be eligible for the dividends received deduction allowed to U.S.
corporations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends paid in a foreign currency (including the amount of any foreign
taxes withheld therefrom) will be includible in your income in a U.S. dollar
amount calculated by reference to the exchange rate in effect on the day the
dividends are received by the CPO trustee, regardless whether the dividends are
converted into U.S. dollars. In addition, any gain or loss resulting from
currency exchange fluctuations during the period from the date the dividend is
includible in your income to the date such payment is converted into U.S.
dollars will be exchange gain or loss and will be treated as ordinary income or
loss.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent legislation. Recently enacted legislation, the Jobs Growth Tax
Relief Reconciliation Act of 2003, generally has lowered to 15% the maximum
full income tax rate imposed on dividends received from U.S. and certain
foreign corporations for years 2003 through 2008. Recipients of dividends from
foreign corporations will benefit from these reduced rates, provided that
certain holding period requirements are satisfied, if the dividends are
received from certain &#147;qualified foreign corporations,&#148; which generally include
corporations located in a jurisdiction with which the United States has an
income tax treaty that the Secretary of the Treasury determines is satisfactory
and includes an information exchange program. While there is an income tax
treaty between the United States and Mexico (see &#147;&#151;Mexican Taxation&#151;United
States/Mexico and other tax treaties&#148;), the Secretary of the Treasury has not
identified yet any jurisdiction whose income tax treaty would qualify under the
legislation. Additionally, dividends paid with respect to stock of a foreign
corporation which is readily tradable on an established securities market in
the United States also will be treated as having been received from a qualified
foreign corporation. However, while not completely clear, we believe that the
CPOs will not be treated as readily tradable on an established securities
market in the United States. Accordingly, there can be no assurance that
dividends received with respect to the CPOs will be entitled to as favorable
treatment as dividends received with respect to stock of a U.S. corporation
under the legislation. You are urged to consult your tax advisor regarding
this legislative change.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the legislation also accelerated to January&nbsp;1, 2003, the
reduction in ordinary income tax rates previously calculated to take effect
over the next several years.
</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Sale, redemption or other taxable disposition of the CPOs. </I></B>Subject to the
&#147;passive foreign investment company&#148; rules discussed below, generally, you
will, upon the sale, redemption or other taxable disposition of your CPOs,
recognize gain or loss for U.S. federal income tax purposes in an amount equal
to the difference between (i)&nbsp;the amount of cash and fair market value of
property received therefore (if the amount received is denominated in foreign
currency other than in U.S. dollars, then its U.S. dollar equivalent determined
at the spot rate on the date of the disposition) and (ii)&nbsp;your tax basis in
your CPOs (in U.S. dollars) as determined in &#147;Sale, exchange or retirement of a
Note&#151;Adjusted tax basis of the new notes and the CPOs.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital gain recognized by you generally will be long-term capital gain
and subject to a maximum federal income tax rate of 20% if you held CPOs for
more than one year before the sale. Recent legislation has reduced the maximum
federal income tax rate to 15% for capital gains taken into account from May&nbsp;6,
2003 through December&nbsp;31, 2008. U.S. corporations, however, are taxed on their
net capital gains at the regular corporate income tax rates. Gain or loss
recognized by you in connection with the disposition of your CPOs generally
will be treated as U.S. source gain or loss.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, you will not recognize any gain or loss upon the conversion of
the CPOs into series N stock or other classes of our stock.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Passive foreign investment company considerations. </I></B>In general, a foreign
corporation will be classified as a passive foreign investment company, or
PFIC, if (i)&nbsp;at least 75% of its gross income for the taxable year consists of
passive income or (ii)&nbsp;at least 50% of the average value of the corporation&#146;s
assets (determined as of the close of each quarter) in a taxable year is
attributable to assets that produce or are held for the production of passive
income. For this purpose, passive income generally includes dividends,
interest, royalties, rents (other than rents and royalties derived from the
active conduct of a trade or business and not derived from a related person),
annuities and gains from assets that produce passive income.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The determination of PFIC status is a factual determination that must be
made annually at the close of each taxable year and depends on the sources of
our income and the relative values of our passive assets such as cash and our
non-passive assets, including goodwill. Based on the source of our income and
the value of our non-passive assets as compared to our passive assets, in 2002
we do not believe we were not a PFIC for U.S. federal income tax purposes and
we do not expect to be a PFIC in future taxable years. However, as noted
above, the determination of PFIC status is a factual determination that must be
made annually and our current belief that we were not a PFIC could be subject
to change in the future. We will make the determination of whether we are a
PFIC on an annual basis and intend to notify you within 75&nbsp;days of the end of
any year in which we become a PFIC.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we were to become a PFIC in any taxable year, a special tax regime
would apply to both (a)&nbsp;any &#147;excess distribution&#148; by us (generally, your
ratable share of distributions in any year that are greater than 125% of the
average annual distributions received by you in the three preceding years or
your holding period, if shorter) and (b)&nbsp;any gain realized on the sale or other
disposition (including a pledge) of your CPOs. Under this regime, any excess
distribution and realized gain will be treated as ordinary income and will be
subject to tax as if (a)&nbsp;the excess distribution or gain had been realized
ratably over your holding period in the CPOs, (b)&nbsp;the amount deemed realized
had been subject to tax in each year of that holding period at the highest
applicable tax rate in effect for that year and (c)&nbsp;the interest charge
generally applicable to underpayments of tax had been imposed on the taxes
deemed to have been payable in those years.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are urged to consult your own tax advisor as to the effect to you of
our company being a PFIC and the availability, if any, of either the &#147;qualified
electing fund&#148; or &#147;mark-to-market&#148; election as defined in the Code and the
regulations thereunder.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Controlled foreign corporation considerations. </I></B>If more than 50% of the
voting power of all classes of our capital stock or the total value of our
capital stock is owned, directly or indirectly, by &#147;U.S. shareholders,&#148; we may
be treated as a controlled foreign corporation, or a CFC, under Subpart F of
the Code. U.S. shareholders are defined as citizens or residents of the United
States, United States domestic partnerships and corporations or estates or
trusts other than foreign estates or trusts, each of whom owns 10% or more of
the total combined voting power of all classes of our capital stock. The
United States generally taxes a U.S. shareholder of a CFC currently on its pro
rata share of the Subpart F income of the CFC. Such U.S. shareholder is
generally treated as having received a current
</FONT>
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<P align="left"><FONT size="2"> distribution out of the CFC&#146;s Subpart F income and is also subject to
current U.S. tax on its pro rata share of the CFC&#146;s earnings invested in U.S.
property. In addition, gain from the sale or exchange of stock in a CFC by a
U.S. person who is or was a U.S. shareholder of the CFC at any time during the
five-year period ending with the sale or exchange is treated as ordinary income
to the extent of the CFC&#146;s earnings and profits attributable to the stock sold
or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign
corporation generally will not be treated as a PFIC with respect to U.S.
shareholders of the CFC.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the current ownership structure, we believe that we are not a CFC
for U.S. federal income tax purposes. However, because of the complexity of
the CFC rules, you should consult your own tax advisor as to the potential
application of these rules to you based on your particular circumstances.
</FONT>
<P align="left"><FONT size="2"><I>Certain U.S. federal income tax consequences to non-U.S. holders of the Notes
and CPOs</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the discussion below concerning information reporting and
backup withholding, generally, a non-U.S. holder will not be subject to U.S.
federal income or withholding tax on distributions in respect of the Notes or
the CPOs unless such income is effectively connected with the conduct by the
non-U.S. holder of a trade or business in the United States.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A non-U.S. holder will generally not be subject to U.S. federal income or
withholding tax on gain realized on the sale or the other disposition of the
Notes or the CPOs unless (i)&nbsp;such gain is effectively connected with the
conduct of a United States trade or business by such non-U.S. holder or (ii)
such non-U.S. holder is present in the United States for 183&nbsp;days or more
during the taxable year of sale or disposition and certain other conditions are
met.
</FONT>
<P align="left"><FONT size="2"><I>Information reporting and backup withholding</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, if you are a non-corporate U.S. holder (or do not come within
certain other exempt categories), information reporting requirements will apply
to certain payments of principal, premium and interest on the Notes, or
dividends on the CPOs, and to payments of the proceeds of the sale of the Notes
or CPOs made to you.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, if you are a non-corporate U.S. holder (or do not come
within certain other exempt categories), you may be subject to backup
withholding at a rate of 28% with respect to such payments, unless you provide
your taxpayer identification number (social security number or employer
identification number), certify that you are not subject to backup withholding
and otherwise comply with applicable requirements of the backup withholding
rules. Generally, you will provide such certification on IRS Form&nbsp;W-9
(&#147;Request for Taxpayer Identification Number and Certification&#148;) or a
substitute Form&nbsp;W-9.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you do not provide your correct taxpayer identification number, you may
be subject to penalties imposed by the IRS, as well as backup withholding.
However, any amount withheld under the backup withholding rules may be
allowable as a credit against your U.S. federal income tax liability (which
might entitle you to a refund), provided that you furnish the required
information to the IRS.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A non-U.S. holder generally will be exempt from information reporting
requirements and backup withholding, but may be required to comply with
certification and identification procedures in order to obtain an exemption
from information reporting and backup withholding.
</FONT>
<P align="left"><FONT size="2"><B>Mexican taxation</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a general discussion of the material consequences of the
exchange of the old notes, the investment in the new notes and CPOs and the
investment in outstanding old notes under the Mexican Income Tax Law <I>(Ley del
Impuesto sobre la Renta</I>) and rules and regulations thereunder, as currently in
effect based on the advice of PricewaterhouseCoopers, our tax advisors. This
summary of certain Mexican tax considerations deals only with holders of notes
and CPOs or of a beneficial interest therein that are not residents of Mexico
for Mexican tax purposes and that do not conduct a trade or business through a
permanent establishment or fixed base in Mexico (a &#147;Foreign Holder&#148;).
</FONT>
<P align="center"><FONT size="2">94</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of Mexican taxation, an individual is a resident of Mexico if
he has a permanent home in Mexico, unless he has been in another country for
more than 183 calendar days, whether consecutive or not, in any one calendar
year and can demonstrate that he has become a resident of that country for tax
purposes. A legal entity is a resident of Mexico for tax purposes if it has
been incorporated under the laws of Mexico, or has established the principal
management of its business or the base of its effective direction in Mexico. A
Mexican citizen is presumed to be a resident of Mexico for tax purposes unless
such person can demonstrate otherwise.
</FONT>
<P align="left"><FONT size="2"><I>United States/Mexico and other tax treaties</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A Convention for the Avoidance of Double Taxation and Prevention of Fiscal
Evasion, together with a related Protocol thereto (collectively, the &#147;Tax
Treaty&#148;), between the United States and Mexico entered into force on January&nbsp;1,
1994. Provisions of the Tax Treaty that may affect the taxation of certain U.S.
holders of notes or CPOs are summarized below. The United States and Mexico
have also entered into an agreement that covers the exchange of information
with respect to tax matters. Mexico has also entered into and is negotiating
several other tax treaties that may reduce the amount of Mexican withholding
tax to which the notes may be subject. Holders of the notes and CPOs should
consult their own tax advisors as to the tax consequences, if any, of such
treaties.
</FONT>
<P align="left"><FONT size="2"><I>Mexican tax consequences to Foreign Holders of the exchange of old notes for
new notes and CPOs</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>General. </I></B>A Foreign Holder will not be subject to any Mexican tax upon the
exchange of the old notes for the new notes and the CPOs, since it will be
treated by us as additional consideration for Mexican tax purposes, paid to the
Foreign Holders in exchange for their tendered old notes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Other taxes. </I></B>A Foreign Holder will not be liable for Mexican estate,
gift, inheritance or similar taxes with respect of the exchange of the old
notes, nor will such a Foreign Holder be liable for Mexican stamp, registration
or similar taxes.
</FONT>
<P align="left"><FONT size="2"><I>Mexican tax consequences to Foreign Holders of the notes</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of interest and principal. </I></B>Under the Mexican Income Tax Law,
payments of interest made by Maxcom in respect of the new notes (including
payments of principal in excess of the issue price of such notes, which, under
Mexican law, are deemed to be interest) to a Foreign Holder will generally be
subject to a Mexican withholding tax assessed at a rate of 4.9% (the &#147;Reduced
Rate&#148;), provided that:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the notes are offered through banks or brokerage houses in a
country with which Mexico has a tax treaty in force;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the notes are registered in the Special Section of the
National Registry of Securities <I>(Registro Nacional de Valores)</I>; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">certain periodic information requirements by the Mexican
Ministry of Finance <I>(Secretar&#237;a de Hacienda y Cr&#233;dito P&#250;blico) </I>are
complied with.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">If these conditions are not met, the applicable withholding
tax rate will be 10%.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>FOREIGN HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING WHETHER THEY RESIDE
IN A COUNTRY THAT HAS ENTERED INTO SUCH A TREATY WITH MEXICO WHICH IS
EFFECTIVE, AND IF SO, THE CONDITIONS AND REQUIREMENTS FOR OBTAINING BENEFITS
UNDER SUCH TREATY.</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, if the beneficial owner, either directly or indirectly,
individually or jointly with related parties, of more than 5% of the interest
derived from the related securities, is any of the following:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a shareholder of the issuer who owns, directly or indirectly,
individually or jointly with related parties, more than 10% of the
voting stock of the issuer, or</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">95</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">a legal entity 20% of whose stock is owned, directly or
indirectly, individually or jointly with related parties, by the
issuer,</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">then, the withholding tax rate will be 34% .
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to Rule&nbsp;3.25.15 (the &#147;Reduced Rate Rule&#148;) issued by the Mexican
Ministry of Finance <I>(Secretar&#237;a de Hacienda y Cr&#233;dito P&#250;blico</I>) on March&nbsp;31,
2003 payments of interest with respect to the notes made by us to Foreign
Holders, regardless of the place of residence or the tax regime applicable to
the Foreign Holder recipient of the interest, will be subject to withholding
taxes imposed at the Reduced Rate if:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the notes are registered with the Special Section of the
National Registry of Securities and Intermediaries and copies of
approval of such registration are provided to the Ministry of
Finance;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">we timely file with the Ministry of Finance certain
information relating to the issuance of the new notes;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">we timely file with the Ministry of Finance on a quarterly
basis information on the amount and dates of interest payments made
during each quarter and information representing that no party
related to us, directly or indirectly, is the effective beneficiary
of more than five percent (5%) of the aggregate amount of each such
interest payment; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">we maintain records that evidence compliance with the
conditions set forth above.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will comply with the first two conditions set forth above and expect
that the last two conditions will also be met and, accordingly, expect to
withhold Mexican tax from interest payments on the notes at the Reduced Rate
during the effectiveness of such rule.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, during the fiscal year 2003 , the Tax Treaty is not expected,
generally, to have any material effect on the Mexican tax consequences
described herein, because, as described above, under Mexican Income Tax Law and
regulations as currently in effect, with respect to a U.S. holder that meets
the Reduced Rate Rule requirements described above, we will be entitled to
withhold taxes in connection with interest payments under the notes at the
Reduced Rate. From 2001 and beyond, holders of the notes should consult their
own tax advisors as to the possible application of the Tax Treaty.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments of interest we make on the notes to non-Mexican pension or
retirement funds will be exempt from Mexican withholding taxes, if any such
fund is:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the effective beneficiary of the interest;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">duly incorporated under the laws of its country of origin;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">exempt in its country of origin from income tax on interest income; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">registered with the Ministry of Finance for that purpose.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under existing Mexican law and regulations, a Foreign Holder will not be
subject to any Mexican taxes in respect of payments of principal made by us
with respect to the notes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of additional amounts. </I></B>We have agreed, subject to specified
exceptions and limitations, to pay Additional Amounts (as such term is defined
in &#147;Description of the Notes&#151;Additional amounts&#148;) to the holders of the notes
in respect of the Mexican withholding taxes mentioned above. Payments of
Additional Amounts with respect to the notes will be subject to Mexican
withholding tax at the same rate applicable to interest paid on the notes.
</FONT>
<P align="center"><FONT size="2">96</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders or beneficial owners of the notes may be requested to provide
certain information or documentation necessary to enable us to establish the
appropriate Mexican withholding tax rate applicable to such holders or
beneficial owners. In the event that the specified information or documentation
concerning the holder or beneficial owner is requested and is not provided on a
timely basis, our obligation to pay Additional Amounts will be limited.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of accrued interest. </I></B>Interest accrued that is not due and
payable under the terms applicable to the old notes before the exchange of the
old notes for the new notes will not be subject to a Mexican income tax
withholding under the terms described above, but such interest will be subject
to a Mexican income tax withholding when such interest becomes due and payable
under the new notes after the exchange of the old notes for the new notes.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Gain on dispositions. </I></B>Gains resulting from the sale or other dispositions
of the notes and by a Foreign Holder will not be deemed as an income arising
from Mexican source, and therefore will not be subject to Mexican income tax.
</FONT>
<P align="left"><FONT size="2"><I>Mexican tax consequences to Foreign Holders of the CPOs</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Distributions. </I></B>Dividends, either in cash or in any other form, paid with
respect to the CPOs will be subject to withholding tax based on the amount of
the distributed dividend, multiplied by a factor of 1.5385, in 2002. For
following years the factor will decrease to 1.5152, 1.4925 and 1.4706 in 2003,
2004 and 2005 and threafter.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Dispositions. </I></B>The sale or other disposition of the CPOs by a Foreign
Holder will not be subject to any Mexican tax if the sale is carried out
through the Mexican Stock Exchange or other securities market approved by the
Ministry of Finance and Public Credit (<I>Secretar&#237;a de Hacienda y Cr&#233;dito
P&#250;blico</I>). Sales or other dispositions of the CPOs made in other circumstances
would be subject to Mexican tax, regardless of the nationality or residence of
the transferor. However, under the Tax Treaty, a U.S. holder that is eligible
to claim the benefits of the Tax Treaty will be exempt from Mexican tax on
gains realized on a sale or other disposition of the CPOs in a transaction that
is not carried out through the Mexican Stock Exchange or such other approved
securities markets, so long as such holder did not own, directly or indirectly,
25% or more of our outstanding shares within the twelve-month period preceding
such sale or other disposition.
</FONT>
<P align="left"><FONT size="2"><I>Certain tax consequences to Mexican holders on the exchange or disposition of
the CPOs.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican income tax effect for a Mexican resident holder on the taxable
disposition or exchange of the CPOs, may vary depending on the conditions of
the acquisitions, disposition or exchange of the CPOs, as well as on the
characteristics of the holders. Therefore, such holders should seek advice from
Mexican tax counsel to determine the effects on a case by case basis.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>F.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Dividends and paying agents</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>G.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Statement by experts</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>H.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Documents on display</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file annual reports with and furnish other information to the SEC as
may be applicable from time to time. You may read and copy any documents filed
or furnished by Maxcom at the SEC&#146;s public reference rooms in Washington, D.C.,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms.
</FONT>
<P align="center"><FONT size="2">97</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>I.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B>Subsidiary information</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<!-- link2 "ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" -->
<DIV align="left"><A NAME="011"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</FONT>
<P align="left"><FONT size="2"><B>Interest rate risk</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The old notes which are payable at a fixed annual rate of 133/4% and the
new notes constituted substantially all of our outstanding indebtedness at
December&nbsp;31, 2002. The new notes will not accrue or pay interest until March&nbsp;1,
2006, and after March&nbsp;1, 2006, the new notes will accrue interest at a fixed
annual rate of 10%. As a result, we do not currently have any significant
interest rate risk.
</FONT>
<P align="left"><FONT size="2"><B>Foreign exchange risk</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary foreign currency exposure relates to our U.S.
dollar-denominated debt. A substantial portion of this debt is incurred to
finance U.S. dollar-denominated capital expenditures. All of our debt
obligations at December&nbsp;31, 2002, were denominated in U.S. dollars. Therefore,
we are exposed to currency exchange rate risks that could significantly affect
our ability to meet our obligations. We currently do not enter into hedging
transactions with respect to these foreign currency risks, but continue to
consider the appropriateness of this option.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The exchange rate of the peso to the U.S. dollar is a freely-floating rate
and the peso has experienced significant devaluations in recent years. Any
significant decrease in the value of the peso relative to the U.S. dollar in
the near term may have a material adverse effect on our results of operations
and financial condition, including our ability to repay or repurchase the
notes. At December&nbsp;31, 2002, an immediate 10% devaluation of the peso relative
to the U.S. dollar would have increased our interest expense by approximately
Ps.1.7&nbsp;million over a one-year period.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent capital expenditures are financed with operating cash flows,
we are also exposed to foreign currency fluctuations. Substantially all of our
capital expenditures are denominated in U.S. dollars. In addition, our
operating lease for our new headquarters building is denominated in U.S.
dollars. See &#147;Item&nbsp;5. Operating and Financial Review and Prospects&#151;B.
Liquidity and capital resources&#151;Other contractual obligations&#148; for a
description of our contractual operating lease obligations denominated in
dollars.
</FONT>
<!-- link2 "ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES" -->
<DIV align="left"><A NAME="012"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</B>
</FONT>
<!-- link2 "ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES" -->
<DIV align="left"><A NAME="013"></A></DIV>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P align="left"><FONT size="2"><B>ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maxcom is not in default under any of its obligations nor is any payment of dividends in arrears.
</FONT>
<!-- link2 "ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AND USE OF PROCEEDS" -->
<DIV align="left"><A NAME="014"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the terms of the exchange offer that was consummated on April
29, 2002, the indenture governing the old notes was amended to, among other
things, eliminate:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">all of the covenants restricting the incurrence of
indebtedness, the making of investments, the granting of loans, the
payment of dividends, the creation of liens, the entering into
transactions with affiliates, the undertaking of mergers,
consolidation of sales, the disposition of assets or subsidiary
stock, a change in control and any limitations on the transfer of
funds from subsidiaries to Maxcom;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the redemption option in the event of a change of control;
and</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">98</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">events of default related to the non-compliance with such
covenants, cross-defaults, adverse judgments in excess of U.S.$5.0
million and certain bankruptcy events.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The modification of the restrictive covenants permits Maxcom, absent the
existence of similar covenants under other indebtedness, to take actions that
could increase the credit risks, with respect to Maxcom and its subsidiaries,
faced by the holders of the old notes or that could otherwise be adverse to the
interest of the holders of the old notes.
</FONT>
<!-- link2 "ITEM 15. CONTROLS AND PROCEDURES" -->
<DIV align="left"><A NAME="015"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 15. CONTROLS AND PROCEDURES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within 90&nbsp;days prior to the date of this report, we performed an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures. Disclosure controls and procedures are designed to
ensure that the material financial and non-financial information required to be
disclosed on Form&nbsp;20-F and filed with the SEC is recorded, processed,
summarized and reported timely. The evaluation was performed with the
participation of our key corporate senior management and under the supervision
of our Chief Executive Officer, Mr.&nbsp;Ren&#233; Sagastuy and our Chief Financial
Officer, Ms.&nbsp;Elo&#237;sa Mart&#237;nez. Based on the foregoing, our management,
including our Chief Executive Officer and Chief Financial Officer, have
concluded that our disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934, as amended) are
effective.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation thereof. Therefore, no corrective actions with regard
to significant deficiencies and material weaknesses were taken.
</FONT>
<!-- link2 "ITEM 16. RESERVED" -->
<DIV align="left"><A NAME="016"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 16. RESERVED</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<P align="center"><FONT size="2">99</FONT>
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<P align="center"><FONT size="2"><B>PART II</B>
</FONT>

<!-- link2 "ITEM 17. FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="017"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 17. FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have responded to Item&nbsp;18 in lieu of responding to this Item.
</FONT>
<P align="center"><FONT size="2">100</FONT>
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<!-- link2 "ITEM 18. FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="018"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 18. FINANCIAL STATEMENTS</B>
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="94%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Page</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><I>Maxcom Telecomunicaciones, S.A. de C.V. and Subsidiaries</I></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reports of Independent Accountants</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Balance Sheets as of December&nbsp;31, 2001 and 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Operations for the years ended
December&nbsp;31, 2000, 2001 and 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Changes in Shareholders&#146; Equity for the years ended
December&nbsp;31, 2000, 2001 and 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-6</FONT></TD>

    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Changes in Financial Position for the years
ended December&nbsp;31, 2000, 2001 and 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Notes to the Consolidated Financial Statements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><I>Financial Statement Schedules</I></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Report of Independent Accountants on Financial Statement Schedules</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">S-I</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation and Qualifying Accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap colspan="3" align="center"><FONT size="2">&nbsp;&nbsp;S-III</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-1</FONT>
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<P align="left"><FONT size="2">REPORT OF INDEPENDENT ACCOUNTANTS
</FONT>

<P align="left"><FONT size="2">Mexico, City, February&nbsp;19, 2003, except for Note 23 for which the date is May
30, 2003
</FONT>

<P align="left"><FONT size="2">To the Board of Directors and Shareholders of<BR>
Maxcom Telecomunicaciones, S. A. de C. V. and Subsidiaries
</FONT>

<P align="left"><FONT size="2">We have audited the accompanying consolidated balance sheets of Maxcom
Telecomunicaciones, S. A. de C. V. and its subsidiaries as of December&nbsp;31, 2002
and 2001, and the related consolidated statements of operations, of changes in
stockholders&#146; equity and of changes in financial position for the years then
ended. These financial statements are the responsibility of the Company&#146;s
Management. Our responsibility is to express an opinion on these financial
statements based on our audits. The consolidated statement of operations of
the Company for the year ended December&nbsp;31, 2000 and the consolidated statement
of changes in shareholders&#146; equity and changes in financial position for the
year ended December&nbsp;31, 2000 were audited by other independent accountants
whose report, dated February&nbsp;12, 2001, expressed an unqualified opinion on
those statements.
</FONT>

<P align="left"><FONT size="2">We conducted our audits in accordance with auditing standards generally
accepted in Mexico and in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement and are
prepared in accordance with generally accepted accounting principles in Mexico.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by Management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
</FONT>

<P align="left"><FONT size="2">In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Maxcom
Telecomunicaciones, S. A. de C. V. and its subsidiaries at December&nbsp;31, 2002
and 2001, and the results of its operations, the changes in its shareholders&#146;
equity and the changes in its financial position for the years then ended, in
conformity with accounting principles generally accepted in Mexico.
</FONT>

<P align="left"><FONT size="2">The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is highly leveraged, is experiencing
liquidity problems and has suffered recurring losses from operations that
raises substantial doubt about its ability to continue as a going concern.
Management&#146;s plans in regard to these matters are also described in Note 2.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
</FONT>

<P align="left"><FONT size="2">Mexican Accounting Standards differ in certain material respects from
Accounting Principles
Generally Accepted in the United States of America. The application of the
latter would have affected the determination of the consolidated net loss for
each of the three years in the period ended December&nbsp;31, 2002, and the
determination of stockholders&#146; equity and consolidated financial position as of
December&nbsp;31, 2002 and 2001, to the extent summarized in Note 22 to the
consolidated financial statements.
</FONT>


<P align="left"><FONT size="2">PricewaterhouseCoopers
</FONT>

<P align="left"><FONT size="2">C.P. Juan Manuel Ferr&#243;n<BR>
Audit Partner
</FONT>
<P align="center"><FONT size="2">F-2</FONT>

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<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><IMG src="y87632y8763200a.gif" alt="(BDO LOGO)"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>BDO Hern&#225;ndez Marr&#243;n y C&#237;a., S C</B><BR>Contadores P&#250;blicos y<BR>Consultores de Empresas
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" colspan="2"><FONT size="2">Av. Ejercito Nacional 904 Piso 7<BR>Polanco<BR>11510 M&#233;xico D.F.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">Tel&#233;fono </FONT></TD>
    <TD align="left" valign="top"><FONT size="2">(52) (55)&nbsp;59013900</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">Telefax </FONT></TD>
    <TD align="left" valign="top"><FONT size="2">(52) (55)&nbsp;59013925</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">REPORT OF INDEPENDENT AUDITORS
</FONT>


<P align="left"><FONT size="2"><B>To the Board of Directors and Shareholders of<BR>
Maxcom Telecomunicaciones, S.A. de C.V. and Subsidiary</B>
</FONT>

<P align="left"><FONT size="2">We have audited the accompanying consolidated balance sheet of Maxcom
Telecomunicaciones, S.A. de C.V. and subsidiary, as of December&nbsp;31, 2000, and
the related consolidated statements of operations, consolidated changes in
shareholders&#146; equity and changes in financial position for the year ended
December&nbsp;31, 2000. These Financial Statements are the responsibility of the
Company&#146;s Management. Our responsibility is to express an opinion on these
Consolidated Financial Statements based on our audits.
</FONT>

<P align="left"><FONT size="2">We conducted our audits in accordance with Generally Accepted Auditing
Standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance as to whether the
Consolidated Financial Statements are free of material misstatements. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the Financial Statements. An audit also includes assessing the
accounting principles used and significant estimates made by Management, as
well as evaluating the overall Financial Statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
</FONT>

<P align="left"><FONT size="2">In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Maxcom
Telecomunicaciones, S.A. de C.V. and subsidiary, as of December&nbsp;31, 2000, and
the consolidated result of its operations, the consolidated changes in
shareholders&#146; equity and the changes in its financial position for the year
ended December&nbsp;31, 2000, in conformity with Mexican Generally Accepted
Accounting Principles (&#147;Mexican GAAP&#148;).
</FONT>

<P align="left"><FONT size="2">Mexican GAAP vary in certain respects from accounting principles generally
accepted in the United States (&#147;U.S. GAAP&#148;). The application of U.S. GAAP
referred to in Note 22 would have affected the determination of consolidated
net loss, the consolidated shareholders&#146; equity and consolidated financial
position, expressed at the purchasing power of pesos as of December&nbsp;31, 2002,
as of and for the year ended December&nbsp;31, 2000, to the extent summarized in
Note 22 to the consolidated financial statements.
</FONT>

<P align="left"><FONT size="2">These consolidated financial statements have been translated into English
solely for the convenience of the readers of this language.
</FONT>

<P align="left"><FONT size="2">BDO INTERNATIONAL
</FONT>

<P align="left"><FONT size="2">MEXICO CITY,
</FONT>

<P align="left"><FONT size="2">FEBRUARY 12, 2001
</FONT>

<P align="center"><FONT size="2">F-3</FONT>

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<P align="center"><FONT size="2">MAXCOM TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
</FONT>


<P align="center"><FONT size="2">CONSOLIDATED BALANCE SHEETS<BR>
AS OF DECEMBER 31, 2002 AND 2001<BR>
(Notes 1, 2, 3 and 4)
</FONT>


<P align="center"><FONT size="2">In thousands of Mexican pesos (&#147;Ps.&#148;) in purchasing power as of December&nbsp;31, 2002<BR>
and thousands of U.S. dollars (&#147;$&#148;)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B>(Note 3)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ASSETS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current assets:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents (Note 5)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">115,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">182,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">11,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restricted cash (Note 12)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">197,452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Customers, net of allowance of Ps.32,107 and Ps.19,693 in 2002
and 2001, respectively</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">104,205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61,189</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Value-added tax refundable (Note 6)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,789</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,226</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other sundry debtors</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">772</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">125,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">88,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventory, net of allowance of Ps.607 and Ps.615 in 2002 and 2001,
respectively</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,835</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,614</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">295,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">509,668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency rights, net (Note 7)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">104,420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">110,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telephone network systems and equipment, net (Note 9)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,588,184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,446,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">152,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preoperating expenses, net (Note 10)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">204,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">234,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,595</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intangible assets, net (Note 11)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">425,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">316,603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Rent deposits of Ps.25,516 and Ps.29,013 in 2002 and 2001
respectively and other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">2,648,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">2,651,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">253,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LIABILITIES AND SHAREHOLDERS&#146; EQUITY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current liabilities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest payable (Note 12)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">4,320</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">104,789</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued expenses and other accounts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">164,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">147,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,745</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Customer deposits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,968</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payroll and other taxes payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,523</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">202,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">274,559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,374</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term liabilities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Senior notes, net (Note 12)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,845,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,578,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">176,938</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total long term liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,845,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,578,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">176,938</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,047,589</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,853,475</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">196,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Commitments and contingencies (Notes 12, 14, 19 and 20)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital stock, no par value (Note 15)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,685,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,031,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">161,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additional paid-in capital (Notes 15 and 21)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">108,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated deficit (Note 17):</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prior years deficit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(352,844</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(651,433</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(33,829</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss for the period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(732,703</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(690,340</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(70,249</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,085,547</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,341,773</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(104,078</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total shareholders&#146; equity (deficit)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">600,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(201,894</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">57,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total liabilities and shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD  align="right"><FONT size="2">2,648,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">2,651,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">253,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The accompanying notes are an integral part of these consolidated financial
statements.
</FONT>

<P align="center"><FONT size="2">F-4</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2">MAXCOM TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
</FONT>


<P align="center"><FONT size="2">CONSOLIDATED STATEMENTS OF OPERATIONS<BR>
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000<BR>
(Notes 1, 2, 3 and 4)
</FONT>


<P align="center"><FONT size="2">In thousands of Mexican pesos (&#147;Ps.&#148;) in purchasing power as of December&nbsp;31, 2002<BR>
and thousands of U.S. dollars (&#147;$&#148;), except per share amounts
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B>(Note 3)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">535,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">332,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">293,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">51,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating costs and expenses:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Network operating costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">208,084</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">159,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">118,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling, general and administrative
expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">428,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">454,454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">365,457</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">317,564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">283,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">221,859</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total operating costs and expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">954,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">897,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">706,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">91,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(418,437</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(564,936</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(412,625</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(40,118</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Integral cost (income)&nbsp;of financing:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">207,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">451,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">441,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,908</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,472</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(81,142</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(108,095</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(428</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain on repurchase of debt (Note 12)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(128,161</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exchange loss (gain), net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">206,612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(95,962</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain on net monetary position</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(100,618</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(87,368</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(99,431</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,646</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">309,163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">58,662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">245,685</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Nonrecurring charges (Note 14)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(65,761</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other income (expense), net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(187</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(520</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Loss before taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(724,957</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(689,546</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(658,830</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(69,508</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reserves for:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asset tax (Note 19)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">653</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income tax (Note 19)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">926</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,746</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">741</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">(Ps.</FONT></TD>
    <TD  align="right"><FONT size="2">732,703)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">(Ps.</FONT></TD>
    <TD align="right"><FONT size="2">690,340)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">(Ps.</FONT></TD>
    <TD align="right"><FONT size="2">658,830)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">($</FONT></TD>
    <TD align="right"><FONT size="2">70,249</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The accompanying notes are an integral part of these consolidated financial
statements.
</FONT>

<P align="center"><FONT size="2">F-5</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2">MAXCOM TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
</FONT>


<P align="center"><FONT size="2">CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#146; EQUITY<BR>
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000<BR>
(Notes 1, 2, 3 and 4)
</FONT>


<P align="center"><FONT size="2">In thousands of Mexican pesos (&#147;Ps.&#148;) in purchasing power as of December&nbsp;31, 2002<BR>
and thousands of U.S. dollars (&#147;$&#148;)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%">
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Additional</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Capital</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>paid-in</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Accumulated</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>shareholders'</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>capital</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>deficit</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>equity</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(Note 15)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(Note 17)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at December&nbsp;31, 1999</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">894,226</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">35,207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">(Ps.</FONT></TD>
    <TD  align="right"><FONT size="2">261,143)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">668,290</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in capital stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">370,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">370,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Contributions for future increases of capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Stock options (Note 21)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">107,886</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">107,886</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Warrants (Note 21)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7,650</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(658,830</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(658,830</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at December&nbsp;31, 2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,271,901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">135,549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(919,973</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">487,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in capital stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27,408</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Losses absorbed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(268,539</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">268,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">New paid-in capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(690,340</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(690,340</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at December&nbsp;31, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,031,739</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">108,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,341,774</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(201,894</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in capital stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">785,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">749,781</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,535,040</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Losses absorbed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(131,428</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(857,502</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">988,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(732,703</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(732,703</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at December&nbsp;31, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,685,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">(Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,085,547)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">600,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">U.S. dollars</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">161,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">($104,079</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">57,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The accompanying notes are an integral part of these consolidated financial
statements.
</FONT>

<P align="center"><FONT size="2">F-6</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2">MAXCOM TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
</FONT>


<P align="center"><FONT size="2">CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION<BR>
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000<BR>
(Notes 1, 2, 3 and 4)
</FONT>


<P align="center"><FONT size="2">In thousands of Mexican pesos (&#147;Ps.&#148;) in purchasing power as of December&nbsp;31, 2002<BR>
and thousands of U.S. dollars (&#147;$&#148;)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B>(Note 3)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">(Ps.</FONT></TD>
    <TD align="right"><FONT size="2">732,703)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">(Ps.</FONT></TD>
    <TD align="right"><FONT size="2">690,340)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">(Ps.</FONT></TD>
    <TD align="right"><FONT size="2">658,830)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">($</FONT></TD>
    <TD align="right"><FONT size="2">70,249</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments to reconcile net loss to resources provided
by (used for) operating activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">317,564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">283,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">221,859</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Non-recurring charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">65,762</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain on repurchase of debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(128,161</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in operating assets and liabilities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Increase) decrease in:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(43,016</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18,529</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,207</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,124</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventory, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20,195</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,863</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(24,723</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,602</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,370</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Decrease) increase in:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restricted cash, liabilities and others, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">131,744</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">150,868</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(405,370</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Resources used for operating activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(340,135</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(355,754</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(858,013</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(32,611</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financing activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Issuance of capital stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">785,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">377,705</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">75,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additional paid-in capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">749,781</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">71,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repurchase of debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(99,781</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from loans and notes payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(733,448</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,126,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(70,321</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Resources provided by (used in) financing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">801,592</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(98,812</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,604,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">76,854</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investing activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preoperating expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,820</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(174</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investment in telephone network systems and
equipment, net of dispositions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(366,427</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(499,582</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(420,163</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(35,132</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intangible assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(163,407</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7,724</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(326,069</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,667</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(39,001</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,303</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">336</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Resources used for investing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(528,149</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(546,307</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(747,535</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(50,637</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net increase (decrease)&nbsp;in cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(66,692</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,000,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">998,527</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,394</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Beginning balance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">182,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,183,294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">184,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,489</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Ending balance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">115,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">182,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,183,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">11,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The accompanying notes are an integral part of these consolidated financial
statements.
</FONT>

<P align="center"><FONT size="2">F-7</FONT>

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<P align="center"><FONT size="2">MAXCOM TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
</FONT>


<P align="center"><FONT size="2">NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS<BR>
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
</FONT>


<P align="center"><FONT size="2">In thousands of Mexican pesos (&#147;Ps.&#148;) in purcashing power as of December&nbsp;31, 2002<BR>
and thousands of U.S. dollars (&#147;$&#148;), except per share amounts
</FONT>

<P align="left"><FONT size="2">NOTE 1 &#151; INCORPORATION AND BUSINESS:
</FONT>

<P align="left"><FONT size="2">Maxcom Telecomunicaciones, S. A. de C. V. (&#147;Maxcom&#148; or the &#147;Company&#148;), is a
Mexican company incorporated on February&nbsp;28, 1996. Its main line of business
is the construction and operation of a telephone network, with the purpose of
providing local, national and international long-distance, data and other
value-added services, and virtual private network service, within Mexico.
</FONT>

<P align="left"><FONT size="2">The Company started its commercial operations in May 1999. Therefore, from its
incorporation through April&nbsp;30, 1999, the Company was in the preoperating and
development stage.
</FONT>

<P align="left"><FONT size="2">Effective February&nbsp;3, 1997 (as amended December&nbsp;7, 1999 and September&nbsp;27,
2001), Mexico&#146;s Ministry of Communications and Transportation (the &#147;SCT&#148;)
awarded the Company a concession to install and operate a public
telecommunication network in Mexico. This concession is non-exclusive; its
initial term is for 30&nbsp;years, and it contains certain renewal rights. The
concession grants the Company the right to provide local telephone services in
the Federal District of Mexico and in 13 states. It also grants the Company
the right to provide long-distance, data and other value-added services
nationwide, although it is not currently providing long-distance service
outside their current customer base. In September 2001, the SCT amended the
concession for national coverage. The Company must meet certain conditions in
order for the concession to remain effective, such as building certain networks
and providing certain services by predetermined dates, among other things.
</FONT>

<P align="left"><FONT size="2">In October 1997, the Company was awarded seven nationwide point-to-point and
three regional point-to-multipoint microwave concessions, each for 20&nbsp;years.
</FONT>

<P align="left"><FONT size="2">On November&nbsp;24, 1998 (as amended March&nbsp;23, 1999), the Company entered into an
agreement with Tel&#233;fonos de M&#233;xico, S. A. de C. V. (&#147;Telmex&#148;), through which
both parties agreed to provide interconnection services to each other&#146;s local
telecommunications network. This agreement calls for reciprocal
interconnection rates for local-to-local services through September&nbsp;15, 2002.
</FONT>

<P align="left"><FONT size="2">On January&nbsp;22, 1999, the Company entered into another agreement with Telmex
through which Maxcom agreed to provide Telmex with interconnection services for
Telmex&#146;s long-distance traffic.
</FONT>

<P align="left"><FONT size="2">The Company is in negotiations with Telmex to sign an amendment agreement of
the original Local Interconnection Service Agreement (the &#147;Agreement&#148;), for the
extension of the Agreement which was valid through September&nbsp;15, 2002,
meanwhile the physical interconnection remains between the companies based in
the clause denominated &#147;continued application&#148; which contracted that upon the
conclusion of the initial term, the terms and conditions of the Agreement will
continue in full effect until the parties sign a new agreement to continue with
the interconnection of their networks.
</FONT>

<P align="left"><FONT size="2">During 2001 and 2000 the Company entered into interconnection and reselling
agreements with several other local and long distance carriers and mobile phone
companies (see Note 4).
</FONT>

<P align="center"><FONT size="2">F-8</FONT>

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<P align="left"><FONT size="2">The COFETEL (Federal Telecommunications Commission) in their session of
November&nbsp;28, 2000 issued a resolution authorizing the Company to operate as
an international port, the station is located in Magdalena No.&nbsp;211, Mexico
City.
</FONT>

<P align="left"><FONT size="2">In September 2001 the Company was awarded an amendment to its concession to
provide nationwide services of basic telephony for 30&nbsp;years.
</FONT>

<P align="left"><FONT size="2">In August 2002, the Company bought a fiber optic system (2,011 Km), which
allows the Company to operate a network that carries traffic from Mexico City
to the Nuevo Laredo border crossing.
</FONT>

<P align="left"><FONT size="2">NOTE 2 &#151; GOING CONCERN:
</FONT>

<P align="left"><FONT size="2">From the beginning of its commercial operations, the Company has had negative
cash flow from operations and losses from operations due to its recent
establishment and the Company&#146;s initial investment in telephone network systems
and equipment, preoperating expenses and frequency rights. The recoverability
of this investment will depend on the ability of the Company to obtain
financing to complete development and on the future profitable commercial
exploitation of the telephone network.
</FONT>

<P align="left"><FONT size="2">The Company has incurred net losses of Ps.732,703, Ps.690,340 and Ps.658,830
for the years ended December&nbsp;31, 2002, 2001 and 2000, respectively. The losses
were due to higher costs of borrowing and lower sales growth than-expected.
During 2000, the Company issued 133/4% Senior Notes with a principal amount
of $300&nbsp;million, maturing on April&nbsp;1, 2007. On April&nbsp;29, 2002, the Company
consummated the exchange offer for its 133/4% Series&nbsp;B Senior Notes due
2007. Holders tendered an aggregate of US $259,410 in principal amount of
Series&nbsp;B Senior Notes, representing 94.33% of all such notes outstanding.
</FONT>

<P align="left"><FONT size="2">Additionally, on July&nbsp;25 2002, the Company completed an additional exchange of
U.S $4,000 in aggregate principal of 13 3/4 % Series&nbsp;B Senior Notes due 2007
with the same terms and conditions of the exchange offer consummated on April
29, 2003.. These holders received in exchange an aggregate of $2,545 in
principal amount of New Senior Notes due March&nbsp;1, 2007. Tendering holders also
received an aggregate of 408,000 Series &#147;N2&#148; convertible preferred shares, with
an initial liquidation preference of $0.4927 per share and limited voting
rights, in the form of CPOs.
</FONT>

<P align="left"><FONT size="2">The Company has experienced significant turnover in executive ranks
over the last three years. The current management team is dedicated
to turnaround the business. Through 2002 and
2001, the Company&#146;s administration has worked aggressively to mitigate its
financial difficulties. The Company took the following actions:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">a.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Corporate debt restructuring -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">As mentioned in Note 12, the Company carried out a restructuring of the
Senior Notes. As a result of these negotiations, the Company was able to
exchange a significant portion of the Senior Notes for a combination of
preferred stock and new notes with more favorable terms, such as: i)
interest free debt for a period of four years, and ii) a lower interest
rate once interest accrual begins.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">b.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Private equity investment -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The Company received a capital infusion of $66.2&nbsp;million from some of its
existing shareholders, bondholders and certain new investors.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">c.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Improvement in operations -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">During 2002 the Company increased net revenues by 61%, achieved positive
net Earnings Before Income Taxes, Depreciation and Amortization
(&#147;EBITDA&#148;) for the fourth quarter (except for the restructuring expense),
and reduced operating loss by 26%.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-9</FONT>

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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">In December 2002 management accrued for a right sizing of its headcount
Ps26,442. It is anticipated that this will improve the related and other
payroll expenses in 2003.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The consolidated financial statements do not give effect to any
adjustments which would be necessary if the Company is not able to
continue as a going concern.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">NOTE 3 &#151; BASIS OF PRESENTATION:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">a.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Consolidation &#150;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The accompanying consolidated financial statements include the accounts
of Maxcom and subsidiaries Corporativo en Telecomunicaciones, S. A. de C.
V. (&#147;Corporativo&#148;) and Maxcom Servicios Administrativos, S. A. de C. V.
(&#147;MSA&#148;). Both are wholly-owned Mexican subsidiaries, whose main line of
business is the rendering of administrative and technical services,
mainly to Maxcom. All intercompany balances and transactions have been
eliminated for the consolidation.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Certain prior year accounts have been reclassified for comparative
presentation purposes.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">b.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Convenience translation -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">U.S. dollar amounts ($) shown in the consolidated financial statements
have been included solely for the convenience of the reader and were
translated from Mexican pesos, as a matter of arithmetic computation
only, at December&nbsp;31, 2002 noon-buying rate of Ps.10.43 per U.S.$1.00, as
published by The Federal Reserve Bank of New York. Such translation
should not be construed as a representation that the Mexican peso amounts
have been or could be converted into U.S. dollars at this or any other
rate.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">NOTE 4 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
</FONT>

<P align="left"><FONT size="2">The accompanying consolidated financial statements are expressed in Mexican
pesos, denoted by the symbol &#147;Ps.&#148;, and have been prepared in accordance with
Accounting Principles Generally Accepted in Mexico (&#147;Mexican GAAP&#148;). The
significant accounting policies used by the Company in the preparation of its
financial statements, including the concepts, methods and criteria related to
the recognition of the effects of inflation on the financial information, are
summarized below:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">a.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Recognition of the effects of inflation -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The financial statements of the Company have been prepared in accordance
with Statement B-10 &#147;Recognition of the Effects of Inflation on
Financial Information,&#148; as amended, issued by the Mexican Institute of
Public Accountants (&#147;MIPA&#148;), which provides guidance for the recognition
of the effects of inflation.</FONT></TD>
</TR>
</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%" align="left" nowrap><FONT size="2">i.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">The Company restates its income statement to reflect the
purchasing power of the Mexican peso as of the most recent reporting
date (December&nbsp;31, 2002), using a restatement factor derived from
the change in the National Consumer Price Index (&#147;NCPI&#148;) from the
month in which the transaction occurred to the most recent year-end.
Financial statements have been restated to Mexican pesos as of
December&nbsp;31, 2002 purchasing power, using the NCPI as of that date.
The financial statements of the previous years have also been
restated in terms of the purchasing power of the Mexican peso as of
the most recent reporting date, thus making them comparable, by
using a restatement factor derived from the change in the NCPI,
which for 2001 and 2000 was 1.0570 and 1.0440, respectively.
Therefore, these amounts differ from those previously reported.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%" align="left" nowrap><FONT size="2">ii.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">Shareholders&#146; equity accounts are restated to be expressed in
terms of constant pesos. The restated amounts are determined by
applying factors derived from the NCPI for historical balances.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-10</FONT>

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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%" align="left" nowrap><FONT size="2">iii.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">The result on the net monetary position represents the
inflationary gain or loss, as determined by applying factors derived
from the NCPI, on the Company&#146;s monthly net monetary assets and
liabilities during the period.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%" align="left" nowrap><FONT size="2">iv.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">Integral income and cost of financing consists of interest
income and expense, exchange gains or losses, and the gain or loss
on the net monetary position. Integral income and cost of financing
during the development stage period was capitalized to preoperating
expenses. Once the Company commenced operations, amortization of
these costs began over a ten-year term.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%" align="left" nowrap><FONT size="2">v.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">Statement B-12 &#147;Statement of Changes in Financial Position,&#148;
issued by the MIPA, specifies the appropriate presentation of the
statement of changes in financial position when the financial
statements have been restated in constant monetary units. Statement
B12 identifies the sources and applications of resources as the
differences between beginning and ending financial statement
balances in constant monetary units. The Statement also requires
that monetary and foreign exchange gains and losses not be treated
as non-cash items in the determination of resources provided by
operations.</FONT></TD>
</TR>
</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">b.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Cash and cash equivalents &#150;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Cash equivalents include highly liquid short-term investments valued at
market.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">c.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Inventory -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Materials and supplies are valued at the lower of acquisition cost on a
weighted-average basis or net realizable value (&#147;NRV&#148;).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">d.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Telephone network systems and equipment -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Telephone network systems and equipment are recorded at acquisition cost
and restated by applying factors derived from the change in the NCPI
since acquisition date.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Telephone network equipments for resale are valued at the lower of
acquisition cost on a LIFO basis or NRV.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Depreciation is calculated by the straight-line method on the restated
cost based on the estimated useful lives of the assets. Depreciation is
charged to results of operations.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The Company constructs certain of its own network systems and related
facilities. Internal costs directly related to the construction of such
facilities are capitalized. Such internal costs capitalized during the
year were Ps.33,071 and Ps.25,204 (including Ps.6,763 and Ps.5,510 of
integral cost of financing) in 2002 and 2001, respectively.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Beginning January&nbsp;1, 2001, the Company elected to capitalize integral
cost of financing attributable to assets under construction. Capitalized
integral financing costs include interest costs, gains from monetary
position, and foreign exchange losses and are determined by reference to
the Company&#146;s average interest cost on outstanding borrowings.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Maintenance and repairs are expensed as incurred. Replacements and
improvements are capitalized. The cost and related reserves of assets
sold or retired are removed from the accounts, and any resulting gain or
loss is reflected in results of operations.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">e.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Frequency rights -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Frequency rights are recorded at acquisition cost and restated by
applying factors derived from the change in the NCPI since acquisition
date. Amortization is calculated by the straight-line method over the
term of the concession (20&nbsp;years) &#091;see Note 7&#093; from the start of the
Company&#146;s operations.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-11</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">f.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Preoperating expenses -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">All expenses incurred during the development stage or in specific
projects in progress are capitalized. Such expenses are amortized on a
straight-line basis over 10&nbsp;years. The amortization period begins when
the corresponding project commences operations.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">g.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Intangibles -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Purchased software and certain activities of developing internal-use
software are capitalized and amortized over their expected useful lives.
Other activities, such as training, maintenance and re-engineering, are
expensed as incurred.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Debt issuance costs are amortized on a straight-line basis over the
outstanding term of the related debt under Mexican GAAP. Under United
States Generally Accepted Accounting Principles (&#147;US GAAP&#148;) such debt
issuance costs are amortized by using effective interest method over the
life of the Company&#146;s long-term obligations.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">h.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Evaluation of long &#151; lived assets -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The Company evaluates the recoverability of its long-lived assets when
events and circumstances indicate that such assets might be impaired.
The Company determines impairment by comparing the undiscounted future
cash flows estimated to be generated by these assets to their respective
carrying amounts. In the event impairment exists, a loss is recognized
based on the amount by which the carrying value exceeds the fair value of
the asset. If quoted market prices for an asset are not available, fair
market value is determined primarily using the anticipated cash flows
discounted at a rate commensurate with the risk involved. Losses on
property and equipment to be disposed of are determined in a similar
manner, except that fair market values are reduced for the cost to
dispose.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">i.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Transactions and balances in foreign currencies -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Transactions in foreign currencies are recorded at the rates of exchange
prevailing on the dates they are entered into or settled. Monetary
assets and liabilities of Mexican companies denominated in those
currencies are stated in Mexican pesos at the year-end closing rate
published in Mexico&#146;s Official Gazette. Exchange gains or losses are
applied as an integral cost of financing.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">j.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Income tax and statutory employees&#146; profit sharing -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The Company has incurred tax losses since inception and accordingly has
not provided for income taxes and statutory employees&#146; profit sharing.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Starting in the year 2000, the Company adopted the guidelines of the
revised Statement D-4 &#147;Accounting for Income Tax, Asset Tax and
Employees&#146; Statutory Profit Sharing,&#148; issued by the MIPA. This Statement
requires the recognition of deferred income tax by using the
comprehensive asset and liability method. Under this method, deferred
income taxes are calculated by applying the respective income tax rate to
the temporary differences between the financial statements&#146; carrying
amounts and the tax basis of existing assets, liabilities and tax losses.
An analysis of the corresponding effects is shown in Note 19.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">In July 2000, the MIPA issued Circular 54 &#147;Statement D-4
Interpretations&#148;, which is intended to clarify certain concepts in
connection with the guidelines and application of D-4.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">k.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Management estimates -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Generally accepted accounting principles require that, in preparing a
company&#146;s financial statements, management make estimates and assumptions
that affect the reported amounts of assets and liabilities and</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-12</FONT>


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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">disclose contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">l.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Financial instruments -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The Company&#146;s financial instruments consist principally of cash and cash
equivalents, restricted cash, accounts receivable and payable, and notes
payable. The carrying amounts of such financial instruments, as
reflected in the balance sheet, approximate their fair value as of
December&nbsp;31, 2002 and 2001.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">In February 2000, the MIPA issued Statement C-2 &#147;Financial Instruments,&#148;
which is effective as of January&nbsp;1, 2001. Statement C-2 provides
guidance for recognizing, measuring and disclosing financial assets and
liabilities, including accounting for derivative instruments and certain
hedging transactions. Statement C-2 requires that all derivative
financial instruments be recorded in the balance sheet at their fair
values and changes in the fair value of financial instruments are
recorded in each period in the income statement. There was no effect on
the financial position or results of operations of the Company upon
adoption.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">m.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Revenue recognition -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The Company recognizes revenues from telephone services provided to
customers, the sale of customer-premise equipment, services provided to
other telephone-service companies (such as interconnection services), and
installation charges.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Revenues from services provided to customers, including installation and
maintenance, are recognized in the month the service is rendered. When
the installation is not charged to the customer, the cost is amortized
during the expected life of the customer line.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Revenues from the sale of customer-premise equipment are recognized at
the time of the sale and delivery and installation of such equipment.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Revenues from interconnections services are recognized on an accrual
basis. The Company has entered into agreements with several telephone
carriers with a &#147;bill and keep&#148; feature. Under this arrangement, if the
imbalance between local calls originated by the other carrier and
terminated by Maxcom and calls originated by Maxcom and terminated by the
other carrier during a month does not exceed 70%, then no interconnection
fee amounts are payable by the net user of interconnection services. If
the imbalance exceeds 70% in any given month, the net user incurs a
liability per minute. If the Company fails to maintain a significant
percentage of residential users, then the &#147;bill and keep&#148; arrangement
will be terminated and asymmetrical interconnection rates may apply.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The Company also has interconnection agreements for mobile and long
distance services with other carriers, however, they do not incorporate a
bill and keep feature.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Advances from customers are classified as current liabilities until they
are refunded. When the contract is rescinded, these deposits are applied
to any outstanding balance.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The Management has been working strongly to reduce the risk of dependence
on a small number of customers. For the year ended December&nbsp;31, 2002 and
2001, the three largest customers accounted 3% and approximately 23% of
revenues, respectively.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The Company creates a reserve for 90% of any receivable due over 90&nbsp;days,
except for high volume customers, whose accounts are 100% reserved once
they reach 30&nbsp;days past due.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">n.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Stock-based compensation -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">At December&nbsp;31, 2002, 2001 and 2000, the Company had several stock option
transactions (see Note 21). Since Mexican GAAP does not have specific
guidance to value and record transactions of this nature, the Company
adopted &#147;U.S. GAAP&#148; pursuant to Mexican Statement A-8, &#147;Supplementary
Application of</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-13</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">International Accounting Standards.&#148; Statement A-8 recommends the
application of another promulgation when such instances arise.
Accounting Principles Board (&#147;APB&#148;) Opinion 14, &#147;Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants&#148;, APB
Opinion 25, &#147;Accounting for Stock Issued to Employees&#148;, and Financial
Accounting Standards Board (&#147;FASB&#148;) Statement 123, &#147;Accounting for
Stock-Based Compensation,&#148; have been applied to the warrant and stock
option grants.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">In accordance with APB 25, the Company recognizes compensation expense
for its employee stock option plan using the intrinsic-value method of
accounting. Under the terms of the intrinsic-value method, compensation
cost is the excess, if any, of the market price of the stock at the grant
date, or other measurement date, over the amount an employee must pay to
acquire the stock.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">In accordance with FAS 123, compensation expense for stock options given
to non-employees and warrants was determined based on fair value using
the Black Scholes valuation model.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Debt with detachable warrants is accounted for using APB 14. A portion
of the proceeds from the issuance of such debt is allocated to additional
paid-in capital against debt discount. The allocation is based on the
relative fair value of the debt versus the warrants. The debt discount
is subsequently amortized over the outstanding term of the debt on a
straight-line basis, which does not materially differ from the interest
method. Amortization expense recognized for the years ended December&nbsp;31,
2002, 2001 and 2000 was Ps.4,636, Ps.2,391, and Ps. 9,679, respectively.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">o.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Advertising and promotional costs -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The Company expenses costs of advertising and promotions as incurred.
Advertising and promotional expenses were Ps.16,558, Ps.21,896 and
Ps.18,647 in 2002, 2001 and 2000, respectively.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">p.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">Segment reporting -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">The International Accounting Standards Committee&#146;s IAS No.&nbsp;14, &#147;Segment
Reporting&#148; (&#147;IAS 14&#148;), is applicable to Mexican companies under Statement
A-8. IAS 14 requires that companies look to their internal
organizational structure and internal reporting system for purposes of
identifying segments. For all years presented the Company operates only
one segment and does not have any particular geographical location. The
revenue by geographical location included in Note 21 is a specific
disclosure required by the SCT in the Company&#146;s concession title.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">q.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">New accounting standards -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="2%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="95%"><FONT size="2">In August 2000, the MIPA issued Statement B-4, &#147;Comprehensive Income,&#148;
which became effective January&nbsp;1, 2001. Based on this Statement,
comprehensive income includes net income for the year and other items
which, in accordance with other statements, are recorded directly in
shareholders&#146; equity and which are not a result of shareholders&#146;
transactions, such as contributions, reductions or distributions of
capital. Currently, the Company does not have any components of other
comprehensive income other than net income.</FONT></TD>
</TR>
</TABLE>


<P align="center"><FONT size="2">F-14</FONT>


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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">In November 2001, the MIPA issued the revised Statement C-9, &#147;Liabilities,
Provisions, Contingent Assets and Liabilities and Commitments&#148; (&#147;Statement
C-9&#148;), which establishes a methodology for valuation, presentation and
disclosure of liabilities and provisions, as well as for valuation and
disclosure of contingent assets and liabilities, and for disclosure of
commitments. The revised Statement C-9 states that: (i)&nbsp;all contingent assets
that have a practically true realization must be accounted and disclosed in the
financial statements; (ii)&nbsp;contingent assets that have a probable realization
cannot be accounted for in the financial statements, but must be disclosed; and
(iii)&nbsp;contingent assets that do not have a probable realization cannot be
accounted for in the financial statements and are not required to be disclosed.
Statement C-9 requires disclosure of committed amounts when it represents
significant fixed asset additions. The provisions of Statement C-9 are
required to be applied beginning on January&nbsp;1, 2003, although early adoption is
recommended.
</FONT>

<P align="left"><FONT size="2">In addition, in December 2001, the MIPA issued revised Statement C-8,
&#147;Intangible Assets&#148; (&#147;Bulletin C-8&#148;), which defines intangible assets as costs
incurred and rights or privileges acquired that will generate a future economic
benefit. Revised Bulletin C-8 states that preoperating costs should be
expensed as a period cost, unless they could be classified as development
costs. Statement C-8 requires that goodwill and intangible assets, including
previously existing goodwill and intangible assets, with indefinite useful
lives should not be amortized, but should be tested for impairment annually.
Goodwill and intangible assets with finite useful lives should be amortized
over its useful life. The provisions of Statement C-8 are required to be
applied beginning on January&nbsp;1, 2003, although early adoption is recommended.
</FONT>

<P align="left"><FONT size="2">The management of the Company estimates that the application of the new
standards will not have a significant impact on the financial statements.
</FONT>


<P align="left"><FONT size="2">NOTE 5 &#151; CASH AND CASH EQUIVALENTS:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments maturing within 30&nbsp;days at December&nbsp;31 consist of:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Bank of America: $7,740 and $2,725 in government
instruments and certificates of deposit, bearing
annual interests at 1.06% and 1.68%, respectively</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">79,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">26,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">HSBC Republic: $13,090, bearing interest at 1.875%,
in a certificate of deposit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">126,495</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Paine Webber Incorporated: $1 and $983 in money
market instruments, bearing interest at a variable rate
and 2.23% per annum, respectively</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Banamex: Ps. 30,475 in government instruments, bearing
annual interest at 7.05%</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,475</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,089</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">115,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">182,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">NOTE 6 &#151; VALUE-ADDED TAX REFUNDABLE:
</FONT>

<P align="left"><FONT size="2">Value-Added Tax (&#147;VAT&#148;) is levied on goods and services acquired, at a standard
rate of 15%. VAT does not usually represent an additional cost to business
enterprises because the amounts paid will be offset against the VAT liability
of the Company generated on the billing to customers. Because the Company has
paid VAT on investments, costs and expenses incurred, the VAT paid has resulted
in a tax overpayment subject to refund. This tax is being refunded on a
regular basis.
</FONT>

<P align="center"><FONT size="2">F-15</FONT>


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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">NOTE 7 &#151; FREQUENCY RIGHTS:
</FONT>

<P align="left"><FONT size="2">Frequency rights at December&nbsp;31 consist of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="62%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Frequency rights</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">127,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">127,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less &#151; Accumulated amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">( 23,441</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(17,048</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">104,420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">110,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">On October&nbsp;3, 1997, the Mexican federal government granted the Company
concessions to use and exploit different bands of the radio-electric spectrum
and to establish point-to-point and point-to-multi-point microwave links. The
concession became effective February&nbsp;28, 1998, and will run through to the year
2018.
</FONT>

<P align="left"><FONT size="2">For the years ended December&nbsp;31, 2002, 2001 and 2000, the Company recorded for
these rights amortization expense of Ps.6,393, Ps.6,393 and Ps.6,393,
respectively.
</FONT>


<P align="left"><FONT size="2">NOTE 8 &#151; TRANSACTIONS WITH RELATED PARTIES:
</FONT>

<P align="left"><FONT size="2">For the period ended December&nbsp;31, related party expense transactions were as
follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Transactions:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Office and site lease (1)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Compensation in connection with the operation
agreement and other expenses with CT Global
Telecommunications, Inc. (2)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">158</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39,407</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Strategic assistance agreement and other expenses
to Bachow and Associates (3)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Advisory fee and other expenses to certain
shareholders (4)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Travel expenses to BancBoston (5)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Travel expenses to Bank of America (5)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operadora Plusgamma (6)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Management services to Comercializadora
Road el Camino (7)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">529</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">4,549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">8,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">43,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-16</FONT>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">Related party payables, classified within accrued expenses and other accounts
payable, as of December&nbsp;31 consist of:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CT Global Telecommunications, Inc., travel expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Bachow and Associates, travel expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Bank of America, travel expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Advertising and other management services expense to Operadora Plusgamma (7)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">841</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Management services to Comercializadora Road el Camino (7)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">158</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The Company leases a site, which is located within the premises of Radio
Centro Group, which is controlled by the family of one of the
shareholders.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">For the years 2001 and 2000, expenses related to operative consulting
services provided from warrant holders. During 2002, the expense relates
to the refund of travel expenses for board meetings.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">During 2001 and 2000, the Company entered into an agreement in which
Bachow and Associates, a shareholder, provided it with strategic advisory
services. The 2002 activity represents travel expenses.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Services provided during 2001 and 2000 by Bachow and Associates, Bank of
America International Investment Corporation and L.A. Strategic Capital
Partners II LLP, all of which were shareholders.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(5)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Refund of travel expenses to certain shareholders.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(6)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">For the years 2001 and 2000, advertising expense paid to a company owned
by the family of one of the shareholders. For the year 2002, advertising
expense related to an advertising purchase agreement of $3.0&nbsp;million,
celebrated on April 2002, for advertising time that will be received from
Grupo Radio Centro radio network from Operadora Plusgamma. The Aguirre
G&#243;mez family used the $ 3.0&nbsp;million proceeds from this agreement to
purchase Series &#147;A1&#148; stock pursuant to the private equity investment.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(7)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Management services paid to a company owned by one of the shareholders.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-17</FONT>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">NOTE 9 &#151; TELEPHONE NETWORK SYSTEMS AND EQUIPMENT, NET:
</FONT>

<P align="left"><FONT size="2">Telephone network systems and equipment, net at December&nbsp;31 consists of:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Useful life *</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(years)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Office furniture</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">14,602</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">8,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Transportation equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,276</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Engineering equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,889</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Computer equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54,197</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">46,634</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telecommunication network and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,197,671</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">969,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Electronic equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">206,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">215,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Radio equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">250,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">236,882</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Leasehold improvements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">263,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">89,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20</FONT></TD>
    <TD nowrap><FONT size="2">(1)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,472</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,158</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,041,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,616,188</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Construction in progress:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telecommunications</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">73,364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">172,193</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capitalized internal costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">37,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less: Accumulated depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(597,132</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(378,550</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,588,184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,446,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">*</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Useful lives accounted from date of use.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Or life of the lease, whichever is shorter.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">For the years ended December&nbsp;31, 2002, 2001 and 2000, the Company recorded
depreciation and amortization (including leasehold improvements) expense of
Ps.225,145, Ps.196,930 and Ps.148,677, respectively.
</FONT>

<P align="left"><FONT size="2">During 2001, the Company wrote-off Ps.9,103, net of accumulated amortization of
Ps.1,397, in leasehold improvements related to its vacancy of its original
building lease.
</FONT>

<P align="center"><FONT size="2">F-18</FONT>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">NOTE 10 &#151; PREOPERATING EXPENSES:
</FONT>

<P align="left"><FONT size="2">For the years ended December&nbsp;31, 2002, 2001 and 2000, the Company recorded
amortization expense of Ps.31,940, Ps.31,940 and Ps.31,912, respectively.
Accumulated amortization was Ps.116,838 and Ps.84,898 as of December&nbsp;31, 2002
and 2001, respectively.
</FONT>


<P align="left"><FONT size="2">NOTE 11 &#151; INTANGIBLES:
</FONT>

<P align="left"><FONT size="2">Intangibles as of December&nbsp;31 consist of:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Software licenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">99,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">41,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Infrastructure rights</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">237,798</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">126,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Debt issuance costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">217,639</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">223,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">555,203</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">391,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(129,280</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(75,197</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">425,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">316,603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">For the years ended December&nbsp;31, 2002, 2001 and 2000, the Company recorded
amortization expense of Ps. 54,086, Ps.48,543 and Ps.34,847 , respectively.
This included Ps. 19,897, Ps.6,761 and Ps.3,222 of software amortization
expense, respectively.
</FONT>


<P align="left"><FONT size="2">NOTE 12 &#151; LONG-TERM DEBT:
</FONT>

<P align="left"><FONT size="2">Long-term debt as of December&nbsp;31 consists of:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">$11,590 (2) ($275,000 in 2001) 13.75% Old Senior Notes
due April, 2007 (1)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">119,522</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">2,657,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">$167,624 New Senior Notes bear 0% interest through
March, 2006, and 10% annual interest in the last year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,728,618</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less &#151; Discount (net of accumulated amortization) (2)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,672</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(78,534</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,845,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">2,578,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">On March&nbsp;17, 2000, Maxcom issued $300&nbsp;million Senior Notes, maturing on
April&nbsp;1, 2007. These notes accrued interest at the rate of 13.75% per
annum (14.46% including the withholding tax effect according to prevailing
tax regulations in the years 2002 and 2001) and are payable semiannually
in arrears on April 1 and October&nbsp;1, commencing on October&nbsp;1, 2000.
During May and June of 2001, the Company spent</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-19</FONT>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">U.S.$10&nbsp;million for the repurchase in the open market of U.S.$25&nbsp;million
of notes. As a result, the Company recognized a pre-tax gain of
Ps.128,161.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">On April&nbsp;29, 2002, the Company consummated the exchange offer for its
13 3/4 % Series&nbsp;B Senior Notes due 2007. Holders tendered an aggregate
of U.S. $259,410 in principal amount of Series&nbsp;B Senior Notes,
representing 94.3% of all such notes outstanding. These holders received
in exchange an aggregate of $165,078 in principal amount of New Senior
Notes due March&nbsp;1, 2007, bearing 0% interest through March&nbsp;1, 2006, and
10% annual interest in the last year. Tendering holders also received an
aggregate of 26,459,820 Series &#147;N2&#148; convertible preferred stock, with an
initial liquidation preference of $0.4927 per share and limited voting
rights, in the form of Mexican Trust Certificates known as &#147;CPOs&#148;.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">Additionally, on July&nbsp;25 2002, the Company completed an additional exchange of
U.S $4,000 in aggregate principal of 13 3/4 % Series&nbsp;B Senior Notes due 2007
with the same terms and conditions of the exchange offer consummated on April
29, 2003.. These holders received in exchange an aggregate of $2,545 in
principal amount of New Senior Notes due March&nbsp;1, 2007. Tendering holders also
received an aggregate of 408,000 Series &#147;N2&#148; convertible preferred shares, with
an initial liquidation preference of $0.4927 per share and limited voting
rights, in the form of CPOs.
</FONT>

<P align="left"><FONT size="2">Series&nbsp;B Senior Notes in an aggregate principal amount of $11,590 remain
outstanding at December&nbsp;31, 2002.
</FONT>

<P align="left"><FONT size="2">The main characteristics of New Senior Notes due March&nbsp;1, 2007 are as follows:
a) unsecured senior obligations of the Company; b) pari passu in right of
payment to all existing and future senior indebtedness of the Company; c)
senior in right of payment to any future subordinated obligations of the
Company; d) subject to registration with the Securities and Exchange Commission
(&#147;SEC&#148;), pursuant to a Registration Rights Agreement; and e) unconditionally
guaranteed by Corporativo and MSA.
</FONT>

<P align="left"><FONT size="2">Restricted Cash:
</FONT>

<P align="left"><FONT size="2">In regards to Series&nbsp;B Senior Notes the first four semiannual scheduled
interest payments were secured pursuant to a Pledge and Escrow Agreement in a
trust, through a deposit of Ps.769,937 ($77.9&nbsp;million). The trust was
invested in a portfolio of U.S. government securities. As of December&nbsp;31,
2001, this fund amounted to approximately Ps.197&nbsp;million ($20&nbsp;million), which
was presented as restricted cash. After the mentioned payments, the remaining
balance of the fund was released from the pledge due to the lapse of time The
exchange offer of April&nbsp;29, 2003 of New Senior Notes did not have such
restricted cash requirement.
</FONT>

<P align="left"><FONT size="2">The indenture contains restrictive covenants including: limitations on
indebtedness; limitations on investments, the redemption of capital stock,
prepayment of subordinated obligations, and granting of loans; restrictions on
distributions from restricted subsidiaries; limitations on sales of assets and
subsidiary stock; limitation on affiliate transactions; limitation of sale or
issuance of capital stock of restricted subsidiaries;
limitations on liens; limitation on sale/leaseback transactions; and
restrictions on mergers and consolidations, among other items. If an event of
default occurs and is continuing, the trustee or the holders of 25% in
principal amount of the outstanding notes may declare the principal and any
accrued, but unpaid, interest on all the notes to be due and payable.
</FONT>

<P align="left"><FONT size="2">As of December&nbsp;31, 2002, the Company had complied with all of the related
covenants.
</FONT>


<P align="left"><FONT size="2">NOTE 13 &#151; EMPLOYEES BENEFITS:
</FONT>

<P align="left"><FONT size="2">As of December&nbsp;31, 2002 and 2001, the Company had the following labor
obligations:
</FONT>

<P align="center"><FONT size="2">F-20</FONT>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">a.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Indemnities to employees -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Employees who are dismissed without cause are entitled to severance
compensation determined in accordance with the provisions of Mexican
Federal Labor Law.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">b.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Seniority premiums -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In the event of dismissal without cause, retirement after 15&nbsp;years of
service or death, employees are entitled to a seniority premium
determined in accordance with the provisions of Mexican Federal Labor
Law.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">As of December&nbsp;31, 2002 and 2001, these items were not significant
because the seniority of the vast majority of the Company&#146;s employees was
less than two years.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">NOTE 14 &#151; NONRECURRING CHARGES:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Nonrecurring charges at December&nbsp;31 consist of:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="68%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002 (4)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventory reserve (1)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">6,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Maintenance contract (1)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lease penalty reserve (2)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,115</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Installation expense write-off (3)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fixed asset write-off (1)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">65,761</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Certain assets were written off due to its technical obsolescence. The
cost of an overdue maintenance contract which was no longer useful was
also written off during the period.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The Company maintains an operating lease on its headquarters. During
2001, the Company vacated a portion of such leased building and moved its
headquarters to a new building. However, the previous lease has a term of
15&nbsp;years, which commenced on October&nbsp;1, 1998. The Company is looking for
a sublessee to take over the commitment. In the meantime, the Company
continues to make payments for the whole of this previous lease. The
Company is liable for a penalty fee for early termination, the amount of
which is dependent on the length of time it has actually been leasing the
building.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Installation costs that were originally capitalized were reversed to the
extent they related to customers who are no longer part of the Company&#146;s
customer base</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In 2002 the Company accrued nonrecurring charges as described in Note
2.c, which qualified as an administrative expense.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">NOTE 15 &#151; CAPITAL STOCK:
</FONT>

<P align="left"><FONT size="2">Under Mexican Federal Telecommunications Law and Foreign Investment Law, no
more than 49% of the full voting capital stock of a Mexican corporation holding
a concession to provide local and long-distance telecommunication services may
be held by foreigners.
</FONT>

<P align="left"><FONT size="2">On April&nbsp;11, 2002 the Company obtained an authorization from the Mexican
Foreign Investment Bureau (Direcci&#243;n General de Inversi&#243;n Extranjera) to
increase its ability to issue limited voting shares up to 95% of its total
capital stock and to simplify its equity structure.
</FONT>

<P align="center"><FONT size="2">F-21</FONT>


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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">Under the capital restructuring effective on April&nbsp;29, 2002 (See Note 12),
tendering holders received an aggregate of 26,459,820 Series &#147;N2&#148; convertible
preferred shares, with an initial liquidation preference of $0.4927 per share
and limited voting rights, in the form of CPOs. Private equity investees paid
US $59,340 and received 6,088,896 and 5,848,209 shares of Series &#147;A1&#148; and &#147;B1&#148;, respectively, common voting stock with preferred liquidation rights and
122,468,441 Series &#147;N1&#148; preferred shares with limited voting rights. In
addition, options to purchase an additional 33.2&nbsp;million Series &#147;N&#148; shares were granted. Additionally, the Series &#147;C&#148; shares were converted at an exchange
ratio of one to one into Series &#147;N&#147;shares. As a result, the holders of the
CPO&#146;s have become the direct holders of two Series &#147;N&#148; shares for each CPO.
Additionally, on July&nbsp;25 2002, the Company announced a complement of the
restructuring debt issuing an aggregate of 408,000 Series &#147;N2&#148; convertible
preferred shares, with an initial liquidation preference of $0.4927 per share
and limited voting rights in the form of CPOs.
</FONT>

<P align="left"><FONT size="2">In connection with the capital restructuring mentioned, the Company issued four new classes of shares: the Series &#147;A1&#148;, &#147;B1&#148;, &#147;N1&#148;, and &#147;N2&#148; preferred shares. The Series &#147;A1&#148; and &#147;B1&#148; preferred shares have full voting rights, and the
Series &#147;N1&#148; and &#147;N2&#148; preferred shares have limited voting rights. The Series &#147;N1&#148; and &#147;N2&#148; preferred shares are not computed for purposes of determining the foreign investment percentage under the Mexican Foreign Investment Law and may be subscribed, paid for, and held by Mexican and non-Mexican investors. Series
&#147;N2&#148; preferred shares have been deposited into the CPO trust, which is
administered by Banco Nacional de M&#233;xico, S.A. de C.V.
</FONT>

<P align="left"><FONT size="2">In November, 2002, as previously approved by the Shareholders&#146; Meeting held on March&nbsp;5, 2002, the Company issued 356,433 Series &#147;N&#148;, Class&nbsp;II, non par value, limited voting rights, shares of the capital stock of the Company in connection with the exercise of certain signing bonuses granted to several officers of the Company as stock options during 2001 and 2002. Additionally, the Company authorized to grant a special retention bonus to its officers in connection
with the consummation of the Exchange Offer and Consent Solicitation, in the
form of cash and options to purchase an aggregate amount of 462,936 Series
&#147;N&#148;, Class&nbsp;II, non par value, limited voting rights shares at a strike price per share of U.S.$0.4927. The executive officers used the cash to exercise the
options at the time of granting.
</FONT>

<P align="left"><FONT size="2">As of December&nbsp;31, 2001 the capital stock was represented by registered shares with no par value, which are divided into Series &#147;A&#148;, &#147;B&#148; and &#147;C&#148; common shares and Series &#147;N&#148; limited-voting shares. Series &#147;A&#148; shares may only be subscribed
to, acquired or owned by Mexicans, Series &#147;B&#148; shares may be freely subscribed
to and Series &#147;C&#148; shares can only be subscribed to, acquired, or owned by the
agent acting as trustee of a Neutral Investment Trust. Series &#147;N&#148; shares,
which may also be freely subscribed to, are limited-voting shares. Series &#147;C&#148;
and &#147;N&#148; shares are deposited in the Neutral Investment Trust, which in turn
issues CPOs. Series &#147;C&#148; and &#147;N&#148; shares may not be computed for purposes of determining the foreign-investment percentage under the terms of the Foreign
Investment Law. In compliance with a ruling of the Mexican Foreign Investment
Authorities, in accordance with the Foreign Investment Law and the Company
bylaws, Series &#147;B&#148; shares may not represent more than 49% of the voting right
shares; Series &#147;C&#148; shares may not represent more than 44.5% of the Company&#146;s total outstanding capital stock; and Series &#147;N&#148; shares may not represent more than 44.5% of the Company&#146;s total outstanding capital stock.
</FONT>

<P align="left"><FONT size="2">The Extraordinary Shareholders&#146; Meeting, held on February&nbsp;21, 2000, resolved to modify the equity structure of the Company by converting 50% of Series &#147;N&#148; shares into new shares of Series &#147;C&#148; shares, at a rate of 1:1. The new Series &#147;C&#148; shares have full voting and economic rights. They can only be subscribed by the agent acting as trustee of a Neutral Investment Trust incorporated in accordance with Mexican Foreign Investment Law. The trust in turn issues CPOs. Statutorily, the Trustee must vote the Series &#147;C&#148; shares in the same manner as the majority of the Series &#147;A&#148; shares are voted. The corporate governance of the Company was not affected. The same Shareholders&#146; Meeting also approved the conversion of 255,000 Series &#147;A&#148; shares into 127,500 Series &#147;C&#148; shares and 127,500 Series &#147;N&#148; shares and the conversion of 245,000 Series &#147;B&#148; shares into 122,500 Series &#147;C&#148; shares and 122,500 Series &#147;N&#148; shares.
</FONT>

<P align="left"><FONT size="2">The Extraordinary Shareholders&#146; Meetings, held on June 5 and September&nbsp;29,
2000, resolved the following:
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">1.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">To increase the capital stock in an amount of $35&nbsp;million by issuing 3,355,446 shares, of which 1,677,723 were Series &#147;C&#148; shares and 1,677,723 were Series &#147;N&#148; shares. The shareholders paid $10.44 for each share or its equivalent in Mexican pesos at the exchange rate published in the
Official Gazette on the day of the payment.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-22</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">2.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">To cancel 4,660,000 Series &#147;N&#148; shares which had previously been authorized by the Company to fulfill commitments of the Company in
accordance with several stock options and warrants agreements (see Note
21).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">3.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">To issue 1,679,866 nominative Series &#147;C&#148;  shares and 1,679,866 Series &#147;N&#148; shares to be held authorized but not outstanding to fulfill the commitments derived from the stock options and warrant agreement (see Note
21).</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">As of December&nbsp;31, the Company&#146;s outstanding shares were:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital stock:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series &#147;A&#148;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,276,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,276,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,276,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series &#147;A1&#148;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,088,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series &#147;B&#148;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,226,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,226,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,226,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series &#147;B1&#148;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,848,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series &#147;C&#148;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,622,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,622,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series &#147;N&#148;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,065,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,622,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,622,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series &#147;N1&#148;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">122,468,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series &#147;N2&#148;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,867,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total issued and outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">175,841,179</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,748,445</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,748,445</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Authorized and not outstanding:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series &#147;C&#148;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,679,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,679,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Series &#147;N&#148;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">38,001,255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,679,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,679,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total authorized</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">213,842,434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,108,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,108,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">As of December&nbsp;31, 2002, the total outstanding shares, 765,714 Series &#147;A&#148; shares and 763,113 Series &#147;B&#148; shares represent the minimum fixed portion, with no withdrawal rights, of Maxcom&#146;s capital stock, while the remaining &#147;A&#148;, &#147;A1&#148;, &#147;B&#148;, &#147;B1&#148;,
&#147;N&#148;, &#147;N1&#148; and &#147;N2&#148; Series shares represent the variable portion of the capital stock.
</FONT>

<P align="left"><FONT size="2">Under the May 1998 Securityholders Agreement, as amended and restated on August
18, 2000, if the Company registers any equity securities for a primary or
secondary public offering prior to May&nbsp;21, 2002, it must permit parties to the
Securityholders Agreement to include their shares in such an offering. The
Company will bear all expenses of any primary or secondary public offering,
other than the fees of counsel to the holders of the registration rights and
any underwriting commission or discounts. If the Company does not register the
equity securities in a primary or secondary public offering prior to May&nbsp;21,
2005, the Series &#147;N&#148; shareholders will have the right to retain an investment
banker to: (a)&nbsp;sell substantially all of the assets of the Company; (b)&nbsp;merge
or consolidate into another company, or (c)&nbsp;require parties to the Shareholders
Agreement to sell their shares and distribute the proceeds to the shareholders.
These righs were eliminated from the new Amended and Restated Securityholders
Agreement executed on April&nbsp;29, 2002. However, certain shareholders of the
Company maintain the right to request the Company, from time to time, to make
the Company to register its securities in order to have a public offering. As
of December&nbsp;31, the Company&#146;s capital stock consists of:
</FONT>

<P align="center"><FONT size="2">F-23</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="68%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,685,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">979,755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restatement for effects of inflation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">51,983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total capital stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,685,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,031,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">On December&nbsp;31, 2002 based on the Mexican Corporate Law (Ley General de
Sociedades Mercantiles) Article&nbsp;19, the Company compensates its restated
additional paid in capital and the effects of inflation in capital stock by
Ps.857,502 and Ps.131,428, respectively, against Ps.988,930 of accumulated
losses.
</FONT>

<P align="left"><FONT size="2">On October&nbsp;16, 2001 Shareholders&#146; Meeting, the capital stock was reduced to
absorb the accumulated losses of Ps.268,539. In 2002 the Company absorb
accumulatd losses for Ps.131,428.
</FONT>


<P align="left"><FONT size="2">NOTE 16 &#151; ACCUMULATED DEFICIT:
</FONT>

<P align="left"><FONT size="2">Dividends, either in cash or other forms, paid by the Company will be subject
to income tax in accordance with the Mexican Income Tax Law if the dividends
are paid from earnings that have not been subject to Mexican income taxes
computed on an individual company basis under the provisions of the Mexican
Income Tax Law, as follows:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">-</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Dividends paid to companies, resident in Mexico, will be subject to a
35% income tax to be paid by the companies paying the dividend and
applied to the result of multiplying the dividends paid by a factor of
1.5385.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">-</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Dividends paid to individuals or foreign residents will be subject to
a withholding tax of 5% applied to the result of multiplying the
dividends paid by a factor of 1.5385 (1.5150 if dividends are paid to
Mexican individuals from earnings that have been subject to Mexican
income taxes).</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">The Company has never generated distributable profits. Any dividends declared will be paid in Mexican pesos.
</FONT>


<P align="left"><FONT size="2">NOTE 17 &#151; POSITION IN FOREIGN CURRENCY:
</FONT>

<P align="left"><FONT size="2">As of December&nbsp;31, the Company&#146;s foreign-currency position is shown as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="68%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">U.S. dollars:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">10,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">47,290</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(187,640</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(317,977</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net liabilities in U.S. dollars</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(177,396</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(270,687</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exchange rate at end of the year (Ps. per U.S.$1.00)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">10.43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">9.1423</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The Company currently does not hedge any of its foreign-denominated assets or
liabilities.
</FONT>

<P align="center"><FONT size="2">F-24</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">NOTE 18 &#151; INCOME TAX, ASSET TAX AND TAX-LOSS CARRYFORWARDS:
</FONT>

<P align="left"><FONT size="2">The Company has had tax losses since inception and accordingly has not been
subject to current income taxes or provided for deferred income taxes. The
difference between taxable income for income tax and pre-tax income for
accounting purposes is due principally to the inflation adjustments recognized
for income tax purposes, translation effects due to the re-measurement into
dollars, the difference between book and tax depreciation and amortization, and
temporary differences for certain items that are reported in different periods
for financial reporting and income tax purposes.
</FONT>

<P align="left"><FONT size="2">Asset tax is calculated at a 1.8% rate on the net value of certain assets and
liabilities and is due only when the asset tax exceeds the income tax amount
payable. The asset tax paid can be recovered over the following 10&nbsp;years, if
and when income taxes exceed asset tax during such year. The Mexican tax
government waives this tax for the first two years of a company&#146;s operations.
</FONT>

<P align="left"><FONT size="2">The components of deferred income tax assets (liabilities)&nbsp;at December&nbsp;31 are
as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="68%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CURRENT:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Bad debt allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">10,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">6,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventory</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,508</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;&nbsp;(10,548</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;&nbsp;(12,109</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,345</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7,701</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7,000</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NON-CURRENT:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telephone network equipment and leasehold
improvements, frequency rights, intangible
assets and preoperating expenses, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(320,771</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(278,843</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asset tax payments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,587</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tax loss carryforwards</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">803,746</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">666,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total non-current</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">489,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">396,895</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net deferred income tax assets before valuation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">481,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">389,895</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(481,861</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(389,895</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net deferred income tax assets (liabilities)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">In accordance with Mexican Income Tax Law, tax losses are subject to
restatement by inflation and may be carried forward against future taxable
profit of the subsequent ten years. As of December&nbsp;31, 2002, the Company&#146;s
restated cumulative tax losses were:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fiscal</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Expiration</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>year incurred</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Amount</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>year</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">6,958</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">159,619</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2008</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">405,704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">544,545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">754,908</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">1,896,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-25</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">For the year ended December&nbsp;31, 2002 the Company incurred a tax loss of Ps.667,484.
</FONT>


<P align="left"><FONT size="2">NOTE 19 &#151; COMMITMENTS AND CONTINGENCIES:
</FONT>

<P align="left"><FONT size="2">At December&nbsp;31, 2002, the Company had the following commitments:
</FONT>

<P align="left"><FONT size="2">The Company maintains operating leases on buildings, sites, poles and office
equipment. The Company recorded leasing expense of Ps.65,516, Ps.67,176 and
Ps.30,406 in 2002, 2001 and 2000. One of the Company&#146;s building lease
agreements has an escalation clause for inflation. The monthly payment of
Ps.1,087 is to be multiplied by the NCPI for the respective year for the
remaining 15&nbsp;year term. The schedule of estimated future minimum lease
payments is as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="82%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">18,912</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,099</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2006</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2007 and thereafter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">89,289</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The Company entered into a new 5-year renewable building lease on July&nbsp;26,
2001, which is denominated in U.S. dollars. The schedule of future minimum
lease payments on said lease is as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="82%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,811</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2006</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2007 and thereafter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">501</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">11,315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Contingency regarding Concessions:
</FONT>

<P align="left"><FONT size="2">The terms of the concessions requires that the Company must satisfy a number of
technical, buildout and financial conditions. In September 2002, the Company
notified COFETEL of the failure to provide coverage in certain towns and cities
by the local and long distance concessions. In addition, it is considered that
the Company will not be able to meet certain buildout obligations in certain
towns and cities along the Mexico City&#151;City of Quer&#233;taro corridor by September
2003. The Company is in the process of preparing a request for a modification
to the buildout requirements of the concessions from COFETEL. If granted, this
modification would allow the Company to be once again in compliance. However,
we cannot assure that COFETEL will agree to such modification.
</FONT>

<P align="left"><FONT size="2">A failure to comply with any of the terms of the concessions or to obtain a
waiver or extension could result in the early termination of any of the
concessions. The Mexican government would not be required to compensate the
Company in case of such termination. If any of the concessions were to be
terminated, we could be unable to engage in our core business.
</FONT>

<P align="center"><FONT size="2">F-26</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">NOTE 20 &#151; REVENUE BY GEOGRAPHICAL LOCATION:
</FONT>

<P align="left"><FONT size="2">The Company&#146;s concession title requires a revenue report by geographic
location:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Center-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Services</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Metropolitan</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>South</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Year ended December&nbsp;31, 2002:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Local</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">275,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">174,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">450,011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long distance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">34,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">67,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Rent of dedicated links</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,426</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sales of customer premise equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,929</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lease of capacity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,835</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">322,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">213,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">535,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Center-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Services</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Metropolitan</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>South</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Year ended December&nbsp;31, 2001:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Local</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">194,076</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">81,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">275,167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long distance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Rent of dedicated links</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sales of customer premise equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,804</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lease of capacity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">232,072</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">100,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">332,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Center-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Services</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Metropolitan</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>South</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Year ended December&nbsp;31, 2000:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Local</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">164,653</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">32,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">196,724</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long distance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">83,139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,254</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">88,393</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Rent of dedicated links</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sales of customer premise equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,520</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lease of capacity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">522</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">522</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,020</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">253,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">39,807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">293,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">NOTE 21 &#150; STOCK OPTIONS:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">a.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Employee stock option plans</FONT></TD>
</TR>
</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">i.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Executive stock option plan -</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">In May 1998, the Company implemented an executive stock option plan. This plan provides that the Company grant options, on every April
1, commencing in 1999 through April 2001, to its executive officers.
Under this plan, a technical committee determines the executive
officers to whom options to purchase Series &#147;N&#148; shares are granted,
as well as the terms of those options.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Generally, options are awarded once certain criteria have been met
and vest either immediately or over four years (20% upon grant and
20% each year thereafter). In the event the employee ceases</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-27</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">to be employed by the Company, all unvested options are forfeited.
Options expire ten years from the date of grant.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">The Company granted 142,250, 583,000 and 206,820 options in 1999,
2000 and 2001, respectively for the services rendered during the
years 1998, 1999 and 2000. Options granted had exercise prices of
U.S.$8.70, U.S.$10.45 and U.S.$12.55, respectively, which were the
then estimated fair market values. Of these options, 256,094 had
vested and 221,622 had been forfeited at December&nbsp;31, 2002.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">ii</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">New executive stock option plan</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">The company implemented a new executive stock plan, covering services rendered during the years 2001, 2002 and 2003. The plan is
divided into four levels, depending on the ranking of the different
members of management. There were initially 80 participants in the
plan. Participants in the top three levels are guaranteed a minimum
number of options for series N stock. The granting of options for
the fourth level, which is comprised of the junior most management,
is discretionary.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">The number of options granted depends on certain revenue and operating cash flow targets. There is a bonus portion of the plan
that is allocated to individual executives at the discretion of
management and the board of Directors. Vesting is 20% upon
allocation and 20% per year for the next four years. Options were
granted during the second quarter of 2002, and will be granted
during the second quarter of 2003 and 2004 at exercise prices of
U.S. $0.4927, U.S.$0.59.12 and U.S.$0.7094 respectively. Options
expire ten years from the date of grant.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">On April&nbsp;1, 2002, the Company granted 1,571,388 options at $0.4927
per share.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">iii.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Board of Directors and members of various committees</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Members of the Board and of the various committees of the company are entitled to receive an option to purchase 2,500 series N shares
at an exercise price of $0.01 per share, each time the member
attends meeting. The Chairman of the Board is entitled to receive
5,000 shares each time (s)he attends a meeting. There are 422,503
options granted and outstanding for meetings attended during 2001,
2002 and 2003. The options are immediately vested and
non-forfeitable, expiring in 3&nbsp;years after the date of grant.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">iv.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Signing and other bonuses</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">The Company has granted to its top officers a signing bonus in the form of options to purchase series N shares at an exercise price of
$0.01 per share. On November 2002, the executives decided to
exercise 356,433 of these options.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">In November 2002, the Company granted some of its officers a special bonus in the form of options to purchase 462,936 series N shares at
an strike price of U.S.$0.4927 per share. The executives decided to
exercise these options at the time of granting.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Pursuant to APB Opinion No.&nbsp;25, compensation expense is determined based on the market or fair-value price of the stock at the
measurement date less the amount, if any, that the employee is
required to pay for the stock.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">In connection with the all of the above described plans, the Company recognized compensation expense of Ps. 13,125; Ps.1,391 and Ps.720
during 2002, 2001 and 2000 under Mexican GAAP.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Pursuant to the additional disclosure requirements of FAS 123, the fair value of options and warrants granted to directors and officers
were calculated on the respective grant dates using the Black
Scholes model with the following assumptions:</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2"><P align="center"><FONT size="2">&nbsp;</FONT>
</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">F-28</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Fiscal Year Ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expected dividend yield</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expected stock price volatility</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Risk-free interest rate</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.55</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.67</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.35</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expected life of options</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">If the Company had elected to recognize compensation cost based on the fair
value at the date of grant, consistent with the method as prescribed by FAS
123, net loss for the years ended December&nbsp;31 would have changed to the pro
forma amounts indicated below:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">As reported</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(732,703</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(690,337</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(658,827</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pro forma</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(751,226</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(689,645</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(661,262</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EPS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">As reported</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(0.06</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">Ps.</FONT></TD>
    <TD align="right"><FONT size="2">(50.21</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(57.47</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pro forma</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.06</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(50.177</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(56.14</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">A summary of the changes of the stock options for employees for the year ended
December&nbsp;31, is presented below (in thousands of shares):
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>average</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>exercise</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>exercise</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>exercise</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Outstanding at beginning of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">10.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">8.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Granted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,832</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1008</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">13.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exercised</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Forfeited</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Outstanding at the end of the year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options exercisable at end of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted-average fair value of options
granted during the year (expressed in
U.S. Dollars)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-29</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">The following table summarizes the stock options outstanding for employees (in thousands of shares):
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Outstanding</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Exercisable</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Weighted-average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>average</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Range of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Remaining</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercise</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>exercise</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Prices</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>life</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December&nbsp;31, 2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD nowrap align="right"><FONT size="2">8.70-10.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">10.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9.88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December&nbsp;31, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">8.7-10.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">12.55-15.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">921</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December&nbsp;31, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,380</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">8.67</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,380</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,697</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">190</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">179</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">b.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Warrants for services rendered</FONT></TD>
</TR>
</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">i.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Nissho Iwai American Corp. stock options:</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">On March&nbsp;24, 1998, the Company granted options to Nissho Iwai for 337,471 Series &#147;N&#148; shares at fixed exercise prices per share of
$10.87, vesting immediately and expiring March 2005. These options
were issued in connection with a financing agreement and their cost
was to be amortized over the 7-year life of the financing. However
since the financing agreement terminated in March of 2000, the
remaining unamortized balance was expensed in 2000.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">ii.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">CT Global Telecommunications, Inc. (&#147;CTGT&#148;) stock options:</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">On May&nbsp;21, 1988, the Company granted options to CTGT for up to 250,000 Series&nbsp;N shares at an exercise price of $8.70. In return,
CTGT agreed to manage the construction of the Company&#146;s telephone
network, provide engineering services, and run their day-to-day
telephone operations. These services were all completed and the
compensation charges expensed in prior years. The options expire 2
years after CTGT disposes of their equity participation in Maxcom.
The right to these options is based on certain performance
criteria. The cost of the options was valued using the Black
Scholes model and was expensed as the options were earned</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Pursuant to the capital restructuring in April 2002, the Company authorized the issuance of options to purchase up to an additional
855,779 series N shares at an exercise price of U.S.$3.06 per share
and to reduce the exercise price of the original options to
U.S.$3.06 per share as partial anti-dilution protection. All this
options are vested and are exercisable.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">iii.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Bachow and Associates (&#147;Bachow&#148;) stock options:</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">On May&nbsp;21, 1998, Bachow was given the opportunity to earn up to 100,000 series N shares at an exercise price of $8.70 expiring two
years after Bachow Investment Partners III L.P. disposes of its
current equity participation in Maxcom. Bachow&#146;s right to exercise
the options was subject to performance objectives. As of December
31, 2000, Bachow had accomplished all objectives, which gave it the
right to exercise the total of the options (30,000 in 1998 and
70,000 in 2000).</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-30</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">The cost of these options was expensed as granted. The shares subject to this options agreement are limited to a maximum gain of
$40.00 per share. Bachow may elect to have the Company finance up
to 95% of the exercise price with a 7-year term non-recourse loan
that will be secured by the shares upon exercise. Bachow will pay
the Company 5% of the $870 cost. During 1999 and 2000, Bachow
advanced the $44 towards the exercise of its options and such
amount is reflected in additional paid-in capital.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Pursuant to the capital restructuring of the company consummated during April 2002, the company authorized the issuance of options
to purchase additional 342,312 series N shares at an exercise price
of U.S.$3.06 per share and reduced the original strike price of the
100,000 options to U.S. $3.06 per share, as partial anti-dilution
protection.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">In addition, on April&nbsp;28, 2000, the Company issued options to purchase 94,000 shares at an exercise price of $0.01 for management
services rendered from Bachow, L.A. Strategic Partners II LLP and
BancAmerica International Investment Corporation. The cost of
these options was also expensed as incurred.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Pursuant to the capital restructuring, the Company authorized the issuance of options to purchase up to an additional 342,312 series
N shares at an exercise price of U.S.$3.06 per share and to reduce
the exercise price of the original options to U.S.$3.06 per share
as partial anti-dilution protection.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">iv.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Warrants in connection with the offering of the Notes:</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">The Company granted the bondholders, initial purchasers and underwriters of the Senior Notes up to 876,491 warrants to purchase
an equivalent amount of Series &#147;N&#148; shares at an exercise price of
$0.01 per share (or $0.02 per CPO). The cost of these warrants was
valued at approximately $9.3&nbsp;million. The fair value of the
warrants was compared to the fair value of the Notes to calculate
the proportionate discount to the Notes. This discount is being
amortized as additional interest expense over the life of the
Senior Notes.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">All options in connection with these warrants vest immediately and
7&nbsp;years from the date of grant.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">v.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">Amsterdam Pacific</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">On May&nbsp;21, 1998, the Company granted options to Amsterdam for
advisory services rendered for up to 24,425 Series&nbsp;N shares at an
exercise price of $8.70, expiring May&nbsp;21, 2003. These services
were all completed and the compensation charges expensed in prior
years.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">vi</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">BankAmerica International Investment Corporation</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">The Company issued options to purchase up to 42,300 series N shares at U.S.$0.01 per share in May 2001 as compensation for management
services provided during 2000. These services were all provided and
the compensation charge expensed. Pursuant to the capital
restructuring, the Company authorized the issuance of options to
purchase up to an additional 207,481 series N shares at an exercise
price of U.S.$0.01 per share as partial anti-dilution protection.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">vii</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">LA Strategic Capital Partners II</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="91%"><FONT size="2">The Company issued options to purchase up to 4,700 series N shares at U.S.$0.01 per share in May 2001 as compensation for management
services provided during 2000. These services were all provided and
the compensation charge expensed. Pursuant to the capital
restructuring, the Company authorized the issuance of options to
purchase up to an additional 23,053 series N shares at an exercise
price of U.S.$0.01 per share as partial anti-dilution protection.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-31</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">viii</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Bachow &#038; Associates, Inc.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Company issued options to purchase up to 47,000 series N shares
at U.S.$0.01 per share in May 2001 as compensation for management
services provided during 2000. These services were all provided and
the compensation charge expensed. Pursuant to the capital
restructuring, the Company authorized the issuance of options to
purchase up to an additional 230,535 series N shares at an exercise
price of U.S.$0.01 per share as partial anti-dilution protection.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The fair value of options for services rendered was determined
using the Black Scholes options pricing model and resulted in a
non-cash charge of approximately Ps.1,681, Ps.1,541 and Ps.4,813,
which was recognized as expense during the years ended December&nbsp;31,
2002, 2001 and 2000.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">A summary of the changes of the stock options for non-employees for
the years ended December&nbsp;31 is presented below (in thousands of
shares):</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>average</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>exercise</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>exercise</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>exercise</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Outstanding at beginning of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3.83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3.83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">464</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">10.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Granted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,188</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exercised</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Forfeited</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Outstanding at the end of the year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options exercisable at end of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted-average fair value of options
granted during the year (expressed in
U.S. Dollars)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">8.79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The following table summarizes the stock options outstanding for non-employees (in thousands):
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="17%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Outstanding</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Exercisable</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Weighted-average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>average</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Range of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Remaining</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercise</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>exercise</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Prices</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>life</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December&nbsp;31, 2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.70 &#150; 10.87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December&nbsp;31, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.70 &#150; 10.87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December&nbsp;31, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">NOTE 22 &#151; SIGNIFICANT DIFFERENCES BETWEEN MEXICAN AND U.S. GAAP:
</FONT>

<P align="left"><FONT size="2">The Company&#146;s consolidated financial statements are prepared in accordance with
Mexican GAAP, which differ in certain significant respects from accounting
principles generally accepted in the United States of America (&#147;U.S. GAAP&#148;).
The Mexican GAAP consolidated financial statements include the effects of
inflation as provided for under Statement B-10, issued by the MIPA. The
application of this Statement represents a comprehensive measure
</FONT>
<P align="center"><FONT size="2">F-32</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="left"><FONT size="2">of the effects of price level changes in the Mexican economy, and is considered
to result in a more meaningful presentation than historical cost-based
financial reporting for both Mexican and U.S. accounting purposes. Therefore,
the following reconciliation to U.S. GAAP does not include the reversal of such
inflationary effects.
</FONT>

<P align="left"><FONT size="2">The principal differences between Mexican GAAP and U.S. GAAP other than
inflation accounting, are presented in the following pages with an explanation,
where appropriate, of the effects on consolidated net income and consolidated
shareholders&#146; equity. Reconciling items are presented net of any gain or loss
from monetary position.
</FONT>

<P align="left"><FONT size="2">The following is a summary of the adjustments to consolidated net loss and
consolidated shareholders&#146; equity as of and for the years ended December&nbsp;31,
2000, 2001 and 2002:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="23"><FONT size="1"><B>Years ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="23"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss under Mexican GAAP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">658,830</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">690,340</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">732,703</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pre-operating expenses (Note 22a)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,820</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of pre-operating expenses
(Note 22a)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,912</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capitalization of interest (Note 22b)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(96</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(196</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of capitalized interest
(Note 22b)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,287</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,131</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of frequency rights
(Note 22c)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">426</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">426</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Installation revenues (Note 22d)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,726</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,212</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Installation costs (Note 22e)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(17,805</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(75,170</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Debt restructuring (Note22g)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">436,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capitalized internal compensation
Cost (Note 22h)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,342</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total U.S. GAAP adjustments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43,735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">383,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss under U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">615,095</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">687,760</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">348,704</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted-average common shares
outstanding, basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,463,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,748,445</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">134,738,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted-average common shares
outstanding, diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,207,113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,176,173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">136,597,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss per share under U.S. GAAP, basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">53.66</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50.02</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.59</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss per share under U.S. GAAP, diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50.39</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45.32</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.55</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-33</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>BALANCES AS OF DECEMBER 31,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity (deficit)&nbsp;under Mexican</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">GAAP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">487,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">201,894</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">600,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated adjustments:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pre-operating expenses (Note 22a)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(319,397</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(319,397</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(321,217</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of pre-operating expenses
(Note 22a)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">52,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">84,897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">116,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capitalization of interest (Note 22b)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61,283</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61,087</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of capitalized interest (Note 22b)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,752</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,882</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,669</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of frequency rights (Note 22c)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,374</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10,948</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10,522</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Installation revenues (Note 22d)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,726</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10,938</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Installation costs (Note 22e)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(17,805</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(92,975</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Debt restructuring (Note 22g)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(327,475</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capitalized internal compensation (Note 22h)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,342</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total U.S. GAAP adjustments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">226,159</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">223,579</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">603,214</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity (deficit)&nbsp;under U.S.
GAAP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">261,318</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">425,473</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,771</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Provided below is an analysis of changes in shareholders&#146; equity (deficit)&nbsp;under U.S. GAAP:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="23"><FONT size="1"><B>Year ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="23"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at the beginning of the year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">398,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">261,318</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">425,473</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss under U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(615,095</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(687,760</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(348,704</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in capital stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">370,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">631,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in additional paid in capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">126,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Contributions for future increases
of capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Stock options and warrants</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">107,886</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at the end of the year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">261,318</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">425,473</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">(Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,771</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="5"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">a. Pre-operating expenses -
</FONT>

<P align="left"><FONT size="2">Under Mexican GAAP, all expenses incurred while a company or a project is in
the pre-operating or development stages are capitalized. Such capitalized
expenses are amortized on a straight-line basis after operations commence for a
period not exceeding 10&nbsp;years. Under U.S. GAAP, such pre-operating expenses
are expensed as incurred and reported in accumulated deficit during the
development stage in shareholders&#146; equity.
</FONT>


<P align="left"><FONT size="2">b. Capitalization of interest -
</FONT>

<P align="left"><FONT size="2">In accordance with Mexican GAAP, capitalization of the integral cost of
financing (which is comprised of interest expense, foreign exchange gains or
losses and monetary gain related to the debt) incurred during the period of
construction and installation of an asset is optional. The cost capitalized is
limited to the specific financing obtained for the construction of the related
asset. The Company did not capitalize any amount in 2000, but did in 2001 and
2002 (Note 4d.).
</FONT>

<P align="left"><FONT size="2">Under U.S. GAAP, capitalization of interest is required for certain qualifying
assets that require a period of time to get them ready for their intended use.
The amount of interest to be capitalized is that portion of the interest cost
incurred during the asset acquisition period that theoretically could have been
avoided if expenditures for the assets had not been made, and is not limited to
indebtedness directly attributable to the assets. In an inflationary economy,
such as Mexico, acceptable practice is to capitalize interest net of the
monetary gain on the related Mexican peso
</FONT>
<P align="center"><FONT size="2">F-34</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2">debt, but not on U.S. dollar or other stable currency debt. U.S. GAAP does not
allow the capitalization of foreign exchange losses.
</FONT>


<P align="left"><FONT size="2">c. Frequency rights -
</FONT>

<P align="left"><FONT size="2">Under Mexican GAAP, frequency rights are being amortized on a straight-line
basis over the term of the concession, from the date the Company commenced
operations.
</FONT>

<P align="left"><FONT size="2">Under U.S. GAAP, this item should be amortized over the term of the concession
beginning at the granting date of the concession by the SCT.
</FONT>


<P align="left"><FONT size="2">d. Installation revenues -
</FONT>

<P align="left"><FONT size="2">Mexican GAAP allows, where installation is charged to customers, for revenue to
be recognized and the related expenses recorded immediately when the service is
rendered.
</FONT>

<P align="left"><FONT size="2">Under U.S. GAAP, installation revenues and direct installation costs are
deferred and amortized over the expected customer relationship period. Prior
to 2001, installation revenues were not material.
</FONT>


<P align="left"><FONT size="2">e. Installation costs -
</FONT>

<P align="left"><FONT size="2">Under Mexican GAAP, installation costs not charged to customers are capitalized
and amortized on a straight-line basis over 20&nbsp;years.
</FONT>

<P align="left"><FONT size="2">Under U.S. GAAP, direct installation costs not charged to customers are
expensed as incurred. Prior to 2001, installation costs were not material.
</FONT>


<P align="left"><FONT size="2">f. Operating income -
</FONT>

<P align="left"><FONT size="2">Mexican GAAP allows certain nonrecurring charges, such as asset write-offs, to
be classified as non-operating.
</FONT>

<P align="left"><FONT size="2">Under U.S. GAAP, such items are considered part of operating income. Under
U.S. GAAP, consolidated operating loss would have been Ps.385,890, Ps.562,257
and Ps.348,704 for the years ended December&nbsp;31, 2000, 2001 and 2002.
</FONT>


<P align="left"><FONT size="2">g. Debt restructuring -
</FONT>

<P align="left"><FONT size="2">Mexican GAAP allows any gain or loss on restructuring to be taken directly to
equity at the time of the restructuring and recorded as additional paid in
capital. Debt issuance costs from the original issuance of debt continues to
be amortized over their original term.
</FONT>

<P align="left"><FONT size="2">Under U.S. GAAP the debt restructuring qualifies as a &#147;troubled debt
restructuring&#148; pursuant to the provisions of Statement of Financial Accounting
Standards No.&nbsp;15, &#147;Accounting by Debtors and Creditors for Troubled Debt
Restructurings&#148;. The debt restructuring is accounted for as a &#147;combination of
types&#148; that includes a combination of both a granting of equity interest in the
form of warrants and common stock, and a modification of the debt terms where
both the principal and interest payments have been reduced. A gain is
recognized where the carrying value of the old debt is greater than total
future cash payments. To calculate the gain on the restructuring, the carrying
value of the old debt is reduced by the fair value of the equity interest
granted as well as all legal and other costs in relation to the restructuring,
and compared against the gross future cash payments. The Company has recognized
a gain of Ps.412,326 as the total income statement effect at the date of the
restructuring.
</FONT>

<P align="center"><FONT size="2">F-35</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">The payable note recorded under Mexican GAAP represents only the principal
of the debt. Under U.S. GAAP the liability represents the principal balance
plus all future gross cash payments including the one year of interest in 2006
of $16,500 not recorded under Mexican GAAP. If the Company had recorded the
interest liability they would have realized an additional Ps.15,835 foreign
currency loss for the year related to this obligation from the dates of the
restructurings through year-end.
</FONT>

<P align="left"><FONT size="2">Legal fees and other direct costs incurred by a creditor to effect a troubled
debt restructuring are deducted in measuring the gain on the restructuring of
payables. Ps. 82,157 of debt issuance costs of the restructured debt and Ps.
59,035 of restructuring costs were recorded as part of the restructuring. This
reduced the balance of the other assets compared to that recorded under Mexican
GAAP. Ps. 18,511 of amortization in 2002 has been recognized under Mexican
GAAP related to the old debt issuance costs.
</FONT>

<P align="left"><FONT size="2">The effect of inflation on the combined transaction is an income statement
increase of Ps.21,158.
</FONT>


<P align="left"><FONT size="2">h. Capitalized internal compensation cost -
</FONT>

<P align="left"><FONT size="2">Mexican GAAP allows that certain compensation charges directly attributable to
capital expenditures can be capitalized, while under U.S. GAAP, these
compensation charges should be expensed. This has resulted in Ps.2.342&nbsp;million
of compensation charges capitalized under Mexican GAAP that should be expensed
under U.S. GAAP.
</FONT>


<P align="left"><FONT size="2">i. Deferred Income Taxes -
</FONT>

<P align="left"><FONT size="2">As mentioned in Note 4j. as of January&nbsp;1, 2000, the Company adopted revised
Statement D-4. Under the new method of Statement D-4, the Company recognized
future tax consequences based on the difference between the financial
statements and tax bases of assets and liabilities -temporary differences-
as of the date of the financial statements. For purposes of the reconciliation
to U.S. GAAP, the Company has applied Statement of Financial Accounting
Standards No.&nbsp;109 &#147;Accounting for Income Taxes&#148; (&#147;FAS 109&#148;), for all periods
presented.
</FONT>

<P align="left"><FONT size="2">FAS 109 requires an asset and liability method of accounting, whereby, deferred
taxes are recognized for the tax consequences of all temporary differences
between the financial statement carrying amounts and the related tax basis of
assets and liabilities. Under U.S. GAAP, the effect on deferred taxes of a
change in tax rate is recognized in income in the period that includes the
enactment date.
</FONT>

<P align="left"><FONT size="2">FAS 109 requires deferred tax assets to be reduced by a valuation allowance if,
based on the weight of available evidence, including cumulative losses in
recent years, it is more likely that some portion or all of the deferred tax
assets will not be realized. Accordingly, the Company has established a
valuation allowance for the full amount of the deferred tax assets.
</FONT>

<P align="left"><FONT size="2">Significant components of deferred income taxes under U.S. GAAP are as follows:
</FONT>


<P align="left"><FONT size="2">December&nbsp;31, 2002
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>

    <TD width="3%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>

    <TD width="3%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>

    <TD width="3%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>

    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="4"><FONT size="1"><B>SFAS 109</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="4"><FONT size="1"><B>SFAS 109</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="4"><FONT size="1"><B>applied to</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="4"><FONT size="1"><B>applied to US</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="4"><FONT size="1"><B>Mexican GAAP</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="4"><FONT size="1"><B>GAAP</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="4"><FONT size="1"><B>balances</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="4"><FONT size="1"><B>adjustments</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="4"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="4"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="4"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="4"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred assets:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Bad debt allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center"><FONT size="2">Ps.&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center"><FONT size="2">10,274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center"><FONT size="2">Ps.&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center"><FONT size="2">Ps.&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center"><FONT size="2">10,274</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asset tax payments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,587</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,587</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tax loss carryforwards</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">756,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">756,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accruals</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Installation revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(452,809</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,347</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(431,461</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>



</TR>



<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>

    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>



</TR>


</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-36</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>SFAS 109</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>SFAS 109</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>applied to</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>applied to US</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Mexican GAAP</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>GAAP</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>balances</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>adjustments</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 320,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 24,847</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.345,367</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>



<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventory</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,508</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,508</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,109</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,109</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telephone network equipment and
leasehold improvements, frequency
rights, pre-operating expenses and
intangible assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(301,902</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(247,667</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Installation costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29,752</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29,752</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Debt issuance costs on restructuring</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(49,330</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(49,330</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. (320,519)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. (24,847)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. (345,366)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net deferred tax assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-37</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">December&nbsp;31, 2001
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>SFAS 109 applied</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>SFAS 109 applied</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>to Mexican GAAP</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>to US GAAP</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>balances</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>adjustments</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred assets:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Bad debt allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&nbsp;&nbsp;6,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&nbsp;&nbsp;&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&nbsp;&nbsp;6,893</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asset tax payments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tax loss carryforwards</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">666,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">666,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accruals</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Installation revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(389,895</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(65,788</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(455,683</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&nbsp;&nbsp;292,736</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&nbsp;&nbsp;(63,784)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&nbsp;&nbsp;228,952</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred
liabilities
</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventory</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10,548</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10,548</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,345</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,345</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telephone network
equipment and
leasehold
improvements,
frequency rights,
preoperating expenses
and intangible assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(278,843</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(208,827</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Installation costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,232</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,232</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. (292,736)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 63,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. (228,952)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net deferred tax assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">j. Statement of changes in financial position -
</FONT>

<P align="left"><FONT size="2">Under Mexican GAAP, the Company presents statements of changes in financial
position in constant Mexican pesos. This presentation identifies the
generation and application of resources representing differences between
beginning and ending financial statement balances in constant Mexican pesos.
</FONT>

<P align="left"><FONT size="2">Under U.S. GAAP, pursuant to FAS No.&nbsp;95 &#147;Statement of Cash Flows&#148;, a statement
of cash flows is a required component of a complete set of financial statements
in lieu of a statement of changes in financial position. FAS 95 establishes
specific presentation requirements and additional disclosures but does not
provide guidance with respect to inflation adjusted financial statements.
Based on requirements of the Securities Exchange Commission (&#147;SEC&#148;), the effect
of inflation restatements and foreign exchange gains and losses on cash flow
related to financing and operating activities has been included in the line
item, &#147;Monetary gain&#148;, and the effect of inflation on cash balances has been
included in a separate line item after cash flows from investing activities.
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Year ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss under U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps.&nbsp;&nbsp;615,095)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps.&nbsp;&nbsp;687,760)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">(Ps.&nbsp;&nbsp;348,704)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments to reconcile net loss to
net cash flow provided by operating activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">195,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">257,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">266,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain on repurchase of debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(128,161</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain on restructuring of debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(436,160</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fixed asset write-offs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,918</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Allowance for doubtful accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,867</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,915</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Monetary gain</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(99,431</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(82,011</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(103,777</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Non recurring charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,844</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Allowance of inventory obsolescence</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Foreign currency exchange loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54,538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">222,447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(478,766</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(508,590</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(360,502</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in operating assets and liabilities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-38</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Year ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restricted cash</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(599,304</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">203,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">197,452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,115</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(32,759</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(73,062</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventory</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,529</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20,810</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,374</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,018</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(25,310</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued interest</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">114,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued expenses and other accounts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">180,769</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(26,322</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">63,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash flow used in operating activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(784,856</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(384,339</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(189,046</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financing activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from debt and notes payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,957,151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">60,591</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from issuance of capital stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">609,995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payments of notes payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(792,521</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in capital stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">451,206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repurchase of debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(99,781</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in additional paid-in capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">103,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash flow provided by (used in) financing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,719,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(39,190</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">609,995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investing activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Acquisition of fixed assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(632,887</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(481,774</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(247,436</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(197,831</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(46,725</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(158,214</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash flow used in investing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(830,718</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(528,499</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(405,650</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of inflation and exchange rate changes
on cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(104,973</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(48,846</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(81,991</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net (decrease)&nbsp;increase in cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">998,527</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,000,874</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(66,692</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents at beginning of the year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">184,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,183,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">182,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents at end of the year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,183,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">182,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">115,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest paid</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 276,971</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 419,011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 213,687</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Taxes paid</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 2,808</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Supplemental disclosures of non-cash
investing and financing activities activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital stock issued in exchange for services</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 9,353</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital stock issued in exchanged for advertising</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 28,058</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reduction of notes payable from troubled
debt restructuring</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps. 622,155</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>


<P align="center"><FONT size="2">F-39</FONT>



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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">k.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Impairment of long-lived assets -</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">During the year ended December&nbsp;31, 2002, the Company adopted SFAS 144,
&#147;Accounting for the Impairment of Long-Lived Assets&#148;. SFAS 144 provides
guidance on the accounting for the impairment of disposal of long-lived assets.
SFAS 144 supercedes SFAS 121 and applies to all long-lived assets (including
discontinued operations) and consequently amends Accounting Principles Board
Opinion No.&nbsp;30, &#147;Reporting Results of Operations Reporting the Effects of
Disposal of a Segment of a Business&#148; (&#147;APB 30&#148;). SFAS 144 develops one
accounting model (based on the model in SFAS 121) for long-lived assets that
are to be disposed of by sale, as well as addresses the principal
implementation issues. The adoption of SFAS 144 had no effect on the
consolidated financial position of the Company.
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">l.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Recent U.S. accounting pronouncements -</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">In June 2001 the Financial Accounting Standards Board (&#147;FASB&#148;) issued SFAS No.
143 &#147;Accounting for Obligations Associated with the Retirement of Long-Lived
Assets&#148;. The objectives of SFAS 143 are to establish accounting standards for
the recognition and measurement of tangible long-lived asset retirement
obligations and their associated asset retirement costs. SFAS 143 is effective
for fiscal years beginning after June&nbsp;30, 2002. The Company does not expect
that the adoption of this standard will have a material impact on its financial
position or results of operations.
</FONT>

<P align="left"><FONT size="2">In April of 2002, the FASB issued SFAS No.&nbsp;145 &#147;Rescission of SFAS No.&nbsp;4, 44,
and 64, Amendment of SFAS 13, and Technical Corrections&#148;. As a result,
companies will no longer be allowed to classify gains and losses from
extinguishments of debt as extraordinary items unless they meet the criteria of
APB No.&nbsp;30. Gains and losses from extinguishments of debt that have been
classified as extraordinary in prior years that do not meet the criteria of APB
30 shall be reclassified on a go forward basis. In addition, SFAS 145 requires
that capital leases that are modified so that the resulting lease agreement is
classified as an operating lease be accounted for under the sale-leaseback
provisions of SFAS 28 or 98, as applicable, instead of SFAS 13. The provisions
of this statement with regard to SFAS 4 will be effective for fiscal years
beginning after May&nbsp;15, 2002, and those for SFAS 13 will be effective for
transactions occurring after May&nbsp;15, 2002. The Company has adopted SFAS 145
for the fiscal year beginning December&nbsp;31, 2002, and accordingly the pre-tax
gain of Ps. 121,249 regarding the extinguishment of U.S. $25.0&nbsp;million debt
during 2001 through a repurchase has not been classified as an extraordinary
gain.
</FONT>

<P align="left"><FONT size="2">In June 2002, the FASB issued SFAS No.&nbsp;146, &#147;Accounting for Costs Associated
with Exit or Disposal Activities&#148;. This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (&#147;EITF&#148;) Issue No.&nbsp;94-3, &#147;Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
on Activity (Including Certain Costs incurred in Restructuring)&#148;. EITF Issue
No.&nbsp;94-3 required accrual of liabilities related to exit and disposal
activities at a plan (commitment)&nbsp;date. SFAS 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred. The provisions of this statement are effective for exit
or disposal activities that are initiated after December&nbsp;31, 2002. The Company
does not expect that the adoption of this standard will have a material impact
on its financial position or results of operations.
</FONT>

<P align="left"><FONT size="2">FASB Interpretation No.&nbsp;45, &#147;Guarantor&#146;s Accounting and Disclosure Requirements
for Guarantees&#148;, (&#147;FIN 45&#148;) was issued on November 2002. FIN 45 requires that
a liability be recognized at the inception of certain guarantees for the fair
value of the obligation, including the ongoing obligation to stand ready to
perform over the term of the guarantee. Guarantees, as defined in FIN 45,
include contracts that contingently require the Company to make
payments to a
guaranteed party based on changes in an underlying that is related to an asset,
liability or equity security of the guaranteed party, performance guarantees,
indemnification agreements or indirect guarantees of indebtedness of others.
This new accounting is effective for certain guarantees issued or modifies
after December&nbsp;31,2002. In addition, FIN 45 requires certain additional
disclosures. The Company does not expect that the adoption of this standard
will have a material impact on its financial position or results of operations.
</FONT>

<P align="left"><FONT size="2">SFAS 148, &#147;Accounting for Stock-Based Compensation &#151; Transition and Disclosure
&#151; an amendment of SFAS No.&nbsp;123&#148;, was issued on December&nbsp;31, 2002. SFAS 148
provides alternative methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee compensation. SFAS
148 also amends the disclosure requirements of SFAS 123, &#147;Accounting for
Stock-Based Compensation&#148;, to require
</FONT>

<P align="center"><FONT size="2">F-40</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of
the method used on reported results. The Company does not expect that the
adoption of this standard will have a material impact on its financial position
or results of operations.
</FONT>

<P align="left"><FONT size="2">In January 2003, the FASB issued Interpretation 46 &#147;Consolidation of Variable
Interest Entities, an interpretation of ARB No.&nbsp;51&#148; (&#147;FIN 46&#148;). FIN 46
provides a new framework for identifying variable interest entities (&#147;VIE &#180;s&#148;)
and determining when a company should include the assets, liabilities,
non-controlling interests and results of activities of a VIE &#180;s created after
January&nbsp;31, 2003 and is effective beginning in the third quarter of 2003 for
VIE &#180;s created prior to issuance of the interpretation. The Company is
presently evaluating the impact, if any, that this new standard will have on
its financial position or results of operations.
</FONT>

<P align="left"><FONT size="2">In April 2003, the FASB issued SFAS No.&nbsp;149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
133, Accounting for Derivative Instruments and Hedging Activities. This
Statement is effective prospectively for contracts entered into or modified
after June&nbsp;30, 2003 and prospectively for hedging relationships designated
after June&nbsp;30, 2003. Management is still assessing whether this statement will
have a material effect on the Company&#146;s financial position or results of
operation.
</FONT>

<P align="left"><FONT size="2">In May 2003, the FASB issued SFAS No.&nbsp;150, Accounting For Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. The Statement
improves the accounting for certain financial instruments that, under previous
guidance, issuers could account for as equity, and requires that these
instruments be classified as liabilities in statements of financial position.
This Statement is effective prospectively for financial instruments entered
into or modified after May&nbsp;31, 2003 and otherwise is effective at the beginning
of the first interim period beginning after June&nbsp;15, 2003. This statement shall
be implemented by reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance date of the
Statement and still existing at the beginning of the interim period of
adoption. Management is still assessing whether this statement will have a
material effect on the Company&#146;s financial position or results of operation.
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">m.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Condensed consolidating financial information -</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">As mentioned in Note 12, in March 2000 the Company issued U.S. $300&nbsp;million of
senior unsecured notes (&#147;Old Notes&#148;) as part of its financing program and in
April and July 2002, the Company restructured the majority of the original $
300&nbsp;million in debt and issued additional senior unsecured notes (&#147;New Notes&#148;).
The Old Notes and the New Notes are joint and severally guaranteed on a senior
subordinated, unsecured, full and unconditional basis, pursuant to a guarantee
by the Company&#146;s subsidiaries, Corporativo and MSA (&#147;Guarantor Subsidiaries&#148;).
The subsidiaries guarantee is full and unconditional.
</FONT>

<P align="left"><FONT size="2">The Company has not presented separate financial statement and other
disclosures concerning the Guarantor Subsidiaries because management has
determined that such information is not material to investors.
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Maxcom</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Corporativo</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Servicios</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Elimination</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Consolidated</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Balance sheet as of December&nbsp;31, 2000:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Cash and cash equivalents and
restricted cash</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">1,182,334</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">961</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">1,183,295</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Short and long term restricted cash</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">627,782</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">627,782</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Accounts receivable &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">75,916</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">9,572</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(23,599</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">61,889</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Inventory &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">9,947</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">9,947</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">26,260</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(14,304</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">11,956</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Frequency rights &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">117,205</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">117,205</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Telephone network system and
equipment &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,199,290</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,199,290</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Preoperating expenses &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">266,422</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">266,422</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Intangible assets &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">357,279</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">141</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">357,420</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Other assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">8,660</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">8,660</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-41</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Maxcom</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Corporativo</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Servicios</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Elimination</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Consolidated</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">3,871,095</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">10,674</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(37,903</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">3,843,866</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total liabilities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">3,383,618</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">13,038</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(40,267</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">3,356,389</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Shareholders&#146; Equity:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Capital stock and additional
paid-in-capital</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,407,450</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">78</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(78</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,407,450</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Accumulated deficit</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(919,973</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(2,442</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,442</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(919,973</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">487,477</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(2,364</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,364</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">487,477</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">3,871,095</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">10,674</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(37,903</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">3,843,866</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total liabilities and shareholders&#146;
equity under Mexican GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">487,477</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(2,364</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,364</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">487,477</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Preoperating expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(319,397</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(319,397</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of preoperting
expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">52,985</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">52,985</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Capitalization of interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">61,379</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">61,379</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of capitalized interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(9,752</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(9,752</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of frequency rights</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(11,374</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(11,374</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total shareholders&#146; equity under
U.P. GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">261,318</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(2,364</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,364</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">261,318</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Statements of operations for the year
ended December&nbsp;31, 2000:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Revenues</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">293,615</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">180,863</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(180,863</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">293,615</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Operating cost and expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(704,360</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(182,743</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">180,863</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(706,240</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Integral (income)&nbsp;cost of financing</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(246,559</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">898</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(24</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(245,685</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Other (income)&nbsp;expense</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,526</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,091</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,097</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(520</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net (loss)&nbsp;income</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(658,830</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(2,073</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,073</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(658,830</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net (loss)&nbsp;income for the year under
Mexican GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(658,830</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(2,703</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,073</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(658,830</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Preoperating expenses
Capitalization of interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">17,002</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">17,002</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of preoperating
expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">31,939</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">31,939</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of frequency rights</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">81</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">81</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of capital interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,287</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,287</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net loss (income)&nbsp;for the year under
U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(615,095</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(2,073</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,073</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(615,095</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Statement of Changes in Financial
Position for the year ended December
31, 2000:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net (loss)&nbsp;income</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(658,830</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(2,073</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,073</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(658,827</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">221,859</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">221,859</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(436,971</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(2,073</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,073</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(436,968</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net change in working capital</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(421,613</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,646</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(2,073</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(421,040</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Resources (used in) provided by
operating activities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(858,581</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">573</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(858,008</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-42</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Maxcom</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Corporativo</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Servicios</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Elimination</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Consolidated</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Financing activities:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Issuance of capital stock</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">377,703</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">377,703</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Additional paid-in-capital</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">100,343</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">100,343</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Proceeds from loans and notes
payables</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,126,015</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,126,015</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Resources provided by financing
activities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,604,061</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,604,061</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Investing activities:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Telephone network systems and
equipment</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(420,160</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(420,160</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Intangible assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(326,046</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(21</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(326,067</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Other assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,303</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,303</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Resources used in investing activities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(747,509</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(21</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(747,530</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Cash and cash equivalents:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Increase (decrease)&nbsp;during the period</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">997,971</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">552</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">998,523</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Beginning balances</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">184,357</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">409</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">184,766</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Ending balances</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">1,182,328</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">961</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">1,183,289</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Maxcom</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Corporativo</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Servicios</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Elimination</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Consolidated</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Balance sheet as of December&nbsp;31, 2001:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Cash and cash equivalents and restricted cash</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">160,098</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">3,474</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">18,849</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">182,421</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Short and long term restricted cash</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">197,452</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">197,452</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Accounts receivable &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">95,163</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(496</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,900</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">88,767</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Inventory &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">30,138</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">30,138</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">10,890</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">10,890</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Frequency rights &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">110,813</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">110,813</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Telephone network system and equipment &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,446,902</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,446,902</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Preoperating expenses &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">234,500</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">234,500</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Intangible assets &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">316,496</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">107</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">316,603</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Other assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">33,067</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">28</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">33,095</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,635,519</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">3,113</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">12,949</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,651,581</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total liabilities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,837,410</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">4,982</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">12,652</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">1,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,853,475</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Shareholders&#146; Equity:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Capital stock and additional paid-in-capital</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,139,875</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">77</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">57</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(130</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,139,879</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Accumulated deficit</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,341,766</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,946</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">240</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,699</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,341,773</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(201,891</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,869</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">297</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(201,894</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total liabilities and shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,635,519</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">3,113</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">12,949</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">1,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,651,581</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total shareholders&#146; equity under Mexican
GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(201,891</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(1,869</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">297</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">1,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(201,894</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Preoperating expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(319,397</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(319,397</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of preoperting expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">84,897</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">84,897</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Capitalization of interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">61,283</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">61,283</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of capitalized interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(15,882</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(15,882</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of frequency rights</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(10,948</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(10,948</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Installation revenues</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(17,805</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(17,805</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-43</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Maxcom</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Corporativo</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Servicios</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Elimination</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Consolidated</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Installation costs</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,726</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,726</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total shareholders&#146; equity under U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(425,469</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(1,869</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">297</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">1,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(425,472</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Statements of Operations for the year
ended December&nbsp;31, 2001:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Revenues</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">332,310</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">141,073</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">108,950</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(  Ps.250,023</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">332,310</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Operating cost and expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(897,668</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(140,844</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(108,757</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">250,023</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(897,246</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Integral (cost)&nbsp;income of financing</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(58,517</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(194</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">49</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(58,662</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Other</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(66,465</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">463</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(742</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(66,742</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net (loss)&nbsp;income</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(690,340</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">498</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">244</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(742</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(690,340</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net (loss)&nbsp;income for the year under
Mexican GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(690,340</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">498</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">244</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(742</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(690,340</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Preoperating expenses
Amortization of preoperating expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">31,912</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">31,912</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Capitalization of interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(96</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(96</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of capitalized interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(6,131</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(6,131</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of frequency rights</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">426</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">426</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Installation revenues</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,726</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,726</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Installation costs</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(17,805</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(17,805</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net loss (income)&nbsp;for the year under
U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(687,760</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">498</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">244</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(742</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">687,760</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Statement of Changes in Financial Position
for the Year Ended December&nbsp;31, 2001:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net (loss)&nbsp;income</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(690,340</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">498</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">244</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(742</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(690,340</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Non recurring charges</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">65,762</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">65,762</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Gain on repurchase of debt</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(128,161</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(128,161</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">283,777</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">283,777</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net change in working capital</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(468,962</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">498</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">244</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(742</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">113,208</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Resources (used in) provided by operating
activities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(377,060</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,515</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(355,754</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">969</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">969</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Financing activities:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Repurchase of debt</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(99,781</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(99,781</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Resources used in financing activities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(98,812</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(98,812</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Investing activities:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Telephone network systems and equipment</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(499,582</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(499,582</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Intangible assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(7,724</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(7,724</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Other assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(39,055</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">54</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(39,001</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Resources (used in) provided by investing
activities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(546,361</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">54</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(546,307</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Cash and cash equivalents:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">(Decrease) increase during the period</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,022,233</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,515</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">18,845</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,000,873</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Beginning balances</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,182,333</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">961</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,183,288</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Ending balances</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">160,094</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">3,476</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">18,845</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">182,415</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-44</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Maxcom</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Corporativo</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Servicios</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Elimination</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Consolidated</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Balance sheet as of December&nbsp;31, 2002:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Cash and cash equivalents and restricted cash</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">103,979</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">7,174</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">4,576</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">115,729</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Short and long term restricted cash
Accounts receivable &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">124,761</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">268</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">19,116</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(19,092</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">125,053</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Inventory &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">19,140</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">19,140</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">35,614</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">35,614</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Frequency rights &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">104,420</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">104,420</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Telephone network system and equipment &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,588,184</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,588,184</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Preoperating expenses &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">204,379</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">204,379</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Intangible assets &#151; net</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">425,923</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">425,923</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Other assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">29,424</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">166</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">29,590</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,635,824</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">7,608</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">23,692</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(19,092</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,648,032</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total liabilities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,035,694</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">9,282</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">23,274</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(20,661</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,047,589</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Shareholders&#146; Equity:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Capital stock and additional paid-in-capital</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,685,989</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">78</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">54</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(131</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,685,990</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Accumulated deficit</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,085,859</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,752</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">364</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,700</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,085,547</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">600,130</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,674</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">418</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">600,443</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total liabilities and shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,635,824</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">7,608</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">23,692</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(19,092</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">2,648,032</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total shareholders&#146; equity under Mexican
GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">600,130</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(1,674</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">418</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">1,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">600,443</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Preoperating expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(321,217</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(321,217</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of preoperting expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">116,838</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">116,838</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Capitalization of interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">61,087</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">61,187</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of capitalized interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(15,669</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(22,013</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of frequency rights</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(10,522</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(10,522</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Installation revenues</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(10,938</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(10,938</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Installation costs</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(92,975</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(32,098</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Debt restructuring (327,476) (327,476)</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Bonus capitalization</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(2,342</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(2,342</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Total shareholders&#146; equity under U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(3,084</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(1,674</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">418</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">1,569</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(2,771</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Statements of Operations for the year
ended December&nbsp;31, 2002:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Revenues</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">535,939</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">90,721</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">198,663</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(289,384</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">535,939</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Operating cost and expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(955,239</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(90,593</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(197,928</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">289,384</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(954,376</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Integral (cost)&nbsp;income of financing</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(309,584</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">117</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">304</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(309,163</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Other</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(4,132</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(52</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(919</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,103</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net (loss)&nbsp;income</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(733,016</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">193</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">120</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(732,703</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net (loss)&nbsp;income for the year under
Mexican GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(733,016</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">193</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">120</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(732,703</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Preoperating expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,820</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,820</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of preoperating expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">31,940</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">31,940</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Capitalization of interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(196</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(196</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of capitalized interest</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">213</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">213</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Amortization of frequency rights</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">426</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">426</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Installation revenues</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,212</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,212</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Installation costs</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(75,170</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(75,170</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Debt restructuring</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">436,160</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">436,160</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Bonus capitalization</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(2,342</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(2,342</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-45</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Maxcom</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Corporativo</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Servicios</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Elimination</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Consolidated</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net loss (income)&nbsp;for the year under
U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(349,017</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">193</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">120</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(348,704</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Statement of Changes in Financial Position
for the Year Ended December&nbsp;31, 2002:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net (loss)&nbsp;income</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(733,016</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">193</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">120</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">(732,703</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Non recurring charges
Gain on investment subsidiary</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(313</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">313</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">317,564</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">317,564</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net change in working capital</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">86,176</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">3,530</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(14,389</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(313</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">75,004</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Resources (used in) provided by operating
activities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(329,589</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">3,723</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(14,269</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(340,135</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Financing activities:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Issuance of capital stock</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">785,259</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">785,259</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Additional paid in capital</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">749,781</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">749,781</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Proceeds from loans and notes payable</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(733,448</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(733,448</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Resources used in financing activities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">801,592</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">801,592</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Investing activities:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Preoperating expenses</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,820</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,820</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Telephone network systems and equipment</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(366,427</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(366,427</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Intangible assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(163,518</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">111</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(163,407</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Other assets</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">3,641</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(136</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">3,505</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Resources (used in) provided by investing
activities</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(528,124</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(25</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(528,149</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Cash and cash equivalents:</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">(Decrease) increase during the period</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(56,121</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">3,699</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(14,269</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(66,692</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Beginning balances</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">160,100</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">3,475</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">18,845</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">182,421</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Ending balances</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">103,979</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">7,174</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">4,576</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">Ps.</FONT></TD>
    <TD align="right"><FONT size="1">115,729</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">23 &#151; SUBSEQUENT EVENTS:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Magdalena Lease agreement</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">In September 2002, the Company commenced actions before the Lease Courts for
the Federal District of Mexico against the lanclord of the Magdalena building,
seeking the termination of a 15-year lease (expiring on September&nbsp;30, 2013) of
70,500 square feet plus parking space in a building on Magdalena, Mexico City,
which was its former headquarters. The action was based on claims of
miscalculation of lease payment amounts and breaches of certain city compliance
regulations. The landlord countersued alleging failure to make lease payments.
</FONT>

<P align="left"><FONT size="2">In May 2003, the Company reached an agreement with the landlord. Pursuant to
this agreement, the Company retained a leasehold interest through May 2013 on
the first floor, where one of its Lucent 5ESS switches is located, the
roof-top, where they have three microwave transmission antennas and a section
of the basement, which is used for parking and to place some of the electric
equipment that supports the switch. The Company was also released from its
lease obligations on approximately 35,887 square feet plus parking space of the
building originally running through September&nbsp;30, 2013, including past-due
lease payments dating back from October 2002. In exchange for the new lease
and the releases agreed to prepay in full, ten-year lease obligations on the
first floor, the roof-top and
</FONT>

<P align="center"><FONT size="2">F-46</FONT>

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<P align="left"><FONT size="2">basement, as well as the payment of the rents due from October 2002 through
April 2003, the settlement for this agreement will cost the Company the amount
of U.S. $2.7&nbsp;million and will be payable in installments through May 2004.
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Stock options granted to former executive officer</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">On April&nbsp;29, 2002, the former chief executive officer was granted 7,730,177
stock options with an exercise price of $0.4927 per share, and 3,957,588 stock
options with an exercise price of $0.01 per share. Most of these options were
vested on the date of grant. On March&nbsp;19, 2003, the chief executive officer
resigned. As per the terms of the severance agreements, the chief executive
officer forfeited all rights he had to these options. Since these options were
not exercised before year-end, they were recorded as outstanding at December
31, 2002.
</FONT>



<P align="center"><FONT size="2">F-47</FONT>



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<P align="center"><FONT size="2"><B>&#091;PricewaterhouseCoopers
Letterhead&#093;</B></FONT>



<P align="left"><FONT size="2">To The Board of Directors and
Shareholders of<BR>
Maxcom Telecomunicaciones, S.A. de C.V.</FONT>


<P><FONT size="2">The audits referred to in our report to Maxcom
Telecomunicaciones, S.A. de C.V. dated February&nbsp;19, 2003, which
is contained in the document constituting part of this annual report,
included the audit of the schedule&nbsp;II for the years ended
December&nbsp;31, 2002 and December&nbsp;31, 2001. This financial statement
schedule is the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on this financial statement
schedule based upon our audits.
</FONT>



<P><FONT size="2">In our opinion, such schedule present fairly, in
all material respects, the information set forth therein.
</FONT>
<P>&nbsp;
<BR>&nbsp;

<P><FONT size="2">PricewaterhouseCoopers
</FONT>

<P>&nbsp;<BR>

<P><FONT size="2">/s/ Juan Manuel Ferr&#243;n<br>
<hr align="left" width="20%">
C.P. Juan Manuel Ferr&#243;n<BR>
Audit Partner<BR>
Mexico City<BR>
February&nbsp;19, 2003
</FONT>



<P align="center"><FONT size="2">S-1
</FONT>

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<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><IMG src="y87632y8763200a.gif" alt="(LOGO)"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="left" valign="top"><FONT size="2">
BDO Hern&#225;ndez Marr&#243;n y C&#237;a., S&nbsp;C<BR>
Contadores P&#250;blicos y<BR>
Consultores de Empresas
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Av. Ejercito Nacional 904
Piso 7<BR>
Polanco<BR>
11510 M&#233;xico D.F.<BR>
Tel&#233;fono (52) (55)&nbsp;59013900<BR>
Telefax (52) (55)&nbsp;59013925</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">ON SCHEDULE
</FONT>

<P align="left"><FONT size="2">TO THE BOARD OF DIRECTORS AND SHAREHOLDER<BR>
OF MAXCOM TELECOMUNICACIONES, S.A. DE C.V.
</FONT>

<P align="left"><FONT size="2">The audits referred to in our report to MAXCOM Telecomunicaciones, S.A. de C.V.
dated February&nbsp;12, 2001, which is contained in the document constituting part
of this annual report, included the audit of the schedule&nbsp;II for
the year ended December&nbsp;31, 2000. This financial statement schedule is the
responsibility of the Company&#146;s management. Our responsibility is to express an
opinion on this financial statement schedule based upon our audits.
</FONT>

<P align="left"><FONT size="2">In our opinion, such schedule present fairly, in all material respects, the
information set forth therein.
</FONT>

<P align="left"><FONT size="2">BDO INTERNACIONAL</font>
<P align="left"><FONT size="2">/s/ BDO INTERNACIONAL<br>
<hr align="left" width="20%">
</FONT>

<P align="left"><FONT size="2">MEXICO CITY<BR>
FEBRUARY 12, 2001
</FONT>

<P align="center"><FONT size="2">S-II</FONT>

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<!-- link1 "Schedule II - Valuation and Qualifying Accounts" -->
<DIV align="left"><A NAME="019"></A></DIV>

<P align="center"><FONT size="2"><B>Maxcom Telecomunicaciones, S.A. de C.V.</B>
</FONT>

<P align="center"><FONT size="2"><B>Schedule II - Valuation and Qualifying Accounts</B>
</FONT>

<P align="center"><FONT size="2"><B>Year Ended 2000, 2001 and 2002</B>
</FONT>

<P align="center"><FONT size="2"><B>(Amounts expressed in Million of Mexican Pesos (Ps.)<BR>
with Purchasing Power as of December&nbsp;31, 2002)</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Balance at</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Charged to</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Beginning of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>cost and</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Balance at</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>period</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>expenses</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Deductions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>end of period</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Allowance for doubtful accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4.7</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7.2</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12.8</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Allowance for obsolete and slow-moving supply inventories</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Allowance for obsolete and slow-moving network inventories</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.2</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1.2</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Allowance for lease penalty</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">Ps.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">S-III</FONT>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link2 "ITEM 19. EXHIBITS" -->
<DIV align="left"><A NAME="020"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 19. EXHIBITS</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Page</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By-laws (estatutos)&nbsp;of Maxcom Telecomunicaciones, S.A. de C.V. as amended to
June&nbsp;10, 2003
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">2(a).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Not applicable.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">2(b).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top" align="right"><FONT size="2">1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Indenture dated as of March&nbsp;17, 2000 among Maxcom, Corporativo en
Telecomunicaciones, S.A. de C.V. and The Bank of New York, as Trustee
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top" align="right"><FONT size="2">2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Indenture dated as of April&nbsp;29, 2002 among Maxcom, Corporativo en
Telecomunicaciones, S.A., de C.V., Maxcom Servicios Administrativos, S.A., de
C.V. and The Bank of New York, as Trustee
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">*</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top" align="right"><FONT size="2">3.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Second Supplemental Indenture dated as of April&nbsp;29, 2002 among Maxcom,
Corporativo en Telecomunicaciones, S.A. de C.V., Maxcom Servicios
Administrativos, S.A. de C.V. and the Bank of New York, as Trustee
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">*</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">2(c).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Not applicable.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top" align="right"><FONT size="2">1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
CPO Trust Agreement effective April&nbsp;25, 2002 among Maxcom., its shareholders
and Banco Nacional de M&#233;xico, S.A., Instituci&#243;n de Banca M&#250;ltiple, Grupo
Financiero Banamex Accival, acting as trustee
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">*</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top" align="right"><FONT size="2">2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Second amended and Restated Securityholders Agreement entered into as of April
29, 2002 among Maxcom and certain existing and new securityholders
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">*</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(a).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Agreement for the use of infrastructure and installation of fiber optic cable
on the highways between Puebla and Mexico, dated August&nbsp;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.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(b).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Interconnection Agreement for long distance services, dated January&nbsp;22, 1999,
between Amaritel and Tel&#233;fonos de Mexico (Telmex) valid for a period of two
years between February&nbsp;1, 1999 and January&nbsp;1, 2001. The agreement establishes
that it would remain in effect after the expiration date if no further
agreement for its termination or renewal has been entered into, in accordance
with article 42 of the Mexican Telecommunications law
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(c).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Local Interconnection Service Agreement, dated November&nbsp;24, 1998, between
Amaritel, S.A. de C.V. and Tel&#233;fonos de Mexico, S.A. de C.V.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(d).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Amendment to Local Interconnection Service Agreement, dated February&nbsp;25, 1999,
between Amaritel, S.A. de C.V. and Tel&#233;fonos de Mexico, S.A. de C.V.,
originally entered into on November&nbsp;24, 1998
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(e).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Metropolitan Network Capacity Sale Agreement, dated April&nbsp;28, 2000, between
Maxcom Telecomunicaciones, S.A. de C.V. and Metro Net, S.A. de C.V. (including
amendment dated December&nbsp;21, 2000)
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">***</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(f).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Telecommunications Service Agreement dated November&nbsp;15, 1999, between Maxcom
and Tel&#233;fonos de M&#233;xico, S.A. de C.V.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(g).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Telecommunications Service Agreement dated March&nbsp;9, 1999, between Maxcom and
Bestel S.A. de C.V., according to which Bestel will provide long distance and
private calls services to Maxcom
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(h).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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&nbsp;20, 1996
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(i).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Amendment to Concession for the installation and operation of
telecommunications services granted to Amaritel by the Secretary of
Telecommunications and Transport on December&nbsp;20, 1996, dated September&nbsp;8,
1999, extending the coverage of such concession to include various additional
municipalities of the State of Mexico
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(j).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Amendment to Concession for the installation and operation of
telecommunications services granted to Amaritel by the Secretary of
Telecommunications and Transport on December&nbsp;20, 1996, dated December&nbsp;7, 1999,
authorizing Maxcom to employ whatever technologies it deems appropriate in
providing telecommunications services to various municipalities
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">E-1</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Page</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(k).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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&nbsp;20, 1996, dated September&nbsp;27,
2001, extending the coverage of such concession to include all of Mexico
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">*</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(l).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Concession for a public telecommunications network in Regions 3, 5 and 8
granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and
Transport on April&nbsp;29, 1998
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(m).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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&nbsp;23, 1998
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(n).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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&nbsp;23, 1998
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(o).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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&nbsp;29, 1998
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(p).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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&nbsp;4, 1998
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(q).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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&nbsp;4, 1998
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(r).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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&nbsp;1, 1998,
dated October&nbsp;12, 1999, regarding the start date for the initiation of
services
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(s).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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&nbsp;20, 1996, dated September&nbsp;24,
1999 eliminating financial restrictions
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(t).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Warrant Agreement dated as of March&nbsp;17, 2000 between Maxcom
Telecomunicaciones, S.A. de C.V. and The Bank of New York, acting as warrant
agent
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">***</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(u).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Dark fiber optic purchase and sale agreement dated as of August&nbsp;13, 2002
between Maxcom Telecomunicaciones, S.A. de C.V. and Bestel S.A. de C.V &#091;*&#093;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" nowrap valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">4(v).</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Transactional Lease Termination Agreement dated as of May&nbsp;20, 2003 among
Maxcom Telecomunicaciones, S.A. de C.V. and Jacobo Zaga Romano, Jacobo Zaga
Buzali, Jacobo Zaga Kalach, Jacobo Zaga Sasson, David Daniel Kabbaz Chiver,
Salvador Daniel Kabbaz Zaga, Gast&#243;n Becherano Maya and Blanca Estela Canela
Talanc&#243;n
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">5.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Not applicable.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="bottom"><FONT size="2">6.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">
Computation of earnings per share
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" nowrap valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">7.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Computation of ratio of earnings to fixed charges
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">8.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
No significant subsidiaries.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">9.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Not applicable.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">10.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
None.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">99.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section&nbsp;1350
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">99.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section&nbsp;1350
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P>
<HR align="left" size="1" width="25%">
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%" valign="top"><FONT size="2">*</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%" align="left" valign="top"><FONT size="2">
Previously filed with annual report on Form&nbsp;20-F, submitted to the SEC on
July&nbsp;1, 2002.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">**</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Previously filed with Registration Statement on Form&nbsp;F-4 No.&nbsp;333-11910
submitted on May&nbsp;5, 2000.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">***</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Previously filed with annual report on Form&nbsp;20-F, as amended, submitted
on June&nbsp;29, 2001 and on September&nbsp;28, 2001.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#091;*&#093;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Certain material has been omitted pursuant to a request for confidential
treatment. The places in this document where material has been omitted is
marked with an asterisk and brackets &#147;&#091;*&#093;.&#148; The omitted material has been
filed separately with the SEC pursuant to Rule&nbsp;24b-2 under the Securities
Exchange Act of 1934.</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">E-2</FONT>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "GLOSSARY OF TELECOMMUNICATIONS TERMS" -->
<DIV align="left"><A NAME="021"></A></DIV>
<P align="center"><FONT size="2"><B>GLOSSARY OF TELECOMMUNICATIONS TERMS</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">ADSL</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Band</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
A range of frequencies between two defined limits.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Bandwidth</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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)&nbsp;or Bits
Per Second (digital).</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Capacity</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Refers to ability to transmit voice or data over
telecommunications equipment.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Carrier</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
A provider of telecommunications transmission
services by fiber, wire or radio.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Centrex service</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Churn</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">COFETEL</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<I>Comisi&#243;n Federal de Telecomunicaciones</I>, the
Mexican Federal Telecommunications Commission.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Digital</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">E1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Fiber optic technology</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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 over 258,000 simultaneous
telephone calls. Because optical signals
disperse over distance, they must be regenerated
/ amplified at sites located along the fiber
optic cable. Fiber optic systems using earlier</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">G-1</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Fixed wireless local loop</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
A wireless local telephony service using the
3.4-3.7 GHz frequency band.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">FTTH</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Gbps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Gigabits per second. A measurement of speed for
digital signal transmission expressed in billions
of bits per second (Gbps).</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Gulf region</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
115 cities and towns in eleven states in eastern
Mexico, which includes the cities of Puebla,
Tampico, Veracruz, Reynosa, Canc&#250;n, Chetumal,
M&#233;rida, Ciudad del Carmen, Campeche,
Coatzacoalcos and Tuxtla Guti&#233;rrez, among others.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Hertz</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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)&nbsp;stands for
thousands of hertz; MHz (megahertz)&nbsp;stands for
millions of hertz and GHz (gigahertz)&nbsp;stands for
billions of hertz.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">ISDN</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Kbps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Kilobits per second, a measurement of speed for
digital signal transmission expressed in
thousands of bits per second.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Lambdas</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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 &#147;window,&#148; roughly
corresponding to a color in the visible light
spectrum.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">LAN</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Microwave technology</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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 intermediate and
longer 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</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">G-2</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
equipment, antennae and back-up power sources,
located on average every 30 kilometers along the
transmission route.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mbps</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
MegaBits per second. A measurement of speed for
digital signal transmission expressed in millions
of bits per second (Mbps).</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Multi-line hunting</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
A value-added service that allows for multiple
calls to be received with a single telephone
number.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">PCS</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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 &#147;bundled,&#148; to
the needs of the individual customers.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Point-to-multipoint<BR>
microwave transmission</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
A transmission using microwave technology by
which a single signal goes from one origination
point to many destination points.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Point-to-point microwave<BR>
transmission</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
A transmission using microwave technology by
which a signal goes from one point to another,
usually connected by some dedicated transmission
line.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">POTS</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Plain Old Telephone Service. The basic service
supplying standard single line telephones,
telephone lines and access to the public switched
network.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">SCT</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Secretar&#237;a de Comunicaciones y Transportes, the
Mexican Communications and Transportation
Ministry.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Switch</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Teledensity</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Web-hosting</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
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.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">xDSL</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
XDSL is a physical-layer protocol that supports
bandwidth downstream and upstream.</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">G-3</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="022"></A></DIV>

<P align="center"><FONT size="2"><B>SIGNATURES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;12 of the Securities and Exchange
Act of 1934, the registrant certifies that it meets all requirements for filing
on Form&nbsp;20-F and has duly created this annual report to be signed on its behalf
by the undersigned, thereunto duly authorized.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">MAXCOM TELECOMUNICACIONES, S.A. DE C.V.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By:
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">/s/ ELOISA MARTINEZ<BR>
<HR align="left" size="1" width="60%" noshade>
Elo&#237;sa Mart&#237;nez</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chief Financial Officer</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">DATE: June&nbsp;30, 2003
</FONT>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>CERTIFICATIONS</B>
</FONT>

<P align="center"><FONT size="2"><B>Certification of Chief Executive Officer</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I,
Ren&#233; Sagastuy Ferr&#225;ndiz, certify that:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this annual report on Form&nbsp;20-F of Maxcom;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-14 and 15d-14) for the registrant and have:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly
during the period in which this annual report is being
prepared;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">evaluated the effectiveness of the registrant&#146;s
disclosure controls and procedures as of a date within 90&nbsp;days
prior to the filing date of this annual report (the
&#147;Evaluation Date&#148;); and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">presented in this annual report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant&#146;s auditors and the audit
committee of registrant&#146;s board of directors (or persons performing the
equivalent function):
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant&#146;s ability to record, process, summarize and
report financial data and have identified for the registrant&#146;s
auditors any material weaknesses in internal controls; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant&#146;s internal controls; and</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="50%"><FONT size="2">/s/ RENE SAGASTUY FERR&#193;NDIZ<BR>
<HR align="left" size="1" width="60%" noshade>
Ren&#233; Sagastuy Ferr&#225;ndiz<BR>
Chief Executive Officer</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">Dated: June&nbsp;30, 2003
</FONT>

<P align="center"><FONT size="2">H-1</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Certification of Chief Financial Officer</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I, Elo&#237;sa Mart&#237;nez, certify that:
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this annual report on Form&nbsp;20-F of Maxcom;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-14 and 15d-14) for the registrant and have:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly
during the period in which this annual report is being
prepared;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">evaluated the effectiveness of the registrant&#146;s
disclosure controls and procedures as of a date within 90&nbsp;days
prior to the filing date of this annual report (the
&#147;Evaluation Date&#148;); and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">presented in this annual report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant&#146;s auditors and the audit
committee of registrant&#146;s board of directors (or persons performing the
equivalent function):
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant&#146;s ability to record, process, summarize and
report financial data and have identified for the registrant&#146;s
auditors any material weaknesses in internal controls; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant&#146;s internal controls; and</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="50%"><FONT size="2">/s/ ELOISA MARTINEZ<BR>
<HR align="left" size="1" width="60%" noshade>
Elo&#237;sa Mart&#237;nez<BR>
Chief Financial Officer</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">Date: June&nbsp;30, 2003
</FONT>


<P align="center"><FONT size="2">H-2</FONT>




</BODY>
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FORM 20-F
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
n
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from                      to
Commission File Number 333-11910
MAXCOM TELECOMUNICACIONES, S.A. DE C.V.
(Exact name of Registrant as specified in its charter)
MAXCOM TELECOMMUNICATIONS, INC.
(Translation of Registrant's name into English)
UNITED MEXICAN STATES
(Jurisdiction of incorporation or organization)
Guillermo Gonzalez Camarena No. 2000
Colonia Centro de Ciudad Santa Fe
Mexico, D.F. 01210
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
None
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Senior Notes due 2007
13¾% Series B Senior Notes Due 2007
Series N2 Ordinary Participation Certificates
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by
the annual report.
Series A shares, no par value, common voting stock
1,276,428
Series A1 shares, no par value, common voting stock with preferred liquidation rights
6,088,896
Series B shares, no par value, common voting stock
1,226,372
Series B1 shares, no par value, common voting stock with preferred liquidation rights
5,848,209
Series N shares, no par value, without voting rights
12,065,013
Series N1 shares, no par value, preferred stock with limited voting rights
122,468,441
Series N2 shares, no par value, preferred stock with limited voting rights
26,867,820
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes
[Y]
No
[  ]
Indicate by check mark which financial statement item the registrant has elected to follow:
Item 17
[  ]
Item 18
[Y]
TABLE OF CONTENTS
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
ITEM 3. KEY INFORMATION
ITEM 4. INFORMATION ON THE COMPANY
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
ITEM 8. FINANCIAL INFORMATION
ITEM 9. THE OFFER AND LISTING
ITEM 10. ADDITIONAL INFORMATION
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS                      AND USE OF PROCEEDS
ITEM 15. CONTROLS AND PROCEDURES
ITEM 16. RESERVED
ITEM 17. FINANCIAL STATEMENTS
ITEM 18. FINANCIAL STATEMENTS
Schedule II - Valuation and Qualifying Accounts
ITEM 19. EXHIBITS
GLOSSARY OF TELECOMMUNICATIONS TERMS
SIGNATURES
BY LAWS AS AMENDED
DARK FIBER OPTIC PURSCAHSE AND SALE AGREEMENT
TRANSACTIONAL LEASE TERMINATION AGREEMENT
COMPUTATION OF EARNINGS PER SHARE
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Table of Contents
TABLE OF CONTENTS
Page
PART I
1
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
1
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
1
ITEM 3.
KEY INFORMATION
1
ITEM 4.
INFORMATION ON THE COMPANY
13
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
35
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
54
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
61
ITEM 8.
FINANCIAL INFORMATION
66
ITEM 9.
THE OFFER AND LISTING
67
ITEM 10.
ADDITIONAL INFORMATION
68
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
98
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
98
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
98
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS
98
ITEM 15.
CONTROLS AND PROCEDURES
99
ITEM 16.
RESERVED
99
PART II
100
ITEM 17.
FINANCIAL STATEMENTS
100
ITEM 18.
FINANCIAL STATEMENTS
F-1
ITEM 19.
EXHIBITS
E-1
GLOSSARY OF TELECOMMUNICATIONS TERMS
G-1
CHIEF
EXECUTIVE OFFICER CERTIFICATION
H-1
CHIEF
FINANCIAL OFFICER CERTIFICATION
H-2
Unless otherwise specified, all references to "U.S. dollars," "dollars,"
"U.S.$" or "$" are to United States dollars, and references to "Ps." and
"pesos" are to Mexican pesos. We publish our financial statements in pesos
that are adjusted to reflect changes in purchasing power due to inflation.
Thus, unless otherwise specified, our financial data is presented in constant
pesos of December 31, 2002 purchasing power. Amounts presented in this annual
report may not add up or may be slightly inconsistent due to rounding.
Unless otherwise provided, this annual report contains translations of
peso amounts into U.S. dollars solely for the convenience of the reader based
on the exchange rate reported by the Federal Reserve Bank of New York as its
noon buying rate for pesos at December 31, 2002, which was Ps.10.43 per
U.S.$1.00. The currency conversions should not be construed as representations
that the peso amounts actually represent such dollar amounts. Additionally,
these conversions should not be construed as representations that these peso
amounts have been or could have been converted into U.S. dollars at those or
any other rates of exchange.
i
Table of Contents
This annual report contains forward-looking statements. Statements that
are not statements of historical fact, including statements about our beliefs
and expectations are forward-looking statements. The words "anticipates,"
"believes," "estimates," "expects," "forecasts," "intends," "plans,"
"predicts," "projects," "targets" and similar words are intended to identify
these statements, which necessarily involve known and unknown risks and
uncertainties. Accordingly, our actual results of operations may be different
from our current expectations, and the reader should not place undue reliance
on these forward-looking statements. Forward-looking statements speak only as
of the date they are made, and we do not undertake any obligation to update
them in light of new information or future developments.
As used in this Form 20-F, unless the context otherwise indicates, the
terms "we," "us," "our," or similar expressions, as well as references to
Maxcom, mean Maxcom Telecomunicaciones, S.A. de C.V. and its consolidated
subsidiaries. Please refer to page G-1 of this Form 20-F for a glossary of
telecommunications terms.
We will provide without charge to each person to whom this report is
delivered, upon written or oral request, a copy of any or all of the documents
incorporated by reference into this annual report (other than exhibits, unless
such exhibits are specifically incorporated by reference in such documents).
Written requests for such copies should be directed to Maxcom
Telecomunicaciones, S.A. de C.V., Guillermo González Camarena No. 2000, Colonia
Centro de Ciudad Santa Fe, México, D.F. 01210, attention: Director, Investor
Relations. Telephone requests may be directed to 011-52-55-5147-1125.
ii
Table of Contents
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.
KEY INFORMATION
A.
Selected financial data
The following tables present selected consolidated financial information
of Maxcom and its consolidated subsidiaries. We have derived this information
from our audited consolidated financial statements for the years ended December
31, 1998, 1999, 2000, 2001 and 2002, including the audited consolidated
financial statements as of December 31, 2001 and 2002 and for the years ended
December 31, 2000, 2001, and 2002 and accompanying notes appearing elsewhere in
this annual report. This data is qualified in its entirety by reference to, and
should be read in conjunction with, such consolidated financial statements.
The consolidated financial statements have been prepared in accordance
with Mexican GAAP, which differs in certain significant respects from U.S.
GAAP. Pursuant to Mexican GAAP, we have prepared the financial statements and
the selected financial data presented below in accordance with Bulletin B-10 of
the Mexican Institute of Public Accountants ("MIPA"), which provides for the
recognition of certain effects of inflation. See note 22 to the consolidated
financial statements for a description of the principal differences, other than
inflation accounting, between Mexican GAAP and U.S. GAAP applicable to us and
for a reconciliation of our net income and stockholders' equity to U.S. GAAP.
1
Table of Contents
As of the year ended December 31,
1998
(1)
1999
(1)(2)
2000
2001
2002
2002
(4)
Thousands of constant December 31, 2002 pesos
and thousands of U.S. dollars, except for shares and per share data
(3)
Statement of Operations Data:
Mexican GAAP
Net revenues
Ps.
106,050
Ps.
293,615
Ps.
332,310
Ps.
535,939
$
51,384
Operating costs and expenses:
Network operating costs
52,693
118,924
159,015
208,084
19,950
Selling, general and
administrative
194,266
365,457
454,454
428,728
41,105
Depreciation and amortization
89,298
221,859
283,777
317,564
30,447
Total operating costs and
expenses
336,257
706,240
897,246
954,376
91,502
Operating loss
(230,208
)
(412,625
)
(564,936
)
(418,437
)
(40,118
)
Integral cost (income) of financing:
Interest expense
55,673
441,397
451,295
207,641
19,908
Interest income
(12,079
)
(108,095
)
(81,142
)
(4,472
)
(428
)
Gain on repurchase of debt
(128,161
)
Exchange loss (gain), net
11,479
11,814
(95,962
)
206,612
19,809
Gain on net monetary position
(23,981
)
(99,431
)
(87,368
)
(100,618
)
(9,646
)
Total integral cost of financing
31,092
245,685
58,662
309,163
29,643
Nonrecurring charges
(65,761
)
Other income (expense), net
158
(520
)
(187
)
2,643
253
Asset tax and income tax
794
7,746
743
Net loss
(261,142
)
(658,830
)
(690,340
)
(732,703
)
(70,249
)
Net loss per share, basic
Ps.
(25.44
)
Ps.
(57.47
)
Ps.
(50.21
)
Ps.
(5.46
)
$
(0.52
)
Weighted-average shares
outstanding
8,134,883
10,264,827
11,463,667
13,748,445
134,738,030
134,738,030
U.S. GAAP
Net loss
Ps.
(132,725
)
Ps.
(321,198
)
Ps.
(615,092
)
Ps.
(687,757
)
Ps.
(348,704
)
$
(33,432
)
Net loss per share
Ps.
(16.32
)
Ps.
(31.29
)
Ps.
(53.66
)
Ps.
(50.02
)
Ps.
(2.59
)
$
(0.248
)
Balance Sheet Data:
Mexican GAAP
Cash and cash equivalents
Ps.
465,676
Ps.
184,768
Ps.
1,183,293
Ps.
182,421
Ps.
115,729
$
11,095
Restricted cash
2,236
22,455
627,785
197,452
—
—
Working capital
(5)
43,627
6,061
(70,355
)
(39,974
)
(17,995
)
(1,725
)
Frequency rights, net
126,482
123,599
117,206
110,813
104,420
10,011
Telephone network systems and
equipment, net
297,969
922,326
1,199,296
1,446,902
1,588,184
152,270
Preoperating expenses, net
232,460
298,363
266,424
234,500
204,379
19,595
Intangible assets, net
44,607
357,421
316,603
425,923
40,836
Rent deposits and other assets
28,743
8,667
33,095
29,590
2,837
Total assets
1,168,449
1,726,652
3,843,881
2,651,581
2,648,032
253,881
Total liabilities
252,681
1,058,395
3,356,404
2,853,475
2,047,589
196,312
Capital stock
882,963
894,196
1,271,901
1,031,738
1,685,570
161,607
Additional paid-in capital
32,529
35,206
135,549
108,141
420
40
Accumulated deficit
(261,142
)
(919,973
)
(1,341,773
)
(1,085,547
)
(104,078
)
Shareholders' equity (deficit)
915,492
668,260
487,477
(201,894
)
600,443
57,569
U.S. GAAP
Shareholders' equity
Ps.
705,682
Ps.
398,393
Ps.
261,316
Ps.
(425,472
)
Ps.
(2,771
)
$
(265.6
)
Other Financial Data:
Mexican GAAP
EBITDA
(6)
Ps.
(155,534
)
Ps.
(140,909
)
Ps.
(190,767
)
Ps.
(281,158
)
Ps.
(100,872
)
$
(9,671
)
Capital expenditures
(7)
482,706
855,107
747,535
546,307
528,149
50,637
Ratio of earnings to fixed
charges
(8)
(2.45
)
(0.39
)
(0.48
)
(2.25
)
(2.25
)
Cash flow used in operating
activities
(154,125
)
(858,013
)
(355,754
)
(340,135
)
(32,611
)
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Table of Contents
As of the year ended December 31,
1998
(1)
1999
(1)(2)
2000
2001
2002
2002
(4)
Thousands of constant December 31, 2002 pesos
and thousands of U.S. dollars, except for shares and per share data
(3)
U.S. GAAP
EBITDA
(6)
Ps.
(155,533
)
Ps.
(140,905
)
Ps.
(190,760
)
Ps.
(304,689
)
Ps.
231,906
$
22,235
Cash used in operating
activities
Ps.
(103,247
)
Ps.
(246,135
)
Ps.
(784,852
)
Ps.
(384,336
)
Ps.
(189,046
)
$
(18,125
)
Cash provided by financing
activities
Ps.
944,939
Ps.
944,971
Ps.
2,719,074
Ps.
(39,189
)
Ps.
609,995
$
58,484
Cash used in investing activities
Ps.
(826,756
)
Ps.
(826,784
)
Ps.
(830,718
)
Ps.
(528,499
)
Ps.
(405,650
)
$
(38,892
)
Notes to Selected Historical Consolidated Financial Information
(1)
All amounts incurred in operations from February 28, 1996 (date of
incorporation) to May 1, 1999 (commencement of operations) were
capitalized as "preoperating expenses" under Mexican GAAP. Therefore, no
amounts are reported in the statement of operations for those periods.
(2)
We commenced commercial operations on May 1, 1999. In accordance with
Mexican GAAP, our financial statements for that year reflect only eight
months of operations.
(3)
Pursuant to Mexican GAAP, financial data for all periods in the
financial statements have, unless otherwise indicated, been restated in
constant pesos as of December 31, 2002. Restatement into December 31,
2002 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, 2002. The inflation
index used in this annual report for 1998 figures is 1.3505, for 1999
figures is 1.2024 for 2000 figures is 1.1035 and for 2001 figures is
1.0570.
(4)
Peso amounts were converted to U.S. dollars at the exchange rate of
Ps.10.43 per U.S.$1.00 reported by the Federal Reserve Bank of New York
as its noon buying rate for pesos on December 31, 2002. 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 all.
(5)
Working capital is defined as current assets (excluding cash and cash
equivalents and restricted cash) less current liabilities (excluding
current maturities of long-term debt, which includes interest payable).
(6)
EBITDA represents earnings before income and asset taxes, integral cost
of financing, other income (expense), nonrecurring charges, and
depreciation and amortization. We have included information concerning
EBITDA (which is not a measure of financial performance under Mexican or
U.S. GAAP) because we believe it is a standard financial statistic
commonly reported and widely used by analysts and other interested
parties. We understand that EBITDA is also used by investors as one
measure of an issuer's ability to service or incur indebtedness. We also
understand that EBITDA may be defined differently by other companies that
disclose a similarly titled account. You should not construe EBITDA as an
alternative to operating income or as a measure of liquidity or cash
flows from operating activities.
(7)
Capital expenditures include frequency rights, telephone network
systems and equipment, intangible assets and other assets. Investing
activities in the consolidated statements of changes in financial
position are net of dispositions.
(8)
Our earnings have been insufficient to cover fixed charges since we
started incurring debt in 1998. 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
for the years ended December 31, 1999, 2000, 2001 and 2002 amounted to
Ps.279.3 million, Ps.749.6 million, Ps.695.6 million and Ps.725.8
million, respectively. Since there is no statement of operations for
the year ended December 31, 1998, the information has not been included.
3
Table of Contents
EXCHANGE RATES
The following table sets forth, for the periods indicated, the period-end,
average, high and low noon buying rates, in each case for the purchase of U.S.
dollars, all expressed in nominal pesos per U.S. dollar. The noon buying rate
at June 26, 2003 was Ps.10.458 per U.S.$1.00.
Noon Buying Rate
(1)
Period End
Average
(2)
High
Low
1998
Ps.
9.90
Ps.
9.152
Ps.
10.63
Ps.
8.04
1999
9.48
9.553
10.60
9.24
2000
9.62
9.470
10.09
9.18
2001
9.16
9.337
9.97
8.95
2002
10.43
9.745
10.43
9.00
December 2002
10.43
10.10
January 2003
10.90
10.32
February 2003
11.06
10.77
March 2003
11.24
10.66
April 2003
10.77
10.31
May 2003
10.42
10.11
(1)
Source: Federal Reserve Bank of New York.
(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.
B.
Capitalization and indebtedness
Not applicable.
C.
Reasons for offer and use of proceeds
Not applicable.
D.
Risk factors
Factors relating to Maxcom
We anticipate that we will have negative operating cash flow until we develop a
sufficiently large customer base
The development of our business and the installation and expansion of our
network, services and customer base require significant expenditures. These
expenditures, together with operating expenses, will adversely impact our cash
flow and profitability until an adequate customer base is established. We have
generated negative cash flows from operating activities since our incorporation
in 1996 and expect to generate insufficient cash flows to cover our fixed
charges through 2003. This is so even though our fixed charges have decreased
significantly as we restructured our financial indebtedness in April 2002 and
do not have to make any interest payments on most of our indebtedness until
September 1, 2006. We cannot assure you that we will be able to establish an
adequate customer base to generate sufficient positive cash flows from our core
operations.
If we cannot generate significant revenues, achieve and sustain
profitability or generate positive cash flows from operating activities in the
future, we will not be able to meet our debt service or working capital
requirements, and the value of our securities, as a result, would be materially
reduced.
4
Table of Contents
Our auditors have indicated in their report that there is substantial doubt
about our ability to continue as a going concern under current conditions
PricewaterhouseCoopers, S.C. in its Report of Independent Accountants
dated February 19, 2003 has stated that we are highly leveraged and have
suffered recurring losses from operations that raises substantial doubt about
our ability to continue as a going concern. We believe that if our financial
situation does not improve and we do not attract new capital, we will be unable
to service our debt and operate as a viable company and we may qualify for
dissolution or liquidation under Mexican corporate law.
In 2002, our accumulated losses were nearly the equivalent of two-thirds
of our capital stock. In the first quarter of 2003, our accumulated losses
exceeded such threshold. According to the Mexican Companies Law (
Ley General
de Sociedades Mercantiles
), an interested party may file a claim for
dissolution and force us to liquidate our assets if the accumulated losses
exceed two-thirds of our contributed capital during any fiscal year.
We expect to incur net losses through at least 2003
Our cash flow from operations for the year 2002 was insufficient to cover
our fixed charges. Even with the consummation of the exchange offer and the
private equity investment, we expect to continue to incur net losses through at
least 2003.
We may need additional financing
We may require additional financing in the future to service our
indebtedness and fund our operations. Our budgeted capital expenditures for
2003 of U.S. $11.8 million are premised on our ability to obtain financing for
the majority of such amount. We cannot assure you that we will have sufficient
resources and that, if needed, any financing will be available in the future or
on terms acceptable to us. In addition, our ability to incur additional
indebtedness will be restricted by the terms of the indenture governing the new
notes.
We may be unable to build out our network in a timely manner or without undue
cost
Our ability to achieve our strategic objectives will depend, in large
part, upon the successful, timely and cost-effective buildout of our network.
Factors that could affect such buildout include, among other things:
•
our inability to obtain permits to use public rights of way;
•
our inability to obtain future financing necessary for such buildout;
•
unforeseen delays, costs or impediments relating to the
granting of state and municipal permits for our buildout;
•
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 temporary seizure or permanent expropriation of assets, import
and export controls, political instability, changes in the
regulation of telecommunications and any future restrictions on the
repatriation of profits or on foreign investment.
Although we believe that our cost estimates and buildout schedule are
reasonable, we cannot assure you that the actual construction costs or time
required to complete the buildout will not substantially exceed current
estimates. Any significant cost overrun or delay could materially affect our
cash flow and our ability to repay our debt.
5
Table of Contents
We have experienced significant turnover in our executive ranks, which has
affected our ability to develop and execute our business strategies
Our operations are managed by a small number of key management personnel,
the loss of whom could materially affect our operations. In June and July
2000, our then chief executive, chief operations and chief marketing officers
resigned. In April 2001, our then chief financial officer resigned. We
appointed new officers to all these positions during 2001 and 2002.
However, between January and April 2003, our then chief executive officer,
chief marketing officer, chief commercial operations officer and vice president
of corporate communications and public relations also resigned. We have since
appointed a new chief executive officer who was our former chief operating
officer. As part of our cost-reduction efforts and more efficient operations,
we have initiated a search for a single executive to head both the marketing
and commercial operations areas, and have eliminated the office of vice
presidency of corporate communications and public relations.
The significant turnover we have experienced in our management has
affected our ability to develop and execute our business strategies. The
success of our company depends in part upon our ability to hire and retain
highly skilled and qualified management personnel. The competition for highly
qualified management personnel in the telecommunications industry is intense
and, accordingly, we cannot assure you that we will be able to hire or retain
the management personnel necessary for our success.
We may not have sufficient administrative, operational or financial resources
to grow as rapidly as we would like
Our expected growth will place a significant strain on our administrative,
operational and financial resources. We anticipate that continued growth will
require us to recruit and hire a significant number of new managerial, finance,
sales and marketing, accounting and support personnel. If we are unable to
attract and retain personnel who can manage our growth effectively, our growth
may be limited and the quality of our service may be impaired. This occurrence
could adversely affect our results of operations and financial condition.
We depend on Telmex for interconnection
Telmex exerts significant influence on all aspects of the
telecommunications market in Mexico, including interconnection agreements. We
use Telmex's network to service virtually all of our customers. Our
interconnection agreement with Telmex expired on September 15, 2002. However,
due to a "continuous application" clause this agreement is still under full
force and effect. We are currently negotiating with Telmex a new
interconnection agreement. Telmex has requested substantial changes to
existing terms and conditions, such as the allowed percentage of imbalance of
traffic for the "bill and keep" procedure and the interconnection rate. We
cannot assure you that we will be able to obtain the services we require from
Telmex on new terms and conditions that permit us to offer services at
profitable and competitive rates.
Our high leverage could affect our ability to service our debt
We are highly leveraged. In 2002, our earnings were insufficient to cover
fixed charges by an amount equal to Ps.725.8 million (U.S.$69.6 million), even
though we do not have to make any interest payments on most of our financial
indebtedness until September 1, 2006 due to our April 2002 debt restructuring.
Our ability to meet our debt service requirements will depend on our
future performance, which is subject to a number of factors, many of which are
outside our control. We cannot assure you that we will generate sufficient cash
flows from operating activities to meet our debt service and working capital
requirements. In addition, our high leverage could affect our access to credit
or our ability to pursue business opportunities.
The indenture governing the new notes issued pursuant to the exchange
offer limits but does not prohibit our incurrence of additional indebtedness.
We expect to incur additional indebtedness in the future. However, our
significant level of indebtedness may impair our ability to raise additional
indebtedness on commercially reasonable terms when required or with terms that
will not limit our ability to develop our business.
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Table of Contents
Furthermore, our significant leverage could adversely affect:
•
our ability to fund capital expenditures, acquisitions or
operating losses or to refinance existing indebtedness;
•
our flexibility in planning for, or reacting to, changes in
our business and market conditions; and
•
our ability to compete in our markets.
We are and will be subject to restrictive covenants
The terms of the new notes, impose significant operating and financial
restrictions. These restrictions will affect, and in many respects
significantly limit or prohibit, our ability to, among other things:
•
borrow money;
•
pay dividends on our capital stock;
•
purchase stock or repay subordinated indebtedness;
•
make investments;
•
restrict the ability of our subsidiaries to pay dividends;
•
use assets as security in other transactions;
•
sell assets; and
•
consolidate or merge into other companies.
If we do not comply with these restrictions, we could be in default even
if we are able to service our debt. If there were a default, holders of the
notes could demand immediate payment of the aggregate principal amount and
accrued interest on the notes outstanding. This could lead to our bankruptcy
or reorganization for the benefit of our creditors or to our inability to pay
our obligations.
We may not be able to finance a change of control offer
We will be required to offer to repurchase all of the new notes if a
change of control, as such term is defined in the indenture governing the new
notes, occurs. However, it is possible that we will not have sufficient funds
at the time of the change of control to make the required repurchase.
If we do not successfully upgrade and operate accounting, billing, customer
service and management information systems, we may not be able to achieve
desired operating efficiencies
Sophisticated information and processing systems are vital to our
operations and growth and our ability to monitor costs, render monthly invoices
for services, process customer orders, provide customer service and achieve
operating efficiencies. We intend to upgrade the accounting, information and
processing systems necessary to provide services efficiently. However, we
cannot assure you that we will be able to successfully upgrade or operate such
systems or that they will perform as expected.
Our operations are dependent upon our ability to protect and maintain our
network infrastructure
Our operations are dependent upon our ability to protect our network
infrastructure against damage from fire, earthquakes, floods, power loss, and
similar events and to construct networks that are not vulnerable to the
7
Table of Contents
effects of such events. The occurrence of a natural disaster or other
unanticipated problem at our facilities or at the sites of our switches could
cause interruptions in the services we provide. The failure of a switch would
result in the interruption of service to the customers served by that switch
until necessary repairs are effected or replacement equipment is installed.
The successful operation of our network and its components is highly dependent
upon our ability to maintain the network and its components in reliable enough
working order to provide sufficient quality of service to attract and maintain
customers.
Any damage or failure that causes interruptions in our operations or lack
of adequate maintenance of our network could have a material adverse effect on
our business, financial condition and results of operations.
We could be negatively affected by the "by-pass" traffic
Pursuant to regulations of the Federal Telecommunications Commission
(
Comisión Federal de Telecomunicaciones
), which we refer to as "COFETEL," the
only legal way to transport international long distance calls in Mexico is
through the international settlement rate system. However, alternative ways to
route and terminate international long distance calls at a lower cost in
countries that exchange a significant amount of traffic with Mexico exist.
Some estimates show that, given the disparity between international settlement
rates and domestic interconnection rates that would be payable under an
alternative arrangement, an increasing portion of the long distance market
between Mexico and the United States is being served by entities that "by-pass"
the international settlement rate system. This practice is deemed illegal by
COFETEL.
Maxcom complies with all relevant regulations relating to local and long
distance services and cannot confirm whether any of its high-volume customers
is engaging in "by-pass" activities. Under Mexican legislation, Maxcom is not
required to investigate whether any such high-volume customers are engaged in
"by-pass" activity. Maxcom is required, however, to obey any COFETEL formal
order to disconnect a customer deemed to be engaged in "by-pass" activity by
COFETEL.
Mexican regulatory authorities have announced their intention to conduct
more rigorous audits of persons or companies engaging in "by-pass" activity.
In December 2000, some of the major Mexican long distance carriers signed a
cooperation agreement to combat "by-pass" in Mexico. If, as a consequence of
such actions, the regulatory authorities determine that any of our high-volume
customers are engaged in "by-pass" activity, Maxcom's revenues could be
negatively affected.
Our telecommunications network infrastructure has several vulnerabilities and
limitations
Our telecommunications network is the source of all our revenues. Any
problem with or limitation of our network may result in a reduction in the
number of our customers and our revenues. The development and operation of our
network is subject to problems and technological risks, including:
•
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;
•
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.
8
Table of Contents
A failure to achieve current specifications for, or future upgrades of,
our network may materially and adversely affect our results of operations and
financial condition.
Our results are negatively impacted by high levels of churn
We experience a high rate of residential and business customer lines
attrition, or "churn." Churn may be impacted by:
•
our 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;
•
promotional and pricing strategies of our competitors; and
•
economic conditions in Mexico.
During 2002, we churned 36,047 lines, of which 28,951 lines were voice
lines (residential and business customer lines) and 7,096 were wholesale lines.
This resulted in an average monthly churn rate of 2.7% for voice lines. See
"Item 5. Operating and Financial Review and Prospects" for a fuller
description of voice and wholesale lines.
A high rate of churn increases our cost of operations and reduces our
revenues.
Factors relating to the Mexican telecommunications industry
We face significant increasing competition, which may negatively affect our
operating margins
The telecommunications industry in Mexico is becoming highly competitive.
We compete with our rivals primarily on the basis of features, pricing and
customer service. We face significant competition from Telmex in all of the
areas where we operate. In particular, as the former state-owned
telecommunications monopoly, Telmex has significantly greater financial and
other resources than those available to us, a nationwide network and concession
and an established customer base.
We also face significant competition from recent entrants, particularly in
Mexico City. Some of these recent entrants may have significantly greater
financial and other resources than us. In addition, we could face increased
competition if the Mexican government grants more concessions or if new,
competing technologies are developed. Competition may limit our ability to
grow or maintain our customer base or to implement price increases to keep pace
with inflation.
If the Mexican government grants more concessions, the value of our concessions
could be severely impaired
The telecommunications industry is regulated by the Mexican government.
Our concessions are not exclusive and the Mexican government could grant
concessions covering the same geographic regions and frequency bands to other
entrants. We cannot assure you that additional concessions to provide services
similar to those we plan to provide will not be granted and that the value of
our concessions will not be adversely affected as a result.
We could lose our concessions if we do not comply fully with their terms
The terms of our concessions require us to satisfy a number of technical,
buildout and financial conditions. In September 2002, we notified COFETEL of
our failure to provide coverage in certain towns and cities by such
date as required by our local and long distance concessions. In addition,
we believe we will not be able to meet
9
Table of Contents
certain buildout obligations in certain
towns and cities along the Mexico City—City of Querétaro corridor by September
2003. We are in the process of preparing a request for a modification to the
buildout requirements of the concessions from COFETEL. If granted, this
modification would allow us to be once again in compliance. However, we cannot
assure you that COFETEL will agree to such modification.
A failure to comply with any of the terms of our concessions or to obtain
a waiver or modification could result in the termination of any of our
concessions and the loss of up to Ps.43.3 million in performance bonds that we
previously issued to the Ministry of Communications and Transportation, or SCT
(
Secretaría de Comunicaciones y Transportes)
. The Mexican government would not
be required to compensate us in case of such termination. If any of our
concessions were to be terminated, we could be unable to engage in our core
business and we would likely be unable to repay our indebtedness.
Fraud increases our expenses
The fraudulent use of telecommunications networks imposes a significant
cost upon service providers, who must bear the cost of services provided to
fraudulent users. We suffer loss of revenue as a result of fraudulent use, and
also cash costs due to our obligation to reimburse carriers for the cost of
services provided to fraudulent users. Although technology has been developed
to combat this fraudulent use and we are installing it in our operations, this
technology does not eliminate fraud entirely. In addition, since we rely on
other long-distance carriers for interconnection, some of which do not have
anti-fraud technology in their network, we are particularly exposed to this
risk in our long distance service. In 2002, we incurred approximately Ps.3.0
million in expenses for the prevention and detection of fraud.
Because of cost reduction measures, we may elect not to upgrade our
licenses relating to anti-fraud software or to cover maintenance fees. We have
also reduced our fraud monitoring personnel. This has reduced our ability to
detect fraudulent use of our services. See "Item 8. Financial Information—A.
Consolidated statements and other financial information—Legal
proceedings—Significant unpaid receivable."
The technology we use may be made obsolete by the technology used by our
competitors
All companies in the global telecommunications industry must adapt to
rapid and significant changes in technology. While we have been installing
what we believe to be a technologically advanced fiber optic network with a
microwave overlay, we cannot assure you that this technology will not be
challenged by competition from new or improved digital or other technologies in
the near future. Technological changes may adversely affect our competitive
position, cause an increase in customer churn, require substantial new capital
expenditures and/or require write-downs of obsolete technology.
The Mexican government could temporarily seize or permanently expropriate our
assets under certain circumstances
The Mexican government has the authority to temporarily seize all assets
related to a telecommunications concession in the event of natural disaster,
war, significant public disturbance, threats to internal peace, economic
events, and for other reasons related to national security. In addition, the
Mexican government has the statutory right to permanently expropriate any
telecommunications concession and claim any related assets for reasons of
public interest. Mexican law provides for compensation in connection with
losses and damages related to temporary seizure or expropriation. However, we
cannot assure you that the actual compensation paid would be adequate or that
such payment would be timely.
Factors relating to Mexico
If Mexico experiences future political and economic crises, our business could
be affected negatively
We are a Mexican company with all of our operations in Mexico.
Accordingly, the political and economic environment within Mexico can have a
significant impact on our financial condition and results of operations.
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The Mexican government has exercised, and continues to exercise,
significant influence over the Mexican economy. Mexican governmental actions
concerning the economy and state-owned enterprises could have a significant
impact on Mexican private sector entities in general and on us in particular,
and on market conditions, prices and returns on Mexican securities, including
our securities. In July 2000, Mexico held national elections, which were won
by Vicente Fox, the candidate of the National Action Party (
Partido Acción
Nacional
). This represents the first time in over 70 years that the
Institutional Revolutionary Party (
Partido Revolucionario Institucional
) has
not won the Presidency and has not secured the absolute majority of the Mexican
Congress. We cannot predict the impact that this new political landscape will
have on the Mexican economy, particularly on the growth and deregulation of the
telecommunications industry.
In the past, Mexico has experienced economic crises, caused by internal
and external factors, characterized by exchange rate instability, high
inflation, high domestic interest rates, economic contraction, a reduction of
international capital flows, a reduction of liquidity in the banking sector and
high unemployment. These economic conditions substantially reduced the
purchasing power of the Mexican population and, as a result, the demand for
telecommunications services.
Crises such as these could have a material adverse effect on our financial
condition and results of operations and on the market value of our securities.
Changes in tax or other regulations could have an adverse impact on our
financial condition
Effective January 1, 2002, the Mexican Congress expanded the scope of the
Sales and Use Tax Law (
Ley del Impuesto Especial Sobre Producción y Servicios
),
whereby, among other things, a new 10% tax was imposed on the rendering of
certain telecommunications and supplementary services. An amendment to this
law, effective January 1, 2003 confirmed that our core business (the offering
of local and long distances services) is not subject to this special tax.
Although we believe, based on the advice of our tax and regulatory advisors,
that certain other services that are part of our local service offerings, are
also not subject to such special tax, we cannot assure you that the tax
authorities may not interpret the law otherwise.
The operation of telecommunications systems in Mexico is subject to laws
and regulations administered by the Mexican Ministry of Communications and
Transportation (
Secretaría de Comunicaciones y Transportes
) and the Mexican
Federal Telecommunications Commission (
Comisión Federal de Telecomunicaciones
).
These governmental agencies may take regulatory actions that could damage our
business.
Foreign ownership restrictions limit our ability to raise equity capital
Mexican law currently provides that no more than 49% of the full voting
stock of a Mexican corporation holding a concession to provide
telecommunications services, other than cellular services, may be held by
non-Mexicans. Non-Mexicans represent 49% of our full voting stock. In
addition, Mexican authorities have mandated that our limited voting shares,
which are also referred to as neutral investment shares, may not represent more
than 95% of our capital stock.
Under our current capital structure, we have limited flexibility to raise
equity capital from non-Mexican investors. As a result, any future sales of
equity securities, may require substantial participation by Mexicans or a
waiver or modification of Mexican foreign investment laws and regulations. We
cannot assure you that such a waiver or modification could be obtained.
We may lose money because of peso devaluations
While our revenues are almost entirely denominated in pesos, the majority
of our obligations, and all of our long-term debt, are denominated in U.S.
dollars. In addition, substantially all of our capital expenditures are
denominated in U.S. dollars. We are, and will be, exposed to peso devaluation
risk. The peso has devalued substantially against the U.S. dollar in the past
and may devalue significantly in the future. For example, the noon buying rate
rose from Ps.3.45 per U.S.$1.00 on December 19, 1994 to Ps.5.00 per U.S.$1.00
on December 31, 1994 and Ps.7.74 per U.S.$1.00 on December 31, 1995,
representing a 124.6% devaluation of the peso relative to the U.S.
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dollar. In 2002, the peso devalued 13.91% relative to the U.S. dollar.
In the first three months of 2003, the peso devalued 3.36% relative to the U.S.
dollar.
We do not currently have, nor do we expect to have, hedging arrangements
with respect to this risk because we do not believe them to be cost effective
for us. Further declines in the value of the peso relative to the U.S. dollar
could adversely affect our ability to meet our U.S. dollar-denominated
obligations, including the notes. In addition, any further decrease in the
value of the peso may negatively affect the value of Mexican securities such as
ours. The peso-to-dollar exchange rate may experience significant devaluations
in the future.
Developments in other countries may impact the price of our securities
We cannot assure you that the price of our securities will not be
adversely affected by events elsewhere, especially in the United States and in
emerging market countries. Mexican financial and securities markets are, to
varying degrees, influenced by economic and market conditions in other
countries. Although economic conditions are different in each country,
investor reaction to developments in one country has had and can have
significant effects on the prices of securities of issuers in other countries,
including Mexico. Currently, the economic slow down in the United States, the
military conflict in Iraq, the threat of terrorism as well as political and
financial crisis in certain emerging markets have had a significant negative
impact on the financial and securities markets in many emerging market
countries, including Mexico. The effects of these crises may worsen, or new
crises may occur, which may negatively affect the price of our new notes and
CPOs or our financial condition and results of operations.
Our financial statements do not give you the same information as financial
statements prepared under United States accounting principles
We prepare our interim financial statements in accordance with Mexican
GAAP and only our annual financial statements are reconciled to U.S. GAAP.
Mexican GAAP differs in significant respects from U.S. GAAP, including in the
treatment of the amortization of frequency rights, the capitalization of
preoperating expenses, the capitalization of interest, the extinguishment of
debt, the restructuring of troubled debt and deferred income taxes and
employees' profit sharing, and in the presentation of cash flow information.
In particular, all Mexican companies must incorporate the effects of inflation
directly in their accounting records and in published financial statements. We
cannot assure you that these will be the only differences in the future. See
note 22 to the consolidated financial statements for a description of the
principal differences between Mexican GAAP and U.S. GAAP applicable to us.
You may suffer a U.S. dollar shortfall if you obtain a judgment against us or a
distribution in bankruptcy
In the event you are awarded a judgment from a court enforcing our U.S.
dollar-denominated obligations under either our old or new notes or the
liquidation preference under our series N2 preferred stock, we will have the
right to discharge our obligations by paying you in pesos at the exchange rate
in effect on the date of payment of such judgment. Likewise, if we are
declared bankrupt, we will have the right to discharge our obligations by
paying our creditors in pesos at the exchange rate in effect on the date of the
declaration of such bankruptcy.
The exchange rate is currently determined by the Mexican Central Bank
(
Banco de México
) every banking day in Mexico and published the following
banking day in the Official Gazette of the Federation (
Diario Oficial de la
Federación
). As a result of such currency conversion, you could face a
shortfall in U.S. dollars. No separate actions exist or are enforceable in
Mexico for compensation for any such shortfall.
You should also be aware that in the event we are declared bankrupt by a
Mexican court or if we are subject to a bankruptcy reorganization proceeding
(
concurso mercantil
) in such court, our debt obligations, including the new
notes and the old notes, if any, will cease to accrue interest and payment of
any of our debt obligations would depend on the outcome of the bankruptcy
reorganization proceedings, which are often very lengthy.
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We may not be able to make payments in U.S. dollars
In the past, the Mexican economy has experienced balance of payment
deficits and shortages in foreign exchange reserves. While the Mexican
government does not currently restrict the ability of Mexican or foreign
persons or entities to convert pesos to foreign currencies generally, and U.S.
dollars in particular, it has done so in the past and could do so again in the
future. We cannot assure you that the Mexican government will not institute a
restrictive exchange control policy in the future. Any such restrictive
exchange control policy could prevent or restrict our access to U.S. dollars to
meet our U.S. dollar obligations and could also have a material adverse effect
on our business, financial condition and results of operations. We cannot
predict the impact of any such measures on the Mexican economy.
High inflation rates in Mexico may decrease demand for our services while
increasing our costs
In recent years, Mexico has experienced high levels of inflation. The
annual rate of inflation, was 18.6%, 12.3%, 9.0%, 4.4% and 5.7% in 1998, 1999,
2000, 2001 and 2002, respectively. High inflation rates can adversely affect
our business and results of operations in the following ways:
•
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.
High interest rates in Mexico could increase our financing costs
Mexico also has, and is expected to continue to have, high real and
nominal interest rates. The interest rates on 28-day Mexican government
treasury securities averaged 24.8%, 21.4%, 15.2%, 11.3% and 7.2% for 1998,
1999, 2000, 2001 and 2002, respectively. Although we do not currently have any
peso-denominated debt, if we need to incur such debt in the future, it will
likely be at high interest rates.
ITEM 4.
INFORMATION ON THE COMPANY
A.
History and development of the Company
Maxcom Telecomunicaciones, S.A. de C.V. is a limited liability company
(
sociedad anónima de capital variable
) with indefinite life, organized under
the laws of Mexico on February 28, 1996. We were originally organized under
the name "Amaritel, S.A. de C.V." We changed our legal name to "Maxcom
Telecomunicaciones, S.A. de C.V." on February 9, 1999. Our legal name is also
our commercial name.
Our principal offices are located at Guillermo Gonzalez Camarena No. 2000,
Colonia Centro de Ciudad Santa Fe, Mexico, D.F. 01210 and our general phone
number is (52) 55-5147-1111. Our website address, the contents of which are
not part of, or incorporated into, this annual report, is www.maxcom.com. Our
agent in the United States is Puglisi & Associates, 850 Library Avenue, Suite
204, P.O. Box 885, Newark, Delaware 19715.
In February 1997, we were awarded Mexico's first competitive wireline
local and long distance telephony concession, covering the Federal District of
Mexico and over 100 cities and towns in the Gulf region for local service and
the whole nation for long distance service. This concession has a term of 30
years. The local telephony portion of our concession was expanded in September
1999 to cover most of the Greater Mexico City area and a wider area within the
Gulf region. In September 2001, our concession was further expanded to allow
us to provide nationwide wireline local telephony service.
In October 1997, we were awarded seven nationwide point-to-point and three
regional point-to-multipoint microwave concessions. Each of these concessions
has a term of 20 years.
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We commenced commercial operations on May 1, 1999. We are currently
offering local, long distance and data services in Mexico City and the cities
of Puebla and Querétaro.
For the three years ended December 31, 2002, we invested approximately
Ps.1,593.3 million in capital expenditures, primarily for the buildout of our
infrastructure.
For 2003, we plan to invest approximately U.S.$11.8 million in capital
expenditures, mainly to continue to build out our network. Of this amount, we
had already spent approximately Ps.32.5 million (approximately U.S. $3.0
million) by March 31, 2003.
B.
Business overview
We are a growing facilities-based telecommunications company operating in
the competitive local exchange carrier market in Mexico. We are focused on
developing our network and support infrastructure required to provide local as
well as long distance and other value-added services to targeted small and
medium-sized businesses and residential customers within our concession areas.
In particular, we believe that the cities of Mexico Puebla and Querétaro, where
we currently operate, and certain other cities where we are planning to operate
in accordance with our nationwide concession, offer opportunities for growth in
telecommunications use as a result of the combination of a relatively large
population, low subscriber line penetration by international standards and
economic growth. We anticipate a large and growing demand for telephony
services in these regions. See below "—Our markets—Concession areas" for a
fuller description of the nationwide concession.
The construction of our telecommunications network is based on a
smart-build, customer-driven, modular platform that utilizes a combination of
fiber optic, copper wire and microwave transmission technology. This
methodology enables us to provide fast service to our target markets, reduces
the time lag between the incurrence of capital expenditures and the generation
of revenues and increases flexibility to accommodate a changing market
environment. To operate our network, we have constructed three central
switching offices located in Mexico City, the City of Puebla and the City of
Querétaro. We have a 170-kilometer fiber optic link connecting the cities of
Puebla and Mexico and a 266-kilometer fiber optic link connecting the cities of
Querétaro and Mexico, which is part of our new 2,011-kilometer long fiber optic
backbone connecting Mexico City and Laredo, Texas.
As of December 31, 2002, we had in service three state-of-the-art Lucent
Technologies 5ESS switches.
In August 2002, we acquired from Bestel, S.A. de C.V. two strands in a
2,011-kilometer fiber optic backbone covering the cities located between Mexico
City and Laredo, Texas. This fiber optic backbone includes a border crossing
with the United States.
We believe that the combination of our smart-build network construction
strategy, our position as a customer service-oriented provider, our focus on
quality and reliability and our state-of-the-art network and systems will allow
us to benefit from the expected growth of the Mexican telecommunications
industry.
We position ourselves as a full service telecommunications provider for
our customers. In addition to our existing local, long distance and data
services, we offer value-added products such as broadband (ADSL), high-speed
dedicated and dial-up Internet access. We are currently expanding our product
portfolio by adding other services, such as web-hosting and network-managed
security services (firewalls) through strategic alliances with third parties.
According to our market research, our target customers value highly, among
other things, quality service, accurate billing and competitive pricing. Our
marketing strategy focuses on these key elements:
•
prices that are between 5% to 15% below current
market levels;
•
"one-stop-shopping" service, such as our
"all-in-one-bill" feature (which allows our customers to
receive a single invoice containing all local, long distance,
data and Internet services together), and
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•
state-of-the-art call center equipped with a
Customer Relationship Management Program (also known as CRM)
application software to receive all customer inquiries
including around-the-clock customer care availability.
Strategy
We intend to capitalize on our competitive strengths to become a leading
telecommunications provider in Mexico. We have been focused on executing a
strategy of growth in our existing markets and expansion in accordance with our
nationwide concession. This strategy includes the following components:
Capture unmet demand for telephony services
We seek to capture unmet demand by targeting small and medium-sized
businesses and residential customers that are looking to expand their
telecommunications capacity or that do not currently receive the types of
products and services we offer. We believe that the potential for expansion in
the Mexican telecommunications market is significant given the low teledensity
rate, which was 14.6 telephone lines per 100 inhabitants as of December 31,
2002 the increasing level of competition and the development of the Mexican
economy.
Build our network on a demand-driven, modular basis
We build our network based on customer demand. We first identify city
areas with the largest potential for new lines, which we refer to as
"clusters," in the markets that we serve through various market research
techniques. We then carry out the network buildout in tandem with increased
sales and promotional efforts targeted at customers within the cluster. This
parallel track minimizes the time lag between the incurrence of capital
expenditures and the generation of revenues, and allows a choice of technology
and construction method based on the particular needs of the cluster. We refer
to this approach as our "smart-build" strategy.
We also build our network on a customer demand basis to support small and
medium-sized enterprises in buildings or locations other than "clusters." We
refer to these locations as "single sites." When our corporate sales people
identify a potential opportunity we analyze its technical feasibility, the
costs associated with providing the service within such locations and the
potential revenues, in order to establish whether it is convenient to offer our
services there.
Differentiate product offerings based on features and price
We believe that we can differentiate ourselves from competitors by
offering a variety of quality products that meet the specific needs of our
customers. To that end, we seek to develop customer loyalty and brand
awareness by informing consumers about the telecommunications services that we
offer and by helping them to differentiate between the various
telecommunications services available in the market. We also seek to offer our
services at prices that are between 5% and 15% lower than the prevailing market
price in order to build our customer base. See "—Pricing."
Deploy cost-efficient technology
We use a cost-efficient technology to deploy our network and serve our
customers. Our current network consists of optical fiber, copper lines and
microwave technology which we deploy to particular customers based on
deployment cost, time to market, time to revenue, time to profitability,
quality and reliability in our service.
Our technology platform allows us to provide xDSL services, dedicated
Internet access lines, POTS and ISDN services, among others. In addition, due
to additional duct capacity in our current facilities we are able to deploy
fiber-to-the-home (FTTH) services whenever customer premises equipment
technology is available at reasonable prices. Our microwave rings allow us to
reach customers throughout our market in a cost efficient manner and allow us
to build network clusters that can reach generally from 1,500 to 6,000 lines.
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Capitalize on our nationwide local telephony concession
In September 2001, our local telephony concession was expanded, allowing
us to provide service to all of Mexico. This provides us with an opportunity
to target small and medium-sized businesses and residential customers within
our new concession areas who we believe are willing to evaluate other
alternatives as they look for better service, higher reliability and lower
tariffs. In September 2002, we acquired two strands in a 2,011-kilometer fiber
optic backbone from Mexico City to the city of Laredo, Texas. We believe this
acquisition is a key element for our nationwide expansion using our own
independent network. As part of this strategy, we have already expanded our
coverage area to the City of Querétaro, one of Mexico's fastest growing cities.
In addition, we believe that the quality of our product and services
offerings gives us a competitive advantage in many regions within our
nationwide concession area, as experienced in the City of Puebla, where in 2002
our number of lines in service grew by 48.4% and where we installed almost 28%
of new net additions in the whole state of Puebla according to COFETEL.
Our markets
Concession areas
In February 1997, we were awarded Mexico's first competitive local and
long distance telephony concession, covering the Federal District of Mexico and
over 100 cities and towns in the Gulf region for local service and nationwide
for long distance service. In September 1999, we received the approval of the
SCT and COFETEL to provide local telephony services in several municipalities
contiguous to the Federal District, which are part of Mexico City, as well as
in selected additional cities in the Gulf region. In September 2001, our local
service concession was expanded to cover all of Mexico. Under our concession,
we are required to start providing service to the cities of San Luis Potosi
during 2003; Veracruz and Toluca by 2004; León, Guadalajara and Tehuacan by
2005 and Oaxaca and Aguascalientes by 2006. We started operations in the City
of Querétaro in November, 2002.
We commenced commercial operations in Mexico City in May 1999. Mexico
City has the nation's greatest concentration of service and manufacturing
industries and is also the center of Mexico's public and financial services
sectors. In 2002, Mexico City had a population of approximately 18.6 million
people, according to the Mexican National Population Council (
Consejo Nacional
de Población
). Although the Federal District, which covers most of Mexico
City, has the highest teledensity rate in Mexico at approximately 37.3%
telephone lines per 100 inhabitants as of December 2002, we believe that
significant unmet demand for high-quality local telephony services in Mexico
City remains. As of December 31, 2002, we had 69,795 lines in service in
Mexico City.
We commenced commercial operations in the City of Puebla in May 1999.
Puebla is the fourth largest city in Mexico, with a population of approximately
1.4 million people as of December 31, 2002. In the City of Puebla we have
expanded our market share in local telephony service from 2.5% in 2000 to 7.2%
in 2001 and to 9.5% in 2002. As of December 31, 2002, we had 53,362 lines in
service, as compared to 36,108 lines in service as of December 31, 2001.
According to COFETEL, these new lines represented 28% of all the new lines
installed in the whole state of Puebla during this period.
We also commenced commercial operations in the City of Querétaro in
November 2002. Querétaro is the fourteenth largest city in Mexico, with a
population of approximately 687,000 people as of December 31, 2002. In our
first two months of operations, we had 2,074 lines in service, representing
10.8% of all new lines installed in the City of Querétaro during this period
according to COFETEL.
Clusters and single sites
We have developed a comprehensive marketing strategy that starts by
identifying city areas with the largest potential for new lines, which we refer
to as "clusters." We use a variety of techniques to identify potential
clusters, including canvassing, plotting of potential clusters and database
marketing. Once a cluster is identified, a map of the geographic area is
produced and the cluster is defined. A cluster becomes the basis for network
design and deployment and for the launching of focused field sales and
marketing one-on-one efforts.
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Our cluster strategy is divided into three stages:
•
Identify clusters
through market research. Our
market research is designed to identify small- and
medium-sized businesses and residential customers. Once we
identify potential customers within the clusters, we design
the deployment of the access network to cover them. We
perform a return on investment 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 promote our services at the same time that we
build our network.
•
Fill in clusters
by offering our services to all
customers within the cluster.
We also build our network on a customer demand basis to support small and
medium-sized enterprises in buildings or locations other than clusters. We
refer to these locations as "single sites." When our corporate sales people
identify a potential opportunity we analyze its technical feasibility, the
costs associated with providing the service within such locations and the
potential revenues, in order to establish whether it is convenient to offer our
services there.
Our network
Buildout strategy
We build out our network on a modular basis. Once a cluster has been
identified in a joint effort by our marketing, engineering and sales
departments, we build our network in clusters varying generally from 1,500 to
6,000 lines. To ensure the highest quality service to our customer, we install
24-gauge copper wire and limit the distance between our backbone network and
the customer premises to four kilometers. These attributes also allow us to
provide to our customers voice and data services, such as ADSL services with
bandwidth of up to 4Mbps.
We standardize all our Lucent and Advanced Fiber Communications (also
known as AFC) equipment to assure consistent, cost efficient, high quality
service and also to enable us to use the same access equipment for all of our
services.
Network backbone
At December 31, 2002, our network backbone consisted of one owned
170-kilometer 24 strand fiber optic link between Mexico City and the City of
Puebla with three optical regenerators at halfway points and two strands in a
2,011-kilometer fiber optic link covering cities between Mexico City and
Laredo, Texas. This fiber optic backbone includes 13 cities (Laredo, Nuevo
Laredo, Monterrey, Saltillo, San Luis Potosí, Aguascalientes, León, Irapuato,
Guadalajara, Celaya, Querétaro, México and Toluca) and six optical
regenerators. We are currently installing Digital Wavelength Division
Multiplexing (also known as DWDM) equipment, with a maximum capacity of 32
Lambdas, each with 2.5 Gbps capacity. We are installing 3 Lambdas that we
expect will be operational by July 2003. We have the capability with this link
to transmit synchrony links, LAN network links, long distance links and
dedicated links. We have also installed a Lucent Technologies 5ESS digital
switch in Mexico City and the cities of Puebla and Querétaro with a total
capacity of 141,000 trunks. Our switch in Mexico City is connected to four
different nodes in the city's public switched telephone network, some by our
own and some by leased fiber capacity. Our switch in Puebla is connected to
four different nodes in the city's public switched telephone network by our own
fiber ring. Our switch in Querétaro is connected to two different nodes in the
city's public switched telephone network by our own fiber. We also lease
capacity to connect to long distance networks.
In June 2000, we finished constructing a lighted 144-strand, 57-kilometer
fiber optic ring in the City of Puebla. We also acquired six strands of dark
fiber for approximately 175 kilometers in metropolitan rings in Mexico City and
obtained an option for additional capacity in future fiber optic rings also in
Mexico City. In addition, the
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infrastructure is in place to provide local telephony service to five
towns located along our Mexico City-City of Puebla fiber optic link.
We use our own fiber optic rings to connect our microwave nodes to the
fiber rings in order to transport the telephone communications from our
customers to the telephone switch and from there back to our customers or to
the public switched telephone network. We also use this fiber to provide to
our customers dedicated links and dedicated Internet links that we connect
through our fiber and also by leased capacity to the Internet backbone.
Last-mile connectivity
The last-mile connectivity portion of our network is comprised of a mix of
wireline and wireless access technologies. We use point-to-point microwave
transmission technology for fast deployment to clusters and single site
locations. We have point-to-point frequencies in the 15 and 23 GHz band
forming a complex microwave network throughout Mexico City and the cities of
Puebla and Querétaro. We use microwave links to connect customers that cannot
be immediately connected to our own fiber network, provided the yield on the
capital expenditures required is in accordance to our investment parameters.
We also have a point-to-multipoint concession for the 10.5 GHz band, covering a
portion of the Gulf region.
We also use wireline access to provide service to clusters. Clusters
generally have an area ranging between one and four kilometers in diameter. An
average of 50 kilometers of cable plant is required to provide last-mile
connectivity within the clusters.
We use copper wire feeder and distribution facilities placed from the host
or remote site along rights of way with a mix of aerial and underground
construction. Aerial is our preferred and most used method because of its cost
of construction advantage. Underground cable is placed using either the open
trench or directional boring methods of construction. The size of the cable is
based on the anticipated number of customers in each cluster's influence area
as forecasted by our marketing research. We also integrate fiber optic and
Digital Subscriber Line Access Multiplexer (also known as DSLAM) facilities in

the distribution plant to allow us to provide broadband services.
Switching
We have a Lucent Technologies 5ESS digital switch in Mexico City, and in
the cities of Puebla and Querétaro. Our switch in Mexico City is currently
equipped for 86,000 trunks, and new switches will be installed as the maximum
capacity of the existing switches is reached. Our switch in the City of Puebla
is equipped for 37,000 trunks. Our switch in the City of Querétaro is equipped
for 18,000 trunks. Each trunk can generally carry between 1 and 3 lines,
depending on whether it serves a residential or a business customer. Our
equipment capacity is scaleable at incremental costs according to customer
demand.
The switches are capable of providing analog lines, E1 digital lines,
digital high-speed data services, centrex services and operator-assisted
services. In addition, they can provide private analog lines, private
clear-channel digital lines, data transmission and value-added services.
Our switches also have a synchrony network that is designed to assure a
proper synchronization of every call that is made in the cities we serve and to
assure proper synchronization with the public switched telephone network as
well as any other carriers with whom we connect. We also have two STPs
(Signaling Transfer Point) in Puebla, four in Mexico City and two in Querétaro,
to assure the proper signaling in our interconnection with all other carriers.
Operational support systems
We have a network operations and control center in Mexico City which
oversees, administers and provides technical support to all service areas. Our
center, which uses Hewlett Packard hardware and Lucent Technologies software
controls and monitors, among other systems, all of our network, microwave,
fiber, access equipment, data equipment, synchrony, signaling and energy
systems. Our center allows us to manage a multi-vendor network with
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the greatest efficiency possible, and to identify problems early in order
to utilize available redundancy and repair the damaged part of the network.
Our operational support systems are designed to allow us to differentiate
ourselves in the marketplace by being able to:
•
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.
Our information technology strategy is to implement operational support
systems possessing a high level of functionality and flexibility from the
service order to the delivery of customer invoices. The systems include the
following functional features:
•
Spanish language support for invoices and documentation;
•
a high degree of integration between 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.
Our services
Our primary focus of service is local telephony, particularly the
provision of high-quality, flexible last-mile connectivity to small and
medium-sized businesses and residential customers. We offer long distance
service as an integrated value-added service for our local telephony customers.
We do not offer our long distance service separately from our local telephony
service.
We currently provide value-added services such as: voice mail, speed
dialing, call waiting, call forwarding, three-way calling, call blocking,
caller identification and multi-line hunting. We also provide digital
high-speed connectivity, dial-up Internet access, dedicated Internet access and
Service Level Agreements (also known as SLA) for both voice and data services.
Service products
We seek to offer high-quality telephony service products combining (1)
prices that are between 5% and 15% below current market levels, (2) a wide
range of value-added solutions and (3) superior customer service. The
following are the service products we currently offer to our customers.
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•
LineaMax Residencial
. This is a service for
residential customers that provides a high-quality telephone
line. The features offered under this product include voice
mail, call waiting, call forwarding, three-way calling, call
blocking, speed dialing and unlisted numbers.
•
LineaMax Comercial
. This service, which is
offered to business customers, is identical to LineaMax
Residencial, except that it also includes multi-line hunting.
•
CentralMax
. This service provides business
customers with all the functions of a private branch exchange
using centrex technology, without having to acquire and
maintain equipment. 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, single digit access to attendant
and distinctive ringing. Optional solutions include voice
mail, music-on-hold, multi-line hunting and attendant
services.
•
Larga Distancia Max
. This service provides
domestic and international long distance. We do not offer our
long distance service separately from our local telephony
service. See "Supervision and Regulation of the Mexican
Telecommunication Industry—Our concessions—Long distance" for
a description of significant special charges we would have to
pay Telmex if we decide to provide long distance service to
customers other than our local telephony customers.
•
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 (also known as
PBX). This service is sold in groups of 10, 20 or 30 trunks.
The groups can be configured with direct inward dial (DID),
direct outward dial (DOD), caller identification or main
telephone number assignments.
•
TroncalMax Analógica
. This service, which is
offered to business customers, provides connectivity to analog
PBX or key systems. The features available with this product
are multi-line hunting, caller identification and call
barring.
•
Internet Max
. This service uses a traditional
POTs line and modem to provide dial-up Internet access
allowing users to navigate on the Internet at speeds of up to
56 Kbps, depending on the number of users accessing the
Internet at the same time, since it is a shared service. We
provide this service to customers, regardless of whether they
have a Maxcom line or not.
•
Speedy Max
(ADSL (128, 256 and 512 Kbps and 1 and
2 Mbps)). Asymmetric Digital Subscriber Line (also known as
ADSL) is a transmission service that turns ordinary telephone
lines into high-speed data connections. It is a digital data
service that provides telecommuting capabilities at speeds
much faster than standard modems. With ADSL it is possible to
have secure, dedicated links to the Internet or a company's
LAN at a high-speed transmission.
•
AsistelMax
. This service, which we launched in
April 2002, provides basic telephone medical and home
assistance to our residential customers in case of emergency.
•
1-800 Numbers
. This service is available for 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.
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•
Digital private lines
. This service provides
highly reliable dedicated circuits between two or more
physical locations. Digital private lines are designed to
integrate voice, data and video private networks over a single
physical link. Digital private lines are, in effect, leased
lines for exclusive/private use with no limitations in usage,
available 365 days a year, with no restrictions in amount of
traffic.
As part of our product portfolio strategy, we are developing strategic
alliances with third parties in order to provide new services. These new
services include web services such as hosting web applications, managed network
security (firewalls) and domain name administration for small and medium-sized
business.
We believe that our products will help us capitalize on the significant
data applications growth expected in Mexico and help us increase our
participation in the small and medium-sized business market. In particular, we
believe that the combination of voice and data services constitutes an
attractive set of product services for those customers enabling us to compete
more effectively in such market.
Pricing
We generally seek to maintain our prices between 5% and 15% below current
market levels. We offer pricing plans that are simple in order to assure
customers of the integrity of the billing process. Our pricing structure
rewards long-term commitments by increasing discounts in relation to the length
of the commitment. We also provide discounts to high-usage customers that are
likely to generate a significant outflow of calls.
We pay interconnection charges to other carriers on a per minute basis.
However, the common practice in the Mexican market is to charge customers on a
per-call basis for local service. We seek to minimize the risk associated with
this mismatch between our revenues and costs; for long holding time customers,
we have, in some cases, implemented a per minute charge plan to be consistent
with our interconnection fees that are on a per minute basis.
During the second half of 2002, we introduced voice line and ADSL service
that for a fixed monthly charge includes the rental of the lines, unlimited
local calling, a specified amount of long distance and mobile minutes, and
high-speed Internet access. This offering is mainly targeted to small- and
medium-sized businesses.
Marketing and sales
General
We seek to develop brand name recognition by using our corporate name,
logo and product names consistently to portray a unified image. We conduct
publicity drives within target clusters to small-and medium-sized businesses
and to residential customers. We seek to differentiate ourselves from our
competitors by our pricing, consistent quality and reliability of
first-to-market technology, one-stop shopping, comprehensive billing and speed
of line activation.
Sales and distribution channels
We focus our sales efforts within clusters using door-to-door sales and
telemarketing promotions. We promote our services primarily through
advertisements on radio, billboards, in-building promotions, press and
magazines. As we commence the deployment of our network within a cluster, we
intensify our promotion efforts through our direct sales force in such cluster.
Our direct sales approach is to assign sales representatives or teams to
locations within a cluster or to single sites.
At December 31, 2002, we employed 22 internal salespeople and 182 external
sales agents. We assign our sales force based on territory, product or market
segment, depending on their background and experience. The compensation
structure for our sales force is tailored to attract and retain high achievers
by providing a base salary and a bonus component. Sales commissions are paid
only after the new line is installed.
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Our sales force is recruited from other telecommunications providers and
systems integrators. Candidates for our sales force undergo extensive training
that covers the industry of telecommunications, our products, our internal
procedures and markets and sales. In its sales effort, our sales force uses,
among other things, multimedia presentation, corporate videos and corporate and
product brochures.
In addition to our sales force, we are developing other distribution
channels, including store fronts, agents, distributors, outsourcing and
telemarketing.
Customer service
We seek to differentiate ourselves by providing superior and consistent
customer service. Our customer service group is divided into three areas:
•
centralized answering point
. This area responds
to calls to our customer care telephone numbers in Mexico City
and the cities of Puebla and Querétaro. Many prospective and
existing customers use our centralized answering point for all
types of queries, including queries regarding area codes,
rates, billing and line installation and changes. Our hours
of operation are 8:00 a.m. to 8:00 p.m. on Mondays through
Fridays and 9:00 a.m. to 6:00 p.m. on Saturdays.
•
walk-in center
. We have two walk-in centers in
Mexico City, two in the City of Puebla and one in the City of
Querétaro for prospective and existing customers who wish to
make inquires in person regarding our services. Our hours of
operation are 9:00 a.m. to 6:00 p.m. on Mondays through
Fridays and from 9:00 a.m. to 2:00 p.m. on Saturdays.
•
centralized trouble-shooting center
. This area
responds to calls in Mexico City and the cities of Puebla and
Querétaro. This center is available 24 hours a day, seven
days a week and handles technical problems, inquiries and
complaints.
Customers may access their billing statements through our website and link
to the websites of two major Mexican banks to effect payment. In addition,
customers may pay their bills with their credit cards at the branches of three
of the largest Mexican banks or at our main office located in Santa Fe, Mexico
City or at our walk-in centers located in the City of Puebla. We also assist
our customers with new service requests and product information at our walk-in
centers.
Credit, billing and collection
We carry out credit checks on all our potential business customers that
request more than two lines using a leading Mexican credit bureau. Depending
on the result of the credit check, we may request a deposit, promissory note,
bond or standby letter of credit.
For business customers with an imperfect credit history we require a one
to three-month deposit, which is calculated based on the number of lines
contracted. For call centers and other high-usage customers we may require
higher deposits, collect on a prepaid or weekly basis and undertake a closer
monitoring of call activity. We do not perform credit checks for business
customers with one or two lines.
In addition, we do not perform credit checks for residential customers.
Our sales representatives are required to verify the identity and address of
our residential customers.
For our billing process, we use state-of-the-art technology including an
Ericsson/Hewlett-Packard billing mediation platform and a Kenan Systems/Arbor
billing platform interfaced with our customer service system.
We perform six billing cycles per month for our business customers and
five billing cycles per month for our residential customers. We invoice
customers monthly on a staggered basis, except in instances that customers
represent a greater credit risk in which case we may invoice weekly. For
regular customers we process and print our
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bills within four days after the
close of each cycle. Customers then have twenty-one days to pay the bill after
the cut off date.
For customers with one to six lines, if a bill is past-due for more than
two days, we call the customer and leave a reminder message on its phone. If
the bill remains unpaid for five additional days, we restrict service to
incoming calls only. If the bill remains unpaid for 7 additional days, we
suspend the service. If the bill remains unpaid for another 7 days, we again
allow in-bound traffic but only in order to contact our customer, negotiate and
collect the payment. After 30 days past-due, unpaid and uncollected
receivables are assigned to collection agencies. If no payment is received
after ninety days, we disconnect the line. If the bill remains unpaid past
such period, we assign the receivables to another collection or legal agency.
For customers with more than six lines we use the same process to the one
described above, except that we do not assign unpaid bills to collecting
agencies. Instead, we use a personalized approach where we try to negotiate
payment terms before imposing any restriction, suspension or disconnection of
the link. We may suspend service when an invoice is at least 30 days past due.
However, in the case of high-usage customers, we may suspend service when an
invoice is at least one day past due.
We have a CRM to support our business growth, which is focused on customer
service, collection, training sales force and enhance marketing. Our initial
investment for this program was U.S.$3.3 million and our strategic partner in
this program is Siebel a software company. As part of our cost reduction
measures, we do not plan to invest additional resources to upgrade our CRM
program during 2003.
Competition
We primarily compete in the local telephony market on the basis of
customer service, value-added products and price. Our direct competitors are
wireline and fixed wireless local telephony operators, although we also face
competition indirectly from mobile wireless operators.
We do not compete directly in the long distance market. Although we
provide long distance service, we position such service as an integrated
value-added service for our local telephony customers. As a result, we do not
offer our long distance service separately from our local telephony service.
See "—Supervision and Regulation of the Mexican Telecommunications Industry—Our
concessions—Long distance" for a description of significant special charges we
would have to pay Telmex if we decide to provide long distance service to
customers other than our local telephony customers.
Our core strategy is to service underserved markets by targeting new
customers that do not currently receive the type of products and services that
we offer. In particular, our intention is to service markets with lower
teledensity rates that are also underserved by Telmex.
Telmex
Our main local telephony competitor is Telmex, the incumbent carrier and
former government-owned telecommunications monopoly. Telmex has significantly
greater financial and other resources than those available to us. In addition,
Telmex has an established customer base, which represents substantially all of
the wireline local telephony lines in Mexico. Telmex customers still represent
the main destination of outgoing calls from our network, therefore local
interconnection with Telmex is critical to our operations.
Other Competitors
We also face competition in local telephony from companies that were
awarded concessions in recent years. The more significant of these competitors
are Alestra, Avantel Servicios Locales S.A. ("Avantel"), Axtel, S.A. de C.V.
("Axtel"), Megacable Comunicaciones de México, S.A. de C.V. ("Megacable") and
Unefon.
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Avantel, in which MCI WorldCom Inc. is a shareholder, was awarded a long
distance service concession in 1996 and a local telephony concession in April
1999. Avantel offers nationwide long distance services and local services in
several cities, including Mexico City, Monterrey and Guadalajara.
Alestra, in which AT&T Corp. is a shareholder, was awarded a long distance
service concession in December 1995 and a local telephony concession in June
2000. In addition, Alestra has a point-to-point microwave frequency concession
in the 15 and 23 GHz band range, a point-to-multipoint microwave frequency
concession in the 10.5 GHz band range and a point-to-point national wireless
telecommunications concession in the 7 GHz band range. Alestra offers
nationwide long distance services and local service in Mexico City, Monterrey
and Guadalajara.
Alestra and Avantel are using their local telephony concessions to service
primarily the corporate business segment. We believe they have recently
started to target the small-and medium-sized business agreement.
Axtel, in which Bell Canada International is a shareholder, was awarded a
nationwide local telephony and long distance concession in June 1996, and fixed
wireless local loop frequencies in the 3.4 to 3.7 GHz band in May 1998. Axtel
commenced commercial services in the northern city of Monterrey in July 1999,
in Mexico City in May 2000, and in Guadalajara, Puebla, Toluca and León during
2001. Axtel targets the high-end residential and the small-and medium-sized
business segments. Axtel strategy includes packages with unlimited local calls
at a fixed rate.
Other competitors such as Megacable, Marcatel and MetroRed that have local
telephony concessions have a market approach that is not massive but rather
seeks to offer services to specific customers within specified coverage areas.
We believe that Megacable, Marcatel and MetroRed do not represent strong
competition in the short term.
Unefon won nationwide concessions for fixed wireless local loop
frequencies in the 3.4 to 3.7 GHz band and in the PCS 1.9 GHz band in May 1998.
Unefon began commercial operations using the 1.9 GHz band in Toluca in early
2000 and has initiated operations in Mexico City, Puebla, Monterrey and
Guadalajara, among other cities, but it has focused mainly on mobile
telephoning. We believe that Unefon will begin to focus on the fixed wireless
telephony market in the near future.
Overview of the Mexican telecommunications industry
General
The telecommunications industry involves the transmission of voice, data
and video communications from point of origination to point of termination.
The Mexican telecommunications industry has been undergoing rapid change in the
last decade due to the introduction of new technologies and the construction of
additional infrastructure, as well as market liberalization, which together
have resulted in increased competition and demand for telecommunications
services.
The modernization of the Mexican telecommunications infrastructure began
in 1990 with the privatization of Telmex, the former government—controlled
telecommunications monopoly. Since privatization, Telmex and several
concessionaires have begun deploying modern fiber and wireless networks
throughout Mexico. To meet the demand for higher volume and higher quality
wireline services, new copper cables are being installed and backbones are
being replaced largely by fiber optic transmission systems that provide greater
capacity at lower cost with higher quality and reliability.
Market liberalization
Historically, Telmex has dominated the Mexican telecommunications
industry. In December 1990, the Mexican government initiated the privatization
and deregulation of Telmex by selling a controlling portion of Telmex's equity
to a private consortium led by Grupo Carso, S.A. de C.V., a Mexican
conglomerate, as well as to subsidiaries of Southwestern Bell Corporation and
France Telecom S.A. Subsequently, the Mexican government
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opened the wireless market by granting nine regional cellular concessions
in Band "A" in order to allow concessionaires to compete with Telmex and its
mobile service provider affiliate, Radiomóvil Dipsa, S.A. de C.V. (also known
as Telcel).
Local telephony market
. In connection with the privatization of Telmex in
1990, the Mexican government amended Telmex's nationwide concession, which
expires in March 2026, and granted Telmex a six-year implied monopoly over
local telephony services. The amended Telmex concession obligated Telmex to
expand and increase local telephony service at a rate of 12% per year beginning
in 1992 and to provide basic telephone service to all population centers of 500
or more inhabitants by 1995. The implied local service monopoly was eliminated
in mid-1996 when the Mexican Communications and Transportation Ministry
(
Secretaría de Comunicaciones y Transportes
), which we refer to as the "SCT,"
published regulations governing the licensing of local services on a
competitive basis.
In order to promote competition in the local telephony market, the Mexican
government granted several concessions beginning in 1997, including first the
regional concession awarded to us for wireline local telephony service and
later expanded to a nationwide concession. Each wireline local telephony
concession granted by the Mexican government generally has a 30-year term, and
authorizes, among other things, the provision of local telephony services and
value-added services in a specified region of the country.
In addition, the Mexican government does not permit the unbundling of
local loop frequencies, requiring all telephone companies wishing to offer
local telephony service to build their own last-mile connectivity in order to
reach their targeted customers.
The Mexican government has also been conducting auctions of spectrum frequencies in the:
•
450 MHz, 1.9 GHz (PCS) and 3.4-3.7 GHz (fixed wireless local loop) frequency bands;
•
7, 15, 23 and 38 GHz frequency band for nationwide
point-to-point microwave transmission links; and
•
10.5 GHz frequency band for regional point-to-multipoint
microwave transmission service.
Four companies won nationwide concessions for fixed wireless local loop
frequencies, although one later forfeited its right for failure to pay
concession fees. In addition, six companies won concessions in the 1.9 GHz
(PCS) frequencies on either a nationwide or regional basis, although one also
forfeited its right for failure to pay concession fees. See "—Competition."
Long distance telephony market
. In connection with the privatization of
Telmex in 1990, the Mexican government granted Telmex an exclusivity period for
long distance telephony services of six years. In August 1996, the exclusivity
period expired and competition commenced in January 1997. According to Pyramid
Research, measured in terms of traffic, since the expiration of the exclusivity
period and the subsequent beginning of competition, Telmex has lost 26% and 31%
of the domestic and international long distance telephony market, respectively,
to new competitors.
In order to promote competition among domestic and international long
distance providers, the Mexican government granted several concessions,
including the national concession awarded to us, for domestic and international
long distance services, as well as value-added services. Each concession
generally has a nationwide scope and a 30-year term, and authorizes the
provision of domestic and international long distance services and value-added
services.
The long distance concessionaires include among others:
•
Alestra, S. de R.L. de C.V., in which AT&T Corp. is a shareholder;
•
Avantel, S.A. de C.V., in which MCI WorldCom Inc. is a shareholder;
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•
Axtel, S.A. de C.V., in which Bell Canada International is a shareholder; and
•
Iusatel, S.A. de C.V., in which Verizon and Vodafone are indirect shareholders.
International liberalization trends will likely impact the flow of long
distance telephone traffic to and from Mexico. In particular, demand for long
distance services may be stimulated by reforms of domestic
access/interconnection charges and international settlement rates and recent
international trade negotiations. As such charges decline, overall demand for
international and local services increases.
Mexican market characteristics
Population and economic growth
. According to the Economic Commission for
Latin America and the Caribbean-CEPAL (
Comisión Económica para América Latina y
el Caribe
), Mexico is the second largest country in Latin America in terms of
population. In 2000, Mexico had an estimated population of 97.3 million and a
population growth rate of approximately 1.3% for the period from 1995 to 2000.
In 2002, 32.2% of the population was under the age of 15, 62.9% between the
ages of 15 and 65 and only 4.9% was over 65. After a decline in 1995, Mexico's
real gross domestic product grew for five straight years, rising by 5.1% in
1996, 6.8% in 1997, 4.8% in 1998, 3.7% in 1999 and 6.6% in 2000. However in
2001, the real gross domestic product decreased by 0.3%. In 2002, the growth
of the real gross domestic product resumed as it increased by 0.9%.
Underserved telephony market
. In 1999, The World Bank ranked Mexico as
the 12th largest economy in the world. However, in terms of wireline
penetration, Mexico was ranked 69th in the world. This relatively low level of
wireline penetration evidences substantial unmet demand for fixed telephony
service. The following table presents telephone wirelines in service per 100
inhabitants for the United States and selected Latin American countries as of
December 31, 2002.
Selected Teledensity Rates
Lines in service per
Country
100 inhabitants
(1)
United States
64
Uruguay
29
Argentina
23
Chile
22
Brazil
18
Colombia
19
México
14
Venezuela
11
Peru
7
(1)
Source: Pyramid Research
According to Pyramid Research, the wireline local telephony market
represents approximately 35% of Mexico's total telecommunications market, when
measured by revenues, and generated approximately U.S.$6.7 billion of revenue
in 2002.
Projected growth trends
. With the introduction of competition in the
Mexican telecommunications market, teledensity rates and line usage increased
substantially. According to Pyramid Research, between 2002 and 2007 fixed line
penetration in service in Mexico is expected to increase by 14.7%.
According to Pyramid Research, local and domestic long distance services
revenues are expected to experience 7.6%, and 2.1% average annual growth rates
between 2002 and 2007, respectively. In contrast, internal long distance
services revenues are expected to experience a 0.2% average annual decrease
over the same period.
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Total local wireline telephony revenues in Mexico are expected to increase
from U.S.$6.7 billion in 2002 to U.S.$9.2 billion in 2007. In contrast,
international long distance services revenues are expected to experience a 0.2%
average annual decrease over the same period. This growth is expected to
result from an increase in the number of lines in service combined with the
growth in the average usage per line. Despite the expected reduction in
international long distance revenues, it is expected that local usage revenues
will drive total market growth.
Supervision and regulation of the Mexican telecommunications industry
General
The telecommunications industry in Mexico is subject to the Federal
Telecommunications Law (
Ley Federal de Telecomunicaciones
) which was enacted in
1995. However, certain rules set forth under the General Means of
Communications Law (
Ley de Vías Generales de Comunicación
), the
Telecommunications Regulation (
Reglamento de Telecomunicaciones
) and the rules
promulgated thereunder, generally remain effective and are referred to as the
Old Telecommunications Law.
Under the Federal Telecommunications Law, the Mexican telecommunications
industry is regulated for administrative and operational matters by COFETEL
(
Comisión Federal de Telecomunicaciones
). COFETEL was created in 1996 as an
autonomous entity from the SCT to regulate and promote the efficient
development of the telecommunications industry in Mexico. COFETEL is
responsible for, among other things:
•
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.
The SCT retains the authority to grant all concessions and permits.
COFETEL makes recommendations to the SCT on major issues, such as amending
existing telecommunications laws, allocating spectrum frequencies, granting,
transferring, renewing or revoking concessions and applying penalties for
concession violations. The SCT has final decision making power on these
issues. Once a final decision is made, COFETEL implements the related
regulations.
Concessions and permits
General
. To provide public telephony services in Mexico through a public
network, a service provider must first obtain a concession from the SCT.
Pursuant to the Federal Telecommunications Law, concessions for public
networks may not exceed a term of 30 years, and concessions for spectrum
frequencies may not exceed a term of 20 years. Generally, concessions for
public networks may be extended for a term equivalent to the term for which the
concession was originally granted. Concessions for spectrum frequencies will
be re-auctioned at least three years prior to their expiration date.
Concessions specify, among other things:
•
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;
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•
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; and
•
any other rights and obligations affecting the concession holder.
In addition to concessions, the SCT may also grant permits for the following:
•
installing, operating or exploiting transmission-ground stations; and
•
providing telecommunications services as a reseller.
There is no legally mandated maximum term for these permits unless
specifically stated in the permit. Under the Federal Telecommunications Law, a
company needs to register with COFETEL the rates for the telecommunications
services that it wishes to provide in order to be able to provide them to the
public.
In addition, the Mexican Congress enacted a law effective January 1, 2002,
that expanded the scope of the sales and use tax to include additional
services, including services provided by telecommunications companies, at a
rate of 10%. An amendment to this law, effective January 1, 2003, confirmed
that our core business (the offering of local and long distance services) is
not subject to the tax. Although we believe, based on the advice of our tax
and regulatory advisors, that certain other services that are part of our local
service offerings are also not subject to such tax, we cannot assure you that
the tax authorities may not interpret the law otherwise.
Ownership restrictions
. Under the Federal Telecommunications Law and the
Mexican Foreign Investment Law (
Ley Federal de Inversión Extranjera
),
concessions may be granted only to:
•
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.
However, in the case of concessions for cellular communications services,
foreign investment participation may exceed 49% of the voting stock with the
prior approval of the Mexican Foreign Investment Bureau of the Mexican Ministry
of Economy
(Secretaría de Economía)
.
Pursuant to the Foreign Investment Law, the Mexican Ministry of Economy
may also authorize the issuance of non-voting or limited-voting stock (also
known as "neutral shares") that are not counted for purposes of determining the
foreign investment percentage of a Mexican corporation under the Mexican
Foreign Investment Law. Any share transfers resulting in a violation of these
foreign ownership requirements are invalid under Mexican law.
Transfer
. Concessions are transferable after the first three-year period
of the concession, if the SCT approves the transfer of the concession title,
the assignee agrees to comply with the terms of the concession and such a
transfer does not violate the foreign ownership requirements of the Federal
Telecommunications Law and the Mexican Foreign Investment Law.
Termination
. A concession or a permit may be terminated pursuant to the
Federal Telecommunications Law upon the following events:
•
expiration of its term;
•
resignation by the concession holder or the permit holder;
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•
revocation. A concession or a permit may be revoked prior to
the end of its term under certain circumstances, such as:
<
failure to exercise the rights of the concession
within 180 days of the grant;
<
failure to provide interconnection services with
other holders of telecommunications concessions and permits
without just cause;
<
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; 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.
The SCT may revoke a concession for violations in any of the
circumstances referred to in the first four instances above. Under
the last four instances above, the SCT would have to fine the
concessionaire at least three times for the same failure before
moving to revoke a concession.
•
expropriation. The Mexican government has the statutory
right to permanently expropriate any telecommunications concession
and claim any related assets for reasons of public interest. Under
Mexican law, the Mexican government is obligated to compensate the
owner of such assets in the case of a statutory expropriation. The
amount of the compensation is to be determined by appraisers. If
the party affected by the expropriation disagrees with the appraisal
amount, such party may initiate judicial action against the
government. In such a case, the relevant judicial authority will
determine the appropriate amount of compensation to be paid. We are
not aware of any instance in which the SCT has exercised its
expropriation rights in connection with a telecommunications
company; and
•
dissolution or bankruptcy of the concession holder or the
permit holder.
Temporary seizure
. The Mexican government, through the SCT, may also
temporarily seize all assets related to a telecommunications concession or
permit in the event of a natural disaster, war, significant public disturbance,
threats to internal peace or for economic reasons or for other reasons related
to national security. If the Mexican government temporarily seizes such
assets, except in the event of war, it must indemnify the concession holder for
all losses and damages, including lost revenues. We are not aware of any
instance in which the SCT has exercised its temporary seizure powers in
connection with a telecommunications company.
Rates for telecommunications services
Before the Federal Telecommunications Law was amended, the SCT's approval
was required for setting the rates charged for all basic local, long distance
and certain value-added local and long distance telecommunications services.
Historically, the SCT permitted rate increases based on the cost of service,
the level of competition, the financial situation of the carrier and certain
macroeconomic factors. Carriers were not allowed to discount the rates
authorized by the SCT, although operators occasionally waived activation fees
on a promotional basis. Interconnection rates also required SCT approval.
Rates for private dedicated circuit services through microwave networks and
private networks through satellites were not regulated before the Federal
Telecommunications Law was amended.
Under the Federal Telecommunications Law, rates for telecommunications
services (including local, cellular and long distance services) are now freely
determined by the providers of such services, except that such rates may not be
set below a service provider's long-term incremental cost.
In addition, COFETEL is authorized to impose specific rate, quality and
service requirements on those companies determined by the Federal Antitrust
Commission (
Comisión Federal de Competencia
) to have substantial
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market power
pursuant to the provisions of Mexico's antitrust statute. All rates for
telecommunications services (other than value-added services) must be
registered with COFETEL prior to becoming effective. The Federal
Telecommunications Law prohibits telecommunications providers from
cross-subsidizing among their services and requires that they keep separate
accounting for each of their services.
The Mexican Antitrust Commission has found that Telmex has substantial
market power on the local, long distance and Internet and data transmission
markets, as defined under Mexico's antitrust statute. Based on this finding,
COFETEL issued a resolution in September 2000 regulating Telmex as a dominant
carrier, imposing special obligations regarding, among other things, quality of
services, tariffs and disclosure of information. Telmex has obtained an
injunction against potential COFETEL actions that intend to regulate Telmex by
imposing special obligations on Telmex regarding, among other things, quality
of services, tariffs and disclosure information. As a result of this
injunction, the Mexican Antitrust Commission must restart the administrative
procedures and prove again that Telmex has substantial power market on certain
services.
Our concessions
Local telephony
. We obtained our regional wireline local telephony
concession in February 1997. In September 2001, this concession was expanded
to a nationwide concession. The concession, which is not exclusive, grants us
the right to provide business, residential and public wireline local telephony
services all over Mexico. Our wireline local telephony concession has a term
of 30 years and may be renewable for up to an equivalent period provided we
have complied with all its terms.
The concession expressly permits us to provide the following services:
•
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.
The concession does not impose any limitations on the setting of our rates
other than the requirement that we file with COFETEL a notification of any rate
change prior to having it take effect.
The concession requires us to comply with service quality specifications
and, starting in September 2001, to install infrastructure on the basis of a
yearly schedule. According to this schedule, we must install at least an
aggregate of 376,000 lines in at least 394 cities and towns in Mexico by the
end of 2006.
Although we are currently in compliance with the requirement in our
concession for the number of lines installed, we are currently in default with
respect to the coverage obligations in certain cities and towns required by our
concession. In addition, we believe we will not be able to meet certain
buildout obligations in certain towns and cities along the Mexico City—City of
Querétaro corridor by September 2003. We are in the process of preparing a
request for a modification to the buildout requirement of the concession from
COFETEL. If granted, this
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modification would allow us to be once again in
compliance. However, we cannot assure you that COFETEL will agree to such
modification. See "Item 3. Key Information—D. Risk Factors—Factors relating
to the Mexican telecommunications industry—We could lose our concessions if we
do not comply fully with their terms."
Failure to comply with the terms of the concession or to obtain a waiver
or modification could result in its revocation and the loss of the Ps.13.1
million performance bond that we previously issued to the SCT. The Mexican
government would not be required to compensate us for such revocation. See
"—Concessions and permits—Termination."
As of January 1, 2003, the level of fines, which are based on a multiple
of the Mexican minimum daily salary, ranged from Ps.87,300 to Ps.4.4 million,
depending on the nature of the infraction. In the case of multiple recurring
infractions, these fines may be doubled.
Long distance
. We obtained our nationwide long distance concession in
February 1997, concurrently with our local telephony concession. Our
nationwide long distance concession has a term of 30 years and may be renewable
for up to an equivalent period, provided that we have complied with all its
terms.
The concession expressly permits us to provide the following services:
•
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
•
nationwide and international long distance telephony.
The concession expressly prohibits the following services:
•
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.
The concession does not impose any limitations on our ability to set rates
other than the requirement that we file with COFETEL a notification of any rate
change prior to having it take effect.
The concession requires us to comply with service quality specifications
and to install infrastructure on the basis of the schedule for our local
telephony concession. According to this schedule, we must provide nationwide
long distance service in the same locations and at the same time in geographic
areas where we provide local telephony services. Of these areas, we must
provide service in 394 cities and towns in Mexico using our own or leased
infrastructure by the end of 2006.
Although we are currently in compliance with the requirement in our
concession for the number of lines installed, we are currently in default with
respect to the coverage obligations in certain cities and towns required by our
concession. In addition, we believe we will not be able to meet certain
buildout obligations in certain towns and cities along the Mexico City—City of
Querétaro corridor by September 2003. We are in the process of preparing a
request for a modification to the buildout requirement of the concession from
COFETEL. If granted, this
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modification would allow us to be once again in
compliance. However, we cannot assure you that COFETEL will agree to such
modification. See "Item 3. Key Information—D. Risk Factors—Factors relating
to the Mexican telecommunications industry—We could lose our concessions if we
do not comply fully with their terms."
The failure to comply with the terms of the concession or to obtain a
waiver or modification could result in its revocation and the loss of the
Ps.13.4 million performance bond that we previously issued to the SCT. The
Mexican government would not be required to compensate us for such revocation.
As of January 1, 2003, the level of fines, which are based on a multiple
of the Mexican minimum daily salary, ranged from Ps.87,300 to Ps.4.4 million,
depending on the nature of the infraction. In the case of multiple recurring
infractions, these fines may be doubled.
We service our long distance concession by reselling our long distance
traffic to other carriers with such capability. We currently do not intend to
provide long distance service to anyone other than our local telephony
customers (who use our own infrastructure for call origination) to avoid having
to pay significant special charges to Telmex. According to COFETEL
regulations, any long distance carrier that wishes to interconnect to Telmex's
local network must make a payment to Telmex on account of Telmex's investment
to upgrade its local infrastructure to allow long distance competition. In
December 2000, Avantel and Alestra negotiated with Telmex a one-time payment of
U.S.$13.6 million as an infrastructure development charge and an
interconnection fee of U.S.$0.0053 per minute. Telmex adjusts the
infrastructure development charge at a 10% annual rate. COFETEL has implicitly
accepted that Telmex may require other long distance carriers to make similar
payments.
According to the Mexican telecommunications regulations, all local
carriers must offer their customers the option to select the long distance
carrier of their preference; this practice is known as pre-subscription.
However, local carriers may request a waiver of this obligation from COFETEL.
On May 27, 2002, COFETEL granted us a waiver of the pre-subscription
requirement. With this waiver, our local telephony customers who are currently
using other long distance carriers may only change, if they wish to do so, to
our long distance service. New local telephony customers must use our long
distance service. This waiver is valid through May 2004 for Mexico City and
the City of Puebla, and for five years (calculated from the date we begin to
provide service) for anywhere else in Mexico including the City of Querétaro.
Microwave transmissions.
Point-to-point. In October 1997, we were
awarded seven nationwide point-to-point microwave concessions. These
concessions cover:
•
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.
These concessions, which were issued in June 1998, have a term of 20
years. COFETEL will re-auction the frequencies covered by the concessions at
least three years before the expiration date of the concessions. The
concessions require us to provide available capacity to the general public.
We are currently in compliance with all the material terms of the
concessions.
The failure to comply with the terms of the concessions could result in
their revocation and the loss of up to Ps.12.2 million in performance bonds
that we previously issued to the SCT for all of our seven point-to-point
concessions. The Mexican government would not be required to compensate us for
such revocation. As of January 1, 2003, the level of fines, which are based on
a multiple of the Mexican minimum daily salary, ranged from Ps.87,300 to Ps.4.4
million, depending on the nature of the infraction. In the case of multiple
recurring infractions, these fines may be doubled.
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These concessions do not impose any limitations on the setting of our
rates other than the requirement that we file with COFETEL a notification of
any rate change prior to having it take effect.
Point-to-multipoint. In October 1997, we were awarded three regional
point-to-multipoint microwave concessions covering Regions 3, 5 and 8, which
include states in the north and southeast of Mexico's Gulf region in the 10.5
GHz with a 60 MHz bandwidth.
These concessions, which were issued in April 1998, have a term of 20
years. COFETEL will re-auction the frequencies covered by the concessions at
least three years before the expiration date of the concessions. These
concessions require us to install a network and offer service to at least 30%
of the population in each region covered by the concessions by the end of the
second year after the issuance of the concession.
We, together with 14 other concessionaires, have been unable to start
operations in some of our Regions because of lack of commercially viable
technological solutions and equipment for those frequencies. COFETEL initially
granted extensions until April 2000 and later extended them to October 2001.
In November 2001 and again in December 2002, we requested that COFETEL amend
our point-to-multipoint concessions in order to postpone the installation of
our network and the offering of our services until one year after the granting
of such request. We have knowledge that other concessionaires have made
similar requests.
We cannot assure you that COFETEL will grant our request. The failure to
comply with the terms of the concessions or to obtain a waiver or modification
could result in its revocation and the loss of the Ps.4.5 million performance
bond that we previously issued to the SCT for all of our three
point-to-multipoint concessions. The Mexican government would not be required
to compensate us for such revocation. As of January 1, 2003 the level of
fines, which are based on a multiple of the Mexican minimum daily salary,
ranged from Ps.87,300 to Ps.4.4 million, depending on the nature of the
infraction. In the case of multiple recurring infractions, these fines may be
doubled.
These concessions do not impose any limitations on the setting of our
rates other than the requirement that we file with COFETEL a notification of
any rate change prior to having it take effect.
Interconnection
In accordance with the Mexican telecommunications laws, all local
telecommunications carriers are required to provide interconnection to each
local, long distance and cellular carrier operating in Mexico.
All terms of interconnection (such as point of interconnection) are
negotiated between telecommunications carriers under COFETEL's supervision.
Should telecommunications carriers be unable to agree on the terms of
interconnection (including rates) after a certain period of negotiation, either
carrier may request COFETEL to resolve any interconnection term at issue.
Telecommunications carriers are prohibited from adopting discriminatory
practices in the application of rates or any other terms of interconnection.
Local interconnection
. In November 1998, we entered into an
interconnection agreement with Telmex. This agreement calls for reciprocal
interconnection rates for local-to-local services. The interconnection rate
was Ps.0.3220, Ps.0.1159 and Ps.0.0990 per minute for the months of December
2000, 2001 and 2002, respectively.
This agreement was amended in February 1999 to incorporate a "bill and
keep" feature through September 15, 2002, provided we maintain a significant
percentage of residential users, and again in November 2000, retroactive to
March 2000, to exempt Internet service provider traffic from interconnection
fees.
Under the "bill and keep" arrangement, if the imbalance between calls
originated by Telmex and terminated by Maxcom and calls originated by Maxcom
and terminated by Telmex during a month does not exceed 70%, then no
interconnection fee amounts are payable by the net user of interconnection
services. If the imbalance exceeds 70% in any given month, the "bill and keep"
feature will not apply for that month.
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If we fail to maintain a significant percentage of residential users, then
the "bill and keep" arrangement will be terminated and asymmetrical
interconnection rates may apply. COFETEL has not yet defined what constitutes
a "significant percentage of residential users" in this case, although in local
concessions granted to Alestra and Avantel it defines it to mean that at least
50% of the customers are residential.
Our interconnection agreement with Telmex expired on September 15, 2002.
However, due to a "continuous application" clause this agreement is still under
full force and effect. We are currently negotiating with Telmex a new
interconnection agreement. Telmex has requested substantial changes to
existing terms and conditions, such as the allowed percentage of imbalance of
traffic for the "bill and keep" procedure and the interconnection rate. We
cannot assure you that we will be able to obtain the services we require from
Telmex on new terms and conditions that permit us to offer services at
profitable and competitive rates.
Through December 31, 2002, no material interconnection fees have been
paid.
Mobile interconnection
. We have also signed reciprocal interconnection
agreements with Telcel, a wholly-owned subsidiary of América Móvil, which is a
spin-off of Telmex; with several subsidiaries of Iusacell and with Operadora
Unefon, S.A. de C.V. ("Unefon") and Pegaso Comunicaciones y Sistemas, S.A. de
C.V., ("Pegaso"). Telcel and Pegaso are the first and second largest mobile
telephony service providers in Mexico, respectively. Telcel and Pegaso are
nationwide cellular operators. Iusacell provides cellular mobile services in
seven of the nine regions covering central Mexico. Unefon is a nationwide PCS
mobile operators.
The mobile to wireline interconnection fees with these carriers were
Ps.0.3220, Ps.0.1159 and Ps.0.0990 per minute for the months of December 2000,
2001 and 2002, respectively. The wireline to mobile interconnection fees under
the "calling party pays" mode was Ps.1.90 per minute for December 2000, 2001
and 2002. There is no interconnection fee for wireline to mobile
interconnection outside of the "calling party pays" mode. The interconnection
agreements provide that transit from Telmex may be used at a rate per minute
which was Ps.0.0626 for the month of December 2000, Ps.0.0278 for the month of
December, 2001 and Ps.0.0304 for the month of December 2002.
Long distance interconnection
. Long distance carriers are required to
ensure call termination by providing transit and direct or indirect
interconnection. Since we view long distance services as a complement to our
core local telephony business, we started our operations giving our customers
the option to use our long distance services or those of other providers. As a
result, we granted long distance carriers the option to pick up calls at our
facilities. However, in May 2002, we obtained a waiver from COFETEL of the
obligation to offer such option to our customers See "—Our concessions—Long
distance."
As a company that provides local service, we have requested
interconnection from all long distance carriers. To date, only Telmex, Alestra
S. de R.L. de C.V. ("Alestra"), Bestel, S.A. de C.V., Operadora Protel, S.A. de
C.V. and Iusatel, S.A. de C.V., the long distance subsidiary of Grupo Iusacell,
have agreed to provide interconnection. We have filed a complaint with COFETEL
against four other long distance carriers who have refused to provide
interconnection. It is unclear when COFETEL will rule in this issue.
We currently provide our long distance service only to our local telephony
customers through our own network and leased facilities on a reselling basis.
Municipal and other regulatory approvals
Our transmission antennas and telecommunication sites are located in sites
that may require municipal and federal approvals to operate. See "Item 3. Key
Information—D. Risk factors relating to Maxcom—Our telecommunications network
infrastructure has several vulnerabilities and limitations."
C.
Organizational structure
Maxcom has only two subsidiaries, Corporativo en Telecomunicaciones, S.A.
de C.V. and Maxcom Servicios Administrativos, S.A. de C.V., each a Mexican
limited liability company (
sociedad anónima de capital
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variable
), that provide
corporate services to Maxcom. Maxcom owns all of the capital stock of the
subsidiaries, except for one share of each, which share is owned by the other
subsidiary. This organizational structure is due to the fact that Mexican law
requires that limited liability companies have a minimum of two stockholders.
D.
Property, plant and equipment
We currently lease the buildings and/or the land where our operations are
carried out and our microwave transmission equipment and switching centers are
located.
We lease space for administrative offices in Mexico City and in the cities
of Puebla and Querétaro. Our main headquarters are located in Santa Fe, Mexico
City in a building leased for a 5-year term that expires on February 26, 2007
and that is renewable for two additional 5-year terms. This building is
comprised of 115,110 square feet.
In May 2003, we reached an agreement with our landlord at our former
headquarters in Magdalena, Mexico City. Pursuant to this agreement, we
retained a leasehold interest through May 2013 on the first floor, where one of
our Lucent 5ESS switches is located, the roof-top, where we have three
microwave transmission antennas and a section of the basement, which will be
used for parking and to place some of our electric equipment that supports the
switch. We were also released from lease obligation on approximately 35,887
square feet plus parking space of the building originally running through
September 30, 2013. In exchange for the new lease and the releases, we agreed
to prepay the full, ten-year lease obligations on the first floor, the roof-top
and basement, as well as pay past-due lease payments dating back from October
2002 through April 2003. All these payments amount in the aggregate to
U.S.$2.7 million and will be payable in installments through May 2004.
Our offices in the City of Puebla are leased for a 10-year renewable term
that expires on March 25, 2008. These offices in Puebla are comprised of
14,100 square feet and hold one of our Lucent Technologies 5ESS switch. We
have a branch office in Puebla that is leased for a 5-year term that expires on
June 1, 2004, renewable for one similar additional term. This building is
comprised of 1,350 square feet.
Our offices in the City of Querétaro are leased for a 15-year renewable
term that expires on August 1, 2017. These offices in Querétaro are comprised
of 13,186 square feet. We have a branch office in Querétaro that is leased for
a 15-year term that expires on June 23, 2017. This branch office is comprised
of 12,015 square feet and holds one of our other Lucent Technologies 5ESS
switch.
We have a 96,900-square-foot industrial warehouse in Mexico City leased
for a 2-year term that expires on July 31, 2003. We do not plan to renew this
lease, and we are looking for a smaller warehouse. In addition, we lease
approximately 131 other sites that are used as hosts or single-site buildings
and are located throughout Mexico City and the cities of Puebla. We believe
that our facilities are adequate for our present needs and are suitable for
their intended purposes.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
All peso amounts discussed in this annual report are presented in constant
December 31, 2002 pesos in accordance with Mexican GAAP, except as otherwise
indicated. You should read the following discussion and analysis in
conjunction with the consolidated financial statements included elsewhere in
this annual report. Unless
otherwise indicated, all financial information in this annual report is
presented in constant pesos as of December 31, 2002. The U.S. dollar
translations provided in this annual report are solely for the convenience of
the reader and are, unless otherwise indicated, calculated utilizing the noon
buying rate at December 31, 2002, which was Ps.10.43 per U.S.$1.00 as reported
by the Federal Reserve Bank of New York. Sums may not add due to rounding.
The following discussion and analysis is intended to facilitate an
understanding and assessment of significant changes and trends in our
historical consolidated results of operations and financial condition and
factors affecting our financial resources. It should be read in conjunction
with the audited consolidated financial statements as of December 31, 2001 and
2002 and for the years ended December 31, 2000, 2001 and 2002 and related
notes.
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These consolidated financial statements, which appear elsewhere in this
annual report, have been prepared in accordance with Mexican GAAP, which
differs in certain significant respects from U.S. GAAP. See note 22 to our
consolidated financial statements for a description of the principal
differences between Mexican GAAP and U.S. GAAP applicable to us. Note 22 to
our financial statements also provides a reconciliation to U.S. GAAP of our net
losses for the years ended December 31, 2000, 2001 and 2002 and of
stockholders' equity as of December 31, 2000, 2001 and 2002.
Our financial statements have been prepared in accordance with Bulletin
B-10, "Recognition of the Effects of Inflation on Financial Information," as
amended, issued by the Mexican Institute of Public Accountants ("MIPA"), which
provides guidance for the recognition of the effects of inflation and
translation of foreign currency transactions.
We restate our income statement to reflect the purchasing power of the
peso as of the most recent reporting date (December 31, 2002), using a
restatement factor derived from the change in the national consumer price index
from the month in which the transaction occurred to the most recent year-end.
Except where otherwise indicated, financial data for all periods in the
consolidated financial statements and throughout this annual report have been
restated in constant pesos as of December 31, 2002. References in this annual
report to "real" amounts are to inflation-adjusted pesos and references to
"nominal" amounts are to unadjusted historical pesos. In calendar years 2000,
2001 and 2002, the rates of inflation in Mexico, as measured by changes in the
Mexican national consumer price index, were 9.0%, 4.4% and 5.7%, respectively.
Bulletin B-12, issued by the MIPA, specifies the appropriate presentation
of the statement of changes in financial position when the financial statements
have been restated in constant monetary units. Bulletin B-12 identifies the
sources and applications of resources as the differences between beginning and
ending financial statement balances in constant monetary units. The Bulletin
also requires that monetary and foreign exchange gains and losses not be
treated as non-cash items in the determination of resources provided by
operations.
Recent developments
On March 18, 2003, our board of directors elected Mr. René S. Sagastuy as
our new chief executive officer. Mr. Sagastuy was our Chief
Operating Officer for the past two years and replaced Mr. Fulvio del Valle who served
as our chief executive officer for the same period of time. See "Item 3. Key
Information—D. Risk Factors—We have experienced significant turnover in our
executive ranks which has affected our ability to develop and execute our
business strategies," for a description of risks associated with our
significant turnover at the executive level. For more information with respect
to our management please see "Item 6. Director, Senior Management and
Employer—A. Directors and Senior Management."
Debt restructuring and recapitalization
On April 29, 2002, we consummated a debt restructuring and
recapitalization of Maxcom. The purpose was to reduce our debt service burden,
improve our liquidity and attract additional investment, in order to continue
the buildout of our infrastructure and the growth of our business. The
following actions were taken pursuant to the debt restructuring and
recapitalization:
•
Holders tendered an aggregate of U.S.$259,410,000 in
principal amount of 13 3/4% series B senior notes due 2007 (which
we refer to in this annual report as the "old notes") in exchange
for an aggregate of (i) U.S.$165,078,150 in principal amount of new
senior notes (which we refer to in this annual report as the "new
notes") bearing 0% interest through March 1, 2006, and 10% annual
interest in the last year, and (ii) 26,459,820 series N2 convertible
preferred stock, with an initial liquidation preference of
U.S.$0.4927 per share and limited voting rights, in the form of
Mexican Trust Certificates known as "CPOs," which represented in the
aggregate 15.2% of our then total capital stock;
•
Existing and new shareholders invested U.S.$66.2 million and
received preferred stock (more fully described in "Item 7. Major
Shareholders and Related Party Transactions—A. Major
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shareholders and share ownership—The capital restructuring"), which represented
in the aggregate 77.0% of our then total capital stock;
•
Our capital structure was restructured as more fully
described in "Item 7. Major Shareholders and Related Party
Transactions—A. Major shareholders and share ownership—The capital
restructuring."
In April 2002, we cancelled U.S.$25,000,000 in principal amount of old
notes we had purchased in the secondary market prior to the debt restructuring.
In addition, on July 25, 2002, we completed an additional exchange of
U.S.$4,000,000 in aggregate principal amount of old notes under the same terms
and conditions of the exchange offer consummated on April 29, 2002. As of
December 31, 2002, 95.8% of the total old notes were exchanged and or
cancelled, and new notes on an aggregate principal amount of U.S.$167,623,590
remained outstanding. Old notes representing an aggregate principal amount of
U.S.$11,590,000 remained outstanding as of the same date.
As a result of the debt restructuring, we will save U.S.$38.1 million in
interest expense on an annualized basis from the date of issuance of the new
notes through February 28, 2006. From March 1, 2006 until March 1, 2007, which
is the maturity date of the new notes, we will save U.S.$20.5 million in
interest expense.
In addition, as a result of the debt restructuring and in accordance with
Mexican corporate law, we recognized a capital stock issuance premium in an
aggregate amount of U.S.$82,548,690. This premium, as well as other items of
the capital stock, was applied to partially offset prior year's accumulated
deficits in capital stock at year end 2002.
A.
Results of operations
Overview of Maxcom
We are a growing facilities-based telecommunications company operating in
the competitive local exchange carrier market in Mexico. We are focused on
developing our network and support infrastructure required to provide local as
well as long distance and other value-added services to targeted small and
medium-sized business and residential customers within our concession areas.
We position ourselves as a single-source provider of telecommunications
services to our customers.
We commenced commercial operations on May 1, 1999 and currently provide
last-mile connectivity to small and medium-sized business and residential
customers in Mexico City and the cities of Puebla and Querétaro. In addition
to our existing local and long distance services, we offer value-added services
such as digital high-speed data connectivity, dial-up Internet access and other
broadband services.
We were incorporated in February 1996 to take advantage of business
opportunities arising out of the liberalization of Mexico's telecommunications
industry. In February 1997, we were awarded Mexico's first competitive
wireline local and long distance telephony concession, covering the Federal
District of Mexico and over 100 cities and towns in the Gulf region for local
service and the whole nation for long distance service. This concession has a
term of 30 years. Our concession was expanded in September 1999 to cover most
of the greater Mexico City area, and a wider area within the Gulf region. In September
2001, our wireline local telephony concession was expanded to cover all of
Mexico.
We were also awarded seven nationwide point-to-point and three regional
point-to-multipoint microwave concessions in October 1997, each for 20 years.
Devaluation and inflation
On December 20, 1994, the Mexican government responded to exchange rate
pressures by increasing the upper limit of the then existing free market
peso/U.S. dollar exchange rate band by 15% and, two days later, by eliminating
the band to allow the peso to fluctuate freely against the U.S. dollar. This
resulted in a major
37
Table of Contents
devaluation of the peso relative to the U.S. dollar. Where
the noon buying rate had been Ps.3.45 per U.S.$1.00 on December 19, 1994, by
December 31, 1994 the noon buying rate had fallen to Ps.5.00 per U.S.$1.00,
representing a 44.9% devaluation. The peso continued to decline against the
U.S. dollar during 1995, closing at a noon buying rate of Ps.7.74 per U.S.$1.00
on December 31, 1995, which represented a 54.8% devaluation relative to the
U.S. dollar for the year.
The Mexican economy began to recover in 1996 and 1997, as exchange rates
stabilized, inflation decreased and real gross domestic product grew by 5.3%
and 6.8%, respectively. However, the financial crises in Asia and Russia,
together with the weakness in the price of oil in 1998, which is a significant
source of revenue for the Mexican government, contributed to renewed weakness
in the peso, which devalued 22.7% relative to the U.S. dollar. From 1999 to
2000, the peso-to-dollar exchange rate remained relatively stable. In 2001,
the peso-to-dollar exchange rate showed a slight recovery of 4.8% from Ps.9.60
on December 31, 2000 to Ps.9.14 on December 31, 2001. However, in 2002, the
peso devalued 13.9% relative to the U.S. dollar. In the first three months of
2003, the peso devalued 3.4% relative to the U.S. dollar.
Peso devaluations contributed to sharp increases in inflation. Inflation,
which had been 7.1% in 1994, increased to 52.0% and 27.7% in 1995 and 1996,
respectively. After a reduction to 15.7% in 1997, inflation was 18.6% in 1998.
In 1999, 2000 and 2001, the inflation rate decreased to 12.3%, 9.0% and 4.4%,
respectively. In 2002, the inflation rate was 5.7%.
The general economic conditions in Mexico resulting from a devaluation of
the peso and the resulting inflation may have a negative impact on our results
of operations, primarily as a result of:
•
the increase in the peso-carrying costs of our U.S.
dollar-denominated debt and capital expenditure requirements;
•
the ensuing decrease in the purchasing power of Mexican
consumers, which results in a decrease in the demand for telephony
services; and
•
our inability, due to competitive pressures, to increase our
prices in line with inflation.
Capitalization of preoperating expenses
We commenced commercial operations on May 1, 1999. As permitted under
Mexican GAAP, during our preoperating stage, we capitalized all of our general
and administrative expenses and our net integral cost of financing.
Accordingly, our financial statements do not include consolidated statements of
operations for the periods from February 28, 1996 (our date of incorporation)
to April 30, 1999.
Beginning on May 1, 1999, we were required to begin to amortize all
previously capitalized pre-operating cost. These capitalized preoperating
expenses, net, which amounted to Ps.266.4 million at December 31, 2000,
Ps.234.5 million at December 31, 2001 and Ps.204.4 million at December 31,
2002, are amortized on a straight-line basis for a period not exceeding ten
years.
Voice, data and wholesale revenues
Beginning with the third quarter of 2002, we itemize voice, data and
wholesale service revenues in our reporting.
Voice services are our core business. Revenues from voice services include:
•
installation charges of voice lines;
•
monthly fees for the rental of voice lines, which include,
depending on the product, a certain number of free local calls;
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Table of Contents
•
usage charges of voice lines, which can be local calls above
those already included in the monthly fees, long distance minutes,
as well as minutes to mobile numbers under the Calling Party Pays
modality; and
•
charges relating to value-added services such as voice mail,
call waiting, call forwarding, three-way calling and caller
identification.
We began to offer data services on a full basis in July 2002. Revenues
from data services include: Internet dial-up access, ADSL, dedicated Internet
access and digital private lines. We charge for these services on a bandwidth
basis.
Wholesale service revenues are related basically to the sale of bulk
minutes where the tariff per minute depends on the volume of traffic.
Customers include high-usage customers, Internet service providers and carriers
with whom we do not have "bill & keep" agreements (such as long distance and
mobile carriers). We also include in this group other miscellaneous revenues.
Results of operations
The following table sets forth, for the periods indicated, selected
statement of operations data calculated in accordance with Mexican GAAP and
expressed as a percentage of net revenue:
Year ended December 31
2000
2001
2002
Net revenues
100
%
100
%
100
%
Operating cost and expenses:
Network operating costs
41
%
48
%
39
%
Selling, general and administrative expenses
124
%
137
%
80
%
Depreciation and amortization
76
%
85
%
59
%
Total operating cost and expenses
241
%
270
%
178
%
Operating loss
141
%
170
%
78
%
Integral cost of financing
84
%
18
%
58
%
Nonrecurring charges
0
%
20
%
0
%
Other expense, net
0
%
0
%
0
%
Taxes
0
%
0
%
0
%
Net loss
224
%
208
%
137
%
Year ended December 31, 2002 compared to year ended December 31, 2001
Net revenues
Our net revenues primarily include monthly fees, usage fees, installation
charges, interconnection fees and the sale of telephone sets. See note 4.m. to
the consolidated financial statements included in this annual report for an
explanation of how we recognize revenues.
Our net revenues increased 61.3% in 2002 as compared to 2001, from Ps.
332.3 million in 2001 to Ps.535.9 million in 2002.
Voice revenues increased by 125.5%, from Ps.213.1 million in 2001 to
Ps.480.6 million in 2002. This increase was primarily due to a more than
doubling of the number of average voice lines in service from 45,701 in 2001 to
96,521 in 2002, as we continued the buildout of our network infrastructure and
had more voice lines available. The increase in voice lines produced a 132.3%
increase in monthly fee revenues (from Ps.90.6 million in 2001 to Ps.212.3
million in 2002) and a 132.0% increase in overall usage fees (from Ps.100.0
million in 2001 to Ps.231.9 million in 2002).
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Table of Contents
Wholesale revenues decreased by 61.8%, from Ps.119.2 million in 2001 to
Ps.45.6 million in 2002. This decrease was primarily due to (i) a reduction in
per-minute tariffs as a result of competitive pressures, and (ii) a 24.6%
decrease in the number of average wholesale lines (from 6,745 lines in 2001 to
5,085 lines in 2002) as a result of our strategy of focusing our sales efforts
in our core business rather than giving in to competitive pressures in this
market.
We started reporting revenues from data services in July 2002, when this
business became more relevant. Prior to that date, revenues from data services
were included under voice revenues. During 2002, revenues from data services
were Ps.9.7 million.
The following table presents a breakdown of our revenues by source for
2001 and 2002:
Year ended December 31
2001
2002
(in millions)
Voice
(1)
Ps.
213.1
Ps.
480.6
Data
—
9.7
Wholesale
119.2
45.6
Total revenues
Ps.
332.3
Ps.
535.9
(1)
Includes revenues only from July 2002. Data service revenues were
minimal before such date and were recorded under voice service revenues.
The following table presents a breakdown of our average revenue per line
(also known as ARPU) for 2001 and 2002.
ARPU
2001
2002
%
(in U.S. dollars)
Business
Monthly charges
$
25.7
$
23.5
(9
)%
Usage
44.1
51.8
18
%
Subtotal
69.8
75.3
8
%
Non-recurring
5.6
4.3
(24
)%
Total business
$
75.4
$
79.6
6
%
Residential
Monthly charges
$
18.1
$
17.7
(2
)%
Usage
13.0
12.4
(4
)%
Subtotal
31.1
30.1
(3
)%
Non-recurring
6.0
2.9
(51
)%
Total residential
$
37.1
$
33.0
(11
)%
Total
Monthly charges
$
20.5
$
18.9
(7
)%
Usage
22.6
20.7
(8
)%
Subtotal
43.0
39.7
(8
)%
Non-recurring
5.9
3.2
(45
)%
Total
$
48.9
$
42.9
12
%
We calculate ARPU by dividing the total voice revenues for a given period
of time by the average number of voice lines in service during such period.
ARPU is a widely used standard in the telecommunications industry
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and is used
to evaluate the performance of the voice business. Revenues from data and
wholesale services are reported separately and do not contribute to ARPU.
We calculate voice lines ARPU for our residential and business lines.
Overall ARPU is affected by our business/residential line mix as business lines
tend to generate more ARPU than residential lines.
Business ARPU increased 5.5% to U.S.$80 in 2002 from U.S.$75 in 2001, as a
result of a 17.5% increase in usage charges as a consequence of a higher number
of local, long distance and mobile outbound calls per line. This increase was
partially offset by: (i) a 23.8% reduction in installation fees per line, as we
waived installation fees in many cases during 2002 due to competitive
pressures; and (ii) an 8.6% decrease in monthly fees related to a change in
product mix, given that each product has different rates.
Residential ARPU decreased 10.9% to U.S.$33 in 2002 from U.S.$37 in 2001.
The decrease was mainly due to a 51.1% decrease in installation fees due to
waivers of such fees granted as a result of competitive pressures.
The following table presents a breakdown of our lines by type of customer
at December 31, 2001 and 2002 and the percentage variation:
At December 31
2001
2002
%
Voice lines:
Business lines
16,754
22,194
32
%
Residential lines
55,537
98,557
77
%
Wholesale lines
5,690
4,480
(21
)%
Total lines
77,981
125,231
61
%
Operating costs and expenses
Our operating costs and expenses include:
•
network operating costs which, until December 31, 2000, were
comprised of long distance reselling costs, circuit leasing costs
and interconnection costs to carriers other than Telmex and,
thereafter, also included network technical expenses, installation
expenses, when applicable and disconnection expenses;
•
selling, general and administrative expenses, which primarily
included salaries, wages and benefits; consulting fees, which
primarily related to temporary management and consulting services,
executive recruiting consultants and general legal and accounting
fees; leasing costs which primarily related to our headquarters,
warehouses, and other facilities; marketing expenses which primarily
related to the implementation of our branding campaign, general
advertising and promotions; and provisioning for bad debt; and
•
depreciation and amortization mainly related to preoperating
expenses, frequency rights, telephone network systems and equipment
and intangibles.
Our operating costs and expenses were Ps.954.4 million in 2002, a 6.4%
increase as compared to Ps.897.2 million in 2001. This increase was primarily
due to:
•
a Ps.49.1 million, or 30.9%, increase in network operating
costs resulting mainly from (i) a Ps.42.0 million increase in
interconnection costs associated with significant increases in
local-to-mobile and long distance traffic, even as interconnection
tariffs for long distance decreased by an average of 23.3%, and (ii)
Ps.6.7 million in costs related to new services launched during 2002
such as AsistelMax and Internet access. These increases were
partially offset by a Ps.10.3 million, or 26.5%, reduction in
installation expenses (we record installation expense only when we
bill the
41
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charge on installation fees, and during 2002 we waived
installation fees in many instances due to competitive pressures).
Through December 31, 2002, when we waived installation costs to our
customers, installation costs were capitalized and amortized on a
straight-line basis over a period of 20 years. Beginning in 2003,
when we will waive installation costs, we capitalize and amortize them on
a straight-line basis over a period equal to the remaining original
term of the microwave concessions, which expire in October 2017; and
•
a Ps.33.8 million, or 11.9%, increase in depreciation and
amortization related to a higher fixed asset base in 2002.
These increases were offset in part by a Ps.25.7 million, or 5.7%,
decrease in selling, general and administrative expenses primarily due to the
implementation of cost-reduction measures such as (i) a Ps.37.7 million, or
15.2%, reduction in salaries, wages and benefits through a reduction in
headcount, (ii) a Ps.10.7 million decrease in general expenses and (iii) a
Ps.2.2 million reduction in advertising expenses. We also experienced a
Ps.33.1 million reduction in external advisors expenses due to the fact that in
2001 we had significant executive recruiting fees and had to rely on external
advisors while certain executive offices were vacant.
These savings were offset in part by (i) Ps.26.4 million in costs related
to severance payments related to the reduction in headcount, (ii) a Ps.18.7
million increase in office and warehouse leasing costs, (iii) a Ps.7.3 million
increase in sales commissions and (iv) a Ps.4.0 million increase in bad debt
provisioning.
Integral cost of financing
Under Mexican GAAP and in accordance with Bulletin B-10, we are required
to quantify all financial effects of operating and financing the business under
inflationary conditions. For presentation purposes, "integral cost of
financing" refers to the combined financial effects of:
•
net interest expense and interest income;
•
net foreign exchange gains or losses;
•
net gains or losses on monetary position; and
•
gain on repurchase of debt.
Net foreign exchange gains or losses reflect the impact of changes in
foreign exchange rates on assets and liabilities denominated in currencies
other than pesos. A foreign exchange loss arises if a liability is denominated
in a foreign currency which appreciates relative to the peso between the time
the liability is incurred and the date it is repaid, as the appreciation of the
foreign currency results in an increase in the amount of pesos which must be
exchanged to repay the specified amount of the foreign currency liability.
The gain or loss on monetary position refers to the gains and losses
realized from holding net monetary assets or liabilities and reflects the
impact of inflation on monetary assets and liabilities. For example, a gain on
monetary position results from holding net monetary liabilities in pesos during
periods of inflation, as the purchasing power of the peso declines over time.
Our integral cost of financing was Ps.309.2 million in 2002, a 427.0%
increase as compared to Ps.58.7 million in 2001. The increase in integral cost
of financing was primarily due to:
(i) a Ps.302.6 million increase in foreign exchange loss as a
consequence of the effect of the devaluation of the peso as compared to
the dollar in 2002 on our dollar-denominated debt,
(ii) a Ps.128.2 million gain associated with the early
extinguishment of U.S.$25.0 million of debt in 2001, and
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Table of Contents
(iii) a Ps.76.7 million decrease in interest income as a result of
a lower average cash position and lower interest rates during 2002.
These factors of financing costs were partially offset by a Ps.13.3
million gain in net monetary position.
Asset tax
We recorded Ps.6.8 million in asset taxes in 2002 as compared to Ps.0.8
million in asset taxes in 2001. The difference is primarily due to a
significant increase in our asset base in 1998, when we commenced the buildout
of our network, as compared to 1997, which are the respective years considered
for purposes of computation of the asset tax. Asset taxes are computed on the
asset base existing four years before the current tax year.
Year ended December 31, 2001 compared to year ended December 31, 2000
Net revenues
Our net revenues increased 13.2% in 2001 as compared to 2000, from
Ps.293.6 million in 2000 to Ps.332.3 million in 2001. This increase was
primarily due to a 77.3% increase in the average number of lines in service
from 25,222 in 2000 to 44,730 in 2001. The increase in net revenues was
partially offset by a 36.2% overall decrease in ARPUs from U.S.$97 in 2000 to
U.S.$62 in 2001.
The decrease in ARPUs was primarily due to:
•
a significant shift in our customer mix towards residential
lines, which carry a lower ARPU, from 35% of total lines at December
31, 2000 to 71% at December 31, 2001; and
•
a lower percentage of high-usage customers, who carry high
ARPUs, but low profit margins, which resulted from the
implementation of our strategy to shift our focus from less
profitable lines. High-usage customers represented 55.2% of our net
revenues in 2000 as compared to 29.1% in 2001.
These two factors were offset in part by (i) a 6% increase in the monthly
fee we charge our residential customers beginning in September 2001; and (ii)
the adoption in July 2001 of a policy whereby we generally no longer waive
installation charges to most of our residential customers.
The following table presents a breakdown of our lines by type of customer
at December 31, 2000 and 2001 and the percentage variation:
At December 31
2000
2001
%
Business lines
17,582
22,444
28
Residential lines
9,328
55,537
495
Total lines
26,910
77,981
190
Operating costs and expenses
Our operating costs and expenses were Ps.897.2 million in 2001, a 27.0%
increase as compared to Ps.706.2 million in 2000. This increase was primarily
due to:
•
the 77.3% increase in the average number of lines in 2001 as
compared to 2000, which resulted in a Ps.18.6 million increase in
interconnection costs, a Ps.23.6 million increase in sales
commissions, and Ps.16.8 million increase in maintenance expenses;
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•
Ps.63.2 million increase in one-time charges related to
consulting and executive recruiting fees, executive compensation and
incentive expenses and excess labor-related taxes; and
•
Ps.43.3 million increase related to installation expenses and
the recognition of bad debt allowance and inventory obsolescence
reserve.
These two factors were partially offset by a Ps.59.2 million decrease in
long distance reselling costs, primarily due to improved traffic management
policies.
Depreciation and amortization increased by Ps.61.9 million, or 28%,
primarily because of a larger asset base.
Integral cost of financing
Our integral cost of financing before the gain on repurchase of debt was
Ps.186.8 million in 2001, a 24.0% decrease as compared to Ps.245.7 million in
2000. The decrease in integral cost of financing was primarily due to a
foreign exchange gain during 2001 of Ps.96.0 million as compared to a loss of
Ps.11.8 million during 2000. This gain is a consequence of the 5.0%
appreciation of the peso as compared to the U.S. dollar during 2001. In
addition, we recorded a gain of Ps.128.2 million in 2001 due to the repurchase
of U.S.$25.0 million (face value) of old notes.
These two factors were partially offset in part by a 24.9% decrease in
interest income from Ps.108.1 million in 2000 to Ps.81.1 million in 2001, as a
result of a lower cash position combined with lower interest rates.
Nonrecurring charges
We recorded Ps.65.8 million in nonrecurring charges primarily related to
the write-off of fixed assets and installation expenses. Our management
evaluated and wrote off certain assets and recognized the cost of an overdue
maintenance contract, which no longer are useful to our revised business
objectives. In addition, installation costs that were originally capitalized
were reversed to the extent they related to customers who are no longer part of
our customer base. See note 14 to our consolidated financial statements.
Asset tax
We recorded Ps.0.8 million in asset taxes in 2001. According to Mexican
tax law, we were not liable for asset taxes in our first two years of
operations.
Principal differences between Mexican GAAP and U.S. GAAP
The financial information included in this annual report is prepared and
presented in accordance with Mexican GAAP, which differ in certain significant
respects from U.S. GAAP. See note 22 to the consolidated financial statements
for a description of the principal differences between Mexican GAAP and U.S.
GAAP applicable to us; for a reconciliation of our net income and stockholders'
equity to U.S. GAAP as of December 31, 2001 and 2002 and for each of the two
years then ended; and for a description of the principal differences in
classification between the statements of changes in financial position under
Mexican GAAP and the requirements under U.S. GAAP for statements of cash flows.
Recent United States accounting pronouncements
In June 2001 the Financial Accounting Standards Board ("FASB") issued SFAS
No. 143 "Accounting for Obligations Associated with the Retirement of
Long-Lived Assets." The objectives of SFAS 143 are to establish accounting
standards for the recognition and measurement of tangible long-lived asset
retirement obligations and their associated asset retirement costs. SFAS 143
is effective for fiscal years beginning after June 30, 2002. The Company does
not expect that the adoption of this standard will have a material impact on
its financial position or results of operations.
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Table of Contents
In April of 2002, the FASB issued SFAS No. 145 "Rescission of SFAS No. 4,
44, and 64, Amendment of SFAS 13, and Technical Corrections." As a result,
companies will no longer be allowed to classify gains and losses from
extinguishments of debt as extraordinary items unless they meet the criteria of
APB No. 30. Gain and losses from extinguishments of debt that have been
classified as extraordinary in prior years that do not meet the criteria of APB
30 shall be reclassified on a go forward basis. In addition, SFAS 145
requires that capital leases that are modified so that the resulting lease
agreement is classified as an operating lease be accounted for under the
sale-leaseback provisions of SFAS 28 or 98, as applicable, instead of SFAS 13.
The provisions of this statement with regard to SFAS 4 will be effective for
fiscal years beginning after May 15, 2002, and those for SFAS 13 will be
effective for transactions occurring after May 15, 2002. The Company has
adopted SFAS 145 for the fiscal year beginning December 31, 2002, and
accordingly the pre-tax gain of Ps. 121,249 regarding the extinguishment of
U.S. $25.0 million during 2001 in debt through a repurchase has
not been classified as
an extraordinary gain.
In June
2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
on Activity (Including Certain Costs incurred in Restructuring)." EITF Issue
No. 94-3 required accrual of liabilities related to exit and disposal
activities at a plan (commitment) date. SFAS 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred. The provisions of this statement are effective for exit
or disposal activities that are initiated after December 31, 2002. The Company
does not expect that the adoption of this standard will have a material impact
on its financial position or results of operations.
FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees," (FIN 45) was issued on November 2002. FIN 45
requires that a liability be recognized at the inception of certain guarantees
for the fair value of the obligation, including the ongoing obligation to stand
ready to perform over the term of the guarantee. Guarantees, as defined in FIN
45, include contracts that contingently require the Company to make payments to
a guaranteed party based on changes in an underlying asset that is related to a
liability or equity security of the guaranteed party, performance guarantees,
indemnification agreements or indirect guarantees of indebtedness of others.
This new accounting is effective for certain guarantees issued or modified
after December 31, 2002. In addition, FIN 45 requires certain additional
disclosures. The Company does not expect that the adoption of this standard
will have a material impact on its financial position or results of operations.
SFAS 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure — an amendment of SFAS No. 123," was issued on December 31, 2002.
SFAS 148 provides alternative methods of transition for a voluntary change to
the fair value-based method of accounting for stock-based employee
compensation. SFAS 148 also amends the disclosure requirements of SFAS 123,
"Accounting for Stock-Based Compensation," to require
prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The Company does not expect
that the adoption of this standard will have a material impact on its financial
position or results of operations.
In January 2003, the FASB issued Interpretation 46 "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51" (FIN 46). FIN 46
provides a new framework for identifying variable interest entities (VIEs) and
determining when a company should include the assets, liabilities,
non-controlling interests and results of activities of a VIEs created after
January 31, 2003 and is effective beginning in the third quarter of 2003 for
VIEs created prior to issuance of the interpretation. The Company is
presently evaluating the impact, if any, that this new standard will have on
its financial position or results of operations.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities." This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement is effective prospectively for contracts entered into or modified
after June 30, 2003 and prospectively for hedging relationships designated
after June 30, 2003. Management is still assessing whether this statement will
have a material effect on the Company's financial position or results of
operations.
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In May 2003, the FASB issued SFAS No. 150, "Accounting For Certain
Financial Instruments with Characteristics of Both Liabilities and Equity."
This statement improves the accounting for certain financial instruments that,
under previous guidance, issuers could account for as equity, and requires that
these instruments be classified as liabilities in statements of financial
position. This statement is effective prospectively for financial instruments
entered into or modified after May 31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. This
statement shall be implemented by reporting the cumulative effect of a change
in an accounting principle for financial instruments created before the
issuance date of the statement and still existing at the beginning of the
interim period of adoption. Management is still assessing whether this
statement will have a material effect on the Company's financial position or
results of operations.
Recent Mexican accounting pronouncements
In November 2001, the MIPA issued the revised Bulletin C-9, "Liabilities,
Provisions, Contingent Assets and Liabilities and Commitments" ("Bulletin
C-9"), which establishes a methodology for valuation, presentation and
disclosure of liabilities and provisions, as well as for valuation and
disclosure of contingent assets and liabilities, and for disclosure of
commitments. The revised Bulletin C-9 states that (i) all contingent assets
that have a practically true realization must be accounted and disclosed in the
financial statements; (ii) contingent assets that have a probable realization
cannot be accounted for in the financial statements, but must be disclosed; and
(iii) contingent assets that do not have a probable realization cannot be
accounted for in the financial statements and are not required to be disclosed.
Bulletin C-9 requires disclosure of committed amounts when it represents
significant fixed asset additions. The provisions of Bulletin C-9 are required
to be applied beginning on January 1, 2003, although early adoption is
recommended.
In addition, in December 2001, the MIPA issued revised Bulletin C-8,
"Intangible Assets" ("Bulletin C-8"), which defines intangible assets as costs
incurred and rights or privileges acquired that will generate a future economic
benefit. Revised Bulletin C-8 states that preoperating costs should be expensed
as a period cost, unless they could be classified as development costs.
Bulletin C-8 requires that intangible assets, including previously existing
intangible assets, with indefinite useful lives should not be amortized, but
should be tested for impairment annually. Intangible assets with finite useful
lives should be amortized over their respective useful lives. The provisions
of Bulletin C-8 are required to be applied beginning on January 1, 2003,
although early adoption is recommended.
We do not expect that the adoption of the above-mentioned accounting
pronouncements will have a significant impact on our financial
position or results of operations.
B.
Liquidity and capital resources
Financing sources and liquidity
We financed our start-up costs through capital contributions and vendor
financing, as described below:
•
U.S.$100.0 million vendor financing facility from Nissho Iwai
American Corporation, bearing an annual interest rate of three-month
LIBOR plus 4.15% due August 12, 2005. Funds from this facility were
used to purchase Lucent Technologies equipment. We used U.S.$72.3
million of proceeds from the sale of the old notes on March 17, 2000
to repay all amounts outstanding in full and terminated this
facility.
•
U.S.$20.0 million vendor financing facility from Nissho Iwai
American Corporation, bearing an annual interest rate of three-month
LIBOR plus 4.15% due August 12, 2005. Funds from this facility were
used to purchase NEC equipment. We used U.S.$13.9 million of
proceeds from the sale of the old notes on March 17, 2000 to repay
all amounts outstanding in full and terminated this facility.
•
U.S.$18.7 million vendor financing from Hewlett Packard de
México, bearing an annual interest rate of three-month LIBOR plus
4.15% due November 25, 2005. We used U.S.$16.3 million of
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proceeds
from the sale of the old notes on March 17, 2000 to repay all
amounts outstanding in full and terminated this facility.
•
U.S.$70.0 million raised from private equity investors since
inception through May 1998.
On March 17, 2000, we sold the old notes bearing an annual interest rate
of 13 3/4% due April 1, 2007 in an aggregate principal amount of U.S.$300.0
million. Our debt service relating to the old notes for the first two years was
paid with U.S.$77.9 million of the net proceeds of the offering of the old
notes that were deposited in the interest escrow account.
In September 2000, our principal shareholders invested an aggregate of
U.S.$35.0 million of new capital. This capital contribution was used primarily
to fund capital expenditures and working capital related to the buildout of our
network infrastructure.
During 2001, we financed our operations and capital expenditures with
remaining funds from the issuance and sale of the old notes and with the
remaining funds from the U.S.$35.0 million capital contribution completed in
September 2000.
On April 29, 2002, we consummated a debt restructuring and
recapitalization of Maxcom. The purpose was to reduce our debt service burden,
improve our liquidity and attract additional investment, in order to continue
the buildout of our infrastructure and the growth of our business. The
following actions were taken pursuant to the debt restructuring and
recapitalization:
•
Holders tendered an aggregate of U.S.$259,410,000 in
principal amount of old notes in exchange for an aggregate of (i)
U.S.$165,078,150 in principal amount of new notes bearing 0%
interest through March 1, 2006, and 10% annual interest in the last
year, and (ii) 26,459,820 series N2 convertible preferred stock,
with an initial liquidation preference of U.S.$0.4927 per share and
limited voting rights, in the form of CPOs, which represented in the
aggregate 15.2% of our then total capital stock;
•
Existing and new shareholders invested U.S.$66.2 million and
received preferred stock (more fully described in "Item 7. Major
Shareholders and Related Party Transactions—A. Major shareholders
and share ownership—The capital restructuring"), which represented
in the aggregate 77.0% of our then total capital stock;
•
Our capital structure was restructured as more fully
described in "Item 7. Major Shareholders and Related Party
Transactions—A. Major shareholders and share ownership—The capital
restructuring."
In April 2002, we cancelled U.S.$25,000,000 in principal amount of old
notes we had purchased in the secondary market prior to the debt restructuring.
In addition, on July 25, 2002, we completed an additional exchange of
U.S.$4,000,000 in aggregate principal amount of old notes under the same terms
and conditions of the exchange offer consummated on April 29, 2002. As of
December 31, 2002, 95.8% of the total old notes were exchanged and or
cancelled, and new notes on an aggregate principal amount of U.S.$167,623,590
remained outstanding. Old notes representing an aggregate principal amount of
U.S.$11,590,000 remained outstanding as of the same date.
As a result of the debt restructuring, we will save U.S.$38.1 million in
interest expense on an annualized basis from the date of issuance of the new
notes through February 28, 2006. From March 1, 2006 until March 1, 2007, which
is the maturity date of the new notes, we will save U.S.$20.5 million in
interest expense.
We estimate that funds from operating activities may not be sufficient to
meet our new, reduced debt service and our working capital and capital
expenditure needs through 2006, and that we may need additional financing to
meet these requirements. We are constantly looking for new sources of funds.
However, we cannot assure you that we will have sufficient resources and that,
if needed, any financing will be available in the future or
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on terms acceptable to us, in which case we will be unable to service our debt
and operate as a viable company. In addition, our ability to incur additional
indebtedness is restricted by the terms of the indenture governing the new
notes.
Our future operating performance and ability to service and repay the new
notes and the outstanding old notes, will be subject to future economic and
competitive conditions and to financial, business and other factors, many of
which are beyond our control.
Indebtedness
Our consolidated debt at December 31, 2002 was Ps.1,848.1 million
(including Ps.2.7 million of debt discount related to the issuance of
detachable warrants), of which all was long-term debt. All of our consolidated
debt outstanding at December 31, 2002 was denominated in U.S. dollars.
The U.S.$300 million aggregate principal amount old notes accrued interest
at an annual rate of 13¾%, representing an interest expense of U.S.$39.8
million per year. In May and June 2001, Maxcom purchased U.S.$25 million
aggregate principal amount of old notes in the secondary market, which Maxcom
cancelled in April 2002. Pursuant to the April 29, 2002 debt restructuring,
old notes in an aggregate principal amount of U.S.$259,410,000 were exchanged
for new notes in an aggregate principal amount of U.S.$165,078,150, as well as
for certain equity. The new notes bear 0% interest through March 1, 2006, and
10% annual interest in the last year. On July 25, 2002 we completed an
additional exchange of U.S.$4,000,000 old notes under the same terms and
conditions of the exchange offer consummated on April 29, 2002. As of December
31, 2002, new notes in an aggregate principal amount of U.S.$167,623,590
remained outstanding while old notes in an aggregate principal amount of
U.S.$11,590,000 remained outstanding.
As a result of this debt restructuring, we will save U.S.$38.1 million in
interest expense on an annualized basis from the date of issuance of the new
notes through February 28, 2006. From March 1, 2006 until March 1, 2007, which
is the maturity date of the new notes, we will save U.S.$20.5 million in
interest expense.
The indenture governing the terms of the new notes restricts our ability
to incur indebtedness. In particular, in order to be able to incur additional
indebtedness, we must comply with a minimum consolidated leverage ratio of less
than 3.75 to 1.00 and a minimum fixed charge coverage ratio of 2.00 to 1.00, in
each case after giving effect to the proposed incurrence of indebtedness. We do
not, and are unlikely in the foreseeable future to, meet these ratios. However,
pursuant to certain exemptions, we are still able to incur up to U.S.$100.0
million of indebtedness to finance the cost of acquiring or constructing or
installing telecommunication assets, and up to U.S.$20.0 million for working
capital purposes, in each case at any one time outstanding. The indenture
governing the old notes no longer has covenants restricting our ability to
incur indebtedness.
The
indenture governing the terms of the new notes also provides that, if
certain events of bankruptcy, insolvency or reorganization of Maxcom
occur, the principal and interest on all of the new notes will become
immediately due and payable. In addition, if certain other events of
default occur and are continuing, the trustee appointed under the
indenture or our holders representing at least 25.0% in principal
amount of the then outstanding new notes, may declare all the new
notes to be due and payable immediately. These other events of
default include, among others, (i) a failure to pay interest or
any gross-up amount when due for thirty days; (ii) a failure to
pay principal when due, (iii) a failure to comply with certain
covenants (including financial, reporting, control, merger and other
covenants), representations, warranties and other agreements in the
indenture; (iv) a default under other indebtedness or a judgment
or decree for the payment of money, in each case in excess of
U.S.$5.0 million, (v) the unenforceability or disaffirmation
of any subsidiary guarantee, and (vi) a failure to disclose an event of default. In
some of these events of default, a limited grace period applies
before the trustee or the holders can proceed to accelerate the new
notes.
The
indenture governing the old notes provides that the trustee appointed
under the indenture or our holders representing at least 25.0% in
principal amount of the then outstanding old notes, may declare all
the new notes to be due and payable immediately if we fail to
(i) pay interest or any gross-up amount when due for thirty days,
(ii) pay principal when due, (iii) comply with certain
conditions in the event of a merger, or (iv) observe any
covenant, representation or agreement in the indenture for sixty days
after notice by the trustee.
Changes in financial position
Historically, our cash generated from operating activities has not been
sufficient to meet our debt service, working capital and capital expenditure
requirements. We have relied on the capital markets for private equity, public
debt and vendor financing. For the years ended December 31, 2000, 2001 and
2002, our earnings were insufficient to cover our fixed charges by Ps.749.6
million (U.S.$71.9 million), Ps.695.6 million (U.S.$66.7 million) and Ps.725.8
million (U.S.$69.6 million), respectively.
Resources used for operating activities
For the year ended December 31, 2002, net resources used in operating
activities amounted to Ps.340.1 million compared to Ps.355.7 million for the
year ended December 31, 2001. The decrease in 2002 from 2001 was
mainly attributable to a Ps.53.8 million decrease in losses from
operations and a Ps.31.2 million reduction in
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inventory as we have used it in
building out our infrastructure. These two factors were offset by a Ps.25.8
million increase in prepaid expenses primarily related to the advanced purchase
of radio advertising time from Operadora Plusgamma, a Ps.24.5 million increase
in accounts receivable due to a higher customer base and a Ps.19.1 million
decrease in short-term liabilities. See "Item 7. Major Shareholders and
Related Party Transactions—B. Related Party Transactions—Advertising."
Net resources used in operating activities in 2001 were Ps.355.7 million
compared to Ps.858.0 million for 2000. This decrease was mainly attributable
to the release of the escrow account (Ps.556.8 million) funded with proceeds
from the issuance of the old notes. This decrease was partially offset by the
non-cash gain on the repurchase of debt of Ps.128.2 million.
Resources provided by financing activities
For the year ended December 31, 2002, net resources generated by financing
activities amounted to Ps.801.6 million compared to resources used of Ps.98.8
million for the year ended December 31, 2001. This change was attributable to
(i) Ps.749.8 million of additional paid-in capital recorded in connection with
the debt capitalization resulting from the exchange of old notes for new
discounted debt and equity instruments pursuant to the debt restructuring
completed in April 2002, and (ii) Ps.784.2 million of additional capital stock
related to the U.S.$66.2 million private placement completed in April 2002.
These two factors were offset in part by the use of (i) Ps.733.4 million
as reduction of liabilities due to the exchange of the old notes, and (ii)
Ps.99.8 million for the repurchase of old notes with an aggregate face amount
of U.S.$25 million in 2001.
For the year ended December 31, 2001, net resources used in financing
activities amounted to Ps.98.8 million compared to resources provided of
Ps.749.8 million for the year ended December 31, 2000. The change was
attributable to the issuance of the old notes (Ps.784.2 million) in March 2000
and the U.S.$35.0 million capital contribution (Ps.733.4 million) in September
2000. In 2001, we had no capital or debt infusion. Instead, we repurchased a
portion of our debt for Ps.99.8 million.
Resources used for investing activities
For the year ended December 31, 2002, net resources used for investing
activities amounted to Ps.528.1 million compared to Ps.546.3 million for the
year ended December 31, 2001. The decrease was mainly attributable to a
Ps.133.2 million decrease in investment in telephone equipment and a Ps.42.5
million decrease in investment in other assets. These factors were offset in
part by a Ps.157.5 million increase in investment in intangible assets
resulting mainly from our purchase of the irrevocable and exclusive right to
use two strands in a 2,011-kilometer fiber optic link covering cities between
Mexico City and Laredo, Texas. These variations reflect Maxcom's strategy of
prioritizing infrastructure growth at a time of financial constraints.
For the year ended December 31, 2001, net resources used for investing
activities amounted to Ps.546.3 million compared to Ps.747.5 million for the
year ended December 31, 2000. The decrease was mainly attributable to debt
issuance costs in 2000 of Ps.299.6 million, partially offset by higher capital
expenditures of Ps.312.1 million in 2001.
Other contractual obligations
In addition to our financial indebtedness, we are committed to make
certain payments under different lease arrangements. All of our
peso-denominated leases and some of our dollar-denominated site leases adjust
automatically to reflect any variances experienced by the Mexican and U.S.
consumer price index, respectively.
Our new corporate headquarters are leased for a 5-year term, renewable for
two additional 5-year terms. Site leases generally run for five, ten or
fifteen year terms.
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In May 2003, we reached an agreement with our landlord at our former
headquarters in Magdalena, Mexico City. Pursuant to this agreement, we
retained a leasehold interest through May 2013 on the first floor, where one of
our Lucent 5ESS switches is located, the roof-top, where we have three
microwave transmission antennas and a section of the basement, which will be
used for parking and to place some of our electric equipment that supports the
switch. We were also released from lease obligation on approximately 35,887
square feet plus parking space of the building originally running through
September 30, 2013. In exchange for the new lease and the releases, we agreed
to prepay the full, ten-year lease obligations on the first floor, the roof-top
and basement, as well as pay past-due lease payments dating back from October
2002 through April 2003. All these payments amount in the aggregate to
U.S.$2.7 million and will be payable in installments through May 2004.
The following table presents our minimum contractual operating lease
obligations denominated in Pesos for the periods indicated:
2007 &
2003
2004
2005
2006
thereafter
(in thousands of Pesos)
Facilities
Ps.
5,997.5
Ps.
2,457.5
Ps.
2,298.6
Ps.
2,298.6
Ps.
9,629.8
Sites
12,878.1
10,641.8
8,535.8
7,687.1
26,828.4
Poles
3,182.2
0
0
0
0
Others
36.0
0
0
0
0
Total
Ps.
22,093.8
Ps.
13,099.3
Ps.
10,834.4
Ps.
9,985.7
Ps.
36,458.2
The following table presents our contractual operating lease obligations
denominated in dollars for the periods indicated:
2007 &
2003
2004
2005
2006
thereafter
(in thousands of U.S. dollars)
Corporate headquarters
$
2,503.1
$
2,503.1
$
2,503.1
$
2,503.1
$
417.2
Sites
56.0
47.7
47.7
47.7
83.5
Poles
0
0
0
0
0
Others
251.9
251.9
98.8
0
0
Total
$
2,811.0
$
2,802.7
$
2,649.6
$
2,550.8
$
500.7
The following table presents our minimum contractual operating maintenance
obligations denominated in Pesos for the periods indicated:
2007 &
2003
2004
2005
2006
thereafter
(in thousands of Pesos)
Corporate equipment
(1)
Ps.
19.0
Ps.
Ps.
Ps.
Ps.
Network
(1)
504.5
Total
Ps.
523.5
Ps.
Ps.
Ps.
Ps.
(1)
Renewal on an annual basis.
The following table presents our contractual operating maintenance
obligations denominated in dollars for the periods indicated:
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2007 &
2003
2004
2005
2006
thereafter
(in thousands of U.S. dollars)
Telephone equipment
(1)
$
1,557.6
$
$
$
$
Fiber optic
844.2
844.2
844.2
844.2
13,208.0
(2)
Network
20.5
Software
(1)
810.9
Total
$
3,233.2
$
844.2
$
844.2
$
844.2
$
13,208.0
(1)
Renewal on an annual basis.
(2)
Included until 2002.
Capital expenditures
Through December 31, 2002, we have invested Ps.2,730.9 million in the
buildout of our network operating support system and other capital
expenditures, excluding cumulative preoperating expenses and the expenses
related to the issuance of the old notes and the new notes and the U.S.$66.2
million private equity investment. This amount includes Ps.127.8 million paid
to obtain all of our frequency rights.
For 2003, we plan to make capital expenditures of approximately U.S.$11.8
million, mainly to continue to build out of our network. Of this total amount,
we had already spent approximately Ps.32.5 million (approximately U.S.$3.0
million) by March 31, 2003. Our ability to make the remaining expenditures
hinges on our ability to obtain financing for them. We cannot assure you that
financing will be available or on terms acceptable to us.
Dividend policy
Our current policy is to reinvest profits into our operations. In
addition, the indenture that governs the terms of the new notes allows us to
pay cash dividends only if we meet the following conditions:
•
a minimum consolidated leverage ratio of less than 3.75 to 1.00;
•
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 cash dividend payments do not exceed an amount determined
in the indenture based on, among other things, cash flow generated
from operations or equity offerings and consolidated interest
expense.
Critical accounting policies
Applications of critical accounting policies and estimates
We have identified certain key accounting policies on which our
consolidated financial condition and results of operations are dependent.
These key accounting policies most often involve complex matters or are based
on subjective judgments or decisions that require management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. We base our estimates on historical
experience, where applicable, and other assumptions that we believe are
reasonable under the circumstances. Actual results may differ from our
estimates under different assumptions or conditions. In the opinion of our
management, our most critical accounting policies under both Mexican GAAP and
U.S. GAAP are those that require management to make estimates and assumptions
that affect the reported amounts related to the accounting for the allowance
for doubtful accounts receivable, revenue recognition, installation revenues
and costs, valuation of long-lived assets, property, plant and equipment,
stock-based compensation and fair value of our common stock, and deferred
taxes. For a full description of all of our accounting policies, see Notes 4
and 23 to the Consolidated Financial Statements included in this Annual Report.
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There are certain critical estimates that we believe require significant
judgment in the preparation of our consolidated financial statements. We
consider an accounting estimate to be critical if:
•
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.
Allowance of doubtful accounts receivable
The allowance for doubtful accounts represents our estimate of losses
resulting from the failure or inability of our customers to make required
payments. Determining our allowance for doubtful accounts receivable requires
significant estimates. Due to the large number of customers that we serve, it
is impractical to review the credit-worthiness of each of our customers,
although a credit review is performed for business customers that request more
than two lines. We consider a number of factors in determining the proper
timing for the recognition of and the amount of allowance, including historical
collection experience, customer base, current economic trends and the aging of
the accounts receivable portfolio. From this analysis, our current policy is
to reserve 90% of the outstanding balance of a customer with at least one bill
past due 90 days and 100% of the outstanding balance of a customer with at
least one bill past due 120 days. We periodically review this policy to ensure
that it accurately reflects current collection policies.
In addition, in order to mitigate collections risk, our collection
procedures include, but are not limited to, periodic reminder phone calls once
a customer is past due, suspension of service, use of a collection agency and
disconnection of service, if needed. Furthermore, within our network we have
systems to detect fraudulent call activity. If these systems fail to identify
any of this activity, we may have to recognize a higher degree of uncollectable
accounts. While we believe that our estimates are reasonable, changes in our
customer trends or any of the factors mentioned above could materially affect
our bad debt expense.
Revenue recognition
We recognize revenues from telephone services provided to customers, from
the sale of customer-premise equipment, from services provided to other
telephone-service companies (such as interconnection services), and from
installation charges.
Revenues are recognized when the service is provided or the product is
delivered. In addition, we have entered into agreements with several telephone
carriers with a "bill and keep" feature. Under this arrangement, if the
imbalance between local calls originated by the other carrier and terminated by
Maxcom and calls originated by Maxcom and terminated by the other carrier
during a month does not exceed a certain percentage, then no interconnection
fee amounts are payable by the net user of interconnection services. If the
imbalance exceeds the agreed percentage in any given month, the net user incurs
a liability per minute. If we fail to maintain a significant percentage of
residential users, then the "bill and keep" arrangement will be terminated and
asymmetrical interconnection rates may apply. Due to a timing lag, we must
estimate whether or not the agreed percentage threshold was exceeded for any
given month and record a corresponding receivable or payable. Based on
previous experience with these carriers, i.e. the threshold has never been
exceeded; we have not accrued for any potential revenue or cost.
Installation revenues and costs
Installation costs include labor, tools and materials. Through December
31, 2002, when we waived installation costs to our customers, installation
costs were capitalized and amortized on a straight-line basis over a period of
20 years. Beginning in 2003, when we waive installation costs,
we will capitalize
and amortize them on a straight-line basis over a period equal to the remaining
original term of the microwave concessions, which expire in October 2017. When
we charge installation fees to our customers, we recognize this cost as an
expense and we do not capitalize or amortize it. Once service with a customer
is terminated, the capitalized estimated average cost per customer is
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expensed. Under U.S. GAAP, installation revenues and the related direct
installation costs are deferred and amortized over the expected customer's
relationship period. When installation costs are not billed to customers, the
related costs are expensed immediately.
We do not track capitalized installation costs on an individual customer
basis because to do so would not be efficient. Based on an analysis of
customer history including installation costs and cancellations, we have
determined an estimated average cost per customer and estimated customer life
and we use these estimates to calculate the amount of cost deferred and the
amortization period of such deferred costs and the related installation revenue
that is deferred and amortized over the customer relationship. As we have a
limited operating history, past history cannot be used as the only accurate
indicator of the average customer relationship period. Based on our limited operating history
and industry benchmarking, we have determined an average customer
relationship period to be of four years.
Valuation of long
-
lived assets
We review fixed, definite lived intangible and other long-lived assets
whenever events or changes indicate that the carrying amount of an asset may
not be recoverable. Impairment reviews require a comparison of the estimated
future undiscounted cash flows to the carrying value of the asset. If the
total of the undiscounted cash flows is less than the carrying value, an
impairment charge is recorded for the difference between the estimated fair
value and the carrying value of the asset. In making such evaluations, we
estimated the fair value of the long-lived assets as well as the undiscounted
cash flows. In determining our undiscounted cash flows we make significant
assumptions and estimates in this process regarding matters that are inherently
uncertain, such as estimating remaining useful lives and the possible impact
that inflation may have in our ability to generate cash flow since, with
inflation accounting, the carrying value is restated by inflation prior to the
impairment analysis. Although we believe that our estimates are reasonable,
different assumptions regarding such remaining useful lives could materially
affect the valuation of our long-lived assets.
We also evaluate our operating leases for utilization. Spaces leased in
buildings with low occupancy have been reserved based on the contractual
penalty for early termination, which is calculated as the maximum amount that
would be paid upon termination of the contract.
Upon adoption of SFAS 142 we were required to reassess the useful lives of
our intangible assets, which primarily consist of Mexican government
telecommunications concessions. Upon reassessment, we
concluded that the useful lives of our concessions do not need to be modified.
We will periodically reassess the useful lives of the concessions.
Property, plant and equipment
We depreciate property, plant and equipment and other intangible assets
with a finite life using straight-line methods over the period of time we
estimate we will benefit from each asset.
Stock-based compensation and fair value of our common stock
We have historically entered into various agreements with third parties
and our employees to exchange our warrants or our stock for services rendered
to us. The fair value of such transactions is based on various assumptions,
such as volatility, risk free interest rates and expected life of the options.
We contract a third party to assist in developing said assumptions. Different
assumptions regarding such estimations could materially affect our financial
position and results of operations.
As our common stock is not traded on the open market there is not a
readily determinable fair value. The fair value of our common stock is
essential for calculating stock compensation amounts and in the calculation of
the troubled debt restructuring as recorded under U.S. GAAP in 2002. To
evaluate the fair value of our common stock we contracted a third party who
used assumptions related to the Mexican telecommunications industry, general
market data, the current state and future operations of Maxcom, as well as
other pertinent factors.
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Deferred taxes
As part of the process of preparing our consolidated financial statements,
we are required to estimate our income tax liability. This process involves
estimating actual current tax exposure together with assessing temporary
differences resulting from the different treatment for tax and accounting
purposes of several items, such as depreciation, amortization, and allowance
for doubtful accounts. These differences result in deferred tax assets and
liabilities that are included in our consolidated balance sheet. We must then
assess the likelihood that our deferred tax assets will be recovered from
future taxable income and, to the extent we believe that recovery is not likely
to occur, we must include an expense within the tax provision in the statement
of operations.
Significant management judgment is required in determining our provision
for income taxes, our deferred tax assets and liabilities and any valuation
allowance recorded against our net deferred tax assets. The valuation
allowance is based on management projections of future financial results.
Accordingly, we have created a valuation account for the full balance of our
deferred tax asset as we feel it is unlikely we will use our net operating loss
carry forwards before they expire. If actual results differ from these
estimates or we adjust the projections in future periods, we may need to
materially adjust the valuation allowance.
C.
Research and development, patents and licenses, etc.
Maxcom does not undertake research and development activities other than
market research.
D.
Trend information
The growth of competition has been substantial and we expect it to
continue. We are continuously improving our competitive position by
strengthening our voice and data products and services. The increase in
competition negatively affects our profit margins.
Our current financial constraints (including the insufficiency of our
earnings to cover fixed charges and the uncertainty as to the availability of
financing) has and may continue to negatively affect our plans for growth,
including the buildout of our network. See "Item 3. Key Information—D. Risk
Factors—We may need additional financing."
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.
Directors and Senior Management
Directors
Our Board of Directors is responsible for the management of our business.
The current members of the Board of Directors were elected at a shareholders'
meeting held on June 10, 2003. Pursuant to the capital restructuring described
in "Item 7. Major Shareholders and Related Party Transactions—A. Major
shareholders and share ownership—The capital restructuring," our series A and
A1 shareholders, voting together as a class, appoint five directors. The
remaining four directors are appointed by our series B and B1 shareholders,
voting together as a class. Pursuant to the terms of the securityholders
agreement described in "Item 7. Major Shareholders and Related Party
Transactions—A. Major shareholders and share ownership—Securityholders
agreement," which became effective upon the consummation of the debt
restructuring and recapitalization, the four series B and B1 directors are now
selected from among nominees proposed by Nexus—Banc of America Fund II, L.P., a
major shareholder which we refer to in this annual report as "Nexus."
Series N2 shareholders have the right to appoint an observer to our Board
of Directors for so long as the series N2 preferred shares represent at least
3% of the outstanding capital stock of the Company or, so long as any series N2
preferred stock remain outstanding and at least U.S.$17.5 million aggregate
principal amount of the new notes remain outstanding. This observer, who is not
a member of the Board of Directors, has the right to attend meetings of the
Board of Directors but is not entitled to vote. In the event Mexican foreign
ownership restrictions
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are lifted, the series N2 shareholders will be entitled to appoint one
director, provided the series N2 shares represent at least 10% of Maxcom's
outstanding capital stock.
The following table presents information concerning our current directors
(ages as of December 31, 2002):
Name
Position
Age
Adrián Aguirre Gómez
Series A and A1 Director and Chairman of the Board
52
Manuel Rubiralta Diaz
Series A and A1 Director
58
María Trinidad Aguirre Gómez
Series A and A1 Director
41
Marco Provencio Muñoz
Series A and A1 Director
44
Rodrigo Guerra Botello
Series A and A1 Director
60
Roberto Chute
Series B and B1 Director
29
Jacques Gliksberg
Series B and B1 Director
44
Pedro Querio
Series B and B1 Director
35
Salvatore A. Grasso
Series B and B1 Director
45
Miguel Sepúlveda Martínez, María Guadalupe Aguirre Gómez, María Elena
Aguirre Gómez, Gilberto Solis Silva and Raúl Guijarro de Pablo are alternate
series A and A1 directors. Marco Viola, Michael Hajjar Jorge Cervantes and
Roberto Engels are alternate series B and B1 directors. Enrique Boillini is the
board observer for the series N-2 shareholders. Gonzalo Alarcón Iturbide is the
secretary of the Board.
Adrián, María Guadalupe, María Trinidad and María Elena Aguirre Gómez are
siblings. Gilberto Solís Silva is the spouse of María Elena Aguirre Gómez. Raúl
Guijarro de Pablo is the spouse of María Trinidad Aguirre Gómez. Miguel
Sepúlveda Martínez is the spouse of María Guadalupe Aguirre Gómez.
Set forth below is a brief biographical description of our directors:
Adrián Aguirre Gómez
has been a series A, and after the capital
restructuring a series A and A1 director and Chairman of the Board of Maxcom,
since Maxcom's incorporation in February 1996. Mr. Aguirre also sits on the
Board of Directors of Corporativo en Telecomunicaciones, S.A. de C.V., a
subsidiary of Maxcom, Grupo Empresarial de Telecomunicaciones, S.A. de C.V.,
Operadora Plusgamma, S.A. de C.V. (formerly known as Recover, S.A. de C.V.) and
Fundación Teletón. He has been the Chairman of the Board since December 1992
for Operadora Plusgamma, S.A. de C.V. In addition, he has been a member of the
Consulting Board of UNICEF Mexico since 1997. Previously, Mr. Aguirre was CEO
of Grupo Radio Centro, S.A. de C.V. from November 1968 to May 24, 1999 and a
Director until May 1999. Mr. Aguirre is a certified public accountant and holds
an undergraduate degree in accounting from the Instituto Tecnológico Autónomo
de México (ITAM).
Manuel Rubiralta Diaz
has been a series A, and after the capital
restructuring a series A and A1 director of Maxcom since June 2002. Mr.
Rubiralta is also the President and Chief Executive Officer of Bacardí
Compañía, S.A. de C.V. Previously, Mr. Rubiralta was the Commercial Director
of Corporate Accounts of Grupo Maseca, S.A. de C.V. from 1999 to 2000 and
Vice-president of Grupo Televisa from 1996 to 1998. Mr. Rubiralta was the
President of Pepsico de Mexico from 1993 to 1996. Mr. Rubiralta was the
President of FEMSA in the United States from 1982 to 1991 and the Sales and
Marketing Vice-President for FEMSA's brewing operations in Mexico from 1975 to
1982. Mr. Rubiralta holds an undergraduate degree in business administration
from the Universidad Nacional Autónoma de Mexico (UNAM).
María Trinidad Aguirre Gómez
has been a series A, and after the capital
restructuring a series A and A1 director of Maxcom, since May 1998. She also
sits on the Board of Directors of Talento Arte Visual, S.A. de C.V., Promotora
de Radiodifusión del Sureste, S.A. de C.V., Promotora de Publicidad del
Sureste, S.A. de C.V. and Publicidad y Promoción del Sureste, S.A. de C.V.
Previously, Ms. Aguirre was an Alternate Director of Grupo Radio Centro, S.A.
de C.V. from March 1997 to May 1999. Ms. Aguirre holds an undergraduate degree
in communications from the Universidad Iberoamericana.
Marco Provencio Muñoz
has been a series A, and after the capital
restructuring a series A and A1 director of Maxcom, since May 2001. He is also
a partner and head of the public relations practice at the consulting firm MBD:
Mexico Business Development. During 2000, Mr. Provencio was the press secretary
and the spokesman for
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the then Mexican President Mr. Ernesto Zedillo. He served 14 years in the
Ministry of Finance and Public Credit where he held various positions,
including Director General for International Financial Affairs. Mr. Provencio
worked also for three years for the Foreign Affairs Ministry, where he was
appointed under-secretary for Economic and Multicultural Affairs. Mr. Provencio
holds an undergraduate degree in economics from the Universidad Iberoamericana
and a masters degree in economics and public affairs from the Woodrow Wilson
School at Princeton University.
Rodrigo Guerra Botello
has been a series A, and after the capital
restructuring a series A and A1 director of Maxcom since June 2002. Mr. Guerra
is also the Head Dean of the Universidad Regiomontana in Monterrey, Mexico,
since September 2001. Mr. Guerra was the Executive President of CETRO (a
private trust for the development of small private business in Mexico), the
National Vice-President of COPARMEX and the General Director and Treasurer of
the Businessman Coordination Council. Mr. Guerra was also Director of Sidek
and Situr. Previously, Mr. Guerra worked for AT&T Mexico from March 1995 to
January 1999 and served as President and Chief Executive Officer of IBM de
México from October 1980 to February 1995. Mr. Guerra holds an undergraduate
degree in Chemical Engineering from Universidad Tecnológica de Monterrey.
Jacques Gliksberg
was a series N director of Maxcom from May 1998 until
April 2002, and has been a series B and B1 director since then. He also sits on
the Board of Directors of Acme Paging, L.P., Bank America International
Investment Corporation, Structured Intelligence LLP, Organización Rescarven,
C.A. (Venezuela), Vesper Holdings, Velocom and Difusion Panoramica S.A. de C.V.
Mr. Gliksberg has been a managing partner of Bank of America Equity Partners
since 1994. Mr. Gliksberg holds a Bachelor of Arts degree in Economics and
Political Science from the University of Rochester and a master's degree in
business administration from the J. L. Kellogg Graduate School of Management of
Northwestern University, Chicago, Illinois.
Salvatore A. Grasso
was a series N director of Maxcom from May 1998 until
April 2002, and a series B and B1 director since then. He also sits on the
Board of Directors of Bachow and Associates, Inc. Mr. Grasso is currently
Managing Director and Chief Financial Officer of Bachow and Associates, Inc.,
Chief Financial Officer of Bachow Innovative Master Fund, Ltd. and Paul S.
Bachow Co-Investment Fund, LP. Further, he is the Vice-President of
Bachow/Coastel Operations, Inc., Bala Equity, Inc., Bachow Co-Investment, Inc,
Bachow 39 GHz, Inc., Bala Equity IV, Inc., Bachow Innovative Equity, LC,
Bachow/Coastal, LLC, Bachow/Coastal, Inc., Bachow Investment Partners III, LP,
Bachow Co-Investment, Inc., Bachow Strategic Partners, LLC. He is also a
Partner in Bala Equity Partners, L.P., Bachow Co-Investment, L.P., Bachow
Innovative Partners, L.P., Bachow Innovative Equity, L.P., Bachow Strategic
Partners, L.P. and Bachtel Development, L.P. Mr. Grasso holds a bachelor of
science degree in accounting from St. Joseph's University and is a certified
public accountant in the state of Pennsylvania.
Pedro Querio
has been a series B and B1 director since June 2002. He also
sits on the Board of Directors of Eki Discount (Argentina), Outdoor
Advertising, Microlending, Structured Intelligence and Difusión Panorámica,
S.A. de C.V. Mr. Querio has been working since 1997 for Banc of America Equity
Partners-Latin America. Prior to that, Mr. Querio worked at Booz Allen &
Hamilton in Buenos Aires, Argentina for one year, and for Merchant Bankers
Asociados also in Buenos Aires, Argentina for four years, where he received
extensive expertise in mergers an acquisitions and, corporate finance for
capital risk funds of the group. Mr. Querio holds a Bachelor of Arts degree
from the Universidad Católica de Argentina and a master's degree in management
from J.L. Kellog Graduate School of Management of Northwestern University,
Chicago, Illinois.
Roberto Chute
, has been a series B and B1 director since April 2002. Mr.
Chute sits on the Board of Directors of Difusion Panoramica, a Mexican outdoor
advertising company, and Eki Discount, an Argentinean discount store chain. Mr.
Chute has been an associate of Bank of America Equity Partners since September
2001. Previously, Mr. Chute worked for Goldman, Sachs, Techint and Strat
Management Consulting. Mr. Chute holds an industrial engineering degree from
the Instituto Tecnológico de Buenos Aires, Argentina and a master's degree in
business administration from the J. L. Kellogg Graduate School of Management of
Northwestern University, Chicago, Illinois.
María Guadalupe Aguirre Gómez
was our series A, and after the capital
restructuring a series A and A1 director of Maxcom, from June 1999 until June
2002. She also sits on the Board of Directors of Sport and Terapy Center, S.A.
de C.V., Operadora Plusgamma, S.A. de C.V. (formerly known as Recover, S.A. de
C.V.). Previously, Ms. Aguirre sat on the Board of Directors of Majurame, S.A.
de C.V. and Cable Centro, S.A. de C.V. from February
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1997 to April 1999 and was an Alternate Director of Grupo Radio Centro,
S.A. de C.V., from July 1998 to May 1999. In her capacity as Alternate
Director, Ms. Aguirre had both director and management responsibilities. Ms
Aguirre holds an undergraduate degree in communications from the Universidad
Iberoamericana.
Gilberto Solís Silva
was our series A, and after the capital restructuring
a series A and A1 director of Maxcom, from February 2002 until June 2002.
Prior to that Mr. Solís was an alternate series A director. He also is the
Secretary of the Board of Radiocomunicación Profesional, S.A. de C.V.,
Radiocomunicación Enfocada, S.A. de C.V. and Radiocomunicación Saltillo, S.A.
de C.V. Previously, Mr. Solís was the Chief Executive Officer and member of the
Board of Directors of Grupo Radio Centro, S.A. de C.V. from 1990 to 1998. Mr.
Solís holds an undergraduate degree in geological engineering from the UNAM.
Executive officers
We have experienced significant turnover in our executive ranks over the
last three years. In June and July 2000, our then chief executive, chief
operations and chief marketing officers resigned. In April 2001, our then
chief financial officer resigned. We appointed new officers to all these
positions during 2001 and 2002.
However, between January and April 2003, our then chief executive officer,
chief marketing officer, chief commercial operations officer and vice president
of corporate communications and public relations also resigned. We have since
appointed a new chief executive officer. As part of our cost-reduction
efforts, we have initiated a search for a single executive to head both the
marketing and commercial operations areas, and have eliminated the office of
vice presidency of corporate communications and public relations.
The significant turnover we have experienced in our management has
affected our ability to develop and execute our business strategies. The
success of our company depends in part upon our ability to hire and retain
highly skilled and qualified management personnel. The competition for highly
qualified management personnel in the telecommunications industry is intense
and, accordingly, we cannot assure you that we will be able to hire or retain
the management personnel necessary for our success.
The following table sets forth our current executive officers (ages as of
December 31, 2002):
Name
Position
Age
René Sagastuy
President and Chief Executive Officer
42
Enrique Corral
Chief Engineering Officer
44
Eloisa Martínez
Chief Financial Officer
43
Ricardo Arévalo Ruiz
Chief Operating and Information Technology Officer
38
Carlos Castro Paniagua
Vice-President, Human Resources
51
Set forth below is a brief biographical description of each of our
executive officers not otherwise provided above:
René Sagastuy
has been the Chief Executive Officer of Maxcom since March
2003, when he replaced Mr. Fulvio del Valle. Mr. Sagastuy was our Chief
Operating Officer from May 2001 until March 2003. Prior to joining Maxcom, Mr.
Sagastuy served for one year as Director of Operations for Johnson Controls in
Mexico, a U.S. public company with 19 manufacturing sites in Mexico. Mr.
Sagastuy also served as operations, strategic planning, manufacturing and
project manager and director of several companies in Mexico, including Avex
Electronics, AMP de México, S.A. de C.V. and the Jefferson Smurfit Group in
Mexico. Mr. Sagastuy holds a bachelor's degree in civil engineering from the
Universidad Iberoamericana in Mexico and a master's degree in Business
Administration form the Instituto Tecnológico Autónomo de México.
Enrique Corral
has been our Chief Engineering Officer, a newly-created
office, since April 2003. From December 2000 to March 2003, Mr. Corral was our
Director of Engineering. Prior to joining Maxcom, Mr. Corral was responsible
for telecommunications and new projects for Cablemás, S.A. de C.V., the third
largest Mexican operator of cable television. Previously, Mr. Corral worked
for AMCEL (Mexican Association of Cellular Carriers) as chief executive
officer. Mr. Corral has also served as commercial director for Baja Celular
Mexicana, S.A. de
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C.V. and Telecomunicaciones del Golfo, S.A. de C.V. Mr. Corral holds a
bachelor's degree in Business Administration from the Universidad
Iberoaméricana in Mexico City as well as a marketing diploma from the same
University and a telecommunications diploma from Technology Training in Miami,
Florida.
Eloísa Martínez
has been Chief Financial Officer since June 2001. Prior to
joining Maxcom, Ms. Martínez served for two years as Financial Planning and
Control Director and two years as Assistant to the Chief Financial Officer at
Iusacell. Previously, Ms. Martínez worked for 12 years at IBM Corporation in
Mexico and in the United States, where she held the positions of Controller,
Internal Audit Manager, Corporate Internal Auditor and Business Control and
Planning Analyst. Ms. Martínez holds a bachelor's degree in Business
Administration from the Instituto Politécnico Nacional in Mexico City and a
master's degree in Business Administration from the Instituto Tecnológico de
Estudios Superiores de Monterrey.
Ricardo Arévalo Ruiz
has been our Chief Operation and Information
Technology Officer since April 2003. Mr. Arévalo was Chief Information Systems
Officer from April 2001 to April 2003. Prior to joining Maxcom, Mr. Arévalo
served as Vice-President, Information Systems and Chief Information Officer of
Iusacell from August 1997 to May 2001. Mr. Arévalo also served as Vice
President, Information Systems, as Chief Information Officer and as Director,
Systems Development of Grupo Iusacell Cellular during the previous two years.
Before then, Mr. Arévalo served as Director of Information Systems, Materials,
Logistics and Customer Service of AMP de México, S.A. de C.V. from May 1993
until August 1997. Mr. Arévalo was also the Information Systems Manager for
Tequila Cuervo, S.A. de C.V. from October 1990 until May 1993. Mr. Arévalo has
an undergraduate degree in computer sciences and a diploma in marketing from
the Instituto Tecnológico y de Estudios Superiores de Monterrey.
Carlos Castro Paniagua
has been our Vice-President of Human Resources
since March 2001. Prior to joining Maxcom, Mr. Castro served as Director of
Human Resources at Gillette de México for twelve years and as Director of
Corporate Human Resources at Phillips Mexicana for two years. Mr. Castro also
served at Gillette de México as engineering manager and production manager. Mr.
Castro holds an industrial degree from the Centro Nacional de Enseñanza Técnico
Industrial.
Fúlvio V. del Valle
was the President and Chief Executive Officer of
Maxcom from April 2001 until March 2003. Prior to joining Maxcom, Mr. del
Valle was President of Iusacell since June 1997 and a member of its Board of
Directors since June 1998. From August 1996 until June 1997, Mr. del Valle
served as President of the non-wireline cellular companies in Regions 3
(Norcel) and 4 (CedeTel). For more than 20 years prior, Mr. del Valle served in
senior Latin America region executive positions for several multinational
positions for several multinational corporations. Mr. del Valle was employed by
AMP Inc. as regional director, Latin America, from January 1996 through July
1996 and as President, Mexico, from August 1992 until December 1995. From
September 1986 until July 1992, Mr. del Valle served as Regional Director for
South America, Electronic Division, for DuPont Latin America Corp. and from
March 1980 through August 1986, he served as general manager, Latin American
North Region, for National Semiconductor Corp. Mr. del Valle holds an
undergraduate degree in electrical engineering from the Instituto Politécnico
Nacional of Mexico and a master's degree in physics from Virginia Polytechnic
Institute.
Eduardo Patrón
was our Chief Marketing Officer of Maxcom from February
2001 until January 2003. Prior to joining Maxcom, Mr. Patrón served for 14
years as Marketing Director, Assistant General Manager and in several other
positions for Kraft Foods in Mexico, a subsidiary of Phillip Morris.
Previously, Mr. Patrón worked as Promotion and Merchandising Manager for Alfa
Alimentos, S.A. de C.V., a food company, and as an account executive for A. C.
Nielsen. Mr. Patrón holds an Industrial Engineering degree from the Universidad
Iberoamericana in Mexico.
Cesar A. Castillo Guerra
was our Chief Commercial Operations Officer from
May 2002 until January 2003. Prior to joining Maxcom, Mr. Castillo served at
Axtel, S.A. de C.V. as Vice-President for the North Region, Vice-President of
Mexico City and Vice-President of Sales and Service from February 2000 to April
2002. He also served as Director of Sales and Customer Care for the same
company from January 1999 to February 2000. From May 1998 to January 1999, Mr.
Castillo served at Iusacell where he was Director of Strategic Alliances and
Channels (Marketing). Mr. Castillo was Director of Strategic Alliances and
Alternate Channels for Alestra between May 1996 and April 1998. Mr. Castillo
holds a CPA degree from the Instituto Tecnológico de Estudios Superiores
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de Monterrey - Monterrey Campus, as well as a master's degree in business
administration with specialization in marketing, from the same University.
Francisco Soroa de las Cuevas
was our Vice-President of Corporate
Communications and Public Relations from September 2001 until April 2003, when
he resigned and the office was cancelled. Prior to joining Maxcom, he held the
same position at Nissan Mexicana for two years and at Iusacell for three years.
Mr. Soroa has also served as Director of Public Relations for Pepsico de Mexico
and Director of Public Relations and Press Secretary of the State of Puebla.
Mr. Soroa de las Cuevas holds a bachelor's degree in International Relations, a
Business Management Communications degree from the Universidad de las Americas
and a Human Resources Management degree from Michigan University. He holds a
bachelor's degree in International Relations from the Universidad de las
Américas.
B.
Compensation
General
For the year ended December 31, 2002, our executive officers received an
aggregate compensation (including bonuses and severance payments but excluding
options) of approximately Ps.32.9 million. Of this amount, Ps.26.2 million was
recognized as selling, general and administrative expenses for 2002, which
represent 6.1% of our total selling, general and administrative expenses for
2002. The remaining balance was recognized as follows:
•
Ps.3.5 million as integral cost of financing,
because certain bonuses were paid to our executives as a
special compensation for the consummation of the
restructuring;
•
Ps.2.3 million as capital expenditures, because
certain bonuses were paid to our executives in connection with
the execution of the Bestel capacity acquisition agreement.
"See. Item 4. Business Overview" for a further explanation of
this transaction; and.
•
Ps.0.9 million as deferred expenses, because
certain bonuses were paid as incentive to retain management.
In November 2002, our executive officers received a bonus in the
form of cash and options to purchase 462,936 series N shares at an exercise
price of U.S.$0.4927 per share. The executive officers used the cash to
exercise the options at the time of granting.
Our executive officers also received options to acquire an aggregate of up
to 356,433 series N shares at U.S.$0.01 per share. We recorded in 2002 Ps.1.7
million in selling, general and administrative expenses in connection with such
options.
During 2002, members and the Chairman of the Board received options that
vest immediately to purchase up to 2,500 and 5,000 series N shares,
respectively, at an exercise price of U.S.$0.01 per share, for each time the
member attended a Board of Directors or any board committee meeting. We already
approved similar options incentives for the year 2003. There were five Board
of Directors meetings, seven Operating Advisory Committee meetings and two
Audit Committee meetings, during 2002. In 2002, we granted to our directors
and committee members options to purchase a total of up to 242,500 series N
shares at an exercise price of U.S.$0.01.
Old executive stock option plan
We implemented an executive compensation plan that included bonuses and
stock options on our C/N CPOs. Upon the completion of the capital
restructuring described in "Item 7. Major Shareholders and Related Party
Transactions—A. Major shareholders and share ownership—The capital
restructuring," beneficiaries under the plan will now receive series N shares
in exchange for their series C shares.
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We granted 142,250, 583,000 and 206,820 options in 1999, 2000 and 2001,
respectively for the services rendered during the years 1998, 1999 and 2000.
Options granted had exercise prices of U.S.$8.70, U.S.$10.45 and U.S.$12.55,
respectively, which were the then estimated fair market values. Of these
options, 256,094 had vested and 221,622 had been forfeited at December 31,
2002.
New executive stock option plan
We implemented a new executive stock plan, covering services rendered
during the years 2001, 2002 and 2003. The plan is divided into four levels,
depending on the ranking of the different members of management. There were
initially 80 participants in the plan. Participants in the top three levels
are guaranteed a minimum number of options for series N stock. The granting of
options for the fourth level, which is comprised of the junior-most management,
is discretionary.
The number of options granted depends on certain revenue and operating
cash flow targets. There is a bonus portion of the plan that is allocated to
individual executives at the discretion of management and the Board of
Directors. Vesting is 20% upon allocation and 20% per year for the next four
years. Options were granted during the second quarter of 2002, and will be
granted during the second quarter of 2003 and 2004 at exercise prices of
U.S.$0.4927, U.S.$0.5912 and U.S.$0.7094, respectively.
The number of options granted under the stock option plan for our former
Chief Executive Officer, Mr. Fulvio del Valle depended on revenue and cash flow
targets, and other factors such as the success of the debt restructuring,
additional capital raising and the obtainment of certain regulatory approvals.
There was a vesting period of two years from the grant date with an exercise
price of U.S.$0.4927 per share for all shares. As part of his severance
arrangement, Mr. del Valle agreed to forego all rights to receive stock under
the plan.
Our new Chief Executive Officer, Mr. Rene Sagastuy, received a signing
bonus of options to purchase 100,000 series N shares at an exercise price of
U.S.$0.01 per share.
The maximum aggregate number of shares of series N stock that can be
distributed under the new executive stock plan is 17,657,064 million shares of
series N stock, which is equivalent to about 9.3% of our capital stock on a
fully diluted basis (excluding other options outstanding).
C.
Board practices
The members of our Board of Directors are elected annually at our ordinary
general meeting of shareholders. All board members hold the positions for one
year and may be reelected.
Our Board of Directors established an Operating Advisory Committee
responsible for advising the Board on, and overseeing, Maxcom's operations. The
Operating Advisory Committee is currently comprised of Adrián Aguirre, Jacques
Gliksberg, Salvatore Grasso, Roberto Chute and Rene Sagastuy.
Our Board of Directors established an Audit Committee responsible for
advising the Board on, and overseeing, Maxcom's financial condition and matters
regarding accounting, taxation and release of financial information. The Audit
Committee is currently comprised of Marco Provencio, Adrián Aguirre, Salvatore
Grasso, Roberto Chute and Hugo Lara. Mr. Juan Manuel Ferrón, our statutory
auditor, and Gonzalo Alarcón, our general counsel and secretary of the Board,
are required to participate in each meeting, although they are not formal
members of the committee.
Under the Mexican Companies Law (
Ley General de Sociedades Mercantiles
),
we are required to have at least one statutory auditor (
comisario
), who is
elected by our shareholders at the annual ordinary general shareholders'
meeting. C.P. Juan Manuel Ferrón is our statutory auditor. Mr. Ferrón is a
partner of PricewaterhouseCoopers, S.C., who are our external auditors. The
primary role of the statutory auditor is to report to our shareholders at the
annual ordinary general shareholders' meeting regarding the accuracy,
sufficiency and reasonable basis of the financial information presented to such
shareholders by the Board of Directors.
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Our executive officers are appointed by the Board of Directors for an
indefinite term and may be removed by the Board at will, provided the
corresponding severance payments are made in accordance with Mexican labor law
and the applicable labor contract.
Members of the Board of Directors are not entitled to any benefits upon
termination.
D.
Employees
As of December 31, 2002, we had 443 employees, a 33% decrease as compared
to the number of employees one year earlier. This decrease is due to a
combination of cost-cutting measures and efficiencies. Of our employees, 32
were unionized and covered by the terms of a collective bargaining agreement
that we entered into with the National Union of Telecommunications,
Communications, Cybernetics, Electric, Electronic and Similar Products Workers
of the Mexican Republic (
Sindicato Nacional de Trabajadores de
Telecomunicaciones, Telefonía, Comunicaciones, Cibernética, Productos
Eléctricos, Electrónicos, Similares y Conexos de la República Mexicana
). This
agreement is renewable every year and next expires on March 31, 2004. We have
not experienced any strikes or work stoppages and believe that our relations
with our employees are satisfactory.
We also had 182 sales representatives as of December 31, 2002, compared to
236 sales representatives as of December 31, 2001. As of December 31, 2002, we
had 53 temporary employees.
E.     Share ownership
Messrs. Jacques Gliksberg, Roberto Chute and Pedro Querio, a series B and
B1 Directors, are officers of Bank of America Equity Partners, manager of
Nexus-Holdings I, LLC, BASCF-Maxcom Holding I, LLC and BAS Capital Funding
Corporation, shareholders that hold, directly and indirectly 71.04% of our
capital stock. None of our other directors or officers owns more than 1% of
our shares, except for shares held by the Aguirre Gómez family, which are
described below in "Principal Shareholders."
The only agreements that we currently maintain for purposes of compensating our
employees with our capital stock our old and new executive stock option plans,
described above under "—B. Compensation."
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
Major shareholders and share ownership
The following table presents the equity structure and the major
shareholders of Maxcom as of the date of this annual report:
Shareholders
Aguirre Gómez
Bank America
Other
Shares
Family
(1)
Equity Partners
(2)
Investors
(3)
Subtotal
Series A Shares
Number of shares
1,276,428
—
—
1,276,428
Percentage owned
100.00
%
—
—
100.00
%
Series A1 Shares
Number of shares
6,088,896
—
—
6,088,896
Percentage owned
100.00
%
—
—
100.00
%
Series B Shares
(4)
Number of shares
—
—
1,226,372
1,226,372
Percentage owned
—
—
100.00
%
100.00
%
Series B1 Shares
Number of shares
—
5,554,528
293,681
5,848,209
Percentage owned
—
94.98
%
5.02
%
100.00
%
Series N Shares
Number of shares
670,244
3,155,164
8,239,605
12,065,013
Percentage owned
5.55
%
26.15
%
31.70
%
100.00
%
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Shareholders
Aguirre Gómez
Bank America
Other
Shares
Family
(1)
Equity Partners
(2)
Investors(3)
Subtotal
Series N1 Shares
Number of shares
—
116,223,430
6,245,01
122,468,441
Percentage owned
—
94.90
%
5.10
%
100.00
%
Series N2 Shares
(5)
Number of shares
—
—
26,867,820
26,867,820
Percentage owned
—
—
100.00
%
100.00
%
Total
Number of shares
8,035,568
124,933,122
42,872,489
175,841,180
Percentage owned
4.60
%
71.04
%
24.37
%
100.00
%
(1)
The shares of Maxcom controlled by the Aguirre Gómez family are held
individually or through trusts or corporations.
(2)
The shares of Maxcom controlled by Bank America Equity Partners are
held through (i) Nexus-Maxcom Holdings I, L.L.C., which holds 60,888,979
shares, (ii) BASCF-Maxcom Holding I, which holds 60,888,979 shares, and
(iii) BAS Capital Funding Corporation, which holds 3,155,164 shares.
(3)
Includes, among others, Credit
Suisse First Boston Corporation, which received 92,575 series B
shares and 1,937,057 series N1 shares (valued at
U.S.$1.0 million) as part compensation for its financial
advisory services in connection with our debt restructuring.
(4)
The series B shares represent 8.49% of the voting stock of Maxcom and
are controlled by CT Global, L.L.C., an assignee of CT Global
Telecommunications, Inc., our former operating partner.
(5)
The series N2 shares were originally issued to the bondholders who
participated in our debt restructuring. See "Item 5—Operating and
Financial Review and Prospects—Debt restructuring and recapitalization."
In addition, we have options outstanding for the purchase of up to
26,837,315 series N shares. See "Outstanding options and warrants."
The capital restructuring
On April 11, 2002 we obtained an authorization from the Mexican Foreign
Investment Bureau (
Dirección General de Inversión Extranjera
) to increase our
ability to issue neutral investment shares for up to 95% of our total capital
stock and to simplify our equity structure.
Under the capital restructuring, we liquidated the existing C/N CPO trust
and cancelled the corresponding C/N CPOs. Additionally, the series C stock was
converted at an exchange ratio of one—to—one into series N stock. As a result,
the holders of the C/N CPOs have become the direct holders of two shares of
series N stock for each C/N CPO. Series N shares are represented by common
stock without voting rights.
Additionally, we issued the following series of stock:
•
Series A1 common voting stock with preferred liquidation rights;
•
Series B1 common voting stock with preferred liquidation rights;
•
Series N1 preferred stock with limited voting rights; and
•
Series N2 preferred stock with limited voting rights.
The holders of our series A stock and series A1 preferred stock voting
together as a class have the ability to elect the majority of the Board of
Directors. All series A stock and A1 preferred stock are beneficially owned,
directly or indirectly, by several members of the Aguirre Gómez family,
including Adrián Aguirre Gómez, María Guadalupe Aguirre Gómez, María Elena
Aguirre Gómez, and María Trinidad Aguirre Gómez. Pursuant to our amended
by-laws, our amended series A stock and A1 preferred stock represent 51% of our
voting stock and may only be held by Mexican nationals.
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Although the Aguirre Gómez family holds 51% of the voting stock through
the series A stock and A1 preferred stock, and has the power to elect the
majority of the Board of Directors, its ability to control Maxcom is
substantially limited by the terms of the securityholders' agreement described
below under "—Securityholders agreement." The holders of our series B stock and
series B1 preferred stock voting together have the right to elect four
directors of our nine-member Board of Directors. However, pursuant to the terms
of the securityholders agreement, the series B and B1 director are elected from
among nominees proposed by Nexus.
The holders of our series N2 preferred stock have the right to appoint an
observer to the Board of Directors for so long as (i) the series N2 preferred
shares represent at least 3% of the outstanding capital stock of Maxcom or (ii)
there is at least one share of series N2 preferred stock remain outstanding and
at least U.S.$17.5 million aggregate principal amount of the new notes remain
outstanding. This observer, who is not a member of the Board of Directors, has
the right to attend meetings of the Board of Directors but is not entitled to
vote.
Outstanding options and warrants
As of the date of this annual report, we have options and warrants
outstanding for the purchase of up to 26.3 million series N shares. Each option
entitles the holder to purchase one series N share or a C/N CPO. The following
table presents information concerning the stock options and warrants authorized
and outstanding:
Percentage
Number of
Exercise price
of options
Name of option holder
options
per share
vested %
Nissho Iwai American Corporation
(1)
337,472
U.S.$10.87
100
CT Global Telecommunications, Inc. (operating services)
(2)
1,105,779
3.06
100
Bachow & Associates, Inc. (strategic assistance services)
(3)
442,312
3.06
100
Amsterdam Pacific LLC
24,426
8.70
100
1998-2000 Executive Stock Option Plan
575,000
8.70 to 12.50
45.97
2001-2003 Executive Stock Option Plan
17,657,064
0.49 to 0.71
17.74
UBS Warburg LLC
(4)
89,244
0.01
100
Donaldson, Lufkin & Jenrette Securities Corporation
(4)
22,312
0.01
100
Predecessor old notes warrantholders
(5)
764,938
0.01
100
Gian Carlo Pecchioni
(6)
10,000
0.01
100
Adrián Aguirre
(7)
3,626,959
0.49
52
Signing bonus reserve for new officers
246,215
0.01
0
BankAmerica International Investment Corporation
(management services)
(8)
249,781
0.01
100
LA Strategic Capital Partners II (management services)
(9)
27,754
0.01
100
Bachow & Associates, Inc. (management services)
(10)
277,535
0.01
100
Directors and committee members compensation
756,699
0.01
55.89
Rene Sagastuy
(11)
100,000
0.01
100
Total
26,313,490
(1)
These options were issued in 1998 as partial compensation for vendor
financing.
(2)
We authorized the issuance of options to purchase up to 250,000 series
N shares at U.S.$8.70 per share in May 1998 as compensation for operating
services. Pursuant to the capital restructuring, we authorized the
issuance of options to purchase up to an additional 855,779 series N
shares at an exercise price of U.S.$3.06 per share and to reduce the
exercise price of the original options to U.S.$3.06 per share as partial
anti-dilution protection. See "—B. Related party transactions—Operation
services" and "—Option grants to shareholders."
(3)
We authorized the issuance of options to purchase up to 100,000 series
N shares at U.S.$8.70 per share in May 1998 as compensation for strategic
assistance services. Pursuant to the capital restructuring, we authorized
the issuance of options to purchase up to an additional 342,312 series N
shares at an exercise price of U.S.$3.06 per share and to reduce the
exercise price of the original options to U.S.$3.06 per share
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as partial anti-dilution protection. See "—B. Related party
transactions—Strategic assistance services" and "—B. Related party
transactions—Management services."
(4)
These warrants were issued in March 2000 as partial compensation for
underwriting services related to the issuance of units comprised of our
predecessor old notes and warrants.
(5)
These warrants were issued as part of the March 2000 offering of our
units comprised of our predecessor old notes and warrants.
(6)
Mr. Pecchioni is a former Chief Executive Officer of Maxcom. These
options, which are partial compensation for his services, have been
exercised; however, the issuance of the underlying shares is subject to
certain corporate and regulatory approvals.
(7)
We issued options to purchase up to 375,000 series N shares at a strike
price varying between U.S.$8.70 and U.S.$12.50 per share pursuant to the
old executive stock option plan described in "Item 6. Directors, Senior
Management and Employees—B. Compensation—Old executive stock option
plan." Pursuant to the capital restructuring, we authorized the issuance
of options to purchase up to 3,251,959 series N shares at an exercise
price of U.S.$0.49 and to reduce the exercise price of the original
options to U.S.$0.49 per share as partial anti-dilution protection.
(8)
We issued options to purchase up to 42,300 series N shares at U.S.$0.01
per share in May 2001 as compensation for management services provided
during 2000. Pursuant to the capital restructuring, we authorized the
issuance of options to purchase up to an additional 207,481 series N
shares at an exercise price of U.S.$0.01 per share as partial
anti-dilution protection. See "—B. Related party transactions—Management
services."
(9)
We issued options to purchase up to 4,700 series N shares at U.S.$0.01
per share in May 2001 as compensation for management services provided
during 2000. Pursuant to the capital restructuring, we authorized the
issuance of options to purchase up to an additional 23,053 series N
shares at an exercise price of U.S.$0.01 per share as partial
anti-dilution protection. See "—B. Related party transactions—Management
services."
(10)
We issued options to purchase up to 47,000 series N shares at U.S.$0.01
per share in May 2001 as compensation for management services provided
during 2000. Pursuant to the capital restructuring, we authorized the
issuance of options to purchase up to an additional 230,535 series N
shares at an exercise price of U.S.$0.01 per share as partial
anti-dilution protection. See "—B. Related party transactions—Management
services."
(11)
We issued options to purchase up to 100,000 series N shares at
U.S.$0.01 per share in March 19,2003 as part of Mr. Sagastuy's new
compensation package in connection with his appointment as our new chief
executive officer.
As part of his severance arrangement, Mr. Fulvio del Valle, our former
Chief Executive Officer, who resigned in March 2003 agreed to forego all rights
he had to options issued under the new executive stock option plan and in
connection with certain bonuses. These options had entitled Mr. Del Valle to
receive up to 11,687,765 series N shares at an exercise price ranging from
U.S.$0.01 to U.S.$0.49.
Securityholders agreement
On August 18, 2000, Maxcom executed an amended and restated
securityholders agreement with our shareholders to, among other things, reflect
the restructuring of our capital stock and to provide that the exchange of
series C stock and series N stock for CPOs may not adversely affect in any
manner the rights granted to the holders of the series N stock under the
original securityholders agreement.
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The securityholders agreement was again amended and restated in connection
with our recapitalization. All of the holders of series A stock, series A1
preferred stock, series B stock, series B1 preferred stock, series N stock and
series N1 preferred stock are parties to the securityholders agreement, which
sets forth certain corporate governance and the transfer or sale of such
securities. The primary purpose of the securityholders agreement is to confirm
the rights and obligations under the by-laws of each of the parties to such
agreement. Accordingly, with certain limited exceptions, the terms of the new
securityholders agreement are substantially the same as the terms of the
by-laws as applicable to the holders of series A stock, series A1 preferred
stock, series B stock, series B1 preferred stock, series N stock and series N1
preferred stock.
In particular, the new securityholders agreement provides that we are
managed by a Board of Directors composed of nine members and nine alternate
members. Five members are designated by holders of a majority of the series A
stock and the series A1 preferred stock, voting together as a single class, and
the remaining four members are designated by the holders of our series B stock
and series B1 preferred stock voting together. However, the series B and B1
directors are selected from among nominees proposed by Nexus.
Pursuant to the new securityholders agreement, Maxcom is required to
deliver to certain significant holders of series A, B and N stock and series
A1, B1 and N1 preferred stock financial statements and other information
reasonably requested by such shareholders.
In addition, the new securityholders agreement provides, among other
things, approval of key matters (which will require the affirmative vote of
both Nexus and the Board, inclusive the approval of at least one director
designated by Nexus), restrictions on transfers, rights of first offer,
participation rights, and rights and obligations with respect to public
offerings. For further description of corresponding provisions of the proposed
by-laws see "Item 10. Additional Information—B. Memorandum and articles of
association."
B.
Related party transactions
General policy
Our general policy is that we will not, and will not permit our
subsidiaries to, enter into any contract or transaction with or for the benefit
of any affiliate (other than transactions between us and our subsidiary), which
is not at a price and on other terms at least as favorable to Maxcom or our
subsidiaries as those which could be obtained on an arm's-length basis from an
unaffiliated third party.
Operation services
On October 17, 1997, we entered into an operating agreement with CT Global
Telecommunications, Inc., one of our series B shareholders. This agreement was
amended in May 21, 1998 and October 1, 1999 and was terminated on December 31,
2000. Under this agreement, CT Global was responsible, among other things, for
providing us with advisory consulting and supporting services in our start-up
phase.
During the life of this Agreement, CT Global earned options to purchase
our shares as incentive compensation for meeting certain start-up and
operational targets. As part of the proposed capital restructuring described
in "—A. Major shareholders and share ownership—The capital restructuring," we
authorized the issuance of options in favor of CT Global to purchase up to
855,779 series N shares at an exercise price of U.S.$3.06 per share and to
reduce the exercise price of the original options to U.S.$3.06 per share as
partial anti-dilution protection. See "—A. Major shareholders and share
ownership—Outstanding options and warrants."
Strategic assistance services
On May 21, 1998, we entered into a strategic assistance agreement with
Bachow & Associates, Inc., an affiliate of one of our current principal
shareholders. The agreement provided that Bachow would help us to:
•
develop and implement a budget model template for our annual operating and capital budgets;
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•
evaluate and assist in the choice and implementation of a financial accounting system;
•
develop a template for the monthly Board of Directors operational reporting package;
•
evaluate and assist in the choice and implementation of a customer billing system;
•
design a sales and marketing plan; and
•
provide training and guidance to our Chief Financial Officer.
This agreement expired on April 1, 1999. Bachow received, in addition to
other compensation, options to purchase 100,000 series N shares at a strike
price of U.S.$8.70 per share. In accordance with the terms of the strategic
assistance agreement, Bachow may elect to have the Company finance up to 95% of
the exercise price with a seven-year term non-recourse loan that will be
secured by the stock. Pursuant to the capital restructuring, we authorized the
issuance of options to purchase up to an additional 342,312 series N shares at
an exercise price of U.S.$3.06 per share and to reduce the exercise price of
the original options to U.S.$3.06 per share as partial anti-dilution
protection.
Advertising
On April 9, 2002 we agreed to purchase U.S.$3.0 million of advertising
time over the Grupo Radio Centro radio network from Operadora Plusgamma, a
company controlled by certain members of the Aguirre Gómez family. Operadora
Plusgamma is an operator of a network of radio station located throughout
Mexico. The Aguirre Gómez family used the U.S.$3.0 million proceeds that were
received by Operadora Plusgamma from this agreement to purchase series A1 stock
pursuant to the private equity investment made at the time of the
recapitalization.
Management services
In May 2001, Bank America International Investment Corporation, Bachow &
Associates, Inc. and LA Strategic Capital Partners II, which are principal
shareholders (or affiliates of principal shareholders in the case of Bachow)
received options to purchase an aggregate of 94,000 series N shares at an
exercise price of U.S.$0.01 for management services rendered in 2000, during
the term of vacancies in the offices of Chief Executive Officer, Chief
Operating Officer and Chief Marketing Officer.
As part of the proposed capital restructuring described in "—A. Major
shareholders and share ownership—The capital restructuring," we authorized the
issuance to the same partners of options to purchase 461,069 series N shares at
an exercise price of U.S.$0.01 per share partial anti-dilution protection. See
"—A. Major shareholders and share ownership—Outstanding options and warrants."
C.
Interest of experts and counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A.
Consolidated statements and other financial information
Financial statements
See Item 18.
Legal proceedings
We are not currently party to any material legal proceedings other than as
described below.
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Lease termination agreement
In September 2002, we commenced actions before the Lease Courts for the
Federal District of Mexico against Messrs. Zaga Romano, Zaga Buzali and others
(collectively, the "landlord"), seeking the termination of a 15-year lease
(expiring on September 30, 2013) of 70,500 square feet plus parking space in a
building on Magdalena, Mexico City, which was our former headquarters. The
action was based on claims of miscalculation of lease payment amounts and
breaches of certain city compliance regulations. The landlord countersued
alleging failure to make lease payments.
In May 2003, we reached an agreement with our landlord at our former
headquarters in Magdalena, Mexico City. Pursuant to this agreement, we
retained a leasehold interest through May 2013 on the first floor, where one of
our Lucent 5ESS switches is located, the roof-top, where we have three
microwave transmission antennas and a section of the basement, which will be
used for parking and to place some of our electric equipment that supports the
switch. We were also released from lease obligation on approximately 35,887
square feet plus parking space of the building originally running through
September 30, 2013. In exchange for the new lease and the releases, we agreed
to prepay the full, ten-year lease obligations on the first floor, the roof-top
and basement, as well as pay past-due lease payments dating back from October
2002 through April 2003. All these payments amount in the aggregate to
U.S.$2.7 million and will be payable in installments through May 2004.
Significant unpaid receivable
We are in the process of initiating legal actions against Americana de
Sistemas, S.A. de C.V. for the failure to pay approximately Ps.6.6 million in
telecommunications services. This service usage, which was incurred over
several days, was detected by our fraud prevention system but was not noticed
by our monitoring personnel, which has been significantly reduced as a result
of our cost-cutting measures. See "Item 3. Key Information—D. Risk
factors—Factors relating to the Mexican telecommunications industry—Fraud
increases our expenses."
Dividend policy
Our current policy is to reinvest profits into our operations. In
addition, the indenture that governs the terms of the new notes allows us to
pay cash dividends only if we meet the following conditions:
•
minimum consolidated leverage ratio of less than 3.75 to 1.00;
•
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 cash dividend payments do not exceed an amount determined
in the indenture based on, among other things, cash flow generated
from operations or equity offerings and consolidated interest
expense.
B.
Significant changes
Except for the debt restructuring and recapitalization described in "Item
5. Operating and Financial Review and Prospects—Debt restructuring and
recapitalization," no significant change has occurred affecting our results or
financial conditions since December 31, 2002.
ITEM 9. THE OFFER AND LISTING
A.
Offer and listing details
Not applicable.
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B.
Plan of distribution
Not applicable.
C.
Markets
None of Maxcom's securities are traded on any stock exchange.
D.
Selling shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A.
Share capital
Not applicable.
B.
Memorandum and articles of association
General
Maxcom was incorporated on February 28, 1996, under the name "Amaritel,
S.A. de C.V." as a variable capital corporation (
sociedad anónima de capital
variable
) established under the laws of Mexico. Maxcom was registered in the
Public Registry of Commerce of the Federal District of Mexico under folio no.
210585 on June 11, 1996. Amaritel changed its name to "Maxcom
Telecomunicaciones, S.A. de C.V." on February 9, 1999.
Maxcom was formed for the purpose of installing, operating and exploiting
a public telecommunications network granted by the Mexican federal government
for the provision of local and long distance telephone services.
Maxcom's corporate purposes are found under Article Two of its by-laws.
The duration of Maxcom's existence under our by-laws is indefinite.
The following table sets forth our capital structure as of December 31,
2002:
% of Total
Number
Capital
Class of Stock
of Stock
Structure
Series A
1,276,428
0.7
%
Series A1 Preferred Stock
6,088,896
3.5
%
Series B
1,226,372
0.7
%
Series B1 Preferred Stock
5,848,209
3.3
%
Series N
12,065,013
6.9
%
Series N1 Preferred Stock
122,468,441
69.6
%
Series N2 Preferred Stock
26,867,820
15.3
%
Total
175,841,180
100.0
%
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On April 11, 2002 we obtained an authorization from the Mexican Foreign
Investment Bureau (
Dirección General de Inversión Extranjera
) to increase our
ability to issue neutral investment shares for up to 95% of our total capital
stock and to simplify our equity structure.
In connection with our capital restructuring, we issued four new classes
of stock: the series A1, B1, N1 and N2 preferred stock. The series A1 and B1
preferred stock have full voting stock and the series N1 and N2 preferred stock
have limited voting stock. The series N1 and N2 preferred stock are not
computed for purposes of determining the foreign investment percentage under
the Mexican Foreign Investment Law and may be subscribed, paid for and held by
Mexican and non-Mexican investors. Our series N2 preferred stock have been
deposited into the CPO trust, which is administered by Banco Nacional de
México, S.A. who is also the holder of record of the series N2 preferred stock.
The trust is managed by a technical committee, a majority of the members of
which are designated by Maxcom. The technical committee has the authority to
direct the trustee to, among other things, waive preemptive rights otherwise
provided by Mexican law. Each CPO represents one series N2 preferred stock.
Under the capital restructuring, we liquidated the existing C/N CPO trust
and cancelled the corresponding C/N CPOs. Additionally, the series C stock was
converted at an exchange ratio of one-to-one into series N stock. As a result,
holders of C/N CPOs have became the direct holders of two shares of series N
stock for each C/N CPO.
Our series A stock and series A1 preferred stock, which may only be
subscribed, paid for and held by Mexican investors, collectively represent
about 51% of our voting stock, and all of our series A and series A1 stock are
held directly or indirectly by members of the Aguirre Gómez family. The series
B stock and the series B1 preferred stock represent 49% of our voting stock and
may be subscribed, paid for and held by Mexican and non-Mexican investors.
Voting rights
Under our amended by-laws, the holders of series A stock, series A1
preferred stock, series B stock and series B1 preferred stock are entitled to
vote on all matters submitted to a vote of the shareholders, with each share of
series A stock, series A1 preferred stock, series B stock and series B1
preferred stock being entitled to one vote. In addition, under our by-laws,
holders of series N stock have no voting rights and holders of series N1 and N2
preferred stock have limited voting rights.
Holders of series N1 preferred stock will vote together as a separate
class in connection with:
•
any amendment to the by-laws that adversely and
disproportionately affects the economic characteristics (i.e.,
conversion right, liquidation right and dividend right) of the
series N1 preferred stock as compared to the series N2 preferred
stock; and
•
any amendment to the section of the by-laws relating to the
voting rights of series N1 preferred stock.
In addition, holders of series N2 preferred stock will vote together as a
separate class in connection with:
•
determining whether a sale of all or substantially all of the
consolidated assets of Maxcom or a merger, recapitalization,
reorganization or consolidation of Maxcom, immediately after which
the shareholders of Maxcom beneficially own less than 50% of the
voting power or equity securities of the surviving entity will not
be deemed a liquidation event with respect to the series N2
preferred stock;
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•
any amendment to the by-laws that adversely and
disproportionately affects the economic characteristics (i.e.,
conversion right, liquidation right and dividend right) of the
series N2 preferred stock as compared to the series N1 preferred
stock;
•
any amendment to the by-laws that adversely affects the right
of the holders of a majority of the series N2 preferred stock to
designate an observer (or, in the circumstance described below, a
member) to the board of directors;
•
any amendment to the by-laws that adversely affects the
rights of the observer designated by the series N2 preferred stock
to receive, subject to any restrictions imposed by applicable law,
copies of any written materials distributed to the holders of series
A and B stock and series A1 and B1 preferred stock simultaneously
with such holders;
•
certain amendments to the by-laws that impose additional
transfer restrictions or conditions on the series N2 preferred
stock, except to the extent necessary to comply with applicable law;
•
any amendment to the by-laws that adversely affects the
co-sale rights or obligations of holders of series N2 preferred
stock;
•
any amendment to the by-laws that adversely affects the
forced sale rights or obligations of holders of series N2 preferred
stock; and
•
any amendment to the section of the by-laws of Maxcom
relating to the voting rights of series N2 preferred stock.
Shareholders' meetings may be called by the Board of Directors, its
Chairman, Vice-Chairman or Secretary, the statutory auditor or Nexus or, in
certain cases, by a Mexican court of competent jurisdiction. In addition, the
Board of Directors or the statutory auditor must call a shareholders' meeting
at the written request of any shareholder if no ordinary general shareholders'
meeting has been held for two consecutive years or if the shareholders'
meetings held during that period have not considered the items mentioned in
Article 181 of the Mexican Companies Law. Notice of meetings must be published
in the Official Gazette of the Federation or in a newspaper of general
circulation in Mexico City or by written notice given to each shareholder of
record at least 15 days prior to the meeting. In order to attend a
shareholders' meeting, a shareholder must request and obtain an admission card
by depositing, at least 24 hours before the time set for holding the
shareholders' meeting, such shares with Maxcom's corporate secretary or with a
Mexican bank or other qualified institution. If entitled to attend the meeting,
a shareholder may be represented by proxy or a power-of-attorney.
Shareholders' meetings may be ordinary, extraordinary or special.
Extraordinary general meetings are called to consider the matters specified in
Article 182 of the Mexican Companies Law, and principally include increases or
reductions of capital stock, amendments to the by-laws, dissolution, issuance
of bonds or preferred stock, merger, spin-off, transformation from one type of
company to another, change in nationality and change of corporate purpose.
General meetings called to consider all matters other than those mentioned
above are ordinary meetings. An ordinary general meeting of the shareholders of
Maxcom must be held at least annually during the four months following the end
of each fiscal year to consider matters specified in Article 181 of the Mexican
Companies Law, principally including the election of directors, the report of
the Board of Directors regarding the performance of Maxcom, containing the
financial statements of Maxcom for the preceding fiscal year and the
declaration of dividends, if any.
Special meetings for each class of stock may be held to elect the members
or observers of the Board of Directors representing those shareholders and to
address other matters relating to the relevant series.
Under our by-laws, the quorum on a first call, and each call thereafter,
for an ordinary general shareholders' meeting is at least a majority of the
voting shares. The quorum on a first call for extraordinary
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shareholders' meetings, and each call thereafter, is at least a majority
of the shares having a right to vote at such meetings. Except for purposes of
certain key matters to be voted upon as a separate class by each of the holders
of series N1 and series N2 preferred stock, series N stock, and series N1 and
N2 preferred stock are not considered voting shares for purposes of determining
the quorum at ordinary general or extraordinary shareholders' meetings. The
quorum on a first call for special shareholders' meetings, and each call
thereafter is at least a majority of the shares of the respective series for
which the special meeting is being held.
Resolutions of ordinary general and special shareholders' meetings may be
adopted by the affirmative vote of the majority of shares present at the
meeting, except as to certain matters described below. Resolutions of general
extraordinary shareholders' meetings held on a first call, and each call
thereafter may be adopted by the affirmative vote of at least a majority of the
shares having a right to vote at such meetings.
Under Mexican law, holders of 33% of Maxcom's outstanding capital stock
may have any shareholder action set aside by filing a complaint with a Mexican
court of competent jurisdiction within 15 days after the close of the meeting
at which such action was taken, by showing that the challenged action violates
Mexican law or Maxcom's by-laws.
Under Mexican law, an action for civil liabilities against a member or
members of the Board of Directors may be initiated by a shareholders'
resolution. In the event shareholders decide to bring an action, the person or
persons against whom the action is brought will immediately cease to be members
of the Board of Directors. Additionally, shareholders representing not less
than 33% of the outstanding shares of Maxcom may directly take such action
against members of the Board of Directors, provided that:
•
such shareholders have not voted in favor of a resolution
approved at the relevant shareholders' meeting pursuant to which it
was resolved not to take any action against the directors who are to
be sued; and
•
the claim in question covers the total amount of damages
alleged to have been caused to Maxcom as well as to the individual
plaintiffs' interests.
Any recovery of damages will be for the benefit of Maxcom and not the
shareholders bringing the action.
Under Mexican law, any shareholder or director who has a conflict of
interests in connection with any matter must abstain from voting at the
relevant shareholders' or board of directors' meeting, respectively. Any
shareholder or director who votes on a business transaction where its interests
conflict with those of Maxcom may be liable for damages if the transaction
would not have been approved without such shareholder's or director's vote.
The terms of compensation of the members of the Board of Directors must be
approved at a shareholders' meeting.
Approval of key matters
Our amended by-laws provide that the approval of each of the key matters
described below will require the approval in advance of both Nexus, solely in
its capacity as a shareholder, and the board of directors; provided that the
approval of the board of directors will require the affirmative vote of at
least one director designated by Nexus.
Key matters generally include the following:
•
the incurrence or assumption by the company and/or any of its
subsidiaries of any indebtedness (including capitalized lease
obligations) or other liabilities exceeding U.S.$10,000,000;
•
the issuance of any equity securities of the company or any
of its subsidiaries;
•
the sale, transfer, exchange or other disposal of all or a
significant portion of the assets or equity securities of the
company or any of its subsidiaries;
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•
any assignment by the company or any of its subsidiaries for
the benefit of creditors or the voluntary commencement of any
bankruptcy or insolvency proceedings;
•
the establishment by the company or any of its subsidiaries
of any non-wholly-owned-subsidiary or the making by the company or
any of its subsidiaries of any loans or advances to, guarantees for
the benefit of, or investments in, any person or entity other than a
wholly-owned subsidiary;
•
the declaration of dividends on, or the making of any other
distributions in respect of, any of its capital stock, other than
dividends and distributions by a direct or indirect wholly-owned
subsidiary of the company to its parent;
•
the acquisition of any equity securities of the company or any of its subsidiaries;
•
the entering into any transaction with any restricted persons;
•
the election, appointment or removal of the Chief Executive
Officer, the General Managers of any business units, the Chief
Operating Officer, the Chief Financial Officer, the Director of
Marketing and the Chief Engineer (or any other individual with a
similar or more senior title or position), and the approval of
salary, compensation and benefit or other similar plans for such key
executives;
•
the approval of the company's and its subsidiaries' annual
business plan and annual budget for each fiscal year;
•
the entering by the company or any of its subsidiaries into
any new line of business (other than the main corporate purpose of
the company);
•
any agreement that would restrict the company's or any of its
subsidiaries' right or ability to perform the provisions of its
by-laws (Estatutos) or any agreements or instruments to which it is
a party;
•
the manner in which the shares or other interests of any
subsidiary or entity owned by the company shall be voted at
shareholders' meetings called for key matters;
•
any amendments to the concessions/licenses granted by the
Mexican authorities, by-laws and certain other specified agreements;
•
the subdivision or combination, in any manner, of the
outstanding shares of one class or series of shares, unless the
outstanding shares of the other class or series of shares of the
company shall also be proportionately subdivided or combined in a
similar manner;
•
the grant to any person or entity of the right to request the company to register securities; and
•
any commitment or agreement to do any of the foregoing.
Board of Directors
Our Board of Directors is composed of nine members, five of whom are
designated by the holders of series A stock and series A1 preferred stock and
four of whom are designated by the holders of series B stock and series B1
preferred stock. Pursuant to the terms of the securityholders agreement
described in "Item 7. Major Shareholders and Related Party Transaction—A.
Major shareholders and share ownership—Securityholders agreement," each series
B and B1 director must be elected from nominees selected by Nexus. One
alternate is also designated for each member of the Board of Directors.
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Prior to the consummation of a qualified public offering, the holders of
series N2 preferred stock or the new class of voting preferred stock into which
the series N2 preferred stock is convertible are generally entitled to
designate one observer to the Board of Directors. With certain exceptions, the
observer has the right to attend meetings of the Board of Directors and receive
information distributed to the company's directors and copies of any written
materials distributed to the holders of series A and B stock and series A1 and
B1 preferred stock. The observer, who is not a member of the Board of
Directors, is also entitled to attend meetings of any committee of the Board of
Directors authorized to act on behalf of the full Board of Directors. The
observer has no right to vote at any meeting of the Board of Directors or any
committee of the Board of Directors. The holders of series N2 preferred stock
or the new class of preferred stock into which such series N2 preferred stock
is converted are permitted to designate an observer to the Board of Directors
for so long as either:
•
the series N2 preferred stock, or such other voting preferred
stock represents at least 3% of the issued and outstanding capital
stock of Maxcom; or
•
there are any shares of series N2 preferred stock outstanding
and at least U.S.$17.5 million principal amount of the new notes
outstanding.
Upon a change in the applicable laws in Mexico permitting a majority of
our Board of Directors to be composed of non-Mexicans, the holders of series N2
preferred stock, or such other voting preferred stock into which the series N2
preferred stock is convertible, will be entitled to designate and elect a full
member of the Board of Directors (in lieu of the observer) for so long as
series N2 preferred stock, or such voting preferred stock, represents at least
10% of the total capital stock of the company then outstanding. If the series
N2 preferred stock, or such other voting preferred stock, declines below this
threshold, the class will again be permitted to designate an observer.
Dividends
At the annual ordinary general meeting of shareholders of Maxcom, the
Board of Directors will typically submit the financial statements of Maxcom for
the previous fiscal year, together with a report by the Board of Directors, to
the general ordinary shareholders' meeting for their approval. The holders of
series A and B stock and holders of series A1 and B1 preferred stock will
determine the allocation of Maxcom's net profits for such fiscal year. At least
5% of such net profits must be allocated to a legal reserve, which is not
available for distribution except as a stock dividend, until the amount of the
legal reserve equals 20% of Maxcom's paid-in capital stock. Additional amounts
may be allocated to other reserve funds as the shareholders determine. The
remaining balance of net profits, if any, is available for distribution as
dividends.
The series N2 preferred stock (on an as-converted basis) are entitled to
receive dividend payments, if any, and rank pari passu with the series A1, B1
and N1 preferred stock with respect to dividend rights. Maxcom will pay no
dividends on any class of capital stock that is junior to the series N2
preferred stock unless it also pays dividends to holders of series N2 preferred
stock.
Maxcom does not anticipate that it will declare and pay dividends in the
foreseeable future.
Liquidation rights
In the event that we are dissolved or liquidated, one or more liquidators
must be appointed at an extraordinary general shareholders' meeting to wind up
our affairs. Except as provided below, all fully paid and outstanding shares of
capital stock will be entitled to share ratably in all assets remaining after
payment of liabilities. Partially paid shares will be entitled to participate
in a liquidation, dissolution or winding up in the same manner as they would in
a dividend or distribution.
However, under our amended by-laws, upon any liquidation, dissolution or
winding up of Maxcom, holders of series N2 preferred stock will be entitled to
receive liquidation proceeds in preference to the holders of the series A, B
and N stock and pari passu with the holders of series A1, B1 and N1 preferred
stock on a pro rata basis in an amount equal to the greater of:
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•
U.S.$0.4927 per share, as adjusted for stock splits, stock
dividends and similar events, plus the accretion of such amount at a
cumulative rate of 12% per year compounded semi-annually; and
•
the amount that holders of series N2 preferred stock would
have received if they had converted all of their series N2 preferred
stock into series N stock (or, to the extent the series N stock has
been converted, to the class of stock the series N stock is
converted into) immediately prior to the liquidation event.
A sale of all or substantially all of the consolidated assets of Maxcom,
or a merger, recapitalization, reorganization or consolidation of Maxcom,
immediately after which the shareholders of Maxcom beneficially own less than
50% of the voting power or the equity securities of the surviving entity, will
be deemed to be a liquidation event with respect to the series N2 preferred
stock, unless the holders of at least a majority of the series N2 preferred
stock deem that such event does not constitute a liquidation event with respect
to their shares.
A waiver of this deemed liquidation event by holders of series N2
preferred stock will not impair the liquidation rights of holders of series A1,
B1 and N1 preferred stock.
The liquidation preference rights will not be retained in the event of an
optional conversion or mandatory conversion into common stock in connection
with a qualified public offering.
Changes in share capital
An increase of our capital stock may be effected through the issuance of
new shares for payment in cash or in kind, by capitalization of indebtedness or
by capitalization of certain items of shareholders' equity. No increase of our
capital stock may be effected until all previously-issued shares of capital
stock have been fully paid. A reduction of our capital stock may be effected to
absorb losses, to redeem shares, or to release shareholders from payments not
made.
Increases in capital may not result in the series N stock and series N1
and N2 preferred stock representing more than 95% in the aggregate of the
outstanding capital stock of Maxcom. The series N stock and the series N1 and
N2 preferred stock currently represent 91.8% of our outstanding capital stock.
The fixed portion of our capital stock may only be increased or decreased
by resolution of an extraordinary general meeting of shareholders and an
amendment to our by-laws. The variable portion of our capital stock may be
increased or decreased by resolution of an extraordinary general meeting of
shareholders.
Preemptive rights
In the event of a capital increase through the issuance of new shares for
payment in cash or in kind, as a matter of Mexican law, a holder of shares has
a preferential right to subscribe for a sufficient number of new shares to
maintain the holder's existing proportion of shares held.
Shareholders have a preemptive right to subscribe for shares, except:
•
in connection with mergers or spin-offs;
•
on the conversion of convertible debentures; or
•
issuances of shares pursuant to a public offering, if a
general extraordinary shareholders' meeting called for such purpose
so approves and other requirements specified in Article 81 of the
Mexican Securities Law are satisfied, including obtaining the
approval of the Mexican National Banking and Securities Commission.
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Under Mexican law, preemptive rights may not be waived in advance by a
shareholder, and cannot be represented by an instrument that is negotiable
separately from the corresponding share but may be waived at the moment of
issuance of such shares.
The series N2 preferred stock are held in a limited purpose trust
administered by Banco Nacional de México, S.A., who is also the holder of
record. The CPO trust is managed by a technical committee, a majority of the
members of which is appointed or designated by Maxcom, which has the authority
to direct the trustee to, among other things, waive any applicable preemptive
rights. See "—Description of the CPO trust" below.
We may not be able to offer additional shares of capital stock to holders
of the CPOs pursuant to preemptive rights granted to our shareholders in
connection with any future issuance of stock, unless a registration statement
under the Securities Act is effective or an exemption from the registration
requirements is available. Whenever we are required to make a preemptive rights
offering to the holders of the series N2 preferred stock, we will evaluate the
costs and potential liabilities associated with any such registration
statement, the benefits to the holders of CPOs, and any other factors that we
consider appropriate and then we will determine whether or not to file such
registration statement. If we determine that we will not be able to offer the
holders of CPOs the right to subscribe for additional shares of capital stock,
we will direct the trustee of the CPO trust to waive its preemptive rights as
the holder of record of the series N2 preferred stock.
Our by-laws and securityholders agreement provide that if the trustee of
the CPO trust waives the preemptive rights in connection with a share issuance,
the holders of series N1 preferred stock will also waive their preemptive
rights with respect to such issuance. Although the holders of series N1
preferred stock must waive their statutory preemptive rights, such holders will
be permitted to participate directly in the share subscription or if otherwise
permitted to do so.
Optional conversion rights
The series N2 preferred stock is convertible, in whole or in part, at the
option of the holder into series N stock at any time prior to the earlier of:
•
the consummation of a public offering; and
•
the elimination of certain foreign ownership restrictions
under Mexican law so as to permit the unrestricted ownership and/or
control of Maxcom by non-Mexicans.
Upon a public offering, the series N2 preferred stock (as well as new
voting preferred stock issued pursuant to a mandatory conversion related to the
elimination of certain foreign ownership restrictions under Mexican law) will
be convertible, in whole or in part, at the option of the holder into the same
class of equity securities offered in such public offering.
In addition, the series A1, B1 and N1 preferred stock are convertible, in
whole or in part, at the option of the holder, at such time, and on such terms,
as the series N2 preferred stock.
Mandatory conversion
Upon a qualified public offering, all, but not less than all, the series
N2 preferred stock (as well as new voting preferred stock issued pursuant to a
mandatory conversion related to the elimination of certain foreign ownership
restrictions under Mexican law) will be convertible at the option of Maxcom
into the same class of equity securities offered in such qualified public
offering.
In addition, all, but not less than all, of the series A1, B1 and N1
preferred stock will be convertible at the option of Maxcom at such time and on
such terms, as the series N2 preferred stock.
Upon the elimination of certain foreign ownership restrictions under
Mexican law so as to permit the unrestricted ownership and/or control of Maxcom
by non-Mexicans, the series N2 preferred stock will automatically
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convert into a new voting preferred stock. This new voting preferred stock
will retain the same liquidation preference rights of the series N2 preferred
stock and the right to appoint either a member of the Board of Directors or, if
such new voting preferred stock represents less than 10% of the outstanding
capital stock of Maxcom, an observer to the Board of Directors.
Anti-dilution protection and conversion price adjustments
If Maxcom issues any shares of common equity or securities convertible
into common equity (other than certain permitted issuances) for consideration
per share of less than either (i) the conversion price, which will initially be
U.S.$0.4927 per share, in effect immediately prior to that time or (ii) the
then fair market value of the stock sold, then, until December 31, 2002, full
ratchet anti-dilution protection will apply, and, thereafter, institutional
weighted average anti-dilution protection will apply to the preferred stock, as
more fully described below. This anti-dilution protection will no longer be
available after the preferred stock is converted into common stock. Maxcom has
not issued any shares of common equity or securities convertible into common
equity since the adoption of this clause.
The following permitted issuances will not trigger the anti-dilution
protections:
•
any rights, options and warrants granted or issued, or
authorized to be granted or issued, to certain employees, directors,
consultants and vendors of Maxcom and its subsidiaries, as of March
5, 2002, or under any management incentive plan approved by the
Board of Directors, including the affirmative vote of at least one
of the directors selected from Nexus appointees.
•
any securities issued pursuant to the private equity
investment and up to U.S.$3.8 million of securities issued within
one year of the consummation of the private equity investment at or
above U.S.$0.4927 per share;
•
any shares issued upon the exercise or conversion of any of
the foregoing; and
•
any of the capital stock issued in connection with a
conversion of any of the series A1, B1, N1 or N2 preferred stock.
Full-ratchet anti-dilution protection means that the conversion price will
be automatically reduced to the lowest consideration at which any share of
capital stock has been issued or sold.
Institutional weighted average anti-dilution protection means that the
conversion price will be reduced to the lower of:
•
an amount equal to (A) the sum of (i) the product derived by
multiplying the conversion price in effect immediately prior to such
issuance or sale by the number of "common shares deemed
outstanding," as defined below, immediately prior to such issue or
sale, plus (ii) the aggregate consideration (expressed as a net
price per share), if any received by Maxcom upon such issue or sale,
divided by (B) the number of common shares deemed outstanding
immediately after such issue or sale; and
•
the conversion price determined by multiplying the conversion
price in effect immediately prior to such issuance or sale by a
fraction, the numerator of which will be the sum of (i) the number
of the common shares deemed outstanding immediately prior to such
issue or sale multiplied by the then market value of the then fair
market value of the common stock of Maxcom then outstanding as of
the date of such issuance or sale plus (ii) the aggregate
consideration, if any, received by Maxcom upon such issuance or sale
and the denominator of which shall be the product derived by
multiplying the then fair market value of the common stock of Maxcom
by the number of common shares deemed outstanding immediately after
such issue or sale.
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For the purposes of the foregoing calculations, the term "common shares
deemed outstanding" means the currently outstanding capital stock of Maxcom
plus all shares of capital stock issuable upon the exercise of options and
warrants or conversion of convertible securities. Whenever Maxcom grants
options or issues securities convertible into the capital stock of the company,
the issue price will be the sum of the per share consideration received by the
company upon the grant or issue of the option or convertible security plus any
per share additional consideration that the company will receive upon exercise
or conversion of such option or convertible security.
Determinations of fair market value will be made in good faith by the
Board of Directors so long as the issuance is for cash consideration (and
without any associated service arrangements) and at least 70% of the shares
issued are to persons who are not then shareholders of Maxcom. Otherwise,
Maxcom at its expense will obtain the opinion of an internationally recognized
or nationally recognized in the United States financial advisory firm or
investment bank to be selected by Maxcom as to the fair value of the shares to
be issued and any non-cash consideration for such shares.
The conversion price will also be adjusted for any stock splits or
combinations.
Following any adjustment of the conversion price of the series N2
preferred stock, Maxcom will deliver notice to the CPO trustee of the
adjustment setting forth the calculation of the adjustment. In addition, upon
the written request of the CPO trustee, Maxcom will furnish or cause to be
furnished to the CPO trustee a certificate setting forth (i) a summary of all
adjustments and readjustments to the conversion price, (ii) the conversion
price for the series N2 preferred stock then in effect, and (iii) the number of
shares of capital stock into which the series N2 preferred stock is then
convertible.
Right of first refusal
Except in connection with a sale of at least 50.1% of the total equity of
Maxcom, a public offering or a transfer to an affiliate or a certain other
permitted transferee, if a Maxcom shareholder other than certain significant
shareholders, who we refer to as the "investors," intends to sell its capital
stock, then shareholders other than the investors and the holders of the series
N2 preferred stock (but only with respect to their series N2 preferred stock)
will have the right to purchase such capital stock. This right of first refusal
will terminate upon the earlier of:
•
a sale or transfer of at least 50.1% of the total capital
stock of Maxcom or the sale of all or substantially all of the
consolidated assets of Maxcom in one or more related transactions to
an independent third party or parties, or
•
the elimination of certain foreign ownership restrictions
under Mexican law so as to permit the unrestricted ownership and/or
control of Maxcom by non-Mexicans.
Right of first offer
Except in connection with a sale of at least 50.1% of the total equity of
Maxcom, a public offering or a transfer to an affiliate or a certain other
permitted transferee, in the event any investor intends to transfer any series
A1, B1 or N1 preferred stock, or securities received in a conversion of such
preferred stock, such investor must offer to sell such securities to each other
investor holding more than one percent of the aggregate series A1, B1 and N1
preferred stock, or securities received in a conversion of such preferred
stock, then outstanding. This right of first offer will terminate upon the
earlier of:
•
a qualified public offering;
•
the sale or transfer of any series A1, B1 or N1 preferred
stock involving at least 50.1% of the total capital stock of Maxcom
or a sale of all or substantially all of the consolidated assets of
Maxcom in one or more related transactions to an independent third
party or parties.
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Co-sale rights and forced sale obligations
Co-sale rights
If holders of series A1, B1 or N1 preferred stock intend to sell, alone or
together with any other shareholder of Maxcom, at least 50.1% of the total
capital stock of Maxcom in one or more related transactions to an independent
third party or parties, then holders of series N2 preferred stock will, except
in certain circumstances, have the right to participate in any such sale on a
pro rata basis with the sellers. Holders of series N2 preferred stock will be
entitled to sell such shares generally on the same terms and conditions as the
selling shareholder. This co-sale right will terminate upon the consummation of
the earlier of
•
a qualified public offering; or
•
the sale or transfer of any series A1, B1 or N1 preferred
stock involving a transfer of at least 50.1% of the total capital
stock of Maxcom or a sale of all or substantially all of the
consolidated assets of Maxcom to an independent third party or
parties in one or more related transactions.
In connection with any sale or transfer of any of our equity securities,
debt securities with equity features or other securities convertible into
equity securities, shareholders other than holders of series N-2 preferred
stock may participate in such sale on a pro rata basis at a price and on terms
substantially the same as the selling securityholder. However, these co-sale
rights will not apply to a sale or transfer of no more than 7,000,000 shares of
preferred stock. This co-sale right will terminate upon the consummation of the
earlier of:
•
a qualified public offering; or
•
the sale or transfer of any series A1, B1 or N1 preferred
stock involving a transfer of at least 50.1% of the total capital
stock of Maxcom or a sale of all or substantially all of the
consolidated assets of Maxcom to an independent third party or
parties in one or more related transactions.
Forced sale obligations
If Nexus desires to transfer at least two-thirds of the beneficial
ownership of the total capital stock of Maxcom then outstanding, in one or more
related transactions to an independent third party or parties, on terms and
conditions approved by Nexus, then all shareholders of Maxcom (including
holders of series N2 preferred stock) may be forced by Nexus to sell a
proportionate share of their series N2 preferred stock. Such shareholders will
be entitled to sell such shares generally on the same terms and conditions as
the selling shareholders.
If Nexus desires to sell all or substantially all of the consolidated
assets of Maxcom in one or more related transactions to an independent third
party or parties on terms and conditions approved by Nexus, then all
shareholders of Maxcom (including holders of series N2 preferred stock) may be
forced by Nexus to vote in favor of, consent to and raise no objections against
such asset sale.
Holders of series N2 preferred stock may not be forced to participate in,
or vote for, any of the foregoing transactions unless:
•
the consideration for such sale is paid in cash and/or freely
tradeable, exchange—listed equity securities; and
•
the value of such consideration on a per share basis is not
less than the then applicable liquidation preference for each share
of series N2 preferred stock.
These forced sale obligations will terminate upon the consummation of the earlier of:
•
a qualified public offering; or
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•
the sale or transfer of any series A1, B1 or N1 preferred
stock involving a transfer of at least 50.1% of the total capital
stock of Maxcom or a sale of all or substantially all of the
consolidated assets of Maxcom to an independent third party or
parties in one or more related transactions.
Other provisions
In both the case of a co-sale and a forced sale, the holders of series N2
preferred stock will not be required to execute any ancillary documents.
However, to the extent the proceeds from any such sale will be subject to any
expense, escrow, holdback or indemnification obligation, the selling
shareholders assume this obligation on a pro rata basis. The amount of any such
obligation of each shareholder in connection with a participation in a sale or
a forced sale will be limited to the maximum amount of proceeds that the such
holder is entitled to receive. Shareholders participating in a sale or forced
to sell may provide the purchaser with different assurances or collateral for
their indemnification obligations. As a result, some shareholders may be
permitted to sign an indemnification agreement or give a guarantee while others
may be subject to a hold back of their sale proceeds.
It is possible that both the participation rights and forced sale
obligations will be triggered by a single transaction. In this event, the
participation rights will not apply.
In the event that the participation rights or forced sale obligations have
been triggered, we will prepare, and to the extent applicable, file with the
appropriate regulatory authority, with the advice of U.S. counsel, any notices
or offering material required by our by-laws or applicable Mexican and U.S.
federal and state securities laws to be delivered to the beneficial owners of
the series N2 preferred stock and to cause such documents to be delivered to
the CPO trustee in sufficient quantities for distribution to the beneficial
owners of the series N2 preferred stock.
Rights and obligations with respect to public offerings
Registration rights
Nexus at any time and from time to time may request that Maxcom take all
requisite action, at its expense, to register one or more series of Maxcom's
equity securities under applicable Mexican securities laws, rules and
regulations or applicable U.S. federal and state securities laws. However, the
initial demand by Nexus shall be a public offering that is expected to yield
aggregate net proceeds of at least U.S.$10.0 million.
Holders of series N1 preferred stock and series A1 and B1 stock will have
the right to participate (piggyback) in any registration statement filed
pursuant to the Securities Act for a public offering other than an initial
public offering. However, the registration rights will be subject to customary
cutback provisions.
Cooperation in connection with an underwritten offering
During the period commencing on Maxcom's initial public offering that is
not a qualified public offering and ending on the earlier to occur of eighteen
months after the consummation of such initial public offering or the
consummation of Maxcom's first qualified public offering, at the request of one
or more holders of series N2 preferred stock, or of any class of stock into
which the series N2 preferred stock has been converted, and at such holders'
expense Maxcom will cooperate one time only with the efforts of such holders to
effect an underwritten offering of their stock, provided that such offering is
for at least U.S.$5.0 million in net proceeds. In addition, the underwriter
must be reasonably acceptable to Maxcom and Maxcom may delay such underwritten
offering for up to six months if it is then separately in the process of
preparing a qualified public offering. Maxcom will not be obligated to prepare
any offering memorandum or registration statement in connection with such
offering.
Listing rights
After a public offering, at the request of any holder of series N2
preferred stock, or any class into which the series N2 preferred stock has been
converted, Maxcom will, at its expense, use commercially reasonable efforts, to
cause the shares into which the series N2 preferred stock has been converted or
is convertible, including any CPOs representing such shares, to be listed on
each securities exchange or the NASD automated quotation system, as
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applicable, on which similar securities of Maxcom, including certificates
of participation representing the beneficial ownership of such similar
securities are then listed. In connection with any such listing, Maxcom will,
if required, also register such securities with the National Registry of
Securities and Intermediaries of the National Banking and Securities Commission
of Mexico.
Lock-up restrictions
We may, under certain circumstances, impose a limitation on the transfer
of series N2 preferred stock, which provides that such stock may not be
transferred after notice from Maxcom, which may not be more than 30 days prior
to the expected effective date of Maxcom's first qualified public offering
until the 180th day after such effective date. Maxcom may not impose this
restriction on the transfer of series N2 preferred stock if more than 20% of
the securities being registered in connection with the qualified public
offering are for the account of Maxcom's shareholders. In addition, this
restriction on transfer may not be more restrictive than any restrictions
placed on all other shareholders.
Transfer of CPOs and transfer restrictions
The series N2 preferred stock and any shares of capital stock into which
series N2 preferred stock is converted is deposited in the CPO trust and may
not be transferred separate from the CPOs representing such securities. The
CPOs may be transferred without restriction under U.S. federal securities laws
by persons who are not affiliates of Maxcom. However, no market currently
exists for the CPOs and we do not currently plan to list the CPOs on any
exchange for trading. In certain circumstances we may be required to list the
CPOs on a securities exchange and to cooperate one time only with efforts of
holders of the CPOs to effect an underwritten offering. We may impose
limitations on the transfer of CPOs for a period after the consummation of a
qualified public offering. See "—Rights and obligations with respect to public
offerings."
Until the earlier of a qualified public offering or a sale of the company,
no holder of series A, B or N stock and series A1, B1 or N1 preferred stock may
transfer such shares without the prior approval of both Nexus, solely in its
capacity as a shareholder, and the Board of Directors, which Board of Directors
approval will require the affirmative vote of at least one Nexus director.
Until a qualified public offering, in the event that certain significant
holders of series A1, B1 and N1 preferred stock desire to transfer such shares,
such holders will be obligated to first offer to sell such shares to other
holders of series A1, B1 or N1 preferred stock at the same price, terms and
conditions offered to the initial proposed transferees.
Upon the effectiveness of changes in certain Mexican regulations, other
holders of series A, B and N stock and series A1, B1 and N1 preferred stock who
desire to transfer such shares will be obligated to first offer to sell such
shares to other series A, B and N stock and series A1, B1 and N1 preferred
stock at the same price, terms and conditions offered to the initial proposed
transferees.
There are certain exceptions to the transfer restrictions in our bylaws.
These exceptions apply to (i) transfers by BAS Capital Funding Corporation or
BASCF–Maxcom Holdings I, LLC with respect to any preferred share acquired by
them pursuant to our restructuring and private equity investment, (ii)
transfers as a result of inheritance, and (iii) transfers among shareholders
and their qualified affiliates.
During our annual ordinary and extraordinary shareholders' meeting held on
June 10, 2003, we amended our bylaws to include a new exception to the transfer
restrictions that allows Morgan Stanley Asset Management, one of the
shareholders who participated both in the private equity investment and the
exchange offer, to transfer its shares to any of its managed accounts.
Under our telecommunications concessions and by-laws, the SCT has 90 days
to object to any transfer, subscription or conveyance of 10% or more of our
capital stock with the exception of:
•
transfers related to series N stock and N1 and N2 stock and
any successor stock; and
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•
subscriptions made pursuant to the exercise of a
shareholder's preemptive rights, as long as the percentage
participation of the shareholders in our capital stock does not
vary.
Other provisions
Forfeiture of stock
Under our amended by-laws, the current or future foreign shareholders of
Maxcom firmly undertake with the Ministry of Foreign Relations (Secretaría de
Relaciones Exteriores) to consider themselves as Mexican nationals with respect
to the stock of Maxcom that they may acquire or own, as well as with respect to
the properties, rights, concessions, securities or interests owned by Maxcom,
or the rights and obligations derived from the agreements entered with the
Mexican authorities to which Maxcom is a party. The current or future foreign
shareholders of Maxcom firmly undertake not to invoke the protection of their
government, under penalty of forfeiting such shares to the benefit of the
Mexican nation.
Dissolution
Pursuant to the Mexican Companies Law and our by-laws, we may be dissolved
upon the occurrence, among other things, of any of the following events:
•
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.
Shareholder conflicts of interest
Under Mexican law, any shareholder that has a conflict of interest in
connection with any transaction must abstain from voting at the relevant
shareholders' meeting. A shareholder that votes on a business transaction in
which its interest conflicts with that of Maxcom may be liable for damages if
the transaction would not have been approved without such shareholder's vote.
Director conflicts of interest
Under Mexican law, any member of the Board of Directors who has a conflict
of interest with Maxcom in any transaction must disclose such a fact to the
other members of the Board of Directors and abstain from voting on such matter
at the relevant meeting of the Board of Directors. Any member of the Board of
Directors who violates such a provision may be liable for damages caused to
Maxcom. Additionally, members of the Board of Directors may not represent any
shareholders at any shareholders' meeting.
Description of the CPO trust
General
The series N2 preferred stock have been deposited by Maxcom in a limited
purpose trust which is administered by Banco Nacional de México, S.A. under a
trust agreement. We refer to the trust as the "CPO trust" and the trustee of
the CPO trust as the "CPO trustee." The CPO trustee is the holder of record of
the series N2 preferred stock and any securities into which the series N2
preferred stock may be converted.
The CPO trustee issued
Certificados de Participación Ordinarios
, or
"CPOs", which are negotiable instruments under Mexican law that give their
holders the economic rights and voting rights of the series N2
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preferred stock or any other shares of capital stock into which the series
N2 preferred stock may be converted, which we refer to together as the
"deposited securities."
The CPOs are initially held in book-entry form through DTC, and a nominee
of DTC is the holder of record of a global CPO certificate. Our amended
by-laws provide that we will obtain all governmental approvals required in
connection with the conversion of the series N2 preferred stock held in the CPO
trust to other securities of Maxcom.
The following is a description of (i) certain provisions included in the
CPO trust agreement and (ii) applicable provisions of the Law of Negotiable
Instruments and Credit Transactions (Ley General de Títulos y Operaciones de
Crédito). This is a summary description and does not purport to be complete and
is qualified in its entirety by reference to the CPO trust agreement and the
provisions of Mexican law referred to in such description.
Purpose
The main purpose of the CPO trust is to have the CPO trustee, as record
holder of the deposited securities and upon the instructions of the technical
committee described below under "Administrator of the CPO trust," waive or not
exercise any statutory preemptive rights that it may have from time to time to
subscribe for additional shares of our capital stock. As the record holder of
the deposited securities, the CPO trustee exercises certain rights attached to
such securities in order to preserve to the largest extent possible the
economic and voting rights that would otherwise be held directly by the
beneficial owners of the CPOs.
Waiver of statutory preemptive rights
The trustee of the CPO trust will waive statutory preemptive rights with
respect to deposited securities when, in the sole judgment of the technical
committee of the CPO trust, as described below, the exercise of such preemptive
rights would require that the shares so subscribed be registered pursuant to
the Securities Act, unless Maxcom decides to register such shares. If the
exercise of the preemptive rights is possible without registration under the
Securities Act (or Maxcom decides to carry out such registration) and the
holders of CPOs provide the CPO trustee with the necessary funds, the CPO
trustee will subscribe for the corresponding number of shares, which will be
held in the CPO trust, and deliver additional CPOs in respect of such
additional deposited securities to the subscribing CPO holders. Under Mexican
law preemptive rights may not be transferred separately from the underlying
shares.
Voting and economic rights
The holders of CPOs are not entitled to directly exercise any voting or
economic rights with respect to the deposited securities. Such voting rights
are exercisable only by the CPO trustee pursuant to the instructions of the
holders of CPOs. The holders of CPOs will be entitled to receive dividend
distributions, if any, from Maxcom through the CPO trustee. DTC will receive
the distributions and will make distributions to the beneficial owners of the
CPOs. In the event of a forced sale the trustee of the CPO trust will cause the
series N2 preferred stock to be delivered in connection with any such sale and
will distribute to the record holder of the CPOs the proceeds from such sale
subject to any holdbacks required pursuant to the terms of any such sale. The
CPO trustee will also deliver deposited securities in connection with the
exercise of the co-sale rights and will distribute to the record holders of the
CPOs the proceeds from sale subject to any holdbacks required pursuant to the
terms of any such sale. See "—Co-sale rights and forced sale obligations"
above.
If a distribution by Maxcom consists of a dividend in shares, such shares
will be transferred to the CPO trustee, and held in the CPO trust, and the CPO
trustee will distribute to the holders of CPOs in proportion to their holdings,
additional CPOs to represent the additional deposited securities received by
the CPO trustee as such dividend.
The holders representing a majority of the outstanding CPOs will be
entitled to appoint the board observer, or in certain circumstances, a member
of the Board of Directors. See "—Board of Directors."
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Administration of the CPO trust
The CPO trust is administered by the CPO trustee under the direction of a
technical committee, which consists of three members, two members of which are
designated by Maxcom and one by the holders of CPOs.
Common representative
The majority of holders of CPOs have the right to appoint a common
representative, whose duties include, among others: verification of the due
execution and terms of the CPO trust agreement; verification of the existence
of the deposited securities; authentication, by its signature, of the
certificate evidencing the CPOs, exercise of the rights of the CPO holders in
connection with the payment of any dividend or distribution related to the
deposited securities to which such CPO holders are entitled; and undertaking of
any other action required to protect the rights, actions or remedies to which
CPO holders may be entitled to under the CPO trust.
Transfer
CPO holders may sell their interest in CPOs. Sales of CPOs may be subject
to Mexican taxes. Neither Maxcom nor the CPO trustee will have any liability in
connection with any such sale. CPO holders may not sell the deposited
securities separately from the CPOs.
Term and termination
The maximum term of the CPO trust is thirty years, but it may be
terminated at any moment by recommendation of the technical committee, in which
case the deposited securities will be delivered to the CPO holders.
Fees
The fees of the CPO trustee for the administration of the CPO trust, and
the fees of the common representative for acting in such capacity, are paid by
Maxcom.
C.
Material contracts
Concessions
In February 1997, we obtained a concession to provide local telephony
services covering Mexico City and the Gulf region and long distance services
nationwide from the Mexican government. We also obtained a nationwide
point-to-point and three regional point-to-multipoint microwave concessions in
October 1997. In September 2001, our local telephony concession was expanded to
cover all of Mexico. For a description of our concessions, see "Item 4.
Information on the Company—B. Business review—Supervision and regulation of the
Mexican telecommunications industry—Our concessions."
Interconnection agreements
In November 1998, we entered into a local interconnection agreement with
Telmex which currently we are renegotiating. We have also signed reciprocal
interconnection agreements with mobile telephony providers Telcel, Grupo
Iusacell and Pegaso. Finally, we have signed long distance interconnection
agreements with Telmex, Alestra, Bestel, Protel and Iusatel. For a description
of these interconnection agreements, see "Item 4. Information on the Company—B.
Business review—Supervision and regulation of the Mexican telecommunication
industry—Interconnection."
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Lucent supply agreement
On September 5, 1997, Maxcom executed a purchase and sales agreement with
subsidiaries of Lucent Technologies, Inc. pursuant to which Maxcom may purchase
from Lucent products, services and software. Through December 31, 2002, Maxcom
has purchased approximately U.S.$62.6 million.
Metro Net capacity sales agreement
On April 28, 2000, Maxcom executed a metropolitan network capacity sale
agreement with Metro Net, S.A. de C.V. (which was amended on December 21, 2000)
for an aggregate amount of U.S.$7.2 million pursuant to which Maxcom purchased
from Metro Net (i) the exclusive and unlimited right to use certain backbone
fiber optic capacity of 6 (six) fiber optic strands of Metro Net's metropolitan
rings in Mexico City, and (ii) an option to acquire the exclusive and unlimited
right to use additional backbone fiber optic capacity of 6 (six) fiber optic
strands.
Bestel capacity acquisition agreement
On August 13, 2002, Maxcom executed an agreement with Bestel, S.A. de C.V.
to acquire the irrevocable right to the exclusive use of two strands in a
2,011-kilometer fiber optic backbone covering the cities located between Mexico
City and Laredo, Texas for U.S.$10.9 million. This fiber optic backbone
includes a border crossing with the United States.
CPO trust agreement
On April 25, 2002, Maxcom and its shareholders executed an irrevocable
trust agreement with Banco Nacional de México, S.A. acting as trustee for the
issuance of ordinary participation certificates, also known as "CPOs," each
representing one series N2 share of the capital stock of Maxcom with
liquidation preference rights. For a description of this agreement, see "Item
10. Additional Information—B. Memorandum and Articles of
Association—Description of the CPO Trust."
Securityholders' agreement
On April 29, 2002, Maxcom executed an amended and restated
securityholders' agreement with the shareholders of the Company to, among other
things, reflect the restructuring of the capital stock of Maxcom. For a
description of the securityholders' agreement, see "Item 7. Major Shareholders
and Related Party Transactions—A. Major shareholders and share
ownership—Securityholders agreement."
Indentures
Old Indenture
On March 17, 2000, Maxcom and its subsidiaries, entered into an Indenture
with The Bank of New York, acting as trustee, which governs the terms and
conditions of the issuance by Maxcom of U.S.$300 million
13¾% senior notes
due April 1, 2007. The Indenture restricted Maxcom's ability to incur
indebtedness by requiring that Maxcom meet minimum consolidated leverage and
fixed charge coverage ratios. In addition, the Indenture limited our ability
to pay dividends, repurchase subordinated debt, redeem our capital stock,
dispose of assets and make investments, among other things. All of these
restrictions were eliminated as a result of the exchange offer and
U.S.$11,590,000 aggregate amount of notes under this indenture remains
outstanding.
New Indenture
On April 29, 2002, Maxcom and its subsidiaries entered into an Indenture
with The Bank of New York acting as a Trustee, which governs the terms and
conditions of the issuance by Maxcom of U.S.$167,623,590 senior notes due 2007.
This Indenture has substantially the same restrictions the old indenture had
before they were eliminated pursuant to the exchange offer.
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Warrant agreement
On March 17, 2000, Maxcom entered into a warrant agreement with The Bank
of New York, acting as warrant agent, pursuant to which Maxcom agreed to issue
warrants to purchasers of 13¾% senior notes due April 1, 2007 for the
purchase of up to 764,938 series N shares, convertible into 382,469 CPOs. The
exercise price for each warrant, which entitled the purchaser to receive
2.54979 series N shares, was U.S.$0.01. These warrants were offered as an
incentive to the purchasers of the notes.
Lease termination agreement
In September, 2002, we commenced actions before the Lease Courts for the
Federal District of Mexico against our landlord, seeking the termination of a
15-year lease (expiring on September 30, 2013) of 70,500 square feet plus
parking space in a building on Magdalena, Mexico City, which was our former
headquarters. The action was based on claims of miscalculation of lease
payment amounts and breaches of certain city compliance regulations. The
landlord countersued alleging failure to make lease payments.
In May 2003, we reached an agreement with our landlord at our former
headquarters in Magdalena, Mexico City. Pursuant to this agreement, we
retained a leasehold interest through May 2013 on the first floor, where one of
our Lucent 5ESS switches is located, the roof-top, where we have three
microwave transmission antennas and a section of the basement, which will be
used for parking and to place some of our electric equipment that supports the
switch. We were also released from lease obligation on approximately 35,887
square feet plus parking space of the building originally running through
September 30, 2013. In exchange for the new lease and the releases, we agreed
to prepay the full, ten-year lease obligations on the first floor, the roof-top
and basement, as well as pay past-due lease payments dating back from October
2002 through April 2003. All these payments amount in the aggregate to
U.S.$2.7 million and will be payable in installments through May 2004.
D.
Exchange controls
The peso fluctuates freely against the U.S. dollar. The Mexican Central
Bank intervenes occasionally in the market to stabilize the exchange rate.
Mexico had an exchange control system from 1982 until November 11, 1991. Under
this system, Mexican residents and companies were entitled to purchase, and
required to sell, foreign currencies for certain purposes at a controlled rate
of exchange that was established daily by the Mexican Central Bank (Banco de
México). Transactions to which the controlled rate applied included payments
for virtually all merchandise imports, revenues from virtually all merchandise
exports, royalty payments and payments of principal, interest and related
expenses with respect to indebtedness to foreign creditors registered with the
Mexican government. For all transactions to which the controlled rate did not
apply, foreign currencies could also be purchased, if they were available, at
the then prevailing domestic free market rate for the type of transaction.
From November 11, 1991 to October 20, 1992, the Mexican Central Bank
permitted a free market rate to fluctuate according to supply and demand within
a moving band. In late December 1994, the Mexican government responded to
exchange rate pressures first by increasing by 15% the upper limit of the
peso/U.S. dollar exchange rate band and then, two days later, allowing the peso
to fluctuate freely against the U.S. dollar. By December 31, 1994, the
peso/U.S. dollar exchange rate, which had been Ps.3.47 to U.S.$1.00 on December
19, 1994 was Ps.5.00 to U.S.$1.00. The peso continued to devalue significantly
through 1998, closing at Ps.9.901 to U.S.$1.00 at December 31, 1998. After a
period of stability and modest appreciation, in 2002, the peso devalued 12.18%
relative to the U.S. dollar. In the first three months of 2003, the peso
devalued 3.82% relative to the U.S. dollar. Although the peso/U.S. dollar
exchange rate has remained relatively stable in the last years, there may be
significant devaluations in the future.
Except for the period from September through December 1982 during the
Mexican liquidity crisis, the Mexican Central Bank consistently has made
foreign currency available to Mexican private sector entities to meet their
foreign currency obligations. Nevertheless, in the event of a renewed shortage
of foreign currency, we cannot assure you that the Mexican Central Bank would
continue to make foreign currency available to private sector companies or that
foreign currency we need to service foreign currency obligations could be
purchased in the open market without substantial additional cost.
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Pursuant to the provisions of North American Free Trade Agreement, or
"NAFTA," Mexico remains free to impose foreign exchange controls on investments
made in Mexico, including those made by U.S. and Canadian investors
E.
Taxation
United States Federal Income Tax Considerations
General
The following is a general discussion of the principal U.S. federal income
tax consequences resulting from the beneficial ownership of (1) the new notes
and CPOs received in the exchange consummated on April 29, 2002, and (2) the
old notes (the old notes collectively with the new notes, the "Notes") for
holders who did not participate in the exchange. In general, the federal
income tax consequences of ownership of the new notes and the old notes are
identical, except where discussed below. This summary is relevant to you only
if you are a U.S. holder holding your Notes and your CPOs (for holders of the
new notes) as capital assets within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended, or the Code. In general, you will be a U.S.
holder if you are:
•
An individual citizen or resident of the United States;
•
a corporation or other entity taxable as a corporation
created in or organized under the laws of the United States or of
any political subdivision thereof;
•
an estate, the income of which is subject to U.S. federal
income tax without regard to its source; or
•
a trust, if a court within the United States is able to
exercise primary supervision over its administration and one or more
United States persons have the authority to control all of the
substantial decisions of such trust.
As used in this annual report, the term "Non-U.S. holder" means a
beneficial owner of a Note or CPO who is not a U.S. holder. In the case of a
holder of Notes or CPOs that is a partnership for U.S. federal income tax
purposes, each partner generally will take into account its allocable share of
income or loss from the Notes or CPOs and will take such income or loss into
account under the rules of taxation applicable to such partner, taking into
account the activities of the partnership and the partner.
This summary is based upon the Code, its legislative history, existing and
proposed regulations thereunder, published rulings and court decisions, all as
currently in effect and all subject to change at any time, perhaps with
retroactive effect. This discussion is for general information only and does
not describe all of the tax consequences that may be relevant to you in light
of your particular circumstances or if you are subject to special tax treatment
under the Code, including, without limitation, because you are:
•
a foreign person or entity;
•
a tax-exempt organization, a financial institution, an
insurance company, a regulated investment company or a dealer or
broker in securities or currencies;
•
a trader in securities or commodities that elects
mark-to-market treatment;
•
a person who holds the Notes, and with respect to a holder of
new notes, the CPOs, as part of an integrated investment such as a
straddle, hedge, constructive sale, conversion transaction or other
risk reduction transaction;
•
a person whose functional currency is not the U.S. dollar;
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•
a partnership or other flow-through entity (including an S
corporation or a limited liability company treated as a partnership
for U.S. federal income tax purposes);
•
a person subject to the alternative minimum tax; or
•
a person who owns or will own directly, indirectly or by
attribution 10% or more (by voting power) of our voting stock or 10%
or more (by value) of our outstanding capital stock.
The summary does not include any discussion of the tax laws of any state,
locality or non-U.S. government that may be applicable to you. You should note
that no rulings have been or will be sought from the United States Internal
Revenue Service (or the IRS) with respect to any of the U.S. federal income tax
consequences discussed below, and we cannot assure you that the IRS will not
take contrary positions. You should consult your own tax advisors concerning
the application of U.S. federal income tax laws to your particular situation as
well as any consequences of the purchase, ownership and disposition of the
Notes or CPOs arising under the laws of any other taxing jurisdiction.
For holders who acquired the new notes and the CPOs in the 2002 exchange,
the U.S. federal income tax consequences of certain aspects of the 2002
exchange were unclear. Therefore, the summary discusses the various
alternative tax consequences of the new notes and the CPOs which may depend in
part on the results of the 2002 exchange. For more complete information on the
2002 exchange, we urge you to consult the section entitled, "United States
Federal Income Tax Considerations" on our Form 20-F for the fiscal year ending
December 31, 2001, which was filed on July 1, 2002. You should also consult
your own tax advisors concerning the application of U.S. federal income tax
laws to your particular situation.
U.S. federal income tax consequences to U.S. Holders of the Notes
Payments of interest and additional amounts.
Generally, payments of
"qualified stated interest," (as defined below in "Original issue discount"),
including Mexican withholding tax imposed on such interest, and additional
amounts (if any) would be taxable to you as ordinary income. Payments of
qualified stated interest and additional amounts (if any) on the Notes
generally are includible in your income as it accrues or is received, in
accordance with your regular method of accounting for tax purposes.
Original issue discount.
The treatment of original issue discount in
respect of the Notes is highly complex. You are urged to consult with your tax
advisor concerning this issue.
In general, original issue discount on a note is equal to the amount by
which the "stated redemption price at maturity" of a note exceeds its "issue
price" by more than a de minimis amount (generally, the product of 0.25% of the
stated redemption price at maturity and the number of full years to maturity on
the instrument). A note's stated redemption price at maturity equals the total
amount of all principal and interest payments to be made on the note, other
than "qualified stated interest." Qualified stated interest generally is
stated interest that is unconditionally payable at least annually at a single
fixed rate over the entire term of the note.
The new notes
.
The interest payments with respect to the new notes do not
constitute qualified stated interest because such payments are not made at
least annually.
The determination of the issue price of the new notes will depend on
whether the new notes or the old notes were "publicly traded" as of the date of
the 2002 exchange, and if not publicly traded, whether the interest rate of the
new notes is at least equal to or above the applicable federal rate, or AFR.
If on the date of the 2002 exchange, the new notes were "traded on an
established securities market" within the meaning of the applicable regulations
on or at any time during the sixty day period ending thirty days after the date
the exchange offer is consummated, then the issue price of such notes would
equal the fair market value established by such trading. If the new notes were
not so traded, but the old notes were so traded, then the issue price of the
new notes would equal the fair market value, established by such trading, of
the old notes. Under these rules, if either of the Notes were publicly traded,
the new notes will be treated as containing original issue discount if the
stated redemption price at maturity of the new notes exceeded the issue price
(i.e., the fair market value of the new notes) by more than the de minimis
amount.
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It could not be determined whether the new notes or the old notes were, at
the relevant times, traded on an established securities market within the
meaning of the applicable regulations. The relevant Treasury Regulations are
complex and highly detailed in defining the phrase "traded on an established
market." For example, it is possible that the new notes would have been
treated as so traded not only if they were listed on an exchange, but also if
transfers of such new notes appear on a computerized quotation medium. You
should consult you own tax advisor with respect to whether your old notes or
new notes qualified for this purpose as "traded on an established market."
In the event that neither the new notes nor the old notes were traded on
an established securities market, the issue price of a new notes would equal
its stated principal amount if the interest rate on the new notes was equal to
or greater than the AFR for the month in which the new notes were issued. If
the interest rate was less than the AFR, then the issue price of a new note
would be equal to its imputed principal amount, which generally is the sum of
all payments due under the new note (including qualified stated interest)
discounted from the date of payment to the issue date of the new notes at the
AFR. Under these rules, if the new notes and the old notes were not traded on
an established securities market and, because the interest rate on the new
notes was less than the AFR for April 2002, the issue price of the new notes
would be the sum of all payments due under the note discounted at the AFR from
the date of payment to the new notes' issue date. The new notes, therefore,
would be treated as having original issue discount because the new notes'
stated redemption price at maturity (which is the total amount of all principal
and interest payments made on the note, other than "qualified stated interest")
would exceed the issue price of the new notes by more than the de minimis
amount.
The old notes. The old notes were issued with original issue discount for
U.S. federal income tax purposes. If you were an original purchaser of an old
note, you also acquired a warrant as part of an "investment unit" for federal
income tax purposes. Our company allocated the issue price of a unit between
the old note and the associated warrant in accordance with our company's
determination of their relative fair market values on the issue date. Our
company determined that the issue price of each old note should be U.S.
$975.06. Although our company's allocation is not binding on the IRS, if you
were an initial purchaser of a unit, you had to use our company's determination
of the old note issue price for purposes of calculating original issue discount
unless you disclosed on your U.S. federal income tax return for the year in
which you acquired the unit that you planned to use an allocation inconsistent
with our company's allocation. As mentioned above, the stated redemption price
at maturity of a note equals the total amount of all principal and interest
payments to be made on the Note, other than qualified stated interest.
However, if the amount of original issue discount determined under this formula
is "de minimis original issue discount," then the notes will be treated as if
there is no original issue discount. The old notes will have de minimis
original issue discount if the total amount thereof is less than the product of
0.25% of the stated redemption price at maturity and the number of full years
from the issue date to the maturity date of the note.
Inclusion of original issue discount in income. You must include any
original issue discount on your Notes in income as ordinary interest income as
it accrues on the basis of a constant yield to maturity. Original issue
discount must be included in income regardless of whether cash is received in
respect of such income. The amount of original issue discount includible in
income by you is the sum of the "daily portions" of original issue discount
with respect to the Notes for each day during the taxable year or portion of
the taxable year on which you held such Note. The daily portion is determined
by allocating to each day in any accrual period other than the initial short
accrual period and the final accrual period an amount equal to the excess of:
•
the product of the Note's "adjusted issue price" at the
beginning of such accrual period and its "yield to maturity"
(determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period)
over
•
the amount of qualified stated interest payments, if any,
allocable to such accrual period.
The yield to maturity is the discount rate that, when applied to all
payments under a Note, results in a present value equal to the issue price.
The amount of original issue discount allocable to the final accrual period is
the difference between the amount payable at maturity and the adjusted issue
price of the Note at the beginning of the final accrual period. The amount of
original issue discount allocable to the initial short period may be computed
under any reasonable method.
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The adjusted issue price of a Note at the beginning of the first accrual
period is equal to its issue price. A Note's adjusted issue price at the
beginning of any subsequent accrual period is equal to its issue price
increased by the amount of accrued original issue discount previously
includible in your gross income (and market discount, as discussed below) for
each prior accrual period and reduced by the amount of any payments previously
made on the note to you (other than payments of qualified stated interest, if
any).
Generally, upon election, you may use the constant yield to maturity
method applicable to original issue discount to determine the timing of
inclusion of all qualified stated interest (if any) and original issue discount
on the new notes, subject to certain limitations. Such an election will apply
to all debt instruments held or acquired by you on or after the beginning of
the first taxable year to which the election applies and may not be revoked
without the consent of the IRS.
The above treatment assumes that the stated redemption price at maturity
for a Note does not include any additional amounts payable on the Notes. It is
possible that the IRS might disagree with this treatment and contend that the
stated redemption price at maturity should include the reasonably expected
amount of additional amounts payable on the Notes. In such case, the amount of
original issue discount on the Notes would be increased by such amount.
With respect to the holders of new notes, the rules discussed below under
"Premium and acquisition premium" may reduce or eliminate the amount of
original issue discount you must include in your income. For example, if your
exchange of the old notes for new notes and CPOs qualified as a
recapitalization, your basis in the new notes may substantially exceed the
issue price of such new notes (depending on your basis in the old notes), and
you may be able to reduce or eliminate the amount of original issue discount
includible with respect to such old notes.
You should consult your tax advisor concerning the inclusion in your
taxable income of the original issue discount attributable to the new notes or
the old notes.
Premium and acquisition premium.
The new notes. If you acquire new notes
for an amount (or with a basis) less than or equal to the sum of all amounts
payable on such new notes after the acquisition date (other than payments of
qualified stated interest, if any) but in excess of their adjusted issue price
(any such excess being acquisition premium), you will be considered to have
acquired the new notes at an acquisition premium. If you do not make the
election described below, you are permitted to reduce the daily portions of
original issue discount includible in your income by a fraction, (i) the
numerator of which is the excess of your adjusted tax basis in the new notes
immediately after their acquisition over the adjusted issue price of such new
notes and (ii) the denominator of which is the excess of the sum of all amounts
payable on such new notes after the acquisition date (other than payments of
qualified stated interest, if any) over the adjusted issue price of such new
notes.
If you acquire the new notes for an amount (or with a basis) greater than
the sum of all amounts payable on such new notes after the acquisition date
(other than payments of qualified stated interest, if any) you will be
considered to have acquired the new notes at a premium. In such a case, you
will not be required to include any original issue discount in your gross
income.
The old notes. Similarly, if you purchased your old notes for an amount
(or with a basis) greater than the sum of all amounts payable on your old notes
after the purchase date (other than payments of qualified stated interest, if
any) you will be considered to have purchased your old notes at a premium.
General. You generally may elect to amortize the premium, if any, on the
constant yield method. The amount amortized in any year will be treated as a
reduction of your interest income from the Notes. The election to amortize the
premium on a constant yield method, once made, applies to all debt obligations
held or subsequently acquired by you on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS. If you make this election, you will be required to reduce
your basis in the Notes to the extent that any amortizable bond premium is
applied to offset your interest income on the Notes. If you do not make this
election, the premium on your Note, whether on an old note or new note, will
decrease the gain or increase the loss otherwise recognized on disposition or
retirement of the Note.
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Market discount.
If you purchased your Note at a price that is less than
its adjusted issue price, the excess of the adjusted issue price over your
purchase price will be treated as "market discount." Such market discount,
however, will be considered zero if it does not exceed a "de minimis amount"
equal to 0.25% of the Note's stated redemption price at maturity multiplied by
the number of complete years to maturity from the date you purchased the Note.
General. Under the market discount rules, you generally will be required
to treat any partial principal payment on, and any gain realized on the sale,
exchange, retirement or other disposition of, a Note as ordinary income
(generally treated as interest income) to the extent of the market discount
which accrued but was not previously included in income during the period you
held such Note. In addition, you may be required to defer your deduction of
all or a portion of the interest expense on any indebtedness incurred or
continued to purchase or carry such Note until the maturity of the Note or its
earlier disposition in a taxable transaction.
In general, market discount will be considered to accrue ratably during
the period from the date of acquisition to the maturity date of the Note,
unless you make an irrevocable election (on an instrument-by-instrument basis)
to accrue market discount under a constant yield method. You may also elect to
include market discount on the Note in income currently as it accrues (under
either a ratable or constant yield method), in which case the rules described
above regarding the treatment as ordinary income of gain upon the disposition
of the Note and upon the receipt of certain payments and the deferral of
interest deductions will not apply. The election to include market discount in
income currently, once made, applies to all market discount obligations
acquired by you on or after the first day of the first taxable year to which
the election applies, and may not be revoked without the consent of the IRS.
Such currently included market discount will increase your tax basis in the
Note and generally is treated as ordinary interest income for U.S. federal
income tax purposes.
The new notes. If you acquired your new notes as part of the 2002
exchange, whether the new notes will be treated as having market discount may
depend on whether the exchange was treated as a recapitalization for U.S.
federal income tax purposes, which is not entirely clear. If the exchange was
not treated as a recapitalization, your new notes will be considered to have
been acquired with market discount if the adjusted issue price of your new
notes at the time of the exchange exceeded your initial tax basis in the new
notes by more than the "de minimis amount." As discussed below in "Adjusted
tax basis of the Notes and the CPOs—The new notes and CPOs," your initial tax
basis in the new notes will depend on whether the new notes are treated as
securities for U.S. federal income tax purposes.
The Code provides the authority for regulations to be issued by the
Treasury Department that would provide that any accrued market discount not
treated as ordinary income upon an exchange of market discount bonds in which
gain or loss is not recognized in whole or in part, such as the exchange of the
new notes and CPOs for the old notes (assuming: (a) such exchange is treated as
a recapitalization, (b) the old notes are market discount bonds, and (c) the
new notes are treated as securities for U.S. federal income tax purposes),
would carry over to the nonrecognition property received on the exchange. If
such regulations are promulgated and are applicable to this exchange, any
accrued market discount with respect to the old notes that was not treated as
ordinary income on the exchange would carry over to the new notes and CPOs
received in the exchange. On disposition of any such new notes or stock, any
gain recognized generally would be treated as ordinary income to the extent of
the amount of accrued market discount carried over thereto (unless, in the case
of the new notes, you had previously elected to include market discount in
income as it accrues, in which case the amount taxable as ordinary income on
disposition would be reduced by the amount of market discount previously
included in income). Although not free from doubt, it is likely that the above
characterization would be required under the Code even without the promulgation
of regulations.
Sale, exchange or retirement of a Note.
General. Upon the sale, exchange
or retirement of a Note, you generally will recognize capital gain or loss
equal to the difference between (i) the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest
which are taxable as ordinary income) and (ii) your adjusted tax basis in the
Note, determined under the rules discussed in the following paragraphs. Such
capital gain or loss recognized on the sale, exchange or retirement of the Note
generally will be long-term capital gain or loss and subject to a maximum U.S.
federal income tax rate of 20% if you held the Note for more than one year
before sale. Recent legislation has reduced the maximum federal income tax
rate to 15% for capital gains taken into account from May 6, 2003 through
December 31, 2008. U.S. corporations, however, are
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taxed on their net capital gains at the regular corporate income tax
rates. Gain or loss recognized by you in connection with the disposition of
the Notes generally will be treated as U.S. source gain or loss.
The adjusted tax bases and the holding periods of the new notes, the old
notes and the CPOs depend upon the tax consequences of the exchange of old
notes for new notes and CPOs. While the issue is not free from doubt, we
believe that the old notes are likely to be treated as securities for U.S.
federal income tax purposes and that there is a reasonable position that the
new notes also should be treated as securities for U.S. federal income tax
purposes. You are encouraged to consult your own tax advisor with regard to
this issue.
Adjusted tax basis of the new notes and the CPOs. If the 2002 exchange is
treated as a recapitalization for U.S. federal income tax purposes and the old
notes and the new notes qualify as securities, your aggregate tax basis in the
new notes and the CPOs will equal your tax basis in your old notes. Although
the method for allocating your tax basis in the old notes between the new notes
and the CPOs is unclear, the determination of the portion of your tax basis in
the old notes that should be allocated to the new notes and the CPOs should be
based on the issue price of the new notes (as determined under "Original issue
discount") and the fair market value of the CPOs. Your holding period in the
new notes and the CPOs will include your holding period in the old notes you
surrender in the exchange.
If, however, the new notes do not qualify as securities, your tax basis in
the new notes should equal their issue price, and your tax basis in the CPOs
should equal your tax basis in your old notes, less the issue price of the new
notes, plus any gain recognized in the exchange. In addition, your holding
period in the new notes will begin on the day following the date of the
exchange and your holding period in the CPOs will include your holding period
in the old notes you surrendered in the exchange.
If, alternatively, the exchange is not treated as a recapitalization
because the old notes are not securities, then your adjusted basis in the new
notes will equal the issue price of the new notes, and your adjusted basis in
the CPOs will equal the fair market value of the CPOs. Your holding period in
the new notes and the CPOs will begin on the day following the date of the
exchange.
Adjusted tax basis of the old notes. If you did not tender your old notes
in the 2002 exchange, while the issue is not free from doubt, you should not be
deemed to have engaged in a taxable exchange for U.S. federal income tax
purposes and you should have the same adjusted tax basis and holding period in
your old notes after the exchange.
Foreign tax credit.
Interest, original issue discount and additional
amounts. Qualified stated interest, original issue discount and additional
amounts (if any) paid on the Notes will constitute income from sources outside
the United States, and, with certain exceptions, will be grouped together with
other items of passive income, for purposes of computing the foreign tax credit
allowable to you. If the payments of qualified stated interest, original issue
discount and additional amounts (if any) were to become subject to a
withholding tax imposed by a foreign country at a rate of 5% or more, the
qualified stated interest, original issue discount and additional amounts (if
any) may be considered "high withholding tax interest" for purposes of
computing the foreign tax credit. If you are predominantly engaged in the
active conduct of a banking, insurance, financing or similar business, the
payments of qualified stated interest, original issue discount and additional
amounts (if any) may be considered "financial services income" for purposes of
computing the foreign tax credit, provided that such amounts do not constitute
high withholding tax interest, as described above.
Effect of Mexican withholding taxes. You will be required to include the
amount of Mexican withholding taxes, if any, imposed on payments on a Note
(including any additional amounts payable by our company) in gross income as
interest income. Such treatment will be required regardless of whether, as
will generally be true, our company is required to pay additional amounts so
that the amount of Mexican withholding taxes does not reduce the net amount
actually received by you as a holder of a Note.
Subject to certain limitations, you may be entitled to a credit against
your U.S. federal income tax liability, or a deduction in computing your U.S.
federal taxable income, for the amount of Mexican taxes withheld by our company
(which, as described above, would include amounts withheld on additional
amounts paid by us with respect to Mexican taxes). However, Mexican taxes may
be deducted from your taxable income only if you do not
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claim a credit for any Mexican or other foreign taxes paid or accrued in
that taxable year. You may be required to provide the IRS with a certified
copy of the receipt evidencing payment of such withholding tax imposed in
respect of payments on the Notes in order to claim a Mexican tax credit in
respect of such Mexican withholding tax.
Since you may be required to include in your gross income original issue
discount on the Notes in advance of any withholding of Mexican income taxes
from payments relating to the discount (which would generally occur when such
discount is paid in cash), you may not be entitled to a credit or deduction for
these Mexican withholding taxes in the year the original issue discount is
included in your gross income for U.S. federal income tax purposes, and may be
limited in your ability to credit or deduct in full the foreign taxes in the
year those taxes are actually withheld by our company. In addition, under
certain U.S. Treasury Department guidance, foreign tax credits will not be
allowed for withholding taxes imposed in respect of certain short-term or
hedged positions in securities or in respect of arrangements in which your
expected economic profit, after non-U.S. taxes, is insubstantial. You should
consult your tax advisor concerning the availability and timing of a foreign
tax credit or deduction relating to the payment of Mexican withholding taxes.
Certain U.S. federal income tax consequences of holding and disposing of the
CPOs
Distributions.
In general, a holder of CPOs will be treated as the
beneficial owner of the series N2 preferred stock represented by the CPOs.
Subject to the "passive foreign investment company" rules discussed below,
generally, distributions of cash or property with respect to your CPOs
(including the amount of any Mexican taxes withheld on any such distribution)
will constitute ordinary dividend income to the extent of our company's current
and accumulated earnings and profits (as determined for U.S. federal income tax
purposes), which generally will be includible in your income on the day on
which the dividends are received by the CPO trustee, and will be treated as
foreign source dividend income (generally passive income) for foreign tax
credit limitation purposes. Any distributions in excess of such earnings and
profits will constitute a nontaxable return of capital and reduce your tax
basis in such CPOs. To the extent such distributions exceed your tax basis in
your CPOs, such excess will constitute capital gain. Dividends on the CPOs
will not be eligible for the dividends received deduction allowed to U.S.
corporations.
Dividends paid in a foreign currency (including the amount of any foreign
taxes withheld therefrom) will be includible in your income in a U.S. dollar
amount calculated by reference to the exchange rate in effect on the day the
dividends are received by the CPO trustee, regardless whether the dividends are
converted into U.S. dollars. In addition, any gain or loss resulting from
currency exchange fluctuations during the period from the date the dividend is
includible in your income to the date such payment is converted into U.S.
dollars will be exchange gain or loss and will be treated as ordinary income or
loss.
Recent legislation. Recently enacted legislation, the Jobs Growth Tax
Relief Reconciliation Act of 2003, generally has lowered to 15% the maximum
full income tax rate imposed on dividends received from U.S. and certain
foreign corporations for years 2003 through 2008. Recipients of dividends from
foreign corporations will benefit from these reduced rates, provided that
certain holding period requirements are satisfied, if the dividends are
received from certain "qualified foreign corporations," which generally include
corporations located in a jurisdiction with which the United States has an
income tax treaty that the Secretary of the Treasury determines is satisfactory
and includes an information exchange program. While there is an income tax
treaty between the United States and Mexico (see "—Mexican Taxation—United
States/Mexico and other tax treaties"), the Secretary of the Treasury has not
identified yet any jurisdiction whose income tax treaty would qualify under the
legislation. Additionally, dividends paid with respect to stock of a foreign
corporation which is readily tradable on an established securities market in
the United States also will be treated as having been received from a qualified
foreign corporation. However, while not completely clear, we believe that the
CPOs will not be treated as readily tradable on an established securities
market in the United States. Accordingly, there can be no assurance that
dividends received with respect to the CPOs will be entitled to as favorable
treatment as dividends received with respect to stock of a U.S. corporation
under the legislation. You are urged to consult your tax advisor regarding
this legislative change.
In addition, the legislation also accelerated to January 1, 2003, the
reduction in ordinary income tax rates previously calculated to take effect
over the next several years.
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Sale, redemption or other taxable disposition of the CPOs.
Subject to the
"passive foreign investment company" rules discussed below, generally, you
will, upon the sale, redemption or other taxable disposition of your CPOs,
recognize gain or loss for U.S. federal income tax purposes in an amount equal
to the difference between (i) the amount of cash and fair market value of
property received therefore (if the amount received is denominated in foreign
currency other than in U.S. dollars, then its U.S. dollar equivalent determined
at the spot rate on the date of the disposition) and (ii) your tax basis in
your CPOs (in U.S. dollars) as determined in "Sale, exchange or retirement of a
Note—Adjusted tax basis of the new notes and the CPOs."
Capital gain recognized by you generally will be long-term capital gain
and subject to a maximum federal income tax rate of 20% if you held CPOs for
more than one year before the sale. Recent legislation has reduced the maximum
federal income tax rate to 15% for capital gains taken into account from May 6,
2003 through December 31, 2008. U.S. corporations, however, are taxed on their
net capital gains at the regular corporate income tax rates. Gain or loss
recognized by you in connection with the disposition of your CPOs generally
will be treated as U.S. source gain or loss.
Generally, you will not recognize any gain or loss upon the conversion of
the CPOs into series N stock or other classes of our stock.
Passive foreign investment company considerations.
In general, a foreign
corporation will be classified as a passive foreign investment company, or
PFIC, if (i) at least 75% of its gross income for the taxable year consists of
passive income or (ii) at least 50% of the average value of the corporation's
assets (determined as of the close of each quarter) in a taxable year is
attributable to assets that produce or are held for the production of passive
income. For this purpose, passive income generally includes dividends,
interest, royalties, rents (other than rents and royalties derived from the
active conduct of a trade or business and not derived from a related person),
annuities and gains from assets that produce passive income.
The determination of PFIC status is a factual determination that must be
made annually at the close of each taxable year and depends on the sources of
our income and the relative values of our passive assets such as cash and our
non-passive assets, including goodwill. Based on the source of our income and
the value of our non-passive assets as compared to our passive assets, in 2002
we do not believe we were not a PFIC for U.S. federal income tax purposes and
we do not expect to be a PFIC in future taxable years. However, as noted
above, the determination of PFIC status is a factual determination that must be
made annually and our current belief that we were not a PFIC could be subject
to change in the future. We will make the determination of whether we are a
PFIC on an annual basis and intend to notify you within 75 days of the end of
any year in which we become a PFIC.
If we were to become a PFIC in any taxable year, a special tax regime
would apply to both (a) any "excess distribution" by us (generally, your
ratable share of distributions in any year that are greater than 125% of the
average annual distributions received by you in the three preceding years or
your holding period, if shorter) and (b) any gain realized on the sale or other
disposition (including a pledge) of your CPOs. Under this regime, any excess
distribution and realized gain will be treated as ordinary income and will be
subject to tax as if (a) the excess distribution or gain had been realized
ratably over your holding period in the CPOs, (b) the amount deemed realized
had been subject to tax in each year of that holding period at the highest
applicable tax rate in effect for that year and (c) the interest charge
generally applicable to underpayments of tax had been imposed on the taxes
deemed to have been payable in those years.
You are urged to consult your own tax advisor as to the effect to you of
our company being a PFIC and the availability, if any, of either the "qualified
electing fund" or "mark-to-market" election as defined in the Code and the
regulations thereunder.
Controlled foreign corporation considerations.
If more than 50% of the
voting power of all classes of our capital stock or the total value of our
capital stock is owned, directly or indirectly, by "U.S. shareholders," we may
be treated as a controlled foreign corporation, or a CFC, under Subpart F of
the Code. U.S. shareholders are defined as citizens or residents of the United
States, United States domestic partnerships and corporations or estates or
trusts other than foreign estates or trusts, each of whom owns 10% or more of
the total combined voting power of all classes of our capital stock. The
United States generally taxes a U.S. shareholder of a CFC currently on its pro
rata share of the Subpart F income of the CFC. Such U.S. shareholder is
generally treated as having received a current
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distribution out of the CFC's Subpart F income and is also subject to
current U.S. tax on its pro rata share of the CFC's earnings invested in U.S.
property. In addition, gain from the sale or exchange of stock in a CFC by a
U.S. person who is or was a U.S. shareholder of the CFC at any time during the
five-year period ending with the sale or exchange is treated as ordinary income
to the extent of the CFC's earnings and profits attributable to the stock sold
or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign
corporation generally will not be treated as a PFIC with respect to U.S.
shareholders of the CFC.
Under the current ownership structure, we believe that we are not a CFC
for U.S. federal income tax purposes. However, because of the complexity of
the CFC rules, you should consult your own tax advisor as to the potential
application of these rules to you based on your particular circumstances.
Certain U.S. federal income tax consequences to non-U.S. holders of the Notes
and CPOs
Subject to the discussion below concerning information reporting and
backup withholding, generally, a non-U.S. holder will not be subject to U.S.
federal income or withholding tax on distributions in respect of the Notes or
the CPOs unless such income is effectively connected with the conduct by the
non-U.S. holder of a trade or business in the United States.
A non-U.S. holder will generally not be subject to U.S. federal income or
withholding tax on gain realized on the sale or the other disposition of the
Notes or the CPOs unless (i) such gain is effectively connected with the
conduct of a United States trade or business by such non-U.S. holder or (ii)
such non-U.S. holder is present in the United States for 183 days or more
during the taxable year of sale or disposition and certain other conditions are
met.
Information reporting and backup withholding
In general, if you are a non-corporate U.S. holder (or do not come within
certain other exempt categories), information reporting requirements will apply
to certain payments of principal, premium and interest on the Notes, or
dividends on the CPOs, and to payments of the proceeds of the sale of the Notes
or CPOs made to you.
Additionally, if you are a non-corporate U.S. holder (or do not come
within certain other exempt categories), you may be subject to backup
withholding at a rate of 28% with respect to such payments, unless you provide
your taxpayer identification number (social security number or employer
identification number), certify that you are not subject to backup withholding
and otherwise comply with applicable requirements of the backup withholding
rules. Generally, you will provide such certification on IRS Form W-9
("Request for Taxpayer Identification Number and Certification") or a
substitute Form W-9.
If you do not provide your correct taxpayer identification number, you may
be subject to penalties imposed by the IRS, as well as backup withholding.
However, any amount withheld under the backup withholding rules may be
allowable as a credit against your U.S. federal income tax liability (which
might entitle you to a refund), provided that you furnish the required
information to the IRS.
A non-U.S. holder generally will be exempt from information reporting
requirements and backup withholding, but may be required to comply with
certification and identification procedures in order to obtain an exemption
from information reporting and backup withholding.
Mexican taxation
The following is a general discussion of the material consequences of the
exchange of the old notes, the investment in the new notes and CPOs and the
investment in outstanding old notes under the Mexican Income Tax Law
(Ley del
Impuesto sobre la Renta
) and rules and regulations thereunder, as currently in
effect based on the advice of PricewaterhouseCoopers, our tax advisors. This
summary of certain Mexican tax considerations deals only with holders of notes
and CPOs or of a beneficial interest therein that are not residents of Mexico
for Mexican tax purposes and that do not conduct a trade or business through a
permanent establishment or fixed base in Mexico (a "Foreign Holder").
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For purposes of Mexican taxation, an individual is a resident of Mexico if
he has a permanent home in Mexico, unless he has been in another country for
more than 183 calendar days, whether consecutive or not, in any one calendar
year and can demonstrate that he has become a resident of that country for tax
purposes. A legal entity is a resident of Mexico for tax purposes if it has
been incorporated under the laws of Mexico, or has established the principal
management of its business or the base of its effective direction in Mexico. A
Mexican citizen is presumed to be a resident of Mexico for tax purposes unless
such person can demonstrate otherwise.
United States/Mexico and other tax treaties
A Convention for the Avoidance of Double Taxation and Prevention of Fiscal
Evasion, together with a related Protocol thereto (collectively, the "Tax
Treaty"), between the United States and Mexico entered into force on January 1,
1994. Provisions of the Tax Treaty that may affect the taxation of certain U.S.
holders of notes or CPOs are summarized below. The United States and Mexico
have also entered into an agreement that covers the exchange of information
with respect to tax matters. Mexico has also entered into and is negotiating
several other tax treaties that may reduce the amount of Mexican withholding
tax to which the notes may be subject. Holders of the notes and CPOs should
consult their own tax advisors as to the tax consequences, if any, of such
treaties.
Mexican tax consequences to Foreign Holders of the exchange of old notes for
new notes and CPOs
General.
A Foreign Holder will not be subject to any Mexican tax upon the
exchange of the old notes for the new notes and the CPOs, since it will be
treated by us as additional consideration for Mexican tax purposes, paid to the
Foreign Holders in exchange for their tendered old notes.
Other taxes.
A Foreign Holder will not be liable for Mexican estate,
gift, inheritance or similar taxes with respect of the exchange of the old
notes, nor will such a Foreign Holder be liable for Mexican stamp, registration
or similar taxes.
Mexican tax consequences to Foreign Holders of the notes
Taxation of interest and principal.
Under the Mexican Income Tax Law,
payments of interest made by Maxcom in respect of the new notes (including
payments of principal in excess of the issue price of such notes, which, under
Mexican law, are deemed to be interest) to a Foreign Holder will generally be
subject to a Mexican withholding tax assessed at a rate of 4.9% (the "Reduced
Rate"), provided that:
•
the notes are offered through banks or brokerage houses in a
country with which Mexico has a tax treaty in force;
•
the notes are registered in the Special Section of the
National Registry of Securities
(Registro Nacional de Valores)
; and
•
certain periodic information requirements by the Mexican
Ministry of Finance
(Secretaría de Hacienda y Crédito Público)
are
complied with.
•
If these conditions are not met, the applicable withholding
tax rate will be 10%.
FOREIGN HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING WHETHER THEY RESIDE
IN A COUNTRY THAT HAS ENTERED INTO SUCH A TREATY WITH MEXICO WHICH IS
EFFECTIVE, AND IF SO, THE CONDITIONS AND REQUIREMENTS FOR OBTAINING BENEFITS
UNDER SUCH TREATY.
However, if the beneficial owner, either directly or indirectly,
individually or jointly with related parties, of more than 5% of the interest
derived from the related securities, is any of the following:
•
a shareholder of the issuer who owns, directly or indirectly,
individually or jointly with related parties, more than 10% of the
voting stock of the issuer, or
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•
a legal entity 20% of whose stock is owned, directly or
indirectly, individually or jointly with related parties, by the
issuer,
then, the withholding tax rate will be 34% .
Pursuant to Rule 3.25.15 (the "Reduced Rate Rule") issued by the Mexican
Ministry of Finance
(Secretaría de Hacienda y Crédito Público
) on March 31,
2003 payments of interest with respect to the notes made by us to Foreign
Holders, regardless of the place of residence or the tax regime applicable to
the Foreign Holder recipient of the interest, will be subject to withholding
taxes imposed at the Reduced Rate if:
•
the notes are registered with the Special Section of the
National Registry of Securities and Intermediaries and copies of
approval of such registration are provided to the Ministry of
Finance;
•
we timely file with the Ministry of Finance certain
information relating to the issuance of the new notes;
•
we timely file with the Ministry of Finance on a quarterly
basis information on the amount and dates of interest payments made
during each quarter and information representing that no party
related to us, directly or indirectly, is the effective beneficiary
of more than five percent (5%) of the aggregate amount of each such
interest payment; and
•
we maintain records that evidence compliance with the
conditions set forth above.
We will comply with the first two conditions set forth above and expect
that the last two conditions will also be met and, accordingly, expect to
withhold Mexican tax from interest payments on the notes at the Reduced Rate
during the effectiveness of such rule.
However, during the fiscal year 2003 , the Tax Treaty is not expected,
generally, to have any material effect on the Mexican tax consequences
described herein, because, as described above, under Mexican Income Tax Law and
regulations as currently in effect, with respect to a U.S. holder that meets
the Reduced Rate Rule requirements described above, we will be entitled to
withhold taxes in connection with interest payments under the notes at the
Reduced Rate. From 2001 and beyond, holders of the notes should consult their
own tax advisors as to the possible application of the Tax Treaty.
Payments of interest we make on the notes to non-Mexican pension or
retirement funds will be exempt from Mexican withholding taxes, if any such
fund is:
•
the effective beneficiary of the interest;
•
duly incorporated under the laws of its country of origin;
•
exempt in its country of origin from income tax on interest income; and
•
registered with the Ministry of Finance for that purpose.
Under existing Mexican law and regulations, a Foreign Holder will not be
subject to any Mexican taxes in respect of payments of principal made by us
with respect to the notes.
Taxation of additional amounts.
We have agreed, subject to specified
exceptions and limitations, to pay Additional Amounts (as such term is defined
in "Description of the Notes—Additional amounts") to the holders of the notes
in respect of the Mexican withholding taxes mentioned above. Payments of
Additional Amounts with respect to the notes will be subject to Mexican
withholding tax at the same rate applicable to interest paid on the notes.
96
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Holders or beneficial owners of the notes may be requested to provide
certain information or documentation necessary to enable us to establish the
appropriate Mexican withholding tax rate applicable to such holders or
beneficial owners. In the event that the specified information or documentation
concerning the holder or beneficial owner is requested and is not provided on a
timely basis, our obligation to pay Additional Amounts will be limited.
Taxation of accrued interest.
Interest accrued that is not due and
payable under the terms applicable to the old notes before the exchange of the
old notes for the new notes will not be subject to a Mexican income tax
withholding under the terms described above, but such interest will be subject
to a Mexican income tax withholding when such interest becomes due and payable
under the new notes after the exchange of the old notes for the new notes.
Gain on dispositions.
Gains resulting from the sale or other dispositions
of the notes and by a Foreign Holder will not be deemed as an income arising
from Mexican source, and therefore will not be subject to Mexican income tax.
Mexican tax consequences to Foreign Holders of the CPOs
Distributions.
Dividends, either in cash or in any other form, paid with
respect to the CPOs will be subject to withholding tax based on the amount of
the distributed dividend, multiplied by a factor of 1.5385, in 2002. For
following years the factor will decrease to 1.5152, 1.4925 and 1.4706 in 2003,
2004 and 2005 and threafter.
Dispositions.
The sale or other disposition of the CPOs by a Foreign
Holder will not be subject to any Mexican tax if the sale is carried out
through the Mexican Stock Exchange or other securities market approved by the
Ministry of Finance and Public Credit (
Secretaría de Hacienda y Crédito
Público
). Sales or other dispositions of the CPOs made in other circumstances
would be subject to Mexican tax, regardless of the nationality or residence of
the transferor. However, under the Tax Treaty, a U.S. holder that is eligible
to claim the benefits of the Tax Treaty will be exempt from Mexican tax on
gains realized on a sale or other disposition of the CPOs in a transaction that
is not carried out through the Mexican Stock Exchange or such other approved
securities markets, so long as such holder did not own, directly or indirectly,
25% or more of our outstanding shares within the twelve-month period preceding
such sale or other disposition.
Certain tax consequences to Mexican holders on the exchange or disposition of
the CPOs.
The Mexican income tax effect for a Mexican resident holder on the taxable
disposition or exchange of the CPOs, may vary depending on the conditions of
the acquisitions, disposition or exchange of the CPOs, as well as on the
characteristics of the holders. Therefore, such holders should seek advice from
Mexican tax counsel to determine the effects on a case by case basis.
F.
Dividends and paying agents
Not applicable.
G.
Statement by experts
Not applicable.
H.
Documents on display
We file annual reports with and furnish other information to the SEC as
may be applicable from time to time. You may read and copy any documents filed
or furnished by Maxcom at the SEC's public reference rooms in Washington, D.C.,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms.
97
Table of Contents
I.
Subsidiary information
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk
The old notes which are payable at a fixed annual rate of 133/4% and the
new notes constituted substantially all of our outstanding indebtedness at
December 31, 2002. The new notes will not accrue or pay interest until March 1,
2006, and after March 1, 2006, the new notes will accrue interest at a fixed
annual rate of 10%. As a result, we do not currently have any significant
interest rate risk.
Foreign exchange risk
Our primary foreign currency exposure relates to our U.S.
dollar-denominated debt. A substantial portion of this debt is incurred to
finance U.S. dollar-denominated capital expenditures. All of our debt
obligations at December 31, 2002, were denominated in U.S. dollars. Therefore,
we are exposed to currency exchange rate risks that could significantly affect
our ability to meet our obligations. We currently do not enter into hedging
transactions with respect to these foreign currency risks, but continue to
consider the appropriateness of this option.
The exchange rate of the peso to the U.S. dollar is a freely-floating rate
and the peso has experienced significant devaluations in recent years. Any
significant decrease in the value of the peso relative to the U.S. dollar in
the near term may have a material adverse effect on our results of operations
and financial condition, including our ability to repay or repurchase the
notes. At December 31, 2002, an immediate 10% devaluation of the peso relative
to the U.S. dollar would have increased our interest expense by approximately
Ps.1.7 million over a one-year period.
To the extent capital expenditures are financed with operating cash flows,
we are also exposed to foreign currency fluctuations. Substantially all of our
capital expenditures are denominated in U.S. dollars. In addition, our
operating lease for our new headquarters building is denominated in U.S.
dollars. See "Item 5. Operating and Financial Review and Prospects—B.
Liquidity and capital resources—Other contractual obligations" for a
description of our contractual operating lease obligations denominated in
dollars.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Maxcom is not in default under any of its obligations nor is any payment of dividends in arrears.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS
Pursuant to the terms of the exchange offer that was consummated on April
29, 2002, the indenture governing the old notes was amended to, among other
things, eliminate:
•
all of the covenants restricting the incurrence of
indebtedness, the making of investments, the granting of loans, the
payment of dividends, the creation of liens, the entering into
transactions with affiliates, the undertaking of mergers,
consolidation of sales, the disposition of assets or subsidiary
stock, a change in control and any limitations on the transfer of
funds from subsidiaries to Maxcom;
•
the redemption option in the event of a change of control;
and
98
Table of Contents
•
events of default related to the non-compliance with such
covenants, cross-defaults, adverse judgments in excess of U.S.$5.0
million and certain bankruptcy events.
The modification of the restrictive covenants permits Maxcom, absent the
existence of similar covenants under other indebtedness, to take actions that
could increase the credit risks, with respect to Maxcom and its subsidiaries,
faced by the holders of the old notes or that could otherwise be adverse to the
interest of the holders of the old notes.
ITEM 15. CONTROLS AND PROCEDURES
(a)     Within 90 days prior to the date of this report, we performed an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures. Disclosure controls and procedures are designed to
ensure that the material financial and non-financial information required to be
disclosed on Form 20-F and filed with the SEC is recorded, processed,
summarized and reported timely. The evaluation was performed with the
participation of our key corporate senior management and under the supervision
of our Chief Executive Officer, Mr. René Sagastuy and our Chief Financial
Officer, Ms. Eloísa Martínez. Based on the foregoing, our management,
including our Chief Executive Officer and Chief Financial Officer, have
concluded that our disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934, as amended) are
effective.
(b)       There have been no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation thereof. Therefore, no corrective actions with regard
to significant deficiencies and material weaknesses were taken.
ITEM 16. RESERVED
Not applicable.
99
Table of Contents
PART II
ITEM 17. FINANCIAL STATEMENTS
We have responded to Item 18 in lieu of responding to this Item.
100
Table of Contents
ITEM 18. FINANCIAL STATEMENTS
Page
Maxcom Telecomunicaciones, S.A. de C.V. and Subsidiaries
Reports of Independent Accountants
F-2
Consolidated Balance Sheets as of December 31, 2001 and 2002
F-4
Consolidated Statements of Operations for the years ended
December 31, 2000, 2001 and 2002
F-5
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 2000, 2001 and 2002
F-6
Consolidated Statements of Changes in Financial Position for the years
ended December 31, 2000, 2001 and 2002
F-7
Notes to the Consolidated Financial Statements
F-8
Financial Statement Schedules
Report of Independent Accountants on Financial Statement Schedules
S-I
Valuation and Qualifying Accounts
S-III
F-1
Table of Contents
REPORT OF INDEPENDENT ACCOUNTANTS
Mexico, City, February 19, 2003, except for Note 23 for which the date is May
30, 2003
To the Board of Directors and Shareholders of
Maxcom Telecomunicaciones, S. A. de C. V. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Maxcom
Telecomunicaciones, S. A. de C. V. and its subsidiaries as of December 31, 2002
and 2001, and the related consolidated statements of operations, of changes in
stockholders' equity and of changes in financial position for the years then
ended. These financial statements are the responsibility of the Company's
Management. Our responsibility is to express an opinion on these financial
statements based on our audits. The consolidated statement of operations of
the Company for the year ended December 31, 2000 and the consolidated statement
of changes in shareholders' equity and changes in financial position for the
year ended December 31, 2000 were audited by other independent accountants
whose report, dated February 12, 2001, expressed an unqualified opinion on
those statements.
We conducted our audits in accordance with auditing standards generally
accepted in Mexico and in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement and are
prepared in accordance with generally accepted accounting principles in Mexico.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by Management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Maxcom
Telecomunicaciones, S. A. de C. V. and its subsidiaries at December 31, 2002
and 2001, and the results of its operations, the changes in its shareholders'
equity and the changes in its financial position for the years then ended, in
conformity with accounting principles generally accepted in Mexico.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is highly leveraged, is experiencing
liquidity problems and has suffered recurring losses from operations that
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Mexican Accounting Standards differ in certain material respects from
Accounting Principles
Generally Accepted in the United States of America. The application of the
latter would have affected the determination of the consolidated net loss for
each of the three years in the period ended December 31, 2002, and the
determination of stockholders' equity and consolidated financial position as of
December 31, 2002 and 2001, to the extent summarized in Note 22 to the
consolidated financial statements.
PricewaterhouseCoopers
C.P. Juan Manuel Ferrón
Audit Partner
F-2
Table of Contents
BDO Hernández Marrón y Cía., S C
Contadores Públicos y
Consultores de Empresas
Av. Ejercito Nacional 904 Piso 7
Polanco
11510 México D.F.
Teléfono
(52) (55) 59013900
Telefax
(52) (55) 59013925
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Maxcom Telecomunicaciones, S.A. de C.V. and Subsidiary
We have audited the accompanying consolidated balance sheet of Maxcom
Telecomunicaciones, S.A. de C.V. and subsidiary, as of December 31, 2000, and
the related consolidated statements of operations, consolidated changes in
shareholders' equity and changes in financial position for the year ended
December 31, 2000. These Financial Statements are the responsibility of the
Company's Management. Our responsibility is to express an opinion on these
Consolidated Financial Statements based on our audits.
We conducted our audits in accordance with Generally Accepted Auditing
Standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance as to whether the
Consolidated Financial Statements are free of material misstatements. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the Financial Statements. An audit also includes assessing the
accounting principles used and significant estimates made by Management, as
well as evaluating the overall Financial Statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Maxcom
Telecomunicaciones, S.A. de C.V. and subsidiary, as of December 31, 2000, and
the consolidated result of its operations, the consolidated changes in
shareholders' equity and the changes in its financial position for the year
ended December 31, 2000, in conformity with Mexican Generally Accepted
Accounting Principles ("Mexican GAAP").
Mexican GAAP vary in certain respects from accounting principles generally
accepted in the United States ("U.S. GAAP"). The application of U.S. GAAP
referred to in Note 22 would have affected the determination of consolidated
net loss, the consolidated shareholders' equity and consolidated financial
position, expressed at the purchasing power of pesos as of December 31, 2002,
as of and for the year ended December 31, 2000, to the extent summarized in
Note 22 to the consolidated financial statements.
These consolidated financial statements have been translated into English
solely for the convenience of the readers of this language.
BDO INTERNATIONAL
MEXICO CITY,
FEBRUARY 12, 2001
F-3
Table of Contents
MAXCOM TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2002 AND 2001
(Notes 1, 2, 3 and 4)
In thousands of Mexican pesos ("Ps.") in purchasing power as of December 31, 2002
and thousands of U.S. dollars ("$")
2002
2001
2002
(Note 3)
ASSETS
Current assets:
Cash and cash equivalents (Note 5)
Ps.
115,729
Ps.
182,421
$
11,095
Restricted cash (Note 12)
—
197,452
—
Accounts receivable:
Customers, net of allowance of Ps.32,107 and Ps.19,693 in 2002
and 2001, respectively
104,205
61,189
9,990
Value-added tax refundable (Note 6)
12,789
14,590
1,226
Other sundry debtors
8,059
12,988
772
125,053
88,767
11,988
Inventory, net of allowance of Ps.607 and Ps.615 in 2002 and 2001,
respectively
19,140
30,138
1,835
Prepaid expenses, net
35,614
10,890
3,414
Total current assets
295,536
509,668
28,332
Frequency rights, net (Note 7)
104,420
110,813
10,011
Telephone network systems and equipment, net (Note 9)
1,588,184
1,446,902
152,270
Preoperating expenses, net (Note 10)
204,379
234,500
19,595
Intangible assets, net (Note 11)
425,923
316,603
40,836
Rent deposits of Ps.25,516 and Ps.29,013 in 2002 and 2001
respectively and other assets
29,590
33,095
2,837
Total assets
Ps.
2,648,032
Ps.
2,651,581
$
253,881
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Interest payable (Note 12)
Ps.
4,320
Ps.
104,789
$
414
Accrued expenses and other accounts payable
164,262
147,279
15,745
Customer deposits
1,699
3,968
162
Payroll and other taxes payable
31,840
18,523
3,053
Total current liabilities
202,121
274,559
19,374
Long-term liabilities:
Senior notes, net (Note 12)
1,845,468
2,578,916
176,938
Total long term liabilities
1,845,468
2,578,916
176,938
Total liabilities
2,047,589
2,853,475
196,312
Commitments and contingencies (Notes 12, 14, 19 and 20)
Shareholders' equity:
Capital stock, no par value (Note 15)
1,685,570
1,031,738
161,607
Additional paid-in capital (Notes 15 and 21)
420
108,141
40
Accumulated deficit (Note 17):
Prior years deficit
(352,844
)
(651,433
)
(33,829
)
Net loss for the period
(732,703
)
(690,340
)
(70,249
)
(1,085,547
)
(1,341,773
)
(104,078
)
Total shareholders' equity (deficit)
600,443
(201,894
)
57,569
Total liabilities and shareholders' equity
Ps.
2,648,032
Ps.
2,651,581
$
253,881
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
Table of Contents
MAXCOM TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(Notes 1, 2, 3 and 4)
In thousands of Mexican pesos ("Ps.") in purchasing power as of December 31, 2002
and thousands of U.S. dollars ("$"), except per share amounts
2002
2001
2000
2002
(Note 3)
Net revenues
Ps.
535,939
Ps.
332,310
Ps.
293,615
$
51,384
Operating costs and expenses:
Network operating costs
208,084
159,015
118,924
19,950
Selling, general and administrative
expenses
428,728
454,454
365,457
41,105
Depreciation and amortization
317,564
283,777
221,859
30,447
Total operating costs and expenses
954,376
897,246
706,240
91,502
Operating loss
(418,437
)
(564,936
)
(412,625
)
(40,118
)
Integral cost (income) of financing:
Interest expense
207,641
451,295
441,397
19,908
Interest income
(4,472
)
(81,142
)
(108,095
)
(428
)
Gain on repurchase of debt (Note 12)
—
(128,161
)
—
—
Exchange loss (gain), net
206,612
(95,962
)
11,814
19,809
Gain on net monetary position
(100,618
)
(87,368
)
(99,431
)
(9,646
)
309,163
58,662
245,685
29,643
Nonrecurring charges (Note 14)
—
(65,761
)
—
—
Other income (expense), net
2,643
(187
)
(520
)
253
Loss before taxes
(724,957
)
(689,546
)
(658,830
)
(69,508
)
Reserves for:
Asset tax (Note 19)
6,820
794
—
653
Income tax (Note 19)
926
—
—
88
7,746
794
—
741
Net loss
(Ps.
732,703)
(Ps.
690,340)
(Ps.
658,830)
($
70,249
)
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
Table of Contents
MAXCOM TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(Notes 1, 2, 3 and 4)
In thousands of Mexican pesos ("Ps.") in purchasing power as of December 31, 2002
and thousands of U.S. dollars ("$")
Additional
Total
Capital
paid-in
Accumulated
shareholders'
stock
capital
deficit
equity
(Note 15)
(Note 17)
Balance at December 31, 1999
Ps.
894,226
Ps.
35,207
(Ps.
261,143)
Ps.
668,290
Increase in capital stock
370,025
—
—
370,025
Contributions for future increases of capital
—
106
—
106
Stock options (Note 21)
—
107,886
—
107,886
Warrants (Note 21)
7,650
(7,650
)
—
—
Net loss
—
—
(658,830
)
(658,830
)
Balance at December 31, 2000
1,271,901
135,549
(919,973
)
487,477
Increase in capital stock
27,408
(27,408
)
—
—
Losses absorbed
(268,539
)
—
268,539
—
New paid-in capital
969
—
—
969
Net loss
—
—
(690,340
)
(690,340
)
Balance at December 31, 2001
1,031,739
108,141
(1,341,774
)
(201,894
)
Increase in capital stock
785,259
749,781
1,535,040
Losses absorbed
(131,428
)
(857,502
)
988,930
—
Net loss
(732,703
)
(732,703
)
Balance at December 31, 2002
Ps.
1,685,570
Ps.
420
(Ps.
1,085,547)
Ps.
600,443
U.S. dollars
$
161,608
$
40
($104,079
)
$
57,569
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
Table of Contents
MAXCOM TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(Notes 1, 2, 3 and 4)
In thousands of Mexican pesos ("Ps.") in purchasing power as of December 31, 2002
and thousands of U.S. dollars ("$")
2002
2001
2000
2002
(Note 3)
Operating activities:
Net loss
(Ps.
732,703)
(Ps.
690,340)
(Ps.
658,830)
($
70,249
)
Adjustments to reconcile net loss to resources provided
by (used for) operating activities:
Depreciation and amortization
317,564
283,777
221,859
30,447
Non-recurring charges
—
65,762
—
—
Gain on repurchase of debt
—
(128,161
)
—
—
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable, net
(43,016
)
(18,529
)
(8,207
)
(4,124
)
Inventory, net
10,999
(20,195
)
1,863
)
1,054
Prepaid expenses, net
(24,723
)
1,064
(5,602
)
(2,370
)
(Decrease) increase in:
Restricted cash, liabilities and others, net
131,744
150,868
(405,370
)
12,631
Resources used for operating activities
(340,135
)
(355,754
)
(858,013
)
(32,611
)
Financing activities:
Issuance of capital stock
785,259
969
377,705
75,288
Additional paid-in capital
749,781
—
100,344
71,887
Repurchase of debt
—
(99,781
)
—
—
Proceeds from loans and notes payable
(733,448
)
—
2,126,026
(70,321
)
Resources provided by (used in) financing activities
801,592
(98,812
)
2,604,075
76,854
Investing activities:
Preoperating expenses
(1,820
)
—
—
(174
)
Investment in telephone network systems and
equipment, net of dispositions
(366,427
)
(499,582
)
(420,163
)
(35,132
)
Intangible assets
(163,407
)
(7,724
)
(326,069
)
(15,667
)
Other assets
3,505
(39,001
)
(1,303
)
336
Resources used for investing activities
(528,149
)
(546,307
)
(747,535
)
(50,637
)
Cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents
(66,692
)
1,000,873
998,527
(6,394
)
Beginning balance
182,421
1,183,294
184,768
17,489
Ending balance
Ps.
115,729
Ps.
182,421
Ps.
1,183,295
$
11,095
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
Table of Contents
MAXCOM TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
In thousands of Mexican pesos ("Ps.") in purcashing power as of December 31, 2002
and thousands of U.S. dollars ("$"), except per share amounts
NOTE 1 — INCORPORATION AND BUSINESS:
Maxcom Telecomunicaciones, S. A. de C. V. ("Maxcom" or the "Company"), is a
Mexican company incorporated on February 28, 1996. Its main line of business
is the construction and operation of a telephone network, with the purpose of
providing local, national and international long-distance, data and other
value-added services, and virtual private network service, within Mexico.
The Company started its commercial operations in May 1999. Therefore, from its
incorporation through April 30, 1999, the Company was in the preoperating and
development stage.
Effective February 3, 1997 (as amended December 7, 1999 and September 27,
2001), Mexico's Ministry of Communications and Transportation (the "SCT")
awarded the Company a concession to install and operate a public
telecommunication network in Mexico. This concession is non-exclusive; its
initial term is for 30 years, and it contains certain renewal rights. The
concession grants the Company the right to provide local telephone services in
the Federal District of Mexico and in 13 states. It also grants the Company
the right to provide long-distance, data and other value-added services
nationwide, although it is not currently providing long-distance service
outside their current customer base. In September 2001, the SCT amended the
concession for national coverage. The Company must meet certain conditions in
order for the concession to remain effective, such as building certain networks
and providing certain services by predetermined dates, among other things.
In October 1997, the Company was awarded seven nationwide point-to-point and
three regional point-to-multipoint microwave concessions, each for 20 years.
On November 24, 1998 (as amended March 23, 1999), the Company entered into an
agreement with Teléfonos de México, S. A. de C. V. ("Telmex"), through which
both parties agreed to provide interconnection services to each other's local
telecommunications network. This agreement calls for reciprocal
interconnection rates for local-to-local services through September 15, 2002.
On January 22, 1999, the Company entered into another agreement with Telmex
through which Maxcom agreed to provide Telmex with interconnection services for
Telmex's long-distance traffic.
The Company is in negotiations with Telmex to sign an amendment agreement of
the original Local Interconnection Service Agreement (the "Agreement"), for the
extension of the Agreement which was valid through September 15, 2002,
meanwhile the physical interconnection remains between the companies based in
the clause denominated "continued application" which contracted that upon the
conclusion of the initial term, the terms and conditions of the Agreement will
continue in full effect until the parties sign a new agreement to continue with
the interconnection of their networks.
During 2001 and 2000 the Company entered into interconnection and reselling
agreements with several other local and long distance carriers and mobile phone
companies (see Note 4).
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The COFETEL (Federal Telecommunications Commission) in their session of
November 28, 2000 issued a resolution authorizing the Company to operate as
an international port, the station is located in Magdalena No. 211, Mexico
City.
In September 2001 the Company was awarded an amendment to its concession to
provide nationwide services of basic telephony for 30 years.
In August 2002, the Company bought a fiber optic system (2,011 Km), which
allows the Company to operate a network that carries traffic from Mexico City
to the Nuevo Laredo border crossing.
NOTE 2 — GOING CONCERN:
From the beginning of its commercial operations, the Company has had negative
cash flow from operations and losses from operations due to its recent
establishment and the Company's initial investment in telephone network systems
and equipment, preoperating expenses and frequency rights. The recoverability
of this investment will depend on the ability of the Company to obtain
financing to complete development and on the future profitable commercial
exploitation of the telephone network.
The Company has incurred net losses of Ps.732,703, Ps.690,340 and Ps.658,830
for the years ended December 31, 2002, 2001 and 2000, respectively. The losses
were due to higher costs of borrowing and lower sales growth than-expected.
During 2000, the Company issued 133/4% Senior Notes with a principal amount
of $300 million, maturing on April 1, 2007. On April 29, 2002, the Company
consummated the exchange offer for its 133/4% Series B Senior Notes due
2007. Holders tendered an aggregate of US $259,410 in principal amount of
Series B Senior Notes, representing 94.33% of all such notes outstanding.
Additionally, on July 25 2002, the Company completed an additional exchange of
U.S $4,000 in aggregate principal of 13 3/4 % Series B Senior Notes due 2007
with the same terms and conditions of the exchange offer consummated on April
29, 2003.. These holders received in exchange an aggregate of $2,545 in
principal amount of New Senior Notes due March 1, 2007. Tendering holders also
received an aggregate of 408,000 Series "N2" convertible preferred shares, with
an initial liquidation preference of $0.4927 per share and limited voting
rights, in the form of CPOs.
The Company has experienced significant turnover in executive ranks
over the last three years. The current management team is dedicated
to turnaround the business. Through 2002 and
2001, the Company's administration has worked aggressively to mitigate its
financial difficulties. The Company took the following actions:
a.
Corporate debt restructuring -
As mentioned in Note 12, the Company carried out a restructuring of the
Senior Notes. As a result of these negotiations, the Company was able to
exchange a significant portion of the Senior Notes for a combination of
preferred stock and new notes with more favorable terms, such as: i)
interest free debt for a period of four years, and ii) a lower interest
rate once interest accrual begins.
b.
Private equity investment -
The Company received a capital infusion of $66.2 million from some of its
existing shareholders, bondholders and certain new investors.
c.
Improvement in operations -
During 2002 the Company increased net revenues by 61%, achieved positive
net Earnings Before Income Taxes, Depreciation and Amortization
("EBITDA") for the fourth quarter (except for the restructuring expense),
and reduced operating loss by 26%.
F-9
Table of Contents
In December 2002 management accrued for a right sizing of its headcount
Ps26,442. It is anticipated that this will improve the related and other
payroll expenses in 2003.
The consolidated financial statements do not give effect to any
adjustments which would be necessary if the Company is not able to
continue as a going concern.
NOTE 3 — BASIS OF PRESENTATION:
a.
Consolidation –
The accompanying consolidated financial statements include the accounts
of Maxcom and subsidiaries Corporativo en Telecomunicaciones, S. A. de C.
V. ("Corporativo") and Maxcom Servicios Administrativos, S. A. de C. V.
("MSA"). Both are wholly-owned Mexican subsidiaries, whose main line of
business is the rendering of administrative and technical services,
mainly to Maxcom. All intercompany balances and transactions have been
eliminated for the consolidation.
Certain prior year accounts have been reclassified for comparative
presentation purposes.
b.
Convenience translation -
U.S. dollar amounts ($) shown in the consolidated financial statements
have been included solely for the convenience of the reader and were
translated from Mexican pesos, as a matter of arithmetic computation
only, at December 31, 2002 noon-buying rate of Ps.10.43 per U.S.$1.00, as
published by The Federal Reserve Bank of New York. Such translation
should not be construed as a representation that the Mexican peso amounts
have been or could be converted into U.S. dollars at this or any other
rate.
NOTE 4 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements are expressed in Mexican
pesos, denoted by the symbol "Ps.", and have been prepared in accordance with
Accounting Principles Generally Accepted in Mexico ("Mexican GAAP"). The
significant accounting policies used by the Company in the preparation of its
financial statements, including the concepts, methods and criteria related to
the recognition of the effects of inflation on the financial information, are
summarized below:
a.
Recognition of the effects of inflation -
The financial statements of the Company have been prepared in accordance
with Statement B-10 "Recognition of the Effects of Inflation on
Financial Information," as amended, issued by the Mexican Institute of
Public Accountants ("MIPA"), which provides guidance for the recognition
of the effects of inflation.
i.
The Company restates its income statement to reflect the
purchasing power of the Mexican peso as of the most recent reporting
date (December 31, 2002), using a restatement factor derived from
the change in the National Consumer Price Index ("NCPI") from the
month in which the transaction occurred to the most recent year-end.
Financial statements have been restated to Mexican pesos as of
December 31, 2002 purchasing power, using the NCPI as of that date.
The financial statements of the previous years have also been
restated in terms of the purchasing power of the Mexican peso as of
the most recent reporting date, thus making them comparable, by
using a restatement factor derived from the change in the NCPI,
which for 2001 and 2000 was 1.0570 and 1.0440, respectively.
Therefore, these amounts differ from those previously reported.
ii.
Shareholders' equity accounts are restated to be expressed in
terms of constant pesos. The restated amounts are determined by
applying factors derived from the NCPI for historical balances.
F-10
Table of Contents
iii.
The result on the net monetary position represents the
inflationary gain or loss, as determined by applying factors derived
from the NCPI, on the Company's monthly net monetary assets and
liabilities during the period.
iv.
Integral income and cost of financing consists of interest
income and expense, exchange gains or losses, and the gain or loss
on the net monetary position. Integral income and cost of financing
during the development stage period was capitalized to preoperating
expenses. Once the Company commenced operations, amortization of
these costs began over a ten-year term.
v.
Statement B-12 "Statement of Changes in Financial Position,"
issued by the MIPA, specifies the appropriate presentation of the
statement of changes in financial position when the financial
statements have been restated in constant monetary units. Statement
B12 identifies the sources and applications of resources as the
differences between beginning and ending financial statement
balances in constant monetary units. The Statement also requires
that monetary and foreign exchange gains and losses not be treated
as non-cash items in the determination of resources provided by
operations.
b.
Cash and cash equivalents –
Cash equivalents include highly liquid short-term investments valued at
market.
c.
Inventory -
Materials and supplies are valued at the lower of acquisition cost on a
weighted-average basis or net realizable value ("NRV").
d.
Telephone network systems and equipment -
Telephone network systems and equipment are recorded at acquisition cost
and restated by applying factors derived from the change in the NCPI
since acquisition date.
Telephone network equipments for resale are valued at the lower of
acquisition cost on a LIFO basis or NRV.
Depreciation is calculated by the straight-line method on the restated
cost based on the estimated useful lives of the assets. Depreciation is
charged to results of operations.
The Company constructs certain of its own network systems and related
facilities. Internal costs directly related to the construction of such
facilities are capitalized. Such internal costs capitalized during the
year were Ps.33,071 and Ps.25,204 (including Ps.6,763 and Ps.5,510 of
integral cost of financing) in 2002 and 2001, respectively.
Beginning January 1, 2001, the Company elected to capitalize integral
cost of financing attributable to assets under construction. Capitalized
integral financing costs include interest costs, gains from monetary
position, and foreign exchange losses and are determined by reference to
the Company's average interest cost on outstanding borrowings.
Maintenance and repairs are expensed as incurred. Replacements and
improvements are capitalized. The cost and related reserves of assets
sold or retired are removed from the accounts, and any resulting gain or
loss is reflected in results of operations.
e.
Frequency rights -
Frequency rights are recorded at acquisition cost and restated by
applying factors derived from the change in the NCPI since acquisition
date. Amortization is calculated by the straight-line method over the
term of the concession (20 years) [see Note 7] from the start of the
Company's operations.
F-11
Table of Contents
f.
Preoperating expenses -
All expenses incurred during the development stage or in specific
projects in progress are capitalized. Such expenses are amortized on a
straight-line basis over 10 years. The amortization period begins when
the corresponding project commences operations.
g.
Intangibles -
Purchased software and certain activities of developing internal-use
software are capitalized and amortized over their expected useful lives.
Other activities, such as training, maintenance and re-engineering, are
expensed as incurred.
Debt issuance costs are amortized on a straight-line basis over the
outstanding term of the related debt under Mexican GAAP. Under United
States Generally Accepted Accounting Principles ("US GAAP") such debt
issuance costs are amortized by using effective interest method over the
life of the Company's long-term obligations.
h.
Evaluation of long — lived assets -
The Company evaluates the recoverability of its long-lived assets when
events and circumstances indicate that such assets might be impaired.
The Company determines impairment by comparing the undiscounted future
cash flows estimated to be generated by these assets to their respective
carrying amounts. In the event impairment exists, a loss is recognized
based on the amount by which the carrying value exceeds the fair value of
the asset. If quoted market prices for an asset are not available, fair
market value is determined primarily using the anticipated cash flows
discounted at a rate commensurate with the risk involved. Losses on
property and equipment to be disposed of are determined in a similar
manner, except that fair market values are reduced for the cost to
dispose.
i.
Transactions and balances in foreign currencies -
Transactions in foreign currencies are recorded at the rates of exchange
prevailing on the dates they are entered into or settled. Monetary
assets and liabilities of Mexican companies denominated in those
currencies are stated in Mexican pesos at the year-end closing rate
published in Mexico's Official Gazette. Exchange gains or losses are
applied as an integral cost of financing.
j.
Income tax and statutory employees' profit sharing -
The Company has incurred tax losses since inception and accordingly has
not provided for income taxes and statutory employees' profit sharing.
Starting in the year 2000, the Company adopted the guidelines of the
revised Statement D-4 "Accounting for Income Tax, Asset Tax and
Employees' Statutory Profit Sharing," issued by the MIPA. This Statement
requires the recognition of deferred income tax by using the
comprehensive asset and liability method. Under this method, deferred
income taxes are calculated by applying the respective income tax rate to
the temporary differences between the financial statements' carrying
amounts and the tax basis of existing assets, liabilities and tax losses.
An analysis of the corresponding effects is shown in Note 19.
In July 2000, the MIPA issued Circular 54 "Statement D-4
Interpretations", which is intended to clarify certain concepts in
connection with the guidelines and application of D-4.
k.
Management estimates -
Generally accepted accounting principles require that, in preparing a
company's financial statements, management make estimates and assumptions
that affect the reported amounts of assets and liabilities and
F-12
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disclose contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
l.
Financial instruments -
The Company's financial instruments consist principally of cash and cash
equivalents, restricted cash, accounts receivable and payable, and notes
payable. The carrying amounts of such financial instruments, as
reflected in the balance sheet, approximate their fair value as of
December 31, 2002 and 2001.
In February 2000, the MIPA issued Statement C-2 "Financial Instruments,"
which is effective as of January 1, 2001. Statement C-2 provides
guidance for recognizing, measuring and disclosing financial assets and
liabilities, including accounting for derivative instruments and certain
hedging transactions. Statement C-2 requires that all derivative
financial instruments be recorded in the balance sheet at their fair
values and changes in the fair value of financial instruments are
recorded in each period in the income statement. There was no effect on
the financial position or results of operations of the Company upon
adoption.
m.
Revenue recognition -
The Company recognizes revenues from telephone services provided to
customers, the sale of customer-premise equipment, services provided to
other telephone-service companies (such as interconnection services), and
installation charges.
Revenues from services provided to customers, including installation and
maintenance, are recognized in the month the service is rendered. When
the installation is not charged to the customer, the cost is amortized
during the expected life of the customer line.
Revenues from the sale of customer-premise equipment are recognized at
the time of the sale and delivery and installation of such equipment.
Revenues from interconnections services are recognized on an accrual
basis. The Company has entered into agreements with several telephone
carriers with a "bill and keep" feature. Under this arrangement, if the
imbalance between local calls originated by the other carrier and
terminated by Maxcom and calls originated by Maxcom and terminated by the
other carrier during a month does not exceed 70%, then no interconnection
fee amounts are payable by the net user of interconnection services. If
the imbalance exceeds 70% in any given month, the net user incurs a
liability per minute. If the Company fails to maintain a significant
percentage of residential users, then the "bill and keep" arrangement
will be terminated and asymmetrical interconnection rates may apply.
The Company also has interconnection agreements for mobile and long
distance services with other carriers, however, they do not incorporate a
bill and keep feature.
Advances from customers are classified as current liabilities until they
are refunded. When the contract is rescinded, these deposits are applied
to any outstanding balance.
The Management has been working strongly to reduce the risk of dependence
on a small number of customers. For the year ended December 31, 2002 and
2001, the three largest customers accounted 3% and approximately 23% of
revenues, respectively.
The Company creates a reserve for 90% of any receivable due over 90 days,
except for high volume customers, whose accounts are 100% reserved once
they reach 30 days past due.
n.
Stock-based compensation -
At December 31, 2002, 2001 and 2000, the Company had several stock option
transactions (see Note 21). Since Mexican GAAP does not have specific
guidance to value and record transactions of this nature, the Company
adopted "U.S. GAAP" pursuant to Mexican Statement A-8, "Supplementary
Application of
F-13
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International Accounting Standards." Statement A-8 recommends the
application of another promulgation when such instances arise.
Accounting Principles Board ("APB") Opinion 14, "Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants", APB
Opinion 25, "Accounting for Stock Issued to Employees", and Financial
Accounting Standards Board ("FASB") Statement 123, "Accounting for
Stock-Based Compensation," have been applied to the warrant and stock
option grants.
In accordance with APB 25, the Company recognizes compensation expense
for its employee stock option plan using the intrinsic-value method of
accounting. Under the terms of the intrinsic-value method, compensation
cost is the excess, if any, of the market price of the stock at the grant
date, or other measurement date, over the amount an employee must pay to
acquire the stock.
In accordance with FAS 123, compensation expense for stock options given
to non-employees and warrants was determined based on fair value using
the Black Scholes valuation model.
Debt with detachable warrants is accounted for using APB 14. A portion
of the proceeds from the issuance of such debt is allocated to additional
paid-in capital against debt discount. The allocation is based on the
relative fair value of the debt versus the warrants. The debt discount
is subsequently amortized over the outstanding term of the debt on a
straight-line basis, which does not materially differ from the interest
method. Amortization expense recognized for the years ended December 31,
2002, 2001 and 2000 was Ps.4,636, Ps.2,391, and Ps. 9,679, respectively.
o.
Advertising and promotional costs -
The Company expenses costs of advertising and promotions as incurred.
Advertising and promotional expenses were Ps.16,558, Ps.21,896 and
Ps.18,647 in 2002, 2001 and 2000, respectively.
p.
Segment reporting -
The International Accounting Standards Committee's IAS No. 14, "Segment
Reporting" ("IAS 14"), is applicable to Mexican companies under Statement
A-8. IAS 14 requires that companies look to their internal
organizational structure and internal reporting system for purposes of
identifying segments. For all years presented the Company operates only
one segment and does not have any particular geographical location. The
revenue by geographical location included in Note 21 is a specific
disclosure required by the SCT in the Company's concession title.
q.
New accounting standards -
In August 2000, the MIPA issued Statement B-4, "Comprehensive Income,"
which became effective January 1, 2001. Based on this Statement,
comprehensive income includes net income for the year and other items
which, in accordance with other statements, are recorded directly in
shareholders' equity and which are not a result of shareholders'
transactions, such as contributions, reductions or distributions of
capital. Currently, the Company does not have any components of other
comprehensive income other than net income.
F-14
Table of Contents
In November 2001, the MIPA issued the revised Statement C-9, "Liabilities,
Provisions, Contingent Assets and Liabilities and Commitments" ("Statement
C-9"), which establishes a methodology for valuation, presentation and
disclosure of liabilities and provisions, as well as for valuation and
disclosure of contingent assets and liabilities, and for disclosure of
commitments. The revised Statement C-9 states that: (i) all contingent assets
that have a practically true realization must be accounted and disclosed in the
financial statements; (ii) contingent assets that have a probable realization
cannot be accounted for in the financial statements, but must be disclosed; and
(iii) contingent assets that do not have a probable realization cannot be
accounted for in the financial statements and are not required to be disclosed.
Statement C-9 requires disclosure of committed amounts when it represents
significant fixed asset additions. The provisions of Statement C-9 are
required to be applied beginning on January 1, 2003, although early adoption is
recommended.
In addition, in December 2001, the MIPA issued revised Statement C-8,
"Intangible Assets" ("Bulletin C-8"), which defines intangible assets as costs
incurred and rights or privileges acquired that will generate a future economic
benefit. Revised Bulletin C-8 states that preoperating costs should be
expensed as a period cost, unless they could be classified as development
costs. Statement C-8 requires that goodwill and intangible assets, including
previously existing goodwill and intangible assets, with indefinite useful
lives should not be amortized, but should be tested for impairment annually.
Goodwill and intangible assets with finite useful lives should be amortized
over its useful life. The provisions of Statement C-8 are required to be
applied beginning on January 1, 2003, although early adoption is recommended.
The management of the Company estimates that the application of the new
standards will not have a significant impact on the financial statements.
NOTE 5 — CASH AND CASH EQUIVALENTS:
Investments maturing within 30 days at December 31 consist of:
2002
2001
Bank of America: $7,740 and $2,725 in government
instruments and certificates of deposit, bearing
annual interests at 1.06% and 1.68%, respectively
Ps.
79,819
Ps.
26,333
HSBC Republic: $13,090, bearing interest at 1.875%,
in a certificate of deposit
—
126,495
Paine Webber Incorporated: $1 and $983 in money
market instruments, bearing interest at a variable rate
and 2.23% per annum, respectively
19
9,504
Banamex: Ps. 30,475 in government instruments, bearing
annual interest at 7.05%
30,475
—
Cash
5,416
20,089
Ps.
115,729
Ps.
182,421
NOTE 6 — VALUE-ADDED TAX REFUNDABLE:
Value-Added Tax ("VAT") is levied on goods and services acquired, at a standard
rate of 15%. VAT does not usually represent an additional cost to business
enterprises because the amounts paid will be offset against the VAT liability
of the Company generated on the billing to customers. Because the Company has
paid VAT on investments, costs and expenses incurred, the VAT paid has resulted
in a tax overpayment subject to refund. This tax is being refunded on a
regular basis.
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NOTE 7 — FREQUENCY RIGHTS:
Frequency rights at December 31 consist of the following:
2002
2001
Frequency rights
Ps.
127,861
Ps.
127,861
Less — Accumulated amortization
( 23,441
)
(17,048
)
Ps.
104,420
Ps.
110,813
On October 3, 1997, the Mexican federal government granted the Company
concessions to use and exploit different bands of the radio-electric spectrum
and to establish point-to-point and point-to-multi-point microwave links. The
concession became effective February 28, 1998, and will run through to the year
2018.
For the years ended December 31, 2002, 2001 and 2000, the Company recorded for
these rights amortization expense of Ps.6,393, Ps.6,393 and Ps.6,393,
respectively.
NOTE 8 — TRANSACTIONS WITH RELATED PARTIES:
For the period ended December 31, related party expense transactions were as
follows:
2002
2001
2000
Transactions:
Office and site lease (1)
Ps.
—
Ps.
—
Ps.
207
Compensation in connection with the operation
agreement and other expenses with CT Global
Telecommunications, Inc. (2)
158
1,291
39,407
Strategic assistance agreement and other expenses
to Bachow and Associates (3)
145
490
1,873
Advisory fee and other expenses to certain
shareholders (4)
—
242
1,175
Travel expenses to BancBoston (5)
13
260
98
Travel expenses to Bank of America (5)
214
—
—
Operadora Plusgamma (6)
3,490
6,654
698
Management services to Comercializadora
Road el Camino (7)
529
—
—
Ps.
4,549
Ps.
8,937
Ps.
43,458
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Table of Contents
Related party payables, classified within accrued expenses and other accounts
payable, as of December 31 consist of:
2002
2001
CT Global Telecommunications, Inc., travel expenses
Ps.
69
Ps.
—
Bachow and Associates, travel expenses
—
141
Bank of America, travel expenses
42
—
Advertising and other management services expense to Operadora Plusgamma (7)
—
841
Management services to Comercializadora Road el Camino (7)
47
—
Ps.
158
Ps.
982
(1)
The Company leases a site, which is located within the premises of Radio
Centro Group, which is controlled by the family of one of the
shareholders.
(2)
For the years 2001 and 2000, expenses related to operative consulting
services provided from warrant holders. During 2002, the expense relates
to the refund of travel expenses for board meetings.
(3)
During 2001 and 2000, the Company entered into an agreement in which
Bachow and Associates, a shareholder, provided it with strategic advisory
services. The 2002 activity represents travel expenses.
(4)
Services provided during 2001 and 2000 by Bachow and Associates, Bank of
America International Investment Corporation and L.A. Strategic Capital
Partners II LLP, all of which were shareholders.
(5)
Refund of travel expenses to certain shareholders.
(6)
For the years 2001 and 2000, advertising expense paid to a company owned
by the family of one of the shareholders. For the year 2002, advertising
expense related to an advertising purchase agreement of $3.0 million,
celebrated on April 2002, for advertising time that will be received from
Grupo Radio Centro radio network from Operadora Plusgamma. The Aguirre
Gómez family used the $ 3.0 million proceeds from this agreement to
purchase Series "A1" stock pursuant to the private equity investment.
(7)
Management services paid to a company owned by one of the shareholders.
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Table of Contents
NOTE 9 — TELEPHONE NETWORK SYSTEMS AND EQUIPMENT, NET:
Telephone network systems and equipment, net at December 31 consists of:
Useful life *
2002
2001
(years)
Office furniture
Ps.
14,602
Ps.
8,998
10
Transportation equipment
30,276
29,898
4
Engineering equipment
10,060
9,889
10
Computer equipment
54,197
46,634
3.33
Telecommunication network and equipment
1,197,671
969,960
10
Electronic equipment
206,787
215,071
3.33
Radio equipment
250,367
236,882
10
Leasehold improvements
263,964
89,698
20
(1)
Other
13,472
9,158
10
2,041,396
1,616,188
Construction in progress:
Telecommunications
73,364
172,193
Capitalized internal costs
70,556
37,071
10
Less: Accumulated depreciation and amortization
(597,132
)
(378,550
)
Ps.
1,588,184
Ps.
1,446,902
*
Useful lives accounted from date of use.
(1)
Or life of the lease, whichever is shorter.
For the years ended December 31, 2002, 2001 and 2000, the Company recorded
depreciation and amortization (including leasehold improvements) expense of
Ps.225,145, Ps.196,930 and Ps.148,677, respectively.
During 2001, the Company wrote-off Ps.9,103, net of accumulated amortization of
Ps.1,397, in leasehold improvements related to its vacancy of its original
building lease.
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Table of Contents
NOTE 10 — PREOPERATING EXPENSES:
For the years ended December 31, 2002, 2001 and 2000, the Company recorded
amortization expense of Ps.31,940, Ps.31,940 and Ps.31,912, respectively.
Accumulated amortization was Ps.116,838 and Ps.84,898 as of December 31, 2002
and 2001, respectively.
NOTE 11 — INTANGIBLES:
Intangibles as of December 31 consist of:
2002
2001
Software licenses
Ps.
99,766
Ps.
41,611
Infrastructure rights
237,798
126,219
Debt issuance costs
217,639
223,970
555,203
391,800
Accumulated amortization
(129,280
)
(75,197
)
Ps.
425,923
Ps.
316,603
For the years ended December 31, 2002, 2001 and 2000, the Company recorded
amortization expense of Ps. 54,086, Ps.48,543 and Ps.34,847 , respectively.
This included Ps. 19,897, Ps.6,761 and Ps.3,222 of software amortization
expense, respectively.
NOTE 12 — LONG-TERM DEBT:
Long-term debt as of December 31 consists of:
2002
2001
$11,590 (2) ($275,000 in 2001) 13.75% Old Senior Notes
due April, 2007 (1)
Ps.
119,522
Ps.
2,657,450
$167,624 New Senior Notes bear 0% interest through
March, 2006, and 10% annual interest in the last year
1,728,618
—
Less — Discount (net of accumulated amortization) (2)
(2,672
)
(78,534
)
Ps.
1,845,468
Ps.
2,578,916
(1)
On March 17, 2000, Maxcom issued $300 million Senior Notes, maturing on
April 1, 2007. These notes accrued interest at the rate of 13.75% per
annum (14.46% including the withholding tax effect according to prevailing
tax regulations in the years 2002 and 2001) and are payable semiannually
in arrears on April 1 and October 1, commencing on October 1, 2000.
During May and June of 2001, the Company spent
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U.S.$10 million for the repurchase in the open market of U.S.$25 million
of notes. As a result, the Company recognized a pre-tax gain of
Ps.128,161.
(2)
On April 29, 2002, the Company consummated the exchange offer for its
13 3/4 % Series B Senior Notes due 2007. Holders tendered an aggregate
of U.S. $259,410 in principal amount of Series B Senior Notes,
representing 94.3% of all such notes outstanding. These holders received
in exchange an aggregate of $165,078 in principal amount of New Senior
Notes due March 1, 2007, bearing 0% interest through March 1, 2006, and
10% annual interest in the last year. Tendering holders also received an
aggregate of 26,459,820 Series "N2" convertible preferred stock, with an
initial liquidation preference of $0.4927 per share and limited voting
rights, in the form of Mexican Trust Certificates known as "CPOs".
Additionally, on July 25 2002, the Company completed an additional exchange of
U.S $4,000 in aggregate principal of 13 3/4 % Series B Senior Notes due 2007
with the same terms and conditions of the exchange offer consummated on April
29, 2003.. These holders received in exchange an aggregate of $2,545 in
principal amount of New Senior Notes due March 1, 2007. Tendering holders also
received an aggregate of 408,000 Series "N2" convertible preferred shares, with
an initial liquidation preference of $0.4927 per share and limited voting
rights, in the form of CPOs.
Series B Senior Notes in an aggregate principal amount of $11,590 remain
outstanding at December 31, 2002.
The main characteristics of New Senior Notes due March 1, 2007 are as follows:
a) unsecured senior obligations of the Company; b) pari passu in right of
payment to all existing and future senior indebtedness of the Company; c)
senior in right of payment to any future subordinated obligations of the
Company; d) subject to registration with the Securities and Exchange Commission
("SEC"), pursuant to a Registration Rights Agreement; and e) unconditionally
guaranteed by Corporativo and MSA.
Restricted Cash:
In regards to Series B Senior Notes the first four semiannual scheduled
interest payments were secured pursuant to a Pledge and Escrow Agreement in a
trust, through a deposit of Ps.769,937 ($77.9 million). The trust was
invested in a portfolio of U.S. government securities. As of December 31,
2001, this fund amounted to approximately Ps.197 million ($20 million), which
was presented as restricted cash. After the mentioned payments, the remaining
balance of the fund was released from the pledge due to the lapse of time The
exchange offer of April 29, 2003 of New Senior Notes did not have such
restricted cash requirement.
The indenture contains restrictive covenants including: limitations on
indebtedness; limitations on investments, the redemption of capital stock,
prepayment of subordinated obligations, and granting of loans; restrictions on
distributions from restricted subsidiaries; limitations on sales of assets and
subsidiary stock; limitation on affiliate transactions; limitation of sale or
issuance of capital stock of restricted subsidiaries;
limitations on liens; limitation on sale/leaseback transactions; and
restrictions on mergers and consolidations, among other items. If an event of
default occurs and is continuing, the trustee or the holders of 25% in
principal amount of the outstanding notes may declare the principal and any
accrued, but unpaid, interest on all the notes to be due and payable.
As of December 31, 2002, the Company had complied with all of the related
covenants.
NOTE 13 — EMPLOYEES BENEFITS:
As of December 31, 2002 and 2001, the Company had the following labor
obligations:
F-20
Table of Contents
a.
Indemnities to employees -
Employees who are dismissed without cause are entitled to severance
compensation determined in accordance with the provisions of Mexican
Federal Labor Law.
b.
Seniority premiums -
In the event of dismissal without cause, retirement after 15 years of
service or death, employees are entitled to a seniority premium
determined in accordance with the provisions of Mexican Federal Labor
Law.
As of December 31, 2002 and 2001, these items were not significant
because the seniority of the vast majority of the Company's employees was
less than two years.
NOTE 14 — NONRECURRING CHARGES:
Nonrecurring charges at December 31 consist of:
2002 (4)
2001
Inventory reserve (1)
Ps.
—
Ps.
6,950
Maintenance contract (1)
3,603
Lease penalty reserve (2)
7,115
Installation expense write-off (3)
14,126
Fixed asset write-off (1)
33,967
$
—
$
65,761
(1)
Certain assets were written off due to its technical obsolescence. The
cost of an overdue maintenance contract which was no longer useful was
also written off during the period.
(2)
The Company maintains an operating lease on its headquarters. During
2001, the Company vacated a portion of such leased building and moved its
headquarters to a new building. However, the previous lease has a term of
15 years, which commenced on October 1, 1998. The Company is looking for
a sublessee to take over the commitment. In the meantime, the Company
continues to make payments for the whole of this previous lease. The
Company is liable for a penalty fee for early termination, the amount of
which is dependent on the length of time it has actually been leasing the
building.
(3)
Installation costs that were originally capitalized were reversed to the
extent they related to customers who are no longer part of the Company's
customer base
(4)
In 2002 the Company accrued nonrecurring charges as described in Note
2.c, which qualified as an administrative expense.
NOTE 15 — CAPITAL STOCK:
Under Mexican Federal Telecommunications Law and Foreign Investment Law, no
more than 49% of the full voting capital stock of a Mexican corporation holding
a concession to provide local and long-distance telecommunication services may
be held by foreigners.
On April 11, 2002 the Company obtained an authorization from the Mexican
Foreign Investment Bureau (Dirección General de Inversión Extranjera) to
increase its ability to issue limited voting shares up to 95% of its total
capital stock and to simplify its equity structure.
F-21
Table of Contents
Under the capital restructuring effective on April 29, 2002 (See Note 12),
tendering holders received an aggregate of 26,459,820 Series "N2" convertible
preferred shares, with an initial liquidation preference of $0.4927 per share
and limited voting rights, in the form of CPOs. Private equity investees paid
US $59,340 and received 6,088,896 and 5,848,209 shares of Series "A1" and "B1", respectively, common voting stock with preferred liquidation rights and
122,468,441 Series "N1" preferred shares with limited voting rights. In
addition, options to purchase an additional 33.2 million Series "N" shares were granted. Additionally, the Series "C" shares were converted at an exchange
ratio of one to one into Series "N"shares. As a result, the holders of the
CPO's have become the direct holders of two Series "N" shares for each CPO.
Additionally, on July 25 2002, the Company announced a complement of the
restructuring debt issuing an aggregate of 408,000 Series "N2" convertible
preferred shares, with an initial liquidation preference of $0.4927 per share
and limited voting rights in the form of CPOs.
In connection with the capital restructuring mentioned, the Company issued four new classes of shares: the Series "A1", "B1", "N1", and "N2" preferred shares. The Series "A1" and "B1" preferred shares have full voting rights, and the
Series "N1" and "N2" preferred shares have limited voting rights. The Series "N1" and "N2" preferred shares are not computed for purposes of determining the foreign investment percentage under the Mexican Foreign Investment Law and may be subscribed, paid for, and held by Mexican and non-Mexican investors. Series
"N2" preferred shares have been deposited into the CPO trust, which is
administered by Banco Nacional de México, S.A. de C.V.
In November, 2002, as previously approved by the Shareholders' Meeting held on March 5, 2002, the Company issued 356,433 Series "N", Class II, non par value, limited voting rights, shares of the capital stock of the Company in connection with the exercise of certain signing bonuses granted to several officers of the Company as stock options during 2001 and 2002. Additionally, the Company authorized to grant a special retention bonus to its officers in connection
with the consummation of the Exchange Offer and Consent Solicitation, in the
form of cash and options to purchase an aggregate amount of 462,936 Series
"N", Class II, non par value, limited voting rights shares at a strike price per share of U.S.$0.4927. The executive officers used the cash to exercise the
options at the time of granting.
As of December 31, 2001 the capital stock was represented by registered shares with no par value, which are divided into Series "A", "B" and "C" common shares and Series "N" limited-voting shares. Series "A" shares may only be subscribed
to, acquired or owned by Mexicans, Series "B" shares may be freely subscribed
to and Series "C" shares can only be subscribed to, acquired, or owned by the
agent acting as trustee of a Neutral Investment Trust. Series "N" shares,
which may also be freely subscribed to, are limited-voting shares. Series "C"
and "N" shares are deposited in the Neutral Investment Trust, which in turn
issues CPOs. Series "C" and "N" shares may not be computed for purposes of determining the foreign-investment percentage under the terms of the Foreign
Investment Law. In compliance with a ruling of the Mexican Foreign Investment
Authorities, in accordance with the Foreign Investment Law and the Company
bylaws, Series "B" shares may not represent more than 49% of the voting right
shares; Series "C" shares may not represent more than 44.5% of the Company's total outstanding capital stock; and Series "N" shares may not represent more than 44.5% of the Company's total outstanding capital stock.
The Extraordinary Shareholders' Meeting, held on February 21, 2000, resolved to modify the equity structure of the Company by converting 50% of Series "N" shares into new shares of Series "C" shares, at a rate of 1:1. The new Series "C" shares have full voting and economic rights. They can only be subscribed by the agent acting as trustee of a Neutral Investment Trust incorporated in accordance with Mexican Foreign Investment Law. The trust in turn issues CPOs. Statutorily, the Trustee must vote the Series "C" shares in the same manner as the majority of the Series "A" shares are voted. The corporate governance of the Company was not affected. The same Shareholders' Meeting also approved the conversion of 255,000 Series "A" shares into 127,500 Series "C" shares and 127,500 Series "N" shares and the conversion of 245,000 Series "B" shares into 122,500 Series "C" shares and 122,500 Series "N" shares.
The Extraordinary Shareholders' Meetings, held on June 5 and September 29,
2000, resolved the following:
1.
To increase the capital stock in an amount of $35 million by issuing 3,355,446 shares, of which 1,677,723 were Series "C" shares and 1,677,723 were Series "N" shares. The shareholders paid $10.44 for each share or its equivalent in Mexican pesos at the exchange rate published in the
Official Gazette on the day of the payment.
F-22
Table of Contents
2.
To cancel 4,660,000 Series "N" shares which had previously been authorized by the Company to fulfill commitments of the Company in
accordance with several stock options and warrants agreements (see Note
21).
3.
To issue 1,679,866 nominative Series "C"  shares and 1,679,866 Series "N" shares to be held authorized but not outstanding to fulfill the commitments derived from the stock options and warrant agreement (see Note
21).
As of December 31, the Company's outstanding shares were:
2002
2001
2000
Capital stock:
Series "A"
1,276,428
1,276,428
1,276,428
Series "A1"
6,088,896
Series "B"
1,226,372
1,226,373
1,226,373
Series "B1"
5,848,209
Series "C"
5,622,822
5,622,822
Series "N"
12,065,013
5,622,822
5,622,822
Series "N1"
122,468,441
Series "N2"
26,867,820
Total issued and outstanding
175,841,179
13,748,445
13,748,445
Authorized and not outstanding:
Series "C"
1,679,866
1,679,866
Series "N"
38,001,255
1,679,866
1,679,866
Total authorized
213,842,434
17,108,177
17,108,177
As of December 31, 2002, the total outstanding shares, 765,714 Series "A" shares and 763,113 Series "B" shares represent the minimum fixed portion, with no withdrawal rights, of Maxcom's capital stock, while the remaining "A", "A1", "B", "B1",
"N", "N1" and "N2" Series shares represent the variable portion of the capital stock.
Under the May 1998 Securityholders Agreement, as amended and restated on August
18, 2000, if the Company registers any equity securities for a primary or
secondary public offering prior to May 21, 2002, it must permit parties to the
Securityholders Agreement to include their shares in such an offering. The
Company will bear all expenses of any primary or secondary public offering,
other than the fees of counsel to the holders of the registration rights and
any underwriting commission or discounts. If the Company does not register the
equity securities in a primary or secondary public offering prior to May 21,
2005, the Series "N" shareholders will have the right to retain an investment
banker to: (a) sell substantially all of the assets of the Company; (b) merge
or consolidate into another company, or (c) require parties to the Shareholders
Agreement to sell their shares and distribute the proceeds to the shareholders.
These righs were eliminated from the new Amended and Restated Securityholders
Agreement executed on April 29, 2002. However, certain shareholders of the
Company maintain the right to request the Company, from time to time, to make
the Company to register its securities in order to have a public offering. As
of December 31, the Company's capital stock consists of:
F-23
Table of Contents
2002
2001
Capital stock
Ps.
1,685,570
Ps.
979,755
Restatement for effects of inflation
—
51,983
Total capital stock
Ps.
1,685,570
Ps.
1,031,738
On December 31, 2002 based on the Mexican Corporate Law (Ley General de
Sociedades Mercantiles) Article 19, the Company compensates its restated
additional paid in capital and the effects of inflation in capital stock by
Ps.857,502 and Ps.131,428, respectively, against Ps.988,930 of accumulated
losses.
On October 16, 2001 Shareholders' Meeting, the capital stock was reduced to
absorb the accumulated losses of Ps.268,539. In 2002 the Company absorb
accumulatd losses for Ps.131,428.
NOTE 16 — ACCUMULATED DEFICIT:
Dividends, either in cash or other forms, paid by the Company will be subject
to income tax in accordance with the Mexican Income Tax Law if the dividends
are paid from earnings that have not been subject to Mexican income taxes
computed on an individual company basis under the provisions of the Mexican
Income Tax Law, as follows:
-
Dividends paid to companies, resident in Mexico, will be subject to a
35% income tax to be paid by the companies paying the dividend and
applied to the result of multiplying the dividends paid by a factor of
1.5385.
-
Dividends paid to individuals or foreign residents will be subject to
a withholding tax of 5% applied to the result of multiplying the
dividends paid by a factor of 1.5385 (1.5150 if dividends are paid to
Mexican individuals from earnings that have been subject to Mexican
income taxes).
The Company has never generated distributable profits. Any dividends declared will be paid in Mexican pesos.
NOTE 17 — POSITION IN FOREIGN CURRENCY:
As of December 31, the Company's foreign-currency position is shown as follows:
2002
2001
U.S. dollars:
Assets
$
10,244
$
47,290
Liabilities
(187,640
)
(317,977
)
Net liabilities in U.S. dollars
$
(177,396
)
$
(270,687
)
Exchange rate at end of the year (Ps. per U.S.$1.00)
Ps.
10.43
Ps.
9.1423
The Company currently does not hedge any of its foreign-denominated assets or
liabilities.
F-24
Table of Contents
NOTE 18 — INCOME TAX, ASSET TAX AND TAX-LOSS CARRYFORWARDS:
The Company has had tax losses since inception and accordingly has not been
subject to current income taxes or provided for deferred income taxes. The
difference between taxable income for income tax and pre-tax income for
accounting purposes is due principally to the inflation adjustments recognized
for income tax purposes, translation effects due to the re-measurement into
dollars, the difference between book and tax depreciation and amortization, and
temporary differences for certain items that are reported in different periods
for financial reporting and income tax purposes.
Asset tax is calculated at a 1.8% rate on the net value of certain assets and
liabilities and is due only when the asset tax exceeds the income tax amount
payable. The asset tax paid can be recovered over the following 10 years, if
and when income taxes exceed asset tax during such year. The Mexican tax
government waives this tax for the first two years of a company's operations.
The components of deferred income tax assets (liabilities) at December 31 are
as follows:
2002
2001
CURRENT:
Bad debt allowance
Ps.
10,916
Ps.
6,893
Inventory
(6,508
)
(10,548
)
Prepaid expenses
(12,109
)
(3,345
)
Total current
(7,701
)
(7,000
)
2002
2001
NON-CURRENT:
Telephone network equipment and leasehold
improvements, frequency rights, intangible
assets and preoperating expenses, net
(320,771
)
(278,843
)
Asset tax payments
6,587
9,172
Tax loss carryforwards
803,746
666,566
Total non-current
489,562
396,895
Net deferred income tax assets before valuation
Allowance
481,861
389,895
Valuation allowance
(481,861
)
(389,895
)
Net deferred income tax assets (liabilities)
Ps.
—
Ps.
—
In accordance with Mexican Income Tax Law, tax losses are subject to
restatement by inflation and may be carried forward against future taxable
profit of the subsequent ten years. As of December 31, 2002, the Company's
restated cumulative tax losses were:
Fiscal
Expiration
year incurred
Amount
year
1996
Ps.
6,958
2006
1997
24,828
2007
1998
159,619
2008
1999
405,704
2009
2000
544,545
2010
2001
754,908
2011
Ps.
1,896,562
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Table of Contents
For the year ended December 31, 2002 the Company incurred a tax loss of Ps.667,484.
NOTE 19 — COMMITMENTS AND CONTINGENCIES:
At December 31, 2002, the Company had the following commitments:
The Company maintains operating leases on buildings, sites, poles and office
equipment. The Company recorded leasing expense of Ps.65,516, Ps.67,176 and
Ps.30,406 in 2002, 2001 and 2000. One of the Company's building lease
agreements has an escalation clause for inflation. The monthly payment of
Ps.1,087 is to be multiplied by the NCPI for the respective year for the
remaining 15 year term. The schedule of estimated future minimum lease
payments is as follows:
2002
2003
Ps.
18,912
2004
13,099
2005
10,834
2006
9,986
2007 and thereafter
36,458
Ps.
89,289
The Company entered into a new 5-year renewable building lease on July 26,
2001, which is denominated in U.S. dollars. The schedule of future minimum
lease payments on said lease is as follows:
2002
2003
$
2,811
2004
2,802
2005
2,650
2006
2,551
2007 and thereafter
501
$
11,315
Contingency regarding Concessions:
The terms of the concessions requires that the Company must satisfy a number of
technical, buildout and financial conditions. In September 2002, the Company
notified COFETEL of the failure to provide coverage in certain towns and cities
by the local and long distance concessions. In addition, it is considered that
the Company will not be able to meet certain buildout obligations in certain
towns and cities along the Mexico City—City of Querétaro corridor by September
2003. The Company is in the process of preparing a request for a modification
to the buildout requirements of the concessions from COFETEL. If granted, this
modification would allow the Company to be once again in compliance. However,
we cannot assure that COFETEL will agree to such modification.
A failure to comply with any of the terms of the concessions or to obtain a
waiver or extension could result in the early termination of any of the
concessions. The Mexican government would not be required to compensate the
Company in case of such termination. If any of the concessions were to be
terminated, we could be unable to engage in our core business.
F-26
Table of Contents
NOTE 20 — REVENUE BY GEOGRAPHICAL LOCATION:
The Company's concession title requires a revenue report by geographic
location:
Center-
Services
Metropolitan
South
Total
Year ended December 31, 2002:
Local
Ps.
275,080
Ps.
174,931
Ps.
450,011
Long distance
34,661
32,672
67,333
Rent of dedicated links
4,426
549
4,975
Sales of customer premise equipment
3,879
1,929
5,808
Lease of capacity
169
169
Other
3,808
3,835
7,643
Ps.
322,023
Ps.
213,916
Ps.
535,939
Center-
Services
Metropolitan
South
Total
Year ended December 31, 2001:
Local
Ps.
194,076
Ps.
81,091
Ps.
275,167
Long distance
20,925
15,999
36,924
Rent of dedicated links
2,400
2,400
Sales of customer premise equipment
3,804
1,834
5,638
Lease of capacity
198
198
Other
10,669
1,314
11,983
Ps.
232,072
Ps.
100,238
Ps.
332,310
Center-
Services
Metropolitan
South
Total
Year ended December 31, 2000:
Local
Ps.
164,653
Ps.
32,071
Ps.
196,724
Long distance
83,139
5,254
88,393
Rent of dedicated links
2,714
2,714
Sales of customer premise equipment
760
760
1,520
Lease of capacity
522
522
Other
2,020
1,722
3,742
Ps.
253,808
Ps.
39,807
Ps.
293,615
NOTE 21 – STOCK OPTIONS:
a.
Employee stock option plans
i.
Executive stock option plan -
In May 1998, the Company implemented an executive stock option plan. This plan provides that the Company grant options, on every April
1, commencing in 1999 through April 2001, to its executive officers.
Under this plan, a technical committee determines the executive
officers to whom options to purchase Series "N" shares are granted,
as well as the terms of those options.
Generally, options are awarded once certain criteria have been met
and vest either immediately or over four years (20% upon grant and
20% each year thereafter). In the event the employee ceases
F-27
Table of Contents
to be employed by the Company, all unvested options are forfeited.
Options expire ten years from the date of grant.
The Company granted 142,250, 583,000 and 206,820 options in 1999,
2000 and 2001, respectively for the services rendered during the
years 1998, 1999 and 2000. Options granted had exercise prices of
U.S.$8.70, U.S.$10.45 and U.S.$12.55, respectively, which were the
then estimated fair market values. Of these options, 256,094 had
vested and 221,622 had been forfeited at December 31, 2002.
ii
New executive stock option plan
The company implemented a new executive stock plan, covering services rendered during the years 2001, 2002 and 2003. The plan is
divided into four levels, depending on the ranking of the different
members of management. There were initially 80 participants in the
plan. Participants in the top three levels are guaranteed a minimum
number of options for series N stock. The granting of options for
the fourth level, which is comprised of the junior most management,
is discretionary.
The number of options granted depends on certain revenue and operating cash flow targets. There is a bonus portion of the plan
that is allocated to individual executives at the discretion of
management and the board of Directors. Vesting is 20% upon
allocation and 20% per year for the next four years. Options were
granted during the second quarter of 2002, and will be granted
during the second quarter of 2003 and 2004 at exercise prices of
U.S. $0.4927, U.S.$0.59.12 and U.S.$0.7094 respectively. Options
expire ten years from the date of grant.
On April 1, 2002, the Company granted 1,571,388 options at $0.4927
per share.
iii.
Board of Directors and members of various committees
Members of the Board and of the various committees of the company are entitled to receive an option to purchase 2,500 series N shares
at an exercise price of $0.01 per share, each time the member
attends meeting. The Chairman of the Board is entitled to receive
5,000 shares each time (s)he attends a meeting. There are 422,503
options granted and outstanding for meetings attended during 2001,
2002 and 2003. The options are immediately vested and
non-forfeitable, expiring in 3 years after the date of grant.
iv.
Signing and other bonuses
The Company has granted to its top officers a signing bonus in the form of options to purchase series N shares at an exercise price of
$0.01 per share. On November 2002, the executives decided to
exercise 356,433 of these options.
In November 2002, the Company granted some of its officers a special bonus in the form of options to purchase 462,936 series N shares at
an strike price of U.S.$0.4927 per share. The executives decided to
exercise these options at the time of granting.
Pursuant to APB Opinion No. 25, compensation expense is determined based on the market or fair-value price of the stock at the
measurement date less the amount, if any, that the employee is
required to pay for the stock.
In connection with the all of the above described plans, the Company recognized compensation expense of Ps. 13,125; Ps.1,391 and Ps.720
during 2002, 2001 and 2000 under Mexican GAAP.
Pursuant to the additional disclosure requirements of FAS 123, the fair value of options and warrants granted to directors and officers
were calculated on the respective grant dates using the Black
Scholes model with the following assumptions:
F-28
Table of Contents
Fiscal Year Ended December 31,
2002
2001
2000
Expected dividend yield
—
—
—
Expected stock price volatility
50
%
50
%
50
%
Risk-free interest rate
4.55
%
4.67
%
6.35
%
Expected life of options
5
5
5
If the Company had elected to recognize compensation cost based on the fair
value at the date of grant, consistent with the method as prescribed by FAS
123, net loss for the years ended December 31 would have changed to the pro
forma amounts indicated below:
2002
2001
2000
Net loss:
As reported
Ps.
(732,703
)
Ps.
(690,337
)
Ps.
(658,827
)
Pro forma
Ps.
(751,226
)
(689,645
)
(661,262
)
EPS:
As reported
Ps.
(0.06
)
Ps.
(50.21
)
(57.47
)
Pro forma
(0.06
)
(50.177
)
(56.14
)
A summary of the changes of the stock options for employees for the year ended
December 31, is presented below (in thousands of shares):
2002
2001
2000
Weighted-
Weighted-
Weighted-
average
average
average
exercise
exercise
exercise
Shares
price
Shares
price
Shares
price
Outstanding at beginning of year
1,721
10.12
714
$
10.12
138
$
8.70
Granted
17,832
0.34
1008
$
13.25
593
10.27
Exercised
829
0.28
—
—
10
0.01
Forfeited
1,311
5.43
1
11.01
7
9.54
Outstanding at the end of the year
17,413
0.57
1721
11.95
714
10.12
Options exercisable at end of year
15,172
0.51
447
8.28
174
9.88
Weighted-average fair value of options
granted during the year (expressed in
U.S. Dollars)
$
0.19
$
0.21
$
2.28
F-29
Table of Contents
The following table summarizes the stock options outstanding for employees (in thousands of shares):
Outstanding
Exercisable
Weighted-average
Weighted-
average
Range of
Remaining
Exercise
exercise
Prices
Number
life
price
Number
price
December 31, 2000
$
8.70-10.45
714
9.06
$
10.12
174
$
9.88
December 31, 2001
0.01
87
9.41
0.01
87
0.01
8.7-10.45
713
8.06
10.12
319
9.98
12.55-15.06
921
9.28
14.50
41
12.55
December 31, 2002
$
0.01
4,380
$
8.67
$
0.01
$
4,380
$
0.01
0.49
12,697
9.33
0.49
10,536
0.49
8.7
33
6.33
8.7
33
8.7
10.45
190
7.33
10.45
179
10.45
12.55
112
8.33
12.55
45
12.55
b.
Warrants for services rendered
i.
Nissho Iwai American Corp. stock options:
On March 24, 1998, the Company granted options to Nissho Iwai for 337,471 Series "N" shares at fixed exercise prices per share of
$10.87, vesting immediately and expiring March 2005. These options
were issued in connection with a financing agreement and their cost
was to be amortized over the 7-year life of the financing. However
since the financing agreement terminated in March of 2000, the
remaining unamortized balance was expensed in 2000.
ii.
CT Global Telecommunications, Inc. ("CTGT") stock options:
On May 21, 1988, the Company granted options to CTGT for up to 250,000 Series N shares at an exercise price of $8.70. In return,
CTGT agreed to manage the construction of the Company's telephone
network, provide engineering services, and run their day-to-day
telephone operations. These services were all completed and the
compensation charges expensed in prior years. The options expire 2
years after CTGT disposes of their equity participation in Maxcom.
The right to these options is based on certain performance
criteria. The cost of the options was valued using the Black
Scholes model and was expensed as the options were earned
Pursuant to the capital restructuring in April 2002, the Company authorized the issuance of options to purchase up to an additional
855,779 series N shares at an exercise price of U.S.$3.06 per share
and to reduce the exercise price of the original options to
U.S.$3.06 per share as partial anti-dilution protection. All this
options are vested and are exercisable.
iii.
Bachow and Associates ("Bachow") stock options:
On May 21, 1998, Bachow was given the opportunity to earn up to 100,000 series N shares at an exercise price of $8.70 expiring two
years after Bachow Investment Partners III L.P. disposes of its
current equity participation in Maxcom. Bachow's right to exercise
the options was subject to performance objectives. As of December
31, 2000, Bachow had accomplished all objectives, which gave it the
right to exercise the total of the options (30,000 in 1998 and
70,000 in 2000).
F-30
Table of Contents
The cost of these options was expensed as granted. The shares subject to this options agreement are limited to a maximum gain of
$40.00 per share. Bachow may elect to have the Company finance up
to 95% of the exercise price with a 7-year term non-recourse loan
that will be secured by the shares upon exercise. Bachow will pay
the Company 5% of the $870 cost. During 1999 and 2000, Bachow
advanced the $44 towards the exercise of its options and such
amount is reflected in additional paid-in capital.
Pursuant to the capital restructuring of the company consummated during April 2002, the company authorized the issuance of options
to purchase additional 342,312 series N shares at an exercise price
of U.S.$3.06 per share and reduced the original strike price of the
100,000 options to U.S. $3.06 per share, as partial anti-dilution
protection.
In addition, on April 28, 2000, the Company issued options to purchase 94,000 shares at an exercise price of $0.01 for management
services rendered from Bachow, L.A. Strategic Partners II LLP and
BancAmerica International Investment Corporation. The cost of
these options was also expensed as incurred.
Pursuant to the capital restructuring, the Company authorized the issuance of options to purchase up to an additional 342,312 series
N shares at an exercise price of U.S.$3.06 per share and to reduce
the exercise price of the original options to U.S.$3.06 per share
as partial anti-dilution protection.
iv.
Warrants in connection with the offering of the Notes:
The Company granted the bondholders, initial purchasers and underwriters of the Senior Notes up to 876,491 warrants to purchase
an equivalent amount of Series "N" shares at an exercise price of
$0.01 per share (or $0.02 per CPO). The cost of these warrants was
valued at approximately $9.3 million. The fair value of the
warrants was compared to the fair value of the Notes to calculate
the proportionate discount to the Notes. This discount is being
amortized as additional interest expense over the life of the
Senior Notes.
All options in connection with these warrants vest immediately and
7 years from the date of grant.
v.
Amsterdam Pacific
On May 21, 1998, the Company granted options to Amsterdam for
advisory services rendered for up to 24,425 Series N shares at an
exercise price of $8.70, expiring May 21, 2003. These services
were all completed and the compensation charges expensed in prior
years.
vi
BankAmerica International Investment Corporation
The Company issued options to purchase up to 42,300 series N shares at U.S.$0.01 per share in May 2001 as compensation for management
services provided during 2000. These services were all provided and
the compensation charge expensed. Pursuant to the capital
restructuring, the Company authorized the issuance of options to
purchase up to an additional 207,481 series N shares at an exercise
price of U.S.$0.01 per share as partial anti-dilution protection.
vii
LA Strategic Capital Partners II
The Company issued options to purchase up to 4,700 series N shares at U.S.$0.01 per share in May 2001 as compensation for management
services provided during 2000. These services were all provided and
the compensation charge expensed. Pursuant to the capital
restructuring, the Company authorized the issuance of options to
purchase up to an additional 23,053 series N shares at an exercise
price of U.S.$0.01 per share as partial anti-dilution protection.
F-31
Table of Contents
viii
Bachow & Associates, Inc.
The Company issued options to purchase up to 47,000 series N shares
at U.S.$0.01 per share in May 2001 as compensation for management
services provided during 2000. These services were all provided and
the compensation charge expensed. Pursuant to the capital
restructuring, the Company authorized the issuance of options to
purchase up to an additional 230,535 series N shares at an exercise
price of U.S.$0.01 per share as partial anti-dilution protection.
The fair value of options for services rendered was determined
using the Black Scholes options pricing model and resulted in a
non-cash charge of approximately Ps.1,681, Ps.1,541 and Ps.4,813,
which was recognized as expense during the years ended December 31,
2002, 2001 and 2000.
A summary of the changes of the stock options for non-employees for
the years ended December 31 is presented below (in thousands of
shares):
2002
2001
2000
Weighted-
Weighted-
Weighted-
average
average
average
exercise
exercise
exercise
Shares
price
Shares
price
Shares
price
Outstanding at beginning of year
1,582
$
3.83
1,582
$
3.83
464
$
10.28
Granted
2,103
2.26
—
—
1,188
1.09
Exercised
—
—
—
—
70
0.01
Forfeited
787
2.42
—
—
—
—
Outstanding at the end of the year
2,898
2.36
1,582
3.83
1,582
3.83
Options exercisable at end of year
2,898
2.36
1,582
3.83
1,582
3.83
Weighted-average fair value of options
granted during the year (expressed in
U.S. Dollars)
$
0.12
$
—
$
8.79
The following table summarizes the stock options outstanding for non-employees (in thousands):
Outstanding
Exercisable
Weighted-average
Weighted-
average
Range of
Remaining
Exercise
exercise
Prices
Number
life
price
Number
price
December 31, 2000
$
0.01
970
6.51
0.01
970
0.01
8.70 – 10.87
612
4.79
$
9.90
612
$
9.90
December 31, 2001
$
0.01
970
5.51
0.01
970
0.01
8.70 – 10.87
612
3.79
$
9.90
612
$
9.90
December 31, 2002
$
0.01
1,338
3.96
0.01
1,338
0.01
3.06
1,198
2.00
3.06
1,198
3.06
8.70
362
2.05
8.7
0362
8.70
NOTE 22 — SIGNIFICANT DIFFERENCES BETWEEN MEXICAN AND U.S. GAAP:
The Company's consolidated financial statements are prepared in accordance with
Mexican GAAP, which differ in certain significant respects from accounting
principles generally accepted in the United States of America ("U.S. GAAP").
The Mexican GAAP consolidated financial statements include the effects of
inflation as provided for under Statement B-10, issued by the MIPA. The
application of this Statement represents a comprehensive measure
F-32
Table of Contents
of the effects of price level changes in the Mexican economy, and is considered
to result in a more meaningful presentation than historical cost-based
financial reporting for both Mexican and U.S. accounting purposes. Therefore,
the following reconciliation to U.S. GAAP does not include the reversal of such
inflationary effects.
The principal differences between Mexican GAAP and U.S. GAAP other than
inflation accounting, are presented in the following pages with an explanation,
where appropriate, of the effects on consolidated net income and consolidated
shareholders' equity. Reconciling items are presented net of any gain or loss
from monetary position.
The following is a summary of the adjustments to consolidated net loss and
consolidated shareholders' equity as of and for the years ended December 31,
2000, 2001 and 2002:
Years ended December 31,
2000
2001
2002
Net loss under Mexican GAAP
(Ps
658,830
)
(Ps.
690,340
)
(Ps.
732,703
)
Adjustments:
Pre-operating expenses (Note 22a)
—
—
(1,820
)
Amortization of pre-operating expenses
(Note 22a)
31,939
31,912
31,940
Capitalization of interest (Note 22b)
17,002
(96
)
(196
)
Amortization of capitalized interest
(Note 22b)
(5,287
)
(6,131
)
213
Amortization of frequency rights
(Note 22c)
81
426
426
Installation revenues (Note 22d)
—
(5,726
)
(5,212
)
Installation costs (Note 22e)
—
(17,805
)
(75,170
)
Debt restructuring (Note22g)
—
—
436,160
Capitalized internal compensation
Cost (Note 22h)
—
—
(2,342
)
Total U.S. GAAP adjustments
43,735
2,580
383,999
Net loss under U.S. GAAP
(Ps
615,095
)
(Ps.
687,760
)
(Ps.
348,704
)
Weighted-average common shares
outstanding, basic
11,463,667
13,748,445
134,738,030
Weighted-average common shares
outstanding, diluted
12,207,113
15,176,173
136,597,574
Net loss per share under U.S. GAAP, basic
(Ps
53.66
)
(Ps.
50.02
)
(Ps.
2.59
)
Net loss per share under U.S. GAAP, diluted
(Ps
50.39
)
(Ps.
45.32
)
(Ps.
2.55
)
F-33
Table of Contents
BALANCES AS OF DECEMBER 31,
2000
2001
2002
Shareholders' equity (deficit) under Mexican
GAAP
Ps
487,477
(Ps.
201,894
)
Ps.
600,443
Accumulated adjustments:
Pre-operating expenses (Note 22a)
(319,397
)
(319,397
)
(321,217
)
Amortization of pre-operating expenses
(Note 22a)
52,985
84,897
116,837
Capitalization of interest (Note 22b)
61,379
61,283
61,087
Amortization of capitalized interest (Note 22b)
(9,752
)
(15,882
)
(15,669
)
Amortization of frequency rights (Note 22c)
(11,374
)
(10,948
)
(10,522
)
Installation revenues (Note 22d)
—
(5,726
)
(10,938
)
Installation costs (Note 22e)
—
(17,805
)
(92,975
)
Debt restructuring (Note 22g)
—
—
(327,475
)
Capitalized internal compensation (Note 22h)
—
—
(2,342
)
Total U.S. GAAP adjustments
(Ps
226,159
)
(Ps.
223,579
)
(Ps.
603,214
)
Shareholders' equity (deficit) under U.S.
GAAP
Ps
261,318
(Ps.
425,473
)
(Ps.
2,771
)
Provided below is an analysis of changes in shareholders' equity (deficit) under U.S. GAAP:
Year ended December 31,
2000
2001
2002
Balance at the beginning of the year
Ps
398,396
Ps.
261,318
(Ps.
425,473
)
Net loss under U.S. GAAP
(615,095
)
(687,760
)
(348,704
)
Increase in capital stock
370,025
—
631,782
Increase in additional paid in capital
—
969
126,574
Contributions for future increases
of capital
106
—
—
Stock options and warrants
107,886
—
13,050
Balance at the end of the year
Ps
261,318
(Ps.
425,473
)
(Ps.
2,771
)
a. Pre-operating expenses -
Under Mexican GAAP, all expenses incurred while a company or a project is in
the pre-operating or development stages are capitalized. Such capitalized
expenses are amortized on a straight-line basis after operations commence for a
period not exceeding 10 years. Under U.S. GAAP, such pre-operating expenses
are expensed as incurred and reported in accumulated deficit during the
development stage in shareholders' equity.
b. Capitalization of interest -
In accordance with Mexican GAAP, capitalization of the integral cost of
financing (which is comprised of interest expense, foreign exchange gains or
losses and monetary gain related to the debt) incurred during the period of
construction and installation of an asset is optional. The cost capitalized is
limited to the specific financing obtained for the construction of the related
asset. The Company did not capitalize any amount in 2000, but did in 2001 and
2002 (Note 4d.).
Under U.S. GAAP, capitalization of interest is required for certain qualifying
assets that require a period of time to get them ready for their intended use.
The amount of interest to be capitalized is that portion of the interest cost
incurred during the asset acquisition period that theoretically could have been
avoided if expenditures for the assets had not been made, and is not limited to
indebtedness directly attributable to the assets. In an inflationary economy,
such as Mexico, acceptable practice is to capitalize interest net of the
monetary gain on the related Mexican peso
F-34
Table of Contents
debt, but not on U.S. dollar or other stable currency debt. U.S. GAAP does not
allow the capitalization of foreign exchange losses.
c. Frequency rights -
Under Mexican GAAP, frequency rights are being amortized on a straight-line
basis over the term of the concession, from the date the Company commenced
operations.
Under U.S. GAAP, this item should be amortized over the term of the concession
beginning at the granting date of the concession by the SCT.
d. Installation revenues -
Mexican GAAP allows, where installation is charged to customers, for revenue to
be recognized and the related expenses recorded immediately when the service is
rendered.
Under U.S. GAAP, installation revenues and direct installation costs are
deferred and amortized over the expected customer relationship period. Prior
to 2001, installation revenues were not material.
e. Installation costs -
Under Mexican GAAP, installation costs not charged to customers are capitalized
and amortized on a straight-line basis over 20 years.
Under U.S. GAAP, direct installation costs not charged to customers are
expensed as incurred. Prior to 2001, installation costs were not material.
f. Operating income -
Mexican GAAP allows certain nonrecurring charges, such as asset write-offs, to
be classified as non-operating.
Under U.S. GAAP, such items are considered part of operating income. Under
U.S. GAAP, consolidated operating loss would have been Ps.385,890, Ps.562,257
and Ps.348,704 for the years ended December 31, 2000, 2001 and 2002.
g. Debt restructuring -
Mexican GAAP allows any gain or loss on restructuring to be taken directly to
equity at the time of the restructuring and recorded as additional paid in
capital. Debt issuance costs from the original issuance of debt continues to
be amortized over their original term.
Under U.S. GAAP the debt restructuring qualifies as a "troubled debt
restructuring" pursuant to the provisions of Statement of Financial Accounting
Standards No. 15, "Accounting by Debtors and Creditors for Troubled Debt
Restructurings". The debt restructuring is accounted for as a "combination of
types" that includes a combination of both a granting of equity interest in the
form of warrants and common stock, and a modification of the debt terms where
both the principal and interest payments have been reduced. A gain is
recognized where the carrying value of the old debt is greater than total
future cash payments. To calculate the gain on the restructuring, the carrying
value of the old debt is reduced by the fair value of the equity interest
granted as well as all legal and other costs in relation to the restructuring,
and compared against the gross future cash payments. The Company has recognized
a gain of Ps.412,326 as the total income statement effect at the date of the
restructuring.
F-35
Table of Contents
The payable note recorded under Mexican GAAP represents only the principal
of the debt. Under U.S. GAAP the liability represents the principal balance
plus all future gross cash payments including the one year of interest in 2006
of $16,500 not recorded under Mexican GAAP. If the Company had recorded the
interest liability they would have realized an additional Ps.15,835 foreign
currency loss for the year related to this obligation from the dates of the
restructurings through year-end.
Legal fees and other direct costs incurred by a creditor to effect a troubled
debt restructuring are deducted in measuring the gain on the restructuring of
payables. Ps. 82,157 of debt issuance costs of the restructured debt and Ps.
59,035 of restructuring costs were recorded as part of the restructuring. This
reduced the balance of the other assets compared to that recorded under Mexican
GAAP. Ps. 18,511 of amortization in 2002 has been recognized under Mexican
GAAP related to the old debt issuance costs.
The effect of inflation on the combined transaction is an income statement
increase of Ps.21,158.
h. Capitalized internal compensation cost -
Mexican GAAP allows that certain compensation charges directly attributable to
capital expenditures can be capitalized, while under U.S. GAAP, these
compensation charges should be expensed. This has resulted in Ps.2.342 million
of compensation charges capitalized under Mexican GAAP that should be expensed
under U.S. GAAP.
i. Deferred Income Taxes -
As mentioned in Note 4j. as of January 1, 2000, the Company adopted revised
Statement D-4. Under the new method of Statement D-4, the Company recognized
future tax consequences based on the difference between the financial
statements and tax bases of assets and liabilities -temporary differences-
as of the date of the financial statements. For purposes of the reconciliation
to U.S. GAAP, the Company has applied Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("FAS 109"), for all periods
presented.
FAS 109 requires an asset and liability method of accounting, whereby, deferred
taxes are recognized for the tax consequences of all temporary differences
between the financial statement carrying amounts and the related tax basis of
assets and liabilities. Under U.S. GAAP, the effect on deferred taxes of a
change in tax rate is recognized in income in the period that includes the
enactment date.
FAS 109 requires deferred tax assets to be reduced by a valuation allowance if,
based on the weight of available evidence, including cumulative losses in
recent years, it is more likely that some portion or all of the deferred tax
assets will not be realized. Accordingly, the Company has established a
valuation allowance for the full amount of the deferred tax assets.
Significant components of deferred income taxes under U.S. GAAP are as follows:
December 31, 2002
SFAS 109
SFAS 109
applied to
applied to US
Mexican GAAP
GAAP
balances
adjustments
Total
Deferred assets:
Bad debt allowance
Ps.
10,274
Ps.
—
Ps.
10,274
Asset tax payments
6,587
—
6,587
Tax loss carryforwards
756,467
—
756,467
Accruals
—
—
—
Installation revenues
—
3,500
3,500
Valuation allowance
(452,809
)
21,347
(431,461
)
F-36
Table of Contents
SFAS 109
SFAS 109
applied to
applied to US
Mexican GAAP
GAAP
balances
adjustments
Total
Deferred tax assets
Ps. 320,519
Ps. 24,847
Ps.345,367
Deferred liabilities
Inventory
(6,508
)
—
(6,508
)
Prepaid expenses
(12,109
)
—
(12,109
)
Telephone network equipment and
leasehold improvements, frequency
rights, pre-operating expenses and
intangible assets
(301,902
)
54,235
(247,667
)
Installation costs
—
(29,752
)
(29,752
)
Debt issuance costs on restructuring
—
(49,330
)
(49,330
)
Deferred tax liabilities
Ps. (320,519)
Ps. (24,847)
Ps. (345,366)
Net deferred tax assets
—
—
—
F-37
Table of Contents
December 31, 2001
SFAS 109 applied
SFAS 109 applied
to Mexican GAAP
to US GAAP
balances
adjustments
Total
Deferred assets:
Bad debt allowance
Ps.  6,893
Ps.  —
Ps.  6,893
Asset tax payments
9,172
—
9,172
Tax loss carryforwards
666,566
—
666,566
Accruals
—
—
—
Installation revenues
—
2,004
2,004
Valuation allowance
(389,895
)
(65,788
)
(455,683
)
Deferred tax assets
Ps.  292,736
Ps.  (63,784)
Ps.  228,952
Deferred
liabilities
Inventory
(10,548
)
—
(10,548
)
Prepaid expenses
(3,345
)
—
(3,345
)
Telephone network
equipment and
leasehold
improvements,
frequency rights,
preoperating expenses
and intangible assets
(278,843
)
70,016
(208,827
)
Installation costs
—
(6,232
)
(6,232
)
Deferred tax liabilities
Ps. (292,736)
Ps. 63,784
Ps. (228,952)
Net deferred tax assets
—
—
—
j. Statement of changes in financial position -
Under Mexican GAAP, the Company presents statements of changes in financial
position in constant Mexican pesos. This presentation identifies the
generation and application of resources representing differences between
beginning and ending financial statement balances in constant Mexican pesos.
Under U.S. GAAP, pursuant to FAS No. 95 "Statement of Cash Flows", a statement
of cash flows is a required component of a complete set of financial statements
in lieu of a statement of changes in financial position. FAS 95 establishes
specific presentation requirements and additional disclosures but does not
provide guidance with respect to inflation adjusted financial statements.
Based on requirements of the Securities Exchange Commission ("SEC"), the effect
of inflation restatements and foreign exchange gains and losses on cash flow
related to financing and operating activities has been included in the line
item, "Monetary gain", and the effect of inflation on cash balances has been
included in a separate line item after cash flows from investing activities.
Year ended December 31,
2000
2001
2002
Operating activities:
Net loss under U.S. GAAP
(Ps.  615,095)
(Ps.  687,760)
(Ps.  348,704)
Adjustments to reconcile net loss to
net cash flow provided by operating activities:
Depreciation and amortization
195,120
257,569
266,148
Gain on repurchase of debt
—
(128,161
)
—
Gain on restructuring of debt
—
—
(436,160
)
Fixed asset write-offs
—
40,918
—
Allowance for doubtful accounts
8,867
10,915
25,259
Monetary gain
(99,431
)
(82,011
)
(103,777
)
Non recurring charges
—
24,844
13,050
Allowance of inventory obsolescence
—
558
1,235
Foreign currency exchange loss
31,773
54,538
222,447
(478,766
)
(508,590
)
(360,502
)
Changes in operating assets and liabilities:
F-38
Table of Contents
Year ended December 31,
2000
2001
2002
Restricted cash
(599,304
)
203,580
197,452
Accounts receivable
6,115
(32,759
)
(73,062
)
Inventory
(2,529
)
(20,810
)
9,374
Prepaid expenses
(6,018
)
562
(25,310
)
Accrued interest
114,877
—
—
Accrued expenses and other accounts payable
180,769
(26,322
)
63,002
Cash flow used in operating activities
(784,856
)
(384,339
)
(189,046
)
Financing activities:
Proceeds from debt and notes payable
2,957,151
60,591
—
Proceeds from issuance of capital stock
—
—
609,995
Payments of notes payable
(792,521
)
—
—
Increase in capital stock
451,206
—
—
Repurchase of debt
—
(99,781
)
—
Increase in additional paid-in capital
103,238
—
—
Cash flow provided by (used in) financing activities
2,719,074
(39,190
)
609,995
Investing activities:
Acquisition of fixed assets
(632,887
)
(481,774
)
(247,436
)
Other assets
(197,831
)
(46,725
)
(158,214
)
Cash flow used in investing activities
(830,718
)
(528,499
)
(405,650
)
Cash and cash equivalents:
Effect of inflation and exchange rate changes
on cash and cash equivalents
(104,973
)
(48,846
)
(81,991
)
Net (decrease) increase in cash and cash equivalents
998,527
(1,000,874
)
(66,692
)
Cash and cash equivalents at beginning of the year
184,768
1,183,295
182,421
Cash and cash equivalents at end of the year
1,183,295
182,421
115,729
Interest paid
Ps. 276,971
Ps. 419,011
Ps. 213,687
Taxes paid
Ps.—
Ps. 794
Ps. 2,808
Supplemental disclosures of non-cash
investing and financing activities activities
Capital stock issued in exchange for services
Ps.—
Ps.—
Ps. 9,353
Capital stock issued in exchanged for advertising
Ps.—
Ps.—
Ps. 28,058
Reduction of notes payable from troubled
debt restructuring
Ps.—
Ps.—
Ps. 622,155
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Table of Contents
k.
Impairment of long-lived assets -
During the year ended December 31, 2002, the Company adopted SFAS 144,
"Accounting for the Impairment of Long-Lived Assets". SFAS 144 provides
guidance on the accounting for the impairment of disposal of long-lived assets.
SFAS 144 supercedes SFAS 121 and applies to all long-lived assets (including
discontinued operations) and consequently amends Accounting Principles Board
Opinion No. 30, "Reporting Results of Operations Reporting the Effects of
Disposal of a Segment of a Business" ("APB 30"). SFAS 144 develops one
accounting model (based on the model in SFAS 121) for long-lived assets that
are to be disposed of by sale, as well as addresses the principal
implementation issues. The adoption of SFAS 144 had no effect on the
consolidated financial position of the Company.
l.
Recent U.S. accounting pronouncements -
In June 2001 the Financial Accounting Standards Board ("FASB") issued SFAS No.
143 "Accounting for Obligations Associated with the Retirement of Long-Lived
Assets". The objectives of SFAS 143 are to establish accounting standards for
the recognition and measurement of tangible long-lived asset retirement
obligations and their associated asset retirement costs. SFAS 143 is effective
for fiscal years beginning after June 30, 2002. The Company does not expect
that the adoption of this standard will have a material impact on its financial
position or results of operations.
In April of 2002, the FASB issued SFAS No. 145 "Rescission of SFAS No. 4, 44,
and 64, Amendment of SFAS 13, and Technical Corrections". As a result,
companies will no longer be allowed to classify gains and losses from
extinguishments of debt as extraordinary items unless they meet the criteria of
APB No. 30. Gains and losses from extinguishments of debt that have been
classified as extraordinary in prior years that do not meet the criteria of APB
30 shall be reclassified on a go forward basis. In addition, SFAS 145 requires
that capital leases that are modified so that the resulting lease agreement is
classified as an operating lease be accounted for under the sale-leaseback
provisions of SFAS 28 or 98, as applicable, instead of SFAS 13. The provisions
of this statement with regard to SFAS 4 will be effective for fiscal years
beginning after May 15, 2002, and those for SFAS 13 will be effective for
transactions occurring after May 15, 2002. The Company has adopted SFAS 145
for the fiscal year beginning December 31, 2002, and accordingly the pre-tax
gain of Ps. 121,249 regarding the extinguishment of U.S. $25.0 million debt
during 2001 through a repurchase has not been classified as an extraordinary
gain.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
on Activity (Including Certain Costs incurred in Restructuring)". EITF Issue
No. 94-3 required accrual of liabilities related to exit and disposal
activities at a plan (commitment) date. SFAS 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred. The provisions of this statement are effective for exit
or disposal activities that are initiated after December 31, 2002. The Company
does not expect that the adoption of this standard will have a material impact
on its financial position or results of operations.
FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees", ("FIN 45") was issued on November 2002. FIN 45 requires that
a liability be recognized at the inception of certain guarantees for the fair
value of the obligation, including the ongoing obligation to stand ready to
perform over the term of the guarantee. Guarantees, as defined in FIN 45,
include contracts that contingently require the Company to make
payments to a
guaranteed party based on changes in an underlying that is related to an asset,
liability or equity security of the guaranteed party, performance guarantees,
indemnification agreements or indirect guarantees of indebtedness of others.
This new accounting is effective for certain guarantees issued or modifies
after December 31,2002. In addition, FIN 45 requires certain additional
disclosures. The Company does not expect that the adoption of this standard
will have a material impact on its financial position or results of operations.
SFAS 148, "Accounting for Stock-Based Compensation — Transition and Disclosure
— an amendment of SFAS No. 123", was issued on December 31, 2002. SFAS 148
provides alternative methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee compensation. SFAS
148 also amends the disclosure requirements of SFAS 123, "Accounting for
Stock-Based Compensation", to require
F-40
Table of Contents
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of
the method used on reported results. The Company does not expect that the
adoption of this standard will have a material impact on its financial position
or results of operations.
In January 2003, the FASB issued Interpretation 46 "Consolidation of Variable
Interest Entities, an interpretation of ARB No. 51" ("FIN 46"). FIN 46
provides a new framework for identifying variable interest entities ("VIE ´s")
and determining when a company should include the assets, liabilities,
non-controlling interests and results of activities of a VIE ´s created after
January 31, 2003 and is effective beginning in the third quarter of 2003 for
VIE ´s created prior to issuance of the interpretation. The Company is
presently evaluating the impact, if any, that this new standard will have on
its financial position or results of operations.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
133, Accounting for Derivative Instruments and Hedging Activities. This
Statement is effective prospectively for contracts entered into or modified
after June 30, 2003 and prospectively for hedging relationships designated
after June 30, 2003. Management is still assessing whether this statement will
have a material effect on the Company's financial position or results of
operation.
In May 2003, the FASB issued SFAS No. 150, Accounting For Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. The Statement
improves the accounting for certain financial instruments that, under previous
guidance, issuers could account for as equity, and requires that these
instruments be classified as liabilities in statements of financial position.
This Statement is effective prospectively for financial instruments entered
into or modified after May 31, 2003 and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003. This statement shall
be implemented by reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance date of the
Statement and still existing at the beginning of the interim period of
adoption. Management is still assessing whether this statement will have a
material effect on the Company's financial position or results of operation.
m.
Condensed consolidating financial information -
As mentioned in Note 12, in March 2000 the Company issued U.S. $300 million of
senior unsecured notes ("Old Notes") as part of its financing program and in
April and July 2002, the Company restructured the majority of the original $
300 million in debt and issued additional senior unsecured notes ("New Notes").
The Old Notes and the New Notes are joint and severally guaranteed on a senior
subordinated, unsecured, full and unconditional basis, pursuant to a guarantee
by the Company's subsidiaries, Corporativo and MSA ("Guarantor Subsidiaries").
The subsidiaries guarantee is full and unconditional.
The Company has not presented separate financial statement and other
disclosures concerning the Guarantor Subsidiaries because management has
determined that such information is not material to investors.
Maxcom
Corporativo
Servicios
Elimination
Consolidated
Balance sheet as of December 31, 2000:
Cash and cash equivalents and
restricted cash
Ps.
1,182,334
Ps.
961
Ps.
Ps.
Ps.
1,183,295
Short and long term restricted cash
627,782
627,782
Accounts receivable — net
75,916
9,572
(23,599
)
61,889
Inventory — net
9,947
9,947
Prepaid expenses
26,260
(14,304
)
11,956
Frequency rights — net
117,205
117,205
Telephone network system and
equipment — net
1,199,290
1,199,290
Preoperating expenses — net
266,422
266,422
Intangible assets — net
357,279
141
357,420
Other assets
8,660
8,660
F-41
Table of Contents
Maxcom
Corporativo
Servicios
Elimination
Consolidated
Total assets
Ps.
3,871,095
Ps.
10,674
Ps.
Ps.
(37,903
)
Ps.
3,843,866
Total liabilities
Ps.
3,383,618
Ps.
13,038
Ps.
Ps.
(40,267
)
Ps.
3,356,389
Shareholders' Equity:
Capital stock and additional
paid-in-capital
1,407,450
78
(78
)
1,407,450
Accumulated deficit
(919,973
)
(2,442
)
2,442
(919,973
)
Total shareholders' equity
487,477
(2,364
)
2,364
487,477
Ps.
3,871,095
Ps.
10,674
Ps.
Ps.
(37,903
)
Ps.
3,843,866
Total liabilities and shareholders'
equity under Mexican GAAP
Ps.
487,477
Ps.
(2,364
)
Ps.
Ps.
2,364
Ps.
487,477
Preoperating expenses
(319,397
)
(319,397
)
Amortization of preoperting
expenses
52,985
52,985
Capitalization of interest
61,379
61,379
Amortization of capitalized interest
(9,752
)
(9,752
)
Amortization of frequency rights
(11,374
)
(11,374
)
Total shareholders' equity under
U.P. GAAP
Ps.
261,318
Ps.
(2,364
)
Ps.
Ps.
2,364
Ps.
261,318
Statements of operations for the year
ended December 31, 2000:
Revenues
Ps.
293,615
Ps.
180,863
Ps.
Ps.
(180,863
)
Ps.
293,615
Operating cost and expenses
(704,360
)
(182,743
)
180,863
(706,240
)
Integral (income) cost of financing
(246,559
)
898
(24
)
(245,685
)
Other (income) expense
(1,526
)
(1,091
)
2,097
(520
)
Net (loss) income
(658,830
)
(2,073
)
2,073
(658,830
)
Net (loss) income for the year under
Mexican GAAP
(658,830
)
(2,703
)
2,073
(658,830
)
Preoperating expenses
Capitalization of interest
17,002
17,002
Amortization of preoperating
expenses
31,939
31,939
Amortization of frequency rights
81
81
Amortization of capital interest
(5,287
)
(5,287
)
Net loss (income) for the year under
U.S. GAAP
Ps.
(615,095
)
Ps.
(2,073
)
Ps.
Ps.
2,073
Ps.
(615,095
)
Statement of Changes in Financial
Position for the year ended December
31, 2000:
Net (loss) income
Ps.
(658,830
)
Ps.
(2,073
)
Ps.
Ps.
2,073
Ps.
(658,827
)
Depreciation and amortization
221,859
221,859
(436,971
)
(2,073
)
2,073
(436,968
)
Net change in working capital
(421,613
)
2,646
(2,073
)
(421,040
)
Resources (used in) provided by
operating activities
(858,581
)
573
(858,008
)
F-42
Table of Contents
Maxcom
Corporativo
Servicios
Elimination
Consolidated
Financing activities:
Issuance of capital stock
377,703
377,703
Additional paid-in-capital
100,343
100,343
Proceeds from loans and notes
payables
2,126,015
2,126,015
Resources provided by financing
activities
2,604,061
2,604,061
Investing activities:
Telephone network systems and
equipment
(420,160
)
(420,160
)
Intangible assets
(326,046
)
(21
)
(326,067
)
Other assets
(1,303
)
(1,303
)
Resources used in investing activities
(747,509
)
(21
)
(747,530
)
Cash and cash equivalents:
Increase (decrease) during the period
997,971
552
998,523
Beginning balances
184,357
409
184,766
Ending balances
Ps.
1,182,328
Ps.
961
Ps.
Ps.
Ps.
1,183,289
Maxcom
Corporativo
Servicios
Elimination
Consolidated
Balance sheet as of December 31, 2001:
Cash and cash equivalents and restricted cash
Ps.
160,098
Ps.
3,474
Ps.
18,849
Ps.
Ps.
182,421
Short and long term restricted cash
197,452
197,452
Accounts receivable — net
95,163
(496
)
(5,900
)
88,767
Inventory — net
30,138
30,138
Prepaid expenses
10,890
10,890
Frequency rights — net
110,813
110,813
Telephone network system and equipment — net
1,446,902
1,446,902
Preoperating expenses — net
234,500
234,500
Intangible assets — net
316,496
107
316,603
Other assets
33,067
28
33,095
Total assets
Ps.
2,635,519
Ps.
3,113
Ps.
12,949
Ps.
Ps.
2,651,581
Total liabilities
Ps.
2,837,410
Ps.
4,982
Ps.
12,652
Ps.
1,569
Ps.
2,853,475
Shareholders' Equity:
Capital stock and additional paid-in-capital
1,139,875
77
57
(130
)
1,139,879
Accumulated deficit
(1,341,766
)
(1,946
)
240
1,699
(1,341,773
)
Total shareholders' equity
(201,891
)
(1,869
)
297
1,569
(201,894
)
Total liabilities and shareholders' equity
Ps.
2,635,519
Ps.
3,113
Ps.
12,949
Ps.
1,569
Ps.
2,651,581
Total shareholders' equity under Mexican
GAAP
Ps.
(201,891
)
Ps.
(1,869
)
Ps.
297
Ps.
1,569
Ps.
(201,894
)
Preoperating expenses
(319,397
)
(319,397
)
Amortization of preoperting expenses
84,897
84,897
Capitalization of interest
61,283
61,283
Amortization of capitalized interest
(15,882
)
(15,882
)
Amortization of frequency rights
(10,948
)
(10,948
)
Installation revenues
(17,805
)
(17,805
)
F-43
Table of Contents
Maxcom
Corporativo
Servicios
Elimination
Consolidated
Installation costs
(5,726
)
(5,726
)
Total shareholders' equity under U.S. GAAP
Ps.
(425,469
)
Ps.
(1,869
)
Ps.
297
Ps.
1,569
Ps.
(425,472
)
Statements of Operations for the year
ended December 31, 2001:
Revenues
Ps.
332,310
Ps.
141,073
Ps.
108,950
(  Ps.250,023
)
Ps.
332,310
Operating cost and expenses
(897,668
)
(140,844
)
(108,757
)
250,023
(897,246
)
Integral (cost) income of financing
(58,517
)
(194
)
49
(58,662
)
Other
(66,465
)
463
2
(742
)
(66,742
)
Net (loss) income
(690,340
)
498
244
(742
)
(690,340
)
Net (loss) income for the year under
Mexican GAAP
(690,340
)
498
244
(742
)
(690,340
)
Preoperating expenses
Amortization of preoperating expenses
31,912
31,912
Capitalization of interest
(96
)
(96
)
Amortization of capitalized interest
(6,131
)
(6,131
)
Amortization of frequency rights
426
426
Installation revenues
(5,726
)
(5,726
)
Installation costs
(17,805
)
(17,805
)
Net loss (income) for the year under
U.S. GAAP
Ps.
(687,760
)
Ps.
498
Ps.
244
Ps.
(742
)
Ps.
687,760
Statement of Changes in Financial Position
for the Year Ended December 31, 2001:
Net (loss) income
Ps.
(690,340
)
Ps.
498
Ps.
244
Ps.
(742
)
Ps.
(690,340
)
Non recurring charges
65,762
65,762
Gain on repurchase of debt
(128,161
)
(128,161
)
Depreciation and amortization
283,777
283,777
Net change in working capital
(468,962
)
498
244
(742
)
113,208
Resources (used in) provided by operating
activities
(377,060
)
2,515
(355,754
)
969
969
Financing activities:
Repurchase of debt
(99,781
)
(99,781
)
Resources used in financing activities
(98,812
)
(98,812
)
Investing activities:
Telephone network systems and equipment
(499,582
)
(499,582
)
Intangible assets
(7,724
)
(7,724
)
Other assets
(39,055
)
54
(39,001
)
Resources (used in) provided by investing
activities
(546,361
)
54
(546,307
)
Cash and cash equivalents:
(Decrease) increase during the period
(1,022,233
)
2,515
18,845
(1,000,873
)
Beginning balances
1,182,333
961
1,183,288
Ending balances
Ps.
160,094
Ps.
3,476
Ps.
18,845
Ps.
Ps.
182,415
F-44
Table of Contents
Maxcom
Corporativo
Servicios
Elimination
Consolidated
Balance sheet as of December 31, 2002:
Cash and cash equivalents and restricted cash
Ps.
103,979
Ps.
7,174
Ps.
4,576
Ps.
Ps.
115,729
Short and long term restricted cash
Accounts receivable — net
124,761
268
19,116
(19,092
)
125,053
Inventory — net
19,140
19,140
Prepaid expenses
35,614
35,614
Frequency rights — net
104,420
104,420
Telephone network system and equipment — net
1,588,184
1,588,184
Preoperating expenses — net
204,379
204,379
Intangible assets — net
425,923
425,923
Other assets
29,424
166
29,590
Total assets
Ps.
2,635,824
Ps.
7,608
Ps.
23,692
Ps.
(19,092
)
Ps.
2,648,032
Total liabilities
Ps.
2,035,694
Ps.
9,282
Ps.
23,274
Ps.
(20,661
)
Ps.
2,047,589
Shareholders' Equity:
Capital stock and additional paid-in-capital
1,685,989
78
54
(131
)
1,685,990
Accumulated deficit
(1,085,859
)
(1,752
)
364
1,700
(1,085,547
)
Total shareholders' equity
600,130
(1,674
)
418
1,569
600,443
Total liabilities and shareholders' equity
Ps.
2,635,824
Ps.
7,608
Ps.
23,692
Ps.
(19,092
)
Ps.
2,648,032
Total shareholders' equity under Mexican
GAAP
Ps.
600,130
Ps.
(1,674
)
Ps.
418
Ps.
1,569
Ps.
600,443
Preoperating expenses
(321,217
)
(321,217
)
Amortization of preoperting expenses
116,838
116,838
Capitalization of interest
61,087
61,187
Amortization of capitalized interest
(15,669
)
(22,013
)
Amortization of frequency rights
(10,522
)
(10,522
)
Installation revenues
(10,938
)
(10,938
)
Installation costs
(92,975
)
(32,098
)
Debt restructuring (327,476) (327,476)
Bonus capitalization
(2,342
)
(2,342
)
Total shareholders' equity under U.S. GAAP
Ps.
(3,084
)
Ps.
(1,674
)
Ps.
418
Ps.
1,569
Ps.
(2,771
)
Statements of Operations for the year
ended December 31, 2002:
Revenues
Ps.
535,939
Ps.
90,721
Ps.
198,663
Ps.
(289,384
)
Ps.
535,939
Operating cost and expenses
(955,239
)
(90,593
)
(197,928
)
289,384
(954,376
)
Integral (cost) income of financing
(309,584
)
117
304
(309,163
)
Other
(4,132
)
(52
)
(919
)
(5,103
)
Net (loss) income
(733,016
)
193
120
(732,703
)
Net (loss) income for the year under
Mexican GAAP
(733,016
)
193
120
(732,703
)
Preoperating expenses
(1,820
)
(1,820
)
Amortization of preoperating expenses
31,940
31,940
Capitalization of interest
(196
)
(196
)
Amortization of capitalized interest
213
213
Amortization of frequency rights
426
426
Installation revenues
(5,212
)
(5,212
)
Installation costs
(75,170
)
(75,170
)
Debt restructuring
436,160
436,160
Bonus capitalization
(2,342
)
(2,342
)
F-45
Table of Contents
Maxcom
Corporativo
Servicios
Elimination
Consolidated
Net loss (income) for the year under
U.S. GAAP
Ps.
(349,017
)
Ps.
193
Ps.
120
Ps.
Ps.
(348,704
)
Statement of Changes in Financial Position
for the Year Ended December 31, 2002:
Net (loss) income
Ps.
(733,016
)
Ps.
193
Ps.
120
Ps.
Ps.
(732,703
)
Non recurring charges
Gain on investment subsidiary
(313
)
313
Depreciation and amortization
317,564
317,564
Net change in working capital
86,176
3,530
(14,389
)
(313
)
75,004
Resources (used in) provided by operating
activities
(329,589
)
3,723
(14,269
)
(340,135
)
Financing activities:
Issuance of capital stock
785,259
785,259
Additional paid in capital
749,781
749,781
Proceeds from loans and notes payable
(733,448
)
(733,448
)
Resources used in financing activities
801,592
801,592
Investing activities:
Preoperating expenses
(1,820
)
(1,820
)
Telephone network systems and equipment
(366,427
)
(366,427
)
Intangible assets
(163,518
)
111
(163,407
)
Other assets
3,641
(136
)
3,505
Resources (used in) provided by investing
activities
(528,124
)
(25
)
(528,149
)
Cash and cash equivalents:
(Decrease) increase during the period
(56,121
)
3,699
(14,269
)
(66,692
)
Beginning balances
160,100
3,475
18,845
182,421
Ending balances
Ps.
103,979
Ps.
7,174
Ps.
4,576
Ps.
Ps.
115,729
23 — SUBSEQUENT EVENTS:
a)
Magdalena Lease agreement
In September 2002, the Company commenced actions before the Lease Courts for
the Federal District of Mexico against the lanclord of the Magdalena building,
seeking the termination of a 15-year lease (expiring on September 30, 2013) of
70,500 square feet plus parking space in a building on Magdalena, Mexico City,
which was its former headquarters. The action was based on claims of
miscalculation of lease payment amounts and breaches of certain city compliance
regulations. The landlord countersued alleging failure to make lease payments.
In May 2003, the Company reached an agreement with the landlord. Pursuant to
this agreement, the Company retained a leasehold interest through May 2013 on
the first floor, where one of its Lucent 5ESS switches is located, the
roof-top, where they have three microwave transmission antennas and a section
of the basement, which is used for parking and to place some of the electric
equipment that supports the switch. The Company was also released from its
lease obligations on approximately 35,887 square feet plus parking space of the
building originally running through September 30, 2013, including past-due
lease payments dating back from October 2002. In exchange for the new lease
and the releases agreed to prepay in full, ten-year lease obligations on the
first floor, the roof-top and
F-46
Table of Contents
basement, as well as the payment of the rents due from October 2002 through
April 2003, the settlement for this agreement will cost the Company the amount
of U.S. $2.7 million and will be payable in installments through May 2004.
b)
Stock options granted to former executive officer
On April 29, 2002, the former chief executive officer was granted 7,730,177
stock options with an exercise price of $0.4927 per share, and 3,957,588 stock
options with an exercise price of $0.01 per share. Most of these options were
vested on the date of grant. On March 19, 2003, the chief executive officer
resigned. As per the terms of the severance agreements, the chief executive
officer forfeited all rights he had to these options. Since these options were
not exercised before year-end, they were recorded as outstanding at December
31, 2002.
F-47
Table of Contents
[PricewaterhouseCoopers
Letterhead]
To The Board of Directors and
Shareholders of
Maxcom Telecomunicaciones, S.A. de C.V.
The audits referred to in our report to Maxcom
Telecomunicaciones, S.A. de C.V. dated February 19, 2003, which
is contained in the document constituting part of this annual report,
included the audit of the schedule II for the years ended
December 31, 2002 and December 31, 2001. This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement
schedule based upon our audits.
In our opinion, such schedule present fairly, in
all material respects, the information set forth therein.
PricewaterhouseCoopers
/s/ Juan Manuel Ferrón
C.P. Juan Manuel Ferrón
Audit Partner
Mexico City
February 19, 2003
S-1
Table of Contents
BDO Hernández Marrón y Cía., S C
Contadores Públicos y
Consultores de Empresas
Av. Ejercito Nacional 904
Piso 7
Polanco
11510 México D.F.
Teléfono (52) (55) 59013900
Telefax (52) (55) 59013925
ON SCHEDULE
TO THE BOARD OF DIRECTORS AND SHAREHOLDER
OF MAXCOM TELECOMUNICACIONES, S.A. DE C.V.
The audits referred to in our report to MAXCOM Telecomunicaciones, S.A. de C.V.
dated February 12, 2001, which is contained in the document constituting part
of this annual report, included the audit of the schedule II for
the year ended December 31, 2000. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based upon our audits.
In our opinion, such schedule present fairly, in all material respects, the
information set forth therein.
BDO INTERNACIONAL
/s/ BDO INTERNACIONAL
MEXICO CITY
FEBRUARY 12, 2001
S-II
Table of Contents
Maxcom Telecomunicaciones, S.A. de C.V.
Schedule II - Valuation and Qualifying Accounts
Year Ended 2000, 2001 and 2002
(Amounts expressed in Million of Mexican Pesos (Ps.)
with Purchasing Power as of December 31, 2002)
Balance at
Charged to
Beginning of
cost and
Balance at
period
expenses
Deductions
end of period
Allowance for doubtful accounts
2000
Ps
3.3
Ps.
10.2
Ps.
(4.7
)
Ps.
8.8
2001
Ps
8.8
Ps.
18.1
Ps.
(7.2
)
Ps.
19.7
2002
Ps
19.7
Ps.
25.3
Ps.
(12.8
)
Ps.
32.1
Allowance for obsolete and slow-moving supply inventories
2000
Ps
—
Ps.
—
Ps.
—
Ps.
—
2001
Ps
—
Ps.
0.6
Ps.
—
Ps.
0.6
2002
Ps
0.6
Ps.
—
Ps.
—
Ps.
0.6
Allowance for obsolete and slow-moving network inventories
2000
Ps
—
Ps.
—
Ps.
—
Ps.
—
2001
Ps
—
Ps.
14.0
Ps.
—
Ps.
—
2002
Ps
14.0
Ps.
(0.2
)
Ps.
(1.2
)
Ps.
12.6
Allowance for lease penalty
2000
Ps
—
Ps.
—
Ps.
—
Ps.
—
2001
Ps
—
Ps.
7.1
Ps.
—
Ps.
7.1
2002
Ps
7.1
Ps.
0.5
Ps.
—
Ps.
7.6
S-III
Table of Contents
ITEM 19. EXHIBITS
Page
1.
By-laws (estatutos) of Maxcom Telecomunicaciones, S.A. de C.V. as amended to
June 10, 2003
2(a).
Not applicable.
2(b).
1.
Indenture dated as of March 17, 2000 among Maxcom, Corporativo en
Telecomunicaciones, S.A. de C.V. and The Bank of New York, as Trustee
**
2.
Indenture dated as of April 29, 2002 among Maxcom, Corporativo en
Telecomunicaciones, S.A., de C.V., Maxcom Servicios Administrativos, S.A., de
C.V. and The Bank of New York, as Trustee
*
3.
Second Supplemental Indenture dated as of April 29, 2002 among Maxcom,
Corporativo en Telecomunicaciones, S.A. de C.V., Maxcom Servicios
Administrativos, S.A. de C.V. and the Bank of New York, as Trustee
*
2(c).
Not applicable.
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, acting as trustee
*
2.
Second amended and Restated Securityholders Agreement entered into as of April
29, 2002 among Maxcom and certain existing and new securityholders
*
4(a).
Agreement for the use of infrastructure and installation of fiber optic cable
on the highways between Puebla and Mexico, 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.
**
4(b).
Interconnection Agreement for long distance services, dated January 22, 1999,
between Amaritel and Teléfonos de Mexico (Telmex) valid for a period of two
years between February 1, 1999 and January 1, 2001. The agreement establishes
that it would remain in effect after the expiration date if no further
agreement for its termination or renewal has been entered into, in accordance
with article 42 of the Mexican Telecommunications law
**
4(c).
Local Interconnection Service Agreement, dated November 24, 1998, between
Amaritel, S.A. de C.V. and Teléfonos de Mexico, S.A. de C.V.
**
4(d).
Amendment to Local Interconnection Service Agreement, dated February 25, 1999,
between Amaritel, S.A. de C.V. and Teléfonos de Mexico, S.A. de C.V.,
originally entered into on November 24, 1998
**
4(e).
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. (including
amendment dated December 21, 2000)
***
4(f).
Telecommunications Service Agreement dated November 15, 1999, between Maxcom
and Teléfonos de México, S.A. de C.V.
**
4(g).
Telecommunications Service Agreement dated March 9, 1999, between Maxcom and
Bestel S.A. de C.V., according to which Bestel will provide long distance and
private calls services to Maxcom
**
4(h).
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
**
4(i).
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
**
4(j).
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
**
E-1
Table of Contents
Page
4(k).
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
*
4(l).
Concession for a public telecommunications network in Regions 3, 5 and 8
granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and
Transport on April 29, 1998
**
4(m).
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
**
4(n).
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
**
4(o).
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
**
4(p).
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
**
4(q).
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
**
4(r).
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
**
4(s).
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
**
4(t).
Warrant Agreement dated as of March 17, 2000 between Maxcom
Telecomunicaciones, S.A. de C.V. and The Bank of New York, acting as warrant
agent
***
4(u).
Dark fiber optic purchase and sale agreement dated as of August 13, 2002
between Maxcom Telecomunicaciones, S.A. de C.V. and Bestel S.A. de C.V [*]
4(v).
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, Jacobo Zaga Kalach, Jacobo Zaga Sasson, David Daniel Kabbaz Chiver,
Salvador Daniel Kabbaz Zaga, Gastón Becherano Maya and Blanca Estela Canela
Talancón
5.
Not applicable.
6.
Computation of earnings per share
7.
Computation of ratio of earnings to fixed charges
8.
No significant subsidiaries.
9.
Not applicable.
10.
None.
99.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350
99.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350
*
Previously filed with annual report on Form 20-F, submitted to the SEC on
July 1, 2002.
**
Previously filed with Registration Statement on Form F-4 No. 333-11910
submitted on May 5, 2000.
***
Previously filed with annual report on Form 20-F, as amended, submitted
on June 29, 2001 and on September 28, 2001.
[*]
Certain material has been omitted pursuant to a request for confidential
treatment. The places in this document where material has been omitted is
marked with an asterisk and brackets "[*]." The omitted material has been
filed separately with the SEC pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.
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Table of Contents
GLOSSARY OF TELECOMMUNICATIONS TERMS
ADSL
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 ability to transmit voice or data over
telecommunications equipment.
Carrier
A 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.
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 over 258,000 simultaneous
telephone calls. Because optical signals
disperse over distance, they must be regenerated
/ amplified at sites located along the fiber
optic cable. Fiber optic systems using earlier
G-1
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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.
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 intermediate and
longer 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
G-2
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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 some 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.
SCT
Secretaría de Comunicaciones y Transportes, the
Mexican Communications and Transportation
Ministry.
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.
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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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the registrant certifies that it meets all requirements for filing
on Form 20-F and has duly created this annual report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MAXCOM TELECOMUNICACIONES, S.A. DE C.V.
By:
/s/ ELOISA MARTINEZ
Eloísa Martínez
Chief Financial Officer
DATE: June 30, 2003
Table of Contents
CERTIFICATIONS
Certification of Chief Executive Officer
I,
René Sagastuy Ferrándiz, certify that:
1.          I have reviewed this annual report on Form 20-F of Maxcom;
2.          Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4.          The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a)
designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly
during the period in which this annual report is being
prepared;
b)
evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the
"Evaluation Date"); and
c)
presented in this annual report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5.     The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a)
all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b)
any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6.          The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ RENE SAGASTUY FERRÁNDIZ
René Sagastuy Ferrándiz
Chief Executive Officer
Dated: June 30, 2003
H-1
Table of Contents
Certification of Chief Financial Officer
I, Eloísa Martínez, certify that:
1.          I have reviewed this annual report on Form 20-F of Maxcom;
2.          Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3.          Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4.     The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a)
designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly
during the period in which this annual report is being
prepared;
b)
evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the
"Evaluation Date"); and
c)
presented in this annual report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5.          The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a)
all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b)
any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6.          The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ ELOISA MARTINEZ
Eloísa Martínez
Chief Financial Officer
Date: June 30, 2003
H-2