**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

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**FORM 20-F**

**(MarkOne)**

| **o**      |   | **REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)  OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934**                  |
|------------|--------|----------------------------------------------------------------------------------------------------------------------|
| ** ** |   | ** **                                                                                                           |
| ** ** |   | **OR**                                                                                                               |
| ** ** |   |                                                                                                                 |
| **x**      |   | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED:** |
| ** ** |   | ** **                                                                                                           |
| ** ** |   | **DECEMBER 31, 2006**                                                                                                |
| ** ** |   | ** **                                                                                                           |
| ** ** |   | **OR**                                                                                                               |
| ** ** |   | ** **                                                                                                           |
| **o**      |   | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                        |
| ** ** |   | ** **                                                                                                           |
| ** ** |   | **OR**                                                                                                               |
| ** ** |   | ** **                                                                                                           |
| **o**      |   | **SHELL COMPANY REPORT  PURSUANT TO SECTION 13 OR 15(****d) OF THE  SECURITIES EXCHANGE ACT OF 1934**                |

 

**DATE OF EVENT REQUIRING THIS SHELL COMPANY REPORT             **

**FOR THE TRANSITION PERIOD FROM                            TO                            **

**CommissionFile Number****:  1-14816**

**TRICOM, S.A.**(Exact name of Registrantas specified in its charter)

**Dominican Republic**(Jurisdiction ofincorporation or organization)

**Avenida Lope de Vega No.95, Santo Domingo, Dominican Republic**(Address of principalexecutives offices)

Securities registered pursuant to Section 12(b) ofthe Act.

***None***

Securities registered pursuant to Section 12(g) ofthe Act.

***American Depositary SharesClass A Common Stock, par value RD$10 per share***

Securities for which there is areporting obligation pursuant to Section 15(d) of the Act.

***11-3/8% Senior Notes due September 1, 2004***

Indicate the number ofoutstanding shares of each of the issuer’s classes of capital or common stockas of the close of the period covered by the annual report.

**At December 31, 2006, there were45,458,041 shares of Class A Common Stock and 19,144,544 shares of Class BStock issued and outstanding.**

**Indicate bycheck mark if the registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities Act.**

**Yes****o****    No ****x**

**If this reportis an annual or transition report, indicate by check mark if the registrant isnot required to file reports pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934.**

**Yes **o    No x

**Indicateby check mark whether the Registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.**

**Yes **o                     No x

**Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Checkone):**

**Largeaccelerated filer ****o****   Accelerated filer ****o****   Non-accelerated filer ****x**

***Indicate by check mark whichfinancial statement item the Registrant has elected to follow.***

**Item 17 **o                                    Item18 x

***If this reportis an annual report, indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Exchange Act).***

**Yes **o      No x

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**TABLE OF CONTENTS**
| PART I.   |                                                                          |   |
|-----------|-------------------------------------------------------------------------------|--------|
|      |                                                                          |   |
| ITEM 1.   | IDENTITY  OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        |   |
| 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                       |   |
|      |                                                                          |   |
| PART II.  |                                                                          |   |
|      |                                                                          |   |
| ITEM 13.  | DEFAULTS,  DIVIDEND ARREARAGES AND DELINQUENCIES                              |   |
| ITEM 14.  | MATERIAL  MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |   |
| ITEM 15.  | DISCLOSURE  CONTROLS AND PROCEDURES                                           |   |
| ITEM 16.  | [RESERVED]                                                                    |   |
| ITEM 16A. | AUDIT  COMMITTEE FINANCIAL EXPERT                                             |   |
| ITEM 16B. | CODE OF ETHICS                                                                |   |
| ITEM 16C. | PRINCIPAL  ACCOUNTANT FEES AND SERVICES                                       |   |
| ITEM 16D. | EXEMPTIONS  FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE                    |   |
| ITEM 16E. | PURCHASES  OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED                  |   |
|      |                                                                          |   |
| PART III. |                                                                          |   |
|      |                                                                          |   |
| ITEM 17.  | FINANCIAL  STATEMENTS*                                                        |   |
| ITEM 18.  | FINANCIAL  STATEMENTS                                                         |   |
| ITEM 19.  | EXHIBITS                                                                      |   |

 

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*              We have completed Item 18 in lieu of this Item.

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**GENERAL INFORMATION**

#### **Forward-Looking Statements**

The statements containedin this Annual Report, which are not historical facts, are forward-lookingstatements that involve risks and uncertainties.  Management cautions the reader that theseforward-looking statements are only predictions; actual events or results maydiffer materially as a result of risks facing us.  Such risks include, but are not limited to,the following factors:

·                                          Uncertaintyin our debt restructuring process;

·                                          UnfavorableDominican Republic bankruptcy laws;

·                                          Possibleacceleration of indebtedness by our creditors;

·                                          Expectationsas to the amount of cash required to operate as a going concern;

·                                          Contingenciesarising out of our placement of Class A Common Stock in December 2002, theissues raised by the report of the Special Committee and the restatement andamendment of our 2002 financial statements;

·                                          Unfavorabledecisions in our various legal proceedings resulting in financial difficultiesfor us;

·                                          Ourability to generate cash flow from operations to meet our debt servicerequirements;

·                                          Thevolatility and depreciation of the Dominican peso against the U.S. dollar;

·                                          Competitionin Dominican markets for local, long distance and mobile services withmultinational telecommunications providers;

·                                          Reducedrevenues due to our business plan of focusing on higher usage customers and disconnectinglower usage or unprofitable customers;

·                                          Customernon-payments;

·                                          Decliningrates for international long distance traffic;

·                                          Ourreliance in the U.S. long distance markets on resellers, many of which havebeen adversely affected by intensified competition;

·                                          Customerchurn;

·                                          Rapidtechnological change;

·                                          Ourdependence on third parties for television programming;

·                                          Ourvulnerability to viruses, hackers and other disruptions;

·                                          Thecontinuation of a favorable political, economic and regulatory environment inthe Dominican Republic;

·                                          Inabilityto enforce claims in the Dominican Republic based on U.S. securities and otherlaws;

·                                          Thelikelihood that, as a result of our pending debt restructuring, the holdings ofour current shareholders, including holders of our American Depositary Shares (“ADSs”),would be effectively eliminated; and

·                                          OurADSs no longer being listed on a national securities exchange.

2

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# **PART I.**

## **ITEM 1.                  IDENTITY OF DIRECTORS, SENIORMANAGEMENT AND ADVISERS**

Not Applicable.

## **ITEM 2.                  OFFER STATISTICS AND EXPECTEDTIMETABLE**

Not Applicable.

## **ITEM 3.                  KEY INFORMATION**

#### **Key Company Developments**

#### ***Default on Indebtedness.***

#### Commencing in 2001, a combination ofmacro-economic factors and circumstances specific to our business contributedto a steady and significant decline in our operating performance, cash flowsand financial condition.  These factorsincluded, among others, the following:

·                                          Aworld-wide decline in the telecommunications sector;

·                                          Adverseeconomic conditions precipitated by the events of September 11, 2001;

·                                          TheDominican Republic banking crisis of 2003 and the resulting currency andeconomic crisis;

·                                          Continuingvolatility and depreciation of the Dominican peso;

·                                          Unprofitableinvestments we made in certain new business segments; and

·                                          Increasedcompetition in Dominican markets for local, long distance and mobile servicestriggered by entry of multinational telecommunications providers into themarket.

#### As a consequence of these factors, inSeptember 2003, we announced that we would not be making a scheduled interestpayment on our 11-3/8% Senior Notes due September 1, 2004.  In October 2003, we suspended principal andinterest payments on our unsecured indebtedness and principal payments on oursecured indebtedness.  Subsequently, onSeptember 1, 2004, we announced that we would not be making the $200 millionprincipal payment on our 11-3/8% Senior Notes due September 1, 2004.  As a result, we have defaulted onsubstantially all of our secured and unsecured indebtedness, which wasapproximately $447.1 million in principal amount as of December 31, 2006.  In addition to our 11-3/8% Senior Notes due2004, our indebtedness consists of bank and other borrowings, capital leases,commercial paper and telecommunication equipment trade financings.

#### ***Financial Restructuring.***

We have engaged indiscussions with the holders of our indebtedness regarding arestructuring.  In April 2006, weannounced that we had reached a non-binding agreement in principle with certainof our creditors on a consensual financial restructuring of our balancesheet.  These creditors included an AdHoc Committee (the “Ad Hoc Committee”) comprised of certain holders of our11-3/8% Senior Notes due 2004 and other significant creditors, as well ascertain affiliates of GFN Corporation Ltd. (“GFN”), our majority shareholder,who are also significant creditors.

Subsequently, wenegotiated and entered into a Plan Support and Lock-Up Agreement and relatedterm sheet (collectively, as amended, the “Plan Support Agreement”) with ourlargest secured creditor and unsecured creditors representing more than 70% byprincipal amount of our unsecured indebtedness. The Plan Support Agreement was amended in August 2007 to, among othermatters, extend certain time deadlines for filing our reorganization case.  The Plan Support Agreement provides for theconsensual restructuring of our 

3

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financial obligations,ownership and governance, to be effectuated through court supervisedreorganization proceedings in the United States.  Subject to certain conditions, the creditorswho have signed the Plan Support Agreement (the “Supporting Creditors”) haveagreed to vote in favor of, and not to object to or oppose, a plan ofreorganization that we are finalizing.

In general, the PlanSupport Agreement contemplates an exchange of all of our unsecured borrowedmoney obligations for a pro rata share of (i) new secured notes to be issued byreorganized Tricom and (ii) all of the equity in a to-be-formed holdingcompany.  This will result in asubstantial reduction of the amount of our indebtedness.  Holders of our existing secured indebtednesswill be subject to separate treatment on a case-by-case basis.  The interests of the existing holders of ourequity, including the American Depository Shares, will be effectivelyeliminated.

The restructuringcontemplated by the Plan Support Agreement is not intended to affect the ordinarycourse trade obligations of the Company.

Consummation of theproposed restructuring is subject to significant uncertainties.  The Plan Support Agreement is subject totermination upon the occurrence of certain events, including failure to meetcertain milestones in the restructuring process, and failure to resolve certaincontingent liabilities to the satisfaction of the Ad Hoc Committee.  It is likely that an extension of time tomeet certain of these milestones and to file our reorganization case will benecessary, and the Supporting Creditors may not grant this. Filing of ourreorganization case requires the approval of the holders of two thirds of thevotes entitled to be cast at a meeting of our shareholders.  Creditors that have not signed the PlanSupport Agreement may be able to object to or otherwise seek to prevent theconsummation of the proposed restructuring. Consummation of the proposed restructuring will be subject to, amongother matters, obtaining certain governmental approvals.  Accordingly, there can be no assurance that asuccessful restructuring of our financial obligations, ownership and governancewill be effectuated.

Even though theserestructuring discussions are continuing, our creditors could, and in somecases have sought to, exercise their rights to collect debt owed to them. Theycould also take other actions, including the exercise under Dominican law ofprovisional remedies that could result in, among other things, denying usaccess to our bank accounts, or creditors attaching or seizing our assets.  We do not expect to have any funding sourcesuntil the restructuring process is concluded, other than funds generated byoperations or from the sale of assets, if any. If we are not successful in restructuring our outstanding indebtedness,we may not be able to continue to operate our business as a going concern.  We may be forced into insolvency proceedingswhich, in the Dominican Republic, could result in our liquidation. Even if our indebtednessis restructured, we may not be able to generate the cash required to operate orto obtain the financing necessary to continue funding our business or workingcapital and capital expenditure requirements.

***Bancrédito Criminal Litigation Settlement.***

In September 2005, a Dominican investigative judge added usand two of our subsidiaries as co-defendants to criminal proceedings brought bycertain creditors of Bancrédito and other financial institutions formerlycontrolled by GFN.  Several current andformer related parties, as well as certain of our directors and officers, werealso defendants in the proceedings.  Theallegations against us and the other co-defendants included fraud,embezzlement, violations of monetary laws and money laundering.  We were added to these proceedings withoutprior notice or participation in the existing proceedings.

In October 2005, an Appellate Court denied our appeal of theinvestigative judge’s action and in December 2005 the Supreme Court of theDominican Republic denied our petition to reconsider the lower court’sdecision.  Following the Supreme Court’sdecision, we, together with the other co-defendants, entered into settlementswith the private parties that originally brought the criminal actions.  Our share of these settlements, which waspaid in January 2006, was $2,182,105.

In March 2006, the Criminal Court to which the matter wasremanded following the Supreme Court’s decision decided that the criminalactions, which had previously been consolidated into one action, bedeconsolidated into six different matters, corresponding to the six criminalcomplaints originally filed.  We were aparty to only one of such matters. Subsequently, the Criminal Court 

4

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dismissed the public actions in four out of the six criminalcomplaints, including the only one to which we and our subsidiaries wereparties.  No objection to, or appealagainst, this decision was filed; accordingly, all civil and criminal liabilityto which we might have been subject as a result of these allegations wasextinguished.  In its rulings, theCriminal Court also dismissed criminal complaints pending against Mr. HéctorCastro Noboa, our Chief Executive Officer, and Ms. Rosangela Pellerano, one ofour directors.

The Criminal Court did not, however, dismiss all of thecomplaints against Mr. Manuel Arturo Pellerano, one of our directors and thebeneficial holder of a majority of the voting power of our shares.  In August 2006, as part of a series ofrelated proceedings, Mr. Pellerano was convicted by the Criminal Court ofseveral violations of the Dominican Criminal Code and Monetary and FinancialLaw.  The court sentenced each of Mr.Pellerano and a co-defendant to three years imprisonment and ordered each ofthem to pay a fine of RD$1 million (approximately $31,000).  The charges on which Mr. Pellerano wasconvicted, which we understand stem from Mr. Pellerano’s activities at relatedfinancial services entities and not at Tricom itself, include forgery,alteration, manipulation and concealment of banking books and records andfinancial statements.  Mr. Pellerano’sappeal of the decision of the Criminal Court remains pending at the date ofthis filing.

#### ***Termination of Deposit Facility.***

In December 2006, theBank of New York, the depositary for our ADS facility, notified us and holdersof our ADSs, that it was terminating our ADS facility.  Upon termination of the ADS facility, most ofthe depositary’s obligations under the Deposit Agreement also terminated.  Holders of our ADSs may obtain delivery ofthe shares of Class A Common Stock underlying our ADSs, upon payment of certaintaxes and processing fees.  As a resultof the termination, the Bank of New York is no longer obligated to perform anyfunctions in connection with voting the Class A Common Stock underlying ourADSs.  With the termination of the ADSfacility, our ADSs ceased trading on the “Pink Sheets” service on March 29,2007.

#### **SELECTED FINANCIAL DATA**

The following tableprovides selected financial and operating data of Tricom for the periodsindicated.  It has been derived from our consolidatedfinancial statements for the periods in question, which have been audited byour independent registered public accounting firm, Sotomayor Associates, LLP (“Sotomayor”).

Our 2002 financialstatements were restated. See our Annual Report on Form 20-F for the fiscalyear ended December 31, 2004.

The information in thefollowing tables should be read in conjunction with “Operating and FinancialReview and Prospects” and the consolidated financial statements included inthis Annual Report.

5

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| ** **                                                                                                  | ** ** | **Year ended December 31,** (1) | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                  | ** ** | **2002**                                            | ** ** | **2003** | ** ** | **2004** | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                                                                                  | ** ** | **Restated**                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                                  | ** ** | **(in thousands)**(2)                          | ** ** |
| **Statement of Operations Data:**                                                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Operating revenues:                                                                                         |       |                                                |       |   |   |   |   |   |   |   |   |
| Long distance                                                                                               |       | $                                                   | 80,978     |   | $ | 92,088 |   | $ | 72,009 |   | $ | 70,620 |   | $ | 70,282 |   |
| Domestic telephony                                                                                          |       | 83,721                                              |       | 59,475 |   | 64,974 |   | 84,071 |   | 82,242 |   |
| Mobile                                                                                                      |       | 45,074                                              |       | 29,232 |   | 32,124 |   | 35,485 |   | 36,283 |   |
| Cable                                                                                                       |       | 21,487                                              |       | 13,585 |   | 13,651 |   | 19,304 |   | 20,177 |   |
| Data and internet                                                                                           |       | 11,007                                              |       | 4,487 |   | 5,355 |   | 7,953 |   | 8,929 |   |
| Other                                                                                                       |       | 498                                                 |       | 121 |   | 68 |   | 91 |   | 187 |   |
| Total operating  revenues                                                                                   |       | 242,766                                             |       | 198,988 |   | 188,181 |   | 217,525 |   | 218,100 |   |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Operating costs and  expenses:                                                                              |       |                                                |       |   |   |   |   |   |   |   |   |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Cost of sales and  services                                                                                 |       | 86,519                                              |       | 91,010 |   | 89,541 |   | 87,696 |   | 92,117 |   |
| Selling, general and  administrative expenses                                                               |       | 73,923                                              |       | 60,393 |   | 56,685 |   | 77,654 |   | 81,677 |   |
| Litigation Settlement                                                                                       |       | —                                              |       | — |   | — |   | — |   | 2,182 |   |
| Restructuring costs (3)                                                                                     |       | —                                              |       | 1,597 |   | 8,146 |   | 7,803 |   | 10,448 |   |
| Depreciation and  amortization                                                                              |       | 66,517                                              |       | 70,292 |   | 75,254 |   | 62,041 |   | 49,110 |   |
| Expense in lieu of  income taxes (4)                                                                        |       | 5,897                                               |       | — |   | — |   | — |   | — |   |
| Asset impairments (5)                                                                                       |       | 17,273                                              |       | 191,284 |   | — |   | — |   | — |   |
| Other charges and  special items (6)                                                                        |       | —                                              |       | 15,871 |   | — |   | — |   | — |   |
| Total operating costs                                                                                       |       | 250,129                                             |       | 430,447 |   | 229,626 |   | 235,195 |   | 235,534 |   |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Operating loss from  continuing operations                                                                  |       | (7,363                                              | )          | (231,459 | ) | (41,445 | ) | (17,670 | ) | (17,434 | ) |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Other income  (expenses):                                                                                   |       |                                                |       |   |   |   |   |   |   |   |   |
| Interest expense, net                                                                                       |       | (62,314                                             | )          | (64,351 | ) | (63,475 | ) | (68,863 | ) | (68,866 | ) |
| Foreign currency  exchange gain (loss)                                                                      |       | 3,067                                               |       | 5,347 |   | (2,674 | ) | 727 |   | (63 | ) |
| Other, net                                                                                                  |       | (1,502                                              | )          | 303 |   | 5,740 |   | 1,614 |   | 677 |   |
| Other expenses, net                                                                                         |       | (60,749                                             | )          | (58,701 | ) | (60,409 | ) | (66,522 | ) | (68,252 | ) |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Loss  before income taxes, minority interest and cumulative effect of accounting  change                    |       | (68,111                                             | )          | (290,160 | ) | (101,854 | ) | (84,192 | ) | (85,685 | ) |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Income taxes (provision)  benefit                                                                           |       | (2,016                                              | )          | (1,359 | ) | (300 | ) | 818 |   | (1,856 | ) |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Loss  from continuing operations before discontinued operations and cumulative  effect of accounting change |       | (70,127                                             | )          | (291,519 | ) | (102,154 | ) | (83,374 | ) | (87,541 | ) |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Discontinued  operations:                                                                                   |       |                                                |       |   |   |   |   |   |   |   |   |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Loss from  discontinued operations (7)                                                                      |       | (9,179                                              | )          | (46,651 | ) | — |   | — |   | — |   |
| Minority  interest                                                                                          |       | 1,871                                               |       | — |   | — |   | — |   | — |   |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Total Discontinued  Operations                                                                              |       | (7,308                                              | )          | (46,651 | ) | — |   | — |   | — |   |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Net loss                                                                                                    |       | $                                                   | (77,435    | ) | $ | (338,170 | ) | $ | (102,154 | ) | $ | (83,374 | ) | $ | (87,541 | ) |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Loss per common  share-basic and diluted:                                                                   |       |                                                |       |   |   |   |   |   |   |   |   |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Loss from continuing operations before cumulative  effect of accounting change                              |       | $                                                   | (1.62      | ) | $ | (4.51 | ) | $ | (1.58 | ) | $ | (1.29 | ) | $ | (1.36 | ) |
| Loss from  discontinued operations                                                                          |       | (0.17                                               | )          | (0.72 | ) | — |   | — |   | — |   |
|                                                                                                        |       |                                                |       |   |   |   |   |   |   |   |   |
| Net loss — basic  and diluted                                                                          |       | $                                                   | (1.79      | ) | $ | (5.23 | ) | $ | (1.58 | ) | $ | (1.29 | ) | $ | (1.36 | ) |
| Average number of  common shares outstanding — basic and diluted                                       |       | 43,400                                              |       | 64,603 |   | 64,603 |   | 64,603 |   | 64,603 |   |

 

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|                                                      | ** ** | **At December 31,** | ** ** |
|------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                           | ** ** | **2002**                      | ** ** | **2003** | ** ** | **2004** | ** ** | **2005** | ** ** | **2006** | ** ** |
| ** **                                           | ** ** | **Restated**                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | **(in thousands) (2)**        | ** ** |
| **Balance Sheet Data:**                              |       |                          |       |   |   |   |   |   |   |   |   |
| ** **                                           |       |                          |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                           |       | $                             | 6,080      |   | $ | 2,415 |   | $ | 17,590 |   | $ | 32,113 |   | $ | 23,072 |   |
| Property, plant and  equipment, net                  |       | 668,120                       |       | 396,373 |   | 332,908 |   | 298,439 |   | 274,361 |   |
| Total assets                                         |       | 779,193                       |       | 438,845 |   | 387,683 |   | 368,532 |   | 350,385 |   |
| Total liabilities                                    |       | 534,689                       |       | 532,511 |   | 583,503 |   | 647,727 |   | 717,121 |   |
|                                                 |       |                          |       |   |   |   |   |   |   |   |   |
| Shareholders’ equity                            |       | 244,504                       |       | (93,666 | ) | (195,820 | ) | (279,195 | ) | (366,736 | ) |
|                                                 |       |                          |       |   |   |   |   |   |   |   |   |
| **Other Financial Data:**                            | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                                 |       |                          |       |   |   |   |   |   |   |   |   |
| Capital expenditures                                 |       | $                             | 53,830     |   | $ | 10,786 |   | $ | 13,277 |   | $ | 28,624 |   | $ | 26,228 |   |
| Net cash provided by  operating activities           |       | 7,184                         |       | 7,270 |   | 22,211 |   | 43,212 |   | 17,589 |   |
| Net cash used in investing  activities               |       | (57,918                       | )          | (183 | ) | (2,972 | ) | (28,286 | ) | (26,271 | ) |
| Net cash provided by  (used in) financing activities |       | 44,239                        |       | (10,752 | ) | (4,064 | ) | (404 | ) | (359 | ) |
|                                                 |       |                          |       |   |   |   |   |   |   |   |   |
| **Other Operating Data:**                            | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| International minutes  (in thousands) (8)            |       | 1,069,130                     |       | 1,133,973 |   | 885,009 |   | 877,728 |   | 944,410 |   |
| Local access lines in  service (at period end)       |       | 150,456                       |       | 141,856 |   | 153,440 |   | 167,763 |   | 183,975 |   |
| Mobile subscribers (at  period end)                  |       | 432,058                       |       | 435,341 |   | 345,636 |   | 393,991 |   | 465,910 |   |
| Cable subscribers (at period end)                    |       | 71,726                        |       | 61,433 |   | 59,320 |   | 63,878 |   | 68,903 |   |

 

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(1)                           Beginningin 2003, we changed the presentation of our statement of operations in order toalign more accurately our core product and service segments with how managementevaluates our consolidated results of operations.  Certain amounts previously reported for 2002have been restated to conform to the new presentation.  For 2002, sales incentives are reclassifiedas a reduction of long distance revenues in the case of long distance callingcards and as a reduction of cellular revenues in the case of prepaid cellularservices, rather than as selling, general and administrative (“SG&A”)expenses.  See Note 2.23 to ourconsolidated financial statements.

(2)                           Exceptper share, ratios and other operating data.

(3)                           Weincurred professional and other costs in connection with negotiation of ourrestructuring.

(4)                           On June4, 2002, a Presidential decree modified the tax system imposed on alltelecommunication providers in the Dominican Republic by concession agreements(including by our 1996 concession agreement) in favor of the payment of a taxequal to the greater of 25% of net taxable income or 1.5% of gross revenues,which is the tax applicable to Dominican corporate taxpayers.  We began paying income tax on this basis onSeptember 1, 2002.  For each of theperiods prior to September 1, 2002 presented, we made payments in lieu ofincome taxes equal to 10% of gross domestic revenues, after deducting chargesfor access to the local network, plus 10% of net international revenues.  We are also required by Dominican law towithhold a percentage (10% during 2006) of interest paid to financialinstitutions located outside the Dominican Republic and 25% of all otherpayments outside the Dominican Republic, excluding payments to foreignsuppliers for goods and equipment imported to the Dominican Republic. We arerequired by the terms of various financings with non-Dominican lenders,including our 11-3/8% Senior Notes due 2004, to pay additional amounts so thatthe net amount received by the lender after any withholding or deduction onaccount of taxes will not be less than the amount the lender would havereceived if such taxes had not been withheld or deducted.

(5)                           During2003, we performed our annual impairment review and recorded non-cash chargesof approximately $191.3 million related to our long-lived assets, goodwill andother intangible assets.  The assetimpairment charges reflected primarily the impact of the Dominican pesodevaluation on our telecommunication business in the Dominican Republic as wellas 

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increased competition in the mobile business andcancellation of a contract with the Dominican government for the provision ofinternet services to public schools.  SeeNote 23 of notes to consolidated financial statements.

(6)                                 Includescosts of terminating operating leases, write-off of certificates of deposit andtax penalties.

(7)                                 Lossfrom discontinued operations relates to the classification of our CentralAmerican operations and assets as discontinued operations in 2003.  In February 2004, we sold our CentralAmerican operations, including our digital trunking network in Panama, and ourradio frequency rights in Guatemala and El Salvador.  As a result of the difference between the netsale proceeds from the sale and the net book value of our assets in CentralAmerica, we recorded a $38.6 million loss from impairment of assets held forsale in 2003.

(8)                                 Includesboth inbound and outbound international long distance minutes.

#### **EXCHANGE RATES**

The Federal Reserve Bank of New York does not report abuying rate for Dominican pesos.  Thefollowing table sets forth the high, low and average official and privatemarket exchange rates for each of the five most recent years, and the high, lowand average official and private market exchange rates for each of the sixmonths ended June 30, 2007, as reported by the Central Bank of the DominicanRepublic.  The average annual rates havebeen calculated by using the average of the exchange rates on the last day ofeach month during the period.  At June30, 2007, the average official exchange rate was RD$32.57 per US$1.00 while theaverage private market rate was RD$32.62 per US$1.00.
|                                            | ** ** | **Official Rate**                       | ** ** |
|--------------------------------------------|------------|----------------------------------------------|------------|
| **Year Ended December 31,** | ** ** | **   High   ** | ** ** | **Low** | ** ** | **Avg.** | ** ** |
| ** **                                 | ** ** | **(RD$ per US$)**                  | ** ** |
|                                       |       |                                         |       |   |   |   |   |
| 2002                                       |       | 17.63                                        |       | 16.97 |   | 17.45 |   |
| 2003                                       |       | 43.82                                        |       | 17.76 |   | 29.37 |   |
| 2004                                       |       | 55.42                                        |       | 27.93 |   | 41.93 |   |
| 2005                                       |       | 34.50                                        |       | 28.05 |   | 30.28 |   |
| 2006                                       |       | 35.05                                        |       | 32.19 |   | 33.30 |   |

 
| Month Ended        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------|------------|------------|------------|------------|------------|------------|------------|
|               |       |       |       |       |       |       |       |
| January 31, 2007   |       | 34.51      |       | 33.66      |       | 33.90      |       |
| February 28,  2007 |       | 33.69      |       | 33.43      |       | 33.51      |       |
| March 31, 2007     |       | 33.47      |       | 32.54      |       | 32.96      |       |
| April 30, 2007     |       | 32.65      |       | 32.12      |       | 32.40      |       |
| May 31, 2007       |       | 32.63      |       | 32.02      |       | 32.29      |       |
| June 30, 2007      |       | 33.40      |       | 32.13      |       | 32.57      |       |

 

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|                                            | ** ** | **Private Market Rate**                      | ** ** |
|--------------------------------------------|------------|----------------------------------------------|------------|
| **Year Ended December 31,** | ** ** | **   High   ** | ** ** | **Low** | ** ** | **Avg.** | ** ** |
| ** **                                 | ** ** | **(RD$ per US$)**                  | ** ** |
|                                       |       |                                         |       |   |   |   |   |
| 2002                                       |       | 22.83                                        |       | 17.03 |   | 18.54 |   |
| 2003                                       |       | 44.06                                        |       | 22.50 |   | 30.93 |   |
| 2004                                       |       | 55.72                                        |       | 28.08 |   | 42.11 |   |
| 2005                                       |       | 34.85                                        |       | 28.12 |   | 30.39 |   |
| 2006                                       |       | 35.52                                        |       | 32.30 |   | 33.34 |   |

 
| Month Ended        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------|------------|------------|------------|------------|------------|------------|------------|
|               |       |       |       |       |       |       |       |
| January 31, 2007   |       | 33.45      |       | 33.74      |       | 33.95      |       |
| February 28,  2007 |       | 33.74      |       | 33.48      |       | 33.56      |       |
| March 31, 2007     |       | 33.47      |       | 32.55      |       | 33.00      |       |
| April 30, 2007     |       | 32.68      |       | 32.22      |       | 32.48      |       |
| May 31, 2007       |       | 32.65      |       | 32.12      |       | 32.33      |       |
| June 30, 2007      |       | 33.44      |       | 32.24      |       | 32.62      |       |

 

**RISKFACTORS**

You shouldcarefully consider the risks described below and other information in thisAnnual Report.

#### **Risks Relating to our Restructuring**

***We have defaulted on payment ofour outstanding indebtedness and are in restructuring discussions with ourcreditors; certain of our creditors may exercise their remedies against uswhich could prevent us from continuing as a going concern.***

In September 2003, weannounced that we would not be making a scheduled interest payment on our11-3/8% Senior Notes due September 1, 2004. In October 2003, we suspended principal and interest payments on ourunsecured indebtedness and principal payments on our secured indebtedness.  Subsequently, on September 1, 2004, weannounced that we would not be making the $200 million principal payment on our11-3/8% Senior Notes due September 1, 2004. As a result, our creditors generally have the right to accelerate thematurity of our indebtedness to them and to demand payment of the full amountspayable under their respective debt instruments.  We are continuing discussions with our lenders,including the Ad Hoc Committee which is comprised of certain holders of our11-3/8% Senior Notes due 2004 and other significant creditors, regarding arestructuring.  In 2007, we negotiatedand entered into a Plan Support Agreement with our largest secured creditor andunsecured creditors representing more than 70% by principal amount of ourunsecured indebtedness, providing for the consensual restructuring of ourfinancial obligations, ownership and governance.  Even though these discussions are continuing,our creditors could exercise their rights to collect the debt owed to them ortake other actions, including the exercise under Dominican law of provisionalremedies that could result in, among other things, denying us access to ourbank accounts, or creditors attaching or seizing our assets.  If we are not successful in restructuring ouroutstanding indebtedness, we may not be able to continue to operate ourbusiness as a going concern.

***Our debt restructuring process issubject to significant uncertainty and is likely to result in the effectiveelimination of our current shareholders’ ownership.  If the restructuring process is notsuccessful, we may be forced into insolvency proceedings, which, in theDominican Republic, could result in our liquidation.***

The Plan SupportAgreement contemplates an exchange of all of our unsecured borrowed moneyobligations for a pro rata share of new secured notes to be issued byreorganized Tricom and all of the equity in a to-be-formed holding company.  This will result in a substantial reductionof the amount of our indebtedness.  Theinterests of the existing holders of our equity, including the AmericanDepository Shares, will be effectively eliminated.

Consummation of theproposed restructuring remains subject to significant uncertainties. Althoughour goal is to achieve a consensual restructuring, we may not succeed inaccomplishing this.  It is possible thatone or more of our creditors may seek to attach or seize our assets prior tothe proposed restructuring.  If a claimis filed requesting our bankruptcy by one or more of our creditors, we may seekthe assistance of the Dominican or United States courts.

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In general, if we areforced into bankruptcy in the Dominican Republic our shareholders and holdersof our indebtedness should expect the following three-stage process:

·                                          Aconciliation proceeding administered by the Ministry of State for Industry andCommerce (*Secretaría de Estado de Industria y Comercio*)in which the debtor and its creditors attempt to reach an amicable settlement;

·                                          Ifno amicable settlement is reached, a bankruptcy proceeding is initiated beforethe Court of First Instance (*Tribunal de PrimeraInstancia*) in which the Court determines whether to issue abankruptcy order declaring the debtor bankrupt; and

·                                          Ifa bankruptcy order is issued, the management and/or liquidation of the businessof the debtor and the resolution of creditor claims is administered by up tothree receivers.

However, aDominican court may elect not to apply the amicable settlement and bankruptcylaws because no clear precedents on this subject exist and because of theeffects of the dual revision judicial system established by the Dominicanconstitution which provides litigants the right to appeal any decision of thecourt before a Court of Appeals and later to interpose a certiorari recoursebefore the Supreme Court.  Any bankruptcyproceeding in the Dominican Republic may last for years before a final andirrevocable decision can be obtained.

***Dominican Republic bankruptcylaws may not be as favorable to Tricom or its creditors as U.S. insolvency andbankruptcy laws.***

If ourrestructuring efforts are unsuccessful, we may become involved with bankruptcyproceedings in the Dominican Republic. The bankruptcy laws of the Dominican Republic are significantlydifferent from, and are less developed than, those of the United States.  There have been very few bankruptcyproceedings in the Dominican Republic and none has involved an entity withoperations as significant or a capital structure as complex as ours.  Except for an amicable settlement process,Dominican bankruptcy law does not provide for a reorganization process fordebtors or for an automatic stay on collection or foreclosure efforts bysecured creditors.

**Unless creditors’claims are resolved in an amicable settlement process or in negotiations amongcreditors and the debtor, Dominican law provides only for the liquidation of adebtor’s business and distribution of the proceeds first to employees,Dominican tax authorities, lawyers, landlords, secured creditors, and finallyto unsecured creditors.  Amicablesettlement and bankruptcy proceedings may be time consuming and subject tosignificant delays.  Our business andmarket position likely would be adversely and significantly affected by theproceedings and the adverse publicity that would accompany it.**

**Dominicancourts have broad discretion and, in the absence of precedent, we cannotpredict how courts or appointed receivers would apply the law or administer abankruptcy.  The ability of our creditorsto realize any value may be limited, particularly in liquidation, in which caseour assets and business units likely would have a significantly diminishedvalue.  Our liquidation under Dominicanbankruptcy laws could result in creditors receiving distributions from suchliquidation in Dominican pesos, including with respect to indebtednessdenominated in U.S. dollars, thus subjecting such creditors to the currencyrisks associated with converting Dominican pesos into U.S. dollars.**

***Successfulcompletion of a consensual restructuring requires the cooperation of ourprincipal shareholders, GFN and Motorola. Entities affiliated with GFN are also among our major creditors.***

**Under ourBylaws, the holders of two-thirds of the votes entitled to be cast at ashareholders’ meeting are required to approve the filing of a voluntarybankruptcy petition.  Although theholdings of our current shareholders would be effectively eliminated in therestructuring, the consent of our principal shareholders, GFN and Motorola, isnecessary in order for any restructuring that involves our filing a voluntarybankruptcy petition to move forward. Entities affiliated with one of our major shareholders, GFN, are amongour creditors.  It is therefore possiblethat our major shareholders, in approving our restructuring, may not act in thebest interests of our other creditors.**

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***Potentialfor Duplicate Claims.***

**A portion ofour payment obligations have been subject to one or more assignments orre-documentation both with respect to third parties and our affiliates andformer affiliates.  We are not currentlyaware of any claim that has been asserted against us by more than oneclaimant.  However, it is possible thatmultiple claims relating to the identical underlying liability may be assertedagainst us arising from, among other circumstances, alleged defects in theassignment documentation, lack of required consents or failure to obtainappropriate approvals.  Such risk mayexist in connection with certain transfers of debt between our affiliates.**

***Even if our restructuring process is successfully completed, we may notbe able to service new debt or other obligations resulting from therestructuring.***

Any plan of reorganization resulting from ourrestructuring process, whether pursuant to the Plan Support Agreement orotherwise, is likely to involve us issuing or assuming a significant amount ofindebtedness.  As a result, we willlikely be highly leveraged immediately after any restructuring isconsummated.  The degree to which we areleveraged could have important consequences to us, including the following:

·      Asubstantial portion of our cash flow would need to be used to pay interest onour indebtedness and therefore would not be available for use in our business;

·      We maybe vulnerable to changes in general economic and industry conditions;

·      Ourability to obtain additional financing for working capital, capitalexpenditures, acquisitions, general corporate purposes or other purposes couldbe impaired;

·      We mayhave much more indebtedness than our competitors in the Dominican Republic,which may be a competitive disadvantage in our principal market;

·      Becausesome of our borrowings may be short-term or at variable rates of interest, wemay be vulnerable to interest rate fluctuations, which could result in ourincurring higher interest expenses if interest rates increase;

·      Anydevaluation of the Dominican peso would cause the cost of our U.S.dollar-denominated debt to increase; and

·      Ourfailure to comply with covenants and restrictions contained in the terms of ourborrowings could lead to a default which could cause all or a significantportion of our debt to become immediately payable.

***Notrading market may develop in the securities resulting from our restructuring,and trading in such securities may be subject to significant volatility.***

It is likely that a combination of debt and equitysecurities will be issued in connection with the consummation of ourrestructuring.  There is currently notrading market in any securities that may result from our restructuring and,following consummation of the restructuring, an active trading market for thosesecurities may not develop or be sustained. This could adversely affect the liquidity and market price of oursecurities and holders might not be able to sell them readily.

Active, liquid trading markets generally result inlower price volatility and more efficient execution of buy and sell orders forinvestors. If a liquid trading market for our post-restructuring securitiesdoes not develop, their price may become more volatile, and it may be moredifficult to complete a buy or sell order for such securities.

In addition to our operating results, the tradingprices of our post-restructuring securities may fluctuate in response toseveral 

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extraneous factors, including economic conditions inemerging markets generally, in Latin America, and in our business sector.  The market price of our post-restructuringsecurities may decline below the price set in the restructuring.

***Whetheror not a restructuring is achieved, certain creditors may be beyond thejurisdiction of the United States courts.***

**Dominicancourts may not recognize the jurisdiction or decisions of the United Statescourts, including bankruptcy courts, and our Dominican creditors may not besubject to the jurisdiction of the United States courts.  In a typical restructuring of an entityorganized in the United States, all creditors are subject to the automatic stayprovision and are bound by any plan of reorganization resulting from the bankruptcyproceedings.  We are organized in theDominican Republic and certain of our creditors, in particular our Dominicancreditors, may not be subject to the jurisdiction of the United States courts.  It may therefore be necessary to negotiateseparate settlements with such creditors, which may be on terms different fromthose available to creditors subject to a United States bankruptcyproceeding.  We may not reach settlementswith all such creditors, who may be able to exercise remedies against us andmay not be subject to the automatic stay or other orders of a United Statesbankruptcy court.**

***Weare involved in various legal proceedings which could result in unfavorabledecisions and financial difficulties for us.***

Weare a defendant in a number of legal proceedings.  We cannot be certain that these claims willbe resolved in our favor.  We may, in thefuture, be subject to further legal proceedings, including those arising out ofthe December 2002 private placement and other legal proceedings resulting fromour former affiliation with certain banking and other financial servicesentities that collapsed during 2003.  Ifan unfavorable judgment is obtained against us in any of these matters, we maynot be able to satisfy the amount of the judgment without significantlyimpairing our liquidity.  There can be noassurance that any of the litigants in our pending legal proceedings would beamenable to participating in any consensual restructuring.  If a judgment creditor exercises its rightsto collect a judgment, this could result in, among other things, denial ofaccess to our bank accounts, the attachment or seizure of our assets, or theinitiation of bankruptcy proceedings in the United States or the DominicanRepublic.  A bankruptcy proceeding in theDominican Republic could result in our liquidation.

***Consummationof our restructuring will require the consent of our regulator, Indotel andpossibly other government departments in the Dominican Republic.***

Our restructuring willlikely involve a change of control, an event that will require the consent ofour regulator, Instituto Dominicano de las Telecomunicaciones (“Indotel”).  As part of the proceedings to determinewhether such consent will be granted, third parties, including our competitors,may object to the transactions constituting the restructuring.  In considering our application for consent,Indotel may consult with other government departments and governmental agenciesin the Dominican Republic, including the Central Bank of the DominicanRepublic, any of which may raise objections based on matters extraneous to ourbusiness or the merits of the restructuring. If Indotel decides in favor of these or any other objections, it couldinvalidate the transfer of our telecommunications licenses and other concessionsand impose fines on us.  It is alsopossible that Indotel might limit the areas where we can provide services.  Any determination by Indotel that is adverseto us could have a material adverse effect both on our ability to consummateour restructuring and on our operations and financial position.

***Thechange of control contemplated by our restructuring will likely require theconsent of the Federal Communications Commission in the United States and statetelecommunications regulatory agencies in order for Tricom USA to remain in compliancewith applicable regulatory requirements.***

As our restructuring willlikely involve a change of control, such a change affecting carriers authorizedby the Federal Communications Commission and state telecommunicationsregulators in the United States typically requires the approval of the FederalCommunications Commission and state telecommunications regulators.  Since our subsidiary Tricom USA is certifiedby the Federal Communications Commission and several state telecommunicationsregulatory agencies, prior approval of these governmental entities for thechange of control contemplated by the restructuring may be necessary in orderfor Tricom USA to remain in compliance with applicable regulatory requirements.  As part of the proceedings to determinewhether consent will be granted, third parties, including our competitors, mayobject to the transactions constituting the restructuring.  In considering our application for consent,the Federal Communications Commission may consult with other governmentdepartments and governmental agencies in the United States, including theDepartment of Homeland Security, which has been reviewing certain transactionsinvolving foreign carriers and foreign individuals. Pursuant to the rules ofthe Federal Communications Commission and most state telecommunicationsagencies, we would be required to obtain an approval before consummating the restructuringin order for Tricom USA to remain in compliance with applicable regulatoryrequirements.

***Taxissues concerning the restructuring.***

The tax authority of the Dominican Republic hasauthorized us to use significant amounts of accumulated losses to offsetpotential income arising from the cancellation of our debt that is expected totake place in the context of the restructuring. This authorization is premised on several conditions, in particular,that the ruling only applies for fiscal year 2007.  If we do not consummate our restructuringprior to December 31, 2007, we may be subject to significant additional taxes.

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In or about 2004, we elected to allocate the interestaccrued and to be accrued on the instruments underlying our unsecuredindebtedness to Tricom USA, which is a guarantor of certain, but not all, ofthese obligations.  Our tax advisorsconcluded that such allocation was appropriate and as of June 30, 2007,approximately $111 million of accrued and unpaid interest plus $17 million inpenalty interest has been allocated to Tricom USA.  It is possible, however, that the InternalRevenue Service, another U.S. agency, or the Dominican tax authorities would seekto challenge this allocation.  To theextent such interest is allocated back to Tricom, S.A., we would be required topay all requisite withholding taxes on such interest and it is possible,although unlikely, that Tricom, S.A. could incur additional, fines andpenalties in the Dominican Republic.

**Risks Relating to our CorporateGovernance**

***GFN owns stock witha majority of the voting power and will be able to determine many decisionsconcerning us, including matters in connection with any restructuring that mayrequire shareholder approval.***

According to recordsavailable to us, Mr. Manuel Arturo Pellerano, together with members of hisfamily, either directly or through GFN or their other wholly-ownedsubsidiaries, are the beneficial owners of 17,453,874 shares of our Class ACommon Stock and 11,486,720 shares of our Class B Common Stock,representing approximately 50.8% of the issued and outstanding shares of ourClass A Common Stock (calculated in accordance with SEC Rule 13d-3) and60% of the issued and outstanding shares of our Class B Common Stock.  Mr. Pellerano, together with members of hisfamily, has the right to appoint a majority of the members of our Board ofDirectors and, indirectly, the right to control selection of our management.  Through this control, Mr. Pellerano is ableto significantly influence our strategic direction, our corporate governanceand, to the extent that director or shareholder votes are required, the outcomeof our restructuring.  Entitiesaffiliated with GFN are also among our major creditors.  We have entered into, and may in the futureenter into, transactions with related entities that are controlled by Mr.Pellerano or members of his family.  Suchtransactions may not in all respects be on arm’s length terms and may not be inthe best interests of our other stakeholders, such as creditors and minorityshareholders.

***Directors’ andothers’ duties in the Dominican Republic are different from those in the UnitedStates, and the provisions of our Bylaws and Shareholders Agreement may be oflimited benefit to interested parties.***

We are organized under,and our Bylaws and Shareholders Agreement are governed by, the laws of theDominican Republic.  Under Dominican law,the law concerning fiduciary duties of directors, controlling shareholders andothers, is not as well developed as in the United States.  As a result, in practice it may be moredifficult for creditors, minority shareholders and others to enforce theirrights against us or our directors or controlling shareholder than it would beif we were a U.S. company.

Our principal corporatedocuments consist of our Bylaws and the Shareholders Agreement between our twoprincipal shareholders, GFN and Motorola. See Item 7, Major Shareholders and Related Party Transactions—ShareholdersAgreement.  While these documents addresscertain corporate governance issues, one of their principal purposes was toregulate matters as between those two shareholders.  Accordingly, the benefit of these documentsto other interested parties, such as minority shareholders and creditors, maybe limited.  Furthermore, it is difficultto predict how a court of competent jurisdiction in the Dominican Republicwould interpret the provisions of these documents in specified circumstances.

***Wemay have significant liabilities arising out of a private placement that tookplace in December 2002.***

Our consolidatedbalance sheet as of December 31, 2002 and the related statements of operations,stockholders’ equity (deficit) and comprehensive loss and cash flows for theyear then ended were restated to reflect adjustments to the financialinformation and footnotes previously reported in our Annual Report on Form 20-Ffor the fiscal year ended December 31, 2002. The adjustments related primarily to the purchase in December 2002 ofshares of our Class A Common Stock by a group of investors for anaggregate purchase price of approximately $70 million.  See Item 7, Major Shareholders and RelatedParty Transactions—2002 Private Placement in our Annual Report on Form 20-F forthe fiscal year ended December 31, 2004, for a detailed description of thePlacement, the report of the Special Committee and the restatement andamendment of our 2002 financial statements.

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The report of theSpecial Committee contained observations to the effect that we may have certainundisclosed actual or contingent liabilities arising out of the Placement andthat the disclosure as to the Placement and related transactions contained inour Annual Report on Form 20-F for the fiscal year ended December 31, 2002 mayhave been deficient and/or not consistent with information presented to theSpecial Committee.  The report alsostated that varying conclusions can be reached as to whether we properlyaccounted for the Placement, based on different hypothetical factscenarios.  As of the filing date of thisreport, no claims arising out of the events relating to the Placement have beenasserted, in any jurisdiction, in any litigation or similar proceedings broughtagainst us or our subsidiaries. Nevertheless, we have received indications thatcertain parties involved in the Placement believe that they have claims inconnection with the Placement, although we are unable at the present time todetermine either the probability of such claims being asserted against us, orthe validity or amount of such claims if they are asserted.  While it is possible that we will in thefuture need to establish loss contingencies relating to the Placement, ourmanagement does not believe that this is necessary at the present time.  Claims arising out of the Placement could, inthe aggregate, equal or substantially exceed the $70 million amount of thePlacement, in particular if the claimants seek rescission of the Placement orcertain related transactions.

***Thereport of the Special Committee raised several issues relating to our corporategovernance, most of which have not been addressed.***

In addition to thepossibility of liabilities arising out of the Placement, the Special Committeeoffered several observations and corrective recommendations for our Board ofDirectors’ consideration, including, among others, the following:

·     Thecreation of an independent audit committee of the Board of Directors, inaccordance with current best corporate governance practices for U.S. publiccompanies;

·     Expansionof the scope of review of our internal audit function to cover all relatedparty transactions;

·     Strengtheningthe internal legal function by adoption of more stringent internal policiescovering the legal review and sign-off of corporate transactions, and Board ofDirectors approval of a consistent policy for retention and use of outsidelegal counsel in connection with any significant corporate transaction;

·     Constitutionof a formal internal management disclosure committee, comprised of members ofour finance/accounting, legal and selected business units, having primaryresponsibility for creating and reviewing our public disclosures of materialevents and transactions and other matters;

·     Adoptionof a comprehensive code of conduct, covering all directors, officers and employees,in a form consistent with best internal governance practices for publiccompanies addressing, among other things, the guidelines for appropriatedocumentation and independent review and approval of transactions involving ourrelated parties or affiliates;

·     Adoptionof a formal records retention policy covering, among other things, aclassification of records to be preserved (and for how long), who has access toour files and guidelines for documenting material transactions, etc.

Amore detailed description of these recommendations is set forth in our Reporton Form 6-K dated December 9, 2005.  Todate, we have not implemented most of these recommendations.  While adoption of these or similarrecommendations may not prevent the occurrence of transactions raising issuessimilar to those raised by the Placement, our failure to implement theserecommendations could leave us exposed to further liabilities from transactionsthat may occur in the future.

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***We donot have an audit committee and our internal accounting systems and controlsmay be inadequate to ensure timely and accurate financial reporting.***

Our Board ofDirectors has not appointed an audit committee. For purposes of U.S. securities laws, in the absence of an auditcommittee, our full Board of Directors fulfills the functions of the auditcommittee.  While our Board of Directorsis not currently required to appoint an audit committee, the absence of one isunusual and not in accordance with current best corporate governance practicesfor U.S. public companies.

During the courseof the audit of our consolidated financial statements for the years endedDecember 31, 2004, 2005 and 2006, our independent registered accounting firmnoted several major weaknesses in our financial reporting and related internalcontrols.  Our auditor recommended thatour management assess these weaknesses and implement improvements in themonitoring, revision and supervision of our internal controls over financialreporting.  While we have implementedmany of these recommendations, we are still in the process of addressing theseissues.  Our internal accounting systemsand controls may be inadequate to ensure timely and accurate financialreporting.  We may be, and historicallymay have been, unable to detect or prevent a material misstatement of ourconsolidated financial statements.

***Weare not able at the present time to engage an internationally recognizedauditing firm.***

For the fiscalyear ended December 31, 2002 and prior years our auditor was the member firm ofKPMG located in the Dominican Republic (“KPMG”).  This firm performed our audit work for thefiscal year ended December 31, 2003, but withheld its consent to filing ourAnnual Report on Form 20-F for that year. Since then, KPMG has not performed any further work for us.  In March 2005, we announced that Sotomayorhad been retained to act as our auditor for the year ended December 31, 2004,and in December 2005, we announced that they would also be retained as auditorfor the years ended December 31, 2002 and 2003, replacing KPMG.  Sotomayor was also our auditor for the years endedDecember 31, 2005 and 2006. Sotomayor is a Public Company Accounting OversightBoard (“PCAOB”) registered independent public accounting firm with itsprincipal office in Pasadena, California. The firm has acted as independent auditor to Tricom USA, our whollyowned subsidiary in the United States, since 1999.  While our auditor’s PCAOB qualificationpermits it to act as our independent registered public accounting firm, it isnot an internationally recognized firm, and may not have available to it all ofthe resources necessary to address the more complex audit and accounting issueswe face.

#### **RisksRelating to our Capital Structure and Liquidity**

***Ourconsolidated financial statements have been prepared on a going concern basis.***

Our consolidated financial statements have beenprepared on a going concern basis, which contemplates continuity of operations,realization of assets and satisfaction of liabilities in the ordinary course ofbusiness.  However, because of ourcurrent financial condition and the effects of the Dominican economy, includingthe effects of the fluctuation of the Dominican peso on our operating resultsand other matters, the realization of assets and satisfaction of ourliabilities are subject to substantial uncertainty.  In the past, we financed our capitalexpenditure and working capital requirements, to the extent we did not generatesufficient cash flow from operations, with borrowings, principally in Dominicanmarkets.  In light of our recentfinancial results and adverse developments in the Dominican economy, we may notbe able to generate the cash flow from operations required to operate as agoing concern.  At the present time, ouronly source of liquidity is cash flow from operations and proceeds from assetsales.  We do not have access to outsidefunding sources.  Even if we are able toreach agreement with our lenders concerning a financial restructuring, we maynot be able to obtain the financing in the future necessary to continue fundingour operations or capital needs.  Thereport on our financial statements by our independent registered accountingfirm contains an explanatory paragraph that states that these factors, amongothers, create substantial doubt about our ability to continue as a goingconcern.

***We donot generate sufficient cash flow from operations to meet our debt servicerequirements.***

Even if we are able to reach agreement with ourlenders concerning a financial restructuring, our ability to pay interest onour indebtedness (even if the principal amount is reduced in a restructuring)and meet our debt service obligations will depend on our future operatingperformance, including our ability to increase revenues and control expenses,which in turn depends on successful 

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implementation of our strategy and on financial,competitive, regulatory, technical and other factors, many of which are beyondour control.  It is likely that any newdebt issued in exchange for our existing indebtedness will be payable in U.S.dollars and our ability to pay interest and principal will continue to beaffected by and dependent on the performance of the Dominican economy.  As a result of these and other factors, wemay not be able to meet our debt service obligations even if our currentindebtedness is restructured.

***Thevolatility and depreciation of the Dominican peso against the U.S. dollar couldreduce the amount of cash we will have to fund our operations or to purchaseequipment and cable television programming, and to repay indebtedness, even ifour indebtedness is restructured.***

For 2005 and 2006,we earned 52.5% and 55% respectively, of our operating revenues in Dominicanpesos and the remainder of our operating revenues in foreign currency,primarily in U.S. dollars.  Thepercentage of operating revenues in Dominican pesos could increase if wesuccessfully increase our share in Dominican local markets in accordance withour business strategy.  From 2005 to2006, the average annual exchange rate increased 9.7% representing astrengthening of the U.S. dollar against the Dominican peso compared to adecrease of 27.8% from 2004 to 2005. Most of our indebtedness is U.S. dollar-denominatedand must be paid in U.S. dollars.  Ourcommunications equipment vendors and cable programming providers all requirethat we pay in U.S. dollars.  Asignificant increase in the exchange rate in the foreseeable future may againadversely affect our operating results, as well as our ability to purchase U.S.dollars in order to service our debt obligations and pay equipment vendors andcable programming providers.  Ourpurchase of substantial amounts of U.S. dollars in Dominican markets couldadversely affect the value of the Dominican peso in relation to the U.S. dollarand make these purchases more costly for us.

***OtherTax Issues.***

The Dominican government has in the past changed taxrates and created new taxes, as well as modified the system of taxation withsome frequency.  In addition, it ispossible that the Dominican government may impose taxes related to thetelecommunications industry that may affect our financial performance.

#### **RisksRelated to our Operations**

***Ourprincipal competitor for the provision of local, mobile and international longdistance services in the Dominican Republic, Codetel, has substantially greatermarket share and resources, which may prevent us from maintaining or increasingour market share.***

We compete primarily with Compañía Dominicana deTeléfonos C. por A., or “Codetel” (formerly Verizon Dominicana, which wasacquired by América Móvil, S.A. de C.V. in December 2006). Codetel has anestablished market presence, networks and resources substantially greater thanours.  At December 31, 2006,approximately 80% of the Dominican Republic’s local access line customers andapproximately 50% of subscribers for mobile services were customers of Codetel.Codetel’s presence is particularly strong in the market segments that we noware targeting, including consumer and business post-paid subscribers for mobileand local services, which generate greater revenues than pre-paid individualsubscribers.  The growth of our marketshare among consumer and corporate post-paid subscribers depends upon ourability to convince Codetel customers to either add, or switch to, thetelephony services we offer.  If Codetelimplements significant price reductions for particular services, we may beforced to reduce our rates in response in order to remain competitive.  In addition, Codetel could expendsignificantly greater amounts of capital than are available to us in order toupgrade its network and/or sustain price reductions over a prolongedperiod.  As a result, we may not be ableto maintain or increase our market share for local services or in other marketsin which we compete with Codetel.

***Otherentrants in the Dominican markets, particularly for mobile services, haveincreased competition for our services, and could reduce our market share orincrease price competition.***

In addition to Codetel, weface substantial competition in the mobile market:

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·                               Orange,a subsidiary of France Telecom Group, offers cellular services and hasdeveloped an aggressive marketing strategy based on offering services atdiscounts.  We believe that at December31, 2006 Orange subscribers represented approximately 30% of subscribers formobile services in the Dominican Republic. Orange also employs GSM technology, which is the prevalent technologyused in Europe and makes its services compatible with handsets that manytourists use;

·                               AllAmerica Cables and Radio, Inc., or “Centennial Dominicana” (which was acquiredby Trilogy International Partners in early 2007), is an integratedtelecommunications provider that offers mobile and data services.

As a result of these and other potential new entrants,we expect to face more competition in the Dominican telecommunications marketin the future, including from international communications companies withsignificantly greater resources than ours, which could adversely affect ourability to maintain our market share or require us to lower prices.

Further investment by foreign companies in Dominicantelecommunications markets could limit the number of U.S. carriers that wouldsend significant traffic to us, thereby adversely affecting our ability togenerate international long distance termination revenues. Due to unfavorablemarket trends, termination rates for international traffic from the UnitedStates and Puerto Rico to the Dominican Republic have declined and couldcontinue to decline, which would further reduce our international revenues andrelated profit margins.

***If weexperience a significant number of customer non-payments our business andresults of operations could be adversely affected.***

Our business plan includes increasing our revenuesfrom post-paid services, including mobile telecommunication services and cabletelevision services.  Although we haveinstituted measures to minimize consumer credit risks, these efforts may not besuccessful as we expand our services in the post-paid area.  Moreover, efforts to minimize credit risk maylimit the number of our new subscribers. If we experience a significant number of non-payments or are unable toattract new post-paid customers, then our revenues will decrease and our cashposition will be weakened.

***Terminationrates for international traffic from the United States and Puerto Rico havedeclined and could continue to decline, which would reduce our internationalrevenues and profit margins from these revenues.***

Revenues from our international long distance businessrepresented approximately 38% of our operatingrevenues in 2004, and 32% in each of 2005 and 2006. Exchange rate and markettrends have caused our average termination rates for traffic between the UnitedStates and the Dominican Republic to decline from $0.41 per minute during 1996to $0.069 per minute in 2006. We believe that competitive and regulatorypressures could continue to push settlement rates lower.  Future decreases in termination rates,without a corresponding increase in our international long distance trafficoriginating in the United States and Puerto Rico, would reduce ourinternational termination revenues and adversely affect the profit margins thatwe realize from these revenues.

As in the rest ofthe world, there are changing dynamics in our international business. Modernmarket technologies such as Voice-over-Internet Protocol (“VoIP”) equipmenthave created an environment allowing new entrants into this business in theDominican Republic.  These companies mayextend their reach to many of our traditional U.S.-based carriers and resellersthat terminate significant traffic in the Dominican Republic***.***

***Becausewe are receiving an increasing portion of our international minutes from U.S.-basedresellers, we may experience substantial fluctuation in our internationalrevenues.***

Since 1997, wehave derived an increasing proportion of international revenues from U.S.-basedresellers, which are companies that typically buy long distance minutes in bulkand resell the minutes to other companies or individual end users.  During

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2006, resellersoriginated approximately 68% of our international long distance minutes fromthe United States to the Dominican Republic.  While we enter intoagreements with resellers, they are not required to provide us with anyspecified amount of traffic.  The volume of minutes and revenues wereceive from these resellers has significantly varied throughout the past yearsbecause of competition for their business, primarily from Codetel, our maincompetitor, and because of the uncertain financial condition of manyresellers.  The price per minute we charge a reseller is frequentlyrenegotiated and as a result we, together with our competitors, struggle tomaintain stable prices. At December 31, 2006, we received traffic fromapproximately 75 resellers. Intense competition in U.S. markets amonginternational long distance carriers has resulted in bankruptcy filings by manyof our reseller clients.

***Ournet growth in, and revenue derived from, subscribers may be reduced by customerdisconnections or churn.***

Our results ofoperations in the past have been, and in the future may be, affected bysubscriber disconnections, whether initiated by our customers or by us.  In order to realize net growth insubscribers, we must replace disconnected subscribers with newsubscribers.  Our average monthlydisconnection rate, or “churn rate,” was 5.1% formobile subscribers during 2006 compared to 6.7% during 2005, and 1.6% for localaccess line subscribers during 2006 compared to 1.8% during 2005. During 2005and 2006, our average churn rate for cable television was 1.4%.. The sales andmarketing costs associated with attracting new subscribers are substantial,relative to the costs of providing service to existing subscribers.  If we are unable to maintain our creditpolicies or otherwise limit churn, we will experience a decline in net growthin subscribers and revenue.

***Wemay not have sufficient resources to keep pace with rapid changes in technologiesused to provide telecommunications services which could increase competition orrequire us to make substantial additional expenditures to maintain and improveour current networks, which could reduce our revenues from subscribers and cashflow.***

The services weoffer are technology intensive.  Thedevelopment of new technologies could make the technology we use obsolete.  We may have to make substantial additionalinvestments in new technologies to remain competitive.  New technologies we choose may not prove tobe commercially successful.  We wouldrequire substantial investment to replace or upgrade all or a substantial partof our network.  We have chosen toimprove our liquidity by reducing our capital expenditures which affects ourability to improve our network.  We spentapproximately $26.2 million on capital expenditures in 2006.  This compares to $28.6 million in 2005 and$13.3 million expended in 2004.  If we donot invest in the latest technology, our network may rapidly become obsoleteand we may not be able to retain our existing customers or attract new ones.

***If weare unable to continue offering high-quality programming, our cable revenuesmay decline.***

The success of ourcable television services depends upon our ability to acquire popular,high-quality programming content.  Welicense a significant portion of our programming from third parties.  Our arrangements with these third partiesregarding programming may be terminated, or may not be renewed on favorableterms, if at all.  These third partiescould increase our costs of obtaining programming and we may not be able topass these costs on to our cable subscribers. As we upgrade the channel capacity of our cable system and addprogramming to our basic cable service, we may not be able to pass programmingcosts on to our cable subscribers.  Ifsome or all of our programming arrangements are terminated or if we cannotnegotiate new agreements on terms favorable to us, we may lose existingsubscribers and attract fewer new subscribers, which would reduce our revenues.

***Ouroperations may be vulnerable to hacking, viruses, thefts and other disruptions.***

“Hacking” involves efforts to gain unauthorized accessto information or systems or to cause intentional malfunctions or loss orcorruption of data, software, hardware or other computer equipment. Inaddition, the transmission of computer viruses could expose us to a materialrisk of loss or litigation and possible liability.  Computer viruses, break-ins or other problemscould lead to:

·                               Theinterruption, delay or cessation of services to our subscribers;

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·                               Thecompromise of confidential information relating to our subscribers;

·                               Damageto our reputation and the loss of subscribers; and

·                               Costlylitigation.

***TheDominican Republic is highly vulnerable to hurricanes.***

Much of our network is above ground, includingsignificant parts of our backbone. A major hurricane could result insignificant damage to and disruption of our network. In addition, our networkmay not be fully insured. Our network is also vulnerable to theft and sabotage.

**RisksRelating to our Principal Market, the Dominican Republic**

***Ourresults of operations have been, and may continue to be, materially adverselyaffected by the fluctuation of the peso and the economic conditions currentlyprevailing in the Dominican Republic.***

We realize asubstantial portion of our revenues in Dominican pesos and, as a result, theincrease in the exchange rate of the Dominican peso to the U.S. dollar has hadand may in the future have a material adverse effect on the U.S. dollar valueof our operating results and our ability to service our debt which is largelydenominated in U.S. dollars. The average annual Dominican peso exchange rateagainst the U.S. dollar increased 9.7% in 2006 compared to a 27.8% decrease in2005, and a 36.1% increase in 2004.  Thefluctuation of the Dominican peso in the past few years has had a materialadverse effect on our financial condition, as our largely Dominicanpeso-denominated assets have depreciated in value and our indebtedness islargely U.S. dollar denominated. Although the exchange rate recently has improved, in particularfollowing the change in government in 2004, there cannot be any assurance thatcurrent exchange rates will be sustained. Any further depreciation of the Dominican peso against the U.S. dollarwill correspondingly increase the amount of our debt in Dominican pesos, withfurther adverse effects on our results of operations and financial condition.Our total indebtedness as of December 31, 2006 was $447.1 million.

It is impossibleto predict whether, and to what extent, the value of the Dominican peso mayfurther depreciate against the U.S. dollar and how these uncertainties willaffect the Dominican economy and the consumption of telecommunicationservices.  Moreover, we cannot predictwhether the Dominican government will modify its monetary policy and, if so,what impact any such changes could have on our financial condition and resultsof operations.

***Poverty,social unrest and shortages of basic services in the Dominican Republic couldaffect the use of telecommunications services, which would decrease ourrevenues.***

The DominicanRepublic has widespread poverty.  Fromtime to time, the country has experienced social unrest partly as a result ofprice increases and shortages of water and electricity.  Any increase in poverty, social unrest orshortage of basic services could adversely affect the use of telecommunicationsservices.

***Youmay not be able to enforce claims in the Dominican Republic based on U.S. laws.***

A majority of ourdirectors and all of our officers reside outside of the United States.  A substantial portion of our assets and theassets of these persons are located outside the United States.  As a result, it may not be possible forinvestors to effect service of process within the United States upon us orthese other persons to enforce judgments obtained against us or against them inUnited States courts predicated upon the civil liability provisions of theUnited States federal securities laws, other federal laws of the United Satesor laws of the individual states of the United States.

No treatycurrently exists between the United States and the Dominican Republic providingfor reciprocal enforcement of 

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foreignjudgments.  We have been advised by ourDominican counsel, that there is doubt as to (1) the ability of a plaintiff tobring an original action in a Dominican court which is predicated solely uponthe United States securities laws, other federal laws of the United States orlaws of the individual states of the United States and (2) the enforceabilityin Dominican courts of judgments of United States courts obtained in actions predicatedupon civil liability provisions of the United States federal securities laws,other federal laws of the United States or laws of the individual states of theUnited States.

Our Dominicancounsel also has advised us that the enforceability of actions brought inDominican courts of liabilities predicated on U.S. laws would requirecompliance with certain procedures, including the validation by Dominicancourts of decisions rendered by United States courts.  Compliance with such procedures could requirea substantial amount of time and expense, and local defendants could assertdefenses to enforcement based on noncompliance with such procedures.  Foreign plaintiffs bringing original actionsin a Dominican court also can, at the request of the defendant, be required topost a litigation bond in an amount established by such court in itsdiscretion.

The Dominicanlegal system is based upon civil law principles according to which judgesdecide both the facts and legal issues of a case, and they are not bound bylegal precedents.  As a result, judgeshave broader discretion in reaching decisions than do judges in the UnitedStates.  In the past, the United StatesDepartment of Commerce has reported that Dominicans and foreign observers havecriticized the Dominican judicial system for what they perceive as aninequitable resolution of business disputes. The Dominican legal system, coupled with the fact that substantially allof our assets are located in the Dominican Republic, may present substantialobstacles to the enforcement of judgments against us, as well as our directorsand officers in the Dominican Republic.

***Increasesin the inflation rate would adversely affect the Dominican Republic’s economyand the demand for our services.***

Inflation in theDominican Republic has decreased in 2006 compared to the two previous years.According to the Central Bank, the annual rate of inflation was 5.0% in 2006compared to 7.4% in 2005 and 28.7% in 2004. While inflation in 2005 and 2006 reflected general price increases, thehigh level of inflation in 2004 was principally due to the depreciation of theDominican peso against the U.S. dollar, higher fuel prices and growth in publicspending. According to the Central Bank, the average annual exchange rate ofthe Dominican peso to the U.S. dollar increased 9.7% in 2006, compared to adecrease of 27.8% in 2005 and an increase of 36.1% in 2004.  Any increase in the value of the U.S. dollaragainst the Dominican peso directly affects the Dominican Republic’s inflationrate because the Dominican Republic relies heavily on imports from the UnitedStates of raw materials and consumer goods. High inflation levels could adversely affect the Dominican Republic’seconomy and reduce demand for our services.

#### **RisksRelating to our Shares and ADSs**

***OurADSs have been delisted and are no longer listed on a national securitiesexchange; our Depositary Agreement has been terminated; our debt restructuringis likely to result in effective elimination of our current shareholders.***

On May 11, 2004,the New York Stock Exchange (“NYSE”) determined to suspend trading and pursuedelisting of our ADSs, ticker symbol “TDR”. On May 19, 2004, our ADSs began trading on the OTC (over-the-counter)Bulletin Board (“OTCBB”) under the symbol “TRICY.OB”. On July 25, 2004, theOTCBB suspended trading of our ADSs. Thereafter, our ADSs were traded on the “Pink Sheets” service under thesymbol “TRICY.PK”.  In December 2006, theBank of New York, as depositary for our ADS facility, notified us and holdersof our ADSs that they were terminating the ADS facility.  With the termination of the ADS facility, ourADSs ceased trading on the “Pink Sheets” service on March 29, 2007.  Upon termination of the ADS facility, most ofthe depositary’s obligations under the Deposit Agreement also terminate.  Holders of our ADSs may obtain delivery ofthe shares of Class A Common Stock underlying our ADSs, upon payment of certaintaxes and processing fees.  As a resultof the termination, the Bank of New York is no longer obligated to perform anyfunctions in connection with voting the Class A Common Stock underlying ourADSs.

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Followingconsummation of our debt restructuring, the interests of our currentshareholders, including holders of our ADSs, are expected to be effectively eliminated.

***GFNmay act without approval of the ADS holders to release directors and officersfrom liability.***

Under Dominican law, shareholders are asked to voteupon the performance of management at annual shareholders’ meetings.  Our vigilance officer delivers a report onour financial performance and other issues related to management’sperformance.  If the holders of amajority of the votes entitled to be cast approve management’s performance, allshareholders are deemed to have released the directors and officers fromliability to us or our shareholders arising out of actions taken or any failureto take actions by any of them on our behalf during the prior fiscal year, withcertain exceptions.  As a result, shareholderslikely will fail in any suit brought in a Dominican court with respect to suchacts or omissions.  Officers anddirectors may not be released from any claims or liability for criminal acts,fraud, self-dealing or gross negligence. GFN controls a majority of the votes entitled to be cast at annualshareholders’ meetings and, without the concurrence of other shareholders, isable to approve the performance of management, thereby releasing managementfrom liability to our shareholders, including holders of our ADSs.

## **ITEM 4.           INFORMATIONON THE COMPANY**

Tricom, S.A. isincorporated in the Dominican Republic. Our operations are headquartered at Ave. Lope de Vega No. 95, SantoDomingo, Dominican Republic and our telephone number at the above address is809-476-4000.  Our website address iswww.tricom.net.  Our agent in the UnitedStates, appointed for purposes of the indenture governing our 11-3/8% SeniorNotes due 2004, is CT Corporation System. This agent can be reached at 111Eighth Avenue, New York, NY 10011 and at telephone number 800-624-0909.

#### **BUSINESS OVERVIEW**

#### **Overview**

We are a fullservice communications services provider in the Dominican Republic.  We offer local, long distance, mobile, cabletelevision and broadband data transmission and internet services.  Our mobile network covers approximately 90%of the population in the Dominican Republic. Our network providing local service is 100% digital.  Telecommunications networks that employdigital technology can transmit higher quality signals at lower cost.  We also own interests in undersea fiber opticcable networks that connect and transmit telecommunications signals betweenCentral America, the Caribbean, the United States and Europe.  Fiber optic cable is composed of glassstrands and transmits telecommunications signals in the form of light.  Through our subsidiary, Tricom USA, Inc., weown telecommunication-switching facilities in New York and Florida. Using thesefacilities, we originate, transport and terminate international long-distancetraffic.  We believe we are one of thefew Latin American-based long distance carriers that is licensed by the U.S.Federal Communications Commission (“FCC”) to own and operate switchingfacilities in the United States.

Through oursubsidiary, TCN Dominicana, S.A., we are the largest cable television operatorin Santo Domingo and one of the largest cable television operators in theDominican Republic.

#### **Service Offerings**

Our serviceofferings include:

·                               International long distance;

·                               Domestic telephony;

·                               Mobile;

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·                               Cabletelevision; and

·                               Datatransmission and internet.

###### ***International Long Distance.***

In the DominicanRepublic, we provide international long distance services to our local accessline and mobile customers.  In addition,we offer a prepaid calling card for international long distance, the *Bla Bla Bla®* card that can be used from any telephone in theDominican Republic.  We operate telephonecenters that provide access to telephone services to individual customers whoeither do not have telephone services in their own homes or who are attracted bythe competitive pricing of the telephone centers.  The centers offer a wide range of telephoneservices, including bill payments and service of sales in addition to longdistance calls.

In the UnitedStates, our subsidiary Tricom USA provides international carrier servicesprimarily to resellers, which account for an increasing share of internationallong distance traffic between the United States and the DominicanRepublic.  During 2006, resellersoriginated approximately 68% of the international long distance minutes fromthe United States to the Dominican Republic that we received. Minutes deliveredby resellers may fluctuate significantly. Through our telecommunicationsswitching facilities in the United States, we have been able to provideresellers with an alternate channel for sending international long distancetraffic.  In addition, by havingfacilities that can originate, transport and terminate international longdistance traffic between the United States and the Dominican Republic, webelieve that we are able to send and receive such traffic at a lower cost to usthan by exchanging traffic with traditional international carriers.

Since 1997, TricomUSA has offered international long distance calling services to the Hispaniccommunity in the United States, targeting primarily Dominican communities.  Our prepaid calling cards were distributedthrough wholesalers from our New Jersey office and through retailers from ourNew York location.  Our cards were soldprimarily in small retail stores including groceries, drugstores andnewsstands. They were advertised through special promotions during Hispanicevents and by radio, television and newspapers that target Dominican and otherethnic communities, particularly in the New York metropolitan area. Ouradvertising emphasized savings, voice quality and patriotic themes.  At the beginning of 2007, we discontinued ourprepaid calling card business in the United States.

In addition toprepaid calling cards, Tricom USA offers national and international longdistance services in New York, New Jersey and Florida, through carrieridentification code (“CIC”) services. A CIC is a four-digit number used byend-user customers to reach the services of inter-exchange carriers throughequal access arrangements. Major users of this service are calling centers.This service is offered through a combination of our own and independent salesagents.

In addition to itsinterstate and international authorization, Tricom USA is currently certifiedto provide telecommunications services in California, Delaware, Florida,Georgia, Illinois, Indiana, Maryland, Massachusetts, New Jersey, New York,Ohio, Pennsylvania, Rhode Island, Washington DC, and Wisconsin, as well as PuertoRico, the U.S. Virgin Islands and Canada.

###### ***Domestic Telephony.***

We are acompetitive local exchange carrier in the Dominican Republic and atDecember 31, 2006 we had 183,975 local access lines in service compared to167,763 lines at December 31, 2005. According to Indotel, there wereapproximately 897,026 local access lines in service in the Dominican Republicat December 31, 2006.  Tricom hadapproximately 20.5% of the local access line market at the end of that period.  Our local access network covers areas withapproximately 65% of the population of the Dominican Republic. We previouslydeployed a wireless local loop but intend, to the extent economically feasible,to convert most wireless local loop subscribers to wireline over the nextseveral years.

All of our basictelephone service customers have access to a range of value-addedservices, including call forwarding, three-way 

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calling, callwaiting, caller ID and voicemail applications. In addition to local service, we provide international and domestic longdistance services and internet access to our consumer and business customers.

We offer ourcustomers broad flexibility in assembling customized packages of services,which provide our customers with cost savings and enhanced control over theirconsumption of telephone services. Customers may choose from a menu of services, including domestic andinternational long distance services, local service and value-addedservices.  They also may bundle theirlocal access service with cellular or PCS, paging, cable television andinternet services.  Service packagespermit customers to preset their monthly bills based upon, for example, localservice minutes or long distance minutes. Customers are responsible for paying for usage levels in excess ofpreset package amounts, at regular per minute rates.  We believe that providing customers with suchbudgeting capability increases consumer confidence in using telecommunicationsservices, consequently allowing for increased service penetration, higherlevels of customer satisfaction and lower incidence of delinquent payments.

Using wirelineconnections, we can also offer data transmission and other value added servicesattractive to the businesses and higher usage consumer subscribers that we aretargeting.  We also sell fully integratedsystems and components for both turnkey systems and private telephone networksused within enterprises.  We are adistributor of leading manufacturers of private branch exchanges and keytelephone systems and a leading provider of computer telephony integrationsystems in the Dominican Republic.

###### ***Mobile.***

Our mobile networkcovers approximately 90% of the Dominican Republic’s population.  We offer both analog cellular and PCS mobileservices.  According to Indotel, therewere approximately 4,605,659 analog and PCS cellular subscribers in theDominican Republic at December 31, 2006. At December 31, 2006, we had 465,910 mobile subscribers compared to393,991 mobile subscribers at December 31, 2005. Our market share declined from10.9% to 10.1% during 2006. We attribute this decline to intense competitivepressures during the period, coupled with our limited ability to make capitalexpenditures, low investment in marketing and low equipment subsidies, ascompared to our competitors.

Our prepaid cardprogram offers both analog cellular and PCS mobile services to individuals whowould not satisfy our credit policies for postpaid services. These cards alsoappeal to customers who prefer to budget their mobile telephone spending.  At December 31, 2006, we had 441,197prepaid mobile subscribers, approximately 95% of our total mobile subscribersin the Dominican Republic.

We have offeredPCS mobile services since April 1999. This technology provides for added security and privacy compared withtraditional analog systems, and it also offers greater capacity.  PCS customers are able to receive benefitsrelated to digital service, including digital messaging, caller ID and voicemail.  We offer a dual-band service, allowingcustomers to use seamlessly their mobile phones nationwide over both digitaland analog networks.

For largecorporate, medium and small businesses, with multiple mobile phones included aspart of one service contract, we offer a range of unique mobile fleetmanagement services, specifically designed to help our business customersmanage their fleet communication needs. We offer our business customers broadflexibility in assembling customized mobile fleet service plans, which providefor cost savings and enhanced control over their consumption of mobilecommunication services.  Our mobile fleetmanagement service offers cost reductions for “on-net” calls, flat rates forcalls to wireline and mobile phones, and cost control for “off-net” callsthrough a comprehensive on-line reporting suite, among other benefits.

We offer domesticas well as international roaming services to participating subscribers.Subscribers who pay the roaming rates gain access to our nationwide mobilenetwork, while subscribers paying the international roaming fees are able toroam outside of the Dominican Republic, using the networks of cellular serviceproviders with which Tricom has entered into roaming agreements.

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***Cable Television.***

We are the largestprovider of cable television services in Santo Domingo and one of the largestin the Dominican Republic.  At December31, 2006, our cable network served 68,903 subscribers, including 52,249 basic programmingsubscribers, 12,171 occupied hotel and other commercial rooms (based on ourinternal calculations) and 4,483 subscribers for cable modem and digitalmusic.  In addition to publicly availableprogramming, we license or otherwise acquire programming from various programmingproviders for broadcast on our cable television network. We also produce alimited amount of programming ourselves intended for exclusive broadcast on ournetwork.  We currently offer 105 basicand expanded programming channels including HBO, Cinecanal, Moviecity, Disney,ESPN, Fox Sports and CNN.  We also sellour own advertising time, replacing international commercials with localadvertisements.

*BasicProgramming Packages.* Our basic programming packages provide access to a maximum of 78 localand foreign content channels. Subscribers pay a one time, refundable deposit for each analog set topbox and a monthly fee for this service. Subscribers do not need a digital decoder to receive the basic servicepackage.

*ExpandedProgramming Packages.* Our expanded programming packagesinclude all of the channels included in our basic programming package, with anadditional choice of premium packages, including movies and adult programmingpackages.  Expanded programmingsubscribers pay the basic service package monthly fee plus the additional costof the expanded programming. An analog or digital decoder set-top box isrequired for these services, providing a maximum of 105 channels.  We are currently focusing on marketing ourvarious expanded programming packages to our existing basic subscribers with aview to increase our overall revenues per subscriber.

*DigitalCable and Cable Modem Service.*  We offer digital cable television andhigh-speed internet access over coaxial cable via cable modem, under the brandname Internet Tornado®.  Digital cabletelevision provides movie-quality pictures, digital-quality sound, broadcastservices and certain programming not available through our basic or expandedprogramming packages.  Our digital cabletelevision offering includes an on-screen interactive program guide, 17 pay-perview channels, 2 video music channels and 50 channels of commercial freeCD-quality music.  A digital decoderset-top box is required for these services.

*DigitalMusic Services.*** **We offer digital audio programmingprovided by DMX Music International through our hybrid fiber coaxial network.Customers choose from 50 exclusive music channels that play 24 hours a day,seven days a week.  Subscribers for thisservice are primarily hotels.

***Data Transmission and Internet.***

In the DominicanRepublic, we are the second largest internet service provider. According toIndotel, there were approximately 181,853 data and internet subscribers in theDominican Republic at December 31, 2006. Comparatively, we had 21,464subscribers or 11.8% of the data and internet market share. We provide internetconnectivity to the consumer and business markets through traditional dial-upconnections, digital subscriber lines, or xDSLs, dedicated lines and cablemodems.  Our cellular PCS services arenow fully integrated with our internet service, offering e-mail and digitalmessaging through our website, www.tricom.net. In addition, we offer ourresidential customers internet access bundled together with local, wireless andother services.

We providebroadband data transmission services to large business customers in theDominican Republic through several means of delivery including fiber opticcable and digital wireless point-to-point radio links.  In addition, we provide these large customerswith data circuits, internet access, private networks and frame relay services.We also offer computer network security services such as firewalls for xDSL andlease lines, bandwidth control and auto-bandwidth, filtering, captive portal,content, and virtual private networks.

#### **Marketing and Sales**

Our advertisingand promotional materials in the Dominican Republic emphasize that we are afull-service provider of local access, 

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long distance,mobile, cable television, and broadband data transmission and internet servicesand that customers can realize significant savings from our servicepackaging.  Our advertising alsoemphasizes reliability, performance, quality of service and the multipleadvantages that users can obtain from our different products and services.  Seasonal promotions are also made forspecific target markets at different points throughout the year.  Our sales force is oriented to develop closerelationships with business customers to assess their needs and offercustomized solutions.

***Local Access and Mobile Service.***

We usetelemarketing, mass media, the internet, direct sales and database marketing topromote and sell our local access and mobile services in the DominicanRepublic. We use product differentiation, pricing and promotions to targetconsumer and business customers. Our advertising strategy for PCS servicesfocuses on our nationwide coverage, quality of service and competitive prices.

Our sales andmarketing approach for offering local access and mobile services to largebusiness customers is to offer comprehensive and customized telecommunicationssolutions for individual business customers needs.  Our sales staff works closely with eachcustomer to gain a better understanding of its particular operations and todevelop customized local and mobile service solutions.  Many of our sales executives in this marketsegment have engineering backgrounds or receive periodical training sessions inwhich they learn the fundamentals of our industry as well as thoroughinformation on our line of products. Our product development and customerservice departments also offer them continuous support.

***Calling Cards.***

In addition to ourDominican local access and mobile services, we have marketed our prepaidcalling cards to individual customers both in the Dominican Republic and theUnited States.  In the Dominican market,we have unified all of our calling card products into a single brand called the*Bla Bla Bla®* card, allowing ourcustomers to use the card for domestic and international long distance callingas well as prepaid mobile services.

We feature ourprepaid card in our basic services advertisements, as well as advertising thatis specific to the prepaid card.  Ouradvertising emphasizes the accuracy and reliability of our billing as well assavings.  Our prepaid card is distributedat our commercial offices, call centers and through wholesalers andretailers.  We have four wholesale distributorsin the Dominican Republic as well as an internal sales force targeting smallerretailers.

***Cable Television.***

We use a varietyof methods to attract new subscribers. We generally advertise on our cablebroadcasts as well as on television and radio broadcasts, magazines, newspapersand billboards. Our direct marketing includes flyers and promotional materials.Our telemarketing staff focuses on both attracting new subscribers, as well asupgrading our existing basic subscribers to one of our expanded programmingpackages.  We market our cable servicesunder the brand name TelecableÔ.

Our current marketing strategy is intended to  promote subscriber loyalty and timelypayments, reinforce our market position by offering better programming content,increase our subscriber base by increasing the penetration levels in ourcoverage areas, and convert users that pirate our cable services to legitimatesubscribers.

***Data Transmission and Internet.***

For datatransmission services, we target large Dominican businesses, which require moresophisticated technology and demand 

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specializedservice and support. We developed a sales force focused on this sector, whichincludes multi-national corporations, local business conglomerates, local andinternational banks and large hotels.  Wealso have a specialized sales force targeting medium and small businesses withproducts that fit their needs such as virtual private networks, dial up andbroadband internet, among others. Our advertising campaign is focused onpromoting the speed and accuracy of our data transmission services.

#### **Customer Service**

In the DominicanRepublic, we provide customer care for all of our services through five servicecenters and 10 commercial offices. At these offices and centers, our customersmay subscribe for services, pay and obtain information about monthly bills andinquire about billing adjustments. We also provide payment services for ourcustomers through several other businesses including supermarkets, banks andother commonly frequented businesses.  AtDecember 31, 2006 there were approximately 310 such stations, all of which arelinked to our central billing and collection system.

We maintain a callcenter to respond to incoming calls from existing or potential subscribers. Thecall center staff is trained to respond to questions concerning our extensiveproduct and service offerings, as well as to contact potential subscribers,market our services and receive payment for our services by credit card.

We use a customerrelationship management (“CRM”) system, integrating our information systems andour customer relationship management software. This system allows customer service representatives to access allbilling, service order and other client specific information.  This enables us to offer speedier service andmore efficient follow through and to monitor every step of the customer servicerelationship.

We provide a24-hour interactive voice response service through which customers can registerproblems and make billing inquiries.  Inaddition, customers may access their account information online 24 hours aday, seven days a week, on our website, www.tricom.net.  Our website provides information about ourservices and can be used to purchase products including prepaid cards, mobilephones and accessories.

We provideinstallation and repair services to our customers and have established servicebenchmarks for, among other things, network availability, and installation andrepair intervals.  We research othercompanies’ response times and client promises in order to establish our ownpolicies and ensure our competitive advantage.

Our customerservice department gathers information from our customers, which we then use totailor our products and services to meet customer needs.  We regularly survey our customers todetermine their satisfaction with our services and to improve services basedupon the explanations offered by customers who voluntarily cancel theirservices.  Furthermore, we have acustomer retention department that works to determine the cause for customerchurn and also to develop appropriate retention strategies to target thissegment.

#### **Billing and Credit Policies**

We have developedan integrated billing system for local access, long distance, mobile, internet,paging and value-added services. The integrated billing system enables our customers to obtain a singlebill, providing detailed information about charges for all services rendered,other than cable television for which customers receive a separate bill.  Our subscribers can call our center and speakwith a customer care representative and obtain account and statementinformation.  Our customers also canaccess information over the telephone through an interactive voice responsesystem that enables customers to review recent calling activity and accountbalances.

Cash payments maybe made at walk-in commercial offices, centers and bank branches, or funds maybe debited from credit cards or bank accounts. Our customers may also pay their bills at any one of our paymentstations, which are located in neighborhood gas stations, grocery stores andother retail outlets.

Each residentialbasic telephone service and mobile subscriber is assigned a preset creditlimit, which varies depending upon the individual’s monthly usage and paymenthistory.  We use credit bureaus to checkthe credit history of new clients.  Werequire all

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individualswishing to subscribe for mobile services to have a credit card or prepay forservices.  We contact any customersexceeding their pre-set credit limit and request that they pay all or part ofthe outstanding bill.

Our policy is tosuspend service for all post-paid subscribers if payment is not received within45 days after a bill is issued and to terminate service 45 days afterthe suspension date.  Pre-paid servicesare suspended when the prepayment balance is exhausted or the pre-paid card hasexpired. Upon suspension, both pre-paid and post-paid service customers maycontinue to receive incoming calls for the next 15 days.  Service to post-paid subscribers is alsosuspended when a customer’s credit limit is reached.  In order to reinstate service aftertermination, post-paid subscribers must pay a reinstallation fee, except forinternet services for which no reinstallation fee is required aftertermination.

We had an averagemonthly churn rate for mobile subscribers of 5.1% in 2006, 6.7% in 2005, and9.1% in 2004. We had an average monthly churn rate for local access linesubscribers of 1.6% in 2006, 1.8% in 2005, and 2.0% in 2004.  We had an average monthly churn rate forcable subscribers of 1.4% in 2006, 1.4% in 2005, and 1.8% in 2004.  We calculate average monthly churn bydividing the number of subscribers disconnected during the year by the sum ofsubscribers at the beginning of each month during the year.

Tricom USAdistributed its prepaid cards through wholesale distributors.  Depending on their credit history and thelength of their relationship with Tricom USA, wholesalers were required to payin full for calling cards upon delivery or were extended credit for up to15 days. Distributors of prepaid cards in the Dominican Republic areextended credit for up to 15 days, depending on their business volumes andpayment histories.

Tricom USArequires that new and smaller reseller customers pay on a weekly basis for longdistance services.  Some customers thathave a previous relationship with Tricom USA are extended credit for 15 to 30days on average, depending on proven reliable financial condition.  Traditional long distance carriers generallypay Tricom USA for traffic within 60 to 90 days.

#### **Management Information Systems**

Our businessapplications are designed to generate accurate information in real time for ouremployees and to provide our customers with direct access to pertinentinformation from our computer network. For this reason, we have designed afully integrated, open architecture network.

We use Oracle asour unified database and software application development tool set.  We use Oracle Financials as our enterpriseresource planning system, which includes the following modules: accountspayable, accounts receivable, general ledger, purchase orders, inventory controland fixed asset accounting.  We have alsodeveloped an integrated billing and customer care system that runs on theOracle platform.

#### **Network Infrastructure**

***International Long Distance Network.***

We have our ownswitching facilities in the New York metropolitan area and Florida, which allowus to provide multiple international signaling protocols.  By having our own switching facilities, wecan provide termination of international long distance traffic at verycompetitive rates to several countries in addition to the Dominican Republic.

By purchasing andleasing international traffic capacity from various systems, we have acquireddiverse options to route our international traffic. This capacity is fullyconnected to the international network. We have purchased capacity in 11 international submarine fiber opticcables that have been built to send and receive international traffic orconnect with other cables that provide service to Latin America, the Caribbeanand Europe.  We own capacity in theAntillas-1 and Arcos-I submarine cables, which connect the Dominican Republicto the United States via other submarine cable systems.  In addition, for redundancy purposes, wemaintain

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two earthstations, which connect to satellite systems serving the Atlantic region,Africa and Europe.  The use of thesesatellite facilities also allows us to route international traffic between theDominican Republic and most other countries in the world.

***Local Access and Mobile Network.***

The core of ournetwork is composed of gateway switches, possessing special features such asultra-high-speed and port-to-port call switching. Our switch time-of-daycapability allows us to distribute our telecommunications traffic efficientlyand provide, as a result, competitive pricing. Our switches also provide statistical call distribution information,which allows us to control our flow of traffic. Without such capabilities, we would have to conduct these monitoringtasks manually.  The switches also handlecommon channel signaling protocols, optimizing the channels available for voicetransmission.  Without this capability, anetwork must use each of its channels to signal the origination and terminationfor each call, which often results in uncompleted calls and poor circuitutilization.

During 2006, ourintra-city wireline local access network was comprised of approximately 535route miles of fiber optic cable and approximately 3,138 miles of copper cablein more than nine cities. The network is composed of central office switches,remote switching centers and digital loop carriers.

We use digitalloop carrier technology, which is a multi-service access platform connected tothe central office through fiber optic cables. This network layout minimizesthe copper plant and employs digital network transmission equipment used toprovide multiple phone conversations. Our central office switches are connected by fiber optic cable tovarious digital loop carriers located throughout the three largest cities in theDominican Republic.

We transmit our domestictraffic through a digital wireless point-to-point backbone system, whichprovides both intra-city and inter-city telecommunications services.  A point-to-point backbone system is adedicated connection between two endpoints of a communications network.  The backbone system and the intra-city accessnetworks reach approximately 90% of the country’s population, including majorcities and certain key tourist and rural areas. The wireless point-to-point system serves the areas that have hightelecommunications usage, including large industrial and commercial areas.

To oversee andmonitor the activities of our network infrastructure, we have installed anetwork management system.  This systemallows us to manage our central office switches and remotely monitor allnetwork components. The management system provides continuous informationregarding our equipment, any equipment failure, and network security.  In addition, it allows the central office tosend commands and to test our network.

Our mobile networkin the Dominican Republic uses analog technology in the 800 MHz band and ourPCS network uses CDMA or digital protocol, in the 800 and 1900 MHz bands.  Our analog mobile network enables us toprovide mobile coverage to those regions of the Dominican Republic not coveredby our competitor’s digital networks. During 2006, we provided PCS service in 35 cities and offered continuouscoverage on the main highway routes of the country.

***Cable Television Network.***

Our cabletelevision network uses a broadband network employing radio frequencytransmission over coaxial and/or fiber optic cable to transmit multiplechannels carrying images, sound and data between a central facility and asubscriber television set. Coaxial cable is a type of cable used for broadbanddata and cable systems. This type of cable has high-quality broadband frequencycharacteristics, noise immunity and physical durability. Fiber optic cable is acommunications medium that uses hair-thin glass fibers to transmit signals overlong distances with less signal loss or distortion than coaxial cable.

Our existing cablenetwork consists of four major portions: a master head-end, a fiber trunknetwork, coaxial distribution and nodes. At our master head-end, programmingsignals are received, processed, amplified and then sent through ourdistribution network, which consists of fiber optic and coaxial cablesconnected to nodes. A node, which is typically shared by a number ofsubscribers 

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within the samearea, is a single connection to any of our distribution network’s main fiberoptic cables that receives and transmits signals. During 2006, one node in ourexisting network typically served an average of 809 homes passed. Programmingsignals then travel, via coaxial cable, from nodes into subscribers’ homes. Aspart of our plan for the expansion and upgrade of our network, we plan toredesign our distribution network by installing hubs and additional nodes toimprove the quality and redundancy of our services. Hubs receive signals fromthe head-end and retransmit signals to the nodes, increasing the quality andreliability of the signals.

At December 31,2006, our cable network consisted of approximately 214 miles of fiber opticcable, 752 miles of coaxial cable and 233 nodes.  Approximately 98% of our network isconstructed above ground, with a small percentage of the fiber optic cableconstructed underground.

The completechannel package signal delivered to our customers in Santo Domingo is encoded,using analog and digital descrambler systems. This allows us to reduce, but not eliminate, theft or piracy of ourcable entertainment services, as well as giving us the opportunity to offercompressed packages to reach low-income subscribers living in marginal areas,and increase penetration levels.

The expansion andupgrade of our network involves the conversion of our existing cable networkinto a broadband bi-directional network which results in increased bandwidthcapacity. A broadband bi-directional network allows subscribers to transmit aswell as receive signals.  This allows usto offer internet connection, video and games on demand.  A broadband bi-directional network combinesthe use of fiber optic cable, which can carry hundreds of video, data and voicechannels over long distances, with coaxial cable, which requires more extensivesignal amplification in order to obtain the desired transmission levels fordelivering programming signals and nodes. At December 31, 2006, 40% of ournetwork had bi-directional capacity.

***Data Transmission and Internet Network.***

Datacommunications services are primarily targeted to the business community andprovided at a variety of speeds.  Ourdata communications network consists of data multiplexing nodes, which arenetwork connection points that allow for the transmission of two or moresignals over a single channel, linked to a fiber optic ring and digitalwireless point-to-point radio links.  The“last mile” to the customer is provided through fiber optic cable and/ordigital wireless point-to-point radio links. Our data network has the capability to monitor the communications linkall the way to the customer’s desktop and to support multiple data protocolssuch as ATM and frame relay.

Our technologyinfrastructure is built and maintained to assure reliability, security andflexibility, and is monitored by our technical staff.  Each of our servers can function separately,and multiple redundant machines serve key components of our serverarchitecture.

We maintain ourcentral production servers at our headquarters data center.  Our operations depend on the ability of thenetwork operating centers to protect their systems against damage from fire,hurricanes, power loss, telecommunications failure, break-ins and otherdisruptive events.

Our local andmobile networks employ monitoring software developed by us and by others tomonitor access to our production and development servers.  Our reporting and tracking systems generatedaily traffic, demographic and advertising reports, which are copied to backuptapes each night.

#### **Competition**

The followingtable sets forth information about our market share in several of our marketsbased upon information published by Indotel, at December 31, 2006, andinformation that we generate internally about our operations:

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| Service           | ** ** | **Approximate  Market Share   (%)** | ** ** | **Rank**   | ** ** | **Number of   Providers** | ** ** |
|-------------------|------------|-----------------------------------------------|------------|------------|------------|-------------------------------------|------------|
| ** **        |       |                                          | ** ** | ** ** | ** ** | ** **                          | ** ** |
| Local Access      |       | 20.5                                          | %          | 2          |       | 2                                   |       |
| Mobile            |       | 10.1                                          | %          | 3/4        |       | 4                                   |       |
| Cable Television  |       | 61.6                                          | %          | 1          | (1)        | Multiple                            |       |
| Data and Internet |       | 11.8                                          | %          | 2          |       | 3                                   |       |

 

***International Long Distance.***

The internationaltelecommunications industry is intensely competitive and subject to rapidchange precipitated by changes in the regulatory environment and advances intechnology.  Our success depends upon ourability to compete with a variety of other telecommunications providers in theUnited States and in each of our international markets.  Our competitors include largefacilities-based multinational carriers and smaller facilities- basedwholesale long distance service providers in the United States and overseasthat have emerged as a result of deregulation, as well as switched-basedresellers of international long distance services.  Competition primarily is based on price,although reliability, quality of transmission, routing capacity and customerservice also are competitive factors.

Tricom and Codetelare the two principal Dominican carriers terminating Dominican-boundinternational long distance traffic. Centennial Dominicana also offers longdistance calls at very low rates to the United States from the DominicanRepublic.  However, neither Indotel northe FCC publishes current information about traffic exchanged.  International long distance traffic hasexpanded in the last five years as the price per minute charged to consumershas declined.

***Local, Mobile, Data and Internet.***

In the localaccess and data and internet markets, our main competitor is Codetel.  Codetel is an integrated communicationsservice provider, which, at December 31, 2006, had approximately 80% of thelocal access lines and subscribers for local services and approximately 88% ofthe data and internet subscribers in the Dominican Republic.  In 2002, Centennial Dominicana, usingwireless technology, began offering to businesses local access service andbroadband internet access but we believe that it has not obtained a significantpercentage of the market for those services.

In mobile service,in addition to Codetel, we compete with Orange and Centennial Dominicana.  Orange operates a GSM 1900 MHz network in themain cities of the country.  Orange hasan aggressive expansion strategy based on low prices for mobile equipment, astrong distribution network with dealers, and a large marketing budget.Centennial Dominicana offers PCS mobile services.

As of December 31,2006, the Dominican government had also granted eight concessions to othertelecommunications companies, which had not yet commenced operations or hadminimal operations.  Each of theseconcessions allows for the provision of some or all of the telecommunicationsservices that we provide.

***Cable Television.***

We are the largestcable television operator in Santo Domingo and one of the largest in theDominican Republic as of December 31, 2006. Indotel has indicated that there are more than 100 cable operators inthe Dominican Republic, including illegal cable television providers.  However, in our principal markets, SantoDomingo and its surrounding areas and La Romana, we face little competitionfrom other cable television operators.

We also facecompetition from pirate direct broadcast satellite or DBS transmission. Thereis no legal DBS service offered in the 

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(1) In SantoDomingo. Statistics for the country as a whole are unavailable.

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DominicanRepublic.  For several years, theDominican pay television market has been harmed by the persistent violation ofcopyright laws or “piracy.” We have deployed****encodingtechnology to aid in reducing piracy from our network.

All pay televisionservice providers, including cable television systems, direct to home (“DTH”)satellite services and multi-point, multi-channel distribution systemoperators, face substantial competition from other signal delivery methods,including television broadcasters and the Internet.  The ability of potential subscribers todirectly receive traditional public over-the-air television signals fromtelevision broadcasters may hinder our ability to obtain additional subscribers.

#### **Regulation**

##### ***General.***

The legalframework of the telecommunications sector in the Dominican Republic consistsof General Telecommunications Law No. 153-98, enacted on May 27, 1998,resolutions and regulations issued by Indotel and the concession agreementsentered into by the Dominican government or the regulator with individualservice providers.

In addition to theindustry-specific legal framework, the Constitution of the DominicanRepublic affects the telecommunications sector. Among other individual and social rights, the Dominican Constitutionguarantees Dominican citizens the freedom of trade.  The Constitution specifically provides thatmonopolies can be established only by law and only for the benefit of theDominican government.  None of theexisting concession agreements grants a monopoly in any sector of thetelecommunications industry to any carrier, and the Dominican government hasannounced a policy of encouraging growth through competition in thetelecommunications industry.

In 1930, Codetelwas granted a concession to operate telecommunications services in theDominican Republic.  Over the years,while other service providers entered the Dominican telecommunications market,none was successful in becoming a full-service telephone company able tocompete with Codetel because Codetel was not required to allow other serviceproviders to interconnect their services with its physical infrastructure.  To provide services, a company would have toinstall its own wireline telecommunications network.  The economics of this requirement hinderedcompetition.  As a result, Codetel held ade facto monopoly for more than 60 years.

To increasesubstantially the number of Dominican citizens with access to a telephone andto allow for the establishment and growth of other modern telecommunicationsservices, the Dominican government adopted a policy of liberalization of thetelecommunications sector beginning in the late 1980s.  In 1990, the Dominican government granted usa concession to provide a full range of telecommunications services within,from and to the country.  Additionally,advances in wireless technologies made it more cost-effective for companies topenetrate the market even without being able to interconnect to Codetel’snetwork.  However, interconnectionremained important for full-service competition.  In 1994, the Dominican government enacted aseries of interconnection resolutions requiring all service providers in theDominican Republic to interconnect with all other service providers pursuant tocontracts between them.  The guidelinesfor those contracts are set forth in those resolutions.  In May 1994, we entered into aninterconnection agreement with Codetel which became effective inNovember 1994.  This agreementallowed us to become the second full-service telecommunications provider in theDominican Republic.

##### ***GeneralTelecommunications Law No. 153-98 of 1998.***

FormerTelecommunications Law No. 118 of February 1, 1966 was repealed by Law No.153-98 of May 27, 1998.  Law No.153-98 is the result of a joint government and industry project conducted withthe assistance of the International Telecommunication Union (“ITU”), whichstudied the telecommunications sector in the Dominican Republic.  As part of this process, the ITU drafted a proposedtelecommunications law and various regulations, including interconnection andtariff regulations, in consultation with Dominican telecommunicationscarriers.  The project was requested bythe Technical Secretariat of the Dominican Presidency and the country’stelecommunications carriers, and was funded by the carriers.

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Law No. 153-98established a basic framework to regulate the installation, maintenance andoperation of telecommunications networks and the provision oftelecommunications services and equipment. The law adopted the “Universal Service Principle,” by seeking to ensureaccess to telecommunications services at affordable prices in low-income ruraland urban areas.  The law creates a fundfor the development of the telecommunications sector that is supported by a 2%contribution payable by customers and collected by telecommunications providersbased on billings to customers for telecommunications services.

In addition, thelaw created an independent regulator with strong regulatory powers, Indotel,and established the regulator’s responsibilities, authorities andprocedures.  The regulator is headed by afive-member council, the members of which serve a four-year term, and includesa representative from the telecommunications industry.  Among other responsibilities, Indotel ischarged with implementing telecommunications development projects to satisfythe requirements of the Universal Service Principle.             LawNo. 153-98 grants Indotel control over all frequency bands and channels ofradio transmission and communications within the country and over itsjurisdictional waters.

Law No. 153-98seeks to encourage competition by, among other things, imposing the obligationto interconnect with existing participants and prohibiting and punishingdifferent types of monopolistic behavior. The law requires that interconnection charges be cost based andeliminates cross subsidies.  Pursuant tothe law, a rate rebalancing process was completed on December 31, 2000which eliminated cross subsidies and allowed for rates for services to reflectactual costs.  Currently, marketparticipants are free to establish the rates for the services that they offer.

##### ***Recent RegulatoryInitiatives.***

###### *Interconnection Regulations.*

On June 22, 2002,Indotel issued interconnection regulations including rules on co-location,network unbundling, open network architecture and equal access.  The regulations required that interconnectionagreements had to be modified and established a deadline extended by Indotel onseveral occasions for filing conforming contracts with Indotel.  A dispute arose from the lack of agreement oninterconnection terms and, after several hearings on the case, on April 11,2003 the case was settled with the execution of a new two-year interconnectionagreement for the Dominican market.

This agreement,entered into by and between all current local carriers (Codetel, CentennialDominicana, Orange and Tricom), provided for full interconnection between therespective networks interconnected for all types of telecommunications traffic.Further, the agreement included the following access charges per minute oftraffic: local traffic, US$0.02; national transportation traffic, US$0.01;national traffic, US$0.03; international transportation traffic, US$0.015;incoming international traffic, US$0.035 terminating into fixed networks andUS$0.09 terminating into mobile networks; mobile or cellular traffic, US$0.075.These charges are translated into Dominican pesos and adjusted every sixmonths.

The interconnectionagreement was renewed on substantially similar terms in 2005 and a newinterconnection agreement has been in the process of renegotiation during thesecond half of 2007. The exact terms of this interconnection agreement are notknown at the date of this filing. Also in 2005, Indotel issued a statementmandating the convergence of interconnection rates by September 30, 2007 forlocal access and for incoming minutes to the Dominican Republic fromabroad.  As of October 1, 2007 theinterconnection rates were adjusted to eliminate the 1.5 cent differencebetween interconnection rates for local access and interconnection rates forincoming international minutes.  As aresult, it is possible that our operations and financial position will beadversely affected.

###### *Proposed Telecommunications Regulations.*

On August 30,2006, Indotel approved resolution 156-06 titled “General Rule on NumberPortability” which states that in the 

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Dominican Republictelecommunications market, customers will be able to move their service fromone telecommunications provider to another without losing their telephonenumbers.  In order to implement this law,telecommunications carriers will have to update their networks before July 1,2009.

Number portabilitywill apply to customers changing from one mobile service provider to anotherand from one fixed line company to another within the same region.  It will not allow number portability from amobile network to a fixed line service or vice versa or between fixed lineregions.

##### ***Our ConcessionAgreements.***

###### *Tricom Concession Agreement.*

In accordance withformer Law No. 118, we entered into a concession agreement with the Dominicangovernment in 1990 under which we were issued a non-exclusive license toestablish, maintain and operate a system of telecommunications servicesthroughout the Dominican Republic, as well as between the Dominican Republicand international points.  The serviceswhich we were permitted to provide under the 1990 concession agreement includedtelegraphy, radio communications, paging, cellular and local, domestic andinternational telephone services.

InFebruary 1996, we entered into a new concession agreement with the Dominicangovernment which superseded the 1990 concession agreement.  Under the 1996 concession agreement, we weregranted the same non-exclusive license as provided in the 1990 concessionagreement to establish, maintain and operate a telecommunications systemthroughout the Dominican Republic until June 30, 2010.  Under its original provisions, the 1996 concessionagreement and the license granted under it were renewable automatically for20-year periods unless, at least three years prior to the end of the thenexisting term, the Dominican government advised us of its intention not torenew.

Law No. 153-98,which was enacted in 1998, established a new regulatory framework fortelecommunications services in the Dominican Republic.  Pursuant to Law No. 153-98, where necessary,we were required to adjust our concession agreement to conform to the newlegislation.  Law No. 153-98 requiredsuch adjustments to be made within one year of its enactment and were to beexecuted through procedures established thereunder.  However, to date, Indotel has neither fullyestablished nor implemented these procedures within the term initiallyestablished.

Pursuant to LawNo. 153-98, Indotel has the discretion to determine the extent to which anyexisting concession requires adjustments to comply with the newlegislation.  However, until theadjustments are complete, Law No. 153-98 provides that concessions grantedprior to its enactment remain in full force and effect.  Law No. 153-98 provides that the adjustmentprocedures should be implemented in a manner that will maintain the rightsgranted to the holder of the original concession with respect to the scope ofservices covered by the concession, while guarantying equality among concessionholders.  Furthermore, under Law No.153-98, a concession may only be cancelled for the reasons expresslyestablished in the concession and for the specific causes described in Law153-98. 

Once theprocedures for adjusting the concessions and bringing them into compliance withLaw No. 153-98 are established and fully implemented, concessions in theDominican Republic will have terms ranging from five (5) to twenty (20) yearsbased on the term originally provided for in such concession.  For concessions granted under Law No.118 thatdid not have a fixed term, Law No. 153-98 establishes that the new term isautomatically 20 years.  The term of suchamended concessions will commence on the date they are approved by a resolutionenacted by Indotel’s board. 

As of the date ofthis filing, we have received an adjustment from Indotel’s board and Indotel’sExecutive Director is authorized to amend our concession agreement.  Our amended concession agreement willautomatically have a term of 20 years. Our concession agreement, once amended, will be renewable for successive20-year periods.  However, if the holderof a concession fails to comply with the provisions of Law No.153-98, Indotelis entitled to deny the request for a renewal of the concession.

###### *TCN Concession Agreement.*

In 1982, TCN (thenTelecable Nacional) entered into a concession agreement with the Dominicangovernment pursuant which TCN was granted a license to provide close circuitcable television services within the Dominican Republic.  Originally, this concession was for anunlimited term; however, in 1998 when Law No. 153-98 was enacted, concessionsand licenses in the telecommunications industry became limited to a maximum 20year term, renewable for successive 20-year periods. Accordingly, when amendedto conform to Law No. 153-98, TCN’s concession agreement will have a term of 20years and will be renewable for successive 20-year periods.

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#### **U.S. Telecommunications Regulation**

The followingsummarizes certain aspects of United States federal and statetelecommunications regulation as it applies to Tricom USA.  We do not purport to summarize all present,pending or proposed regulation, any of which could change the impact ofregulations on U.S. telecommunications carriers such as Tricom USA.

##### ***Federal Regulation.***

In 1995, the FCCauthorized Tricom USA (then Domtel Communications, Inc.), pursuant to Section214 of the Communications Act of 1934, to be a domestic and internationalfacilities-based carrier and an international resale carrier of voice, data andprivate line services between the Unites States and international points,including the Dominican Republic.  TheFCC classified Tricom USA as a non-dominant carrier on all routes, including tothe Dominican Republic.

Tricom USA’sdomestic and international Section 214 authority permits it to provide, respectively,inter-exchange (long distance) service between the states within the UnitedStates and service to and from destinations outside the United States, forwhich it has entered into international settlement or call terminationagreements with other carriers.  Theseagreements and the services of Tricom USA are subject to certain regulatoryobligations.  These include, but are notlimited to, the obligation to offer services at just and reasonable rates, topay certain regulatory fees, to file certain regulatory reports with the FCC,to contribute to certain federal funds such as the universal service fund, notto unjustly or unreasonably discriminate in charges, practices or other areas,to obtain FCC approval for a transfer of control under certain circumstances,to post its rates, terms and conditions on its website instead of filing themwith the FCC, to obtain FCC approval to reduce or discontinue service, andother obligations.  Failure to complywith any regulatory requirements may subject Tricom USA to penalties including,but not limited to, a fine, regulatory restrictions, license sanctions orrevocation.

Tricom USA’s coresource of revenue is its international service. As a result of increased international competition in the globaltelecommunications market, the FCC relaxed its former International SettlementsPolicy (“ISP”), in general, and in particular to destinations qualifying forelimination of the International Settlement Policy, pursuant to a Report andOrder dated March 30, 2004.  TheDominican Republic is one such destination. Thus, Tricom USA is no longer required to file international agreementswith the FCC for Dominican service or service to countries on the FCC’s list ofISP-exempt destinations.  The Report andOrder dated March 30, 2004 did not address international terminations intocellular networks, which is a growing destination for Tricom USA, and for whichaccess charges are higher than those for fixed line terminations in mostcountries outside the United States including the Dominican Republic, makingthe cost of terminating higher.  Instead,the FCC issued a Notice of Inquiry on October 26, 2004.  It cannot be predicted if or how the FCC willrule on this matter or, if it rules, what impact, if any, that ruling will haveon Tricom USA’s business.

***State Regulation.***

The public utilitycommission of each state individually regulates the provision oftelecommunications services within its state. This typically requires certification by the state public servicecommission as well as corporate registration with the state’s corporatedepartment, filing of annual or semi-annual reports and, where appropriate, thepayment of taxes.  Tricom USA providesrelatively little intra-state service, and it has obtained local exchange(central office code) numbers in, and has a point of presence in, severalstates.  Tricom USA is certified in thefollowing states: California, Delaware, Florida, Georgia, Illinois, Indiana,Maryland, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, RhodeIsland, Washington, D.C. and Wisconsin; as well as Puerto Rico, the U.S. VirginIslands and Canada.

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#### **Property, Plant and Equipment**

Our principalproperties consist of our fiber optic network, satellite earth stations, nodesand real estate.  At December 31,2006, the net book value of our real estate and equipment was approximately$274.4 million.  Our real estate holdingsare strategically located throughout the Dominican Republic, providing theinfrastructure for the telecommunications network and sales facilities.  Most of our properties are related directlyto our telecommunications operations and are used for network equipment ofvarious types, such as telephone exchanges, transmission stations, wirelesspoint-to-point radio equipment and digital switching nodes.  Our current headquarters are located indowntown Santo Domingo in a building that we own.

## **ITEM 5.           OPERATINGAND FINANCIAL REVIEW AND PROSPECTS**

Our consolidatedfinancial statements have been prepared on a going concern basis, whichcontemplates continuity of operations, realization of assets and satisfactionof liabilities in the ordinary course of business.  However, because of recurring operatinglosses, a continuing working capital deficit and the recent fluctuation of theDominican peso, the realization of assets and satisfaction of liabilities aresubject to uncertainty.

In September 2003we announced that we would not be making a scheduled interest payment on our11-3/8% Senior Notes due September 1, 2004. In October 2003 we suspended principal and interest payments on our unsecuredindebtedness and principal payments on our secured indebtedness.  Subsequently, on September 1, 2004, weannounced that we would not be making the $200 million principal payment on our11-3/8% Senior Notes due September 1, 2004. We have engaged in discussions with certain holders of our Senior Notesand other lenders to formulate a restructuring plan.  See “Liquidity and Capital Resources–RestructuringOverview”.

We have financedour capital expenditure and working capital requirements, including expensesrelated to our proposed restructuring, with cash flow from operations and,during 2004, from net proceeds from the sale of our Central American trunkingoperations and other assets. We do not expect to have any other funding sourcesuntil our restructuring is completed. Even if a restructuring is achieved wemay not be able to generate the cash required to operate or to obtain thefinancing necessary to continue funding our business.

#### **Presentation of Certain Financial Information**

We prepare ourconsolidated financial statements in conformity with generally acceptedaccounting principles in the United States. We adopted the United States dollar as our functional currency effectiveJanuary 1, 1997 and maintain our books and records in U.S. dollars.

In this AnnualReport references to “$”, “US$” or “U.S. dollars” are to United States dollars,and references to “Dominican pesos” or “RD$” are to Dominican Republicpesos.  For purposes of our financialstatements, foreign currency balances are translated into U.S. dollars atdiffering rates depending on the item in question. See Note 2.3 of notes toconsolidated financial statements. For most balance sheet purposes, theexchange rates we used to translate Dominican peso-denominated amounts as ofDecember 31, 2005 and 2006, were RD$34.85 and RD$33.78 per U.S. dollar,respectively. For most revenue and expense purposes, the exchange rates we usedwere the average annual private market rates which were RD$42.11, RD$30.39, andRD$33.34 during the years ended December 31, 2004, 2005 and 2006,respectively.  These translations shouldnot be construed as representations that the Dominican peso amounts actuallyrepresent such U.S. dollar amounts or could be converted into U.S. dollars atthe rate indicated.  The Federal ReserveBank of New York does not report a buying rate for Dominican pesos.  To the extent information relates to theDominican Republic government or Dominican Republic macroeconomic data, theinformation in this Annual Report has been extracted from publications issuedby Indotel at www.indotel.org.do and the Central Bank at www.bancentral.gov.do.

#### **Overview**

*Wederive our operating revenues primarily from long distance, domestic telephony,mobile, cable television, and data and Internet services.  The components of each of these services areas follows.*

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Long distancerevenues represent amounts recognized for the termination of traffic fromforeign telecommunications carriers to the Dominican Republic, includingrevenues derived from our U.S.-based international long distance wholesale andprepaid calling card operations, as well as outbound international and domesticlong distance calls generated by our retail call centers and prepaid cards soldwithin the Dominican Republic.

Domestic telephonyrevenues consist of fees received for local exchange services in the DominicanRepublic, including monthly fees, measured local service and measured localcharges for value-added services, outbound international and domestic longdistance calls generated by our residential and business customers within theDominican Republic, sale of customer premises equipment, installation andactivation fees, and interconnection revenues received from other serviceproviders for calls that terminate in our local network.

Mobile revenuesconsist of fees received for cellular and PCS services, including fixed monthlyfees, per minute usage charges and additional charges for value-added services,outbound international long distance charges, as well as paging services,installation and activation fees, equipment sales, and interconnection chargesreceived from other service providers for incoming calls that terminate in ourmobile network.

Cable televisionrevenues consist of monthly fees derived from basic programming, expanded basicprogramming, expanded basic services, digital music services, internet accessvia cable modem, installation fees and revenues from advertising sales tonational advertisers on non-broadcast channels we carry over our cablecommunications systems. Cable television revenues, including installation fees,are recognized when the service is provided.

Data and Internetrevenues consist of fixed monthly fees received from our consumer and businesscustomers for high speed broadband data transmission and internet connectivityservices, including traditional dial-up connections, dedicated lines, privatenetworks, frame relay, digital subscriber lines, or xDSLs, that providehigh-bandwidth transmission of voice and data over regular telephone lines.

Other revenues consistof revenues that are not generated from our core businesses, includingcommissions received for providing package handling services for a courier andcommissions received for collection services for utility companies.

*Ouroperating costs and expenses consist primarily of cost of sales and services,selling, general and administrative expenses (“SG&A”), depreciation andamortization charges, as well as asset impairment and other non-operatingcharges and special items. Major components of our operating costs and expensesare as follows.*

Cost of sales andservices consist of amounts paid to foreign carriers for our use of theirnetworks for termination of outbound traffic and interconnection costs, whichare access charges paid to other providers in the Dominican Republic, andpayments for international satellite circuit leases; amounts paid toprogramming providers for licenses to broadcast on our cable televisionnetwork; cost of equipment and prepaid cards sold; and telephone installationcosts.

Selling, generaland administrative expenses include salaries and other compensation topersonnel, building occupancy and maintenance expenses, marketing expenses, baddebt expenses, commissions and other related costs.

Depreciation andamortization expenses reflect the decline in the value of our fixed assets, dueto general wear and tear or obsolescence, other intangible assets and deferredcharges.

The followingtable sets forth the percentage contribution of each category of revenues tototal operating revenues for the period indicated:

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|                           | ** ** | **Year Ended December 31,** | ** ** |
|---------------------------|------------|--------------------------------------------|------------|
| ** **                | ** ** | **2004**                                   | ** ** | **2005** | ** ** | **2006** | ** ** |
|                      |       |                                       |       |   |   |   |   |
| Long distance             |       | 38.3                                       | %          | 32.5 | % | 32.2 | % |
| Domestic  telephony       |       | 34.5                                       | %          | 38.6 | % | 37.7 | % |
| Mobile                    |       | 17.1                                       | %          | 16.3 | % | 16.6 | % |
| Cable                     |       | 7.3                                        | %          | 8.9 | % | 9.3 | % |
| Data and  internet        |       | 2.8                                        | %          | 3.7 | % | 4.1 | % |
| Other                     |       | 0.0                                        | %          | 0.0 | % | 0.1 | % |
| Total operating  revenues |       | 100                                        | %          | 100 | % | 100 | % |

Note: Percentagesmay not add up to 100% due to rounding.

The followingtable sets forth certain items in the statements of operations expressed as a percentage of total operatingrevenues for the period indicated:
|                               | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------|------------|--------------------------------------------|------------|
| ** **                    | ** ** | **2004**                                   | ** ** | **2005** | ** ** | **2006** | ** ** |
|                          |       |                                       |       |   |   |   |   |
| Operating costs               |       | 122.0                                      | %          | 108.1 | % | 108.0 | % |
| Operating loss                |       | (22.0                                      | )%         | (8.1 | )% | (8.0 | )% |
| Interest expense,  net        |       | (33.7                                      | )%         | (31.7 | )% | (31.6 | )% |
| Other income  (expenses), net |       | (32.1                                      | )%         | (30.6 | )% | (31.3 | )% |
| Loss before  income taxes     |       | (54.1                                      | )%         | (38.7 | )% | (39.3 | )% |
| Net loss                      |       | (54.3                                      | )%         | (38.3 | )% | (40.1 | )% |

 

#### **Results of Operations**

#### **2006 Compared to 2005**

***ForeignExchange Rate.***The average annual foreign exchange rateincreased 9.7% to RD$33.34 per US$1.00 during 2006 from RD$30.39 per US$1.00during 2005. This represents a 9.7% strengthening of the U.S. dollar againstthe Dominican peso from 2005 to 2006 or a corresponding weakening of theDominican peso. This foreign exchange fluctuation significantly affected ouroverall financial performance and results of operations during this period.

***OperatingRevenues.***Our total operating revenues demonstrated nosignificant change from 2005 to 2006. Operating revenues were $218.1 millionduring 2006 compared to $217.5 million in 2005 primarily due to an increasednumber of subscribers in all business segments, offset by the devaluation of theDominican peso against the U.S. dollar.

The following is adiscussion of our consolidated revenues for each of the revenue line items inour financial statements.

*Long Distance.*  Long distance revenues decreased 0.4% to$70.3 million during 2006 from $70.6 million in 2005. This decrease resultedprimarily from lower international revenues generated in the United States anda reduction in revenues generated from international carriers andresellers.  In 2006, the internationalbusiness was adversely impacted by more intense competition and an increaseduse of VoIP technology in this market.

International longdistance revenues decreased 0.8% or $0.5 million to $63.9 million in 2006 from$64.4 million in 2005 primarily due to lower international traffic revenuesderived from minutes generated in the United States that terminated incountries other than the Dominican Republic. This was the result of a strategyinitiated in 2005 to reduce minutes to other destinations which generate agross margin under 5%.  Internationalminutes terminating in countries other than the Dominican Republic decreased24.8% to 36.6 million 

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minutes in 2006compared to 48.7 million minutes in 2005 while the average correspondinginternational long distance termination rates decreased to $0.302 per minuteduring 2006 compared to $0.314 per minute during 2005.

Long distancedomestic revenues generated by our prepaid cards and calling centers in theDominican Republic increased 1.6% to $6.4 million in 2006 from $6.3 million in2005. This increase was primarily due to an 9.0% increase in total minutes to58.4 million in 2006 from 53.6 million in 2005. This was primarily the resultof our ability to increase our share of the prepaid card market, partiallyoffset by a decline in usage of our calling centers.

*Domestic Telephony.*Domestic telephony revenues decreased 2.3% to $82.2 millionduring 2006 from $84.1 million in 2005, primarily as a result of a 9.7%devaluation of the Dominican Peso, offset by an increase in the average numberof lines in service during 2006. At December 31, 2006, we had 183,975 lines inservice compared to 167,763 lines in service at December 31, 2005, a 9.7%increase.

Monthly servicefees, measured local service charges, and outbound international and domesticlong distance revenues accounted for the majority of our domestic telephonyrevenues in 2006. Revenues from monthly fees increased 1.4% to $42.2 million in2006 from $41.6 million in 2005 primarily due to the increase in the number ofsubscribers. Measured local service revenues decreased 4.2% to $20.5 million in2006 from $21.4 million in 2005 as a result of our introduction of new serviceplans with a limited number of minutes for a fixed monthly fee, compared to previousplans which allowed customers to exceed their allotted minutes by payingadditional per minute fees. Outbound international and domestic long distancerevenues generated by our mobile and wireline customers, includinginterconnection charges, increased 4.9% to $10.7 million in 2006 from $10.2million in 2005 due primarily to an increase in long distance minutes resultingfrom a new promotional rate, which was launched in June 2006, for wireline longdistance calls to the United States.

*Mobile.*****Mobile revenues increased 2.3% to $36.3million during 2006 from $35.5 million in 2005. The increase in mobile revenueswas attributable primarily to an increase in the number of subscribers andchurn rate reduction, offset by the peso devaluation.

Airtime revenues,including interconnection charges, increased 0.9% to $23.3 million in 2006 from$23.1 million in 2005 due to an increase in the number of subscribers offset bythe exchange rate increase. Revenues from monthly rent increased 2.7% to $3.8 millionin 2006 from $3.7 million in 2005 for similar reasons. Outbound internationallong distance revenues, including interconnection charges, generated by themobile subscriber base decreased 1.3% to $7.6 million in 2006 from $7.7 millionin 2005 as a result of a decrease in incoming minutes to our mobilesubscribers, offset by price increases.

At December 31,2006, we had 465,910 mobile subscribers compared to 393,991 at December 31,2005. The increase in subscribers resulted primarily from our market penetrationstrategy, which included handset subsidies and increased marketing investment.

*Cable.* Revenues from cable television servicesincreased 4.7% during 2006 to $20.2 million from $19.3 million in 2005.Revenues were positively affected by a price increase and an increased numberof cable subscribers.

Cable programmingrevenues, including monthly basic and expanded basic programming service fees,increased 1.3% to $15.5 million during 2006 from $15.3 million in 2005.Revenues from advertising sales and channel rental charges decreased 20% to$2.0 million in 2006 from $2.5 million in 2005 primarily as a result of theimposition of regulated prices for “must carry” channels.

At December 31,2006, we had 68,903 cable subscribers compared to 63,878 at December 31, 2005.The increase in the number of cable subscribers during 2006 was attributable toan extensive customer relations campaign and a corresponding churn ratereduction.

The number ofcable subscribers at December 31, 2006 includes 52,249 basic and expanded basicprogramming subscribers, 12,171 

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commercial rooms,which include commercial establishments (for example, hotels) and multiple dwellingunits (for example, apartment buildings and hospitals), for which we receive abulk rate for our basic cable service, and 4,483 subscribers for cable modem,digital audio programming and other services.

*Data and Internet.*Data and internet service revenues increased 11.3% to $8.9million in 2006 from $8.0 million in 2005, primarily due to growth in our dataand internet subscriber base.

The number of ourdata and internet subscribers increased 8.6% to 21,464 at December 31, 2006from 19,771 at December 31, 2005.

*Other.*Othernon-core business revenues increased to $0.2 million in 2006 from $0.1 millionin 2005.

***OperatingCosts and Expenses.*** Our operating costs and expenses demonstratedno significant variation during 2006 increasing slightly to $235.5 from $235.2million in 2005.  These results weremainly driven by an increase in cost of sales and services, SG&A expenses,and a litigation settlement, which were offset by a reduction in depreciationand amortization expenses.

The following is adiscussion of our operating costs and expenses for each of the line items inour financial statements.

*Costof Sales and Services*. Cost of sales and services increased5.0% to $92.1 million in 2006 from $87.7 million in 2005, which was primarilyattributable to increased equipment and cable programming costs due toincreased subscriber numbers.

Cost of equipmentsales, prepaid cards, and line installations, totaled $6.1 million in 2006compared to $5.3 million in 2005, a 15.1% increase. This increase was theresult of increased gross sales, which generated more installations and higherequipment costs, in particular for handset subsidies in our mobile segment.

Transport andaccess charges increased 4.2% to $80.1 million in 2006 from $76.9 million in 2005primarily as a result of an increase in minutes due to the promotional rate forwireline long distance calls to the United States mentioned above.

*Selling, Generaland Administrative*. SG&A expenses increased 5.1% to $81.7 million during 2006 from $77.7million during 2005.  This increase wasprimarily driven by an increase in building occupancy, activation commissionand insurance expenses.

Building occupancyincreased 28.2% to $15.9 million in 2006 from $12.4 million in 2005 primarilydue to a $2.3 million one-time extraordinary expense related to the use ofexternal utility poles resulting from a new agreement with electric utilitycompanies and higher electricity consumption due to a rate increase and newcell sites. Activation-commissions increased 16.0% to $12.3 million in 2006compared to $10.6 million in 2005, mainly due to increased gross sales in ourmobile business in accordance with our strategy to gain market penetration.Marketing expenses increased 8.5% to $5.1 million in 2006 from $4.7 million in2005 mainly due to our strategy to increase our wireless subscriber base.Insurance expenses increased $0.8 million****dueto an increase in premiums for our Transmission & Distribution Lines andDirectors and Officers insurance coverage.

Salaries and othercompensation to personnel decreased 3.4% to $22.4 million in 2006 from $23.2million in 2005 mainly due to the increase of the exchange rate, given thatsalaries are paid in Dominican pesos. At December 31, 2006, we had 1,723employees compared to 1,671 employees at December 31, 2005.

*LitigationSettlement Expense. *In September2005, a Dominican investigative judge added us as a co-defendant to criminalproceedings brought by certain creditors of Bancredito and other financialinstitutions formerly controlled by GFN. Several current and former related parties, as well as certain of ourdirectors and officers, were also defendants in the proceedings.  The allegations against us and the otherco-defendants included fraud, embezzlement, violations of monetary laws andmoney laundering.  We were added to theseproceedings without prior notice or participation in the existing proceedings.

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Followingthe decision in December 2005 of the Supreme Court of the Dominican Republicdenying our appeal of the investigative judge’s action, we, together with theother co-defendants, entered into settlements with the private parties thatoriginally brought the criminal actions. Our share of these settlements, which was paid in January 2006, was $2,182,105.

*Depreciationand Amortization*. Depreciation and amortization decreased20.8% to $49.1 million during 2006 from $62.0 million during 2005, primarilydue to a decrease in the depreciable asset base.

***OperatingLoss***.* *Operating loss decreased by 1.7%to $17.4 million in 2006 from $17.7 million in 2005.  Thedecrease in operating loss was attributable to a margin improvement.

***OtherExpenses****. *Other expenses increased 2.7% to$68.3 million in 2006 from $66.5 million in 2005, primarily as a result of a foreignexchange loss in 2006 compared to a foreign exchange gain in 2005*.*

***IncomeTaxes****. *Income taxes were $1.9 million in2006 compared to negative $0.8 million in 2005.

***NetLoss.**** *Net loss totaled $87.5 million or$1.36 per share in 2006 compared to a net loss of $83.4 million, or $1.29 pershare in 2005. The increase in net loss during 2006 is attributable to higherother expenses and income taxes.

#### **2005 Compared to 2004**

***ForeignExchange Rate.* **Theaverage annual foreign exchange rate decreased 27.8% to RD$30.39 per US$1.00during 2005 from RD$42.11 per US$1.00 during 2004. This represents a 27.8%weakening of the U.S. dollar against the Dominican peso from 2004 to 2005 or acorresponding strengthening of the Dominican peso. This foreign exchange fluctuationsignificantly affected our overall financial performance and results ofoperations during this period.

***OperatingRevenues.* **Ourtotal operating revenues increased 15.6% to $217.5 million during 2005 from$188.2 million in 2004 primarily due to the appreciation of the Dominican pesocompared to the U.S. dollar and an increased number of subscribers in allbusiness segments.

The following is adiscussion of our consolidated revenues for each of the revenue line items inour financial statements.

*Long Distance.*  Long distance revenues decreased 1.9% to$70.6 million during 2005 from $72.0 million in 2004. This decrease resultedprimarily from lower international revenues generated in the United States anda reduction in the number of minutes generated from prepaid calling cards andcalling centers.

International longdistance revenues decreased 1.8% or $1.2 million to $64.4 million in 2005 from$65.6 million in 2004 primarily due to lower international traffic revenuesderived from minutes generated in the United States that terminated incountries other than the Dominican Republic. This was the result of a strategyto reduce minutes to other destinations which generate a gross margin under5%.  Average international long distancetermination rates to the Dominican Republic increased to $0.071 per minuteduring 2005 compared to $0.069 per minute during 2004, and inbound minutesterminating in the Dominican Republic increased by 0.8% to 824 million minutesduring 2005 from 817.6 million minutes during 2004. However, the averageinternational long distance rate (which includes all destinations) decreased to$0.085 per minute during 2005 compared to $0.088 during 2004 as a result of adecrease in other destination total minutes.

Long distancedomestic revenues generated by our prepaid cards and calling centers in theDominican Republic decreased 3.1% to $6.3 million in 2005 from $6.5 million in2004. This decrease in prepaid cards and calling centers was primarily due to a20.6% decrease in total minutes to 53.6 million in 2005 from 67.5 millionminutes in 2004. This was the result of declining usage of our calling centersbecause of increased wireless service penetration in the Dominican Republic anda greater usage of VoIP telephony by small calling center operators in order toreduce their access charge costs.

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*Domestic Telephony.*Domestic telephony revenues increased 29.4% to $84.1 millionduring 2005 from $65.0 million in 2004, primarily as a result of a higheraverage number of lines in service during 2005 and due to the 27.8% exchangerate decrease mentioned above, which increased our total revenues in U.S.dollars because these revenues are generated in Dominican pesos. At December31, 2005, we had 167,763 lines in service compared to 153,440 lines in serviceat December 31, 2004, a 9.3% increase.

Monthly servicefees, measured local service charges, and outbound international and domesticlong distance revenues accounted for the majority of our domestic telephonyrevenues in 2005. Revenues from monthly fees increased 47.0% to $41.6 millionin 2005 from $28.3 million in 2004. Measured local service revenues increased7.5% to $21.4 million in 2005 from $19.9 million in 2004 due to increasedinbound minutes and higher prices. Outbound international and domestic longdistance revenues, including interconnection charges, generated by ourresidential and business customers increased 4.1% to $10.2 million in 2005 from$9.8 million in 2004 for similar reasons.

*Mobile.*****Mobile revenues increased 10.6% to $35.5million during 2005 from $32.1 million in 2004. The increase in mobile revenueswas attributable primarily to a higher number of subscribers and to the 27.8%exchange rate decrease mentioned above, which improved our total revenues inU.S. dollars.

Airtime revenues,including interconnection charges, increased 12.7% to $23.1 million in 2005from $20.5 million in 2004 due to increased prices in U.S. dollars generated bythe exchange rate decrease. Revenues from monthly rent increased 27.6% to $3.7million from $2.9 million in 2004 due to the exchange rate decrease and ahigher number of customers. Outbound international long distance revenues,including interconnection charges, generated by the mobile subscriber basedecreased 7.2% to $7.7 million in 2005 from $8.3 million in 2004 due to an overalldecrease in international minutes.

At December 31,2005, we had 393,991 mobile subscribers compared to 345,636 at December 31,2004. The increase of 14% in subscribers resulted primarily from our newactivation commission structure for external distributors and increasedmarketing investment.

*Cable.* Revenues from cable television servicesincreased 40.9% during 2005 to $19.3 million from $13.7 million in 2004.Revenues were positively affected by a price increase, an increased number ofcable subscribers and the exchange rate decrease mentioned above, whichbenefited the translation of cable revenues generated in Dominican pesos.

Cable programmingrevenues, including monthly basic and expanded basic programming service fees,increased 54.5% to $15.3 million during 2005 from $9.9 million during 2004.Revenues from advertising sales and channel rental charges increased 8.7% to$2.5 million in 2005 from $2.3 million in 2004.

At December 31,2005, we had 63,878 cable subscribers compared to 59,320 at December 31, 2004.The increase of 7.7% in the number of cable subscribers during 2005 reflects amore aggressive strategy in terms of sales and advertising.

The number ofcable subscribers at December 31, 2005 includes 49,199 basic and expanded basicprogramming subscribers, 11,083 commercial rooms, which include commercialestablishments (for example, hotels) and multiple dwelling units (for example,apartment buildings and hospitals), for which we receive a bulk rate for ourbasic cable service, and 3,596 subscribers for cable modem, digital audioprogramming and other services.

*Data and Internet.*Data and internet service revenues increased 48.1% to $8.0million in 2005 from $5.4 million in 2004, primarily due to conversion ofdial-up customers to broadband services and growth in our data and internetsubscriber base.

The number of ourdata and internet subscribers increased 31.3% to 19,771 at December 31, 2005from 15,053 at December 31, 2004.

*Other.*Othernon-core business revenues increased 32.2% to $90,557 in 2005 from $68,487 in2004.

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***OperatingCosts and Expenses.*** Our operating costs and expenses increased2.4% to $235.2 million in 2005 from $229.6 million in 2004.  This increase was mainly due to an increasein SG&A expenses due to the exchange rate decrease mentioned above, whichincreased our total expenses in U.S. dollars because most of our expenses areincurred in Dominican pesos.

The following is adiscussion of our operating costs and expenses for each of the line items inour financial statements.

*Costof Sales and Services*. Cost of sales and services decreased2.0% to $87.7 million in 2005 from $89.5 million in 2004, which was primarilyattributable to lower transport and access charges which decreased due to a reductionin the international business related to other destination traffic.

Cost of equipmentsales, prepaid cards, and line installations, totaled $5.3 million in 2005compared to $4.9 million in 2004. This increase of 8.2% was the result ofincreased gross sales in local access lines and mobile, which generated moreinstallations and higher equipment costs.

Transport andaccess charges decreased 2.9% to $76.9 million in 2005 from $79.2 million in2004, primarily as a result of the reduction of minutes terminating incountries other than the Dominican Republic as part of the strategy discussedabove.

*Selling, Generaland Administrative*. SG&A expenses increased 36.9% to $77.6 million during 2005 from$56.7 million during 2004.  This increasewas primarily driven by the exchange rate decrease mentioned above, whichincreased our total expenses converted to U.S. dollars because 77% of theseexpenses were generated in Dominican pesos.

Salaries and othercompensation to personnel increased 49.7% to $23.2 million in 2005 from $15.5million in 2004 mainly due to an extraordinary expense of $1.5 million relatedto executive severance and the impact of the exchange rate decrease mentionedabove, given that salaries are paid in Dominican pesos. At December 31, 2005,we had 1,671 employees compared to 1,615 employees at December 31, 2004.Building occupancy increased 47.6% to $12.4 million in 2005 from $8.4 millionin 2004 as a result of new cell sites built in new geographic areas to increaseour wireless coverage and the exchange rate effect. Marketing expensesincreased 80.8% to $4.7 million in 2005 from $2.6 million in 2004 because of astrategy to improve our brand positioning and to increase our product sales.Other expenses were basically affected by the exchange rate decrease.

*Depreciationand Amortization*. Depreciation and amortization decreased 17.7%to $62.0 million during 2005 from $75.3 million during 2004, primarily due to adecrease in the depreciable asset base.

***OperatingLoss.**** *Operating loss decreased by 57.2%totaling $17.7 million in 2005 from $41.4 million in 2004.  Thedecrease in operating loss was attributable to a margin improvement.

***OtherExpenses****. *Other expenses increased to $66.5million in 2005 from $60.4 million in 2004, primarily as net interest expenseincreased to $69.6 million in 2005 from $63.7 million in 2004.

***IncomeTaxes.**** *Income taxes were negative (abenefit) $817,848 in 2005 compared to $300,182 (an expense) in 2004 as a resultof the recalculation of deferred taxes at December 31, 2005.

***NetLoss.**** *Net loss totaled $83.4 million, or$1.29 per share in 2005 compared to a net loss of $102.2 million, or $1.58 pershare in 2004. The decrease in net loss during 2005 is attributable to revenuesgrowing faster than costs and expenses.

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#### **Critical Accounting Policies**

###### ***Accounting Change.***

In November 2001, the Emerging Issue Task Force (“EITF”)of the Financial Accounting Standards Board (“FASB”) reached a consensus onEITF Issue 01-09, “Accounting for Consideration Given by a Vendor to a Customer(Including a Reseller of the Vendor’s Products)”. The Company adopted theprovision of EITF Issue 01-9, “Accounting for Consideration Given by a Vendorto a Customer (Including a Reseller of the Vendor’s Products)” effectiveJanuary 1, 2003. EITF Issue 01-09 addresses the recognition, measurement, andincome statement classification for sales incentives offered to customers.Sales incentives include discounts and generally any other offers that entitlea customer to receive a reduction in the price of a product by submitting aclaim for a refund or rebate. Under EITF Issue 01-09, the reduction in orrefund of the selling price of the product resulting from any sales incentivesshould be classified as a reduction of revenue. Prior to adopting thispronouncement, we recognized sales incentives paid to distributor of prepaidcalling card as SG&A expenses. As a result of adopting EITF Issue 01-09,sales incentives were restated (reclassified) as a reduction of long distancerevenues in the case of long distance calling cards and as a reduction ofcellular revenues in the case of prepaid cellular services for the years endedDecember 31, 2003 and 2004. Amounts reclassified were $9,295,489 and $6,102,127in the years ended December 31, 2003 and 2004, respectively. This pronouncementdid not have any impact on net loss reported in these years.

###### ***Long-Lived Assets.***

In accordance withStatement of Financial Accounting Statements No.144, long-lived assets, such asproperty, plant, and equipment, and purchased intangibles subject toamortization, are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. Recoverability of assets to be held and used is measured by acomparison of the carrying amount of an asset to the estimated undiscountedfuture cash flows expected to be generated by the asset. If the carrying amountof an asset exceeds its estimated future cash flows, an impairment charge isrecognized by the amount by which the carrying amount of the asset exceeds thefair value of the asset. Assets to be disposed of would be separately presentedin the balance sheet and reported at the lower of the carrying amount or fairvalue less costs to sell, and are no longer depreciated. The assets andliabilities of a disposed group classified as held for sale would be presentedseparately in the appropriate asset and liability sections of the balancesheet.

Goodwill is testedannually for impairment, and is tested for impairment more frequently if eventsand circumstances indicate that the asset might be impaired.  An impairment loss is recognized to theextent that the carrying amount exceeds the asset’s fair value. Thisdetermination is made at the reporting unit level and consists of two steps.First, we determine the fair value of a reporting unit and compare it to itscarrying amount. Second, if the carrying amount of a reporting unit exceeds itsfair value, an impairment loss is recognized for any excess of the carryingamount of the reporting unit’s goodwill over the implied fair value of thatgoodwill. The implied fair value of goodwill is determined by allocating thefair value of the reporting unit in a manner similar to a purchase priceallocation, in accordance with FASB Statement No. 141, Business Combinations.The residual fair value after this allocation is the implied fair value of thereporting unit goodwill.

***Goodwilland Other Intangible Assets.***

Goodwillrepresents the excess of costs over fair value of assets of businessesacquired. We adopted the provisions of FASB Statement No. 142, Goodwill andOther Intangible Assets, as of January 1, 2002. Pursuant to Statement 142,goodwill and intangible assets acquired in a purchase business combination anddetermined to have an indefinite useful life are not amortized, but insteadtested for impairment at least annually in accordance with the provisions ofStatement 142. Statement 142 also requires that intangible assets with estimableuseful lives be amortized over their respective estimated useful lives to theirestimated residual values, and reviewed for impairment in accordance with FASBStatement No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

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#### **Effects of Inflation and Currency Devaluation**

The annualinflation rate in the Dominican Republic was 5% for 2006, 7.4% for 2005, and28.7% for 2004, according to data published by the Central Bank of theDominican Republic.

In terms of annualaverage foreign exchange rates, the U.S. dollar strengthened against theDominican peso during 2006 compared to a weakening in 2005 and a strengtheningin 2004. The annual average foreign exchange rate for the year ended December31, 2006 increased 9.7% compared to a decrease of 27.8% and an increase of36.1% for the years ended December 31, 2005 and 2004, respectively, as derivedfrom data published by the Central Bank of the Dominican Republic.

Our results ofoperations and financial condition are significantly affected by fluctuationsin the Dominican peso against the U.S. dollar. The majority of our revenues aredenominated in pesos while we have significant expenses, such as interest,equipment purchase and programming cost denominated in U.S. dollars. We do nothave hedging or other arrangements in place to protect ourselves against theeffects of currency fluctuations.

#### **Liquidity and Capital Resources**

***Background.***

Historically, ourexpansion strategy required us to incur significant costs and to makesubstantial capital investments in our network infrastructure before realizingrelated revenues.  We funded ourexpansion primarily through private and public equity, short-term and long-termdebt offerings and credit facilities.

Since 2001, ourliquidity resources have been significantly restricted by the worldwidecontraction of the telecommunications industry and capital markets, at a timewhen we were completing major network expansion projects.  As a result, in 2002 we initiated arationalization plan to curtail our spending and capital investments, whilemaintaining a healthy growth in subscribers and revenues.

In 2003, there wasa significant devaluation of the Dominican peso that continued into the middleof 2004. The average annual exchange rate of the Dominican peso to the U.S.dollar increased 66.4% and 36.1%, in 2003 and 2004, respectively, adverselyaffecting the Dominican economy. In particular, the failure of one of thelargest private commercial banks, Banco Intercontinental, in 2003 cost theDominican Republic an amount estimated to be approximately 12% to 15% of GrossDomestic Product and strained the finances of the Central Bank. This bankingcrisis led to increased inflation and reduced consumer confidence.

***Restructuring.***

Commencing in2001, a combination of macro-economic factors and circumstances specific to ourbusiness contributed to a steady and significant decline in our operatingperformance, cash flows and financial condition.  In light of these factors, our continuing fundingneeds, and our inability to service our debt, during late 2003, we took stepsto conserve cash and to focus our efforts on our core businesses, as follows:

·              *Suspension of Capital and Interest Payments to Lenders*.  In September 2003, we announced that we wouldnot be making a scheduled interest payment on our 11-3/8% Senior Notes dueSeptember 1, 2004.  In October 2003 wesuspended principal and interest payments on our unsecured indebtedness andprincipal payments on our secured indebtedness. Subsequently, on September 1, 2004, we announced that we would not bemaking the $200 million principal payment on our 11-3/8% Senior Notes dueSeptember 1, 2004.  As a result, we donot expect to have available any external funding sources until therestructuring process is concluded;

·              *Appointment of Chief Restructuring Officer*. Our Board ofDirectors appointed Kevin Lavin of FTI Consulting as Chief RestructuringOfficer to assist in negotiations with bondholders and lenders, to assist inthe implementation of a cash conservation plan, and to assist in thedevelopment of a core business plan;

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·              *Reduction of Capital Spending*.  We significantly reduced our capital spendingin 2003. Capital expenditures were cut from $53.8 million in 2002 to $10.8million in 2003. Subsequently, capital expenditures increased to $13.3 millionin 2004 and $28.6 million in 2005. In 2006, capital expenditures decreased from2005 to $26.2 million. We made capital expenditures for improvements in all ofour business segments as well as for general network maintenance. Our capitalexpenditures since 2003 have been funded by internally generated cash flow,vendor financing, and from proceeds of asset sales. A large part of our plannedcapital expenditures are discretionary and can be postponed or cancelled if wedetermine that funds are not available to us;

·              *Divestment of Non-Strategic Assets*.  We sold our Central American trunking assetsto a group of Panamanian investors for a purchase price of approximately $12.5million payable in installments. Estimated net proceeds, after transactionexpenses and satisfaction of liabilities directly related to the CentralAmerican operations, totaled approximately $10.7 million;

·              *Reduction of Spending*. We have implemented a series ofexpense reduction and cash conservation initiatives, which have resulted in thereduction of SG&A expenses, including headcount reductions, loweringprepaid commission rates and marketing expenses, as well as freezing ourdiscretionary spending.

***Cash Flows.***

Our primary sourceof funds in 2006 was cash generated from our operations. Net cash provided byoperating activities totaled $17.6 million in 2006 compared to $43.2 million in2005 and $22.2 million in 2004. The increase in cash from operations in 2005compared to 2004 resulted from improved operational margins and the effects ofa change in our policy for booking capital expenses payments.

During 2006,capital expenditures continued to be our primary use of capital resources. Netcash used in investing activities totaled $26.3 million in 2006 compared to$28.3 million in 2005, and $3.0 million in 2004. Our capital expendituresdecreased to $26.2 million in 2006 from $28.6 million in 2005, reflectingreduced investment in 2006 as compared to investments made during 2005 in cellsites (towers, buildings and antennas) to widen our mobile coverage.

Net cash used infinancing activities was $358,843 in 2006 and $403,542 in 2005 compared to $4.1million in 2004.  Financing activitiesduring 2006 primarily included payments to certain banks and holders oflong-term debt.

At December 31,2006, we had approximately $23.1 million in cash.

***Indebtedness.***

Our indebtednesswas approximately $447.1 million in principal amount at December 31, 2006compared to $447.5 million at December 31, 2005.  Our indebtedness at December 31, 2006consisted of $200.0 million of 11-3/8% Senior Notes due 2004, and $247.1million of bank and other borrowings, capital leases, commercial paper andtelecommunication equipment trade financings. In October 2003, we suspended principal and interest payments onsubstantially all unsecured bank debt and Senior Notes through therestructuring process.  As a result, allof our indebtedness can be called on demand; accordingly all of ourindebtedness at December 31, 2006 has been reclassified as current debt.

At December 31,2006, our current liabilities exceeded our current assets by $644.6 millioncompared to $577.7 million at December 31, 2005.  The increase in negative working capital isprimarily due to an increase in accrued but unpaid interest, resulting from oursuspension of substantially all principal and interest payments to lenders.

***Trend Information.***

See informationprovided above in Items 3 & 4.

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***Off-Balance Sheet Arrangements.***

We do not maintainany off-balance sheet transactions, arrangements, obligations or otherrelationships with unconsolidated entities or others that are reasonably likelyto have a material current or future effect on our financial condition, changesin financial condition, revenues or expenses, results of operations, liquidity,capital expenditures or capital resources, which are not disclosed in the notesto the consolidated financial statements.

###### ***Contractual Obligations.***

The followingtable contains certain information concerning our material contractualobligations at December 31, 2006 (in millions of U.S. dollars).
|                                            | ** ** | **Payments due by Period** | ** ** |
|--------------------------------------------|------------|-------------------------------------------|------------|
| **Contractual Cash Obligations** | ** ** | **Total**                                 | ** ** | **Less than 1  year** | ** ** | **1 – 3 years** | ** ** | **More than  4 years** | ** ** |
|                                       |       | **(in thousands)**                   |       |
| Short-term debt                            |       | $                                         | 432.6      |   | 432.6 |   | — |   | — |   |
| Long-term debt                             |       | —                                    |       | — |   | — |   | — |   |
| Capital lease  obligations                 |       | 14.5                                      |       | 14.5 |   | — |   | — |   |
| Operating leases                           |       | 16.1                                      |       | 2.7 |   | 9.6 |   | 3.8 |   |
|                                       |       |                                      |       |   |   |   |   |   |   |
| Total Contractual Cash  Obligations        |       | $                                         | 463.5      |   | 451.1 |   | 8.9 |   | 3.5 |   |

 

At December 31,2003, our 11-3/8% Senior Notes due 2004 were rated “Ca” (“Ca” rating indicatesobligations that are highly speculative and likely in, or very near, default,with some prospect of recovery of principal and interest) by Moody’s InvestorsService (“Moody’s”) and “D” (“D” rated indicates payment default or the filingof a bankruptcy petition) by Standard & Poor’s (“S&P”), due to ourfailure to make interest payments on these notes. On April 12, 2004, S&P withdrewits rating of our 11-3/8% Senior Notes due 2004 and on December 21, 2004, Moody’swithdrew its rating as well.

**ITEM 6.               DIRECTORS, SENIOR MANAGEMENT ANDEMPLOYEES**

We are managed bya Board of Directors, the members of which, in accordance with our by-laws, areelected at the annual general meeting of shareholders and serve for a period ofone year.  The Board of Directors iscomposed of a Chairman and Vice President of the Board and nine additionalmembers.  The Board of Directorstypically meets at least once every three months.  Special meetings of the Board of Directorsmay be held at any time.

Each Director(whenever elected) holds office until the next Annual General Meeting ofShareholders following his or her election and until his or her successor iselected or until earlier resignation or removal.  If any vacancies occur in the Board ofDirectors, or if the authorized number of directors is increased, the directorsthen in office may continue to act, and such vacancies may be filled by a majorityof the directors then in office. No annual general meeting of shareholders hasbeen held since 2002.  Accordingly, mostof our directors have been appointed by action of the Board of Directorspursuant to the provisions of our by-laws for filling vacancies.

The names of ourdirectors and executive officers at December 31, 2006 are set forth belowtogether with their ages and current positions at that date:

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| Name                                                           | ** ** | **Age**    | ** ** | **Position**                                                                        |
|----------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------------------------|
| ** **                                                     | ** ** | ** ** | ** ** | ** **                                                                          |
| **Board of Directors**                                         | ** ** | ** ** | ** ** | ** **                                                                          |
| *** ***                                                   | ** ** | ** ** | ** ** | ** **                                                                          |
| ***Named by GFN Corporation, Ltd.:***                          | ** ** | ** ** | ** ** | ** **                                                                          |
| Ricardo Valdez Albizu                                          |       | 48         |       | Chairman                                                                            |
| Héctor Castro Noboa                                       |       | 65         |       | Vice President of the Board                                                         |
| Adriano Miguel Tejada                                          |       | 58         |       | Director                                                                            |
| Manuel Arturo Pellerano                                        |       | 52         |       | Director                                                                            |
| Rosangela Pellerano                                            |       | 48         |       | Director                                                                            |
| Pablo Linares                                                  |       | 69         |       | Director                                                                            |
| * *                                                       | * *   | * *   | * *   | * *                                                                            |
| ***Named by Motorola, Inc.:***                                 | * *   | * *   | * *   | * *                                                                            |
| James Deane                                                    |       | 63         |       | Director                                                                            |
| Thomas Canfield                                                |       | 50         |       | Director                                                                            |
| Carlos Castillo                                                |       | 52         |       | Director                                                                            |
| * *                                                       | * *   | * *   | * *   | * *                                                                            |
| ***Independent Directors:***                                   | * *   | * *   | * *   | * *                                                                            |
| Anibal de Castro                                               |       | 57         |       | Director                                                                            |
| Gerald Gitner                                                  |       | 61         |       | Director                                                                            |
|                                                           |       |       |       |                                                                                |
| Manuel Arturo Pellerano and Rosangela Pellerano are  siblings. |       |       |       |                                                                                |
|                                                           |       |       |       |                                                                                |
| **Executive Officers**                                         | ** ** | ** ** | ** ** | ** **                                                                          |
|                                                           |       |       |       |                                                                                |
| Héctor Castro Noboa                                       |       | 65         |       | President, Chief Executive Officer                                                  |
| Alfredo Arredondo                                              |       | 42         |       | Vice President, Information Technology                                              |
| Marco Cabral                                                   |       | 33         |       | Vice President, Mobile Division (appointed November  29, 2006)                      |
| Julio German                                                   |       | 42         |       | Vice President, Network Engineering & Operations  (appointed November 29, 2006) |
| Ryan Larrauri                                                  |       | 34         |       | Vice President, Fixed Lines Division                                                |
| Erwin Mendez                                                   |       | 46         |       | Vice President, Finance & Administration                                        |
| Luis Ruiz                                                      |       | 59         |       | Vice President, Telecable                                                           |
| Bela Szabo                                                     |       | 37         |       | Vice President, International Division                                              |
| Miriam Vargas                                                  |       | 43         |       | Vice President, Services Division                                                   |
| Angela Vega                                                    |       | 36         |       | Vice President, Human Resources (appointed November  29, 2006)                      |

 

In addition, the following executive officers servedduring 2006 and resigned from the indicated positions as follows:

Carlos Romero, Vice President Business Segment Division (resignedDecember 31, 2006);

Valerio Valeriano, Vice President, Network Planning & Operations(resigned November 29, 2006);

Maripily Peralta, VicePresident, Human Resources (resigned November 29, 2006).

Each of thecurrent members of the Board of Directors has been elected pursuant to theterms of an amended and restated shareholders agreement, dated at May 8,1998, among Tricom, Motorola, Oleander Holdings, Inc., Zona Franca SanIsidro, S.A. and certain individuals that are affiliates of GFN or Tricom.

The following setsforth further information about the members of our Board of Directors and ourexecutive officers current as at December 31, 2006.

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#### **Board of Directors**

***RicardoValdez Albizu*****has beenChairman of our Board of Directors since May 2004 and a member of our Board ofDirectors since February 2004. Mr. Albizu has been the Chairman and ChiefExecutive Officer of Zona Franca San Isidro, a diversified industrial park inthe Dominican Republic, since 1997. He obtained his law degree from theUniversidad Autónoma de Santo Domingo in 1984.

***HéctorCastro Noboa*** has served as Vice President of our Board ofDirectors since August 1994 and has been a board member since our formation inJanuary 1988. Mr. Castro was a director and Executive Vice President ofGFN from April 1989 to June 2002. Between March 1993 and September 1997, Mr. Castro served asthe Executive Vice President of Bancrédito. Mr. Castro has also worked for the Deutsche Sudamerikanische Bank(Germany), Citibank (Marketing Vice President), Bonanza Dominicana (ChiefFinancial Officer), Banco Metropolitano (Financial Advisor) and UniversidadNacional Pedro Henríquez Ureña (professor of international economics andmacroeconomics).  Mr. Castro has a degreein Business Economics from Madrid’s Universidad Complutense where he studiedbusiness economics.

***ThomasCanfield*** has been a member of our Board of Directorssince July 2004. Since February 2004, Mr. Canfield has served as thecourt-appointed Chief Executive Officer and Plan Administrator of AT&TLatin America Corp., a broadband communications services provider to majormetropolitan business markets in Latin America. Mr. Canfield also served asAT&T Latin America’s General Counsel and Secretary from 2000 to 2004.Before joining AT&T Latin America, from 1991 to 2000, Mr. Canfield was anassociate and counsel in the corporate and international practice groups of theinternational law firm Debevoise & Plimpton LLP for nine years. Mr.Canfield holds a B.A. in History from Wesleyan University and a J.D. fromFordham University School of Law, New York.

***CarlosCastillo*** has been a member of our Board of Directorssince July 2004. Since January 2001, Mr. Castillo has been an independentfinancial advisory consultant.  He hasover 20 years of operational and transactional experience in corporate finance,debt restructuring, investment and merchant banking services principally inLatin America. From July 1997 to June 1995, and again from August 1999 toDecember 2000, Mr. Castillo was a Senior Managing Director at Bear Stearns& Co., Inc. Latin America Equity Capital Markets and Investment Banking.Mr. Castillo’s previous experience also includes positions at Bankers TrustCompany and Continental Bank. Mr. Castillo holds a B.S. in Economics fromUniversidad Nacional de Ingenieria in Peru and an MBA from the Wharton Schoolof Business, University of Pennsylvania.

***AníbalDe Castro*** has been a member of our Board of Directorssince May 1998.  Mr. De Castro iscurrently the ambassador of the Dominican Republic to the Court of St. James,Great Britain. He has been President of Editorial AA, a subsidiary of GFN sinceMay 1994 and was Executive Vice President of Omnimedia from May 1994 toJune 2004.  Mr. De Castro served on theBoard of Directors of Corporación Dominicana de Electricidad (C.D.E.), thecountry’s state-owned electric utility provider from 1979 to 1982, andcurrently serves on the Board of Directors of several Dominican companies andprofessional associations including Banco de la Pequeña Empresa and Fondo deFinanciamiento de la Micro-Empresa. Mr. De Castro graduated from Universidad Autónoma de Santo Domingo witha degree in journalism and holds a B.A. in Economics from the University ofEast Anglia in Great Britain.

***JamesDeane*****has been amember of our Board of Directors since June 2004. Since March 1995, he has beenthe Chief Executive Officer and majority shareholder of DSJ Holdings, Inc.,which specializes in the origination of structured trade transactions andprocurement for overseas buyers in Latin America and Africa. From June 1971until January 1992, Mr. Deane was employed by Citibank in Latin America and theU.S., including as Country Corporate Officer in Ecuador and the DominicanRepublic. Mr. Deane earned his Bachelor’s degree in Industrial Engineering fromStanford University and an MBA from the Wharton School of Business, Universityof Pennsylvania.

***GeraldGitner*** has been a member of our Board of Directors sinceAugust 2004. Since 1986, Mr. Gitner has served as Chairman of G. Associates, Inc.  Since 2002, Mr. Gitner has also served asnon-executive Chairman of Kitty Hawk, Inc., which operates an overnight expresscargo network and an all cargo airline headquartered in Dallas, Texas.  He served as Chairman of the Board of 

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Trans WorldAirlines, Inc. from 1997 to 2002 and as its CEO from 1996 to 1999.  He also co-founded and co-chaired from 1990to 1997 a private leasing company specializing in wide-bodied aircraft. Mr.Gitner is a former Vice Chairman of Pan American World Airways and CEO of PanAmerican World Services. Mr. Gitner was President and Co-founder of PeopleExpress Airlines, Inc. from 1980 to 1982. He also served as President and CEOof Atasco USA, a private aviation concern involved in commercial aircraftleasing and servicing.  Mr. Gitnerreceived a B.A. from Boston University.

***PabloLinares*****has been amember of our Board of Directors since February 2005. Mr. Linares has dedicatedover 30 years to international agencies including the Organization of thePetroleum Exporting Countries (“OPEC”), the United Nations, and theInter-American Development Bank (“IADB”). He has served as the representativeof the IADB in the Dominican Republic and Nicaragua, as Chief of the OperationsDivision in Washington, D.C. and as Chief of IADB operations for CentralAmerica, Panama, Colombia, Equator, Mexico, Bolivia, Uruguay and Paraguay inWashington. He has also served as economic advisor to the OPEC Fund forInternational Development and advised on the formation of the African Bank ofDevelopment and the Asian Bank of Development. He currently serves as theExecutive Director of the Dominican Association of Foreign Investment Companiesand consults on projects in the Dominican Republic and other countries. Mr.Linares graduated with degrees in Economy, Management, Finance and Accountingfrom George Washington University, Georgetown University, INCAE in Nicaraguaand the Academias Hispanoamericanas in Caracas, Venezuela, respectively.

***ManuelArturo Pellerano Peña*** has served as a member of our Boardof Directors since May 2004. Mr. Pellerano served as Chairman of our Board ofDirectors and Director from August 1994 until October 2003 and as ourChief Executive Officer from August 1994 until October 2003. Mr. Pellerano hasbeen a member and the Vice President of the Board of Directors of GFN sinceApril 1989. Mr. Pellerano graduated from Universidad Nacional PedroHenríquez Ureña with a degree in economics.

***RosangelaPellerano*Peña**has been a member of our Board of Directors since July 2004. Ms. Pellerano hasover 16 years of experience within the Dominican commercial banking industry.From 1987 to 2003, Ms. Pellerano served as a Vice President of both theConsumer and Corporate Banking Services and International Banking Servicesdivisions of Bancrédito, S.A., a former affiliate of GFN Corp., our principalshareholder. Ms. Pellerano is a graduate of Instituto Tecnológico de SantoDomingo where she majored in business administration and holds an MBA fromUniversité du Québec in Montreal, Canada.

***AdrianoTejada*** has been a member of our Board of Directors sinceMay 2004.  Since 2000, Mr. Tejada hasbeen the editor of several newspapers in the Dominican Republic and served aspress secretary for President Leonel Fernandez from 1997 to 2000. Since June2004, Mr. Tejada has been the Director of Omnimedia, which produces the DiarioLibre newspaper and magazine publications. Mr. Tejada holds a law degreefrom Universidad Católica Madre y Maestra and a Master of Arts in PoliticalScience from Temple University, Philadelphia. Mr. Tejada also was an associateprofessor and dean at Pontificia Universidad Católica Madre y Maestra and aFulbright scholar who studied journalism and political history at theUniversity of Pittsburgh.

#### **Executive Officers**

***HéctorCastro Noboa*** has served as Chief Executive Officer (“CEO”)following former CEO Carl H. Carlson’s resignation in June 2005 and has servedas Vice President of our Board of Directors since August 1994. See additionalinformation in the Board of Directors section above.

***Alfredo Arredondo*** has served as Vice President of Information Technology since 2004 andhas held a number of positions in the Company’s Management Information Systems(“MIS”) department since 1991. Before joining Tricom, from 1989 to 1991, he wasa systems analyst for Nestle Dominicana. Mr. Arredondo has worked as ProjectManager for development and deployment of all of the Company’sinternally-developed applications, including billing, rating customer care,provisioning and traffic measurement. Mr. Arredondo is a systems engineerfrom Pontificia Universidad Católica Madre y Maestra and has a post-graduatedegree in management from Instituto Tecnológico de Santo Domingo.

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***Marco Cabral*****has served as Vice President of our Wireless Unit sinceDecember 2006 and also as Regional Vice President of our  North Region(DR) operations since July 2001. Before joining Tricom, Mr. Cabral was GeneralManager of Destileria del Yaque, an Alcohol Distillery. He served as a BoardMember and Import-Export Manager of J. Armando Bermudez, a Dominican rummanufacturer. Previously, Mr. Cabral worked for Interamericana ProductsInternational, a textile manufacturer, as General Manager.  Mr. Cabral holds an Industrial Engineeringdegree from Pontificia Universidad Catolica Madre y Maestra, and an MBA degreefrom Kenan Flagler Business School, University of North Carolina at ChapelHill.

***Julio German*****has served as Vice President of our Network Engineering andOperations Division since November 2006. Since joining Tricom in 1995, Mr.German held numerous managerial positions in the company including Second VicePresident of Network Engineering & Operations.  Previously, he worked as Network PlanningEngineer for Verizon (formerly Codetel) for five years.  Mr. German holds a B.S. in ElectricalEngineering from Universidad Central del Este and he has many certifications inthe engineering area from different US training institutions.

***RyanLarrauri*** has served as Vice President of our ConsumerSegment Division since June 2001. Before joining Tricom, he was Vice Presidentof Marketing for GFN’s Bancrédito and Compañía Nacional de Seguros from1999.  He has held numerous executivepositions in the textile, consumer goods and financial sectors. Mr. Larrauri isthe published author of *Marketing in the DominicanRepublic, Genesis and Evolution* as well as several other specializedarticles in the field.  Mr. Larrauri hasa B.S. in Marketing from the Universidad Iberoamericana, as well aspost-graduate degrees in Brand Management, International Business, BankManagement and Strategic Planning.

***ErwinMendez*** has served as Vice President of Finance andAdministration since July 2004 and was the Company’s Controller since November2002. Before joining Tricom, from May 2001 to November 2002, he was VicePresident of Finance for Centennial Dominicana, then a subsidiary of CentennialCommunications Corp.  Prior to May 2001,Mr. Mendez worked for 14 years for Colgate-Palmolive Company where he servedfrom 1987 to April 2001 in key accounting and financial control positions inthe Dominican Republic and the Caribbean, including assignments as FinanceDirector for Colgate-Palmolive operations in Barbados and Jamaica. Mr. Mendezis a graduate of Universidad APEC in Santo Domingo where he majored inaccounting and finance and holds an MBA from Instituto Tecnológico de Santo Domingo,Dominican Republic.

***LuisRuiz*** has servedas Vice President of our Cable TV Division since May 2004. Previously, heserved as 2nd VP Cable and Special Services from September2001 to April 2004. Before joining Tricom, Mr. Ruiz was Vice President of TelecableNacional C. por A., were he worked from 1982, with the founding group of cabletelevision business in the country, in partnership with TCI (Comcast). Beforethat, Mr. Ruiz worked for Codetel, then a GTE subsidiary, where he held variouspositions in the engineering and services area. Mr. Ruiz has an IndustrialEngineering degree from World University and a Communications Studies degreefrom George Washington University. Active in cable and telecommunicationsbusiness, Mr. Ruiz is Vice President of TEPAL, an organization uniting cabletelevision companies in Latin America.

***Bela Szabo***has served as Vice President of our International Division since July 2002. Hewas Director of the International Division from April 2001 to July 2002. Before joining Tricom, Mr. Szabo worked at Texaco from September 1994 to April2001 holding numerous positions in marketing, engineering and as manager ofTexaco’s *Express Lube* division. From 1989 to1994, Mr. Szabo worked for La Universal de Seguros, one of the largest insurancecompanies in the Dominican Republic, managing insurance policies to engineeringcompanies.  Mr. Szabo holds a post-graduate degree in Corporate Financeand an Executive MBA from Barna Business School, formerly Barna Escuela de AltaDirección. Mr. Szabo also holds an engineering degree from the UniversidadNacional Pedro Henríquez Ureña.

***MiriamVargas*****has served asVice President of our Services Division since January 2002. She was VicePresident of Finance from January 1997 to December 2001. From 1985 to 1996,Mrs. Vargas was Vice President of Internal Auditing for a number of GFN ́ssubsidiaries including Bancrédito and Compañía Nacional de Seguros. Mrs. Vargasis a graduate of Universidad APEC in Santo 

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Domingo where shemajored in accounting, finance and auditing and holds an MBA from theUniversidad Cató1ica Madre y Maestra. and an Executive MBA from Barna BusinessSchool.

***AngelaVega*****has served asVice President of Human Resources since December 2006.  Ms. Vega has beenemployed by Tricom for 11 years, where she has held numerous positions, asmarketing analyst for residential lines and later becoming Marketing Manager,Director, and, in 2003, Marketing Vice President for Tricom and Telecable. From2003 to 2006 she was Second Vice President of Customer Relations.  Before joining Tricom, she held managemet positions in the automobile sector asa brand manager for Volvo.   Mrs. Vega has a B.S. in Marketing from theUniversidad Iberoamericana and is currently completing an MBA program fromBarna Business School.

#### **Executive Compensation**

The aggregate amount of compensation we paid during the fiscal year endedDecember 31, 2006 to our executive officers, as a group (eleven persons), was $1.9million. In addition, we made severance payments to our executive officers inan aggregate amount of $0.4 million during the fiscal year ended December 31,2006.

#### **Employees**

|            | ** ** | **At December 31,** | ** ** |
|------------|------------|-------------------------------|------------|
| ** ** | ** ** | **2004**                      | ** ** | **2005** | ** ** | **2006** | ** ** |
| Executives |       | 195                           |       | 181 |   | 190 |   |
| Others     |       | 1,420                         |       | 1,490 |   | 1,533 |   |
| Total      |       | 1,615                         |       | 1,671 |   | 1,723 |   |

 

At December 31,2006, we had 1,723 employees.  Of thisnumber, 190 were executives, directors and managers, and the remaining 1,533were technicians, sales, service and staff employees.  None of our employees belong to laborunions.  We believe that we have goodrelations with our employees.

#### **Share Ownership**

We refer to Item 7for information with respect to Manuel Arturo Pellerano Peña, who, to ourknowledge, is the only director with 1% or greater percentage of ownership inTricom.

In connection withour initial public offering, our Board of Directors adopted, and GFN andMotorola approved, our 1998 Long-Term Incentive Plan pursuant to which 750,000shares of Class A Common Stock were reserved for issuance to officers andemployees.  At December 31, 2005 and2006, there were outstanding options to purchase 163,052 and 81,536 shares,respectively, of Class A Common Stock that had been granted to current andformer directors, officers and employees (including certain of the executiveofficers listed above) at exercise prices ranging from $3.00 per share to$16.00 per share.  The options grantedexpire on the tenth anniversary of the date of grant.

## **ITEM 7.               MAJORSHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

The followingtable sets forth certain information known to us with respect to beneficialownership of our Class A Common Stock at December 31, 2006 (unless otherwiseindicated) by each person who, to our knowledge, beneficially owns 5% or moreof our Class A Common Stock and all officers and directors as a group.  Except as otherwise indicated, the holderslisted below have sole voting and investment power with respect to all sharesbeneficially owned by them.

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Each share ofClass B Stock is freely convertible at any time into one share of Class ACommon Stock, subject to adjustment, and may not be transferred except to GFN,Motorola or their permitted transferees, as defined.  Each share of Class B Stock has ten votes andeach share of Class A Common Stock has one vote.  GFN and Motorola own 100% of the outstandingshares of Class B Stock.  Currently, GFNand its affiliates have approximately 55.9% of the voting power (includingshares of Class A Common Stock and Class B Stock owned by it and itsaffiliates) and Motorola approximately 32.3%. If our financial restructuring is consummated as currently contemplated,the interests of the existing holders of our equity will be effectivelyeliminated, and, as a result, the voting power of GFN and its affiliates andMotorola will substantially reduced.
| **Shareholder**                                                                        | ** ** | **Class A  Common  Stock  Beneficially   Owned**(1) | ** ** | **Percentage of  Class A Common  Stock Beneficially  Owned**(1) | ** ** | **Percentage of  Class B Stock  Beneficially  Owned** | ** ** | **Percentage of   Voting Power  (assuming that all  of the Class B  Stock is  Converted into  Class A Common  Stock)** (1) | ** ** |
|----------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                                                   |       |                                                          |       |                                                                                |       |                                                                 |       |                                                                                                                                                                                        |       |
| Oleander  Holdings, Inc. (2)                                                           |       | 25,565,357                                                    |       | 44.9                                                                                |       | 60.0                                                                 |       | 39.6                                                                                                                                                                                        |       |
| GFN Corporation  Ltd (2).                                                              |       | 28,444,145                                                    |       | 50.0                                                                                |       | 60.0                                                                 |       | 44.0                                                                                                                                                                                        |       |
| Manuel Arturo  Pellerano Peña (2)                                                 |       | 28,940,594                                                    |       | 50.8                                                                                |       | 60.0                                                                 |       | 44.8                                                                                                                                                                                        |       |
| Motorola, Inc.                                                                         |       | 7,657,818                                                     |       | 14.4                                                                                |       | 40.0                                                                 |       | 11.9                                                                                                                                                                                        |       |
| Marino A.  Ginebra Hurtado (3)                                                         |       | 3,306,037                                                     |       | 7.3                                                                                 |       | —                                                               |       | 5.1                                                                                                                                                                                         |       |
| Global Capital  Finance Ltd.                                                           |       | 3,030,303                                                     |       | 6.7                                                                                 |       | —                                                               |       | 4.7                                                                                                                                                                                         |       |
| Verkid Finance,  S.A.                                                                  |       | 3,030,303                                                     |       | 6.7                                                                                 |       | —                                                               |       | 4.7                                                                                                                                                                                         |       |
| Directors and executive  officers as a group (20 persons)(4)  |       | 29,038,467                                                    |       | 51.0                                                                                |       | 60.0                                                                 |       | 44.9                                                                                                                                                                                        |       |

 

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(1)                                  For purposes of this table, a person orgroup of persons is deemed to have “beneficial ownership” of any shares as of agiven date which such person or group of persons has the right to acquirewithin 60 days after such date. Information relating to the percentage beneficially owned is calculatedin accordance with SEC Rule 13d-3 and includes for each of GFN CorporationLtd., Manuel Arturo Pellerano Peña, Oleander Holdings Inc. and Motorola theshares of Class A Common Stock issuable upon conversion of the Class BStock beneficially owned by it only.  Forexample, for purposes of calculating the percentage of Class A Common Stockbeneficially owned by GFN Corporation Ltd in accordance with SEC Rule 13d-3,the number of outstanding shares of Class A Common Stock does not includeshares that would be issuable upon conversion of Class B Stock owned byMotorola.  As a result, the percentage ofClass A Common Stock beneficially owned by any holder of Class B Stock isgreater than the percentage of Class A Common Stock owned by that holder,assuming conversion of all Class B Stock, shown in the column, “Percentage ofVoting Power.”

(2)                                  Oleander Holdings, Inc., aPanamanian corporation, is a wholly owned subsidiary of GFN CorporationLtd.  Manuel Arturo Pellerano Peña andmembers of his family control both GFN Corporation Ltd. and Oleander Holdings,Inc.

(3)                                  Includes 606,061 shares of Class A CommonStock owned by Mr. Ginebra directly and 2,699,976 shares of Class A CommonStock owned by Walbeck Overseas Ltd., an entity controlled by Mr. Ginebra.

(4)                                  Includes 11,486,720 shares of Class BStock and 17,453,874 shares of Class A Common Stock that may be deemed to bebeneficially owned by Mr. Pellerano in his capacity as a controlling person ofGFN.  Also includes 750 shares of Class ACommon Stock that are issuable upon exercise of currently exercisable optionsbeneficially owned by officers.

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#### **Shareholders Agreement**

Each of thecurrent members of the Board of Directors has been elected under the terms ofan amended and restated shareholders agreement, dated at May 8, 1998,among Tricom, Motorola, Oleander Holdings Inc., Zona Franca San Isidro, S.A.and certain nominal shareholders that are affiliates of GFN or Tricom.

The shareholdersagreement provides that the Board of Directors will consist, and GFN andMotorola each will vote all of the shares owned by it (or in the case of anytransfer of shares to its permitted transferee, as defined in the shareholdersagreement, will cause such permitted transferees to vote their shares) infavor, of six directors to be designated by GFN, four directors to bedesignated by Motorola and two independent directors.  The shareholders agreement provides that inorder for a person to qualify as an independent director such person must notbe:

·              An officer,employee, principal stockholder, consultant or partner of Tricom, apart fromsuch directorship, or an officer, employee, principal stockholder, consultantor partner of an entity that was dependent upon Tricom or any affiliate ofTricom for more than 5% of its revenues or earnings in its most recent fiscalyear;

·              An officer,director, employee, principal stockholder, consultant or partner of a personthat is a competitor of Tricom or any of its affiliates, any affiliate of suchcompetitor, or any other person that was dependent upon such competitor oraffiliate of such competitor for more than 5% of its revenues or earnings inits most recent fiscal year; or

·              An officer, director,employee, principal stockholder, consultant or partner of Motorola or GFN or anofficer, employee, principal stockholder, consultant or partner of an entitythat was dependent upon Motorola or any affiliate of Motorola for more than 5%of its revenues or earnings in its most recent fiscal year.

Each of Motorolaand GFN will be entitled to nominate one independent director so long as ittogether with its permitted transferees owns at least 25% of the issued andoutstanding shares of Class B Stock.  Incalculating the number of shares of Class B Stock owned by either GFN orMotorola, there will be included the number of shares of Class B Stock owned byany of it permitted transferees.

The number ofdirectors other than independent directors that GFN or Motorola each maydesignate will change if its percentage ownership of Class B Stock changes asfollows:

·              If GFN and Motorolaeach owns 50% of the then outstanding shares of Class B Stock, each would havethe right to designate five directors;

·              If either GFN orMotorola owns shares of Class B Stock:

·              Greaterthan 50% but less than or equal to 60% of the then outstanding shares of ClassB Stock, it would designate six directors and the other four directors;

·              Greaterthan 60% but less than or equal to 70% of the then outstanding shares of ClassB Stock, it would designate seven directors and the other three directors;

·              Greaterthan 70% but less than or equal to 80% of the then outstanding shares of ClassB Stock, it would designate eight directors and the other two directors;

·              Greaterthan 80% but less than or equal to 90% of the then issued and outstandingshares of Class B Stock, it would designate nine directors and the other onedirector; or

·              Greaterthan 90% of the issued and outstanding Class B Stock, it would designate allten directors.

Until such time aseither Motorola or GFN owns less than 25% of the outstanding shares of Class BStock, the shareholders agreement requires the affirmative vote of ninedirectors to approve the following actions:

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·              The acquisition orformation by Tricom of any entity or the making of any investments in an otherentity of business, including, but not limited to, the purchasing of equity ordebt interests in or the extension of credit to such entity;

·              The incurrence ofindebtedness, if after giving effect to such incurrence, including the proposedapplication of the proceeds of such indebtedness to pay existing indebtedness,the ratio of indebtedness to shareholders’ equity would be greater than threeto one;

·              Approval of annualbudgets relating to income, capital expenditure, operating expenses and cashflows (provided that this does not require approval of any projected debtincurrence that otherwise complies with the limits described above or of any otherproposed corporate action for which super-majority approval is notspecifically required); and

·              The issuance, orredemption, of Class A Common Stock or other securities or instrumentsexercisable for or convertible into Class A Common Stock.

In addition,approval by the independent directors is required for any transaction that hasa fair market value exceeding $1.0 million which we enter into with eitherGFN or Motorola and their respective affiliates.  The vote of a majority of the directors presentat a duly convened meeting is required for all other board actions (and at suchtime that Motorola or GFN owns less than 25% of the then outstanding shares ofClass B Stock for the four actions specified as requiring a greater vote).

Under theshareholders agreement, if we propose to register any of our securities underthe Securities Act of 1933 (other than a registration in connection with areorganization on Form F-4 or in connection with any employee stockoption, stock purchase or savings plan on Form S-8 or similar registrationforms), whether or not for our own account, GFN and Motorola are entitled toinclude shares of Class A Common Stock owned by them in any suchregistration, subject to the right of the managing underwriter of any suchoffering to exclude, due to market conditions, some or all of suchsecurities.  In addition, GFN andMotorola each has the right to require us to prepare and file on threeoccasions a registration statement covering registerable securities with amarket value of at least $5.0 million, subject to customary blackoutperiods.  We are generally required tobear the expenses (except underwriting discounts and commissions and fees andexpenses of any special counsel) of all such registrations, whether or notinitiated by GFN or Motorola.

#### **Certain Transactions with Related Parties**

***Summary Description of Relationships.***

We are,either directly or indirectly, related to various entities through commonownership, contractual rights and/or family ownership, as more fully set forthbelow.

Mr.Manuel Arturo Pellerano Peña (“Mr. Pellerano”), together with members of hisfamily, either directly or through wholly-owned subsidiaries were, at December31, 2005 and 2006, and continue to be, the beneficial owners of 17,453,874shares of our Class A Common Stock and 11,486,720 shares of our Class BStock.  This represents 50.8% of theissued and outstanding shares of our Class A Common Stock (calculated inaccordance with SEC Rule 13d-3) and 60% of the issued and outstanding shares ofour Class B Stock.  From August 1994through late 2003, Mr. Pellerano was the Chairman of our Board of Directors,President and Chief Executive Officer. He resigned from our Board of Directors in November 2003 and wasreappointed in May 2004.  He retains,together with members of his family, the right to appoint a majority of themembers of our Board of Directors and, indirectly, the right to controlselection of our management.

Until2003, Mr. Pellerano, together with members of his family, controlled various entitiesthat were engaged in the businesses of banking, insurance, credit cardissuance, securities broker-dealer and other businesses, including:

·                  Banco Nacional de Crédito S.A., aDominican Republic Bank (“Bancrédito Dominican Republic”);

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·                  Bancrédito (Panama), S.A., aPanamanian Bank (“Bancrédito Panama”);

·                  Bancredit Cayman, Ltd., a CaymanIslands Bank (“Bancredit Cayman”);

·                  Grupo Financiero Nacional, S.A., aDominican Republic holding company (“GFN, S.A.”); and

·                  Compañía Nacional de ArrendamientosS.A., a Dominican Republic equipment leasing company (“Conaresa”).

Thefollowing additional entities, among others, continue to be controlled by Mr.Pellerano and members of his family, and are therefore related parties:

·                  Omnimedia, S.A. (“Omnimedia”), aDominican media holding company;

·                  Omni TV, S.A. (“Omni TV”), aDominincan subsidiary of Omnimedia that provides television programming;

·                  Editorial AA, S.A., a Dominicanpublishing company (which was merged into Omnimedia in 2006);

·                  Zona Franca San Isidro, S.A., a freetrade zone located in the Dominican Republic;

·                  Ellis Portafolio, S.A., BalkingTrading, Inc., Eastern Power Corp. and Porter Capital, Ltd., which hold certainclaims against us; and

·                  Compañía Nacional de Seguridad, S.A.,a provider of security services.

Motorolais the beneficial owner of 7,657,818 shares of our Class B Stock and hascertain rights under our Shareholders Agreement, including the right todesignate a minority of the members of our Board of Directors.

*Description of Related PartyTransactions*

We have entered into varioustransactions with related parties (some of which are no longer related).

Indebtedness.  We incurred indebtedness from BancréditoPanama, Bancredit Cayman, Conaresa, GFN Capital Corporation Ltd., Ellis Portafolio,S.A. and certain other current and former affiliates of GFN and Tricom,consisting of loans, overdrafts, commercial paper and capital leases.  The aggregate principal amount of ourindebtedness from related parties was $73.8 million and $57.8 million atDecember 31, 2005 and 2006, respectively, as follows:

·                  Unsecured loans,overdrafts and letters of credit owed to various current and former affiliatesof GFN and Tricom in the principal amounts of $25,356,872 and $21,463,203 at December31, 2005 and 2006, respectively, bearing interest at rates ranging from 11.5%to 12% per annum;

·                  Commercial paper and promissory notesheld by various affiliates of GFN in the principal amounts of $48,448,922 and$36,329,491, at December 31, 2005 and 2006, respectively, bearing interest atrates ranging from 11% to 29%.

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Interest incurred on indebtedness due to current andformer related parties was $10,658,941 and $8,371,430 during 2005 and 2006,respectively. Because our outstanding debt was in default at December 31, 2005and 2006, all of the above obligations were payable on demand at thosedates.  Accrued interest payable onindebtedness due to current and former related parties was $24,186,485 and$32,557,915 at December 31, 2005 and 2006, respectively.

Provisionof Telecommunications Services. We provided telecommunications services to certain affiliates ofGFN.  These entities paid us $157,908 and$180,501for such services in 2005 and 2006, respectively.

Programming.  We entered into a contract with Omni TV, anaffiliated entity, to manage our relationship with international cableprogrammers.  During 2005, we paid OmniTV $2,423,657 for services provided under this contract. No such payments weremade in 2006.

LitigationSettlement.  See “KeyCompany Developments” for a description of a settlement payment made inconnection with litigation resulting from our former affiliation with certainbanking and other financial services entities.

#### **Other Transactions**

We havepurchased mortgage participation contracts from savings and loan associationsin the Dominican Republic that are maintained as compensating balances formortgage loans made by these associations to several of our officers.  At December 31, 2005 and 2006, thesemortgage participation contracts totaled $647,693 and $690,410, respectively.

## **ITEM 8.               FINANCIALINFORMATION**

#### **Consolidated Financial Statements**

See “Item 18.  Financial Statements”.

#### **Other Financial Information**

***Legal Proceedings.***

*PaymentOpposition by Creditors of GFN.*

In April 2004, wereceived a payment opposition (the “Payment Opposition”) from certain allegedcreditors (the “GFN Creditors”) of various identified affiliates of GFN, ourcontrolling shareholder (the “Identified GFN Entities”).  The Payment Opposition required that we notin any way pay, transfer or otherwise enter into any transaction that mayreduce, the amount owing by us to any of the Identified GFN Entities.  The amount alleged to be owed to the GFNCreditors by the Identified GFN Entities totaled $32 million.  The amount subject to the Payment Oppositionwas $64 million, as permitted by Dominican law. The Payment Opposition was lifted, without our involvement, in May 2005.

Certain of theIdentified GFN Entities (the “Transferring GFN Entities”) caused certainpromissory notes, commercial paper and other obligations issued by us in theaggregate principal amount of approximately $52,600,000 and RD$73,000,000 to beeither canceled and reissued, or assigned, to certain other affiliates of GFN(collectively, the “New Holders”) (the “Transfer”). None of the New Holders wasan Identified GFN Entity.  While thePayment Opposition was still in effect, we were advised by counsel that theTransfer may have been a violation of the Payment Opposition.  Because the Payment Opposition has beenlifted and is no longer in effect, we believe that the possibility that wewould be exposed to liability for any such violation is remote.

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*GrupoEconómico Suit.*

In April 2004, asuit was brought by certain holders of certificates of deposit and otherinstruments issued by certain affiliates of Bancrédito Dominican Republic, abanking institution formerly controlled by GFN, seeking to have us and severalco-defendants (including, among others, the Central Bank of the DominicanRepublic, the Leon Bank and GFN) held jointly and severally liable for amountsowed by such affiliates to the plaintiffs. Although the Court of First Instance of Santo Domingo found in favor ofthe plaintiffs against certain of the defendants, neither we nor any of oursubsidiaries were included among the defendants against whom judgment wasentered.  The court upheld the terms ofthe tripartite contract under which the Leon family acquired BancréditoDominican Republic, and rendered judgment against the parties to the tripartitecontract in the amount of $156,000,000, which was subsequently reduced (upon amotion filed by the same plaintiffs) by the same judge to approximately$13,000,000.  In an appeal filed bycertain of the parties found liable by the Court of First Instance, theoriginal plaintiffs sought to join us and the other original co-defendants tothe appeal proceedings.  In June 2007,the Appellate Court declined to join us or any of our subsidiaries to theappeal proceedings and further reduced the trial court’s award against theremaining defendants.  While theAppellate Court’s decision has been further appealed to the Supreme Court ofthe Dominican Republic, we believe it is unlikely that we will be found liablein these proceedings.

*BancréditoCriminal Litigation.*

In September 2005,a Dominican investigative judge added us and two of our subsidiaries asco-defendants to criminal proceedings brought by certain creditors ofBancrédito and other financial institutions formerly controlled by GFN, ourprincipal shareholder.  Several current andformer related parties, as well as certain of our directors and officers, werealso defendants in the proceedings.  Theallegations against us and the other co-defendants included fraud,embezzlement, violations of monetary laws and money laundering.  We were added to these proceedings withoutprior notice or participation in the existing proceedings.

In October 2005,an Appellate Court denied our appeal of the investigative judge’s action and inDecember 2005 the Supreme Court of the Dominican Republic denied our petitionto reconsider the lower court’s decision. Following the Supreme Court’s decision, we, together with the otherco-defendants, entered into settlements with the private parties thatoriginally brought the criminal actions.

In March 2006, theCriminal Court to which the matter was remanded following the Supreme Court’sdecision decided that the criminal actions, which had previously beenconsolidated into one action, be deconsolidated into six different matters,corresponding to the six criminal complaints originally filed.  We were a party to only one of suchmatters.  Subsequently, the CriminalCourt dismissed the public actions in four out of the six criminal complaints,including the only one to which we and our subsidiaries were parties.  No objection to, or appeal against, thisdecision was filed; accordingly, all civil and criminal liability to which wemight have been subject as a result of these allegations was extinguished.  In its rulings, the Criminal Court alsodismissed criminal complaints pending against Mr. Héctor Castro Noboa, ourChief Executive Officer, and Ms. Rosangela Pellerano, one of our directors.

The Criminal Courtdid not, however, dismiss all of the complaints against Mr. Manuel ArturoPellerano, one of our directors and the beneficial holder of a majority of thevoting power of our shares.  In August2006, as part of a series of related proceedings, Mr. Pellerano was convictedby the Criminal Court of several violations of the Dominican Criminal Code andMonetary and Financial Law.  The courtsentenced each of Mr. Pellerano and a co-defendant to three years imprisonmentand ordered each of them to pay a fine of RD$1 million (approximately $31,000).  The charges on which Mr. Pellerano wasconvicted, which we understand stem from Mr. Pellerano’s activities at relatedfinancial services entities and not at Tricom itself, include forgery,alteration, manipulation and concealment of banking books and records andfinancial statements.  Mr. Pellerano’sappeal of the decision of the Criminal Court remains pending at the date ofthis filing.

*PotentialClaims Arising from Share Placement and Bancredit Cayman Chapter 15 Proceeding.*

Our Annual Reporton Form 20-F for the year ended December 31, 2004 and our consolidated financialstatements included in that 

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report address thepossibility of claims arising out of the purchase (the “Placement”) in December2002 of shares of our Class A Common Stock by a group of investors for anaggregate purchase price of approximately $70 million.  As of the filing date of this report, noclaims arising out of the events relating to the Placement have been assertedin any jurisdiction in any litigation or similar proceedings brought against usor our subsidiaries.  Nevertheless, wehave received indications that one or more of the liquidators of the Bancréditoentities in Panama and the Cayman Islands believe that they have claims inconnection with the Placement.  However,we are unable at the present time to determine either the probability of suchclaims being asserted against us or the validity or amount of such claims ifthey are asserted.  The Joint Liquidatorsof Bancredit Cayman have, in connection with a Chapter 15 Petition filed in theBankruptcy Court for the Southern District of New York, served subpoenas on usand certain of our subsidiaries seeking documents relating to thePlacement.  In addition, we believe thatit is possible that other parties may assert claims arising out of thePlacement.  Claims brought on behalf ofthe Bancrédito entities and others could, in the aggregate, equal orsubstantially exceed the $70 million amount of the Placement, in particular ifthe claimants seek rescission of the Placement or certain relatedtransactions.  At this time we are notable to determine with any certainty who might assert claims, the precisenature of any claims that may be asserted, the jurisdiction in which suchclaims may be brought, the theories on which such claims may be based, thevalidity of any such claims, whether viable defenses would be available to suchclaims and whether any judgment or award arising out of such claims would beenforceable against our or our subsidiaries’ assets.  Accordingly, while it is possible that wewill in the future need to establish loss contingencies relating to thePlacement for purposes of our financial statements, we do not believe that thisis necessary at the present time.  Ifsuch claims were brought and determined in a manner adverse to us, ourliquidity and financial resources would be adversely affected.

*PotentialClaims Arising from Conaresa Leases.*

Between 1999 and2001, we entered into a series of capital leases with Compañia Nacional deArrendamientos, S.A. (“Conaresa”), at that time a related party.  The entity was sold to Banco Leon during 2003in a transaction also involving the Central Bank of the Dominican Republic.These lease agreements provide for the lease to us of telecommunicationsequipment, automobiles, and other fixed assets.

The installmentspayable under the above-mentioned lease agreements include lease rentalpayments and other expenses such as taxes and fees.  The lease agreements also provide for thepayment of penalty (moratorium) interest on overdue balances, to be calculatedat a rate established by Conaresa.  Nofixed or determinable rate is specified; rather, the lease agreements statethat the amount and conditions of penalty interest can be unilaterally set byConaresa.

In June 2005, wereceived a payment opposition from GFN, freezing in our hands any payments orother amounts owed by us to Conaresa, up to an amount of $38.7 million(RD$1.349 billion) (double the amount of GFN’s claim against Conaresa, as iscustomary in the case of payment oppositions under Dominican law).  When an entity receives a payment oppositionaddressed to one of its creditors, the entity in question must refrain frommaking any payments in violation of the payment opposition (as otherwise it maybecome liable for damages to the party who served the opposition) until it islifted by means of a court order or as a result of a settlement between theconflicting parties.  In May 2007, wereceived two further notices under which (i) Artag Meridian Ltd., an entityrelated to GFN, advised that it had acquired GFN’s aforesaid claims; and (ii)the above-mentioned payment opposition against Conaresa was reiterated, thistime by Artag Meridian, as GFN’s assignee. Following a series of court rulings, appeals, and issuances of newpayment oppositions, the matter is now pending before an Appellate Court.

For the foregoingreasons, at this time we are prevented from making any payments toConaresa.  Furthermore, we have notestablished any accrual for penalty interest that might arise out of theselease agreements because we believe that any penalty interest claim based onthe lease provision described above would be without merit.  Nevertheless, there can be no assurance thatany legal proceedings on this issue would be resolved in our favor.  Accordingly, while it is possible that we mayin the future need to establish a loss contingency relating to penalty interestarising out of these lease agreements, we do not believe that this is necessaryat the present time.

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*Claim forCost of Interconnection Circuits.*

During the periodcommencing with the enactment of the General Telecommunications Law of 1998 andending with Indotel’s issuance of interconnection regulations in 2002, wepurchased from Codetel, at our sole expense, several hundred T-1, or TrunkLevel 1, switches.  These are digitaltransmission links that are necessary for interconnection between our networkand Codetel’s network.  In December 2002,as part of the process for the adjustment of interconnection agreements beforeIndotel, we claimed that Codetel should reimburse us for 50% of the cost of theT-1 switches we had purchased.  Theapproximate amount of our claim is $6.8 million.  Indotel rejected our claim, and an appealbefore the Superior Administration Court is pending.

*FalseImprisonment Claim.*

In August 1999, a Dominican company and two individual plaintiffsbrought a claim against us in the Dominican courts for alleged losses anddamages of up to approximately RD$200,000,000 (approximately $4,800,000)resulting from the imprisonment by Dominican authorities of the two individualsfor 15 days.  The plaintiffs have allegedthat their imprisonment was the result of an investigation by the local districtattorney and police that we instigated following an irregular increase intelephone traffic at certain telephone numbers. The court rejected the action for lack of evidence.  The plaintiffs appealed, but the Court ofAppeals also rejected their claims, and they subsequently filed a motion forcassation with the Supreme Court of Justice, which is pending.  We do not believe that this matter will havea material adverse effect on our operations or financial position.

*UninsuredMotor Vehicle Cases.*

Until 2003, our principal property and casualty insurance carrier wasCompañía Nacional de Seguros (“SEGNA”), at that time a related party.  In 2003, SEGNA’s business was taken over bythe Superintendence of Insurance, following which SEGNA stopped paying oncertain pending motor vehicle accident coverage claims involving ourvehicles.  Although we moved our propertyand casualty coverage to a third party insurance carrier, it was necessary forus to assume direct liability for the pending claims.  We intend to submit a claim in SEGNA’sliquidation at the appropriate time.  Webelieve that the amount of potential liability likely to arise out of theseclaims will not exceed $1,000,000, and do not believe that these matters will have a material adverse effecton our operations or financial position.

*OrdinaryCourse Tort and Contract Claims.*

We are involved from time to time in various other lawsuits andlegal proceedings arising in the ordinary course of our business.  These claims generally relate to tort andcontract actions for damages.  We believethat the final resolution of these matters will not have a material adverseeffect on our operations or financial position.

*DominicanTax Matters.*

In June 2002, wereceived notice from the Dominican tax authority claiming that we were requiredto withhold and pay 25% of the amount of our investment in TricomLatinoamérica, S.A.  The 25% withholdingtax generally applies for payments made for services rendered by non-Dominicanvendors and for certain dividends.  Thetax authority sought RD$168.1 million (approximately $9 million at 2002exchange rates), plus penalties and interest. We contested the claim, indicating that there is no requirement towithhold tax on an investment in a wholly owned subsidiary.  Our motion before the tax authority failedand an appeal to the Ministry of Finance was rejected.  Following a subsequent appeal the Tax Court,in February 2007, ruled in our favor and rejected the tax authority’sclaim.  The tax authority decided not tofile a motion for cassation before the Supreme Court of the Dominican Republic.

In January 2006,we were notified by the tax authority that we should correct our income taxreturn for the fiscal year ended December 31, 2004.  According to the tax authority, the returnsought to use prior period losses to reduce taxable income for the current yearin amounts in excess of those the tax authority considered were permissibleunder its interpretation of the applicable tax law.  In January 2006, we presented a petition tothe tax authority requesting the elimination of this notification.  In January 2007, we made a written request tothe tax authority seeking its authorization for us to use up toRD$9,480,000,000 (approximately $257,216,000) of accumulated losses to offsetpotential income arising from the cancellation of our debt within the contextof our restructuring.  In

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March 2007, thetax authority notified us that this authorization had been granted, premised onthe following conditions: (a) the ruling only applies for fiscal year 2007; (b)we must withdraw our claim against the tax authority’s resolution for lossesnot recognized in an amount of RD$2,464,677,712 (approximately $66,612,911) and(c) we must also forfeit our right to use any losses after December 31, 2007 inexcess of RD$9,480,000,000 (approximately $257,216,000).

*WorldAccess Inc. Bankruptcy.*

In April 2003, Tricom USA was served with a summons and complaint in anadversary proceeding arising out of the World Access, Inc. et al. bankruptcycase in the United States Bankruptcy Court for the Northern District ofIllinois.  The complaint alleged thattransfers in the aggregate amount of approximately $488,000 were made to TricomUSA by one of the debtors, Facilicom International LLC, within the 90 days priorto the filing of the bankruptcy petition, and that the transfers were avoidableas preferential payments pursuant to the United States Bankruptcy Code.  An agreement in principle to settle thematter was reached in March 2007 under which we will undertake to pay $87,500to Facilicom International LLC.  Finaldocumentation of this settlement is pending.

*Other.*

There are no otherlegal proceedings to which we are a party, other than routine litigationincidental to our business that is not otherwise material to our business orfinancial condition.

## **ITEM 9.****                  THE OFFER ANDLISTING**

#### **American Depositary Shares**

Since March 29,2007, the date on which our ADS facility was terminated, our ADSs have nottraded on any exchange or other trading market.

Prior to May 11,2004, our ADSs were traded on the NYSE under the symbol “TDR”. On that date,following the announcement of our financial restructuring update on May 6,2004, the NYSE suspended trading and subsequently delisted our ADSs.  Trading of our ADSs resumed on May 19, 2004on the OTCBB under the symbol “TRICY”. On July 25, 2004, the OTCBB suspendedtrading of our ADSs due to the delay in filing our Form 20-F for the year endedDecember 31, 2003.  Trading of our ADSsthen resumed on the “Pink Sheets” service on August 19, 2004 under the symbol “TRICY.PK”. In December 2006, the Bank of New Yorkas depositary for our ADS facility notified us and holders of our ADSs thatthey were terminating the ADS facility which became effective on March 29,2007.  At December 31, 2006, therewere 32 record holders in the United States of the ADSs.

Shares of ourClass A Common Stock are not traded on any other exchange or automatedquotation system.

The followingtable provides the high and low closing prices for the ADSs reported by therespective markets on which they were traded for (1) our five most recent fullfiscal years ended 2002, 2003, 2004, 2005, and 2006 (2) each quarter of2005 and 2006, our two most recent full fiscal years, and (3) each of the lastsix months ending with December 2005:

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|                     | ** ** | **Tricom ADS Prices** | ** ** |
|---------------------|------------|---------------------------------|------------|
| ** **          | ** ** | **High**                        | ** ** | **Low** | ** ** |
|                |       |                            |       |   |   |
| **Year  Ended:**    | ** ** | ** **                      | ** ** | ** ** | ** ** |
| ** **          | ** ** | ** **                      | ** ** | ** ** | ** ** |
| December 31, 2002   |       | 4.00                            |       | 3.00 |   |
| December 31, 2003   |       | 3.05                            |       | 0.82 |   |
| December 31, 2004   |       | 1.95                            |       | 0.07 |   |
| December 31, 2005   |       | 0.20                            |       | 0.02 |   |
| December 31, 2006   |       | 0.13                            |       | 0.002 |   |
|                |       |                            |       |   |   |
| **Quarter  Ended:** | ** ** | ** **                      | ** ** | ** ** | ** ** |
| ** **          | ** ** | ** **                      | ** ** | ** ** | ** ** |
| March 2005          |       | 0.16                            |       | 0.07 |   |
| June 2005           |       | 0.12                            |       | 0.08 |   |
| September 2005      |       | 0.25                            |       | 0.08 |   |
| December 2005       |       | 0.15                            |       | 0.02 |   |
| March 2006          |       | 0.13                            |       | 0.025 |   |
| June 2006           |       | 0.05                            |       | 0.003 |   |
| September 2006      |       | 0.02                            |       | 0.002 |   |
| December 2006       |       | 0.03                            |       | 0.001 |   |
|                |       |                            |       |   |   |
| **Month  Ended:**   | ** ** | ** **                      | ** ** | ** ** | ** ** |
| ** **          | ** ** | ** **                      | ** ** | ** ** | ** ** |
| July 2006           |       | 0.02                            |       | 0.004 |   |
| August 2006         |       | 0.02                            |       | 0.003 |   |
| September 2006      |       | 0.018                           |       | 0.014 |   |
| October 2006        |       | 0.02                            |       | 0.01 |   |
| November 2006       |       | 0.02                            |       | 0.01 |   |
| December 2006       |       | 0.03                            |       | 0.002 |   |

 

## **ITEM 10.****               ADDITIONALINFORMATION**

#### **Share Capital**

At December 31,2006 and the date hereof, we had 55,000,000 shares of our Class A Common Stock,par value RD$10 per share, authorized. As of December 31, 2006, 45,458,041 shares of Class A Common Stock wereissued and outstanding.  As of December31, 2006 and the date hereof, we also had 25,000,000 shares of our Class BStock, par value RD$10 per share, authorized, 19,144,544 shares of which wereissued and outstanding.  We have notissued any shares of our Class A Common Stock since December 2002 and we havenot issued any shares of our Class B Stock since May 1998.

At December 31,2006, neither we nor any of our subsidiaries owned any shares of our Class ACommon Stock or Class B Stock.

At December 31,2006, there were outstanding options to purchase 81,536 shares of our Class ACommon Stock for an average exercise price of $6.36 per share.  These options are held by certain of ourofficers and employees.

#### **Memorandum and Articles of Association**

###### ***Board of Directors.***

Our business andaffairs are managed by the Board of Directors, which consists of not more thanfifteen or less than eight persons.  Ourdirectors are elected annually at the annual general meeting ofshareholders.  Each director (wheneverelected) holds office until the next annual general meeting of shareholdersfollowing his or her election and until his successor is elected and qualifiedor until his or her earlier resignation or removal.

Any director mayresign at any time upon written notice to the Board of Directors, to theChairman of the Board or to the President. Any director may be removed with or without cause at any time by anaffirmative vote of a majority of the shareholders entitled to 

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vote.  If any vacancies occur in the Board ofDirectors, of if the authorized number of directors is increased, the directorsthen in office may continue to act, and such vacancies may be filled by amajority of the directors then in office. Any vacancies or newly created directorships also may be filled by an affirmativevote of a majority of the shareholders entitled to vote at a general meeting ofshareholders called for such purpose.

Regular meetingsof the Board of Directors may be held at such places within or out of theDominican Republic and at such times as the Board of Directors may from time totime determine.  Special meetings of theBoard of Directors may be held at any time or place within or outside of theDominican Republic whenever called by the Chairman of the Board, by thePresident or by any two directors.  Anymember of the Board of Directors may participate in a meeting of the Board ofDirectors by means of a telephone conference or similar communicationsequipment provided that all persons participating in the meeting can hear eachother.

At all meetings ofthe Board of Directors, the presence of a majority of the total number ofdirectors will constitute a quorum for the transaction of business.  The vote of at least a majority of thedirectors present at any meeting at which a quorum is present is necessary toconstitute the act of the Board of Directors unless otherwise provided byapplicable law.

###### ***Purpose.***

Article 2 of ourby-laws states that our purpose is:

·              Toprovide, maintain and operate telecommunications systems in the Dominican Republicand elsewhere;

·              To enter into suchagreements as may be required to be interconnected to the switched publictelephone network, as well as to any domestic networks rendering inter-urbanservices, as may be required by said telecommunications systems; and

·              To construct,maintain, and exploit a private telecommunications system for the transmissionof national and international calls and for the transmission or reception ofmessages and signals of any kind.

###### ***Capital Stock.***

Our authorizedcapital stock consists of 55,000,000 shares of Class A Common Stock and25,000,000 shares of Class B Stock.  Bothclasses of capital stock vote together as a single class on matters except anymatter that would adversely affect the rights of either class. These matterswould need to be approved by a special meeting of the holders of the class ofshares to be affected. The Class A Common Stock has one vote per share and theClass B Stock has ten votes per share. The economic rights of each class ofcapital stock are identical.

###### ***Registration and Transfer.***

All shares areevidenced by share certificates in registered form. Dominican law requires thatall shares be represented by a certificate, although a single certificate mayrepresent multiple shares of stock. Certificates may be issued in the name ofthe registered holder, bearer or to-order form. All of our share certificatesare issued in the name of the registered holder.  Dominican law also requires that alltransfers, encumbrances and liens on nominative shares must be recorded in theshare registry and only are enforceable against us and third parties after suchregistration occurs.  The Bank of NewYork is the registrar and transfer agent for the Class A Common Stock, exceptduring shareholders meetings when we maintain the share registry for the ClassA Common Stock.

###### ***Shareholders Meetings.***

Shareholders areentitled to vote on all matters at ordinary or special shareholders’meetings.  The Board of Directors willconvene an annual shareholders’ meeting at least once a year in order forshareholders:

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·              To elect newdirectors and a vigilance officer;

·              To acknowledge thevigilance officer’s report; and

·              For management toreport upon our financial performance and for the shareholders to decidewhether or not to distribute dividends.

Ordinaryshareholders’ meetings may be convened at other times in order to transactother business, including removal of directors. Special shareholders’ meetingsare convened in order to effect fundamental changes in our structure, includingapproval of amendments to our by-laws. Under our by-laws, shareholders’ meetings may be convened by:

·              The Chairman of theBoard of Directors;

·              A majority of themembers of the Board of Directors at any time;

·              At the request ofthe holders of 30% of the shares entitled to be cast at such meeting; and

·              At the request ofthe vigilance officer in urgent circumstances, which are not defined underDominican law.

Shareholdersmeetings may be convened not less than 30 but not more than 60 calendar days afterwritten notice has been mailed to shareholders. A majority of the shares entitled to be cast constitutes a quorum at allshareholders meetings.  Our by-lawsprovide that holders of two-thirds of the votes entitled to be cast arerequired to approve:

·              Amendments to theby-laws, including increases or decreases of our authorized share capital;

·              The issuance ofshares of Class B Stock in addition to those shares of Class B Stockoutstanding on the date of the adoption of the by-laws, except in connectionwith a dividend or other distribution with respect to, or a subdivision,consolidation or reclassification of all outstanding shares of stock;

·              The declaration andpayment of any dividend or distribution with respect to our capital stock;

·              Any increase ordecrease in the number of directors; and

·              Our voluntarywinding up or liquidation or the filing of a bankruptcy petition.

The affirmativevote of the holders of a majority of votes entitled to be cast is required toapprove all other actions. Shareholders may vote by proxy, and the depositarywill cast proxies as directed by the holders of the ADSs.

###### ***Limitation of Officers’ andDirectors’ Liability.***

In addition tovoting for directors at the annual shareholder’s meeting, shareholders areasked to vote upon the performance of management. Our vigilance officer, anofficer elected by the shareholders each year, delivers a report on ourfinancial performance and other issues related to management’s performance. Ifthe holders of a majority of the votes entitled to be cast approve management’sperformance, all shareholders are deemed to have released the directors andofficers from claims or liability to us or our shareholders arising out ofactions taken or any failure to take actions by any of them on our behalfduring the prior fiscal year, with certain exceptions.  Shareholders will likely fail in any suitbrought in a Dominican court with respect to the acts or omissions deemed tohave been released. Officers and directors may not be released from any claimsor liability for criminal acts, fraud, self-dealing or gross negligence. If theshareholders do not approve management’s performance, the vigilance officer’sreport may form the basis of any suit brought by the shareholders against ourofficers and directors.

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Our by-lawsprovides that we will indemnify any person made or threatened to be made aparty to any action, suit or proceeding, whether civil, criminal,administrative or investigative, by reason of the fact that such person, or aperson of whom he or she is the legal representative, is or was our director,officer, employee or agent or any of our predecessors, or serves or served anyother enterprise as a director, officer, employee or agent at our request orany of our predecessors. We are required to pay any expenses reasonablyincurred by a director or officer in defending a civil or criminal action, suitor proceeding in advance of the final disposition of such action, suit orproceeding upon receipt of an undertaking by or on behalf of such director orofficer to repay such amount if it ultimately is determined that he or she isnot entitled to be indemnified by us under our by-laws or otherwise. We may, byaction of our Board of Directors, provide for the payment of such expensesincurred by our employees and agents as it deems appropriate.

###### ***Liquidation Rights.***

Each shareholderis entitled to a proportionate share of any of our assets available upondissolution after the payment of debts owed to creditors. Shareholders aredeemed to be creditors of our Company to the extent of declared and unpaiddividends.

###### ***Dividends.***

Under Dominicanlaw, only shareholders may authorize the declaration and payment of dividends.Shareholders are entitled to receive dividends in proportion to theirrespective capital participation, subject to adjustment as provided in theby-laws. Dividends are payable only from after-tax profits, and only after wehave set aside at least 5% of our annual profits as a legal reserve (until suchreserve equals 10% of paid-in capital). The by-laws provide that shareholdersmay only approve the declaration and payment of dividends or distributions ifthe declaration or payment of such dividend or distribution would not violateany obligation, contractual or otherwise, to which we or any of oursubsidiaries are a party or by which any of them or their respective propertiesor operations are bound.

###### ***Voting Rights.***

The holders ofClass A Common Stock and Class B Stock vote together with respect to allmatters.  Every holder of Class A CommonStock is entitled to one vote for each share of Class A Common Stock held andevery holder of Class B Stock is entitled to ten votes for each share of ClassB Stock held by the number of shares of Class A Common Stock into which oneshare of Class B Stock is then convertible. Under our by-laws, Class B Stock may not be transferred except topermitted transferees. Permitted transferees include:

1.             Oleander;

2.             Motorola;

3.             Anysubsidiary or affiliate, as defined; and

4.             With respect toOleander, Manuel Arturo Pellerano Peña and any member of the family of ManuelArturo Pellerano Peña as of the date of the initial public offering that had aninterest (including indirectly through any corporation, trust or entity) inOleander and:

·              Thespouse or surviving spouse and natural and adopted children of any such familymember;

·              Any trust existingsolely for the benefit of family members and any person who would be apermitted transferee of any such family member under clause (4) and any trusteeof such trust;

·              Upon the death ofany such member or any person who would be a permitted transferee of anymember, such holder’s estate or any executor, administrator or other legalrepresentative of such holder; and

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·              Any corporation, partnership orother entity all of the outstanding equity interests of which are owned, or allof the outstanding voting power of which is controlled, directly or indirectlyby, or any trust or similar entity the sole beneficiaries of which are, suchmembers and their permitted transferees.

If, despite these restrictions on transfer, ashareholder owning shares of Class B Stock transferred its shares to a personor entity other than to Oleander, Motorola or a permitted transferee, theshareholder will only become entitled to one vote per share. If, with respectto any shares of Class B Stock owned by Oleander and its permitted transferees,the shares of common stock owned by Oleander and its permitted transfereesconstitute less than 10% of the outstanding common stock, such shares of ClassB Stock will entitle the holder to one vote per share. If, with respect to anyshares of Class B Stock owned by Motorola and its permitted transferees, theshares of common stock owned by Motorola and its permitted transfereesconstitute less than 10% of the outstanding common stock, such shares of ClassB Stock will entitle the holder to one vote per share. Oleander, Motorola andany permitted transferee may pledge shares of Class B Stock without reducingthe number of votes to which it is entitled; provided, however, that if suchshares of Class B Stock are transferred to or registered in the name of thepledgee (unless the pledgee is a permitted transferee), the number of votes towhich such shares of Class B Stock are entitled will be reduced until Oleander,Motorola or any of their permitted transferees either cures any default thatresulted in the transfer or registration or reacquires the shares from thepledgee.

###### ***Preemptive and Other Rights.***

The holders ofClass A Common Stock and Class B Stock are not entitled to preemptive orsimilar rights.  The shares of Class ACommon Stock and Class B Stock are not subject to redemption or a sinking fund.Under our by-laws, we are authorized to issue shares of Class B Stock only inconnection with a dividend or other distribution with respect to, or asubdivision, consolidation or reclassification of, all outstanding shares ofClass A Common Stock. In the event of any subdivision, consolidation,reclassification or other change in the Class A Common Stock, the Board ofDirectors, in its discretion, in lieu of issuing additional shares of Class BStock, may adjust the number of shares of Class A Common Stock into which theClass B Stock is convertible and the number of votes to which each share ofClass B Stock is entitled.

###### ***Reorganization, Consolidation,Share Exchange or Merger.***

In the event of areorganization, consolidation, share exchange or merger of Tricom, each holderof outstanding shares of our stock shall be entitled to receive for each of hisshares the same kind and amount of consideration (whether consisting of cash,property or securities) to be received by each other holder of the same classof stock, if any for each of his or her shares.

#### **Material Contracts**

For information onour material contracts, see Item 3, Key Company Developments and Item 7, MajorShareholders and Related Party Transactions—Certain Transactions with RelatedParties.

#### **Exchange Controls**

There arecurrently no restrictions under Dominican law on the export or import ofcapital, including foreign exchange controls, or restrictions on the remittanceof dividends, interest or other payments to our non-resident stockholders andbondholders.

#### **Taxation**

U.S. HOLDERS ANDPROSPECTIVE PURCHASERS OF OUR ADSs, CLASS A SHARES OR SENIOR NOTES SHOULDCONSULT THEIR OWN TAX ADVISORS AS TO THE U.S. FEDERAL, STATE, LOCAL, FOREIGNAND OTHER TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OFADSs, CLASS A SHARES OR SENIOR NOTES BASED UPON THEIR PARTICULAR CIRCUMSTANCES.

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We are in discussionswith certain holders of our indebtedness regarding a consensual restructuringof our financial obligations, ownership and governance through court supervisedreorganization proceedings in the United States.  This report does not purport to set forth thetax consequences to any holder of claims against us of participating in eitherthe restructuring currently under discussion or any other restructuring orsimilar transaction that may be proposed in the future.  Holders of claims against us should refer tothe applicable plan of reorganization and supporting disclosure statement, ifany, when they become available, and should also consult with their own taxadvisors as to the tax consequences of participating in any restructuringtransaction.

The followingdiscussion summarizes the principal Dominican Republic income tax consequencesof an investment in the American Depositary Receipts (“ADRs”), ADSs or sharesof Class A Common Stock by a person who is neither domiciled in nor a residentof the Dominican Republic for tax purposes and who holds such ADRs, ADSs orshares of Class A Common Stock for investment purposes and not for purposes ofa trade or business.

Cash dividends andother distributions paid by us with respect to ADSs or shares of Class A CommonStock held by any holder could be subject to a 25% withholding tax, which wouldbe required to be withheld by us and paid to the Dominican tax administrationat the time a cash dividend or other distribution is paid. Such tax withheldmay not be a creditable foreign tax in determining the U.S. tax liability ofsuch holder.

Under theprinciples of territoriality underlying the Dominican constitution, gain fromthe sale or exchange of ADRs evidencing the ADSs by a foreign holder outside ofthe Dominican Republic would not be subject to taxation by the Dominican taxauthority.

The Dominicangovernment requires payment of capital gains tax on gain recognized on the saleor exchange in the Dominican Republic of shares of Class A Common Stock (asdistinguished from sales or exchanges of ADSs). Under current law, the capital gains tax rate is identical to theregular income tax rate of the person or entity that earned such gain; there isno preferential rate.  Thus, acorporation selling shares of Class A Common Stock in the Dominican Republicwould be required to pay the corporate income tax of 25% on any gain from asale or exchange of such shares.  Anindividual also would have to pay income tax at the applicable individual rateon gain from the sale of shares of Class A Common Stock in the DominicanRepublic.

The amount of gainon which the capital gains tax is assessed is equal to the sale or transferprice (i.e., amount realized on the sale or transfer) minus the acquisitionprice, adjusted for inflation. Regulations for the application of the DominicanTax Code clarify how the tax basis is to be calculated and also provide how theinflation adjustment is to be applied.

There is no incometax treaty in force between the Dominican Republic and the United States.

There are noDominican inheritance or succession taxes applicable to the ownership, transferor disposition of ADSs by a foreign holder not domiciled in the DominicanRepublic at the moment of death. It is unclear whether Dominican gift taxeswould apply to the transfer or other disposition by gift of shares of Class ACommon Stock by a non-resident foreign holder; however, ADSs or ADRs are notsubject to Dominican gift taxes. There are no Dominican stamp, issue,registration or similar taxes or duties payable by holders of ADSs or shares ofClass A Common Stock.

#### **Dividends and Paying Agents**

Not applicable.

#### **Statement by Experts**

Not applicable.

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#### **Documents on Display**

We file annual andspecial reports and other information with the SEC.  You may read and copy any document that wefile at the Public Reference Room of the SEC at 450 Fifth Street, N.W.,Washington, DC 20549.  Copies of suchmaterials can be obtained at prescribed rates from the Public Reference Room orby calling the SEC at 1-800-SEC-0330. Such material can also be obtained fromthe SEC’s website at http://www.sec.gov.

## **ITEM 11.****               QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

The followingdiscussion about market risks to certain financial instruments includes “forward-looking”statements that involve risks and uncertainties.  Actual results could differ materially fromthose projected in the forward-looking statements.

We are exposed tomarket risks from adverse changes in interest rates and foreign exchangerates.  We do not have hedging or otherarrangements in place to protect ourselves against the effects of interest rateor currency fluctuations.  We do not holdor issue financial instruments for trading purposes.

#### **Interest Rate Risks**

Our interestexpense is sensitive to changes in the general level of interest rates in theUnited States and in the Dominican Republic. Our indebtedness at December 31, 2006 consisted of $200.0 million of our11-3/8% Senior Notes due 2004, and $247.1 million of bank and other borrowings,capital leases, commercial paper and telecommunication equipment tradefinancings.  In October 2003, wesuspended principal and interest payments on our unsecured indebtedness andprincipal payments on our secured indebtedness

Our primaryexposure to market risk for changes in interest rates relates to our borrowingsfrom Dominican banks.  This exposure isbased on the potential for interest rate variations, not on exposure to changesin fair market value of our long-term debt.

#### **Foreign Exchange Risks**

We are subject tocurrency exchange risks.  In 2006, wegenerated operating revenues of $218.1 million which represents approximatelyRD$7,271 million using the average private market rate for 2006.  Approximately 55% of our operating revenueswere generated in Dominican pesos.  AtDecember 31, 2006, we had $436.5 million of U.S. dollar-denominated debtoutstanding and we had significant other expenses, such as programming andequipment purchase costs denominated in U.S. dollars.

Our functionalcurrency is the U.S. dollar and, as a result, we must translate the value ofDominican peso-denominated assets into U.S. dollars when compiling ourfinancial statements.  This translationcan create foreign exchange gains or losses depending upon fluctuations in therelative value of the Dominican peso against the U.S. dollar.  In 2006, we recognized an approximate $0.1million foreign exchange loss.

## **ITEM 12.****               DESCRIPTION OFSECURITIES OTHER THAN EQUITY SECURITIES**

Not Applicable.

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# **PART II.**

## **ITEM 13.****               Defaults, dividEND arrearages and delinquencies**

#### Commencing in 2001, a combination of macro-economic factors andcircumstances specific to our business contributed to a steady and significantdecline in our operating performance, cash flows and financial condition.  These factors included, among others, thefollowing:

·                                          Aworld-wide decline in the telecommunications sector;

·                                          Adverseeconomic conditions precipitated by the events of September 11, 2001;

·                                          TheDominican Republic banking crisis of 2003 and the resulting currency andeconomic crisis;

·                                          Continuingvolatility and depreciation of the Dominican peso;

·                                          Unprofitableinvestments we made in certain new business segments; and

·                                          Increasedcompetition in Dominican markets for local, long distance and mobile servicestriggered by entry of multinational telecommunications providers into themarket.

#### As a consequence of these factors, in September 2003, we announced thatwe would not be making a scheduled interest payment on our 11-3/8% Senior Notesdue September 1, 2004.  In October 2003,we suspended principal and interest payments on our unsecured indebtedness andprincipal payments on our secured indebtedness. Subsequently, on September 1, 2004, we announced that we would not bemaking the $200 million principal payment on our 11-3/8% Senior Notes dueSeptember 1, 2004.  As a result, we havedefaulted on substantially all of our secured and unsecured indebtedness, whichwas approximately $447.1 million in principal amount as of December 31, 2006.  In addition to our 11-3/8% Senior Notes due2004, our indebtedness consists of bank and other borrowings, capital leases,commercial paper and telecommunication equipment trade financings.

For information on our restructuring, see Item 3, KeyInformation – Financial Restructuring.

## **ITEM 14.****               material modifications to the rights ofsecurity holders and use of proceeds**

None.

## **ITEM 15.****               DISCLOSURE CONTROLSAND PROCEDURES**

*DisclosureControls and Procedures*. Disclosure controls and procedures are defined by the SEC as thosecontrols and other procedures that are designed to ensure that information thatwe are required to disclose in reports filed or submitted by us under theSecurities Exchange Act of 1934 is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and forms. There areinherent limitations to the effectiveness of any system of disclosure controlsand procedures, including the possibility of human error and the circumventionor overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can onlyprovide reasonable assurance of achieving their control objectives.  Our management, with the participation of ourChief Executive Officer and Vice President of Finance and Administration, hasevaluated our disclosure controls and procedures as of the end of the periodcovered by this report and determined that such disclosure controls andprocedures are effective.

*InternalControl Over Financial Reporting*.  Subject to the matters referred to in Item 3,“Risk Factors—We do not have an audit committee and our internal accountingsystems and controls may be inadequate to ensure timely and accurate financialreporting,” there were no changes in our internal control over financialreporting that occurred during the period covered by this report that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

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## **ITEM 16.****               [Reserved]**

**ITEM16A.****            AUDIT COMMITTEEFINANCIAL EXPERT**

We do not have anaudit committee and, in the absence of an audit committee, our full Board ofDirectors fulfills the functions of the audit committee pursuant to Section3(a)(58) of the Securities Exchange Act of 1934.  Because our ADSs are no longer listed on theNYSE, we are not required to have an audit committee financial expert.

**ITEM16B.****            CODE OF ETHICS**

Our Board ofDirectors has discussed, but not adopted, a code of ethics that would apply toour principal executive officer and principal financial officer.  This code of ethics was not adopted becauseour Board of Directors could not agree on its scope and terms.  If our Board of Directors adopts such a codeof ethics, we will either file an amendment to this Annual Report on Form 20-Fthat includes the code of ethics as an exhibit, or post the text of such codeof ethics on our website at www.tricom.net.

Our management hasadopted a code of conduct that applies to all employees, including ourprincipal executive officer and principal financial officer.  This code of conduct addresses several issues,including compliance with applicable laws and regulations, preservation ofconfidential information and avoidance of conflicts of interest.

**ITEM16C.****            PRINCIPAL ACCOUNTANTFEES AND SERVICES**

Sotomayor auditedour books and records for the years ended December 31, 2005 and December 31,2006.

#### **Audit Fees**

Fees billed bySotomayor for professional services for the audits of the 2005 and 2006 annualconsolidated financial statements, respectively, totaled approximately $506,344 and $294,459. Such fees includefees associated with the audit of our annual consolidated financial statementsor services that are normally provided by Sotomayor in connection withstatutory and regulatory filings or engagements for those fiscal years.

#### **Audit-Related Fees**

Sotomayor receivedfees of approximately $805,217 for additional services for the year endedDecember 31, 2002 through 2005, including review and evaluation of quarterlyresults, IT audit, fraud audit procedures, the Placement, internal controls,regulatory issues, and the new audit statement format. No fees were paid forthese services in 2006.

#### **Tax Fees**

Fees for taxservices rendered to Tricom USA totaled approximately $55,128 and $10,047 forwork related to the years ended December 31, 2005 and 2006, respectively.

#### **All Other Fees**

For the fiscal years ended December 31, 2005 and 2006,Sotomayor received $114,461 and $118,569 respectively, for FCC-relatedregulatory work, planning and research rendered to Tricom USA.

#### **Pre-approval Policies and Procedures**

Our Board of Directors, in its capacity fulfilling thefunctions of the audit committee pursuant to Section 3(a)(58) of the SecuritiesExchange Act of 1934, has not established pre-approval policies and proceduresfor the engagement of our independent auditors for services.  Our Board of Directors expressly approves, ona case-by-case basis, any engagement of our independent auditors for audit andnon-audit services provided to us or our subsidiaries.

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**ITEM16D.****            EXEMPTIONS FROM THELISTING STANDARDS FOR AUDIT COMMITTEE**

Not applicable.

**ITEM16E.****             PURCHASES OF EQUITYSECURITIES BY THE ISSUER AND AFFILIATED********PURCHASERS**

Not applicable.

# **PART III.**

## **ITEM 17.****               FINANCIALSTATEMENTS**

Not Applicable.

## **ITEM 18.****               FINANCIALSTATEMENTS**

The followingconsolidated financial statements are filed as part of this Annual Report onForm 20-F:

1.             Reportof Independent Registered Public Accounting Firm;

2.             Consolidated Balance Sheets as ofDecember 31, 2005 and 2006;

3.             ConsolidatedStatements of Operations for the Years Ended December 31, 2004, 2005 and 2006;

4.             ConsolidatedStatements of Stockholders’ Deficit and Comprehensive Loss for the Years EndedDecember 31, 2004, 2005 and 2006;

5.             ConsolidatedStatements of Cash Flows for the Years Ended December 31, 2004, 2005 and2006; and

6.             Notesto Consolidated Financial Statements;

70

----

## **ITEM 19.****               EXHIBITS**

| Exhibit Number | ** ** | ** **                                                                                                                                                                                                                                                                                                                |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 1.1                 |       | Amended and Restated By-laws of Tricom, S.A. with  English translation thereof (incorporated by reference to Exhibit 3 to our Amendment  No. 1 of the Registration Statement on Form F-1, filed on May 1, 1998 (file  no. 333-08574)).                                                                                    |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 2.1                 |       | Indenture, dated August 21, 1997, between The Bank  of New York, as trustee, and Tricom, S.A. (incorporated by reference to  Exhibit 4.1 to our Registration Statement on Form F-4, filed on December 29,  1997 (file no. 08150)).                                                                                        |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 2.2                 |       | Form of Class A Common Stock Certificate  (incorporated by reference to Exhibit 4.1 to our Amendment No. 1 to  Registration Statement on Form F-1, filed on May 1, 1998 (file no.  333-08574)).                                                                                                                           |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 2.3                 |       | Form of American Depositary Receipt (included as  part of Exhibit 2.4) (incorporated by reference to Exhibit 4.2 to our  Registration Statement on Form F-1, filed on April 2, 1998 (file no.  333-08574)).                                                                                                               |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 2.4                 |       | Form of Deposit Agreement between The Bank of New  York, Tricom, S.A. and owners and holders of American Depositary Receipts  (incorporated by reference to Exhibit 4.3 to our Registration Statement on  Form F-1, filed on April 2, 1998 (file no. 333-08574)).                                                         |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 4.1                 |       | IDENÒ  Infrastructure Supply Agreement, dated July 31, 2000, between Motorola, Inc.  and Tricom Latinoamerica, S.A. (incorporated by reference to Exhibit 4.1 to  our Annual report on Form 20-F/A, filed on November 21, 2001 (file no.  14816)).                                                                   |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 4.2                 |       | Concession Agreement, dated February 20, 1996,  between the Dominican State and Tricom, S.A. (incorporated by reference to  Exhibit 10.1 to our Registration Statement on Form F-4, filed on December 29,  1997 (file no. 333-08150)).                                                                                    |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 4.3                 |       | Concession Agreement, dated April 30, 1990, between  the Dominican State and Tricom, S.A. (incorporated by reference to Exhibit  10.2 to our Registration Statement on Form F-4, filed on December 29, 1997  (file no. 333-08150)).                                                                                       |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 4.4                 |       | Interconnection Agreement, dated May 17, 1994, between  Compañía  Dominicana de Telefonos, C. por A. (“Codetel”) and Tricom, S.A. (incorporated  by reference to Exhibit 10.3 to our Registration Statement on Form F-4, filed  on December 29, 1997 (file no. 333-08150)).                           |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 4.5                 |       | Addendum to Interconnection Agreement, dated January  2, 1998, between Codetel and Tricom, S.A. (incorporated by reference to  Exhibit 10.4 to our Amendment No. 1 to Registration Statement on Form F-1,  filed on May 1, 1998 (file no. 333-08574)).                                                                    |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 4.6                 |       | Amended and Restated Shareholders Agreement among  Tricom, S.A., Motorola, Inc. and Oleander Holdings, Inc. (incorporated by  reference to Exhibit 10.7 to our Amendment No. 1 to Registration Statement on  Form F-1, filed on May 1, 1998 (file no. 333-08574)).                                                        |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 4.7                 |       | 1998 Long-Term Incentive Plan (incorporated by  reference to Exhibit 10.11 to our Amendment No. 1 to Registration Statement  on Form F-1, filed on May 1, 1998 (file no. 333-08574)).                                                                                                                                     |
|                |       |                                                                                                                                                                                                                                                                                                                      |
| 4.8                 |       | The Guaranty, dated August 21, 1997, issued by each  of Tricom’s subsidiaries in favor of the holders of 11-3/8% notes due 2004  under the Indenture, dated August 21, 1997 (incorporated by reference to  Exhibit 4.2 to our Registration Statement on Form F-4, filed on December 29,  1997 (file no. 333-08150)). |

 

71

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| 8.1    |   | List of Subsidiaries.                                                                                                                                                                      |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                       |
| 12.1   |   | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                       |
|   |   |                                                                                                                                                                                       |
| 12.2   |   | Certification of the Vice President, Finance &  Administration pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                              |
|   |   |                                                                                                                                                                                       |
| 13.1   |   | Certification by Chief Executive Officer of periodic  financial report pursuant to 18 U.S.C. Section 1350, as mandated by Section  906 of the Sarbanes-Oxley Act.                          |
|   |   |                                                                                                                                                                                       |
| 13.2   |   | Certification by the Vice President, Finance &  Administration of periodic financial report pursuant to 18 U.S.C. Section  1350, as mandated by Section 906 of the Sarbanes-Oxley Act. |

 

72

----

### SIGNATURES

Pursuant to therequirements of Section 12 of the Securities Exchange Act of 1934, theregistrant certifies that it meets all of the requirements for filing Form 20-Fand has duly caused this annual report to be signed on its behalf by the undersigned,thereunto duly authorized.
|                         | **TRICOM, S.A.** |
|-------------------------|------------------|
| ** **              | ** **       |
| ** **              | ** **       | ** ** |
| Dated: October 29, 2007 |             | /s/ HECTOR  CASTRO NOBOA |   |
|                    |             | Héctor Castro Noboa |
|                    |             | Chief Executive officer |

 

----

**TRICOM, S.A. AND SUBSIDIARIES**

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**
| Report  of Independent Registered Public Accounting Firm                                                                           |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                               |   |
| Consolidated Balance Sheets as of December 31, 2005  and 2006                                                                      |   |
|                                                                                                                               |   |
| Consolidated Statements of Operations for the Years  Ended December 31, 2004, 2005 and 2006                                        |   |
|                                                                                                                               |   |
| Consolidated Statements of Stockholders’ Deficit and  Comprehensive Loss for the Years Ended December 31, 2004, 2005 and 2006 |   |
|                                                                                                                               |   |
| Consolidated Statements of Cash Flows for the Years  Ended December 31, 2004, 2005 and 2006                                        |   |
|                                                                                                                               |   |
| Notes to Consolidated Financial Statements                                                                                         |   |

 

F-1

----

 
|  | ***Sotomayor & Associates, LLP  Certified Public Accountants****540 S Marengo Avenue  Pasadena, California 91101  (626) 397-4900  Fax: (626) 397-4908  E-mail: sotomayor@sotomayorcpa.com  Web Site www.sotomayorcpa.com* |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

TheBoard of Directors and Stockholders

TRICOM, S.A.:

Wehave audited the accompanying consolidated balance sheets of TRICOM, S. A. andsubsidiaries (the Company) as of December 31, 2005 and 2006 and the relatedconsolidated statements of operations, stockholders’ deficit and comprehensiveloss and cash flows for periods ended December 31, 2004, 2005 and 2006.  These consolidated financial statements arethe responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits.

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements arefree of material misstatement.  An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the consolidated financial statements.  An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall consolidated financial statementpresentation.  We believe that our auditsprovide a reasonable basis for our opinion.

Inour opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of the Company as ofDecember 31, 2005 and 2006 and the results of its operations and its cash flowsfor each of the periods ended December 31, 2004, 2005 and 2006, in conformitywith U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been preparedunder the assumption that the Company will continue as a going concern.  As discussed in Notes 3 and 23 to theconsolidated financial statements, the Company has suffered recurring lossesfrom operations, which have been impacted further by the recognition ofimpairment losses of long-term assets and intangibles and the loss in thedisposal of the Central America operations, which have led the Company todefault in its long and short term debt commitments.  These situations, among others, raisesubstantial doubt about the Company’s ability to continue as a goingconcern.  Management’s plans in regard tothese matters are also described in Note 3. The accompanying consolidated financial statements do not include anyadjustments that might result from the outcome of this uncertainty.
|                                 |
|---------------------------------|
|                            |
|                            |
| Sotomayor & Associates, LLP |
| Pasadena, California            |
|                            |
|                            |
| June 4, 2007                    |

 

F-2

----

**TRICOM, S.A. AND SUBSIDIARIES**

**ConsolidatedBalance Sheets**

**December 31, 2005 and2006**
| ** **                                                    | ** ** | **2005**    | ** **      | **2006**    | ** ** |
|---------------------------------------------------------------|------------|-------------|-----------------|-------------|------------|
| **Assets**                                                    |       |        |            |        |       |
|                                                          |       |        |            |        |       |
| Current assets:                                               |       |        |            |        |       |
| Cash and cash  equivalents                                    |       | $           | 32,113,028      | ** **  | $          | 23,072,443 | ** ** |
|                                                          |       |        |            |        |       |
| Accounts  receivable (Notes 5, 6 and 17):                     |       |        |            |        |       |
| Customers                                                     |       | 16,247,151  |            | 16,880,540  |       |
| Carriers                                                      |       | 4,815,386   |            | 10,629,032  |       |
| Related parties                                               |       | 2,664       |            | 2,040       |       |
| Other                                                         |       | 1,428,250   |            | 1,459,652   |       |
|                                                          |       | 22,493,451  |            | 28,971,264  |       |
| Allowance for  doubtful accounts                              |       | (2,116,291  | )               | (2,007,743  | )          |
| Accounts  receivable, net                                     |       | 20,377,160  |            | 26,963,521  |       |
|                                                          |       |        |            |        |       |
| Accounts  receivable – officers and employees            |       | 108,170     |            | 52,411      |       |
|                                                          |       |        |            |        |       |
| Inventories                                                   |       | 2,385,186   |            | 2,918,387   |       |
|                                                          |       |        |            |        |       |
| Certificates of  deposit and other investment, net (Note 7)   |       | 647,693     |            | 690,410     |       |
|                                                          |       |        |            |        |       |
| Prepaid expenses                                              |       | 7,095,561   |            | 13,449,813  |       |
|                                                          |       |        |            |        |       |
| Deferred income  taxes (Note 15)                              |       | 966,242     |            | —      |       |
| Total current  assets                                         |       | 63,693,040  |            | 67,146,985  |       |
|                                                          |       |        |            |        |       |
| Property, plant and  equipment, net (Notes 4, 12, 13, and 23) |       | 298,439,135 |            | 274,360,933 |       |
|                                                          |       |        |            |        |       |
| Intangible assets (Note 8)                                    |       | 2,664,641   |            | 2,664,641   |       |
| Restricted cash (Note 2.4)                                    |       | 370,378     |            | 1,895,620   |       |
| Deferred income taxes (Note 15)                               |       | —      |            | 8,285       |       |
| Other assets at cost, net of amortization (Note 9)            |       | 3,365,176   |            | 4,308,627   |       |
|                                                          |       |        |            |        |       |
| ** **                                                    | ** ** | **$**       | **368,532,370** | ** **  | **$**      | **350,385,091** | ** ** |

 

F-3

----

**TRICOM, S.A. ANDSUBSIDIARIES**

**Consolidated Balance Sheets(Continued)**
| ** **                                                                                        | ** ** | **2005**     | ** **      | **2006**     | ** ** |
|---------------------------------------------------------------------------------------------------|------------|--------------|-----------------|--------------|------------|
| **Liabilities and Stockholders’  Equity (Deficit)**                                          | ** ** | ** **   | ** **      | ** **   | ** ** |
|                                                                                              |       |         |            |         |       |
| Current liabilities:                                                                              |       |         |            |         |       |
| Borrowed funds –  banks (Note 10)                                                            |       | $            | 48,865,810      |         | $          | 49,062,999 |   |
| Commercial paper  – banks (Note 11)                                                          |       | 6,200,000    |            | 18,354,588   |       |
| Commercial paper  – related parties (Notes 6 and 11)                                         |       | 48,448,922   |            | 36,329,491   |       |
| Current portion  of long-term debt related parties (Note 6)                                       |       | 25,356,872   |            | 21,463,203   |       |
| Current portion  of long-term debt (Note 13)                                                      |       | 298,501,504  |            | 302,630,101  |       |
|                                                                                              |       | 427,373,108  |            | 427,840,382  |       |
|                                                                                              |       |         |            |         |       |
| Current portion of obligation  under capital leases – (Note 12)                              |       | 14,531,321   |            | 14,531,322   |       |
|                                                                                              |       |         |            |         |       |
| Accounts payable:                                                                                 |       |         |            |         |       |
| Carriers                                                                                          |       | 8,196,740    |            | 12,108,692   |       |
| Suppliers                                                                                         |       | 17,257,287   |            | 15,736,815   |       |
| Other                                                                                             |       | 994,513      |            | 670,141      |       |
|                                                                                              |       | 26,448,540   |            | 28,515,648   |       |
| Accrued expenses  (Note 16)                                                                       |       | 11,705,140   |            | 17,569,074   |       |
| Other  liabilities                                                                                |       | 5,659,756    |            | 2,283,333    |       |
| Deferred  revenues                                                                                |       | 2,050,620    |            | 2,174,025    |       |
| Interest payable  related parties (Note 6)                                                        |       | 24,186,485   |            | 32,557,915   |       |
| Deferred income  taxes (Note 15)                                                                  |       | —       |            | 8,534        |       |
| Interest payable                                                                                  |       | 129,439,767  |            | 186,301,595  |       |
| Total current  liabilities                                                                        |       | 641,394,737  |            | 711,781,828  |       |
|                                                                                              |       |         |            |         |       |
| Reserve for severance  indemnities (Note 2.12)                                                    |       | 284,321      |            | 551,040      |       |
| Deferred income taxes (Note  15)                                                                  |       | 433,895      |            | —       |       |
| Long-term debt (Note 13)                                                                          |       | 5,613,904    |            | 4,787,792    |       |
| Total  liabilities                                                                                |       | 647,726,857  |            | 717,120,660  |       |
|                                                                                              |       |         |            |         |       |
| Stockholders’ deficit (Notes 14, 16 and 18):                                                 |       |         |            |         |       |
| Class A common  stock of RD$10 par value: Authorized 55,000,000 shares; issued 45,458,041  shares |       | 24,951,269   |            | 24,951,269   |       |
| Class B common  stock of RD$10 par value: Authorized 25,000,000 shares; issued 19,144,544  shares |       | 12,595,095   |            | 12,595,095   |       |
| Additional  paid-in-capital                                                                       |       | 275,496,964  |            | 275,496,964  |       |
| Accumulated  losses                                                                               |       | (590,214,058 | )               | (677,755,140 | )          |
| Other  comprehensive loss-foreign currency translation (Note 2.3)                                 |       | (2,023,757   | )               | (2,023,757   | )          |
| Stockholders’  deficit, net                                                                  |       | (279,194,487 | )               | (366,735,569 | )          |
| Commitments and  contingencies (Notes 6, 10, 11, 12, 13 14, 15, 16, and 19)                       |       |         |            |         |       |
| ** **                                                                                        | ** ** | **$**        | **368,532,370** | ** **   | **$**      | **350,385,091** | ** ** |

See accompanyingnotes to consolidated financial statements.

F-4

----

**TRICOM,S.A. AND SUBSIDIARIES**

**Consolidated Statementsof Operations**

**Years ended December 31,2004, 2005 and 2006**
| ** **                                                                           | ** ** | **2004**     | ** **   | **2005**    | ** ** | **2006**    | ** ** |
|--------------------------------------------------------------------------------------|------------|--------------|--------------|-------------|------------|-------------|------------|
|                                                                                 |       |         |         |        |       |        |       |
| Operating revenues (Notes  2.5, 2.13 and 6):                                         |       |         |         |        |       |        |       |
| Long distance                                                                        |       | $            | 72,008,996   |        | $          | 70,620,470  |       | $ | 70,282,210 |   |
| Domestic telephony                                                                   |       | 64,973,873   |         | 84,071,137  |       | 82,241,727  |       |
| Mobile                                                                               |       | 32,123,985   |         | 35,485,447  |       | 36,283,216  |       |
| Cable                                                                                |       | 13,651,113   |         | 19,304,412  |       | 20,177,219  |       |
| Data and  Internet                                                                   |       | 5,354,729    |         | 7,952,623   |       | 8,928,557   |       |
| Other                                                                                |       | 68,486       |         | 90,557      |       | 187,426     |       |
| Total operating  revenues                                                            |       | 188,181,182  |         | 217,524,646 |       | 218,100,355 |       |
|                                                                                 |       |         |         |        |       |        |       |
| Operating costs and  expenses (Notes 2.2, 2.6, 2.10, 3, 4, 5, 6(b), 16 and 23): |       |         |         |        |       |        |       |
| Cost of sales and services                                                           |       | 89,540,886   |         | 87,696,237  |       | 92,117,160  |       |
| Selling, general  and administrative expenses                                        |       | 56,685,365   |         | 77,654,448  |       | 81,676,829  |       |
| Litigation settlement                                                                |       | —       |         | —      |       | 2,182,105   |       |
| Restructuring costs                                                                  |       | 8,146,000    |         | 7,803,000   |       | 10,448,000  |       |
| Depreciation and  amortization                                                       |       | 75,253,831   |         | 62,040,872  |       | 49,109,862  |       |
| Total operating  costs                                                               |       | 229,626,082  |         | 235,194,557 |       | 235,533,956 |       |
|                                                                                 |       |         |         |        |       |        |       |
| Operating loss  from continuing operations                                           |       | (41,444,900  | )            | (17,669,911 | )          | (17,433,601 | )          |
|                                                                                 |       |         |         |        |       |        |       |
| Other income (expenses)  (Note 6):                                                   |       |         |         |        |       |        |       |
| Interest expense                                                                     |       | (63,697,822  | )            | (69,561,138 | )          | (69,822,415 | )          |
| Interest income                                                                      |       | 222,776      |         | 698,046     |       | 956,301     |       |
| Foreign currency  exchange (loss) gain net of income tax                             |       | (2,673,823   | )            | 727,114     |       | (62,555     | )          |
| Other, net                                                                           |       | 5,739,855    |         | 1,613,963   |       | 676,893     |       |
| Other expenses,  net                                                                 |       | (60,409,014  | )            | (66,522,015 | )          | (68,251,776 | )          |
|                                                                                 |       |         |         |        |       |        |       |
| Loss from  continuing operations before income taxes                                 |       | (101,853,914 | )            | (84,191,926 | )          | (85,685,377 | )          |
|                                                                                 |       |         |         |        |       |        |       |
| Income taxes benefit  (provision) (Note 15)                                          |       | (300,182     | )            | 817,848     |       | (1,855,705  | )          |
| Net loss                                                                             |       | $            | (102,154,096 | )           | $          | (83,374,078 | )          | $ | (87,541,082 | ) |
|                                                                                 |       |         |         |        |       |        |       |
| Net loss per common  share – basic and diluted                                  |       | $            | (1.58        | )           | $          | (1.29       | )          | $ | (1.36 | ) |
|                                                                                 |       |         |         |        |       |        |       |
| Average number of  common shares used in calculation:                                |       |         |         |        |       |        |       |
| Basic                                                                                |       | 64,602,585   |         | 64,602,585  |       | 64,602,585  |       |
| Diluted                                                                              |       | 64,602,585   |         | 64,602,585  |       | 64,602,585  |       |

See accompanying notes toconsolidated financial statements.

F-5

----

**TRICOM,S.A. AND SUBSIDIARIES**

**Consolidated Statementsof Stockholders’ Deficit and Comprehensive Loss**

**Years Ended December 31,2004, 2005 and 2006**
| ** **                    | ** ** | **Number of Common** | ** ** | ** **            | ** ** | ** **                                | ** ** | **Retained Earnings (Accumulated  Deficit)** | ** ** | **Other   Comprehensive   Loss -  Foreign** | ** ** | ** **                      | ** **  |
|-------------------------------|------------|--------------------------------|------------|-----------------------|------------|-------------------------------------------|------------|--------------------------------------------------------|------------|------------------------------------------------------------|------------|---------------------------------|-------------|
| ** **                    | ** ** | **Shares Issued**         | ** ** | **Common Stock** | ** ** | **Additional  Paid in Capital** | ** ** | **Appropriated   Legal Reserve**             | ** ** | **Unappropriated**                                         | ** ** | **Currency   Translation** | ** **  | **Stockholders’   Deficit Net** | ** ** |
| **Class A**              | ** ** | **Class B**               | ** ** | **Class A**      | ** ** | **Class B**                          |
| Balance at December 31,  2003 |       | 45,458,041                     |       | 19,144,544            |       | $                                         | 24,951,269 |                                                   | $          | 12,595,095                                                 |       | $                               | 275,496,964 |   | $ | 1,653,007 |   | $ | (406,338,891 | ) | $ | (2,023,757 | ) | $ | (93,666,313 | ) |
|                          |       |                           |       |                  |       |                                      |       |                                                   |       |                                                       |       |                            |        |   |   |   |   |   |   |
| Net loss                      |       | —                         |       | —                |       | —                                    |       | —                                                 |       | —                                                     |       | 269,602                         |        | (102,423,698 | ) | — |   | (102,154,096 | ) |
| Balance at December 31,  2004 |       | 45,458,041                     |       | 19,144,544            |       | 24,951,269                                |       | 12,595,095                                             |       | 275,496,964                                                |       | 1,922,609                       |        | (508,762,589 | ) | (2,023,757 | ) | (195,820,409 | ) |
|                          |       |                           |       |                  |       |                                      |       |                                                   |       |                                                       |       |                            |        |   |   |   |   |   |   |
| Net loss                      |       | —                         |       | —                |       | —                                    |       | —                                                 |       | —                                                     |       | 120,633                         |        | (83,494,711 | ) | — |   | (83,374,078 | ) |
| Balance at December 31,  2005 |       | 45,458,041                     |       | 19,144,544            |       | 24,951,269                                |       | 12,595,095                                             |       | 275,496,964                                                |       | 2,043,242                       |        | (592,257,300 | ) | (2,023,757 | ) | (279,194,487 | ) |
|                          |       |                           |       |                  |       |                                      |       |                                                   |       |                                                       |       |                            |        |   |   |   |   |   |   |
| Net loss                      |       | —                         |       | —                |       | —                                    |       | —                                                 |       | —                                                     |       | 48,305                          |        | (87,589,387 | ) | — |   | (87,541,082 | ) |
| Balance at December 31,  2006 |       | 45,458,041                     |       | 19,144,544            |       | $                                         | 24,951,269 |                                                   | $          | 12,595,095                                                 |       | $                               | 275,496,964 |   | $ | 2,091,547 |   | $ | (679,846,687 | ) | $ | (2,023,757 | ) | $ | (366,735,569 | ) |

See accompanyingnotes to consolidated financial statements.

F-6

----

**TRICOM, S.A. AND SUBSIDIARIES**

**Consolidated Statements of Cash Flows**

**Years ended December 31, 2004, 2005 and 2006**
| ** **                                                                                                   | ** ** | **Year Ended December 31,** | ** **   |
|--------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------|--------------|
| ** **                                                                                                   | ** ** | **2004**                                   | ** **   | **2005** | ** ** | **2006** | ** ** |
| ** **                                                                                                   | ** ** | ** **                                 | ** **   | ** ** | ** ** | ** ** | ** ** |
| Cash flows provided by  operating activities:                                                                |       |                                       |         |   |   |   |   |
| Net loss from  continuing operations                                                                         |       | $                                          | (102,154,096 | ) | $ | (83,374,078 | ) | $ | (87,541,082 | ) |
|                                                                                                         |       |                                       |         |   |   |   |   |
| Adjustments to  reconcile net loss from continuing operations to net cash provided by  operating activities: |       |                                       |         |   |   |   |   |
| Depreciation                                                                                                 |       | 75,026,380                                 |         | 61,823,944 |   | 48,892,905 |   |
| Allowance for  doubtful accounts                                                                             |       | 2,296,554                                  |         | 3,497,686 |   | 3,459,613 |   |
| Amortization of  radio frequency rights                                                                      |       | 227,450                                    |         | 216,928 |   | 216,959 |   |
| Charge for  obsolescence of equipment pending installation                                                   |       | 1,114,558                                  |         | 949,094 |   | 797,107 |   |
| Charge for  inventory obsolescence                                                                           |       | 196,204                                    |         | 514,641 |   | 342,079 |   |
| Expenses for  severance indemnities                                                                          |       | 864,800                                    |         | 2,277,835 |   | 789,652 |   |
| Deferred income  tax, net                                                                                    |       | 297,676                                    |         | (817,848 | ) | 532,595 |   |
| Exchange rate  effect in long-term debt                                                                      |       | 2,673,823                                  |         | (355,740 | ) | 326,764 |   |
| Loss on disposal  and sale of assets                                                                         |       | 782,352                                    |         | 319,552 |   | — |   |
| Changes in  operating assets and liabilities:                                                                |       |                                       |         |   |   |   |   |
| (Increase)  decrease in accounts receivable                                                                  |       | (7,594,438                                 | )            | 95,616 |   | (9,990,839 | ) |
| (Increase)  decrease in accounts receivable - related parties                                                |       | (144,577                                   | )            | 197,336 |   | 624 |   |
| (Increase)  decrease in inventories                                                                          |       | (356,553                                   | )            | (1,201,753 | ) | 880,098 |   |
| Increase in  prepaid expenses                                                                                |       | (3,229,447                                 | )            | (3,759,180 | ) | (6,354,252 | ) |
| (Increase)  decrease in restricted cash                                                                      |       | —                                     |         | (370,378 | ) | (1,525,242 | ) |
| Decrease  (increase) in other assets                                                                         |       | 406,547                                    |         | 302,717 |   | (1,160,409 | ) |
| (Decrease)  increase in accounts payable                                                                     |       | (5,579,402                                 | )            | 4,925,111 |   | 2,067,108 |   |
| Increase in  interest payable - related parties                                                              |       | 7,319,770                                  |         | 9,307,337 |   | 8,371,430 |   |
| Increase in  interest payable                                                                                |       | 49,944,971                                 |         | 54,072,939 |   | 56,861,828 |   |
| (Decrease)  increase in other liabilities                                                                    |       | (1,565,351                                 | )            | 2,372,028 |   | (3,376,423 | ) |
| Increase (decrease) in deferred revenues                                                                     |       | 1,280,657                                  |         | (3,754,130 | ) | 123,405 |   |
| Increase (decrease) in accrued expenses                                                                      |       | 1,342,387                                  |         | (1,983,737 | ) | 4,397,991 |   |
| Decrease in  reserve for severance indemnities                                                               |       | (939,450                                   | )            | (2,043,750 | ) | (522,933 | ) |
| Total  adjustments                                                                                           |       | 124,364,911                                |         | 126,586,248 |   | 105,130,060 |   |
| Net cash provided by  operating activities                                                                   |       | 22,210,815                                 |         | 43,212,170 |   | 17,588,978 |   |
|                                                                                                         |       |                                       |         |   |   |   |   |
| Cash flows from investing activities (Notes 4 and 7):                                                        |       |                                       |         |   |   |   |   |
| (Acquisition)  cancellation of investments                                                                   |       | (355,910                                   | )            | 338,383 |   | (42,717 | ) |
| Cash provided by  investing activities of discontinued operations                                            |       | 10,661,300                                 |         | — |   | — |   |
| Acquisition of  property and equipment                                                                       |       | (13,277,265                                | )            | (28,624,156 | ) | (26,228,003 | ) |
| Net cash used in  investing activities                                                                       |       | (2,971,875                                 | )            | (28,285,773 | ) | (26,270,720 | ) |
|                                                                                                              |            |                                            |              |  |  |  |  |  |  |  |

 

F-7

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| ** **                                                                       | ** ** | **Year Ended December 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                       | ** ** | **2004**                                   | ** ** | **2005** | ** ** | **2006** | ** ** |
|  Cash flows from financing activities (Notes  3, 6, 10, 11, 12, 13 and 16): |       |                                       |       |   |   |   |   |
| Borrowed funds  from banks                                                       |       | —                                     |       | 268,979 |   | 8,333,620 |   |
| Principal  payments to banks                                                     |       | (310,304                                   | )          | — |   | — |   |
| Principal  payments of commercial paper-banks                                    |       | —                                     |       | (1,828,680 | ) | — |   |
| Principal  payments of commercial paper to related parties                       |       | —                                     |       | (642,145 | ) | — |   |
| Borrowed funds  to related parties                                               |       | (2,503,341                                 | )          | — |   | — |   |
| Principal  payments to related parties                                           |       | (3,888                                     | )          | — |   | — |   |
| Payments of  long-term debt                                                      |       | (1,246,732                                 | )          | (3,749,552 | ) | (8,692,463 | ) |
| Proceeds from  issuance of long-term debt                                        |       | —                                     |       | 5,547,856 |   | — |   |
| Net cash used in  financing activities                                           |       | (4,064,265                                 | )          | (403,542 | ) | (358,843 | ) |
|                                                                             |       |                                       |       |   |   |   |   |
| Net increase (decrease)  in cash and cash equivalents                            |       | 15,174,675                                 |       | 14,522,855 |   | (9,040,585 | ) |
|                                                                             |       |                                       |       |   |   |   |   |
| Cash and cash  equivalents at beginning of the year                              |       | 2,415,498                                  |       | 17,590,173 |   | 32,113,028 |   |
|                                                                             |       |                                       |       |   |   |   |   |
| Cash and cash  equivalents at the end of the year                                |       | $                                          | 17,590,173 | ** ** | $ | 32,113,028 |   | $ | 23,072,443 |   |
|                                                                             |       |                                       |       |   |   |   |   |
| Supplementary  information:                                                      |       |                                       |       |   |   |   |   |
| Interest paid  (net of capitalization)                                           |       | $                                          | (6,272,758 | ) | $ | (5,824,428 | ) | $ | (3,896,904 | ) |
| Expense in lieu  of income taxes and income taxes paid                           |       | $                                          | (550,676   | ) | $ | — |   | $ | — |   |
|                                                                             |       |                                       |       |   |   |   |   |
| Noncash financing  activities:                                                   |       |                                       |       |   |   |   |   |
| Transfer of commercial  papers from related parties to non-related parties       |       | $                                          | —     | ** ** | $ | — |   | $ | 12,154,587 |   |

 

**See accompanying notes to consolidated financialstatements.**

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**TRICOM, S.A. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

# **1****     ****Organization and Nature of Business**

The consolidated financial statements ofTRICOM, S.A. (“Tricom” or the “Company”) include the operations of thefollowing companies engaged in the telecommunications and cable broadcastingindustry, with operations in the Dominican Republic, The United States anduntil August 2004 in the Republic of Panama:

TRICOM,S.A. (Parent Company)GFN Comunicaciones, S.A.TRICOM Centroamérica, S.A. Call Tel CorporationTRICOM USA, Inc. And SubsidiariesTCN Dominicana, S.A. (TCN or Telecable)

TRICOM is a diversified telecommunicationscompany, which provides international and domestic long distance, basic localservice, mobile, Internet and broadband services in the Dominican Republic andlong distance services through subsidiaries in the United States. The Company’soperations in the Dominican Republic are governed by the Telecommunications Law(Law No.153-98) and by a Concession Agreement signed with the DominicanGovernment and ratified by the National Congress on April 30, 1990. Thisagreement is for an initial term of 20 years through June 30, 2010, subject torenewal for an additional 20-year term. Law No. 153-98 establishes a basicframework to regulate the installation, maintenance and operation oftelecommunications networks and the provision of telecommunications servicesand equipment.  The law adopted the “UniversalServices Principle” by guaranteeing access to telecommunications services at affordableprices in low-income rural and urban areas. The law creates a fund for the development of the telecommunicationssectors that is supported by a 2% tax on industry participants’ billings of alltelecommunications services.

TRICOM USA, Inc. (TRICOM USA) is a companyorganized under the laws of Delaware and authorized by the United StatesFederal Communications Commission (FCC) to operate as a facilities-based longdistance carrier in the United States.

TCN Dominicana, S.A. is a company organized onSeptember 13, 2001 under the laws of the Dominican Republic, and engaged in theoperation of three cable television systems and networks in the DominicanRepublic.

**2****     Summary of Significant Accounting Policies**

**2.1****       Principles of Consolidation**

The accompanying consolidated financial statementsinclude the accounts of TRICOM, S.A. (Parent Company) and its majority ownedsubsidiaries. All significant inter-company accounts and transactions have beeneliminated in consolidation.

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**2.2****       Use of Estimates**

The accompanying consolidated financial statementshave been prepared in conformity with accounting principles generally acceptedin the United States of America. The preparation of consolidated financialstatements in conformity with these principles requires management to make anumber of estimates and assumptions relating to the reported amounts of assetsand liabilities and the disclosures of contingent assets and liabilities at thedate of the consolidated financial statements and the reported amounts of revenuesand expenses during the period.

Significant items subject to such estimates andassumptions include: the carrying amount of property, plant and equipment,valuation allowances for receivables, inventories, intangible assets anddeferred income tax assets. Actual results could differ from those estimates.

**2.3****       Foreign Currencies**

The Company’s and itssubsidiaries’ functional currency are the U.S. dollar.  All foreign currency balances are restated inUS dollars using both historical and current exchange rates. Under thissituation, SFAS 52 requires the use of the remeasurement method, also referredto as the monetary/nonmonetary method, when translating the entities’ financialstatements.   This method translatesmonetary assets (cash and other assets and liabilities that will be settled incash) at the current rate.  No monetaryassets, liabilities, and stockholders’ equity are translated at the appropriatehistorical rates which are the exchange rates at the dates the transactions inthe no monetary account originated. Also, the income statement amounts related to no monetary assets andliabilities, such as cost of goods sold (inventory), depreciation (property,plant and equipment), and goodwill amortization (goodwill), are translated atthe same rate used for the related balance sheet translation.  Other revenues and expenses occurring evenlyover the year may be translated at the weighted-average exchange rate for theperiod.  Remeasurement gains or lossesthat result from the remeasurement process applied to foreign subsidiaries thatare consolidated are reported on the US parent company’s consolidatedstatements of operations.

As of December 31, 2005 and 2006, the rates used bythe Company to translate Dominican peso denominated accounts were RD$34.85 andRD$33.78 per one US dollar, respectively. The weighted-average exchange ratesused to translate certain revenues and expenses accounts for the 2004, 2005 and2006 statements of operations were RD$42.11, RD$30.39 and RD$33.34. PanamanianBalboas (B/.) were at par with the U.S. dollar.

**2.4****       Cash and Cash Equivalentsand Restricted Cash**

For the purpose of the statements of cash flows, theCompany considers as cash and cash equivalents all cash on hand; cash in banks,time deposits and highly liquid debt instruments with original maturities atthe time of purchase of three months or less. Restricted cash is primarily related to cash held in escrow at financialinstitutions as determined by the court judge and restricted for possiblelitigation settlements.

**2.5****      ****Customer and Carrier Accounts Receivable**

Customer accounts receivable are recorded on the dateinvoiced and recorded with the amount of services provided plus a late 

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charge, if any, which accrues after a maximum graceperiod of 15 days for individual customers and 30 days for corporate customers(on the accounts past due). The assessed monthly late charge is 2.98%.  Carrier accounts receivable are recognizedbased on the termination of traffic in the Company’s network.

**2.6****       Allowance for Doubtful Accounts**

The allowance for doubtful accounts receivable isestablished through a charge to an expense account. The Company, afteranalyzing current market trends and collection history of its receivablesportfolio has estimated those customers’ receivables balances over 90 days pastdue are uncollectible and are therefore reserved.

The allowance for doubtful accounts from carriers andothers is established through a charge to an expense account based on ananalysis of the collectability of individual accounts and payment history.

**2.7****       Inventories**

Inventories are valued at the lower of average cost ormarket.  Inventory mainly corresponds totelephone equipment available for sale.

The Company’s policy is to review its inventory forspecific usage and future utility. Estimates of impairment of individual items of inventory are recorded toreduce the item to the lower of cost or market. The reserve for inventory obsolescence was $871,435 and $ 905,002 as ofDecember 31, 2005 and 2006, respectively.

**2.8****      ****Change in Accounting Estimate**

The Company’s management reviews the estimated usefullives of its fixed assets. The 2004 review indicated the actual lives forcertain asset categories generally were shorter than the useful lives used fordepreciation purposes in the Company’s financial statements. As a result, theCompany revised the estimated useful lives of certain categories of property,principally building, communication, office, production and transmissionequipment, hardware and other.   Theeffect of this change in estimate increased accumulated depreciation byapproximately $17.4 million.

The change in estimates of the useful lives of fixedassets was performed based on a comparison of the Company’s useful lives withother companies’ useful lives for similar assets.  The Company made these changes to betterreflect the estimated periods during which such assets will remain in service.

**2.9****       Property,Plant and Equipment**

Property, plant and equipment are carried atcost.  Construction costs and equipmentinstallations in process are maintained as construction projects until they arecompleted and/or the equipment is placed in service. Depreciation is recordedfrom the first full month that the assets are placed in service. Property andplant related to cable television operations are carried at cost and includeall direct costs and certain indirect costs associated with the construction ofcable television transmission and distribution systems and new subscriberinstallations.

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**2.10****    Depreciation and Amortization**

The depreciation method used by the Company is thestraight-line method, that is, the uniform distribution of cost over theestimated useful lives of the corresponding assets. Leasehold improvements areamortized using the straight-line method over the shorter of the lease term orthe estimated useful life of the improvement. The estimated useful lives ofassets are as follows:
| Description                                        | ** ** | **Years** |
|----------------------------------------------------|------------|-----------|
| Buildings and  improvements                        |       | 15-40     |
| Furniture,  equipment and transportation equipment |       | 3-15      |
| Leasehold  improvements                            |       | 5-10      |
| Communications  and transmission equipment         |       | 7-15      |
| Computer  equipment                                |       | 4         |
| Other equipment                                    |       | 1-10      |

 

**2.11****    OtherAssets**

Radio frequency rights are amortized on astraight-line basis over their useful lives, which range from 15 to 20 years(see Note 9).

**2.12****    SeveranceIndemnities**

According to the Labor Code of the Dominican Republic,employers are required to pay severance indemnities to those workers whoselabor contracts are terminated without just cause. Just cause is defined in theLabor Code as including misstatements by an employee in his job application,termination within three months of employment for poor performance, dishonesty,threats of violence, willful or negligent destruction of property, unexcusedabsences or termination of the job for which the employee was hired. TheCompany maintains a minimal reserve to cover severance indemnities based on itsexperience. At December 31, 2005 and 2006, the non-current liability forseverance indemnities presented in the balance sheet is of $284,321 and$551,040 respectively.

**2.13****    RevenueRecognition**

##### ***Long Distance.***

Long distance revenues represent amounts recognizedfor the transmission of traffic from foreign telecommunication carriers to theDominican Republic, including revenues derived from the Company’s U.S. basedinternational long distance wholesale and prepaid calling card operations, outboundinternational and domestic long distance calls generated by calling card usersand 

F-12

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retail telephone centers. Long distance revenues arerecognized as the minutes are provided or as the calls are made, except forrevenues from prepaid calling cards, which are recognized, as the calling cardsare used, net of commission paid for sale.

##### ***Domestic Telephony.***

Domestictelephony revenues consist of fees received for local exchange services in theDominican Republic, including monthly fees, local measured service and localmeasured charges for value-added services, outbound international and domesticlong distance calls generated by the Company’s residential and businesscustomers within the Dominican Republic, sales of customer equipment, andinterconnection revenues received from other service providers for calls thatterminate in the Company’s network. These revenues are recognized as servicesare rendered. Installation fees are recognized over the estimated averageservice life based on the Company’s experience, net of costs incurred in theinstallation. When installation cost are greater than the installation feescharged, the net cost related to the installations is charged as an expenseimmediately.

##### ***Mobile.***

Mobilerevenues consist of fees received for cellular and PCS services, includingfixed monthly fees, per minute usage charges and additional charges forvalue-added services, outbound international long distance charges, as well aspaging services, equipment sales, and interconnection charges received fromother service providers for incoming calls that terminate in the Company’snetwork.  These revenues are recognizedas services are rendered. Revenues generated by calling cards used for prepaidcellular services are recognized, as the calling cards are used, net of salescommissions paid.

##### ***Cable Television.***

Cabletelevision revenues consist of monthly fees derived from basic programming,expanded basic programming, digital music services, Internet access andrevenues from advertising sales to national advertisers on non-broadcastchannels carried over the cable communications systems. Cable revenues arerecorded in the period the service is provided, except advertising services,which are recognized when commercials are telecast.

TheCompany has entered into transactions that exchange advertising services. Suchtransactions are recorded at the estimated fair value of the advertisementreceived or given in accordance with the provisions of EITF Issue No. 99-17 “Accountingfor Advertising Barter Transactions”. Barter transactions were not material tothe Company’s consolidated statements of operations for the years endedDecember 31, 2004, 2005 and 2006.

##### ***Data and Internet.***

Dataand Internet revenues consist of fixed monthly fees received from residentialand corporate customers for high speed broadband data transmission and Internetconnectivity services, including traditional dial-up connections, dedicatedlines, private networks, frame relay and digital subscriber lines, or xDSLs,that provide broad-band transmission of voice and data over regular telephonelines. These revenues are recognized as services are rendered.

F-13

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Activationfees are recognized over the estimated average service life net of the costincurred in the activations based on the Company’s experience. When theactivation costs are greater than the activation fees collected, the net costrelated to activation is charged as an expense immediately.

##### ***OtherRevenues.***

Otherrevenues represent revenues that are not generated from the Company’s corebusiness activities, including commissions and revenues from the provision ofmiscellaneous services. These revenues are recognized when the service isrendered.

**2.14****    Capitalizationof Interest**

Interest is capitalized on qualified projects andincluded as part of project costs during the period necessary forinstallation.  For the years endedDecember 31, 2005 and 2006 Tricom S.A. did not take new loans; therefore nointerest has been capitalized for this year.

**2.15****    IncomeTaxes**

Income tax on profit orloss comprises current and deferred tax. Income tax is recognized in the consolidated statements of operations.Current tax is the expected tax payable on the taxable income for the year,using the tax rate in effect at the balance sheet date.

Income taxes areaccounted for under the asset and liability method.  Deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences betweenthe carrying amounts of existing assets and liabilities and their respectivetax bases and operating losses and tax credit carry forwards. Deferred taxassets and liabilities are measured using enacted tax rates expected to applyto taxable income in the years in which those temporary differences areexpected to be recovered or settled.  Theeffect on deferred tax assets and liabilities of a change in tax rates isrecognized in income in the period that includes the enactment date.

A deferred tax asset isrecognized only to the extent that it is probable that future taxable profitswill be available against which the assets can be utilized.  Deferred tax assets are reduced to the extentthat it is no longer probable that the related tax benefit will be realized.

**2.16****    EarningsPer Common Share**

Basic earnings per share are computed based on theweighted average number of common shares outstanding. Diluted earnings pershare reflect the increase in average common shares outstanding that would resultfrom the assumed exercise of outstanding stock options, calculated using thetreasury stock method.

The weighted average number of common sharesoutstanding used in the calculation of basic and diluted (loss) per commonshare for the years 2004, 2005 and 2006 are as follows:
|                                                                           | ** ** | **2004**   | ** ** | **2005**   | ** ** | **2006**   | ** ** |
|---------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| Weighted average number  of common shares outstanding - basic and diluted |       | 64,602,585 |       | 64,602,585 |       | 64,602,585 |       |

 

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For 2004, 2005 and 2006, all stock options andwarrants are excluded from consideration of diluted loss per share because ofthe Company’s net loss.

## **2.17****   ****Pension Plan**

Until August 2003, aprivate pension administration company managed the Company’s plan, which wasconverted to a defined contribution plan in 2000. Under this arrangement, boththe Company and the employee made fixed contributions to the employee’saccount. The contributions made by the Company were recognized as expenses on amonthly basis.

 In August 2003, a new Social Security law(87-01) entered into effect making employer and employee pension contributionsmandatory for all entities based on a percentage of monthly salaries; 2.58%paid by the employee and 6.42% contributed by the employer.

During the years endedDecember 31, 2004, 2005 and 2006 the Company recognized as expensescontributions for approximately $137,000, $892,000 and $852,000 respectively.

## **2.18****    Impairment of Long-Lived Assets**

SFAS No. 144 provides asingle accounting model for long-lived assets to be disposed of, SFAS No. 144also changes the criteria for classifying an asset as held for sale, broadensthe scope of businesses to be disposed of that qualify for reporting asdiscontinued operations and changes the timing of recognizing losses on suchoperations. The Company adopted SFAS No. 144 on January 1, 2002 (see Note 23).

In accordance with SFASNo. 144, long-lived assets, such as property, plant, and equipment are reviewedfor impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable. Recoverability of assets tobe held and used is measured by a comparison of the carrying amount of an assetto estimated undiscounted future cash flows expected to be generated by theasset. If the carrying amount of an asset exceeds its estimated future cashflows, an impairment charge is recognized in the amount by which the carryingamount of the asset exceeds the fair value of the asset. Assets to be disposedof would be separately presented on the balance sheet and reported at the lowerof the carrying amount or fair value less costs to sell, and are no longerdepreciated. The assets and liabilities of a disposed group classified as heldfor sale would be presented separately in the appropriate asset and liabilitysections of the balance sheet.

Goodwill and intangible assets not subject to amortization are testedannually for impairment and more frequently if events and circumstancesindicate that the asset might be impaired. An impairment loss is recognized tothe extent that the carrying amount exceeds the asset’s fair value. Thisdetermination is made at the reporting unit level and consists of two steps.First, the Company determines the fair value of a reporting unit and comparesit to its carrying amount. Second, if the carrying amount of a reporting unitexceeds its fair value, an impairment loss is recognized for any excess of thecarrying amount of the reporting unit’s goodwill over the implied fair value ofthat goodwill. The implied fair value of goodwill is determined by allocatingthe fair value of the reporting unit in a manner similar to a purchase priceallocation, in accordance with FASB Statement No. 141, Business Combinations.The residual fair value after this allocation is the implied fair value of thereporting unit goodwill.

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## **2.19****    Advertising Costs**

Advertising costs are expensed as they areincurred.  For the years ended December31, 2004, 2005 and 2006 these costs amounted to approximately $2,609,000,$4,711,000 and $5,105,000 respectively, and are included as part of selling,general and administrative expenses in the accompanying consolidated statementsof operations.

## **2.20****    Stock Option Plan**

On January 1, 2006, the Company adopted Statementof Financial Accounting Standards (SFAS) No. 123(R) which is a revision ofSFAS 123, “Share-Based Payment” (SFAS 123(R)), which requires themeasurement and recognition of compensation expense for all share-based paymentawards made to employees and directors, including employee stock options andemployee stock purchases related to the Employee Stock Purchase Plan based onestimated fair values. SFAS 123(R) supersedes the Company’s previousaccounting under Accounting Principles Board (APB) Opinion 25, “Accountingfor Stock Issued to Employees” (APB 25), for periods beginning January 1,2006.  Under the provisions of SFAS No.123 (R), stock-based compensation cost is estimated at the grant date based onthe fair-value of the award and is recognized as expense ratably over therequisite service period of the award. Determining the appropriate fair-value model and calculating the fairvalue of stock-based awards at the grant date requires considerable judgment,including estimating stock price volatility, expected option life andforfeiture rates.  The Company uses theBlack-Scholes option valuation model to value employee stock awards. Thefollowing table illustrates the effect on net loss if the fair-value-basedmethod had been applied to all outstanding and vested awards in each period.
|                                                                                                        | ** ** | **2004** | ** **   | **2005** | ** ** | **2006**    | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|----------|--------------|----------|------------|-------------|------------|
|                                                                                                   |       |     |         |     |       |        |       |
| Net loss – as  reported                                                                           |       | $        | (102,154,096 | )        | $          | (83,374,078 | )          | $ | (87,541,082 | ) |
| Add total  stock-based employee compensation determined under fair-value-based method  for all rewards |       | (1,218   | )            | (136     | )          | (7          | )          |
| Pro forma net  loss                                                                                    |       | $        | (102,155,314 | )        | $          | (83,374,214 | )          | $ | (87,541,089 | ) |
| Net loss per  share:                                                                                   |       |     |         |     |       |        |       |
| As reported – basic and diluted                                                                   |       | $        | (1.58        | )        | $          | (1.29       | )          | $ | (1.36 | ) |
| Pro forma –  basic and diluted                                                                    |       | $        | (1.58        | )        | $          | (1.29       | )          | $ | (1.36 | ) |

 

## **2.21****    Goodwill and Other Intangible Assets**

Goodwill represents the excess of cost over fair valueof assets of businesses acquired. Effective July 1, 2001, the Company adoptedthe provisions of SFAS No. 142, Goodwill and Other Intangible Assets, forbusiness combinations consummated after June 30, 2001, and as of January 1, 2002for business combinations consummated before June 30, 2001.

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Goodwill and intangible assets acquired in a purchasebusiness combination and determined to have an indefinite useful life are notamortized, but instead tested for impairment at least annually in accordancewith the provisions of SFAS No. 142. SFAS No. 142 also requires that intangibleassets with estimated useful lives be amortized over their respective estimateduseful lives to their estimated residual values, and reviewed for impairment inaccordance with SFAS No. 144, Accounting for Impairment or Disposal ofLong-Lived Assets.

In connection with SFAS No. 142’s transitionalgoodwill impairment evaluation, the Statement required the Company to performan assessment of whether there was an indication that goodwill was impaired asof the date of adoption. To accomplish this, the Company was required toidentify its reporting units and determine the carrying value of each reportingunit by assigning the assets and liabilities, including the existing goodwilland intangible assets, to those reporting units as of January 1, 2002. TheCompany was required to determine the fair value of each reporting unit andcompare it to the carrying amount of the reporting unit within six months ofJanuary 1, 2002. To the extent the carrying amount of a reporting unit exceededthe fair value of the reporting unit, the Company would be required to performthe second step of the transitional impairment test, as this is an indicationthat the reporting unit’s goodwill may be impaired. The second step wasrequired for one reporting unit. In this step, the Company compared the impliedfair value of the reporting unit goodwill with the carrying amount of thereporting unit goodwill, both of which were measured as of the date ofadoption. The implied fair value of goodwill was determined by allocating thefair value of the reporting unit to all of the assets (recognized andunrecognized) and liabilities of the reporting unit in a manner similar to apurchase price allocation, in accordance with SFAS No. 141, BusinessCombinations. The residual fair value after this allocation was the impliedfair value of the reporting unit goodwill.

The implied fair value of this reporting unit exceededits carrying amount and the Company was not required to recognize an impairmentloss.

Prior to the adoption of SFAS No. 142, goodwill wasamortized on a straight-line basis over the expected periods to be benefited,generally 40 years, and assessed for recoverability by determining whether theamortization of the goodwill balance over its remaining life could be recoveredthrough undiscounted future operating cash flows of the acquired operation. Theamount of goodwill and other intangible asset impairments, if any, was measuredbased on projected discounted future operating cash flows using a discount ratereflecting the Company’s average cost of funds.

## **2.22****    Investment Securities**

Investment securities at December 31, 2005 and 2006consisted of certificates of deposit and mortgage participation contracts. TheCompany classifies its securities as held-to-maturity. Held-to-maturitysecurities are those securities for which the Company has the ability andintent to hold the security until maturity.

Held-to-maturity securities are recorded at amortizedcost, adjusted for the amortization or accretion of premiums or discounts.

A decline in the market value of held-to-maturitysecurities below cost, that is deemed to be other than temporary, results in areduction in carrying amount to fair value. The impairment is charged toearnings and a new cost basis for the security is established.

F-17

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Premiums and discounts are amortized or accreted overthe life of the related held-to-maturity security as an adjustment to yieldusing the effective interest method. Interest income is recognized when earned.

## **2.23****   Recognition, Measurement, and Income Statement Classificationfor Sales Incentives Offered to Customers**

In November 2001, the Emerging Issues Task Force(EITF) of the FASB reached a consensus on EITF issue 01-09, “Accounting forConsideration Given by a Vendor to a Customer (Including a Reseller of theVendor’s Products)”. The Company adopted EITF Issue 01-09 effective January 1,2003. EITF Issue 01-09 addresses the recognition, measurement, and incomestatement classification for sales incentives offered to customers. Salesincentives include discounts and generally any other offers that entitle acustomer to receive a reduction in the price of a product by submitting a claimfor a refund or rebate. Under EITF 01-09, the reduction in or refund of theselling price of the product resulting from any sales incentives should beclassified as a reduction of revenue. Prior to adopting this pronouncement, theCompany recognized sales incentives paid to distributors of prepaid callingcards as selling, general and administrative expenses. As a result of adoptingEITF Issue 01-09, sales incentives were restated (reclassified) as a reductionof long distance revenues in the case of long distance calling cards and as areduction of cellular revenues in the case of prepaid cellular services.Amounts reclassified were $6,102,127, $10,071,926 and $9,660,463 for the yearsended December 31, 2004, 2005 and 2006, respectively. This pronouncement didnot have any impact on net loss reported in these years.

# **3****      ****Liquidity**

The consolidated financial statements have beenprepared on a going concern basis, which contemplates continuity of operations,realization of assets and satisfaction of liabilities in the ordinary course ofbusiness.  However, as a result ofrecurring operating losses and the Company’s on-going debt restructuringprocess, such realization of assets and satisfaction of liabilities are subjectto significant uncertainty.

At December 31, 2005 and 2006, the Company’scurrent liabilities exceeded its current assets by $577.7 million and $642.7million, respectively.

On October 2, 2003, the Company announced thatit would not be making a scheduled interest payment to the holders of its11-3/8% Senior Notes due 2004, and that it had initiated discussions withholders of its Senior Notes and its bank lenders, and would be continuingdiscussions with prospective strategic partners, to formulate a restructuringplan of the Company’s balance sheet.

An unofficial committee of bondholders andcommercial banks was established. Concurrently with the non-payment of interestdue to bondholders, the Company suspended principal and interest payments ofall unsecured bank debt.  As a result,the Company does not expect to have any available funding sources until therestructuring process is concluded.

In December 2003, the Company’s Board ofDirectors appointed a Chief Restructuring Officer to assist in negotiationswith bondholders and other lenders, the implementation of a cash conservationplan and in the development of a core business plan.

F-18

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Further, the Company has engaged severalfinancial advisory and legal firms to assist in its financial restructuringprocess.  The Company has also agreed topay the fees and expenses of financial advisory and legal firms engaged by theunofficial committee of bondholders and commercial banks and by the Company’s majority shareholder, GFNCorporation Ltd, and certain of its affiliates, which are also major creditorsof the Company. The Company also agreed to pay retention bonuses to certain ofits executives. Expenses related to the Company’s financial restructuring wereapproximately $27.9 million.

Details of restructuring expenses are as follows:
|                                                  | ** ** | **2003**   | ** **    | **2004**   | ** ** | **2005**      | ** ** | **2006**   | ** **    | **Total**  | ** ** |
|--------------------------------------------------|------------|------------|---------------|------------|------------|---------------|------------|------------|---------------|------------|------------|
| **Financial  Services:**                         | ** ** | ** ** | ** **    | ** ** | ** ** | ** **    | ** ** | ** ** | ** **    | ** ** | ** ** |
| FTI Consulting (Company)                         |       | $          | 75,000        |       | $          | 1,987,000     |       | $          | 2,237,000     |       | $          | 2,069,000 |   | $ | 6,368,000 |   |
| Bear Stearns & Co. Inc (Company)             |       | 500,000    |          | 906,000    |       | —        |       | —     |          | 1,406,000  |       |
| Chanin Capital Partners (Committee)              |       | —     |          | 1,162,000  |       | 1,335,000     |       | 1,056,000  |          | 3,553,000  |       |
| Broadspan Capital (GFN)                          |       | —     |          | 677,000    |       | 568,000       |       | 557,000    |          | 1,802,000  |       |
|                                             |       |       |          |       |       |          |       |       |          |       |       |
| **Legal  Services:**                             |       |       |          |       |       |          |       |       |          |       |       |
| Manatt Phelps & Phillips, LLP (Committee)    |       | 572,000    |          | 1,082,000  |       | 984,000       |       | 1,557,000  |          | 4,195,000  |       |
| Greenberg Traurig, LLP (Company)                 |       | 366,000    |          | 780,000    |       | 1,386,000     |       | —     |          | 2,532,000  |       |
| DLA Piper Rudnick Gray Cary US, LLP (co.)        |       | 84,000     |          | 217,000    |       | —        |       | —     |          | 301,000    |       |
| White & Case (GFN)                           |       | —     |          | 207,000    |       | 577,000       |       | 1,486,000  |          | 2,270,000  |       |
| E. Veras Consultoria, S.A (Committee)            |       | —     |          | 127,000    |       | 95,000        |       | 200,000    |          | 422,000    |       |
| Cadawalader. Wickersham & Taft, LLP (Co.)    |       | —     |          | 113,000    |       | —        |       | —     |          | 113,000    |       |
| Headrick Rizik Alvarez & Fernandez (Vendors) |       | —     |          | 60,000     |       | —        |       | —     |          | 60,000     |       |
| Melo Guerrero (Company)                          |       | —     |          | 37,000     |       | 35,000        |       | —     |          | 72,000     |       |
| Jimenez Cruz Peña (Company)                 |       | —     |          | 31,000     |       | 28,000        |       | —     |          | 59,000     |       |
| Squire, Sanders & Dempsey LLP (Company)      |       | —     |          | —     |       | —        |       | 331,000    |          | 331,000    |       |
| Morrison & Foerster LLP (Company)            |       | —     |          | —     |       | —        |       | 2,571,000  |          | 2,571,000  |       |
| Barnichta & Asociate                         |       | —     |          | —     |       | —        |       | 15,000     |          | 15,000     |       |
| Langa & Abinader (GFN)                       |       | —     |          | 19,000     |       | 289,000       |       | 606,000    |          | 914,000    |       |
| Steel, Hector & Davis (Company)              |       | —     |          | —     |       | 269,000       |       | —     |          | 269,000    |       |
|                                             |       |       |          |       |       |          |       |       |          |       |       |
| **Executive  Compensation:**                     |       |       |          |       |       |          |       |       |          |       |       |
| Retention  Bonuses                               |       | —     |          | 741,000    |       | —        |       | —     |          | 741,000    |       |
|                                             | ** ** | **$**      | **1,597,000** | ** ** | **$**      | **8,146,000** | ** ** | **$**      | **7,803,000** | ** ** | **$**      | **10,448,000** | ** ** | **$** | **27,994,000** | ** ** |

 

As part of the restructuring process, effectiveJanuary 2004, the Company entered into an agreement for the sale of its CentralAmerican trunking assets to a group of Panamanian investors for a price ofapproximately $12.5 million, payable in installments. Estimated net proceeds,after transaction expenses and liabilities directly related to Central Americaand the payment of a portion of the proceeds to a minority partner, amounted to$10.7 million.

For the years ended December 31, 2005 and 2006,the Company generated $43.2 and $17.6 million respectively of cash flow fromoperations. Since the Company has not paid interest to its unsecured lendersfrom September 2003, interest payable as of December 31, 2005 and 2006 amountedto approximately $153.6 and $218.9 million respectively. Had the Company paidall interest on a current basis, cash flows used in operations would have been$(110.4) and $(201.3) million respectively.

At December 31, 2005 and 2006, the Company’sliabilities exceeded its total assets by approximately $279.2 and $366.7 million

F-19

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respectively, resulting from the increasedcompetition for mobile telecommunication services in the Dominican Republic.

At December 31, 2005 and 2006, the Company hadindebtedness in the aggregate principal amount of $447.5 and $447.2 millionrespectively.  The ability of the Companyto pay future interest on its indebtedness and meet debt service obligationswill depend on the outcome of the restructuring process, as well as the Company’sfuture operating performance, including the ability to increase revenues andcontrol expenses, which in turn depends on the successful implementation of itsstrategy and on financial, competitive, regulatory, technical and otherfactors, many of which are beyond the Company’s control.  Interest expense was $69.6 million for theyear ended December 31, 2005 and $69.8 million for the year ended December 31,2006.

If the restructuring is not possible, theCompany’s creditors could initiate bankruptcy proceedings, most likely in theDominican Republic, or the Company could be forced to dispose of businesssegments or assets at unfavorable prices.

# **4****         ****Property, Plant and Equipment**

A detail of property, plant and equipment atDecember 31, 2005 and 2006 is as follows:
|                                                   | ** ** | **2005**    | ** **      | **2006**    | ** ** |
|---------------------------------------------------|------------|-------------|-----------------|-------------|------------|
| Operations and  communications:                   |       |        |            |        |       |
| Land                                              |       | $           | 8,573,661       |        | $          | 9,041,147 |   |
| Buildings and improvements                        |       | 19,054,404  |            | 16,520,874  |       |
| Furniture and equipment                           |       | 4,068,074   |            | 6,325,914   |       |
| Communications equipment                          |       | 188,990,966 |            | 173,900,415 |       |
| Transmission equipment                            |       | 197,500,189 |            | 233,869,164 |       |
| Other equipment                                   |       | 1,104,919   |            | 2,844,793   |       |
|                                              |       | 419,292,213 |            | 442,502,307 |       |
| Less accumulated depreciation                     |       | 164,087,292 |            | 207,463,826 |       |
| Sub-total, operations and communications          |       | 255,204,921 |            | 235,038,481 |       |
|                                              |       |        |            |        |       |
| Property and  equipment:                          |       |        |            |        |       |
| Buildings                                         |       | 9,723,465   |            | 10,033,266  |       |
| Furniture and office equipment                    |       | 6,003,680   |            | 6,022,145   |       |
| Transportation equipment                          |       | 8,421,244   |            | 10,196,635  |       |
| Leasehold improvements                            |       | 7,689,963   |            | 8,049,124   |       |
| Data processing equipment                         |       | 36,690,433  |            | 37,253,733  |       |
|                                              |       | 68,528,785  |            | 71,554,903  |       |
| Less accumulated depreciation                     |       | 50,861,120  |            | 56,337,698  |       |
| Sub-total, property and equipment                 |       | 17,667,665  |            | 15,217,205  |       |
|                                              |       |        |            |        |       |
| Communications  equipment pending installation    |       | 4,578,188   |            | 4,671,406   |       |
| Cable company  equipment pending installation (a) |       | 642,331     |            | 947,286     |       |
| Equipment in  transit (b)                         |       | 154,354     |            | 141,306     |       |
| Construction in  process (c)                      |       | 20,191,676  |            | 18,345,249  |       |
|                                              |       |        |            |        |       |
| Property plant and equipment, net                 | ** ** | **$**       | **298,439,135** | ** **  | **$**      | **274,360,933** | ** ** |

 

F-20

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----

### (a)          Communications equipment, net of allowancefor obsolescence, and cable company equipment pending installation, correspondsto assets acquired for future installation into the network of the Company.These assets are recorded at average cost, which is lower than market.

### (b)         Equipment in transit represents accumulatedcosts of equipment imported by TRICOM, S.A. and TCN, for which additionalimport related costs are still to be incurred.

### (c)          A detail of construction in process atDecember 31, 2005 and 2006 is as follows:

|                                 | ** ** | **2005**  | ** **     | **2006**   | ** ** |
|---------------------------------|------------|-----------|----------------|------------|------------|
| Operations and  communications: |       |      |           |       |       |
| Transmission  equipment         |       | $         | 9,578,625      |       | $          | 3,538,156 |   |
| Cells                           |       | 8,104,352 |           | 11,832,038 |       |
| Other-property and  equipment   |       | 2,508,699 |           | 2,975,055  |       |
|                            |       |      |           |       |       |
|                            |       | **$**     | **20,191,676** |       | **$**      | **18,345,249** |   |

 

# **5****         ****Accounts Receivable**

Changesin the allowance for doubtful accounts during the years ended December 31,2004, 2005 and 2006 were as follows:
|                                 | ** ** | **2004**   | ** **    | **2005**   | ** ** | **2006**      | ** ** |
|---------------------------------|------------|------------|---------------|------------|------------|---------------|------------|
|                            |       |       |          |       |       |          |       |
| Allowance at  beginning of year |       | $          | 5,152,025     |       | $          | 3,138,530     |       | $ | 2,116,291 |   |
| Increase for the  year, net (a) |       | 2,296,554  |          | 3,497,686  |       | 3,459,613     |       |
| Write-offs  during the year     |       | (4,310,049 | )             | (4,519,925 | )          | (3,568,161    | )          |
|                            |       | ** ** |          | ** ** |       | ** **    |       |
| Allowance at end of  year       |       | **$**      | **3,138,530** |       | **$**      | **2,116,291** |       | **$** | **2,007,743** |   |

 

----

### (a)                             Duringthe years ended December 31, 2004, 2005 and 2006, the Company recognizedcollection recoveries from customer accounts previously written-off of$181,433, $276,872 and $368,557, respectively. These amounts are included as areduction to selling, general and administrative expenses in the accompanyingconsolidated financial statements of operations, net of increase, in theallowance for doubtful accounts.

### **6          Transactionswith Related Parties**

Asdefined in FAS 57, the Company is or was directly or indirectly related tovarious entities through common ownership, contractual rights and/or familyownership, as more fully set forth below.

Mr.Manuel Arturo Pellerano (“Mr. Pellerano”) together with members of his family,either directly or through their wholly-owned subsidiaries GFN Corporation,Ltd., Oleander Holdings, Inc. and Plan de Pensiones y Jubilaciones de laCompañía 

F-21

----

Nacionalde Seguros (PPJ), were, at December 31, 2006,  the beneficial owners of 17,453,874 shares of the Company’s Class ACommon Stock and 11,486,720 shares of the Company’s Class B Common Stock,representing 50.8% of the issued and outstanding shares of Class A Common Stock(calculated in accordance with SEC Rule 13d-3) and 60% of the issued andoutstanding shares of Class B Common Stock. From 1994 through late 2003,  Mr. Pellerano was the Company’s Chairman ofthe Board of Directors, President and Chief Executive Officer.  He retains, together with members of hisfamily, the right to appoint a majority of the members of the Board ofDirectors of the Company and, indirectly, the right to control selection of theCompany’s management.

GFNInternational Investments Corp., a financial services holding companyincorporated in the Cayman Islands was, at the relevant times, wholly owned andcontrolled by Mr. Pellerano and members of his family.  GFN International Investments Corp. was,until 2003, the parent company and related parties of the following entities,among others, which were engaged in the businesses of banking, insurance,credit card issuance, securities broker-dealer and other businesses:

·      GrupoFinanciero Nacional, S.A., a Dominican Republic holding company (“GFN, S.A.”).

The following additional entities, among others,continue to be controlled by Mr. Pellerano and members of his family, and aretherefore related parties:

·    Omnimedia, a Dominican mediaholding company;

·    Zona Franca San Isidro, a freetrade zone located in the Dominican Republic;

·    EllisPortafolio, which holds certain claims against the Company.

**Balances with Related Parties**

A detail of balances with related companies atDecember 31, 2005 and 2006 is as follows:
|                                       | ** ** | **2005**   | ** **     | **2006**   | ** ** |
|---------------------------------------|------------|------------|----------------|------------|------------|
| Assets:                               |       |       |           |       |       |
| Accounts receivable (a)               |       | $          | 2,664          |       | $          | 2,040 |   |
| **Total  Assets**                     | ** ** | **$**      | **2,664**      | ** ** | **$**      | **2,040** | ** ** |
|                                  |       |       |           |       |       |
| Liabilities:                          |       |       |           |       |       |
| Commercial paper (b)                  |       | 48,448,922 |           | 36,329,491 |       |
| Interest payable (c)                  |       | 24,186,485 |           | 32,557,915 |       |
| Current portion of long term-debt (d) |       | 25,356,872 |           | 21,463,203 |       |
| **Total Liabilities**                 | ** ** | **$**      | **97,992,279** | ** ** | **$**      | **90,350,609** | ** ** |

 

F-22

----

----

(a)           At December 31, 2005 and 2006, these amounts of $2,664 and$2,040 correspond to communication services to Editora AA.

(b)           At December 31, 2005 and 2006, these amounts include obligations forthe issuance of commercial paper in US$ to a group of GFN’s related companiesfor the principal amount of $47,339,007 and $35,184,420, bearing interest ratesranging from 11% and 14.93% per annum, respectively.  Also at December 31, 2005 and 2006, theseamounts also include the issuance of commercial paper in RD$ for the amount ofRD$38,680,527 equivalent to $1,109,915 (US$1 to RD$34.85) and $1,145,071 (US$1 to RD$33.78), respectively, bearinginterest rates ranging from 20% to 29% per annum.

(c)           The nature of theinterest payable is related to the loans described above in Note (b).

(d)            At December 31, 2005 and 2006, these amounts represent unsecured loansof $22,000,000 and $18,000,000 with GFN Capital Corporation, Ltd., a relatedoffshore entity. Interest accrues monthly at an interest rate ranging from11.5% to 12% per annum in 2005 and 2006, respectively. The loans mature inDecember 2007. The Company is not paying interest on these loans, consequently,these amounts are presented as current portion of long-term debt.

Additionally,it includes unsecured loans received from a GFN, S.A., a related institution,in the amount of RD$94,007,000 (equivalent to $2,697,475 in 2005 and $2,782,919in 2006) and RD$22,980,000 (equivalent to $659,397 in 2005 and $680,284 in2006) with interest rate ranging from 11.5% to 12% per annum in 2005 and 2006,respectively.  At December 31, 2005 and2006, these loans have been classified as part of the current liabilities inthe accompanying consolidated balance sheets, as a result of the default inpayment of interest and principal.

Asa result of operating losses, the Company was unable to remain in compliancewith the financial covenants arising under substantially all of its long-termnote agreements. The Company has been working with the different creditors torestructure the existing debt.

**Other Transactions with RelatedParties**

Adetail of transactions with related parties during the years ended December 312004, 2005 and 2006, are as follows:
|                                                                | ** ** | **2004**    | ** ** | **2005**    | ** ** | **2006**   | ** ** |
|----------------------------------------------------------------|------------|-------------|------------|-------------|------------|------------|------------|
| ** **                                                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** ** | ** ** |
| Operating revenues –  communications service revenues (a) |       | $           | 14,939     |        | $          | 157,908    |       | $ | 180,501 |   |
|                                                           |       |        |       |        |       |       |       |
| Selling, general and  administrative expenses:                 |       |        |       |        |       |       |       |
| Litigation  settlement (b)                                     |       | —      |       | —      |       | (2,182,105 | )          |
| Other charges  and special items (c)                           |       | (5,359,768  | )          | (2,423,657  | )          | —     |       |
|                                                           |       |        |       |        |       |       |       |
| Other expenses:                                                |       |        |       |        |       |       |       |
| Interest  incurred on loans (d)                                |       | (10,083,449 | )          | (10,658,941 | )          | (8,371,430 | )          |
| Equipment  purchased (Motorola) (e)                            |       | (1,535,297  | )          | —      |       | —     |       |
|                                                                |            |             |            |             |            |            |            |  |  |  |

 

----

(a)                                  Duringthe year ended December 31, 2004 this amount corresponds to telecommunications servicesto Zona Franca San Isidro of $14,939.

F-23

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During the years endedDecember 31, 2005 and 2006, these amounts correspond to telecommunicationservices to Zona Franca San Isidro of $17,688 and $17,563, respectively; and toEditora AA of $140,220 and $162,938, respectively.

(b)                                In September 2005, the Company was beingadded by a Dominican investigative judge as a co-defendant to criminalproceedings brought by certain creditors of Bancredito and other financialinstitutions formerly controlled by GFN, the Company’s principal shareholder.  The Company was added to these proceedingswithout prior notice or participation in the existing proceedings.  In January 2006, the Company, together withthe other co-defendants, entered into settlements with the private parties thatoriginally brought the criminal actions. The Company’s share of thesesettlements totaled $2,182,105.

(c)                                 Duringthe years ended December 31, 2004 and 2005 these amounts correspond to paymentsmade to Omni, T.V. arising from to a contract signed between the Company andOmni, T.V. to manage the relationship with international cable programmers.

(d)                                Theseinterest expenses tie to the loans from commercial paper and other debt fromrelated parties described in Note 6, Letters b and d.

(e)                                 Duringthe year ended December 31, 2004 this amount related to the purchase oftelecommunications equipment that is being disclosed because Motorola owns 40%of the class B common stock of the Company.

# **7****                            ****Certificates of Deposit and OtherInvestments**

At December 31, 2005 and 2006 the Company had mortgageparticipation contracts by $647,693 and $690,410, respectively, purchased fromunrelated savings and loans associations in the Dominican Republic. Thesecontracts earned interest at rates ranging from 5% to 10% per annum in 2004, 2005and 2006 respectively. These investments are maintained as compensatingbalances for mortgage loans made by these savings and loans associations tocertain officers and employees of the Company.

# **8****                            ****Intangible Assets**

There were no acquisitions of intangible assets duringthe years ended December 31, 2004, 2005 and 2006.  The summary of changes in the Company’sintangible assets (other than goodwill) during the years ended December 31,2004, 2005 and 2006, is as follows:
|                                | ** ** | **License** | ** **    |
|--------------------------------|------------|-------------|---------------|
|                           |       |        |          |
| Balances at  December 31, 2003 |       | $           | 2,664,641     |   |
| Impairment  charge             |       | —      |          |
| Balances at  December 31, 2004 |       | 2,664,641   |          |
| Impairment  charge             |       | —      |          |
| Balances at  December 31, 2005 |       | 2,664,641   |          |
| Impairment  charge             |       | —      |          |
| Balances at December  31, 2006 | ** ** | **$**       | **2,664,641** | ** ** |

 

F-24

----

Theintangible assets are determined to have indefinite useful lives due to theirexpected ability to generate cash flows indefinitely.  The cable license is based on an agreementsigned with the Dominican government, which has an indefinite life.  In the case of broadcasting contracts, thecontracts can be renewed automatically without additional payment.  The Company performed its annual impairmentreview for intangible assets and it was determined that there were no impairmentcharges for the years 2004, 2005 and 2006.

# **9****                     ****Other Assets**

Other assets at December 31, 2005 and 2006 consistedof the following:
|                                  | ** ** | **2005**  | ** **    | **2006**   | ** ** |
|----------------------------------|------------|-----------|---------------|------------|------------|
|                             |       |      |          |       |       |
| Deposits                         |       | $         | 386,640       |       | $          | 420,276 |   |
| Radio frequency  rights, net (a) |       | 2,856,702 |          | 2,639,774  |       |
| Other (b)                        |       | 121,834   |          | 1,248,577  |       |
| ** **                       | ** ** | **$**     | **3,365,176** | ** ** | **$**      | **4,308,627** | ** ** |

 

----

(a)                                 AtDecember 31, 2005 and 2006, these amounts represent payments for frequencyusage rights to expand the Company’s cellular and PCS capacity in the DominicanRepublic. For the years ended December 31, 2004, 2005 and 2006, theamortization expense corresponding to the frequency usage rights in theDominican Republic amounted to $227,450, $216,928 and  $216,959 respectively.

At December 31, 2004 the company transferred certainfrequency rights to a third party communications company in the amount of$308,706. This transaction generated revenues in the amount of $5,081,508,which is included in other income in the accompanying consolidated statement ofoperations.

(b)                                Adetail of this amount is as follows:
|                                        | ** ** | **2005** | ** **  | **2006**   | ** ** |
|----------------------------------------|------------|----------|-------------|------------|------------|
|                                   |       |     |        |       |       |
| Equipment held  for investment (Enron) |       | $        | 81,022      |       | $          | 81,022 |   |
| Restructuring  Legal retainers         |       | —   |        | 918,900    |       |
| Other Bank  Commission                 |       | 40,812   |        | 248,655    |       |
|                                   | ** ** | **$**    | **121,834** | ** ** | **$**      | **1,248,577** | ** ** |

 

# **10****               BorrowedFunds – Banks**

Funds borrowed by the Company consist of:
|                                           | ** ** | **2005**  | ** **     | **2006**   | ** ** |
|-------------------------------------------|------------|-----------|----------------|------------|------------|
| Funds  denominated in US dollars (a)      |       | $         | 47,676,599     |       | $          | 47,837,119 |   |
| Funds  denominated in Dominican pesos (b) |       | 1,189,211 |           | 1,226,880  |       |
|                                      | ** ** | **$**     | **48,865,810** | ** ** | **$**      | **49,062,999** | ** ** |

 

----

(a)                                 AtDecember 31, 2005 and 2006 these amounts included loans made by the CentralBank of the Dominican Republic for 

F-25

----

$29,745,027 and $7,395,081 respectively, asa result of draws on stand-by letters of credit issued on behalf of theCompany by Bancrédito, a financial institution that was related to the Companyat the time the letters of credit were issued and was sold in 2003 to a thirdparty in a transaction involving the Central Bank.  In that sale transaction, the Central Bankagreed to assume liability for the letters of credit. The loans made by theCentral Bank accrue interest at rates ranging from 10.25% to 14% per annum. TheCompany has not paid interest on its unsecured debt since September 2004.

AtDecember 31, 2005 and 2006 these amounts included a secured loan of $3,000,000;this loan is secured by transmission equipment with an approximate book valueof $5.2 million and accrues interest at an annual rate of 5% per annum. AtDecember 31, 2005 and 2006 these amounts also include loans in the amounts of$5,640,476 with Citibank, Dominican Republic and $7,276,956 with Credit SuisseFirst Boston, respectively, which accrues interest at an annual rate of 10%.

At December 31, 2006 this amount also include a loan in the amount of$20,426,773 with Stark Trading Co. which accrues interest at an annual rate of10.25%.

AtDecember 31, 2005 and 2006, these amounts include unsecured loans of letter ofcredit in the amount of  $1,282,802 owedto Bancredito Panama, bearing interest at rates ranging from 9.5% to 11.5% perannum; it also includes a loan owed to Bancredito Panama in the amount of$6,601,131, bearing interest at 11.5% per annum. This loan was granted for afive-year period maturing in December 2007. The balance of $121,067 corresponds to bank overdrafts owed toBancredito Panama and Bancredito Cayman as of December 31, 2005 and 2006.   At December 31, 2005 and 2006, the Companydid not have any available lines of credit.

At December 31, 2005 and 2006, these amounts include unsecured loanswith various banks in the amount of $1,286,096 and $ 1,733,309 respectively.

(b)                                AtDecember 31, 2005 and 2006, these loans represented RD$41,444,000 (equivalentto $1,189,211 and $1,226,880 using the prevailing exchange rate at that date,which was RD$34.85and RD$33.78, respectively, per US$1.00) bearing interest ata rate of 40% per annum.

# **11****               ****Commercial Paper**

As of December 31, 2005 and 2006, commercial paperissued by the Company consisted of:
|                                                              | ** ** | **2005**   | ** ** | **2006**   | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------|------------|
| Commercial paper  in US dollars (a)                          |       | $          | 6,200,000  |       | $          | 18,354,588 |   |
| Commercial paper  in US dollars related parties (Note 6 (b)) |       | 47,339,007 |       | 35,184,420 |       |
| Commercial paper  in Dominican pesos related parties (b)     |       | 1,109,915  |       | 1,145,071  |       |
|                                                         |       |       |       |       |       |
| Total commercial paper                                       |       | 54,648,922 |       | 54,684,079 |       |
|                                                         |       |       |       |       |       |
| Less short-term  commercial paper                            |       | 54,648,922 |       | 54,684,079 |       |
|                                                         |       |       |       |       |       |
| Long-term commercial  paper                                  |       | $          | —     |       | $          | — |   |

 

----

(a)                                 AtDecember 31, 2005 and 2006, these instruments accrued interest at annual ratesranging from 11% to 14.93%.

F-26

----

(b)                                AtDecember 31, 2005 and 2006, peso-denominated commercial paper consisted ofRD$38,680,538 (equivalent to $1,109,915 and $1,145,072) using the prevailingexchange rate at that date, which was RD$34.85 and $33.78, respectively, perUS$1.00, bearing interest at annual rates ranging between 20% to 29%. At December 31, 2005 and 2006 the Company did nothave a facility for the issuance of commercial paper (see Note 6 (b)).

A portion of the commercial paper issued by the Company is held byrelated parties (see Note 6 (b)).  Allcommercial paper issued by the Company and outstanding at December 31, 2005 and2006 are due on demand. These obligations are issued through the relatedcompany “Acciones y Valores, S.A.” and through an unrelated company “ValoresProfesionales, S. A.”

Thefollowing is a schedule of the maturity for such debt at December 31, 2005 and2006:
|               | ** ** | **2005** | ** ** | **2006** | ** ** |
|---------------|------------|----------|------------|----------|------------|
|          |       |     |       |     |       |
| Due on demand |       | $        | 54,648,922 |     | $          | 54,684,079 |   |
|          |       |     |       |     |       |
| Total         |       | $        | 54,648,922 |     | $          | 54,684,079 |   |

 

# **12****      ****Capital Leases**

TheCompany has entered into various capital lease contracts with Conaresa, aformer related party that until 2003 was owned and controlled by GFN, S.A.

AtDecember 31, 2005 and 2006, the Company had not made the lease payments dueduring 2005 and 2006 respectively. The contracts for capital leases providethat in case payments are not made, the lender could cancel the contracts. Dueto this fact, the debt has been classified in its entirety as a currentliability in the accompanying balance sheets at December 31, 2005 and 2006.

Thecapital lease contracts also provide for interest and penalty interest inunspecified amounts to be determined by the lessor. A detail of commitments andcontingencies related to these contracts are disclosed in Note 16 (g).

Assets recorded under these capital leases consist of:
|                                | ** ** | **2005**   | ** ** | **2006**   | ** ** |
|--------------------------------|------------|------------|------------|------------|------------|
| Transportation                 |       | $          | 1,276,815  |       | $          | 1,276,815 |   |
| Machinery and  equipment       |       | 307,748    |       | 307,748    |       |
|                           |       | 1,584,563  |       | 1,584,563  |       |
| Less accumulated  depreciation |       | (1,584,563 | )          | (1,584,563 | )          |
|                           |       | $          | —     |       | $          | — |   |

 

### At December31, 2005 and 2006, the fixed assets under capital leases were fullydepreciated.

F-27

----

# **13****    ****Current Portion of Long-Term Debt**

The outstanding debt at December 31, 2005 and 2006 wasin default and consequently classified as a current liability in the Company’sbalance sheet. Outstanding debt consists of the following:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | ** ** | **2005**    | ** **  | **2006**    | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|
| Senior Notes (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       | $           | 200,000,000 |        | $          | 200,000,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |        |        |       |
| Bank loans and  note payable:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |       |        |        |        |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |        |        |       |
| Loans  denominated in Dominican pesos equivalent to RD$162,400,000 at December 31,  2005 and 2006, equivalent to US$4,659,972 and $4,807,578 respectively. These  loans carried annual interest rates ranging from 36% to 40% per annum at December  31, 2005 and 2006 respectively;                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       | 4,659,972   |        | 4,807,578   |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |        |        |       |
| Loans with  variable annual interest between 4.90% and 9.33% at December 31, 2005 and  2006, respectively. These loans are payable in installments up to 2007. A  related party company secures these  loans.  Some of these loans include clauses with respect to non-compliance of  payments of installments of interest and principal, maintaining the levels of  assets and debts, among others. At December 31, 2003, the Company had not  complied with the debt contracts and, as a result, these loans may be called  on demand with the exception of the General Electric note. At December 31,  2005 and 2006, these loans were classified as current liabilities in the  consolidated balance sheet;                              |       | 59,216,917  |        | 58,390,805  |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |        |        |       |
| Loans which pay  interest at rates ranging between 9.5% and 15.50% per annum and at December  31, 2005 and 2006. These loans have maturities up to 2007. Some of the loans  are secured by liens on telecommunications equipment and a mortgage over Real  Estate (Tricom Duarte) with a book value of approximately $15.3 million at December  31, 2005. Some of these loans include clauses related to non-compliance with  the timely payment of interest and principal and maintaining a minimum of  assets and debts. At December 31, 2003, the Company was not in compliance  with debt contracts in an amount of $38,714,515. At December 2005 and 2006  these loans were classified as current liabilities on the consolidated  balance sheet. |       | 40,238,519  |        | 44,219,510  |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |        |        |       |
| Total bank loans and note payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       | 104,115,408 |        | 107,417,893 |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |        |        |       |
| Total long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       | 304,115,408 |        | 307,417,893 |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |        |        |       |
| Less current portion of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |       | 298,501,504 |        | 302,630,101 |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |        |        |       |
| Long-term debt  excluding current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |       | $           | 5,613,904   |        | $          | 4,787,792 |   |

 

F-28

----

----

(a)               SeniorNotes

On August 15, 1997, the Company issued $200,000,000aggregate principal amount of 11-3/8% Senior Notes due in 2004 (the “SeniorNotes”).  Interest on the Senior Notes ispayable in semi-annual installments on March 1 and September 1 of each year.

On September 2, 2003 the Company did not pay interestdue on the Senior Notes in the amount of $11.3 million. According to the termsgoverning the notes, the Company had a period of 30 additional days to complywith the payment of the interest, but on October 2, 2003 the Company announcedthat it would not be able to make the interest payment. The Company commenced adiscussion process with certain holders of the Senior Notes and othercreditors.

The Senior Notes are senior unsecured obligations ofthe Company ranking *pari passu* inright of payment with all other existing and future senior debt, and will ranksenior to any future subordinated indebtedness.

The indenture for the Senior Notes contains certaincovenants that, among other things, limit the ability of the Company and itsRestricted Subsidiaries, as defined in the indenture, to incur additionalindebtedness and issue preferred stock, pay dividends or make otherdistributions, repurchase equity interests or subordinated indebtedness, engagein sale and leaseback transactions, create certain liens, enter into certaintransactions with affiliates, sell assets of the Company or its RestrictedSubsidiaries, engage in any business other than the telecommunicationsbusiness, issue or sell equity interests of the Company’s RestrictedSubsidiaries or enter into certain mergers and consolidations.

The Senior Notes are guaranteed fully,unconditionally, jointly and severally by each of the Company’s RestrictedSubsidiaries, as defined in the indenture for the Senior Notes, each of whichis wholly owned by the Company.  Separatefinancial statements of each of the guarantor subsidiaries have not beenpresented herein because management has determined that such separate financialstatements would not be material to the holders of the Senior Notes.

Summarized condensed consolidated financialinformation of TRICOM, S.A. (Parent Company) and the subsidiary guarantors on acombined basis (GFN Comunicaciones, TRICOM Centro America, S.A., Call TelCorporation, TRICOM USA and Subsidiaries, TRICOM Latinoamérica, S.A., TRICOM,S.A. – Panama and TCN Dominicana, S.A.) at December 31, 2005 and 2006 and forthe years ended December 31, 2004, 2005 and 2006 is as follows (see Note 1):

F-29

----

**Balancesheet data at December 31, 2005:**
| **Assets**                   | ** ** | **TRICOM,   S.A. Parent   Co.** | ** **      | **Subsidiary   Guarantors** | ** ** | **Consolidating  Adjustments** | ** ** | **Total   Consolidated** | ** **      |
|------------------------------|------------|------------------------------------------------|-----------------|----------------------------------|------------|--------------------------------|------------|-------------------------------|-----------------|
|                         |       |                                           |            |                             |       |                           |       |                          |            |
| Current assets:              |       |                                           |            |                             |       |                           |       |                          |            |
| Cash on hand and in banks    |       | $                                              | 27,618,902      |                             | $          | 4,494,126                      |       | $                             | —          |   | $ | 32,113,028 |   |
| Accounts receivable, net     |       | 56,620,492                                     |            | 12,369,745                       |       | (48,613,077                    | )          | 20,377,160                    |            |
| Other current assets         |       | 9,423,049                                      |            | 1,779,803                        |       | —                         |       | 11,202,852                    |            |
| Total current assets         |       | 93,662,443                                     |            | 18,643,674                       |       | (48,613,077                    | )          | 63,693,040                    |            |
|                         |       |                                           |            |                             |       |                           |       |                          |            |
| Property and  equipment, net |       | 251,632,743                                    |            | 46,806,392                       |       | —                         |       | 298,439,135                   |            |
| Restricted Cash              |       | 263,630                                        |            | 106,748                          |       |                           |       | 370,378                       |            |
| Other  non-current assets    |       | 5,915,733                                      |            | 114,084                          |       | —                         |       | 6,029,817                     |            |
|                         |       |                                           |            |                             |       |                           |       |                          |            |
| Total assets                 | ** ** | **$**                                          | **351,474,549** | ** **                       | **$**      | **65,670,898**                 | ** ** | **$**                         | **(48,613,077** | **)** | **$** | **368,532,370** | ** ** |

 
| **Liabilities and   Stockholders’ Equity**                 | ** ** | **TRICOM,   S.A. Parent   Co.** | ** **      | **Subsidiary  Guarantors** | ** ** | **Consolidating   Adjustments** | ** ** | **Total  Consolidated** | ** **      |
|--------------------------------------------------------------------------------|------------|------------------------------------------------|-----------------|----------------------------|------------|--------------------------------------|------------|-------------------------|-----------------|
|                                                                           |       |                                           |            |                       |       |                                 |       |                    |            |
| Current  liabilities:                                                          |       |                                           |            |                       |       |                                 |       |                    |            |
| Borrowed funds – banks                                                    |       | $                                              | 40,974,312      |                       | $          | 7,891,498                            |       | $                       | —          |   | $ | 48,865,810 |   |
| Commercial paper and  current portion of long-term debt                   |       | 302,004,029                                    |            | 2,697,475                  |       | —                               |       | 304,701,504             |            |
| Commercial paper and current portion of long term-debt  – related parties |       | 73,805,794                                     |            | —                     |       | —                               |       | 73,805,794              |            |
| Current portion of capital leases                                              |       | 14,531,321                                     |            | —                     |       | —                               |       | 14,531,321              |            |
| Accounts payable                                                               |       | 25,857,832                                     |            | 49,203,785                 |       | (48,613,077                          | )          | 26,448,540              |            |
| Other current liabilities                                                      |       | 90,658,192                                     |            | 82,383,576                 |       | —                               |       | 173,041,768             |            |
|                                                                           |       |                                           |            |                       |       |                                 |       |                    |            |
| Total current liabilities                                                      |       | 547,831,480                                    |            | 142,176,334                |       | (48,613,077                          | )          | 641,394,737             |            |
|                                                                           |       |                                           |            |                       |       |                                 |       |                    |            |
| Other  non-current liabilities                                                 |       | 82,837,556                                     |            | 6,051,918                  |       | (82,557,354                          | )          | 6,332,120               |            |
|                                                                           |       |                                           |            |                       |       |                                 |       |                    |            |
| Total liabilities                                                              |       | 630,669,036                                    |            | 148,228,252                |       | (131,170,431                         | )          | 647,726,857             |            |
|                                                                           |       |                                           |            |                       |       |                                 |       |                    |            |
| Stockholders’  deficit                                                    |       | (279,194,487                                   | )               | (82,557,354                | )          | 82,557,354                           |       | (279,194,487            | )               |
|                                                                           |       |                                           |            |                       |       |                                 |       |                    |            |
| Total  liabilities and   stockholders’ equity                             | ** ** | **$**                                          | **351,474,549** | ** **                 | **$**      | **65,670,898**                       | ** ** | **$**                   | **(48,613,077** | **)** | **$** | **368,532,370** | ** ** |

 

F-30

----

**Balancesheet data at December 31, 2006:**
| **Assets**                  | ** ** | **TRICOM,   S.A. Parent   Co.** | ** **      | **Subsidiary   Guarantors** | ** ** | **Consolidating   Adjustments** | ** ** | **Total   Consolidated** | ** **      |
|-----------------------------|------------|------------------------------------------------|-----------------|----------------------------------|------------|--------------------------------------|------------|-------------------------------|-----------------|
|                        |       |                                           |            |                             |       |                                 |       |                          |            |
| Current assets:             |       |                                           |            |                             |       |                                 |       |                          |            |
| Cash on hand and in banks   |       | $                                              | 18,232,261      |                             | $          | 4,840,182                            |       | $                             | —          |   | $ | 23,072,443 |   |
| Accounts receivable, net    |       | 88,897,133                                     |            | 25,777,954                       |       | (87,711,566                          | )          | 26,963,521                    |            |
|                        |       |                                           |            |                             |       |                                 |       |                          |            |
| Other current assets        |       | 16,213,778                                     |            | 897,243                          |       | —                               |       | 17,111,021                    |            |
| Total current assets        |       | 123,343,172                                    |            | 31,515,379                       |       | (87,711,566                          | )          | 67,146,985                    |            |
|                        |       |                                           |            |                             |       |                                 |       |                          |            |
| Property and  equipment net |       | 232,300,001                                    |            | 42,060,932                       |       | —                               |       | 274,360,933                   |            |
| Restricted Cash             |       | 1,746,875                                      |            | 148,745                          |       |                                 |       | 1,895,620                     |            |
| Other  non-current assets   |       | 5,977,340                                      |            | 1,004,213                        |       | —                               |       | 6,981,553                     |            |
|                        |       |                                           |            |                             |       |                                 |       |                          |            |
| Total assets                | ** ** | **$**                                          | **363,367,388** | ** **                       | **$**      | **74,729,269**                       | ** ** | **$**                         | **(87,711,566** | **)** | **$** | **350,385,091** | ** ** |

 
| **Liabilities  and  Stockholders’ Equity**                                | ** ** | **TRICOM,   S.A. Parent  Co.** | ** **      | **Subsidiary   Guarantors** | ** ** | **Consolidating  Adjustments** | ** ** | **Total   Consolidated** | ** **      |
|--------------------------------------------------------------------------------|------------|--------------------------------|-----------------|-----------------------------|------------|--------------------------------|------------|--------------------------|-----------------|
|                                                                           |       |                           |            |                        |       |                           |       |                     |            |
| Current  liabilities:                                                          |       |                           |            |                        |       |                           |       |                     |            |
| Borrowed funds – banks                                                    |       | $                              | 40,725,289      |                        | $          | 8,337,710                      |       | $                        | —          |   | $ | 49,062,999 |   |
| Commercial paper and current portion of long term-debt                         |       | 318,201,769                    |            | 2,782,919                   |       | —                         |       | 320,984,688              |            |
| Commercial paper and current portion of long  term-debt – related parties |       | 57,792,694                     |            | —                      |       | —                         |       | 57,792,694               |            |
| capital leases                                                                 |       | 14,531,322                     |            | —                      |       | —                         |       | 14,531,322               |            |
| Accounts payable                                                               |       | 27,118,294                     |            | 60,495,708                  |       | (59,098,353                    | )          | 28,515,649               |            |
| Other current liabilities                                                      |       | 119,083,386                    |            | 121,811,090                 |       | —                         |       | 240,894,476              |            |
|                                                                           |       |                           |            |                        |       |                           |       |                     |            |
| Total current liabilities                                                      |       | 577,452,754                    |            | 193,427,427                 |       | (59,098,353                    | )          | 711,781,828              |            |
|                                                                           |       |                           |            |                        |       |                           |       |                     |            |
| Other non-current liabilities                                                  |       | 152,650,203                    |            | 4,782,663                   |       | (152,094,034                   | )          | 5,338,832                |            |
|                                                                           |       |                           |            |                        |       |                           |       |                     |            |
| Total liabilities                                                              |       | 730,102,957                    |            | 198,210,090                 |       | (211,192,387                   | )          | 717,120,660              |            |
|                                                                           |       |                           |            |                        |       |                           |       |                     |            |
| Stockholders’ deficit                                                     |       | (366,735,569                   | )               | (123,480,821                | )          | 123,480,821                    |       | (366,735,569             | )               |
|                                                                           |       |                           |            |                        |       |                           |       |                     |            |
| Total  liabilities and   stockholders’ equity                             | ** ** | **$**                          | **363,367,388** | ** **                  | **$**      | **74,729,269**                 | ** ** | **$**                    | **(87,711,566** | **)** | **$** | **350,385,091** | ** ** |

 

F-31

----

**Statements of operations for theyear ended December 31, 2004:**
| ** **                                           | ** ** | **TRICOM,   S.A. Parent   Co.** | ** **       | **Subsidiary   Guarantors** | ** ** | **Consolidating   Adjustments** | ** ** | **Total  Consolidated** | ** **     |
|------------------------------------------------------|------------|------------------------------------------------|------------------|----------------------------------|------------|--------------------------------------|------------|-------------------------|----------------|
|                                                 |       |                                           |             |                             |       |                                 |       |                    |           |
| Operating  revenues                                  |       | $                                              | 112,540,316      |                             | $          | 75,640,866                           |       | $                       | —         |   | $ | 188,181,182 |   |
|                                                 |       |                                           |             |                             |       |                                 |       |                    |           |
| Operating costs                                      |       | (141,051,483                                   | )                | (88,574,599                      | )          | —                               |       | (229,626,082            | )              |
| Operating loss from continuing operations            |       | (28,511,167                                    | )                | (12,933,733                      | )          | —                               |       | (41,444,900             | )              |
|                                                 |       |                                           |             |                             |       |                                 |       |                    |           |
| Other expenses,  net                                 |       | (73,642,929                                    | )                | (28,969,442                      | )          | 42,203,357                           |       | (60,409,014             | )              |
| Loss from  continuing operations before income taxes |       | (102,154,096                                   | )                | (41,903,175                      | )          | 42,203,357                           |       | (101,853,914            | )              |
|                                                 |       |                                           |             |                             |       |                                 |       |                    |           |
| Income taxes                                         |       | —                                         |             | (300,182                         | )          | —                               |       | (300,182                | )              |
|                                                 |       |                                           |             |                             |       |                                 |       |                    |           |
| Net loss                                             | ** ** | **$**                                          | **(102,154,096** | **)**                            | **$**      | **(42,203,357**                      | **)**      | **$**                   | **42,203,357** | ** ** | **$** | **(102,154,096** | **)** |

 

** **

**Statementsof operations for the year ended December 31, 2005:**
| ** **                                          | ** ** | **TRICOM,   S.A. Parent   Co.** | ** **      | **Subsidiary   Guarantors** | ** ** | **Consolidating   Adjustments** | ** ** | **Total  Consolidated** | ** **     |
|-----------------------------------------------------|------------|------------------------------------------------|-----------------|----------------------------------|------------|--------------------------------------|------------|-------------------------|----------------|
|                                                |       |                                           |            |                             |       |                                 |       |                    |           |
| Operating  revenues                                 |       | $                                              | 135,310,532     |                             | $          | 82,214,114                           |       | $                       | —         |   | $ | 217,524,646 |   |
|                                                |       |                                           |            |                             |       |                                 |       |                    |           |
| Operating costs                                     |       | (146,531,995                                   | )               | (88,662,562                      | )          | —                               |       | (235,194,557            | )              |
| Operating loss from continuing operations           |       | (11,221,463                                    | )               | (6,448,448                       | )          | —                               |       | (17,669,911             | )              |
|                                                |       |                                           |            |                             |       |                                 |       |                    |           |
| Other expenses,  net                                |       | (72,152,615                                    | )               | (42,447,946                      | )          | 48,078,546                           |       | (66,522,015             | )              |
| Loss from continuing operations before income taxes |       | (83,374,078                                    | )               | (48,896,394                      | )          | 48,078,546                           |       | (84,191,926             | )              |
|                                                |       |                                           |            |                             |       |                                 |       |                    |           |
| Income taxes                                        |       | —                                         |            | 817,848                          |       | —                               |       | 817,848                 |           |
|                                                |       |                                           |            |                             |       |                                 |       |                    |           |
| Net loss                                            | ** ** | **$**                                          | **(83,374,078** | **)**                            | **$**      | **(48,078,546**                      | **)**      | **$**                   | **48,078,546** | ** ** | **$** | **(83,374,078** | **)** |

 

F-32

----

**Statementsof operations for the year ended December 31, 2006:**
| ** **                                          | ** ** | **TRICOM,   S.A. Parent   Co.** | ** **  | **Subsidiary  Guarantors** | ** ** | **Consolidating   Adjustments** | ** ** | **Total   Consolidated** | ** **  |
|-----------------------------------------------------|------------|------------------------------------------------|-------------|----------------------------|------------|--------------------------------------|------------|-------------------------------|-------------|
|                                                |       |                                           |        |                       |       |                                 |       |                          |        |
| Operating  revenues                                 |       | $                                              | 173,516,690 |                       | $          | 83,958,604                           |       | $                             | (39,374,940 | ) | $ | 218,100,354 |   |
|                                                |       |                                           |        |                       |       |                                 |       |                          |        |
| Operating costs                                     |       | (191,890,540                                   | )           | (83,018,353                | )          | 39,374,940                           |       | (235,533,957                  | )           |
| Operating loss from continuing operations           |       | (18,373,850                                    | )           | 940,251                    |       | —                               |       | (17,433,599                   | )           |
|                                                |       |                                           |        |                       |       |                                 |       |                          |        |
| Other expenses,  net                                |       | (27,488,330                                    | )           | (40,763,450                | )          | —                               |       | (68,251,780                   | )           |
| Loss from continuing operations before income taxes |       | (45,862,180                                    | )           | (39,823,199                | )          | —                               |       | (85,685,379                   | )           |
|                                                |       |                                           |        |                       |       |                                 |       |                          |        |
| Income taxes                                        |       | (1,053,956                                     | )           | (801,749                   | )          | —                               |       | (1,855,705                    | )           |
|                                                |       |                                           |        |                       |       |                                 |       |                          |        |
| Net loss                                            |       | $                                              | (46,916,136 | )                          | $          | (40,624,948                          | )          | $                             | —      |   | $ | (87,541,084 | ) |

 

F-33

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**Statementof Cash flows for the year ended December 31, 2004:**
| ** **                                           | ** ** | **TRICOM,   S.A. Parent   Co.** | ** **    | **Subsidiary   Guarantors** | ** ** | **Consolidating   Adjustments** | ** ** | **Total  Consolidated** | ** ** |
|------------------------------------------------------|------------|------------------------------------------------|---------------|----------------------------------|------------|--------------------------------------|------------|-------------------------|------------|
|                                                 |       |                                           |          |                             |       |                                 |       |                    |       |
| Net cash  provided by (used in) operating activities |       | $                                              | 17,563,423    |                             | $          | 12,108,557                           |       | $                       | (7,461,165 | ) | $ | 22,210,815 |   |
| Net cash (used  in) provided by investing activities |       | (13,763,536                                    | )             | 3,330,496                        |       | 7,461,165                            |       | (2,971,875              | )          |
| Net cash used in  financing activities               |       | (2,842,369                                     | )             | (1,221,896                       | )          | —                               |       | (4,064,265              | )          |
| Net increase in cash on hand and in banks            |       | 957,518                                        |          | 14,217,157                       |       | —                               |       | 15,174,675              |       |
|                                                 |       |                                           |          |                             |       |                                 |       |                    |       |
| Cash on hand and  in banks at beginning of the year  |       | 71,493                                         |          | 2,246,523                        |       | 97,482                               |       | 2,415,498               |       |
|                                                 |       |                                           |          |                             |       |                                 |       |                    |       |
| Cash on hand and in  banks at the end of the year    | ** ** | **$**                                          | **1,029,011** | ** **                       | **$**      | **16,463,680**                       | ** ** | **$**                   | **97,482** | ** ** | **$** | **17,590,173** | ** ** |

 

** **

**Statementof Cash flows for the year ended December 31, 2005:**
| ** **                                           | ** ** | **Tricom, S.A.  Parent Co.** | ** **     | **Subsidiary   Guarantors** | ** ** | **Consolidating   Adjustments** | ** ** | **Total   Consolidated** | ** ** |
|------------------------------------------------------|------------|----------------------------------------|----------------|----------------------------------|------------|--------------------------------------|------------|-------------------------------|------------|
|                                                 |       |                                   |           |                             |       |                                 |       |                          |       |
| Net cash  provided by (used in) operating activities |       | $                                      | 59,265,034     |                             | $          | (16,052,864                          | )          | $                             | —     |   | $ | 43,212,170 |   |
| Net cash used in  investing activities               |       | (26,350,788                            | )              | (1,934,985                       | )          | —                               |       | (28,285,773                   | )          |
| Net cash (used  in) provided by financing activities |       | (6,431,104                             | )              | 6,027,562                        |       | —                               |       | (403,542                      | )          |
| Net increase (decrease) in cash on hand and in banks |       | 26,483,142                             |           | (11,960,287                      | )          | —                               |       | 14,522,855                    |       |
|                                                 |       |                                   |           |                             |       |                                 |       |                          |       |
| Cash on hand and  in banks at beginning of the year  |       | 1,029,011                              |           | 16,561,162                       |       | —                               |       | 17,590,173                    |       |
|                                                 |       |                                   |           |                             |       |                                 |       |                          |       |
| Cash on hand and in  banks at the end of the year    | ** ** | **$**                                  | **27,512,153** | ** **                       | **$**      | **4,600,875**                        |       | $                             | —     | ** ** | **$** | **32,113,028** | ** ** |

 

F-34

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**Statementof Cash flows for the year ended December 31, 2006:**
| ** **                                           | ** ** | **Tricom, S.A.  Parent Co.** | ** **     | **Subsidiary  Guarantors** | ** ** | **Consolidating   Adjustments** | ** ** | **Total   Consolidated** | ** ** |
|------------------------------------------------------|------------|----------------------------------------|----------------|----------------------------|------------|--------------------------------------|------------|-------------------------------|------------|
|                                                 |       |                                   |           |                       |       |                                 |       |                          |       |
| Net cash  provided by operating activities           |       | $                                      | 14,130,998     |                       | $          | 3,457,980                            |       | $                             | —     |   | $ | 17,588,978 |   |
| Net cash used in  investing activities               |       | (23,498,134                            | )              | (2,772,586                 | )          | —                               |       | (26,270,720                   | )          |
| New cash used in  financing activities               |       | (58,190                                | )              | (300,653                   | )          | —                               |       | (358,843                      | )          |
| Net (decrease) increase in cash on hand and in banks |       | (9,425,326                             | )              | 384,741                    |       | —                               |       | (9,040,585                    | )          |
|                                                 |       |                                   |           |                       |       |                                 |       |                          |       |
| Cash on hand and  in banks at beginning of the year  |       | 27,512,153                             |           | 4,600,875                  |       | —                               |       | 32,113,028                    |       |
|                                                 |       |                                   |           |                       |       |                                 |       |                          |       |
| Cash on hand and in  banks at the end of the year    | ** ** | **$**                                  | **18,086,827** | ** **                 | **$**      | **4,985,616**                        |       | $                             | —     | ** ** | **$** | **23,072,443** | ** ** |

 

# **14****              ****Stockholders’ Equity**

***Introduction.***

Theauthorized capital stock of the Company consists of 55,000,000 shares of ClassA common stock and 25,000,000 shares of Class B common stock.

Subjectto the matters described in Note 3 to the consolidated financial statementsincluded in the Company’s Annual Report on Form 20-F for the fiscal year endedDecember 31, 2004(the “2004 Financial Statements”) and under “December 2002Private Placement” below, all of the Company’s outstanding shares are dulyauthorized, validly issued and fully paid. Both classes of capital stock votetogether as a single class, except on any matter that would adversely affectthe rights of either class. The Class A common stock has one vote per share andthe Class B stock has ten votes per share. The economic rights of each class ofcapital stock are identical.

***December 2002 Private Placement.***

In December 2002 the Company completed the Placement(the “Placement”) of 21,212,121 shares of Class A Common Stock, as described inNote 3 to the 2004 Financial Statements. Various related parties were involved in the Placement as described inNotes 3 and 7 to the 2004 Financial Statements. In its letter requestinginitiation of the Special Committee’s (as defined in Note 3 to the 2004Financial Statement) investigation, the Company’s former independent auditor,the member firm of KPMG International in the Dominican Republic (“KPMG”),stated that the investigation should determine whether the Placement qualifiedto be recorded as equity on the Company’s consolidated balance sheet as atDecember 31, 2002.  The resolutionsappointing the Special Committee authorized it to, among other matters, conducta review of the Placement to determine facts reasonably necessary to allow theCompany and its advisors to determine the appropriate accounting treatment tobe given to the Placement. The Special Committee Report included a report byBDO Seidman LLP, a national public accounting firm (“BDO”) that, in summary,stated that varying conclusions as to whether the Company properly accountedfor the Placement can be reached 

F-35

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based on different hypothetical fact scenarios.  Under certain hypothetical fact scenarios,the accounting treatment of the Placement as equity would remain unchanged.

Under certain alternative hypothetical fact scenarios,BDO stated that the consolidated financial statements of the Company includedin its Annual Report on Form 20-F for the fiscal year ended  December 31, 2002 “should be restated toreflect the proceeds of the Placement as debt, or “mezzanine financing” (andnot as “permanent equity”) if (a) the Placement and/or the conduct of therelevant parties related to the Placement could be deemed fraudulent and/or anyapplicable laws or regulations (including applicable SEC laws and regulations)were violated  in connection with thePlacement and, (b) a court of competent jurisdiction, as a remedy in litigationinitiated by the SEC or a third party, has power to, and possibly could,  order and compel a rescission of thePlacement.  The Company’s management isnot at this time in a position to definitively determine which, if any, of BDO’shypothetical scenarios most closely resembles the circumstances surrounding thePlacement.  Determinations as to theconduct of the relevant parties involved in the Placement are inherently factintensive, and therefore uncertain, and in certain of the relevantjurisdictions it is unclear whether or not a rescission remedy would beavailable based on the facts currently known to the  Company’s management. Furthermore, theCompany has received advice from counsel representing its independentaccounting firm questioning whether certain of the accounting literature citedby BDO in support of its rescission analysis is applicable to the circumstancessurrounding the Placement.

Inlight of these uncertainties, and the limited records relating to the Placementavailable to it, the Company’s management has weighed the following factors,among others, in reaching a determination as to the appropriate accountingtreatment of the Placement.  On the onehand, the Company’s board minutes and stock books, the records of its transferagent, the Company’s internal accounting records, certain resolutions of theliquidator of Bancrédito Panama, the stated purpose of the investor financingprovided by Bancrédito Panama, and those records available to the Company’smanagement documenting the application of the proceeds of the Placement, allindicate that Class A common stock was issued in the Placement, supporting theCompany’s management’s belief that the intent behind, and the effect of, thetransaction was to increase stockholders’ equity.  These factors would tend to indicate that thePlacement should continue to qualify to be recorded as equity on the Company’sbalance sheet as of December 31, 2002. On the other hand, the incomplete nature of the records of thetransaction currently available to the Company’s  management, in particular the lack ofsubscription or similar documentation establishing a legal relationship betweenthe Company and the investors, incomplete and in some cases inconsistentrecords as to both the receipt and application by the Company of the proceedsof the Placement, the possible non-recourse nature of the financing provided tothe investors in the Placement, the involvement of related parties in providingthat financing, and suggestions that negotiation of the transactionssurrounding the Placement was not in all respects at arm’s length, raisequestions as to whether the Placement should continue to be recorded as equityin accordance with generally accepted accounting principles.  After weighing these factors, the Company’smanagement has concluded that, on balance, the Placement should continue toqualify to be recorded as equity on its consolidated balance sheet as atDecember 31, 2002, but acknowledges that this conclusion is not beyond disputeand may change if additional information becomes available that is inconsistentwith this treatment.

F-36

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# **15****              ****Income Taxes**

TRICOM, S.A. (Parent Company) and itssubsidiaries operate in several jurisdictions and under different tax regimes,of which the most relevant operations are located in the Dominican Republic,the United States of America and until February 2004, Panama.  Accordingly, each subsidiary must file incomeand other tax returns for its operations in these and other jurisdictions.  Because of the differences in the taxlegislation in each country, each of the individual subsidiaries must file separateincome tax returns instead of one return on a consolidated basis.

Therefore, the information about corporateincome tax expense for the years ended December 31, 2004, 2005 and 2006,respectively, represents the sum of the tax obligations of each of theconsolidated subsidiaries.

The components of the Company’s provision for(benefit from) income taxes are summarized as follows:
|                               | ** ** | **Current** | ** **     | **Deferred** | ** ** | **Total**    | ** ** |
|-------------------------------|------------|-------------|----------------|--------------|------------|--------------|------------|
|                          |       |        |           |         |       |         |       |
| Year ended  December 31, 2004 |       |        |           |         |       |         |       |
| U.S. Federal                  |       | $           | —         |         | $          | 470,666      |       | $ | 470,666 |   |
| Dominican Republic            |       | 134,978     |           | (305,462     | )          | (170,484     | )          |
|                          |       |        |           |         |       |         |       |
|                          | ** ** | **$**       | **134,978**    | ** **   | **$**      | **165,204**  | ** ** | **$** | **300,182** | ** ** |
|                          |       |        |           |         |       |         |       |
| Year ended  December 31, 2005 |       |        |           |         |       |         |       |
| U.S. Federal                  |       | $           | —         |         | $          | (817,848     | )          | $ | (817,848 | ) |
| Dominican Republic (a)        |       |        |           | —       |       | —       |       |
|                          |       |        |           |         |       |         |       |
|                          | ** ** | **$**       | **—**     | ** **   | **$**      | **(817,848** | **)**      | **$** | **(817,848** | **)** |
|                          |       |        |           |         |       |         |       |
| Year ended  December 31, 2006 |       |        |           |         |       |         |       |
| U.S. Federal                  |       | $           | —         |         | $          | (532,595     | )          | $ | (532,595 | ) |
| Dominican Republic (a)        |       | (1,323,110  | )              | —       |       | (1,323,110   | )          |
|                          |       |        |           |         |       |         |       |
|                          | ** ** | **$**       | **(1,323,110** | **)**        | **$**      | **(532,595** | **)**      | **$** | **(1,855,705** | **)** |

 

F-37

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The components ofdeferred tax assets and liabilities are as follows:
| ** **                                               | ** ** | **2004**     | ** **   | **2005**     | ** ** | **2006**     | ** ** |
|----------------------------------------------------------|------------|--------------|--------------|--------------|------------|--------------|------------|
| Deferred tax  assets                                     |       |         |         |         |       |         |       |
| Deferred revenues                                        |       | $            | 763,164      |         | $          | 1,436,260    |       | $ | 163,123 |   |
| Property, plant and equipment in the Dominican  Republic |       | 18,212,994   |         | 14,487,443   |       | 12,992,519   |       |
| Net operating loss                                       |       | 113,698,471  |         | 111,711,894  |       | 128,983,179  |       |
| Tax credit carryforward                                  |       | 96,369       |         | 96,369       |       | 96,369       |       |
| Gross deferred tax assets                                |       | 132,770,998  |         | 127,731,966  |       | 142,235,190  |       |
|                                                     |       |         |         |         |       |         |       |
| Valuation  allowance                                     |       | (132,007,834 | )            | (126,295,706 | )          | (137,974,184 | )          |
|                                                     |       |         |         |         |       |         |       |
| Deferred tax assets, net                                 |       | 763,164      |         | 1,436,260    |       | 4,261,006    |       |
|                                                     |       |         |         |         |       |         |       |
| Deferred tax  liabilities:                               |       |         |         |         |       |         |       |
| Property and equipment in USA                            |       | 661,795      |         | 433,895      |       | 4,089,598    |       |
| US IRC Sec. 481 adjustment                               |       | 386,871      |         | 470,018      |       | 171,657      |       |
| Gross deferred  tax liabilities                          |       | 1,048,666    |         | 903,913      |       | 4,261,255    |       |
|                                                     |       |         |         |         |       |         |       |
| Deferred tax,  net                                       | ** ** | **$**        | **(285,502** | **)**        | **$**      | **532,347**  | ** ** | **$** | **(249** | **)** |

 

(a)                                  AtDecember 31, 2004 and 2005 the applicable taxes of the companies in theDominican Republic were determined based on 25% of the net taxable income forthe years ended December 31, 2004 and 2005. As a result TRICOM S.A and TCNDominicana S.A were not required to pay taxes. At December 31, 2006 the taxrate applicable was 30% as per amendment to the law 11-92 and No.557-05effective since January 1, 2006. The amendment requires the Companies to paytaxes based on the greater of 1% of the total net assets (less investment inanother company stock, farm land and deferred taxes) or 30% of the net taxableincome.  As a result, TRICOM S.A. and TCNDominicana S.A. current tax is approximately RD$44,300,000 (equivalent to $1,323,110)for the year ended in December 31, 2006.

In assessing the reliability of deferred tax assets,management considers whether it is more likely than not that some portion orall of the deferred tax assets will not be realized. The ultimate realizationof deferred tax assets is dependent upon the generation of future taxableincome during the periods in which those temporary differences becomedeductible. Management considers the scheduled reversal of deferred taxliabilities, projected future taxable income, and tax planning strategies inmaking this assessment.

F-38

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At December 31, 2006, TRICOM U.S.A, the subsidiary in the United States has anunused net operating loss carry forward which for US income tax purpose may beused to offset future taxable income, if any, until 2026 and expires asfollows:

| Year      | ** ** | **Amount** | ** **      |
|-----------|------------|------------|-----------------|
|      |       |       |            |
| 2013      |       | $          | 561,115         |   |
| 2015      |       | 38,173     |            |
| 2021      |       | 1,337,981  |            |
| 2022      |       | 11,699,337 |            |
| 2023      |       | 15,227,395 |            |
| 2024      |       | 34,681,203 |            |
| 2025      |       | 41,566,837 |            |
| 2026      |       | 39,408,406 |            |
| **Total** | ** ** | **$**      | **144,520,447** | ** ** |

 

# **16****                      Commitmentsand Contingencies**

A summary of commitments and contingencies atDecember 31, 2005 and 2006 is as follows.

### ***(a)******                            Commitments.***

#### *(i)*                    TRICOM maintains contracts with foreignentities for the traffic of overseas calls. Such contracts require each entity to obtain the necessary facilities toestablish, maintain and operate its respective terminals.  The cost of each contract is based uponnegotiated rates, which are computed based on the amount of traffic eachmonth.  For the years ended December 31,2004, 2005 and 2006 this cost amounted to $4,883,018, $4,379,036 and $4,009,854respectively, and is included in the cost of sales and services in theaccompanying consolidated statements of operations.

#### *(ii)*                On May 8, 1997, the FederalCommunications Commission (FCC) issued an order to adopt the provisions of theTelecommunications Act of 1996 relating to the preservation and advancement ofuniversal telephone service (the “Universal Service Order”).  The Universal Service Order requires alltelecommunications carriers providing interstate telecommunications services tocontribute to universal service by contribution to a Order (the “UniversalService Order”).  Universal Service Ordercontributions were assessed based upon intrastate, interstate and internationalend-user gross telecommunications revenue effective January 1 through December31.

AtDecember 31, 2004, 2005 and 2006 the Company contributed $50,504, $44,816 and$32,985 respectively, to the “Universal Service Order” on end-usertelecommunications revenue of $594,498, $472,730 and $359,161 for the yearsthen ended, respectively. The contribution paid is included as part of selling,general and administrative expenses in the accompanying consolidated statementsof operations.

F-39

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#### *(iii)*              Thesubsidiary dedicated to cable television systems operations has contracts withtelevision and network companies around the world for the transmission ofprogramming content in the Dominican Republic. Such companies required monthly payments that range between $0.05 and$12.5 per subscriber in 2004, 2005 and 2006. The terms of these contracts fluctuate between two and three years andare renewable at the option of the parties. For the years ended December 31, 2004, 2005 and 2006 the total amount ofthese payments was $5,359,768, $2,423,657 and $5,793,153, respectively, whichis included as part of the cost of sale and services in the accompanyingconsolidated statements of operations.   The subsidiary had a trade agreement with Omnimedia S.A, a related partyto receive publicity service in exchange of television services (advertisingannouncements). Part of the agreement involves managing the international cableprogrammers. According to managementand the market practice, the cost of cable programmers is considered as aproduct and not as a service and therefore is not subject to the 25% income taxwithholding.

#### *(iv)*                The Company has employment agreements withcertain of its executive’s officers, the terms of which expire at January 14,2006.  Such agreements provide minimumsalary levels, as well as incentive bonuses that are payable if specifiedmanagement goals are reached.  Theaggregate commitment for future salaries at December 31, 2006, excludingbonuses, is approximately $2,323,979.

#### *(v)*                    The telecommunications law of the DominicanRepublic (Law 153-98) requires that companies operating in this sector pay tothe Instituto Dominicano de Telecomunicaciones (INDOTEL) a monthly feeequivalent to 2% of their international net income. For the years endedDecember 31, 2004, 2005 and 2006 this expense amounted to $462,165, $487,169and $563,840 respectively, which is included as part of selling, general andadministrative expenses in the accompanying consolidated  statements of operations.

#### *(vi)*                The Company has engaged several financialadvisory firms to assist in its financial restructuring process. Currently, theCompany has monthly commitments from retainer and advisory fees related to itsfinancial restructuring in the aggregate of approximately $700,000. Inaddition, the Company has contingencies in the aggregate of approximately$2,000,000 for success-based advisory compensation fees upon the completion ofthe Company’s restructuring process.

F-40

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#### *(vii)*            Thesubsidiary Tricom USA, Inc. has guaranteed for loans made to Tricom S.A., itsparent company.   Two guarantees are toThe International Bank of Miami as lender and Export-Import Bank of the UnitedStates for $36,002,530 on July 2000 and $20,000,000 on November 2000 respectively.The first is a five-year loan with an interest rate equal to the sum of LIBORfor the applicable period plus 2.25 percent per annum, the second has the sameinterest rate and the loan payment term could be from two to seven years.  The outstanding balance as of year-end is$40,481,013.  The third is a corporateguarantee to the Export Development of Canada for $1,122,000 on May 27, 2002with the rate of interest of LIBOR plus 4% per annum.  The loan term is 18 months to be paid in 5consecutive semi-annual installments commencing on September 30, 2002.  This loan is to be paid in threeinstallments, the last installment is due in June 30, 2004 and the interestrate is equal to the sum of Eurodollar rate and the applicable margin. SinceOctober 2003, TRICOM, S.A has made no interest or principal payments on any ofits debt. TRICOM, S.A., is negotiating with the lenders but at this time thereis no assurance that an agreement will occur.

### ***(b)******                           ******LeaseObligations.***

The Company maintains operating leases for the use ofoffice space, telecommunications centers, commercial offices, warehouse,automobiles and others.  These operatingleases are renewable at the end of the lease period, which is usually one year.Expenses for these leases in 2004, 2005 and 2006 amounted to approximately$922,371, $2,005,726 and $3,640,011 respectively, and are included in selling,general and administrative expenses in the consolidated statements ofoperations.  The commitment estimated forlease payments for the next four years is as follows:
| Year            | ** ** | **Amount** | ** ** |
|-----------------|------------|------------|------------|
|            |       |       |       |
| 2007            |       | $          | 2,970,000  |   |
| 2008            |       | 3,207,600  |       |
| 2009            |       | 3,464,000  |       |
| 2010 and beyond |       | 3,750,000  |       |
|                 |            |            |            |  |

 

F-41

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### ***(c)******        ******LegalProceedings.***

#### *(i)*        *Grupo Económico Suit*.In April 2004, a suit was brought by certain holders of certificates of depositand other instruments issued by certain affiliates of Bancrédito DominicanRepublic a banking institution formerly controlled by GFN, seeking to have theCompany and several co-defendants (including, among others, the Central Bank ofthe Dominican Republic, the Leon Bank and GFN) held jointly and severallyliable for amounts owed by such affiliates to the plaintiffs.  Although the Court of First Instance of SantoDomingo found in favor of the plaintiffs against certain of the defendants, italso found that neither the Company nor any of its subsidiaries were liable tothe plaintiffs.  The court upheld theterms of the tripartite contract under which the Leon family acquired Bancrédito,and rendered judgment against the parties to the tripartite contract in the $156,000,000,which was subsequently reduced (upon a motion filed by the same plaintiffs) bythe same judge to approximately $13,000,000. In an appeal filed by certain of the parties found liable by the Courtof First Instance, the original plaintiffs sought to join the Company and theother original co-defendants to the appeal proceedings.  In June 2007 the Appellate Court declined tojoin the Company or any of its subsidiaries to the appeal proceedings.  While it is possible that this decision maybe challenged by means of a motion for cassation before the Supreme Court ofthe Dominican Republic, the Company believes it is unlikely that it will befound liable in these proceedings.

*(ii)*  *Claim for Cost ofInterconnection Circuits.* During the period commencing with the enactment of the GeneralTelecommunications Law of 1998 and ending with Indotel’s issuance ofinterconnection regulations in 2002, the Company purchased from Codetel, at theCompany’s sole expense, several hundred T-1, or Trunk Level 1, switches.  These are digital transmission links that arenecessary for interconnection between the Company’s network and Codetel’snetwork.  In December 2002, as part ofthe process for the adjustment of interconnection agreements before Indotel,the Company claimed that Codetel should reimburse it for 50% of the cost of theT-1 switches it had purchased.  The approximateamount of the Company’s claim is $6.8 million. Indotel rejected the Company’s claim, and an appeal before the SuperiorAdministration Court is pending.

*(iii)*  *False ImprisonmentClaim. *In August 1999, aDominican company and two individual plaintiffs brought a claim against the Companyin the Dominican courts for alleged losses and damages of up to approximatelyRD$200,000,000 (approximately $4,800,000) resulting from the imprisonment byDominican authorities of the two individuals for 15 days.  The plaintiffs have alleged that theirimprisonment was the result of an investigation by the local district attorneyand police that the Company instigated following an irregular increase intelephone traffic at certain telephone numbers. The court rejected the action for lack of evidence.  The plaintiffs appealed, but the Court ofAppeals also rejected their claims, and they subsequently filed a motion forcassation with the Supreme Court of Justice, which is pending.  The Company does not believe that this matterwill have a material adverse effect on its operations or financial position.

*(iv)*  *Uninsured Motor VehicleCases. *Until 2003, theCompany’s principal property and casualty insurance carrier was CompaniaNacional de Seguros (“SEGNA”), at that time a related party.  In 2003 SEGNA’s business was taken over bythe Superintendence of Insurance, following which SEGNA stopped paying oncertain pending motor vehicle accident coverage claims involving the Company’svehicles.  Although the Company moved itsproperty and casualty coverage to 

F-42

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a third party insurancecarrier, it was necessary for the Company to assume direct liability for thepending claims.  The Company intends tosubmit a claim in SEGNA’s liquidation at the appropriate time.  The Company believes that the amount ofpotential liability likely to arise out of these claims will not exceedUS$1,000,000, and does not believe that these matters will have a materialadverse effect on its operations or financial position.

*(v)*  *Ordinary Course Tort andContract Claims. *The Companyis involved from time to time in various other lawsuits and legal proceedingsarising in the ordinary course of its business. These claims generally relate to tort and contract actions for damages.  The Company believes that the finalresolution of these matters will not have a material adverse effect on itsoperations or financial position.

*(vi)  World Access Inc. Bankruptcy. *In April 2003, Tricom USAwas served with a summons and complaint in an adversary proceeding arising outof the World Access, Inc. et al. bankruptcy case in the United StatesBankruptcy Court for the Northern District of Illinois.  The complaint alleged that transfers in theaggregate amount of approximately $488,000 were made to Tricom USA by one ofthe debtors, Facilicom International LLC, within the 90 days prior to thefiling of the bankruptcy petition, and that the transfers were avoidable aspreferential payments pursuant to the United States Bankruptcy Code.  An agreement in principle to settle thematter was reached in March 2007 under which the Company will undertake to pay $87,500to Facilicom International LLC.  Finaldocumentation of this settlement is pending.

Noamounts have been recorded in the accompanying financial statements related tothese legal proceedings.

### ***(d)******                  ******Dominican TaxMatters.***

In June 2002, the Companyreceived notice from the Dominican tax authority claiming that the Company wasrequired to withhold and pay 25% of the amount of its investment in TricomLatinoamérica, S.A.  The 25% withholdingtax generally applies for payments made for services rendered by non-Dominicanvendors and for certain dividends.  Thetax authority sought RD$168.1 million (approximately $9 million at 2002exchange rates), plus penalties and interest. The Company contested the claim, indicating that there is no requirementto withhold tax on an investment in a wholly owned subsidiary.  The Company’s motion before the tax authorityfailed and an appeal to the Ministry of Finance was rejected.  Following a subsequent appeal the Tax Court,in February 2007, ruled in the Company’s favor and rejected the tax authority’sclaim.  The tax authority decided not tofile a motion for cassation before the Supreme Court of the Dominican Republic.

In January 2006 theCompany was notified by the tax authority that it should correct its income taxreturn for the fiscal year ended December 31, 2004.  According to the tax authority, the returnsought to use prior period losses to reduce taxable income for the current yearin amounts in excess of those tax the tax authority considered were permissibleunder its interpretation of the applicable tax law.  In January 2006 the Company presented apetition to the tax authority requesting the elimination of this notification.

F-43

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In January 2007 theCompany made a written request to the tax authority seeking its authorizationfor the Company to use up to RD$9,480,000,000 (approximately $257,216,000) ofaccumulated losses to offset potential income arising from the cancellation ofdebt within the context of the Company’s restructuring. In March 2007 the taxauthority notified the Company that this authorization had been granted on the condition that any losses not used atDecember 31, 2007 will not be carryforward.

### ***(e)****** ******Potential ClaimsArising from 2002 Share Placement and Bancredit Cayman Chapter 15 Proceeding.***

Under SFAS 5 the Company is required to disclosecertain loss contingencies and to determine whether an accrual for theestimated loss arising out of such contingencies should be made in itsfinancial statements. This determination is made based on assessments as to thelikelihood that the future event will confirm the loss or liability inquestion.

The Company’s Annual Report on Form 20-F for the yearended December 31, 2004 and the consolidated financial statements included inthat report address the possibility of claims arising out of the purchase (the “Placement”)in December 2002 of shares of the Company’s Class A Common Stock by a group ofinvestors for an aggregate purchase price of approximately $70 million.  As of the filing date of this report, noclaims arising out of the events relating to the Placement have been assertedin any jurisdiction in any litigation or similar proceedings brought againstthe Company or its subsidiaries. Nevertheless, the Company has received indications that one or more ofthe liquidators of the Bancrédito entities in Panama and the Cayman Islandsbelieve that they have claims in connection with the Placement.  However, the Company is unable at the presenttime to determine either the probability of such claims being asserted againstit or the validity or amount of such claims if they are asserted.  The Joint Liquidators of Bancredit Caymanhave, in connection with a Chapter 15 Petition filed in the Bankruptcy Courtfor the Southern District of New York, served subpoenas on the Company andcertain of its subsidiaries seeking documents relating to the Placement.  In addition, the Company believes that it ispossible that other parties may assert claims arising out of thePlacement.  Claims brought on behalf ofthe Bancrédito entities and others could, in the aggregate, equal orsubstantially exceed the $70 million amount of the Placement, in particular ifthe claimants seek rescission of the Placement or certain relatedtransactions.  At this time the Companyis not able to determine with any certainty who might assert claims, theprecise nature of any claims that may be asserted, the jurisdiction in whichsuch claims may be brought, the theories on which such claims may be based, thevalidity of any such claims, whether viable defenses would be available to suchclaims and whether any judgment or award arising out of such claims would beenforceable against the Company or its subsidiaries’ assets.  Accordingly, while it is possible that theCompany will in the future need to establish loss contingencies relating to thePlacement for purposes of its financial statements, it does not believe thatthis is necessary at the present time. If such claims were brought and determined in a manner adverse to theCompany, its liquidity and financial resources would be adversely affected.

***(f)******    ConfirmationLetter and other correspondence from Liquidator of  Bancredit Cayman Limited.***

In response to a letter dated October 5, 2006 sent byTricom S.A. to the liquidator of Bancredit CaymanLimited requiringdocumentary support related to the 2002 Private Placement, Tricom S.A. receiveda response letter dated November 24, 2006 

F-44

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from the Bancredit CaymanLimited Liquidator purportingto have a claim against the Company of $70,000,000 in connection with the “Private Placement “and referencing as support for the claim resolution No.056-2004 issued by the Liquidator of Bancrédito Panama S.A., which establishesthat there were thirteen (13) loans issued to thirteen (13) different borrowerswho invested the total amount of the loans in Tricom S.A. class A commonshares.

The mentioned resolution of the liquidator of BancréditoPanama suggests that, $20,964,510 of the funds loaned to the investors in thePlacement were never turned over to Bancredit Cayman Limited and acknowledges aclaim for such amount owed by Bancrédito Panama to Bancredit Cayman Limited.Nevertheless,****there is not sufficient evidenceor documentation to support the $70,000,000 claim per the Bancredit CaymanLimited Liquidator or to justify a contingency accrual in the 2006 financialstatements. Under SFAS 5 (see Note 16 (e)) it is possible that the Company willin the future need to establish loss contingencies relating to the Placement,but, at this time the Company’s management does not believe that is necessary.

On June 25, 2007, the Board of Directors of theCompany received a letter from the Bancredit Cayman Limited Liquidator settingout certain allegations arising from the Placement and other matters.  Based on the lack of substantiation for theseallegations, the Company believes that they are without merit, although therecan be no assurance that a contingency for these matters will not need to beestablished in the future.

***(g)******            Potential ClaimsArising from Conaresa Leases.***

According to SFAS 5, if the conditions for the accrualof a loss contingency are not met but a loss is nevertheless consideredprobable or reasonably possible, financial statement disclosure of the losscontingency is required. The disclosure should contain a description of thenature of the loss contingency and the range of possible loss, or include astatement that an estimate of the loss cannot be made.

Between 1999 and 2001, the Company entered into aseries of capital leases with Compañia Nacional de Arrendamientos, S.A. (“Conaresa”),at that time a related party. The entity was sold to Banco Leon during 2003 ina transaction also involving the Central Bank of the Dominican Republic. Theselease agreements provide for the lease to the Company of telecommunicationsequipment, automobiles, and other fixed assets.

The installments payable under the above-mentionedlease agreements include lease rental payments and other expenses such as taxesand fees.  The lease agreements alsoprovide for the payment of penalty (moratorium) interest on overdue balances,to be calculated at a rate established by Conaresa.  No fixed or determinable rate is specified;rather, the amount and conditions of penalty interest can be unilaterally setby Conaresa.

In June 2005, the Company received a paymentopposition from GFN, freezing in the Company’s hands any payments or otheramounts owed by the Company to Conaresa, up to an amount of $38.7 million(RD$1.349 billion) (double the amount of GFN’s claim against Conaresa, as iscustomary in the case of payment oppositions under Dominican law).  When an entity receives a payment oppositionaddressed to one of its creditors, the entity in question must refrain frommaking any payments in violation of the payment opposition (as otherwise it maybecome liable for damages to the party who served the opposition) 

F-45

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until it is lifted by means of a court order or as a resultof a settlement between the conflicting parties.  In May 2007, the Company received two furthernotices under which (i) Artag Meridian Ltd., an entity related to GFN, advisedthat it had acquired GFN’s aforesaid claims; and (ii) the above-mentionedopposition against Conaresa was reiterated, this time by Artag Meridian, as GFN’sassignee.  In July 2007 the Company wasnotified that a court ruling had lifted these payment oppositions.  Subsequently, Artag Meridian appealed thecourt’s ruling and issued a new payment opposition seeking to freeze anypayments to Conaresa.

For the foregoing reasons, at this time the Company isprevented from making any payments to Conaresa. Furthermore, the Company has not established any accrual for penaltyinterest that might arise out of these lease agreements because it believesthat any claim based on the lease provision described above would be withoutmerit.  Nevertheless, there can be noassurance that any legal proceedings on this issue would be resolved in theCompany’s favor.  Accordingly, while itis possible that the Company may in the future need to establish a losscontingency relating to penalty interest arising out of these lease agreements,it does not believe that this is necessary at the present time.

# **17****                     ****Business and Credit Concentration**

In the normal course of business, the Companyhas accounts receivable from carriers. Although the Company’s exposure tocredit risk associated with non-payment by these carriers is affected byconditions or occurrences within the industry, most of these receivables aredue from large, well-established companies. The Company does not believe that this concentration of credit riskrepresents a material risk of loss.

# **18****                     ****Legal Reserve**

Article 58 of the Code of Commerce of theDominican Republic requires all companies to segregate at least 5% of their netearnings as a legal reserve until such reserve equals 10% of its paid-incapital as disclosed in the Consolidated Statements of stockholders’deficit.  This reserve is not availablefor distribution as dividend, except in case of the dissolution of thecorporation.

# **19****                     ****Stock Option Plan**

On May 4, 1998, the Company initiated aLong-term Incentive Plan (the Plan), in which certain employees could begranted options to purchase shares of the Company’s common stock.  The Plan is administered by the Board ofDirectors of the Company and has the authority to determine which employeeswill participate in the Plan.

The Plan authorizes grants of options topurchase up to 750,000 authorized Company shares. Stock options are grantedwith an exercise price equal to the stock’s fair market value at the date ofgrant.  All stock options have a term often-years and become exercisable after one and three years from the date ofgrant.

At December 31**,**2004,2005 and 2006 there were 500,870, 586,948 and 668,464 additional sharesavailable for grant under the Plan, respectively.

F-46

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Changes in the number of shares subject tooption are summarized as follows:
|                             | ** ** | **Options** | ** ** | **Weighted Average Exercise  Price** | ** ** |
|-----------------------------|------------|-------------|------------|------------------------------------------------|------------|
| Balance,  December 31, 2003 |       | 337,591     |       | $                                              | 7.00       |   |
| Surrendered                 |       | (88,461     | )          | 7.61                                           |       |
| Balance,  December 31, 2004 |       | 249,130     |       | 6.79                                           |       |
| Surrendered                 |       | (86,078     | )          | 7.00                                           |       |
| Balance,  December 31, 2005 |       | 163,052     |       | 6.68                                           |       |
| Surrendered                 |       | (81,516     | )          | 7.00                                           |       |
| Balance, December 31,  2006 |       | 81,536      |       | $                                              | 6.36       |   |

### In2001 the Board of Directors approved a stock option re-pricing pursuant towhich the Company’s employees could elect to cancel granted options in exchangefor new options with an exercise price of $7.00, which was the Company’s commonstock price on the New York Stock Exchange at the moment.  Approximately 520,000 options were eligiblefor re-pricing, of which the Company cancelled 453,130 options and granted 241,994options.

The number of re-priced options was also reducedproportionately. All other conditions were unchanged. Effective July 1, 2000,the FASB issued Financial Interpretation No. 44 (FIN 44) which amended APB 25and requires “variable” accounting for all stock option re-pricing grantedbefore six months of the cancelled date. As a result, these options will require variable accounting until theyare exercised, cancelled, forfeited or expired.

Under variable accounting, compensation expense must bemeasured by the difference between the exercise price and the market price ofthe Company’s stock at each reporting period amortized over the vesting period.The effect of the application of FIN 44 during 2003, 2004 and 2005 was notsignificant.

Exercise prices of options outstanding at December 31,2004,2005 and 2006 ranged from $3 to $16 per share. The following table provides certaininformation with respect to stock options outstanding at December 31, 2005 and2006:

** **
|                                    | ** ** | **2005  Options Outstanding** | ** ** | **Options Exercisable**           | ** ** |
|------------------------------------|------------|------------------------------------|------------|----------------------------------------|------------|
| **Range of  Exercise  Price** | ** ** | **Number   Outstanding**      | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining   Contractual  Life** | ** ** | **Weighted  Number  Exercisable** | ** ** | **Average  Exercise   Price** | ** ** |
|                               |       |                               |       |                                   |       |   |   |   |   |   |   |
| $3.00 - $5.00                      |       | 7,000                              |       | $                                      | 3.46       |   | 7.26 |   | 2,625 |   | $ | 3.46 |   |
| $5.01 - $7.00                      |       | 154,052                            |       | 6.70                                   |       | 6.14 |   | 48,629 |   | 6.65 |   |
| $7.01 - $9.00                      |       | —                             |       | —                                 |       | — |   | — |   | — |   |
| $9.01 - $16.00                     |       | 2,000                              |       | 16.00                                  |       | 6. 00 |   | 750 |   | 16.00 |   |
|                               | ** ** | **163,052**                        | ** ** | **$**                                  | **6.68**   | ** ** | **6.19** | ** ** | **52,004** | ** ** | **$** | **6.62** | ** ** |

 

F-47

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|                                    | ** ** | **2006  Options Outstanding** | ** ** | **Options Exercisable**           | ** ** |
|------------------------------------|------------|------------------------------------|------------|----------------------------------------|------------|
| **Range of  Exercise  Price** | ** ** | **Number  Outstanding**            | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining   Contractual   Life** | ** ** | **Weighted  Number   Exercisable** | ** ** | **Average  Exercise  Price** | ** ** |
|                               |       |                               |       |                                   |       |   |   |   |   |   |   |
| $3.00 - $5.00                      |       | 7,000                              |       | $                                      | 3.46       |   | 5.26 |   | 4,500 |   | $ | 3.46 |   |
| $5.01 - $7.00                      |       | 72,536                             |       | 6.37                                   |       | 4.84 |   | 48,096 |   | 6.37 |   |
| $7.01 - $9.00                      |       | —                             |       | —                                 |       | — |   | — |   | — |   |
| $9.01 - $16.00                     |       | 2,000                              |       | 16.00                                  |       | 4.00 |   | 1,500 |   | 16.00 |   |
|                               | ** ** | **81,536**                         | ** ** | **$**                                  | **6.36**   | ** ** | **4.86** | ** ** | **54,096** | ** ** | **$** | **6.40** | ** ** |

The weighted-average fair value at date ofgrant for options granted during, 2005 and 2006 were $0.0074 and $0.001,respectively and were estimated using the Black-Scholes option valuation modelwith the following weighted-average assumptions.
|                         | ** ** | **2005** | ** ** | **2006** | ** ** |
|-------------------------|------------|----------|------------|----------|------------|
|                    |       |     |       |     |       |
| Expected life in  years |       | 6.19     |       | 4.86     |       |
| Interest rate           |       | 4.29     | %          | 4.80     | %          |
| Volatility              |       | 100.00   |       | 100.00   |       |
| Expected dividends      |       | —   |       | —   |       |

Total unrecognized compensation costs relatedto non-vested stock option awards at December 31, 2006 is $9 and is expected tobe recognized over the weighted average period of approximately 4.6 years.

# **20****                     ****Segment Information**

The Company has adopted Financial AccountingStandards Board Statement No. 131, “Disclosures about Segment of an Enterpriseand Related Information”, which establishes standards for reporting informationabout a company’s operating segments.

The Company has divided its operations into sixreportable segments, which include five core business reportable segments basedupon similarities in revenue generation, cost recognition, marketing andmanagement of its businesses. The Company’s five core business reportablesegments are: Long Distance, Domestic Telephony, Mobile, Cable and Data andInternet. The Company’s six reportable segment corresponds to other revenuesthat are not generated from its core businesses.

The reporting segments follow the sameaccounting policies used for the Company’s consolidated financial statementsand described in the summary of significant accounting policies. Managementmeasures and evaluates reportable segments based on several factors, of whichrevenues and operating income (loss) are the primary financial measures.

F-48

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The segments and a description of each are asfollows:

·      Long distance, which represents international long distance trafficgeneration and termination services, including those derived from the Company’sU.S.-based wholesale carrier and prepaid calling card operations, as well asoutbound international and domestic long distance calls generated by theCompany’s retail call centers and prepaid cards sold within the DominicanRepublic;

·      Domestic telephony, which represents local exchange services in theDominican Republic;

·      Mobile, which represents wireless communication services in theDominican Republic, including cellular and PCS services and paging;

·      Cable, which represents cable television basic and expanded programmingservices and other related services, including advertising sales to nationaladvertisers on non-broadcast channels the Company carries over its cablecommunications systems;

·      Data and Internet, which represents high speed broadband datatransmission and Internet connectivity services, including traditional dial-upconnections, dedicated lines, private networks, frame relay, digital subscriberlines, or xDSLs; and

·      Other segments, which representsall of the Company’s non-core business revenues which includes paging revenues.

F-49

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**Geographic**
|                                                  | ** ** | **2004**               | ** **      |
|--------------------------------------------------|------------|------------------------|-----------------|
| ** **                                       | ** ** | **United States** | ** **      | **Dominican   Republic** | ** ** | **Elimination (a)** | ** ** | **Consolidated** | ** ** |
| ** **                                       | ** ** | ** **             | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Long distance                                    |       | $                      | 61,156,846      |   | $ | 33,503,473 |   | $ | (22,651,323 | ) | $ | 72,008,996 |   |
| Others                                           |       | 832,908                |            | 116,028,939 |   | (689,661 | ) | 116,172,186 |   |
| Total revenues  from external customers          | ** ** | **$**                  | **61,989,754**  | ** ** | **$** | **149,532,412** | ** ** | **$** | **(23,340,984** | **)** | **$** | **188,181,182** | ** ** |
|                                             |       |                   |            |   |   |   |   |   |   |
| Net loss before  income tax                      |       | $                      | (36,665,106     | ) | $ | (65,188,808 | ) | $ | — |   | $ | (101,853,914 | ) |
| Income tax                                       |       | (470,666               | )               | 170,484 |   | — |   | (300,182 | ) |
| Net loss                                         | ** ** | **$**                  | **(37,135,772** | **)** | **$** | **(65,018,324** | **)** | **$** | **—** | ** ** | **$** | **(102,154,096** | **)** |
| Identifiable  assets (include long-lived assets) | ** ** | **$**                  | **41,068,670**  | ** ** | **$** | **414,718,871** | ** ** | **$** | **(68,104,462** | **)** | **$** | **387,683,079** | ** ** |

** **
|                                                  | ** ** | **2005**               | ** **     |
|--------------------------------------------------|------------|------------------------|----------------|
| ** **                                       | ** ** | **United States** | ** **     | **Dominican  Republic** | ** ** | **Elimination (a)** | ** ** | **Consolidated** | ** ** |
|                                             |       |                   |           |   |   |   |   |   |   |
| Long distance                                    |       | $                      | 61, 917,543    |   | $ | 33,744,587 |   | $ | (25,041,660 | ) | $ | 70,620,470 |   |
| Others                                           |       | 992,148                |           | 146,406,223 |   | (494,195 | ) | 146,904,176 |   |
| Total revenues  from external customers          | ** ** | **$**                  | **62,909,691** | ** ** | **$** | **180,150,810** | ** ** | **$** | **(25,535,855** | **)** | **$** | **217,524,646** | ** ** |
|                                             |       |                   |           |   |   |   |   |   |   |
| Net loss before  income tax                      |       | $                      | (46,539,433    | ) | $ | (37,652,493 | ) | $ | — |   | $ | (84,191,926 | ) |
| Income tax                                       |       | 817,848                |           | — |   | — |   | 817,848 |   |
| Net loss                                         | ** ** | **$**                  | **45,721,585** | **)** | **$** | **(37,652,493** | **)** | **$** | **—** | ** ** | **$** | **(83,374,078** | **)** |
| Identifiable assets  (include long-lived assets) | ** ** | **$**                  | **29,244,099** | ** ** | **$** | **411,434,686** | ** ** | **$** | **(72,146,415** | **)** | **$** | **368,532,370** | ** ** |

 
|                                                  | ** ** | **2006**               | ** **      |
|--------------------------------------------------|------------|------------------------|-----------------|
| ** **                                       | ** ** | **United States** | ** **      | **Dominican   Republic** | ** ** | **Elimination (a)** | ** ** | **Consolidated** | ** ** |
|                                             |       |                   |            |   |   |   |   |   |   |
| Long distance                                    |       | $                      | 62,137,957      |   | $ | 38,612,963 |   | $ | — |   | $ | 70,282,210 |   |
| Others                                           |       | 1,638,527              |            | 146,628,418 |   | (448,800 | ) | 147,818,145 |   |
| Total revenues  from external customers          | ** ** | **$**                  | **63,776,484**  | ** ** | **$** | **185,241,381** |   | $ | (30,917,510 | ) | **$** | **218,100,355** | ** ** |
|                                             |       |                   |            |   |   |   |   |   |   |
| Net loss before  income tax                      |       | $                      | (40,874,274     | ) | $ | (44,811,103 | ) | $ | — |   | $ | (85,685,377 | ) |
| Income tax                                       |       | (532,595               | )               | (1,323,110 | ) | — |   | (1,855,705 | ) |
| Net loss                                         | ** ** | **$**                  | **(41,406,869** | **)** | **$** | **(46,134,213** | **)** | **$** | **—** | ** ** | **$** | **(87,541,082** | **)** |
| Identifiable assets  (include long-lived assets) | ** ** | **$**                  | **37,954,406**  | ** ** | **$** | **400,142,156** | ** ** | **$** | **(87,711,471** | **)** | **$** | **350,385,091** | ** ** |

 

(a)             Revenuesrepresent the elimination of the revenues between subsidiaries and theCompany.  Identifiable assets representeliminations of inter-company accounts and investments in common stock betweenTRICOM, S.A. (Parent Company) in the Dominican Republic and the subsidiaries inUnited States and Central America.

F-50

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**Products and Services**
| ** **                               | ** ** | **2004**               | ** **      |
|------------------------------------------|------------|------------------------|-----------------|
| ** **                               | ** ** | **Long Distance** | ** **      | **Domestic  Telephony** | ** ** | **Mobile** | ** ** | **Cable** | ** ** | **Data and  Internet** | ** ** | **Other (b)** | ** ** | **Consolidated** | ** ** |
|                                     |       |                   |            |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues from  external customers        |       | $                      | 72,008,996      |   | $ | 64,973,871 |   | $ | 32,123,985 |   | $ | 13,651,113 |   | $ | 5,354,729 |   | $ | 68,488 |   | $ | 188,181,182 |   |
| Intersegment  revenues                   |       | —                 |            | 3,527,942 |   | 2,252,883 |   | — |   | — |   | — |   | 5,780,825 |   |
| Total revenues                           |       | 72,008,996             |            | 68,501,813 |   | 34,376,868 |   | 13,651,113 |   | 5,354,729 |   | 68,488 |   | 193,962,007 |   |
| Reconciling items  intersegment revenues |       | —                 |            | (3,527,942 | ) | (2,252,883 | ) | — |   | — |   | — |   | (5,780,825 | ) |
| Total  consolidated revenues             | ** ** | **$**                  | **72,008,996**  | ** ** | **$** | **64,973,871** | ** ** | **$** | **32,123,985** | ** ** | **$** | **13,651,113** | ** ** | **$** | **5,354,729** | ** ** | **$** | **68,488** | ** ** | **$** | **188,181,182** | ** ** |
| Net (loss)  earnings before income tax   |       | $                      | (32,540,216     | ) | $ | (54,274,468 | ) | $ | (8,301,760 | ) | $ | (5,238,069 | ) | $ | (1,567,889 | ) | $ | 68,488 |   | $ | (101,853,914 | ) |
| Income tax                               |       | (470,666               | )               | — |   | — |   | 170,484 |   | — |   | — |   | (300,182 | ) |
| Net (loss)  earnings                     | ** ** | **$**                  | **(33,010,882** | **)** | **$** | **(54,274,468** | **)** | **$** | **(8,301,760** | **)** | **$** | **(5,067,585** | **)** | **$** | **(1,567,889** | **)** | **$** | **68,488** | ** ** | **$** | **(102,154,096** | **)** |
| Identifiable  assets                     | ** ** | **$**                  | **61,817,191**  | ** ** | **$** | **195,559,882** | ** ** | **$** | **30,383,936** | ** ** | **$** | **42,942,282** | ** ** | **$** | **1,797,649** | ** ** | **$** | **55,182,139** | ** ** | **$** | **387,683,079** | ** ** |
| Interest revenues                        | ** ** | **$**                  | **33,230**      | ** ** | **$** | **64,026** | ** ** | **$** | **39,524** | ** ** | **$** | **83,658** | ** ** | **$** | **2,338** |   | **$** | **—** | ** ** | **$** | **222,776** | ** ** |
| Interest expenses                        | ** ** | **$**                  | **(9,380,827**  | **)** | **$** | **(32,327,083** | **)** | **$** | **(15,728,096** | **)** | **$** | **(5,320,763** | **)** | **$** | **(941,053** | **)** | **$** | **—** | ** ** | **$** | **(63,697,822** | **)** |
| Depreciation  expense                    | ** ** | **$**                  | **(13,118,393** | **)** | **$** | **(46,227,019** | **)** | **$** | **(5,831,811** | **)** | **$** | **(8,111,033** | **)** | **$** | **(157,968** | **)** | **$** | **(1,580,156** | **)** | **$** | **(75,026,380** | **)** |
| Capital expenditure                      | ** ** | **$**                  | **298,169**     | ** ** | **$** | **6,441,058** | ** ** | **$** | **3,991,082** | ** ** | **$** | **717,291** | ** ** | **$** | **881,475** | ** ** | **$** | **948,190** | ** ** | **$** | **13,277,265** | ** ** |

 
| ** **                               | ** ** | **2005**               | ** **      |
|------------------------------------------|------------|------------------------|-----------------|
| ** **                               | ** ** | **Long Distance** | ** **      | **Domestic  Telephony** | ** ** | **Mobile** | ** ** | **Cable** | ** ** | **Data and  Internet** | ** ** | **Other (b)** | ** ** | **Consolidated** | ** ** |
|                                     |       |                   |            |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues from  external customers        |       | $                      | 70,620,470      |   | $ | 84,071,137 |   | $ | 35,485,447 |   | $ | 19,304,412 |   | $ | 7,952,623 |   | $ | 90,557 |   | $ | 217,524,646 |   |
| Intersegment  revenues                   |       | —                 |            | 3,849,016 |   | 2,659,182 |   | — |   | — |   | — |   | 6,508,197 |   |
| Total revenues                           |       | 70,620,470             |            | 87,920,153 |   | 38,144,629 |   | 19,304,412 |   | 7,952,623 |   | 90,557 |   | 224,032,843 |   |
| Reconciling items  intersegment revenues |       | —                 |            | (3,849,016 | ) | (2,659,182 | ) | — |   | — |   | — |   | (6,508,197 | ) |
| Total  consolidated revenues             | ** ** | **$**                  | **70,620,470**  | ** ** | **$** | **84,071,137** | ** ** | **$** | **35,485,447** | ** ** | **$** | **19,304,412** | ** ** | **$** | **7,952,623** | ** ** | **$** | **90,557** | ** ** | **$** | **217,524,646** | ** ** |
| Net (loss)  earnings before income tax   |       | $                      | (26,154,009     | ) | $ | (51,303,885 | ) | $ | (5,931,361 | ) | $ | (2,356,962 | ) | $ | 1,463,734 |   | $ | 90,557 |   | $ | (84,191,926 | ) |
| Income tax                               |       | 817,848                |            | — |   | — |   | — |   | — |   | — |   | (817,848 | ) |
| Net (loss)  earnings                     | ** ** | **$**                  | **(25,336,161** | **)** | **$** | **(51,303,885** | **)** | **$** | **(5,931,361** | **)** | **$** | **(2,356,962** | **)** | **$** | **1,463,734** | ** ** | **$** | **90,557** | ** ** | **$** | **(83,374,078** | **)** |
| Identifiable  assets                     | ** ** | **$**                  | **45,520,496**  | ** ** | **$** | **181,818,354** | ** ** | **$** | **34,221,999** | ** ** | **$** | **33,781,140** | ** ** | **$** | **2,436,099** | ** ** | **$** | **70,754,282** | ** ** | **$** | **368,532,370** | ** ** |
| Interest revenues                        | ** ** | **$**                  | **104,803**     | ** ** | **$** | **457,523** | ** ** | **$** | **65,522** | ** ** | **$** | **68,719** | ** ** | **$** | **1,479** |   | **$** | **—** | ** ** | **$** | **698,046** | ** ** |
| Interest expenses                        | ** ** | **$**                  | **(18,226,825** | **)** | **$** | **(44,170,647** | **)** | **$** | **(6,708,543** | **)** | **$** | **(295,704** | **)** | **$** | **(159,419** | **)** | **$** | **—** | ** ** | **$** | **(69,561,138** | **)** |
| Depreciation  expense                    | ** ** | **$**                  | **(8,499,413**  | **)** | **$** | **(37,801,565** | **)** | **$** | **(6,892,403** | **)** | **$** | **(8,015,984** | **)** | **$** | **(403,037** | **)** | **$** | **(211,542** | **)** | **$** | **(61,823,944** | **)** |
| Capital expenditure                      | ** ** | **$**                  | **1,608,404**   | ** ** | **$** | **10,859,830** | ** ** | **$** | **9,160,876** | ** ** | **$** | **1,623,548** | ** ** | **$** | **1,285,049** | ** ** | **$** | **4,086,449** | ** ** | **$** | **28,624,156** | ** ** |

 

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| ** **                               | ** ** | **2006**               | ** **        |
|------------------------------------------|------------|------------------------|-------------------|
| ** **                               | ** ** | **Long Distance** | ** **        | **Domestic   Telephony** | ** ** | **Mobile** | ** ** | **Cable** | ** ** | **Data and   Internet** | ** ** | **Other (b)** | ** ** | **Consolidated** | ** ** |
|                                     |       |                   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues from external  customers        |       | $                      | 70,282,210        |   | $ | 82,241,727 |   | $ | 36,283,216 |   | $ | 20,177,219 |   | $ | 8,928,557 |   | $ | 187,426 |   | $ | 218,100,355 |   |
| Intersegment revenues                    |       | —                 |              | 4,907,854 |   | 3,549,581 |   | — |   | — |   | — |   | 8,457,435 |   |
| Total revenues                           |       | 70,282,210             |              | 87,149,581 |   | 39,832,797 |   | 20,177,219 |   | 8,928,557 |   | 187,426 |   | 226,557,790 |   |
| Reconciling items  intersegment revenues |       | —                 |              | (4,907,854 | ) | (3,549,581 | ) | — |   | — |   | — |   | (8,457,435 | ) |
| Total consolidated  revenues             | ** ** | **$**                  | **70,282,210**    | ** ** | **$** | **82,241,727** | ** ** | **$** | **36,283,216** | ** ** | **$** | **20,177,219** | ** ** | **$** | **8,928,557** |   | $ | 187,426 | ** ** | **$** | **218,100,355** | ** ** |
| Net earnings (loss)  before income tax,  |       | $                      | (19,329,958       | ) | $ | (55,924,698 | ) | $ | (12,782,485 | ) | $ | 1,051,077 |   | $ | 1,113,261 |   | $ | 187,426 |   | $ | (85,685,377 | ) |
| Income tax                               |       | (679,576               | )                 | (770,109 | ) | (128,000 | ) | (269,154 | ) | (8,866 | ) | — |   | (1,855,705 | ) |
| Net earnings (loss)                      | ** ** | **$**                  | **(20,009534**    | **)** | **$** | **(56,694,807** | **)** | **$** | **(12,910,485** | **)** | **$** | **781,923** | ** ** | **$** | **1,104,395** | ** ** | **$** | **187,426** | ** ** | **$** | **(87,541,082** | **)** |
| Identifiable assets                      | ** ** | **$**                  | **6,696,821**     | ** ** | **$** | **168,005,990** | ** ** | **$** | **36,877,687** | ** ** | **$** | **37,131,379** | ** ** | **$** | **2,799,306** | ** ** | **$** | **48,873,908** | ** ** | **$** | **350,385,091** | ** ** |
| Interest revenues                        | ** ** | **$**                  | **23,117**        | ** ** | **$** | **674,588** | ** ** | **$** | **107,570** | ** ** | **$** | **47,116** | ** ** | **$** | **3,911** | ** ** | **$** | **—** | ** ** | **$** | **956,302** | ** ** |
| Interest expenses                        | ** ** | **$**                  | **(9  ,737,216)** | ** ** | **$** | **(51,018,143** | **)** | **$** | **(8,479,735** | **)** | **$** | **(302,724** | **)** | **$** | **(284,597** | **)** | **$** | **—** | ** ** | **$** | **(69,822,415** | **)** |
| Depreciation expense                     | ** ** | **$**                  | **(6,117,856**    | **)** | **$** | **(32,086,672** | **)** | **$** | **(6,155,010** | **)** | **$** | **(4,389,266** | **)** | **$** | **(144,101** | **)** | **$** | **—** | ** ** | **$** | **(48,892,905** | **)** |
| Capital expenditure                      | ** ** | **$**                  | **530,534**       | ** ** | **$** | **12,987,621** | ** ** | **$** | **6,330,973** | ** ** | **$** | **2,592,007** | ** ** | **$** | **566,191** | ** ** | **$** | **3,220,678** | ** ** | **$** | **26,228,003** | ** ** |

### (b)                   Other identifiable assets includeadministrative/corporate assets which are not revenue generating.  Also includes construction in process andcommunication equipment pending installation, which at December 31, had notbeen placed in service and were not specifically associated with any businesssegment. Other remaining assets do not meet any quantifiable test fordetermining reportable segments.

# **21****                     ****Recent Accounting Pronouncements**

In May 2005, the FASBissued SFAS No. 154, *Accounting Changes andErrors Corrections*. This Statement replaces APB Opinion No. 20,Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes inInterim Financial Statements, and changes the requirements for the accountingfor and reporting of a change in accounting principle. Opinion 20 previouslyrequired that most voluntary changes in accounting principle be recognized byincluding in net income of the period of the change the cumulative effect ofchanging to the new accounting principle. This Statement applies to allvoluntary changes in accounting principle. It also applies to changes requiredby an accounting pronouncement in the unusual instance that the pronouncementdoes not include specific transition provisions. When a pronouncement includesspecific transition provisions, those provisions should be followed. ThisStatement improves financial reporting because its requirement to reportvoluntary changes in accounting principles via retrospective application,unless impracticable, enhances the consistency of financial information betweenperiods. That improved consistency enhances the usefulness of the financialinformation, especially by facilitating analysis and understanding ofcomparative accounting data. See note 2.23 for the effect of this Statement onthe Conpany’s consolidated financial statements.

In June 2006, the FASB issued Interpretation No. 48 *Accounting for Uncertainty in Income Taxes*, or FIN 48, aninterpretation of SFAS No. 109, Accounting for Income Taxes. Fin 48 clarifiesthe accounting for uncertainty in income taxes recognized in an enterprise’sfinancial statements in accordance with SFAS No.109, and prescribes arecognition threshold and measurement 

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attribute for the financial statement recognition andmeasurement of tax position taken or expected to be taken in a tax return. FIN48 also provides guidance on derecognition, classification interest andpenalties accounting in interim periods, disclosure and transition. FIN 48 iseffective for fiscal years beginning after December 15, 2006. The cumulativeeffect of adopting FIN 48 generally will be recorded directly to retainedearnings. However, to the extent the adoption of FIN 48 results in arevaluation of uncertain tax positions acquired in purchase businesscombinations, the cumulative effect will be recorded as an adjustment to anygoodwill remaining from the corresponding purchase business combination. Thecompany is evaluating the impact of adopting FIN 48 on its consolidatedfinancial statements.

In June 2006, the EITF reached a consensus on IssueNo. 06-3*How Taxes Collected from Customers and Remitted toGovernmental Authorities Should Be Presented in the Income Statement (That Is,Gross Versus Net Presentation)*. EITF Issue No. 06 — 3 requires thatcompanies disclose their accounting policy regarding the gross or netpresentation of certain taxes. Taxes within the scope of EITF Issue No. 06-3are any tax assessed by a governmental authority that is directly imposed on arevenue producing transaction between a seller and a customer and may include,but is not limited to sales, use value added and some excise taxes.  EITF Issue No. 06-3 is effective for fiscalyears beginning after December 15, 2006. The adoption of EITF No. 06-3 is notexpected to have a material effect on the Company’s consolidated financialstatements.

In September 2006, the EITF reached a consensus onIssue No. 06-1, *Accounting for Consideration Given by aService Provider to Manufacturers or Resellers of Equipment Necessary for anEnd-Customer to Receive Service from the Service Provider*. EITFIssue No. 06-1 provides guidance regarding whether the consideration given by aservice provider to a manufacturer or reseller specialized equipment should becharacterized as a reduction of revenue or an expense. Entities are required torecognize the effects of applying this issue as a change in accountingprinciple through retrospective application to all prior periods unless it isimpracticable to do so. This issue is effective for fiscal year beginning afterJune 15, 2007. The adoption of EITF No. 06-1 is not expected to have a material effect on the Company’s consolidatedfinancial statements.

In September 2006, the FASB issued SFAS No. 157, *Fair value Measurements*.This statement defines fair value and establishes a framework for measuringfair value. Additionally, this statement expands disclosure requirements forfair value with a particular focus on measurement inputs. SFAS No. 157 iseffective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years.The adoption of SFAS No. 157 is not expected to have a material effect on the Company’s consolidated financialstatements.

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# **22****                     ****Fair value of Financial Instruments**

The following table presents the carryingamount and estimated fair values of the Company’s financial instruments atDecember 31, 2005 and 2006. The fair value of a financial instrument is theamount at which the instrument could be exchanged in a current transactionbetween willing parties. Amounts in parentheses represent liabilities.

|                                                    | ** ** | **2005**                   | ** ** | **2006**            | ** ** |
|----------------------------------------------------|------------|----------------------------|------------|---------------------|------------|
| ** **                                         | ** ** | **Carrying   Amount** | ** ** | **Fair Value** | ** ** | **Carrying   Amount** | ** ** | **Fair Value** | ** ** |
|                                               |       |                       |       |                |       |   |   |   |   |
| Cash and cash  equivalents                         |       | $                          | 32,113,028 |                | $          | 32,113,028 |   | $ | 23,072,443 |   | $ | 23,072,443 |   |
|                                               |       |                       |       |                |       |   |   |   |   |
| Accounts  receivable, net                          |       | 20,377,160                 |       | 20,377,160          |       | 26,963,521 |   | 26,963,521 |   |
| Certificates of  deposit and other investment      |       | 647,692                    |       | 647,692             |       | 690,410 |   | 690,410 |   |
| Restricted cash                                    |       | 370,378                    |       | 370,378             |       | 1,895,620 |   | 1,895,620 |   |
| Borrowed funds –  banks                       |       | (48,865,810                | )          | (48,865,810         | )          | (49,062,999 | ) | (49,062,999 | ) |
| Accounts payable                                   |       | (26,448,540                | )          | (26,448,540         | )          | (28,515,648 | ) | (28,515,648 | ) |
| Interest payable  to banks and related parties     |       | (153,626,252               | )          | (153,626,252        | )          | (218,859,510 | ) | (218,859,510 | ) |
| Other  liabilities and deferred revenues           |       | (7,710,376                 | )          | (7,710,376          | )          | (4,457,358 | ) | (4,457,358 | ) |
| Accrued expenses                                   |       | (11,705,140                | )          | (11,705,140         | )          | (17,569,074 | ) | (17,569,074 | ) |
| Commercial paper  – banks and related parties |       | (54,648,922                | )          | (54,648,922         | )          | (54,684,079 | ) | (54,684,079 | ) |
| Capital leases                                     |       | (14,531,321                | )          | (14,531,321         | )          | (14,531,322 | ) | (14,531,322 | ) |
| Long-term debt –  banks and related parties   |       | (129,472,280               | )          | (129,472,280        | )          | (128,881,096 | ) | (128,881,096 | ) |
| Long-term debt – senior  notes                |       | (200,000,000               | )          | (110,000,000        | )          | (200,000,000 | ) | (110,000,000 | ) |
|                                                    |            |                            |            |                     |            |  |  |  |  |  |  |  |  |

The following methods and assumptions were used toestimate the fair value of each class of financial instruments.

Cash on hand and in banks, restricted cash,investments in certificates of deposit and other investment, notes payable tobanks and related parties, accounts payable, other liabilities in 2005 and2006, the carrying amounts approximate fair value because of the short maturityof these instruments.  Accountsreceivable are adjusted by their valuation allowance and, therefore, arepresented at realizable value that approximates fair value.

The fair value of the value of the Company’spublicly traded 11-3/8% Senior Notes, shown above, are based on quoted marketprices. The fair values of the Company’s non-traded debt in 2005 and 2006, alsoshown above, were estimated by discounting the future cash flows of eachinstrument at rates offered to the Company for similar debt instruments by theCompany’s bankers at that time.

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At December 31, 2006, the Company was engagedin discussions with its principal lenders in an effort to effect arestructuring of its indebtedness These discussions and negotiations focusedon, among other things, the level of debt to be issued by the Company to itscreditors and rates of interest, the amount and structure of any equity-linkedinstrument to be issued to lenders and the extent, if any, to which any part ofthe new debt obligations would be collateralized.

Because the Company’s restructuring plansremain subject to significant uncertainties and no funding sources areavailable until the restructuring process is concluded, the management believesthat it is not practicable at December 31, 2006 to estimate reasonably the fairvalues of interest payable, accrued expenses (provision of terminatingoperating lease) non-traded debts, including amounts owed to banks and relatedparties, commercial paper, capital leases, and long-term debt to banks andrelated parties.** **AtDecember 31, 2006 the detail of these amounts are as follow:
| Description                                      | ** ** | **Carrying Amount** | ** **   | **Interest Rate** | ** **    | **Maturity** | ** ** |
|--------------------------------------------------|------------|--------------------------|--------------|------------------------|---------------|--------------|------------|
|                                             |       |                     |         |                   |          |         |       |
| Interest payable                                 |       | $                        | (218,859,510 | )                      | —        |         | Demand     |   |
| Accrued expenses                                 |       | $                        | (17,569,074  | )                      | —        |         | Demand     |   |
| Commercial paper                                 |       | $                        | (54,684,079  | )                      | 8.5% - 26%    |         | Demand     |   |
| Capital leases                                   |       | $                        | (14,531,322  | )                      | 12% - 12.875% |         | Demand     |   |
| Long-term debt – banks  and related parties |       | $                        | (128,881,096 | )                      | 3.8%-40%      |         | Demand     |   |
| Long-term debt – senior  note               |       | $                        | (200,000,000 | )                      | 11.375%       |         | Demand     |   |

 

# **23****                     ****Impairment of Long-Lived Assets**

According to the requirement of SFAS No. 142 “Goodwilland Other Intangible Assets” and SFAS No. 144 “Accounting for the Impairment orDisposal of Long-Lived Assets”, the Company performed its annual impairmentreview of its long-lived assets, intangible assets and goodwill. It wasdetermined that no impairment charges were necessary for the years endedDecember 31, 2004, 2005, and 2006, respectively.

The Company’s management reviews the estimated usefullives of its fixed assets. This review during 2003 indicated those actual livesfor certain asset categories generally were longer than the useful lives usedfor depreciation purposes in the Company’s financial statements. As a result,the Company revised the estimated useful lives of certain categories ofproperty, principally building, improvements, communication, office,production, transmission equipments, hardware and other. The effect of thischange during 2004 increased accumulated depreciation by $17.4 millionapproximately.

The change in estimates of the useful lives of fixedassets was based on comparison of the Company’s useful lives with othercompanies’ useful lives of certain machinery and equipment. The Company madethese changes to better reflect the estimated periods during which such assetswill remain in service.

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# **24****                     ****De-listing of American DepositaryShares and Termination of Deposit Facility**

On May 11, 2004, the New York Stock Exchange (“NYSE”) determined tosuspend trading and pursue delisting of our ADSs, ticket symbol “TDR”.  On May 19, 2004, our ADSs, began trading onthe OTC (over-the-counter) Bulletin Board (“OTCBB”), under the symbol “TRICY.OB”.  On July 25, 2004, the OTCBBsuspended trading of our ADSs. Thereafter, our ADSs were traded on the “PinkSheets” service under the symbol “TRICY.PK”. In December 22, 2006, the Bank ofNew York, the depositary for our ADS facility, notified us and holders of ourADSs, that it was terminating the ADS facility. Upon termination of the ADSfacility, most of depositary’s obligations under the Deposit Agreement alsoterminate. Holders of our ADSs may obtain delivery of the shares of Class ACommon Stock underlying our ADSs, upon payment of certain taxes and processingfees. As a result of the termination, the Bank of New York is no longerobligated to perform any functions in connection with voting the Class A CommonStock underlying our ADSs. With the termination of the ADS facility, our ADSs,ceased trading on the “Pink Sheets” service on March 28, 2007.

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