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                                                                  EXHIBIT 10.23







                         COLLECTIVE BARGAINING AGREEMENT


                                   BETWEEN THE


                          PUERTO RICO TELEPHONE COMPANY


                                     AND THE


                              INDEPENDENT UNION OF


                       TELEPHONE EMPLOYEES OF PUERTO RICO











                                 EFFECTIVENESS:

                              FROM JANUARY 18, 2000
                             UNTIL JANUARY 17, 2003




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                                    ARTICLE 1
                            RECOGNITION OF THE UNION

SECTION 1

         The Company recognizes the Union as the exclusive representative for
all the employees included in the bargaining unit, such as it is defined in
Article 2 (Bargaining Unit) for purposes of the Collective Bargaining Agreement
with regard to the rates of compensation, salaries, work hours, employment
tenure, grievances and other employment conditions.

SECTION 2

         For purposes of this Collective Bargaining Agreement, the terms
"worker" and "employee" shall be interchangeable, reason why they will be
utilized alternatively in singular as well as in plural.

                                    ARTICLE 2
                       APPROPRIATE UNIT (BARGAINING UNIT)

SECTION 1

         The employees covered by this Collective Bargaining Agreement
henceforth referred to as the "Employees", shall be all the non-supervisor
employees, including all the regular employees, the temporary ones, Messengers
or Mail Office Clerks (certified by the National Board in case number 24-RC-4380
of August 9, 1971) and all those positions which have been included in the
Appropriate Unit by the Labor Relations Board from that date onwards; and all
the employees included in the Certification of the Labor Relations Board (case
number P-96-1D-96-1257) dated July 10, 1996: Administrative Office Clerks,
Administrative Assistants, Executive Receptionists, Document Filing Clerk,
Document Assistant, Phone Card Office Clerk, Coordinator of Materials, Verifier
of Invoices, Librarian for the Data Center and Transportation Analysts.
Excluding all the Executives, Officers, Administrators, Supervisors, Department
Directors, Managers, Heads of Divisions, Sections, Zones, Districts and
Geographical Sub-Divisions, Security Guards, Employees from other Appropriate
Units, all personnel with capacity to hire, fire, promote, discipline or in
another manner vary the status of employees or make recommendations to that
effect, office employees intimately linked to the management, employees of
trust, including Secretaries for the Officers, Executives, Administrators,
Department Directors, Managers, all the employees from the Department from Labor
and Employee Affairs, Salesmen on a Commission basis, Payroll Office Clerk,
Employees from the Department of Client Affairs, Executive Receptionists from
the Office of the President, Administrative Office Clerks from the Office of the
Vice-President of Operations, Administrative Assistants from the Office of the
Vice-President for Network Planning and Engineering, from the Office of the
Vice-President for Business Services, from the Office of Treasury Operations,
from the Department for Corporate Security and any other positions which
functions imply responsibilities equal to those of positions which are excluded
in the Bargaining Unit and the Supervisors according to how they are defined by
the Law.

SECTION 2

         The titles mentioned above shall not limit the exclusion in the future
of positions which functions imply responsibilities equal to those excluded
above, including the ones that have the functions of a confidential nature
(positions of trust), in accordance to how these have been defined under the
labor jurisprudence.

SECTION 3

         The Company shall send the Union, on or before the following sixty (60)
days of each year that this Collective Bargaining Agreement is in effect, a
listing of all the positions by levels, included in this Bargaining Unit, with
the names of the ones holding the positions, entry dates, postal address and
their present salary.

                                    ARTICLE 3
                            RIGHTS OF THE MANAGEMENT

SECTION 1

         The Union recognizes that the administration of the Company and
direction of the working force are the exclusive prerogative of the Company.
Therefore, except as expressly limited by the terms of this Collective
Bargaining Agreement, the Company retains and shall retain the exclusive control
of all the matters concerning the operation, handling and administration of its
business, including, but without having this being interpreted as a limitation,
the administration and handling of its departments and operations, the work
organization and methods, the processes, methods and procedures for the
rendering of service, the determination of the equipment, parts and services to
be purchased, the assignment of working hours, the direction of the personnel,
the right to employ, classify, re-classify, transfer and discipline employees,
and all the functions inherent to the administration and/or handling of the
business.





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SECTION 2

         If it is the understanding of any employee that he has been treated in
a discriminatory, arbitrary or unfair fashion in accordance to the terms of this
contract or any provision of this contract has been violated by any action taken
by the Company by virtue of the preceding section, such allegation shall be
submitted by the Union or by the employee to the Grievance Procedure established
in this Agreement.

                                    ARTICLE 4
                                   UNION SHOP

SECTION 1

         All employees who are covered by this Agreement who as of the date of
the signing of the same are a member of the Union, shall be obligated as a
condition of employment to continue as members of the Union and, in the case of
new personnel, these shall be obligated as a condition of employment to join the
Union within the thirty (30) days following their working for the Company and in
both cases, to pay dues to the Union during the effective period of this
Agreement.

SECTION 2

         The Company, at the written requirement on the part of the Union, shall
dismiss or suspend from their job any employee who is not affiliated or who does
not continue being affiliated as a bona-fide member of the Union. Said written
requirement must be notified to the Company by certified mail and with a copy to
the affected employee by certified mail.

SECTION 3

         The Company shall post a copy of this clause in visible places in its
different departments in the Island of Puerto Rico, for knowledge of the
personnel.

SECTION 4

         In the event that a competent entity determines that the separation to
which Section 2 of this article refers was unjustified or illegal, the Union
shall be the only one responsible for all the damages caused by said dismissal,
and the Union will safeguard the Company and reimburse it for any expense or
outlay in which the Company may incur as a result of said dismissal.

SECTION 5

         The Company and the Union agree that the Union shall have the
opportunity to meet during thirty (30) minutes with the recently hired
employees, as part of the general orientation process, for the purpose of
supplying them with information about the Union and the Collective Bargaining
Agreement. The time invested during the regular work shift of each employee
given orientation shall be paid as time worked. This orientation shall be
carried out during the fifteen (15) days following the entry of the union member
employee, or from the time that the Company notifies the entry, whichever is
greater.

                                    ARTICLE 5
                                 DUES CHECK-OFF

SECTION 1

         During the effectiveness of this Collective Bargaining Agreement, the
Company commits itself to automatically deduct from the salary received by all
the employees covered by the definition of the Bargaining Unit, the sum of the
initiation dues, the regular dues and any uniform special dues which the Union
establishes for its members after receiving the written authorization on the
part of the employee. The authorization for the regular dues shall be for a
minimum term of one (1) year and shall be extended year after year, while the
employee occupies a position within the Bargaining Unit. This authorization
shall be irrevocable for a period of one (1) year from the date of the
authorization. The Union shall notify the Company in writing with regard to the
dues to be checked off from the employees covered by this Agreement. The Union
shall comply with all the applicable procedures and laws prior to the
establishment of said dues and the sum of said deductions shall be deposited
within a term which shall not exceed five (5) calendar days, after carrying out
the bi-weekly deduction by means of a direct deposit to the UIET's bank account,
it being provided that the Company will do everything possible to make the
deposit on the next working day.

SECTION 2

         a) The Company will send the Treasurer of the Union or the Officer
designated by him, after rendering the bond required by law, the document
evidencing the deposit of the amount of the corresponding dues during the ten
(10) calendar days after the payment of every two (2) weeks has been made except
when there are extraordinary circumstances intervening in which case the term
shall not exceed ten (10) additional days. The Company shall send the


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Union a summary every two (2) weeks with the names of the employees who have had
said deductions made, in addition, containing the individual sum and the total
of the same. The Company will check off the initiation dues in the amount and
installments certified by the Union for all employees joining the Union, after
receiving the written authorization from the employee.

         b) The Company shall not forward dues until the Union has shown it that
the Treasurer or the designated Officer have rendered the bond required by law.

         c) In all cases of suspension or dismissal in which an Arbitrator,
court or administrative entity has determined that the suspension of the
employee or the dismissal of the employee was not justified and has ordered the
reinstatement of the employee with all the total or partial salaries that it did
not receive in cases of dismissal or has ordered the total or partial payment of
the salaries not received during the suspension, the Company must deduct from
said payment the total of the Union dues not paid by the employee during the
time that the employee was dismissed or suspended, as the case may be, and
forward its sum to the Union in conformity to this article.

         d) In addition, the parties agree that in those cases of suspension or
dismissals that were settled and as part of the agreement the total or partial
payment of salaries not received by the employee have been agreed upon, the
Company must also deduct from said pay the total of the Union dues not paid by
the employee during the time that the employee was dismissed or suspended and to
forward its sum to the Union in the terms stated above.

         e) With regard to the deduction of dues to which reference is made in
paragraphs c) and d) of this section, it shall be the obligation of the Union to
notify the Company on a timely basis about the total sum of dues that the
employee is to have checked off.

SECTION 3

         In the event that any competent entity determines that any dues have
been illegally set or deducted, the Union shall release the Company from all
liability and shall indemnify and pay directly any reimbursement ordered by said
entity.

SECTION 4

         During the effective period of this Collective Bargaining Agreement,
the Company shall send the Union, on a monthly basis, a report regarding the
employees who are enjoying any of the leaves established in this Collective
Bargaining Agreement, which duration shall be of thirty (30) calendar days or
more, with said report having to state the name of the employee and his number,
the position occupied by him, the department, the work center, the leave which
he is enjoying and up to where it is possible, the duration of the leave stating
the possible return date.

SECTION 5

         During the effective period of this Agreement, the Company must check
off the Union dues in all those cases in which an employee from the bargaining
unit is enjoying the benefits of any of the leaves with pay acknowledged in the
Agreement, except under the Prolonged Illness Leave, (Act 139), and forward its
sum on the basis of the terms stated above, it being provided that in those
cases under Act 139 (SINOT), the Company, once the employee has returned to his
job, must withhold the Union dues that were not paid by the employee during said
leave and forward their sum to the Union in the terms stated in this article.
The total of said check offs must be made during the first three pay periods.

                                    ARTICLE 6
                      COOPERATION ON THE PART OF THE UNION

SECTION 1

         The Union, as well as its members, agree to promote, at all times and
as fully as possible, good service and efficient operation. The Union and its
members also agree with the Company to produce maximum production during each
daily work shift.

                                    ARTICLE 7
                                  PRODUCTIVITY

         The Union and the Company acknowledge that productivity must be
increased to confront the competition in the telecommunications services.

         To that effect, the Union agrees that the employees who are Union
members shall commit themselves to render the maximum of their productivity,
attendance, timeliness, efficiency and effectiveness with order and discipline.
All of it in accordance to Article 6, Cooperation on the part of the Union.

         The Company will carry out all possible efforts to provide the means
and resources necessary so that the employees can attain the productivity
objectives established.


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                                    ARTICLE 8
                             DELEGATES OF THE UNION

SECTION 1

         The delegates and their sub-delegates in their substitution, shall
represent the Union in the process of administrating the Collective Bargaining
Agreement before the Company.

         The delegates shall provide orientation to the employees covered by
this Collective Bargaining Agreement with regard to their responsibilities and
rights; in like manner they shall watch out and be empowered to help their
co-workers when these have a complaint or grievance or when their presence is
required by any boss or supervisor.

SECTION 2

         The Union delegates shall be limited to handling the grievances and
matters related to the application of the Collective Bargaining Agreement in
their work area.

SECTION 3

         No delegate may intervene in another department or area that is not one
for which he has been designated, with the exception of those work areas or
departments where no delegate has been appointed, in which case the delegate
from another nearby department may act as the appointed delegate in that other
operational unit or department, as long as he has been previously authorized in
writing by the President of the Union or his authorized representative.

         The Union shall be entitled to appoint sub-delegates or substitute
delegates who shall act only in the absence of the appointed delegate.

SECTION 4

         The delegate shall utilize the time adequately for the quickest
solution of the grievances. When it is necessary for a Union delegate to deal
with a grievance or related matter, the delegate must:

         a. Notify his immediate supervisor with reasonable time to stop taking
care of his regular work and taking care of the grievance or related matter.

         b. The delegates shall receive up to a maximum two (2) hours for each
grievance. When a delegate is required by the Management to handle some specific
matter related to the Collective Bargaining Agreement, the time devoted by him
to the attention of said matter, shall not be deducted from his salary. It being
provided, that the meeting time may be limited by the Management.

         The Union binds itself to comply and promote faithful compliance with
this article in such manner that the time requested by the delegate be utilized
exclusively for the aforementioned purposes.

         The Company, on its part, may take the actions and measures that it
deems necessary and relevant in such manner that faithful compliance be given to
the provisions of this article, including having the time requested by a
delegate to be utilized exclusively for the purpose stated above.

         c. Return to his job upon finishing dealing with the manner if his work
schedule has not ended.

         d. The meetings between the delegate and the employee requiring his
services in accordance with this Agreement, work shall be carried out in the
areas near the employee's work area.

         e. When it is necessary to have a delegate hold a private conversation
with an employee during time with or without pay on the part of the Company to
process a grievance or to deal with a matter relating to the application of the
Collective Bargaining Agreement in accordance to the Grievance Procedure, the
express authorization from the supervisor must be obtained.

         f. The Company agrees to provide the Union with adequate facilities at
each work site where the same exists and which are available for the purpose of
having its functionaries, delegates or agent being able to hold meetings
relating to grievances from the concerned area or department.

SECTION 5

         When the Company expands its services creating additional units and
increasing in a substantial manner the personnel in the additional services, the
parties, after previous agreement, shall reach an agreement regarding the
appointment of the corresponding delegates.

SECTION 6

         The delegate shall represent the employees covered by this Collective
Bargaining Agreement when the employee so requires it in the different stages of
the Procedure for Grievances, with the President of the Union or any member of
the Board of Directors being able to participate in said representation.

SECTION 7

         The Company shall not acknowledge any delegate until the President or
Vice-President of the Union has informed the Director of Labor and Employee
Affairs about it in writing and the delegate has received his appointment.


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         The delegates will have to be regular employees of the Company.

SECTION 8

         The parties shall reach an agreement with regard to the schedule,
number and place where the delegates shall act. It being provided that there
shall not be more than one delegate and one sub-delegate in functions per each
operational unit of the Company, with the exception of the Traffic Department in
which centers the delegates and sub-delegates necessary to insure that the
employees are duly represented may be appointed.

SECTION 9

         The President or the Vice-President of the Union may appoint General
delegates, in conformity with the preceding section 7 and these shall receive
the same treatment, respect and courtesy that should be rendered to the Officers
of the Union.

         The General Delegates shall be appointed to represent and substitute
the officers of the Union and when they visit the shop or specific area to which
they have been appointed, they shall have all the prerogatives that the Officers
of the Union have. The General delegate must comply with what is provided for in
Section 4 of this article.

                                    ARTICLE 9
                           VISITS FROM UNION OFFICERS

SECTION 1

         The President of the Union, the members of the Board of Directors and
the members of the Elections Committee shall have access to the Company's
premises during working hours, for the purpose of resolving grievances,
investigating work conditions and verifying the compliance with this Collective
Bargaining Agreement. The members of the Elections Committee, during periods of
reunions for internal elections of the shall have access to the Company's
premises for the sole purpose of administrating and coordinating said elections.
In addition, it is agreed that the members of the Union's Discipline Committee
shall have access to the Company's premises during working hours, for the sole
purpose of carrying out the functions relevant to said Committee, it being
provided that prior notice shall be given, with less in writing, of no lesser
than 24 hours, to the Director of Labor and Employee Affairs.

SECTION 2

         Upon arriving at the area to be visited, the President, members of the
Board of Directors, members of the Elections Committee or members of the
Discipline Committee, shall identify themselves and inform the purpose of their
visit and shall go in person before the officer of the Company that they are
going to be visiting or to the representative appointed by them.

SECTION 3

         The President of the Union may appoint agents or representatives to
carry out any of the functions of said Board. The Company shall not recognize as
such an appointed agent or representative until the President of the Union has
notified the Director of Labor and Employee Affairs in writing about his
designation as such, including a description of the matters which said agent or
representative shall be authorized to handle in the Union's name.

         The representatives appointed by the President of the Union shall be
acknowledged by the Company and these shall receive the same treatment, respect
and courtesy that should be rendered to the officers of the Union, it being
provided that these agents or representatives shall have access to the Company's
premises for the purpose of handling the matters authorized to be handled in the
Union's name. Upon the arrival of the agent(s) or representative(s), he shall
identify himself and inform the purpose of his visit and shall appear in person
before the Officer of the Company that he is going to be visiting or the
representative designated by him.

                                   ARTICLE 10
                              PERSONNEL ACTIVITIES

SECTION 1

         The Company and the Union agree that the employees or representatives
of the Union shall not be allowed to carry out propaganda or Union activities of
any nature whatsoever during their working hours within or outside the Company
premises, except those expressly contained in this Collective Bargaining
Agreement.

SECTION 2

         No union propaganda or activity of any nature whatsoever shall be
allowed within the Company premises on the part of the employees, the Union
delegates and officers during their free time, if by doing so it causes about
one or more of the following conditions:

         a. Interrupts or distracts the work of the personnel which is working.

         b. Constitutes a disturbance or harm to the Company.


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         c. Causes a situation of disorder or violence.

SECTION 3

         The Company and Union the agree that the working hours are for each
employee to devote to his work for the Company and therefore, it is not
allowable to dedicate working time to matters which are foreign to work such as,
for example: discussions about sports, politics, religion, etc. Neither are such
activities allowable during the employee's free time but within the Company's
premises if that causes one or more of the conditions in clauses a, b and c of
the preceding section.

SECTION 4

         No employee shall have access to the Company buildings or premises
without prior express authorization from the Supervisor of the site or the
Director of Labor affairs, except to his regular work site and during his
regular work schedule. In the event of receiving such authorization, the
employee must be accompanied at all times by said Supervisor or by the person
designated by him unless the Supervisor or the person designated by him
determines, at his discretion, that it is not necessary to accompany him and so
informs it verbally to the visiting employee. Under no circumstance will the
employee be authorized to enter onto Company property if there is no Supervisor,
or the person designated by him available to accompany the him.

                                   ARTICLE 11
                     PUBLICATION, ADJUDICATION OF POSITIONS
                   AND APPOINTMENTS, PROMOTIONS AND TRANSFERS

SECTION 1

         The Company shall publish at all the work centers, the positions of new
creation, the vacant ones or the ones which could be left vacant in the near
future, corresponding to the bargaining unit that they are going to cover,
specifying the requirements for the same. The publication of the positions shall
be made for a term no lesser than five (5) working days. The Company shall send
to the Union a copy of said publication. A position so published shall not be
canceled without notifying the Union about the reasons for its cancellation.

SECTION 2

         Any regular employee who meets the requirements for a published
position, may apply for the same by submitting the corresponding application, in
the form supplied by the Company, within the term established in the
publication, to the Recruiting Department, with return receipt requested. It
being provided that those employees who work outside of the buildings of Plaza
Telefonica (1500, 1513 and 1515 Roosevelt) shall count with a term of two (2)
additional working days after the closing of the publication.

SECTION 3

         The Company shall only consider those employees who meet the
requirements, who have filed the petitions within the period established in the
publication, and who may fulfill the functions of the position immediately upon
having it adjudicated to them; or if they are enjoying their vacation leave,
upon the conclusion of the same; or if they are receiving benefits under the
State Insurance Fund or using sick leave, within thirty (30) days after it has
been adjudicated to them.

SECTION 4

         Any vacant position or a position of new creation shall be adjudicated
to the employee who qualifies pursuant to what is provided in Section 6 of this
article within the following order of priority, except in the case of promotion
or transfer from one classification to another, where seniority shall not be the
determinant criterion for the adjudication of the position:

         a. Employees who are going to be affected by personnel reductions.

         b. Employees who have suffered an occupational illness or accident that
prevents them from carrying out the functions that they used to carry out in
their positions prior to said illness or accident. This priority shall not have
the scope of extending the term of time provided by law within which an employee
reserves his job tenure from the time of the occupational accident or illness.

         c. Employees who have suffered a non-occupational illness or accident
that prevents them from carrying out the functions that they used to carry out
in their positions prior to said illness or accident. This priority shall not
have the scope of extending the term of time provided by law within which an
employee reserves his job tenure from the time of the known occupational
accident or illness onwards.

         d. Employees who request a transfer within their same occupational
classification.

         e. Employees requesting a promotion.

         f. Employees requesting lateral transfer or lateral movement (change
from one classification to another with the same salary level).


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         g. Employees requesting a demotion

         h. Ex-employees which the Company may have laid off within the twelve
(12) previous months due to scarcity or reduction of work.

SECTION 5

         For the purpose of this Agreement, no regular employee or one of new
appointment may apply for a movement in transfer, lateral transfer and demotion,
until eighteen (18) months have passed from the date when the adjudication of
the position presently occupied have passed or until the maximum of the existing
progression for his present occupational classification has been reached,
whichever occurs first.

SECTION 6

         In those cases in which the adjudication of a vacant position or one of
new creation represents a promotion or lateral transfer for the applicant
employee, the position shall be adjudicated among the candidates who fulfill the
requirements in accordance to the following factors: seniority; evaluation
criteria, in conformity to the work evaluation form for the previous two (2)
years; disciplinary record for the previous two (2) years; related experience
and trainings. Seniority shall prevail over all the other factors if these were
to turn out to be equal among the employees to be considered for covering the
new or vacant positions.

SECTION 7 - Transfer - Lateral Transfer

         a. For the purpose of this Collective Bargaining Agreement, an
appointment in transfer shall be understood to mean any permanent change from
one department to another, from one work center to another, or from one
municipality to another, as long as the employee continues in his same
occupational classification.

         b. For the purpose of this Collective Bargaining Agreement, an
appointment in transfer or lateral movement shall be understood to mean any
change from one classification to another with the same salary level. No
employee may request a lateral movement until after eighteen (18) months have
passed in one position and he must remain in said position a minimum of eighteen
(18) months after said movement. In a lateral movement, the employee, in his new
classification, shall fulfill the same requirements provided for the cases of
promotion in Section 6 of this Article.

            For the purpose of this Article exclusively, each one of the
following areas of the municipality of San Juan shall be considered as a
municipality:

            o  San Juan - Santurce - Isla Verde

            o  Hato Rey - Rio Piedras

            o  Pueblo Viejo

            Also, for purposes of this Article exclusively, the Levittown area
shall be included in the municipality of Catano.

         c. There will be two (2) types of transfers:

            1. Transfers by a formal petition on the part of the employee, which
is the one that is produced when one fills out a written request, through the
Recruitment Department.

            2. Transfers when the Company determines it due to the need in
service. The employee may, after having carried out this type of transfer,
question it through the Grievance Procedure.

               Except in cases where events occur beyond the control of the
Company and the service may be adversely affected, the employee shall be located
in the position of transfer within a period which shall not exceed thirty (30)
days from the date when the Recruitment Department adjudicated the same to him.

               When the Company is interested in transferring an employee due to
service needs, it shall notify the employee and the Union with thirty (30) days
of advance notice, except when there are extraordinary circumstances in which
case it shall be notified with ten (10) days of advance notice. In the events of
fights or conflicts between employees which may affect the peace or the normal
functioning at the Work Center, if it were considered necessary, a transfer of
the employee can be made until an investigation of the matter can be carried
out, without complying with the terms established herein.

               In the case where there arises the need to cover the position
that was left vacant by the transferred employee due to service need between the
following one hundred and eighty (180) days after the transfer was effected, he,
the transferred employee, shall have priority to return to said position. After
one hundred and eighty (180) days, the position shall be filled following the
process established in this Article.

               The Company will acknowledge the right of exchange among the
employees, as long as the Company determines, in its sole discretion, that there
exists equality of circumstances, category, capacity, efficiency and ability. In
the case of an exchange, the expenses caused by the transfer shall be to the
account of the employees.


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               The Company shall not utilize its discretion in a capricious,
arbitrary or discriminatory fashion to authorize the exchange being requested.

               The transfer shall not be utilized capriciously, arbitrarily or
as a disciplinary or discriminatory measure.

SECTION 8 - PROMOTIONS

a. For the purpose of this Collective Bargaining Agreement, a promotion shall be
understood to be the movement of an employee from one position to another, which
has a higher salary level and those changes from one position for which the
maximum series level is inferior to the maximum level of the new position.

b. In the promotions, priority shall be given to the Company employees who have
requested promotion and who qualify for the same, in conformity to what is
provided in this Article, Section 6. Seniority shall prevail over the other
factors, if these were to turn out to be equal among the employees to be
considered for covering of the positions in promotion. When an employee changes
work center due to a promotion for which he has applied, he may not request a
change of position outside of his new work center until twenty-four (24) months
have elapsed from the promotion.

c. Any promoted employee shall be subject to a probationary period of two (2)
months during which he will have to show having ability, knowledge, skills and
the efficiency which, in the judgment of the Company, is required for the new
position. In the cases of promotions which requires special training, said
training period shall not form part of this probationary period.

d. In the case when an employee is promoted, the Company shall pay him the
salary corresponding to the new position as soon as he begins to occupy the
same.

e. If his probationary period were not satisfactorily approved, the
employee shall return to his previous position with the salary that would have
corresponded to him if he had continued in the previous position. The Company
shall reinstate to their previous position and salary the employees who would
have been promoted as a result of the vacancies that would have brought about
the promotion of said employee. If, as a result of said promotion, a new
employee had been hired, the Company would be free to separate said new employee
and the Union shall not file any complaint whatsoever under the Complaint and
Grievance Procedure.

f. Except in cases where events occur beyond the control of the Company and/or
the service may be adversely affected, the employee shall be placed in the
position in promotion within a period that shall not exceed thirty (30) days
from the date when the Recruitment Department adjudicates the same to him. g.
The promotion to a superior level within the same classification shall not be
considered a promotion. These promotions shall be made in conformity to the
requirements established by the Company in the duty sheet.

SECTION 9 - DEMOTION

         For the purpose of this Collective Bargaining Agreement, a demotion
shall be understood to be understood to be any change of an employee from one
position to another position with a lower salary level, or those changes from
one position where the maximum series level is superior to the maximum series
level of the new position, or toward another position in which the employee has
to begin at a level lower than the present one, even when the maximum level of
the new position is equal to the one which he was occupying at the moment of the
change. No employee may request a demotion until after he has been eighteen (18)
months in one position and he must remain in said position a minimum of eighteen
(18) months after said demotion.

         In those cases in which an employee has had a position of an inferior
level adjudicated to him as the result of a request, in other words, one which
represents a demotion, his salary shall be adjusted to that of the position of
the inferior level.

SECTION 10 - GENERAL PROVISIONS

         Nothing of what has been previously provided in this article shall have
the scope of limiting the faculty of the Company to transfer employees due to
needs in service or the right of the Company to recruit external personnel for
those positions which have not been covered by means of internal recruitment in
accordance to this Collective Bargaining Agreement.

SECTION 11

         Within ten (10) working days following the adjudication of a vacant
position or one of new creation, the Company must notify the Union, by certified
mail with return receipt requested, with a copy of the determination and
indicating the position which was adjudicated, the requisition number for the
position and the name and the employee number of the person with whom the same
was covered and the criteria why it was adjudicated to the person. It must also
notify them a list with the names of all the employees who were competing for
the position with the corresponding salary levels.


                                       8
<PAGE>   10

SECTION 12

         The Company shall send to the employees who appear in the registry of
eligibles, by ordinary mail, at their last known postal address, a copy of all
publications of vacant positions or those of new creation, for the purpose of
having these regular laid-off employees be able to apply for the same within the
term established in this article. A copy of said letter shall also be sent to
the Union.

SECTION 13

         The Company shall send the Union a copy of all petitions for change,
outside of the Appropriate Unit, requested by any employee from this bargaining
unit.

                                   ARTICLE 12
                               PROBATIONARY PERIOD

SECTION 1

         All persons hopeful of entering as employees, must have first approved
those examinations, written or evaluation ones, required by the Company.

SECTION 2

         The employees included in the Bargaining Unit are classified as regular
employees, probationary employees and part-timers. The part-timers may continue
working in the traffic functions or any other call center throughout the
geographical areas in which the Company is organized. The parties agree that
when an employee with a regular work day of eight (8) hours is transferred
outside of the Traffic area, the vacancy that he leaves shall be covered with a
part-timer, if it were necessary.

         The putting into effect of the previous measure shall be in a
prospective manner and the operation of Traffic shall never have more than fifty
(50%) percent of the labor force at half shifts. This process shall be put into
effect gradually.

         For the purpose of this article, there shall be two (2) types of
part-time employees (part-timers).

         I. Those employees with a half work shift who work in the Traffic Call
Centers (Long Distance and Information Services), whose work day is no lesser
than twenty (20) hours per week and no more than thirty-nine (39) hours per
week.

         II. Those part-time employees who work in the Repair Call Centers,
calls to Service Representatives and other Call Centers, with the exception of
Traffic, who are those who will work after 5:00 PM and weekends with a work
schedule of no lesser than twenty (20) hours per week and no greater than thirty
(30) hours per week.

         It being provided that when a part-time employee works 2,030 hours
within a period of one (1) year, the Company may consider changing the part-time
work shift to a regular work shift.

SECTION 3

         A condition for regular appointment shall be that the employee has
worked to the satisfaction of the Company during a Probationary Period of ninety
(90) days. The training period for the probationary employees at the training
centers recognized by the Company shall not form part of the Probationary Period
if it does not exceed thirty (30) consecutive days. However, the probationary
period for each employee shall begin to be counted as soon as the Company
assigns him to perform regular work outside of the training centers. The Company
may assign the probationary employee to a work shop for a waiting time at the
beginning of the training, as long as said time does not exceed fifteen (15)
days. However, this initial waiting time, of up to a maximum of fifteen (15)
days, shall form part of the calculations of the ninety (90) days established
for his probationary period. Once the Company reassigns this worker to perform
work in a work shop, any other training time shall be counted for the completion
of his probationary period.

SECTION 4

         All employees, during their probationary period, must be periodically
evaluated with regard to, among other factors, their capacity to assimilate
training, their productivity, their efficiency, their timeliness, their
attendance at work, their habits, attitudes and general behavior. The Company
shall hand over to the employee a copy of each periodic evaluation, except when
the employee has abandoned the service and is not available.

SECTION 5

         Any employee who satisfactorily approves the Probationary Period shall
be appointed as a regular employee by means of an official notice to the
employee.

SECTION 6

         All probationary employees will have to submit themselves to those
medical examinations required by the Company and the result of said medical
examinations will have to be satisfactory to the Company, as a condition of
employment. The cost, if any, of these examinations shall be paid for by the
Company.


                                        9
<PAGE>   11

SECTION 7

         All employees who join the Company by virtue of a transfer, sale,
merger, expropriation or lease shall have the provisions of this article
applicable to them.

SECTION 8

         The Company has the right to order or decree the dismissal of any
probationary employee within the terms of Section 3, without having such
dismissal giving rise to any grievance whatsoever before the entities
established by this Collective Bargaining Agreement for the resolution of
controversies and grievances.

                                   ARTICLE 13
                              MEDICAL EXAMINATIONS

SECTION 1

         The Company may require any regular employees to submit himself to
medical examinations and examinations of any other kind which are of a medical
nature. The cost, if any, of the same, shall be paid for by the Company. This
prerogative may not be utilized in a discriminatory fashion against the members
of the Brotherhood.

SECTION 2

         The Company shall compensate the employee for the time that the
examination takes as long as this is carried out within his regular work
schedule.

                                   ARTICLE 14
                                    SENIORITY

SECTION 1

         Seniority shall be understood to be the total time of service credited
to an employee by the Company. Credited time shall be all the time of regular
work schedule that an employee has worked in a continuous form for the Company
as well as all the leaves with salary. The leaves without salary granted to the
members of the Board of Directors of the Union during the terms for which they
have been elected shall be credited to their seniority with the Company.

SECTION 2

         Seniority rights will expire as a result of any of the following
reasons:

         a) Resignation

         b) Dismissal

         c) Lay-off during twelve (12) consecutive months or upon the receipt of
the compensation provided for in Article 17, Section 3 - Reduction of Personnel
and re-employment.

         d) Absence due to occupational illness or accident in excess of his
leave for occupational illness or accident.

         e) Absence due to non-occupational illness or accident in excess of the
term established in this Collective Bargaining Agreement or until he exhausts
his leave for prolonged illness, whichever is greater.

         f) Not accepting an available position and one for which he qualifies,
while he is on the preferential employment list.

         g) Accepting a position outside of the bargaining unit, unless the
employee decides to return and/or the Company decides to return him to his old
position, within the six (6) months following his departure from the bargaining
unit.

SECTION 3

         The probationary employees shall not accrue seniority until they have
approved their respective probationary periods, in which case the seniority will
be retroactive to the date when they began their respective probationary
periods.

                                   ARTICLE 15
                    REDUCTION OF PERSONNEL AND RE-EMPLOYMENT

SECTION 1

         When the Company determines the need to carry out lay-offs or personnel
transfers due to lack of sufficient work or due to reasons of economy in
determinate classifications of employment, it shall prepare a lay-off or
transfer plan, as the case may be, and in accordance to the provisions of this
Agreement, and it shall notify in writing by certified mail or in person, about
the lay-off or transfer, to the affected employees and to the Union including in
the notice copy of the plan, with no less than one (1) month of advance notice
prior to the date when the lay-off or transfer shall be made effective, and such
reduction shall be made observing the following order:

         a. Probationary employee in the affected classification.

         b. Regular employee in inverse order of seniority in the affected
classification.

         In the case of lay-offs or transfers, the members of the Board of
Directors and the delegates shall have super seniority in their classification.


                                       10
<PAGE>   12

         The determination of the number of employees who are needed to perform
a task is an exclusively managerial function which may not be questioned through
the grievance procedure.

SECTION 2

         a. In the event that a regular employee with less than one (1) year of
seniority is subject to lay-off, he may choose to bump another employee in a
lateral classification or an inferior one with lesser seniority in which the
displacing employee is qualified to perform the work immediately or any other
classification in which the displacing employee has worked previously and
continues being capable of performing the work immediately.

         b. Any regular employee, with at least one (1) year of seniority, who
is bumped as a result of the procedure established in the preceding paragraph a)
shall have, in like manner, the right to bump by means of seniority following
exactly the procedure established in the preceding paragraph.

SECTION 3

         Any regular employee who is laid-off and who at the moment of the
lay-off has one (1) year or more, shall not lose the right to a compensation
equivalent to three (3) weeks plus one (1) week for each year of seniority up to
a maximum of twenty (20) weeks.

SECTION 4

         Any laid-off employee and who at the moment of the lay-off has at least
one (1) year or more of seniority shall be included in a list of preferential
employment for a maximum of twelve (12) months.

SECTION 5

         The compensation provided in the preceding Section 3 shall be paid at
the end of the twelve (12) month period established in the preceding Section 4.
In the alternative, a laid-off employee may choose to receive the compensation
for lay-off previously indicated at any moment after the lay-off has been
notified, plus said employee shall be excluded from the preferential employment
list as soon as he receives said compensation.

SECTION 6

         The regular employees who are laid-off shall be included in a registry
of eligibles, utilizing the criterion of seniority and they shall have the
preference provided in Section 4 of the article regarding "Publication,
Adjudication of Positions and Appointments" to occupy regular or new vacant
positions within the bargaining unit, as long as the employee is qualified and
capable of fulfilling such position.

SECTION 7

         The Company will supply the Union a copy of this list of eligibles with
the name of the employee, position that he used to occupy and the years of
service; in like manner, it will inform the changes in the list, if any.

SECTION 8

         When there arises the possibility of re-employment, the Company shall
get in touch with the laid-off ex-employee by certified mail at his last
address, with copy to the Union, granting him ten (10) working days in which to
accept the position. If he does not to accept or answer within the term, he
shall lose the right granted in this article and shall be eliminated from the
corresponding list. If he answers within said term indicating that he cannot
accept the job due to extraordinary reasons which in effect make it impossible
for him to accept the position being offered to him and it is so proven to the
Company within said term, the laid-off employee shall not lose the right to
re-employment with regard to other vacancies that arise later on in his
classification within the term of twelve (12) months after his lay-off, as is
provided further on.

SECTION 9

         The right to re-employment, as provided in this article, shall be
extinguished within twelve (12) months after having being laid-off as an
employee for the Company, except when he does not accept or does not answer a
communication offering him a vacancy, as provided in the previous section. If
positions are frozen during this period, the right will be extended for a period
of time equal to that of the freezing.

                                   ARTICLE 16
                                RECLASSIFICATION

SECTION 1

         When the Union considers that a position has had assigned to it
functions and duties belonging to a superior position or that the duties and
functions of it have evolved in a substantial and permanent matter toward a
position of a superior level or that functions and duties of greater complexity
have been assigned, the President of the Union or in his absence, the
vice-president, shall submit in writing a petition for reclassification to the
Director of Labor and Employee Affairs indicating the criteria and reasons
justifying the petition.


                                       11
<PAGE>   13

         The Director of Labor and Employee Affairs, once the petition for
reclassification has been received, will refer it to the Director of
Compensation and Records, who shall coordinate a meeting with the President of
the Union or his representative so that he will present in the name of the Union
the reason justifying the petition or reclassification that is being requested.

SECTION 2

         No petitions for reclassification for positions which are not at the
maximum salary level of his class shall be accepted, if this class is made by
progression levels.

SECTION 3

         The assignment of additional duties or functions of equal, similar or
lesser complexity, and/or the increase in the volume of work, shall not imply a
reclassification.

SECTION 4

         The Director of Labor and Employee Affairs shall notify the President
of the Union about the Company's position with regard to the petition for
reclassification within a period of ninety (90) calendar days from the date of
the meeting provided for in Section 1 of this Article. If it were determined
that a position must be reclassified, its reclassification shall be effective to
the date of receipt of the petition on the part of the office of the Director of
Labor and Employee Affairs.

SECTION 5

         If the Union is not in agreement with the determination of the Director
of Labor and Employee Affairs regarding its petition for the reclassification of
a position, it may question the same in conformity to the Grievance Procedure
established in this Agreement.

SECTION 6

         No reclassification petitions for petitions of the Bargaining Unit will
be accepted, if within the last eighteen (18) months, a petition regarding the
same position has been filed.

SECTION 7

         All employees who at the moment of the signature of this Collective
Bargaining Agreement have an occupational level 11 may request a classification
as long as functions and duties of a greater complexity have been assigned to
them. In the event that it were determined that a reclassification is in order
in accordance to this article, the employees shall maintain their occupational
level 11, but they will receive a salary increase of fifty-five ($.55) cents per
hour.

                                   ARTICLE 17
                                 PERSONNEL FILES

SECTION 1

         The official file for each employee is the file in the power of the
Company under the custody of the Division of Records. The warnings, reprimands,
or disciplinary actions imposed which do not appear in the official file, may
not be utilized for any purpose.

SECTION 2

         Any employee may, after requesting and coordinating with his immediate
supervisor, review his personnel file once a year.

SECTION 3

         In addition, the Company agrees to present the official personnel file
when the employee has a grievance pending a hearing in the third stage of the
Grievance Procedure and the employee has requested its presentation previously
in writing, and when the employee understands that in the official file there
appear charges which are not in agreement with the facts. The President or the
member of the Board of Directors may examine the file of the employee at the
third stage of the Grievance Procedure if the employee so allows it and if he is
present. If there do not exist new documents in the personnel file since the
last presentation, the Company will not be obligated to show the file once
again.

SECTION 4

         In like manner, the Company agrees, to present the personnel file to
all union members whose petition for promotion, transfer or change to a position
with an lower salary grade has been denied and the employee requests in writing
to examine his file and has a complaint pending in the third stage regarding his
promotion, transfer or change to a position with a lower salary grade.


                                       12
<PAGE>   14

SECTION 5

         When, in the employee's file, after its presentation, there appear
charges or documents which do not adjust themselves to the real facts, the
Company, after investigating the facts, agrees to withdraw the documents
presented and/or correct them if it were necessary. The disciplinary actions of
the employee file shall not be considered for any purpose whatsoever after a
period of five (5) years has elapsed since they were issued.

         At any moment in which the personnel file of the employee has to be
taken out of the office where the custody of the same is found, to be utilized
in any official procedure, the documents regarding disciplinary actions which
were issued more than five (5) years ago shall be eliminated from said file.

SECTION 6

         The Company will send the Union and deliver to the corresponding
delegate a copy of all disciplinary actions that are notified in writing to an
employee included in the Bargaining Unit. The Company shall send the Union a
copy of all personnel movement duly approved related to employees from the
bargaining unit.

SECTION 7

         The Company shall not supply any person or entity foreign from it,
information which arises from the personnel file of the employee, without his
written authorization, unless there is the intervention a judicial mandate, in
which case it shall be notified previously. When there is an intervening
judicial or legal mandate, the employee shall be notified at the same time as
the documents are handed over, unless the judicial order or the law expressly
forbids it.

SECTION 8

         The employee shall be entitled to be supplied a copy of any document
that is placed in his personnel file containing information relating his person.

                                   ARTICLE 18
                           WORK OF THE BARGAINING UNIT

SECTION 1

         The Company agrees that the personnel employed in the capacity of
supervisor or non-supervisor which are not included within the Bargaining Unit,
shall not carry out work assigned to employees within the Bargaining Unit,
except in cases of emergency and/or circumstances where employees from the
Bargaining Unit, as it is defined in this Agreement, are not available. Nothing
of what has been previously stated shall limit the normal function of the
management to instruct, train and direct the work of employees within the
Bargaining Unit.

SECTION 2

         For purposes of this article "emergency cases" shall signify cases of
Acts of God such as:

         a. National Emergency

         b. Hurricanes

         c. Fires

         d. Flooding

         e. Earthquakes

         f. Cases of major breakdowns where the number of employees available is
not sufficient and/or when they have not been able to correct it.

SECTION 3

         For the purpose of this article the concept "when employees from the
Bargaining Unit are not available", shall mean circumstances such as the ones in
which:

         a. They are required to work overtime and the personnel from the
Bargaining Unit, of the required classification, is not available to work
overtime.

         b. When work accrues in an abnormal fashion and the personnel belonging
to the Union which is available is not sufficient to cover the needs of the
service. This circumstance cannot justify carrying out work of the appropriate
unit with personnel that is not from the unit at a specific site or in a
specific classification for more than ninety (90) days.

         c. When due to the absence of personnel belonging to the union, the
service is affected, requiring that other personnel perform the work.

         When the situations being considered in paragraphs b. and c. arise, the
Company shall exhaust the resource of bringing personnel belonging to the Union
which are available and in the same classification from other work centers of
the Company belonging to the same department and located in the same
geographical area where the need exists, as long as the operation of these other
work centers is not affected.

         During the course of time of the process of exhausting the recourse of
bringing personnel belonging to the union, the Company may take the necessary
measures so that service is not interrupted as long as the implementation of
those measures do not annul the purpose stated in the previous paragraph.


                                       13
<PAGE>   15

         It being understood, however, that the previous provision shall apply
solely and exclusively when the situations considered in paragraphs b. and c.
are due to or are the direct consequence of the normal outcome of the services
rendered by the Company. It shall apply it under no circumstances when the
situations considered in paragraphs b. and c. are the direct or indirect result
of actions from personnel from the Bargaining Unit geared toward producing an
abnormal accrual of work: such as slowdowns, abnormal or agreed upon absences
from the Company's personnel belonging to the Union, or any action of the ones
stated in the article regarding "No-Strike and No-Lockout" of the Collective
Bargaining Agreement and/or disciplinary actions taken as a result of the
conduct indicated above.

         The personnel belonging to the Union will carry out the work
corresponding to them when the exceptions indicated in this article arise.

         The intention of the parties in this agreement is to prevent the
managerial personnel from displacing personnel belonging to the union in their
regular work and when working overtime, and at no time prohibiting that they
carry out its operations as a public service enterprise in a normal fashion.

         This agreement does not have the intention of allowing the supervisors
to perform work of the Bargaining Unit at all times.

SECTION 4

         The Company agrees that it shall not assign supervision, executive,
managerial or confidential work to employees who belong to and are included in
the Bargaining Unit.


                                       14
<PAGE>   16

                                   ARTICLE 19
                                HEALTH AND SAFETY

SECTION 1

         The Union and the Company agree that the health and safety conditions
at work are a responsibility share between the employees and the Company.

         The Company agrees to provide safe working conditions and methods and
to eliminate unsafe situations of work, in regard to which the Union agrees to
cooperate with the Company.

SECTION 2

         The employees must comply with and follow the safety norms established
by the Company, by the laws and/or by the regulations.

         The Company's requirement that requires employees to carry on their
person in a visible place the identification card, crediting them as employees,
shall be complied with by all the personnel. The cost of the identification card
shall be paid for by the Company.

SECTION 3

         Any employee who suffers a work accident or who becomes ill during
working hours and their injury or illness results in an emergency case where
immediate medical or hospitalization services are required, shall be entitled,
after the authorization of a supervisor, to have utilized for their
transportation, any Company vehicle which is available and such vehicle may be
driven by any person authorized to drive motor vehicles if the driver in charge
of the vehicle is not available or accessible at the moment of the accident. In
all investigations carried out by the Company regarding any possible violation
to the present section, all the circumstances related to the emergency situation
may be taken into consideration to determine any justificating or mitigating
factor with regard to the possible violation.

SECTION 4

         The Company shall provide and maintain adequate sanitary facilities, as
well as drinking water, and the Union shall promote the adequate use of said
facilities.

SECTION 5

         The Company shall provide the Union with a copy of all the periodic
reports that it submits to any government agency relating to occupational
accidents.

SECTION 6

         The Company shall comply with all the applicable provisions of the laws
and regulations and Puerto Rico and the federal ones administrated by the
Department of Health or the Department of Labor and Human Resources with regard
to work facilities and safety conditions.

SECTION 7

         In those cases in which the Company determines establishing new work
centers, the Union shall be notified with thirty (30) days of prior notice, for
the purpose its having the opportunity to examine the same before beginning
operations in said centers and may express its observations and recommendations.
In special cases, the Company and the Union will reach an agreement to establish
the inspection within a lesser period of time.

SECTION 8

         The Company, through its Occupational Health and Safety Division,
agrees to provide the Union with the work accident reports and studies performed
by any laboratory on or prior to thirty (30) calendar days following the
accident. In like manner, if the Company were to perform any inspection or study
related to the health and safety of the members from the Bargaining Unit, a copy
of the same shall be provided to them, if it were required, as long as said
request specifies the study.

                                   ARTICLE 20
                              DRUG TESTING PROGRAM

SECTION 1

         The Union and the Company recognize that the use and abuse of
controlled substances is an alarming problem in the country and affects the
working force negatively. The Union, worried about the health and safety of its
members, recognizes the risk to which its employees may be exposed due to the
use and abuse of controlled substances.

SECTION 2

         The Company, aware of its responsibility to protect the health and
safety of its employees and clients, as well as of its responsibility to watch
out for the productivity and efficient rendering of the services that its
employees rendered to the people, wishes to state its concern for the problem
that the use and abuse of drugs by the employees represents.


                                       15
<PAGE>   17

SECTION 3

         For these purposes and to maintain a work environment free from the
problems associated with the use and abuse of controlled substances; and to
protect the health and safety of the employees covered in this Appropriate Unit,
the parties, after a detailed and conscious analysis of all the elements
involved in this problem, voluntarily and in free exercise of their contractual
faculties in conformity to the law, agree that the Company may adopt a
Controlled Substance Use Detection Program for the employees, in accordance to
Act Number 59 of August 8, 1997.

         The guiding criteria of the Program shall be:

         o The protection of the confidentiality, civil and constitutional
           rights of the employees.
         o Non-discrimination against the employee.
         o The identification of drug users for the purpose of providing the
           employees the opportunity for treatment and rehabilitation in
           conformity to the law, the Controlled Substance Use Detection Program
           for the Company Employees and the Company's programs for internal or
           external aid to the employee.

                                   ARTICLE 21
                            RESPECT AND CONSIDERATION

SECTION 1

         The Company and its functionaries obligate themselves to give to the
employees and the Union the best treatment, respect and consideration possible
for the purpose of maintaining the best relations between the employees, the
Union and the Company.

SECTION 2

         The Union and the employees from the Bargaining Unit obligate
themselves to observe toward the Company and its functionaries the best
treatment, respect and consideration possible for the purpose of maintaining the
best relations between the employees, the Union and the Company.

SECTION 3

         In any case in which the Union or an employee covered by this Agreement
accused any personnel from the Company excluded from the Appropriate Unit of a
violation to this Article and the award were to turn out to be favorable for the
grievant, the same shall form part of the official personnel file of the
managerial employee who violated this Article.

                                   ARTICLE 22
                                 BULLETIN BOARD

SECTION 1

         The Company shall allow the Union the use of bulletin boards in places
to be determined by a mutual agreement between the parties.

         In these bulletin boards, there will be posed notices regarding:

         a. Summonses to meetings which will be limited to specifying the place,
time and date of said activities.

         b. Appointments of officers, committees and delegates.

         c. Results of negotiations, elections, grievances or matters which
constitute common projects between the Company and the Union.

         d. Social, union, recreational, educational or cultural activities.

SECTION 2

         The installation and cost of these bulletin boards shall be paid for by
the Company.

SECTION 3

         It is agreed that the notices which are posted shall not contain
material of proselytism, political or religious, or material which tends to
slander, put down or affect the image of the Company or its functionaries.

         The Company shall not allow the posting of notices which are contrary
to and in violation of this clause.

                                   ARTICLE 23
                              WORK DAY AND OVERTIME

SECTION 1

         For the purpose of this Agreement, for the purpose of calculating
overtime, the work week shall consist of forty (40) hours and the daily work day
shall consist of eight (8) hours. The work week shall consist of five (5) days.


                                       16
<PAGE>   18

SECTION 2

         No employee shall work overtime without first having received
authorization from his immediate supervisor or from the immediate supervisors of
his immediate supervisor. When the company determines that the service needs
require working overtime, it may request from any employee that he work overtime
and the employee shall work it, unless he can show that he has just cause for
not working said overtime.

SECTION 3

         The Company shall assign the overtime work without privileges in a fair
and equitable manner and as long as it is operationally possible, the employees
who request it voluntarily and the demands of the service shall be taken into
consideration. The Company, to the degree that it is possible, for it to
anticipate work beyond its regular work day, shall establish work shift
calendars to inform its employees about the work shifts that they will be
working.

SECTION 4

         The overtime that the Company requires to be worked in excess of the
forty (40) hours per week shall be paid at the rate of double time the rate paid
for regular hours of work. The hours required by the Company to be worked in
excess of eight (8) hours per day, shall be paid for at the rate of double the
rate per hour paid for regular hours.

SECTION 5

         When an employee is required to work outside of the place where he
lives, the time during which the employee is not really working, such as, but
without having this understood to be a limitation, the time for meal
consumption, sleeping, etc., shall not be considered as time worked.

SECTION 6

         The employees who belong to the Union may enjoy a fifteen 15) minute
rest during the course of each four (4) hour period of work as long as the
service is not affected and the emergencies are dealt with. The Company shall
schedule the manner in which the employees shall enjoy this rest period.

SECTION 7

         The employee is entitled to enjoy one (1) hour for the consumption of
meals, which must begin to be enjoyed no earlier than the end of the third hour
nor later than the end of the fifth hour of his regular daily work shift. The
time worked during the period destined for the consumption of meals shall be
compensated at the rate at twice (2) the rate of the regular work hour.

SECTION 8

         In the case of the meal consumption periods taking place outside of the
employee's regular work schedule, said period shall be obviated (shall not be
enjoyed), subject to his not working more than two (2) hours after the regular
work day.

SECTION 9

         The aforementioned does not have the effect of eliminating the right of
an employee to enjoy his meal hour when at any given moment he works more than
two (2) hours beyond his regular work day. If this situation were to arise and
the employee does not enjoy his meal consumption period, the Company shall be
obligated to pay the penalty provided by the law for that particular hour.

SECTION 10

         The provisions contained in this article shall apply solely to those
employees of the Company covered by this Agreement who are not exempt or could
be not exempt in the future due to any law, regulation, decree or any other
provision whatsoever regarding the payment of additional compensation for
overtime work hours.

                                   ARTICLE 24
                                 VACATION LEAVE

SECTION 1

         The personnel from the bargaining unit shall enjoy vacation leave in
the following manner:

         a. Those employees who count with less than three (3) years of
employment shall enjoy vacation leave during the effective period of this
Collective Bargaining Agreement at the rate of one point seventy-five (1.75)
working days for each month of work, equivalent to twenty-one (21) days per
year.

         b. Those employees who count with three (3) years or more of employment
but less than seven (7), shall enjoy vacation leave during the effective period
of this Collective Bargaining Agreement at the rate of one point ninety-two
(1.92) working days for each month of work, equivalent to twenty-three (23) days
per year.

         c. Those employees who count with seven (7) years or more of employment
but less than ten (10), shall enjoy vacation leave during the effective period
of this Collective Bargaining Agreement at the rate of two point seventeen
(2.17) working days for each month of work, equivalent to twenty-six (26) days
per year.


                                       17
<PAGE>   19

         d. Employees who count with ten (10) years of more of employment shall
enjoy vacation leave during the effective period of this Collective Bargaining
Agreement, at the rate of two point five (2.5) working days for each month of
work, equivalent to thirty (30) days per year.

         To be entitled to enjoy the days of vacation leave pursuant to how it
is previously provided for, during the month of work, the employee must have
worked at least one hundred (100) hours of work during said month. The employee
who works less than one hundred (100) hours in any month will enjoy vacation
leave in proportion to the number of hours which he in fact worked during that
month with regard to one hundred (100) hours; for example: if an employee who is
entitled to enjoy vacation leave under clause b. of this section works
seventy-five (75) hours in a particular month, he shall be entitled to enjoy in
that month seventy-five percent (75%) of two (2) days on the basis of one
working day of eight (8) hours, twelve (12) hours of vacation leave in that
month. The employee will receive at the beginning of the enjoyment of his
vacation leave the equivalent to the hours accrued on the basis of the
aforementioned applicable formula multiplying by the regular basic rate of pay
per hour for the employee.

SECTION 2

         The vacation leave shall be taken during the twelve (12) month period
following the date of the anniversary of the employees' entry. It being provided
that if at the end of said twelve (12) month period it has not been possible to
grant the employee the vacation leave that he should have enjoyed during the
same, these shall be paid at double the regular rate per hour, and that vacation
leave which was accrued during said twelve (12) month period shall begin to be
enjoyed at the time when the aforementioned vacation leave is paid.

         The Company shall determine the dates when the annual vacation leave
period that is to be granted to each employee shall begin and end, paying
attention in the first instance to the Company's operational needs. However,
they will take into consideration, if this is possible, any observation made by
the employee with regard to the date of his preference for taking his vacation
leave. It being provided that if there are two or more interests of employees in
conflict with regard to the date for taking vacation leave, the employee with
the greater seniority shall have preference.

SECTION 3

         All employees shall be entitled to receive the equivalent of the
vacation leave that they have accrued as of the date of their resignation or
separation from the job in cash.

SECTION 4

         The employee who is enjoying vacation leave shall not be called to work
until he has finished said vacation leave, except in the case of emergency in
which it has to be interrupted due to service needs. Upon finishing the work for
which he was called, the employee shall enjoy the days of vacation leave that he
has remaining, including the days in which he was called in to work.

SECTION 5

         The period of time in which the employee covered by this Collective
Bargaining Agreement is enjoying sick leave or vacation leave shall count for
effect of this article solely as hours worked, once the employee has returned
back to work.

SECTION 6

         When an employee is enjoying annual vacation leave and becomes ill for
a period of three (3) or more consecutive working days, it must be charged to
sick leave, if the employee requests it and as long as the employee presents
medical evidence, in conformity with Article 29, Section 5, (Sick Leave), that
he is ill, in which case the employee upon ending his illness will continue the
vacation leave for a period equivalent to the remaining of his authorized and
unauthorized vacation leave.

SECTION 7

         At the petition of the employee, the Company may schedule the annual
vacation leave in two (2) or more separate periods within the same year in which
the employee is entitled to enjoy the same.

SECTION 8

         The employee may request the cash payment of his accrued vacation leave
in excess of the maximum number of days of vacation leave established in
Mandatory Decree Number 73, applicable to the communications industry. The
granting of this request shall require an agreement between the Company, the
employee and the union representative.

                                   ARTICLE 25
                              SPECIAL SPORTS LEAVE

SECTION 1

         It is agreed to grant a Special Sports Leave, in conformity to Act 49
of July 23, 1992, as amended, to the employees who qualify.


                                       18
<PAGE>   20

SECTION 2

         All employees who request this leave must count with the written
certification from the Olympic Committee of Puerto Rico to represent Puerto Rico
in Olympic Games, Panamerican Games, Central American Games or in regional or
world championships.

SECTION 3

         All employees who are duly certified by the Puerto Rico Olympic
Committee to represent Puerto Rico in the competitions listed in Section 2 of
this article, shall present to the Company, with at least ten (10) days in
advance to their going off to compete, a certified copy of the document
crediting them to represent Puerto Rico in said competition, which shall contain
information about the time that said athlete will be participating in the
aforementioned competition.

SECTION 4

         The employee must submit to his immediate supervisor, within the first
ten (10) days of each month, a certification in which the time utilized in the
Federation or in the Olympic Committee during the preceding month is stated.

SECTION 5

         The Company shall grant a bonus of $500.00 to each participating
athlete who makes use of this leave for a period of at least five (5) days.

                                   ARTICLE 26
                                   SICK LEAVE

SECTION 1

         The employees covered by this Collective Bargaining Agreement shall
accrue sick leave at the rate of one and a half (1 1/2) working days for each
month in which they have worked at least one hundred (100) hours of work. Those
employees who work less than one hundred (100) hours in the month shall accrue
sick leave in the proportion that the number of hours that they worked in the
month has to one hundred (100) hours; in other words, if they work seventy-five
(75) hours during the month, they shall accrue seventy-five percent (75%) of one
and a half (1 1/2) of the working day on the basis of an eight (8) hour working
day, in other words, nine hours of work.

         The period of time in which the employee covered by this Collective
Bargaining Agreement is enjoying sick leave or vacation leave shall count for
the purpose of this article solely as hours worked once the employee has
returned to work.

SECTION 2

         The sick leave unused by the employee during the course of the year
shall remain accrued for the following years up to a maximum of seventy-five
(75) days for the purposes of liquidation provided in Section 3 and ninety (90)
days for the purpose of this Section. As of the date of retirement to enjoy the
benefit of the Company's pension plan or disability plan determined by Social
Security, the employee shall be paid the accrued days of sick leave up to a
maximum of ninety (90) days. This benefit shall be calculated by multiplying by
eight (8) the regular basic rate of pay per hour that the employee was receiving
at the time of his retirement or disability.

SECTION 3

         The Company shall pay on an annual basis the accrued sick leave in
excess of seventy-five (75) days to which the employee is entitled, within an
eight (8) week period from the anniversary of vacation leave, calculating by
eight (8) the regular basic rate of pay per hour that the employee is receiving,
at the rate of fifty percent (50%) during the first two (2) years of the
effective period of this Collective Bargaining Agreement and at the rate of
seventy-five percent (75%) the third year of effectiveness of the same.

SECTION 4

         In the event of having to be absent from work due to any reason, the
employee must let his immediate Supervisor know within the first twenty-four
(24) hours of absence.

SECTION 5

         The employee who is absent due to illness in excess of two (2) days
must present a medical certificate to his supervisor upon returning to work
which specifies the date of the consultation with the physician and the estimate
made by the physician as to the days that the employee must spend recovering. In
the event that the employee continues ill for a period greater than three (3)
days or more, the employee must get said certificate to his supervisor within
the first three (3) days of absence from his job, except in the cases of Acts of
God when he must make said certificate get there in the briefest time possible.
The employee shall receive pay for the benefits provided in this article only
when he complies with what is provided for in this section.


                                       19
<PAGE>   21

SECTION 6

         The Company shall inform the employees on an annual basis about the
balance of days of sick leave accrued.


                                   ARTICLE 27
                               EXTENDED SICK LEAVE

SECTION 1

         In the event that a regular employee is absent for a consecutive period
greater than five (5) working days due to reasons of illness proven by means of
a medical certificate that complies with the requirements provided in the
article regarding Sick Leave, he shall receive benefits at the rate of one (1)
week at full salary and three (3) weeks at half (1/2) salary for each year of
service up to a maximum of thirteen (13) weeks at full salary and thirty-nine
(39) weeks at half (1/2) salary. In the event that the benefit under the
Non-Occupational Disability Insurance Act (Act 139), were to turn out to be
greater than the ones established herein, only the ones that are greater shall
be granted.

SECTION 2

         The Company reserves for itself the right to have examined by
physicians chosen by it, those cases that it deems necessary. The expenses for
these examinations shall be paid for by the Company.

SECTION 3

         Any accident and/or illness of an occupational nature shall be excluded
from the benefits provided in Section 1 of this article.

SECTION 4

         The first five (5) consecutive working days of absence prior to the
enjoyment of prolonged sick leave shall be charged to the regular sick leave
that the employee may have accrued.

SECTION 5

         To be entitled to the full accrual of the benefit considered in Section
1 of this article, during successive periods of illness, the employee must
perform his functions, without any interruption whatsoever, during a thirteen
(13) week period between one illness and another.

         For the purpose of this section, the following shall not be considered
to be interrupting events: periods for Maternity Leave; Funeral Leave; Sports
Leave; Jury Duty and Military Leave.

                                   ARTICLE 28
                             OCCUPATIONAL SICK LEAVE

SECTION 1

         Any regular employee who has to be absent due to an occupational
accident or illness so certified by the State Insurance Fund, shall be entitled
to receive his regular salary during the first twenty-six (26) weeks from the
moment of the accident.

SECTION 2

         In the event that the employee is absent from his work in excess of the
first twenty-six (26) weeks, the employee will be entitled to receive, in
addition, half of his regular salary during the following thirty-five (35)
weeks.

         If the employee were not discharged by the State Insurance Fund, after
the sixty-one (61) weeks have elapsed since the date of the accident, at the
written petition of the employee he shall have approved up to a maximum of
seventeen (17) additional weeks without salary, for purposes of holding on to
the job, as long as he complies with the terms and conditions established by the
law with regard to having had to been discharged and being physically and
mentally capable to be able to exercise his job, among other requirements of
law.

SECTION 3

         In exceptional cases, the Company, in its sole discretion and after a
request on the part of the employee, with no less than thirty (30) days prior to
the termination of the seventeen (17) week period without salary from the
previous section, may carry out a medical evaluation of the employee to
determine his health condition. If it were to consider it necessary, the Company
could on the basis of deserving reasons and in its sole discretion, extend the
period without pay for an additional term which shall not, in any case
whatsoever, exceed four (4) weeks.

SECTION 4

         The Company shall deduct from this leave the per diems that the
employee receives from the State Insurance Fund during this period.

SECTION 5

         In the event that any employee is absent from his job due to an alleged
occupational accident or illness, and until the State Insurance Fund (SIF)
issues a certification of causal relationship, the Company shall pay to him the
benefits to which he is entitled under Act 139 (SINOT), in conformity to the
following table:


                                       20
<PAGE>   22

                                WEEKS OF BENEFITS
<TABLE>
<CAPTION>
YEARS OF                FULL SALARY               HALF SALARY                  SINOT
SERVICE           ADJUSTMENT/SINOT COORD.    ADJUSTMENT/SINOT COORD.        COORDINATION
<S>               <C>                        <C>                            <C>
Less than 1                 -                          -                         26
   1                        1                          3                         22
   2                        2                          6                         18
   3                        3                          9                         14
   4                        4                         12                         10
   5                        5                         15                          6
   6                        6                         18                          2
   7 or more                7                         19                          -
</TABLE>

         Once the SIF issues a certification of causal relationship, the Company
will charge to the Occupational Sick Leave provided in this article and credit
the benefits paid during said period to the Extended Illness Leave, accrued by
the employee.

         In the case of employees who do not have the non-occupational
disability benefits in their entirety, the benefits remaining under Act 139 in
conformity to this table shall be paid. It being explained that the SINOT and
the SIF benefits are mutually excluding between one and the other; in other
words, that the employee cannot receive both benefits at the same time.

                                   ARTICLE 29
                                 MATERNITY LEAVE

SECTION 1

         All employees who are pregnant shall be entitled to a rest period of
four (4) weeks before and four (4) weeks after the birth, with full pay at the
rate of their regular salary.

SECTION 2

         The employee may choose to take up to one week of prenatal rest and
extend it up to seven (7) weeks the post natal rest to which she is entitled as
long as she presents to her supervisor with a medical certification crediting
that she is in condition of working up to one week before the birth.

SECTION 3

         If the employee were to suffer a complication after the birth which
prevented her from working for a term that exceeds four (4) weeks, to be counted
from the day of the birth, the Company will grant an additional rest period for
a term which shall not exceed fifteen (15) additional weeks without pay, as long
as prior to the expiration of the rest period the employee presents a medical
certification crediting such complication. It being provided that the employee
may charge the fifteen (15) weeks either in their entirety or partly to her sick
leave or accrued vacation leave, until completing said fifteen (15) weeks.

SECTION 4

         The employee who adopts an infant (less than 7 years old) in accordance
to the effective legislation and procedures, shall be entitled from the
presentation of the documents crediting this fact onwards, to the same benefits
for Maternity Leave which an employee who delivers a baby enjoys.

SECTION 5

         With one (1) month prior to the beginning of the leave, the employee
shall present to the Company a medical certification crediting her pregnancy and
indicating the probable date of delivery. Upon complying with this requirement,
the employee shall receive the pay corresponding to her as provided in Section
1, in advance, at the moment that she begins to enjoy this leave.

SECTION 6

         The employee who suffers a miscarriage shall be entitled to and can
claim the same benefits enjoyed by the employee who has a normal delivery.
However, to be credited such benefits, the miscarriage must be one of such
nature that it produces the same physiological effects that regularly arise as a
result of the delivery, in accordance to the decree and certification of the
physician attending her during the miscarriage. Said benefit shall be from the
miscarriage onwards.

SECTION 7

         All female regular employees, when they return to their job, after
enjoying this leave, shall be entitled to a period of thirty (30) free minutes
with pay at the beginning of their regular work shift during a period of five
(5) working days.


                                       21
<PAGE>   23

                                   ARTICLE 30
                                LEAVE WITHOUT PAY
                                FOR UNION AFFAIRS

SECTION 1

         The Company and the Union will reach an agreement about the time
without pay to be granted to personnel designated by the Union to attend a
workers convention or another worker activity.

SECTION 2

         The Union shall notify in writing, the immediate supervisor, with copy
to the Department of Labor and Employee Affairs, with at least five (5) working
days of prior notice, the personnel appointed and the probable duration of the
absence.

SECTION 3

         The Union agrees that, when making its petition for free time for Union
activities, it shall give the proper consideration to the number of employees
affected so that there will not be no interruption of the Company's operations
due to the lack of available personnel.

SECTION 4

         The time that any employee is on Union Affairs Leave shall be
considered as service time for purposes of seniority.

         The employee, upon his reinstatement to the Company, shall be entitled
to the occupational level and salary corresponding to him as if he had been
working.

SECTION 5

         The Company and the Union agree that the time that an employee
belonging to the union is on union leave due to his occupying a position in the
Board of Directors of the Union shall be acknowledged as service for purposes of
retirement, and it shall not exceed seven (7) at the same time.

SECTION 6

         This benefit shall be made extensive to all those employees belonging
to the union who have served as members of the Board of Directors of the
Independent Union of Telephone Employees from its foundation in 1971 onwards and
which as of the date of the signature of this Agreement continue as regular
employees and members of the Union.

                                   ARTICLE 31
                    LEAVE FOR ADMINISTRATIVE FUNCTIONS OF THE
                         COLLECTIVE BARGAINING AGREEMENT

SECTION 1

         The Company shall grant five (5) Union Leaves with pay to the Union to
handle worker-employer matters between the Company, the Union and the union
members. It being understood that with regard to this leave, PRTC shall only pay
the sum of the salaries, minus the corresponding deductions of law with the
Union having to pay the fringe benefits and any other deduction or contribution.

SECTION 2

         Union Leave with pay shall be understood to mean that P.R.T.C. will pay
his net monthly salary to the employee enjoying said Leave, Christmas bonus and
the Company's contribution to the health plan. It being understood that with
regard to the Union Leave with Pay as well as the Union Leave without Pay the
benefits for Sick Leave, Vacation Leave and any other benefits, deductions or
contributions shall be agreed upon internally between said employee and the
Union, and in no case whatsoever shall they be paid as an additional and
separate compensation from the salary by the Company.

SECTION 3

         These leaves do not imply an obligation of payment for the concept of
per diems, lodging, mileage, transfers, overtime, differentials, assistance for
studies, scholarships and other benefits provided by the Collective Bargaining
Agreement, but the time of service on Union Leave shall be acknowledged for
purposes of retirement and seniority, as if it were time worked.

SECTION 4

         In the event that any Section of this article were to be declared
invalid or illegal by a Court with jurisdiction, the parties bind themselves to
enter into immediate negotiations for the purpose of agreeing a substitute
provision, mutually satisfactory for such article or section.


                                       22
<PAGE>   24

                                   ARTICLE 32
                                 MILITARY LEAVE

SECTION 1

         Any regular employee who joins the military service shall enjoy all the
rights provided by Public Act Number 756 of the United States Congress, as it
has been or may be subsequently amended.

SECTION 2

         When a regular employee renders temporary services in the Puerto Rico
National Guard in conformity to the relevant provisions of Act Number 62,
Military Code of June 23, 1969 (Puerto Rico Military Code) or in the Reserves of
the Armed Forces of the United States, pursuant to the United States Military
Code, he shall be entitled to a leave with salary of up to a maximum of thirty
(30) days in a natural year to attend the annual exercises.

                                   ARTICLE 33
                                LEAVE WITHOUT PAY

SECTION 1

         All employees who wish leave without pay to be absent from their job
shall request a written permission from the Company by sending a copy of his
petition to the President of the Union. It will be at the discretion of the
Company to grant said leave without pay.

SECTION 2

         All employees who are authorized leave without pay, once they have
returned to work, shall be obligated to pay to the Union the dues not paid
during the period of said leave, in monthly installments equivalent to the
period of the leave without pay granted, until the debt is liquidated. This
deduction shall be in addition to their regular dues, and the Union will request
it from the Company in writing.

SECTION 3

         The leave without pay may be extended up to a maximum of six (6) months
on the basis of the merits of the case and after a study is carried out by the
Company.

SECTION 4

         The purpose of this Leave shall not be that of allowing an employee to
try another job to change employment or to make a profit.

SECTION 5

         One employee for each department in each work center may receive the
benefits of leave without pay. One same employee cannot request leave without
pay in two (2) consecutive years. If there are extraordinary circumstances
involved and the applicant can show the merits of his petition, the Company may
leave without effect the limitations indicated in this section as long as the
service is not affected.

SECTION 6

         During the time that the leave lasts, the Company shall guarantee the
employees the following benefits:

         a) Health Plan

         b) Being retained in his same position or an equivalent position, with
            the same salary, employment benefits and conditions that he used to
            have. The use of this leave shall not result in the loss of
            seniority or accrued benefits as of the date of effectiveness of the
            same. c)

                                   ARTICLE 34
                           FAMILY-MEDICAL LEAVE (FMLA)

SECTION 1

         The employees covered by this Collective Bargaining Agreement may be
eligible for a family-medical leave without salary, as long as they fulfil the
requirements provided in the Family and Medical Leave Act of 1993 (FMLA) and the
regulations promulgated under the same. Said legislation shall rule the benefits
to be granted under the same.

SECTION 2

         The Company will consider requests for leave without pay under the
terms and conditions of the Family Medical Leave Act, for the birth or care of a
child, for the adoption or the custody of a child, or for the care of a spouse,
children or parents, due to a serious health ailment which requires prolonged
treatment through medical diagnosis or for the serious illness of the employee
himself, which prevents him from fulfilling his functions or for other
additional reasons, as long as the Company considers that the same justify the
granting of a leave without pay.

SECTION 3

         This leave shall not be greater than twelve (12) working weeks within a
period of twelve (12) months. Only


                                       23
<PAGE>   25
those employees who have worked for the Company no lesser than twelve (12)
months and who have rendered no lesser than 1,250 hours of service during the
twelve (12) months prior to the request for said leave may apply for this leave.
They must submit their request with thirty (30) days of advance notice before
the foreseeable date of the effectiveness of the leave, except in cases of
emergency. The Company may require medical certification in the cases in which
the leave is due to reasons of a serious health ailment. In addition, it may
require second and third medical opinions (paid for by the Company) and
qualification evaluations for the performance of their functions before the
employee returns to work.

         In cases where both spouses work in the Company and both are eligible
for the family-medical leave, they will be allowed to take a combined leave for
a total of 12 weeks of family-medical leave during the 12 week period,
applicable for each qualifying event. In the cases where the husband or wife
make use of a portion of the total of 12 weeks of the family-medical leave for a
qualifying event, the husband and the wife shall be entitled to the difference
between the number that he or she took individually and 12 weeks of
family-medical leave for another purpose.

         The total period of this leave shall be twelve (12) weeks of work
within a period of twelve (12) months, calculated in a twelve (12) month rolling
form. Any other leave granted under this Collective Bargaining Agreement with or
without pay, which is eligible under the Family and Medical Leave Act, will run
concurrently with this Family-Medical Leave.

SECTION 4

         During the time that the employee is enjoying this Family-Medical
Leave, the Company will guarantee the medical plan and the insurance to which
the employee is subscribed. In turn, it will guarantee the retention of his same
position or an equivalent position, with the same salary, employment benefits
and conditions that he used to have. The use of this leave will not result in
the loss of seniority or accrued benefits as of the date of effectiveness of the
same.

SECTION 5

         The employees, while they are on leave, shall be considered as having
been dismissed from the job, if they accept work with another employer who is
dedicated to business for the purpose of profit and/or who request unemployment
compensation.

SECTION 6

         When granting this twelve (12) week leave, at the request of the
employee, the Company may, in its sole discretion, grant the leave provided by
Article 36, Leave Without Salary.

SECTION 7

         The provisions of this article are not subject to the grievance or
arbitration procedure of the Collective Bargaining Agreement except for cases of
reinstatement to the job by employees making use of the leave.

                                   ARTICLE 35
                                  FUNERAL LEAVE

SECTION 1

         All regular employees shall be entitled to enjoy a permit with salary
for funerals lasting three (3) working days from the date of the death of any of
their natural parents or foster parents (one excludes the other), of his spouse,
of children or of siblings and one day in the event of the death of grandparents
and in-laws.

SECTION 2

         In the event of the death of the natural or foster parents (one
excludes the other), of his spouse, of children and siblings and the funeral
took place outside of Puerto Rico, the employee may enjoy a leave with salary of
up to five (5) working days from the date of the death to travel to the place of
the burial.

SECTION 3

         In the event that an employee needs additional time, the Company shall
grant the same with charge to the vacation leave that the employee has accrued.

SECTION 4

         The Company may require evidence of the death, as well as of the burial
and the trip outside the country.

                                   ARTICLE 36
                           LEAVE FOR JUDICIAL PURPOSES

SECTION 1

         All regular employees shall be entitled to enjoy a permit with salary
for the time that is required by a court of justice to serve as jury.

SECTION 2

         The Company shall pay the regular salary of an employee who is
officially subpoenaed by the district attorney's


                                       24
<PAGE>   26
office or by a court of justice or an administrative agency for a quasi-judicial
proceeding to appear as a witness in a criminal case for all the regular working
hours which said subpoena prevents the employee from showing up at his work. The
employee must inform his immediate supervisor about said subpoena with at least
two (2) days of prior notice unless he is subpoenaed within a lesser period. The
employee must return to his work immediately as soon as he ends his interview
with the district attorney, or be excused by the court. The employee must
present written evidence of the subpoena, as well as of his appearance before
the district attorney and/or the court.

SECTION 3

         When an employee who has been officially subpoenaed to appear before
any court of justice, district attorney, administrative entity or government
agency which is not covered by the two (2) previous sections, he shall be
entitled to enjoy leave without pay for the time during which said official
subpoenas prevent him from showing up at his regular work day. The employee may,
at his option, charge this time to vacation leave.

SECTION 4

         When an employee is subpoenaed, arraigned or accused due to the alleged
commission of a criminal act allegedly committed during his working hours, the
days utilized to appear in court or at the citations, at the request of the
employee, shall be charged to his accrued and unenjoyed regular vacation leave
or in its defect he shall be granted leave without pay, as long as he presents
evidence of the appearances. It being provided that if he were exonerated or the
crime of which he is accused is filed, such days shall be paid to him and the
time shall be taken into consideration for all purposes of the law and the
Collective Bargaining Agreement as time which has been worked.

                                   ARTICLE 37
                                    PER DIEMS

SECTION 1

         Per diems are understood to be the expenses for meals and lodging in
which the employees incur when they are required to work outside of the
municipality where their work center is normally located or vice-versa and of
hours outside their regular work day where their work center is normally
located.

SECTION 2

         When an employee is required to work in a place outside of the
municipality where his work center is normally located for a period not greater
than one day, the Company shall pay expenses for meal and lodgings up to the
amount and under the conditions specified further on:

         a. If he leaves on or before 6:00 a.m. and returns on or after 8:00
a.m. of the same day, for breakfast the first year of the Collective Bargaining
Agreement five dollars ($5.00) shall be paid, and five dollars and fifty cents
($5.50) the second and third years.

         b. If he leaves on or after 8:00 a.m. and returns on or after 1:00 p.m.
of the same day, eight dollars and fifty cents ($8.50) shall be paid for lunch,
during first year of the Collective Bargaining Agreement, and nine dollars
($9.00) during the second and third years.

         c. If he leaves on or after 1:00 p.m. and returns on or after 7:00 p.m.
of the same day, eight dollars and fifty cents ($8.50) shall be paid for dinner
during first year of the Collective Bargaining Agreement, and nine dollars
($9.00) during the second and third years.

         d. If the employee were required to spend the night, he shall be
entitled to lodging and seventy dollars ($70.00) shall be paid during the three
(3) years of the Collective Bargaining Agreement.

SECTION 3

         The employees who travel to the Islands of Vieques and/or Culebra shall
receive for the concept of per diems, the following amounts, during the three
years of the Collective Bargaining Agreement:

<TABLE>
<CAPTION>
         Breakfast                  Lunch                      Dinner
         ---------                  -----                      -------
<S>                                 <C>                        <C>
          $5.50                     $9.00                      $9.00
</TABLE>

SECTION 4

         In the event that an employee has to work in a place outside of the
municipality where the employee's work center is normally located for a period
greater than one day, during which term of time the employee has to have his
meals and sleep in said place, the Company shall pay the amount of ninety-two
dollars ($92.00) daily during the first year of the Collective Bargaining
Agreement, ninety-three dollars and fifty cents ($93.50) daily during the second
and third years, an amount which will cover all the expenses in which the
employee incurs and for which amount the employee will not have to present a
receipt or vouchers. In addition, if he were required to work up to beyond seven
(7) hours from the end of his working day, he shall be paid a per diem for the
amount of $8.50 during the first year of the Collective Bargaining Agreement,
$9.00 during the second and third years.


                                       25
<PAGE>   27

SECTION 5

         For purposes of this article, the municipalities comprised in the
Metropolitan Telephone Area are considered as one single work center, which are
the following: San Juan, Santurce, Hato Rey, Rio Piedras, Pueblo Viejo, Puerto
Nuevo, Caparra, Guaynabo, Levittown, Catano, Bayamon, Carolina, Trujillo Alto,
Isla Verde and any other area within those boundaries.

SECTION 6

         Expenses for the concept of per diems will be reimbursed to employees
who are working in the municipality where their work center is normally located,
under the following circumstances:

         a. To the employees who work exclusively in the dawn work shifts which
are the work shifts that regularly end after 12:00 midnight, they shall be paid
five dollars ($5.00) for a snack during the first year of the Collective
Bargaining Agreement and five dollars and fifty cents ($5.50) during the second
and third years.

         b. In the case of employees who work any (daily) schedule of eight (8)
hours and are required to continue working for more than an hour and a half (1
1/2), they shall be paid a per diem for the amount of eight dollars and fifty
cents ($8.50) during the first year of the Collective Bargaining Agreement and
nine dollars ($9.00) during the second and third years.

         c. In those cases in which the employees are required to work in some
place outside the municipality where their Work Center is normally located and
once they return to their work center, or vice-versa, and they are required to
continue working consecutively for more than one hour and a half (1 1/2) they
shall be paid the per diem of eight dollars and fifty cents ($8.50) during the
first year of the Collective Bargaining Agreement and nine dollars ($9.00)
during the second and third years provided herein. In the event that the
employee is required to work outside the municipality where his work center is
normally located and after the employee working there his regular day he is
required to continue working consecutively in said place for more than one hour
and a half (1 1/2), he shall be paid a per diem of eight dollars and fifty cents
($8.50) during the first year of the Collective Bargaining Agreement and nine
dollars ($9.00) during the second and third years.

         If the employee continues working up to beyond the seven hours (7) from
the end of his daily eight (8) hour work shift, he shall be paid a second per
diem.

         The time in which the employee incurs in the consumption of meals shall
not be considered as time worked and the employee shall not receive pay for said
time.

SECTION 7

         In those cases where an employee is required to work outside of the
municipality where his work center is normally located and during this period of
time there are holidays between two (2) working days, the Company shall pay per
diems and lodging for said holidays.

         In those situations in which an employee is required to report at work
on a Monday at 8:00 a.m. outside of the municipality where his work center is
normally located, the Company will pay the lodging for the previous day
according to the terms of this article, as long as the employee is authorized to
spend the night in lodging during the previous Sunday.

         In those cases where an employee is required to work outside of the
municipality where his work center is normally located and he becomes ill during
this time, the Company will be obligated to pay the per diems provided in this
article, as long as the employee spends the night in the lodging in the
municipality where he is required to work and complies with the provisions of
the article regarding Sick Leave and never for a period in excess of two (2)
days.

SECTION 8

         The following employees shall be entitled to the per diem which is
provided further ahead:

         a. All employees regularly assigned to Bayamon, Levittown or Catano who
are required to work temporarily in Carolina, Isla Verde or Trujillo Alto, and
in like manner, all employees assigned regularly to Carolina, Isla Verde or
Trujillo Alto who are required to work temporarily in Bayamon, Levittown or
Catano.

         b. All employees regularly assigned to Bayamon, Levittown or Catano
when they are required to attend training at the Technical Training Center
(TTC), while the same is located at Las Virtudes; it being provided that if said
Training Center were to be relocated, the parties will renegotiate this clause.

         In these cases, a per diem of eight dollars and fifty cents ($8.50)
shall be paid during the first year of the Collective Bargaining Agreement and
nine dollars $9.00 during the second and third years for each day that they work
temporarily up to a maximum period of thirty (30) calendar days. Upon finishing
the temporary assignment, the aforementioned per diem for each day worked shall
be suspended and the employees shall be reassigned to their work center of
origin or shall be regularly reassigned to the work center where they are
rendering their services temporarily. The Company may extend the temporary
period for an additional period in which case the employees shall


                                       26
<PAGE>   28
continue receiving the per diem of eight dollars and fifty cents ($8.50) during
the first year of the Collective Bargaining Agreement and nine dollars ($9.00)
during the second and third years until the Company determines that the work
that had been assigned to them had concluded.

SECTION 9

         All employees whom the Company requires to attend to testify in its
favor at hearings at the Department of Consumer Affairs (DACO), Public Service
Commission and/or any other government agency, whether state or federal and/or
state or federal court, shall receive the per diems in conformity to Section 2
of this article.

SECTION 10

         Nothing in this article shall be construed in a manner that may imply
the payment of per diem for more than one concept (pyramidal payment).

SECTION 11

         In the event that an employee is required to travel outside of Puerto
Rico, the Company will pay the expenses for meals, as provided in Section 2 of
this article and the lodging shall be for the cost of the same, pursuant to a
receipt with previous authorization on the part of the Company.

                                   ARTICLE 38
                                 TRANSPORTATION

SECTION 1

         When an employee is required to work at a place outside of where his
work center is normally located, the Company, as the case may be, shall supply
the transportation, pay the transportation expenses in which he incurs in
advance or reimburse them, in accordance to what is being provided further on.

SECTION 2

         The transportation expenses must be approved and paid by the Company
prior to incurring in them, it being provided that transportation expenses which
an employee normally incurs in going and/or coming (from his residence) to his
work center shall not be considered to be reimbursable expenses; in addition,
expenses for transportation shall not be paid when the transportation is
supplied by the Company.

SECTION 3

         The employees authorized to utilize their private vehicles shall be
paid at the rate of thirty-nine ($0.39) cents per mile for vehicles without
public liability insurance and forty-three ($0.43) cents per mile for vehicles
with public liability insurance. To determine the miles for the purposes of
claiming the payment, the distance tables between the towns prepared by the
Highway Authority and that of the Metropolitan Area prepared by the Company
shall be used. When the distance tables cannot be applied, the reimbursement
system will be utilized and the employee must inform the distance travelled.

SECTION 4

         When the Company orders an employee to carry out an official trip due
to service needs or when it assigns him to some temporary duties outside of his
regular work center, it shall provide said employee with the means of
transportation from his work center, or instead, it shall pay him the
transportation expenses in advance for the miles he has to travel on said
official trip or for the ones that he may have to travel due to the temporary
assignment from his regular work center.

         This section applies only when the employee shows up at his regular
work center and is sent to work to another place on the same day.

SECTION 5

         When the Company requires an employee to travel directly from his house
to another work center to which he has been temporarily assigned, the Company
will pay said employee for the miles of distance that exist between his regular
work center and the center to which he has been temporarily assigned. The
assignments requested by the employee are excluded from the benefits of this
section.

SECTION 6

         When an employee is required to utilize public transportation, he shall
be reimbursed in accordance to the effective rate in the transportation means
utilized. He will not be reimbursed on the basis of the rate for one means when
the means utilized is another one. The use taxis shall be conditioned to the
employee's presenting together with the petition for reimbursement the following
information: taxi license, name of the taxi line and the number of the taxi.

SECTION 7

         To be entitled to the payment or to the reimbursement of any expense
provided in this article, the employee must complete the forms established by
the Company for this purpose.


                                       27
<PAGE>   29

SECTION 8

         When the Company determines, on the basis of he need, to permanently
transfer an employee from one municipality to another and as a result of said
transfer, the employee changes his residence to the municipality to which he has
been transferred, the Company shall compensate for the following expenses:

         a. Moving expenses really incurred in which must be approved previously
and justified by a receipt signed by the moving company.

         b. Transportation expenses, and per diems and lodging expenses in
conformity to the terms of this Agreement during the time that the employee has
to travel to the new work area until he transfers his residence permanently, for
a period of up to thirty (30) working days from the effective date of the
transfer. If the employee has not moved within the sixty (60) days following the
transfer, he will only be entitled to the benefits provided in Section 9 of this
article and therefore must return what he has been paid in excess.

         Permanent transfers carried out within the limits of the boundaries of
San Juan, Santurce, Hato Rey, Rio Piedras, Pueblo Viejo, Puerto Nuevo and
Caparra and any other area within those boundaries, are excluded from the
benefits of this section, as well as the transfers carried out at the employee's
request.

SECTION 9

         When due to service need, the Company determines to permanently
transfer an employee from one municipality to another and the employee does not
move his residence, he shall be entitled to receive transportation expenses and
per diems for a period of thirty (30) working days for the excess miles of
distance, if any, that he has to travel between his old regular work center and
his residence and his new regular work center and his residence. This shall be
measured by highway through the closest route.

SECTION 10

         For exclusive purposes of this article, transfer shall be understood to
mean:

         a. Any permanent change from one municipality to another as long as the
employee continues in his same occupational classification.

         Each one of the following areas shall be considered as a municipality:

                  1)  San Juan-Santurce-Isla Verde
                  2)  Hato Rey-Rio Piedras
                  3)  Pueblo Viejo (includes Caparra and Puerto Nuevo)

         b. In addition, the Levittown area shall be included in the
municipality of Catano.

SECTION 11

         For the exclusive purposes of transfers motivated by relocation of work
center, the telephone metropolitan area shall be considered as one single
municipality including all of the following: San Juan, Santurce, Hato Rey, Rio
Piedras, Guaynabo, Pueblo Viejo, Levittown, Catano, Bayamon, Carolina, Trujillo
Alto, Isla Verde and any other area within those boundaries. However, any
employee regularly assigned to Bayamon, Levittown or Catano who is permanently
transferred to Carolina, Isla Verde or Trujillo Alto or vice versa, shall be
entitled to mileage during the term provided in this article.

SECTION 12

         The transfers that occur at the petition of the employee are excluded
from the benefits of this article.

SECTION 13

         In the event that the Company adopts a mileage payment policy that is
superior to the one established in this Agreement to be applicable to
non-covered employees, said policy shall be applicable to the Bargaining Unit.

SECTION 14

         a. The employees who are assigned to work in a municipality or place on
the Island in which it is proven that there exists no adequate lodging and who
are authorized by the Company to lodge in another nearby municipality where
there is adequate lodging, shall be entitled to receive the benefits mentioned
in this article relating to the transportation from the authorized lodging to
the assigned work center.

         b. When the employees are assigned to work temporarily outside of their
regular work area in a municipality or place on the Island where they are
required to spend the night in said place, the Company must provide adequate
transportation.

SECTION 15

         The employees from the Traffic Department who work night work shifts
and who end their work shifts between 10:00 P.M. and 12:00 midnight, shall
receive pay for transportation for the amount of $4.25.

SECTION 16

         The provisions of this article, except Section 5, shall apply to the
Installers/Testers of equipment for the Central


                                       28
<PAGE>   30
Office who report to their work center and who during the course of that day are
required to work at another work center.

                                   ARTICLE 39
                               USE OF AUTOMOBILES

SECTION 1

         In all the cases where an employee is required to use his automobile in
official endeavors of his job, due to the fact that there is no fleet vehicle
available or that his duty so demands it, the Company shall answer for the
damages to property belonging to third parties and bodily damages to third
persons which may have arisen as a result of an accident due to the utilization
of said automobile.

SECTION 2

         The employee shall have to notify the police immediately and his
immediate Supervisor as soon as possible (within 24 hours) and shall remain at
the site of the events, until the police arrive and render the corresponding
report, except when it is not feasible. The employee shall submit an automobile
accident report (Form F-603, revised) with the signature of his immediate
supervisor, indicating the case number and any other report required by the
Company.

                                   ARTICLE 40
                   HOLIDAYS AND HOLIDAYS GRANTED OFF WITH PAY

SECTION 1

         The regular employees covered by this Collective Bargaining Agreement
shall receive pay for all the regular work hours and shall enjoy free time with
pay with the exceptions provided in this article on the following holidays:

<TABLE>
<S>                                                  <C>
1.       January 1st.                                New Year's Day
2.       January 6th                                 Three Kings Day
3.       Second Monday in January*                   Eugenio Maria de Hostos Day
4.       Third Monday in January                     Martin Luther King Day
5.       Third Monday in February                    George Washington Day
6.       March 22*                                   Abolition of Slavery Day
7.       Movable                                     Good Friday
8.       Third Monday in April*                      Jose de Diego Day
9.       Last Monday in May                          Memorial Day
10.      July 4                                      U.S. Independence Day
11.      Third Monday in July*                       Luis Munoz Rivera Day
12.      July 25                                     Commonwealth of Puerto Rico
                                                     Constitution Day
13.      July 27*                                    Jose Celso Barbosa Day
14.      First Monday in September                   Labor Day
15.      October 12                                  Discovery of America Day
16.      First Tuesday in November                   General Election Day (every 4 years)
17.      November 11                                 Veterans Day
18.      November 19*                                Discovery of P.R. Day
19.      4th Thursday in November                    Thanksgiving Day
20.      December 25                                 Christmas Day
21.      Individual                                  The Employee's birthday
</TABLE>

         If any of the aforementioned days were to be changed by means of
legislation, this article shall be understood to have been amended to that
effect.

         If during the effective period of this Collective Bargaining Agreement,
the Legislature of Puerto Rico or the United States decrees a holiday by law,
which is applicable to PRT, the Company and the UIET shall meet to discuss the
importance of the event and convenience of considering the new holiday.

         Whenever the aforementioned days fall on a Sunday, the next day shall
be considered a holiday.

         When one of the holidays acknowledged in this article coincides with
another holiday, the following working day shall be considered as a holiday for
all purposes.

SECTION 2

         The regular personnel required by the Company to work on holidays,
shall receive, in addition to their basic


                                       29
<PAGE>   31
pay, pay at time and a half for each hour worked, with the exception of what is
provided for in Section 5 of this article.

         It being provided that when the birthday coincides with another day
outside of his regular work schedule or with another holiday, his next working
day shall be considered, for all the purposes of this Agreement as his birthday.

SECTION 3

         To be able to be entitled to pay for the holiday, the employees will
have to have worked the last work day previously assigned, as well as the
assigned work day after a holiday. The employee who is absent during the
previous assigned work day and/or after a holiday and does not receive any pay
whatsoever from the Company during said absence shall not receive any pay for
the holiday. A duly justified absence on such days, which entitles him to
receive pay during said absence, shall also receive pay for the holiday.

SECTION 4

         The holidays with rights to pay as specified in the preceding paragraph
are those which coincide with the regular assigned work day. When a holiday of
the ones listed in this article is celebrated during the days from Monday
through Friday of any week and said holiday coincides with the employee's day
off during irregular work shifts, the employee shall be compensated for said
holiday in harmony with this article.

SECTION 5

         Those employees who voluntarily are willing to work the holidays marked
with asterisks (*), may request waiving the receipt of the payment at one and a
half times the hourly rate provided in Section 1 and substitute it for the
enjoyment of free time equal to that worked up to a maximum of eight (8) hours,
under the following criterion:

         1. The employee shall request in writing, before the year begins, the
dates when he will enjoy the holidays off with pay marked with an asterisk in
Section 1.

         2. Upon granting the employee holidays with pay, the Company will take
into consideration, principally, the service needs.

         3. The holidays with pay shall be enjoyed and compensated in accordance
to the regular work schedule of each employee (8 hours).

         4. The Company will schedule, in the same manner and criteria which it
establishes the regular vacation leave program, the enjoyment calendar of the
holidays granted off with pay which the employee voluntarily requests.

         5. The employee who works the holiday granted off with pay, previously
scheduled, shall have the option that the same be paid in accordance to what is
provided in Section 1 or shall have the option of the enjoyment of said day off
with pay to be rescheduled within a period no larger than ninety (90) days from
the day when he worked it.

         6. The holidays granted off with pay shall be enjoyed in accordance to
the annual program. These days may not be postponed for enjoyment during the
following year. A holiday granted off with pay may be fractioned for its
enjoyment into two (2) periods of four (4) consecutive hours, at the request of
the employee.

         7. At the request of the employee during the course of the year, these
days may be rescheduled on days which have not been previously selected by other
employees, as long as the service needs so allow it. The employee must present a
request for change with at least forty-eight (48) hours of advance notice, prior
to the day originally scheduled.

                                   ARTICLE 41
                                   HEALTH PLAN

SECTION 1

         During the effective period of this Collective Bargaining Agreement,
the Company commits itself to provide a health plan with the same benefits
provided by the health plan that was in effect at the time of the signing of
this Collective Bargaining Agreement, including benefits such as kerectomy,
chiropractors, psychologists and vaccines (Hepatitis A and B and boosters for
children), with the coverages, deductibles and limitations provided in the plan.
The employee shall select one of the following alternatives offered by the
medical service provider and will contribute on a bi-weekly basis the amounts
indicated below in accordance to his selection:


                                       30
<PAGE>   32

<TABLE>
<CAPTION>
                                                    Contribution during the
                                                    effective period of this
                                                    Collective Bargaining Agreement
                                                    -------------------------------
<S>                                                 <C>
         a.       Basic (H-MQ-A) + Major
                  Medical (M-3) + Pharmacy                    $2.70

         b.       Basic (H-MQ-A) + Major
                  Medical (M-3) + Dental (D-49)               $2.72

         c.       Basic (H-MQ-A) + Major
                  Medical (M-3) + Dental (D-49)               $6.54
                  + Pharmacy
</TABLE>

         In all the coverages for pharmacy indicated above, mandatory Generic
Bioequivalent medications shall be utilized, which shall be without any
deductible whatsoever. Notwithstanding the aforementioned, the brand name
medications shall have a deductible of $3.00 for each one. The over the counter
medications or medications without federal brochure shall have a deductible at
the rate of $3.00 for each one of them prescribed.

SECTION 2

         The employee, when signing the application form provided by the company
providing medical services, shall accept the terms and conditions imposed by
this Company. The Union and the employee accept that the terms and conditions of
the Medical Plan selected are not negotiable. The employee must remain in the
alternative selected until there is a Plan anniversary, on which date the
employee may change from one of the three alternatives to another one.

SECTION 3

         Every month the Company shall send the provider of medical services the
corresponding total contributions while the employee remains on active
employment with the Company, in other words, that the Company will cease its
contribution when the employee due to any reason is fired, laid off or while he
is suspended for more than thirty (30) days.

SECTION 4

         The Union authorizes the individual deduction of each employee member
of the Union of the corresponding contribution according to the alternative
selected by the employee, according to how it is provided for in Section 1 of
this article.

SECTION 5

         To obtain the hospitalization services for mental health conditions
which are related to the rehabilitation for the abuse of substances (drugs) and
alcohol through the medical plan, the employees must request the services of the
Employee Assistance Program (EAP) from the Company and obtain a
pre-authorization from them. If the services are not requested and if the EAP
pre-authorization is not obtained, the benefits will not be covered and the
payment shall be the responsibility of the employee. This requirement applies to
the employee covered by the medical plan.

         If the employee were hospitalized and it is determined that it is for
use or abuse of substances or alcohol, the subsequent hospitalizations and
ambulatory treatments must also be pre-authorized by the EAP.

SECTION 6

         The Union and the employees belonging to the union also agree and
commit themselves to the adequate use of the medical plan.

SECTION 7

         The Company may modify the effective Medical Health Plan at the
termination of the Collective Bargaining Agreement, in which case, if it were to
consider it necessary, it shall notify the Union about said intentions so that
the Union presents any suggestion that it deems relevant.

SECTION 8

         The Health Plan shall be administrated only in accordance to its
provisions and no matter relating to the Health Plan, nor any difference which
arises related to it, shall be subject to the Grievance Procedure or to the
arbitration process of this Collective Bargaining Agreement. The selection of
the Administrator of the Health Plan, the administration of the Medical Plan and
all the terms and conditions relating to the aforementioned and the solution of
any discrepancy related to the terms, conditions, construction, administration
or adequate benefits shall be determined by and be subject solely to the
discretion of the Company.


                                       31
<PAGE>   33

                                   ARTICLE 42
                            SALARIES OF NEW EMPLOYEES

SECTION  1

         All new personnel who joins the Company after the effective date of
this Collective Bargaining Agreement shall start with the type of salary per
hour that applies to the occupational group of the position to which they belong
according to the following scale:

<TABLE>
<CAPTION>
OCCUPATIONAL                                   RATE PER HOUR AS OF THE
GROUP                                          SIGNATURE OF THE AGREEMENT
------------                                   --------------------------
<S>                                            <C>
1-3                                                     $ 5.25
 4                                                      $ 5.25
 5                                                      $ 5.50
 6                                                      $ 5.75
 7                                                      $ 6.00
 8                                                      $ 6.50
 9                                                      $ 6.75
10                                                      $ 7.00
11                                                      $ 7.50
</TABLE>

         In addition, it is stipulated that the salaries for new employees
established herein, shall be maintained at a level of ten cents ($0.10) per hour
over the minimum salary applicable to each level.

         The employees who join after the signature of this Collective
Bargaining Agreement shall be entitled to the raises granted during the first,
second and third anniversary, as long as they are regular employees on the date
when these raises are granted.

PRT PROPOSAL



    (signed)                                         (signed)
---------------------                         --------------------------
Jose R. Ponce - PRT                           Jose Juan Hernandez - UIET
                                              Approved October 6, 2000


                                       32
<PAGE>   34

                                   ARTICLE 43
                                     SALARY

SECTION 1

         All employees covered by this Collective Bargaining Agreement who are
regular employees on the dates which are provided further on, shall receive the
hourly raises which are provided:

<TABLE>
<CAPTION>
AS OF JANUARY 18, 2000       AS OF JANUARY 18, 2001            AS OF JANUARY 18,  2002
----------------------       ----------------------            -----------------------
<S>                          <C>                               <C>
$0.85 Per hour               $0.75 Per hour                    $0.70 Per hour
 ---                           ---                              ---
 ---                           .05  Attendance raise             .10  Attendance raise
-----                        -----                             -----

$0.85  Total                 $0.80  Total                      $0.80  Total
=====                        =====                             =====
</TABLE>

SECTION 2

         The personnel which is promoted during the effective period of this
Collective Bargaining Agreement shall receive a raise of twenty cents ($0.20)
per hour for each grade to which they are raised, if their previous
classification is from grades 1 through 6 and a raise of twenty-five cents
($0.25) per hour for each grade that they are raised if their previous
classification is from grades 7 to 8 and a raise of thirty cents ($0.30) per
hour for each grade that they are raised if their previous classification is
from the grades 9 and 10.

SECTION 3

         The Union understands and accepts that the salary raise provided in
this Collective Bargaining Agreement has been agreed upon on the basis of the
commitment on the part of each one of the employees of the bargaining unit to
significantly increase their production in a manner that will place the Company
in the condition of attaining the objectives of improvement and expansion of the
telephone service.

SECTION 4

         Notwithstanding what has been established as minimum salary per hour in
the article regarding Salary for New Employees and in this article, the Company
may establish one or more incentive program(s) for each work classification(s)
covered in this Collective Bargaining Agreement as well as modifying, changing,
eliminating or reestablishing said program(s), as long as the same do not affect
and/or reduce the minimum salaries per hour established in the article regarding
the Salaries of New Employees and in the article regarding the Salary of New
Employees and in this article.

                                   ARTICLE 44
                            INCENTIVES FOR ATTENDANCE

         The Company shall grant an Incentive for Attendance, which shall
provide the employees with the opportunity to receive compensation based on the
criteria which is specified further on:

SECTION 1

         This raise due to attendance shall be granted to employees who have had
no less than six (6) days of absence during the 2nd year of the Collective
Bargaining Agreement and four (4) days of absence during the 3rd year of the
Collective Bargaining Agreement, during the twelve (12) months prior to the date
when the salary raise is granted.

SECTION 2

         For the purpose of attendance, the following factors shall be
considered:

         o  Sick Leave (S)
         o  Leave without salary (S)
         o  Unjustified absence (U)

SECTION 3

         Criteria for the granting of the salary raise due to attendance:

         o Second salary raise (January 2001). $0.05 cents raise per hour shall
be granted for attendance to all regular employees who have had no more than six
(6) days of absences, during the twelve (12) months prior to the date when said
salary raise is granted.

         o Third salary raise (January 2002). $0.10 cents per hour shall be
granted as raise for attendance for those employees who have had no more than
four (4) days of absences, during the twelve (12) months prior to the date when
said salary raise is granted.

     PRT PROPOSAL



    (signed)                                        (signed)
---------------------                       --------------------------
Jose R. Ponce - PRT                         Jose Juan Hernandez - UIET


                                       33
<PAGE>   35

                                   ARTICLE 45
                                  DIFFERENTIALS

SECTION 1 - Differentials for Nighttime Work Shifts

         The Company shall pay a differential of $.80 per hour worked as part of
the regular work schedule in night work shifts, which are all of those work
shifts that regularly end between 9:00 P.M. and 12:00 (midnight).

         The night work shift may coincidentally be a split work shift with a
right to pay for differential in accordance to what is stipulated in the section
regarding the differential for split work shifts. In these cases, the employee
shall only receive the pay for one differential (the highest of the two).

SECTION 2 - Differential for Split Work Shifts

         The Company shall pay a differential of $.90 per hour worked as part of
the regular work day in work shifts with two (2) or more hours of separation
between the two parts of the same. To be entitled to this pay for differential
two (2) or more hours of separation between the two parts of the work shift must
have elapsed. The separation between the two parts of the work shift shall not
exceed four (4) hours.

         The split work shift may be coincidentally a night work shift with
entitlement to payment for differential in accordance to how it is stipulated in
the section regarding Night Work Shift Differential. In these cases, the
employee shall only receive the payment of a differential (the highest of the
two).

SECTION 3 - Differential Dawn Work Shifts

         The Company shall pay a differential of $1.00 per hour worked as part
of the regular work day in dawn work shifts, which are all those work shifts
which regularly end between 12:00 midnight and 7:00 A.M.

SECTION 4

         The Company shall grant all the employees from the bargaining unit a
salary differential of $.80 per hour that they work in regular work shifts that
comprise Saturdays and/or Sundays (the differential shall only be paid for the
hours worked on Saturday and Sunday). This differential does not apply in cases
where work is performed on Saturdays and/or Sundays in overtime.

SECTION 5

         These differentials shall be part and not in addition to any
differential that is provided by the law or regulations which apply to the
Company for work during schedules comprised in the work shifts included in
Sections 1, 2 and 3 of this article.

                                   ARTICLE 46
                               CHRISTMAS BONUS AND
                            SPECIAL ATTENDANCE BONUS

         All regular employees covered by this Collective Bargaining Agreement
who meet the requirements provided by the Bonus Act (Act #148 of June 30, 1969,
as amended) shall be entitled to receive a Christmas Bonus of 8% for each year
of the Collective Bargaining Agreement with regard to the total of the salaries
received during the bonus year. The term salary shall not include payments made
to the employee for the concept of Occupational Sick Leave, Prolonged Sick Leave
and the Christmas Bonus of the previous year. The same shall be payable between
December 1st. and 15 of each year of the Collective Bargaining Agreement.

                                   ARTICLE 47
                                    PENSIONS

SECTION 1

         The Company agrees to maintain in effect the Pension Plan known as the
"Puerto Rico Telephone Company Pension Plan for Hourly Employees" put into
effect on January 1st, 1972, and agrees to amend the formula that is utilized to
determine the monthly pension in the following manner:

         o THE YEARS OF SERVICE UP TO 20 YEARS WORKED SHALL BE PAID AT THE RATE
OF $44.00 PER YEAR OF SERVICE.

         o THE PENSION OF THE EMPLOYEE WITH 21 TO 29 YEARS OF SERVICE SHALL BE
CALCULATED AT THE RATE OF $46.00 FOR EACH YEAR OF SERVICE.

         o THE PENSION OF THE EMPLOYEE WITH 30 OR MORE YEARS OF SERVICE SHALL BE
CALCULATED AT THE RATE OF $52.00 FOR EACH YEAR OF SERVICE.

SECTION 2

         To be entitled to a full and normal pension, the regular employee must
have turned 62 years of age and have at


                                       34
<PAGE>   36

least twenty (20) years of credited service. An employee shall be entitled to a
pension without any reduction when he has 30 years of service.

SECTION 3

         To be entitled to early retirement, the regular employee must have
turned 52 years of age with at least twenty (20) years of credited service.

SECTION 4

         To determine the early retirement pension, the same formula for the
determination of the normal pension shall be utilized and from the result three
percent (3%) shall be deducted for each year anticipating his pension at the age
of 62.

SECTION 5

         The Vesting Right section is amended only after having five (5) years
of credited service with the Company. In these cases, the pension will be
calculated on the basis of the formula which is in effect as of the date when
the employee has resigned or has been separated from the Company. The Vesting
Rights are calculated on the basis of the actuarial value at the moment when the
employee is receiving or requests his regular pension upon turning 62 years of
age.

SECTION 6

         An additional benefit is established for the spouses of the employees
in the event of death. This benefit provides in the case of the death of an
employee, before retiring, and that he is eligible as of the date of his death,
to an early retirement pension, a benefit payable to his spouse. The amount of
this benefit to be paid shall be the accrued benefit up to the date of his death
reduced by the corresponding early retirement factor (5% for each year in
advance of his turning 62 years of age if he still does not have 20 years of
credited service, or 3% for each year prior to his turning 62 years of age if he
has 20 or more years of credited service as of the date of his death). In the
cases of the employees who die after having turned 52 years of age and that
these have elected one of the reduced options provided by the plan in the event
of death after retirement, the amount of the benefit shall be reduced on an
actuarial basis basing itself strictly on the option that the employee has
selected.

         The Company and the Union agree that the aforementioned amendments
and/or changes shall be applicable to any employee from the bargaining unit who
retires after the signature of the present Collective Bargaining Agreement.

SECTION 7

         The benefits of the Pension Plan shall be payable in their entirety by
the Company.

SECTION 8

         The employees who choose this benefit, during the effective period of
the Collective Bargaining Agreement, shall receive the following lump sum:

         5 to 20 years of service           6 months of salary
         21 to 29 years of service          9 months of salary
         30 or more years of service       12 months of salary

SECTION 9

         All the employees from the bargaining unit who choose to receive the
retirement benefits after the signature of this Collective Bargaining Agreement,
shall be eligible to participate in a family medical plan which shall be similar
to that one provided to the employees covered by this Collective Bargaining
Agreement, without the benefit of dental coverage.

         The retired employee will have to make the contributions provided in
Article 43 (Medical Plan) during the effective period of this Collective
Bargaining Agreement.

         The retired employee will have to make the contributions as indicated
in Article 43 (Medical Plan) during the effective period of this Collective
Bargaining Agreement.

SECTION 10

         Any employee from the bargaining unit who requests this benefit during
the effective period of the Collective Bargaining Agreement, may request
receiving the Social Security Level Option benefit, under the terms and
conditions established by the Company.

         PRT PROPOSAL



     (signed)                                       (signed)
-------------------                         --------------------------
Jose R. Ponce - PRT                         Jose Juan Hernandez - UIET



                                            Approved October 6, 2000


                                       35
<PAGE>   37

                                   ARTICLE 48
                           PUBLICATION OF WORK SHIFTS

SECTION 1

         The Company shall prepare and publish the work shifts of any group of
employees or of each employee with fifteen (15) days of advance notice. The
rotating work shifts that comprise the hourly work schedule from 8:00 A.M. to
12:00 N. and 1:00 P.M. to 5:00 P.M., from Monday through Friday, shall not be
published, except in the Work Centers which have work shifts working after 5:00
P.M., such as the Operator Call Centers, Repairs, Service Representatives and
other Call Centers.

         Only in cases of emergency and/or due to service needs, may the work
shifts be changed and informed to the employee with 48 hours of advance notice.
Emergencies and service needs shall be understood to mean cases such as: greater
breakages and/or which affect a substantial number of clients which interrupt
the services of the communications, severe atmospheric conditions, congestion of
calls in the services due to the fact that other call centers are affected,
unexpected absenteeism and special training needs in an unforeseen manner.

SECTION 2

         The Company shall assign the work shifts in each work center, following
the following principle, the work shifts shall be assigned for the benefit of
the employee in accordance to seniority in the Company. The employee with the
greater seniority may cede his work shift to another employee with less
seniority. To be able to cede a work shift, the employee must notify his
Immediate Supervisor with at least fifteen (15) days of advance notice.

SECTION 3 - Work Shifts of Pregnant Employees

         A pregnant employee who works a nighttime work shift or a dawn work
shift shall be entitled to replace the employee of lesser seniority who works in
her same work center and in her same classification during the daytime work
shift, as long as she is qualified to perform the work, during her seventh and
eighth month of pregnancy. Upon her return, after her maternity leave, the
employee shall be reinstated to the work shift system corresponding to her.

SECTION 4

         The rotating work shifts have the purpose of increasing the
productivity and improving service to the clients, in all of the Company's work
areas.

SECTION 5

         In the event that the employees in skilled and semi-skilled positions
where there is work done during nighttime work shifts, holidays, and weekends,
the personnel with greater seniority may be assigned to work shifts if the
personnel with lesser seniority does not have the skills, the trainings
completed or the knowledge required to perform the job. The assignment shall be
made for a term no greater than 30 days within a period of six (6) months within
one (1) calendar year.

         If the employee with greater seniority gives his consent and the
service needs so require it, the Company may extend the assignment for up to a
maximum of 30 additional days.

                                   ARTICLE 49
                                  PROGRESSIONS

         When an employee is prevented in progressing in his classification due
to the fact that the Company has not offered the course or courses required for
his progression or when even though the same has been offered, the Company has
not allowed him to attend the training although he requested it on time and was
available to take it or them, the Company shall approve his progression with the
condition that the employee approves the training later on.

         In all cases where the employee has been performing the work or the
functions of a position in a satisfactory manner, for a period greater than
eighteen (18) months, it will be considered that he has approved the training.
He may be able to modify this period by means of a written agreement between the
parties, as long as the employee has performed the functions in a satisfactory
manner during a period greater than twelve (12) months. Notwithstanding, the
employee will be obligated to take the corresponding training.

                                   ARTICLE 50
                     FINANCIAL AID FOR EDUCATIONAL EXPENSES

SECTION 1

         All regular employees with one year or more of service with the
Company, who have completed their last two job evaluations with qualifications
of at least satisfactory and who satisfactorily completes studies relating to
the area of telecommunications at learning institutions credited by the Council
of Higher Education or the Department of Education,


                                       36
<PAGE>   38
may request that the Company reimburse them for the first one hundred and sixty
dollars ($160.00) of the total cost of the tuition, plus eighty percent (80%) of
the remaining one per semester. The cost of the books, up to a maximum of a
hundred and sixty dollars ($160.00) per semester may be included in the balance.
The maximum amount to be reimbursed per semester, including books, shall not
exceed one thousand ($1,000.00) dollars.

SECTION 2

         The right to request reimbursement for completed courses shall expire
three (3) months after having finalized the same and the employee may not claim
those expenses that have been paid by means of any other study aid program. To
that purpose, the employee shall provide the necessary authorizations to verify
the existence or not of the other sources of aid.

SECTION 3

         The applicant must accompany his petition for reimbursement with
documents that evidence that the employee paid the tuition, as well as the grade
obtained. The employee must submit the originals or certified photocopies of
these documents. Before beginning the course, the employee must present his duly
filled out petition to the Company.

SECTION 4

         When the Company decides to put into effect a study scholarship
program, it shall give consideration to the employees who belong to the Union.
The applicant must fulfill the requirements which the Company establishes for
the granting of said scholarships.

SECTION 5

         The Company will not reimburse tuition expenses for courses taken in
learning institutions which are similar to the ones offered by the Company as
part of the Regular Training Program, except in those cases where the courses
are indispensable as requirements leading toward an academic degree.

SECTION 6

         The studies must be carried out during the employee's non-working
hours.

                                   ARTICLE 51
                                 LIFE INSURANCE

SECTION 1

         The Company agrees to provide life insurance for all the regular
employees from the bargaining unit, for the sum of fifty-five thousand dollars
($55,000.00) and another fifty-five thousand dollars ($55,000.00) for the
concept of accidental death and dismemberment.

SECTION 2

         The cost of this life insurance shall be paid in its entirety by the
Company.

SECTION 3

         The employee shall have the option to purchase optional life insurance
(option I and II), which shall be paid in its entirety by the employee.

                                   ARTICLE 52
                            UNIFORMS AND SAFETY SHOES

SECTION 1

         In the event that the Company requires the use of uniform as a
condition of employment, the Company shall provide five (5) uniforms upon the
employee's entry and five additional uniforms as of the date of his
anniversaries for service or one year after the previous ones have been handed
in without any cost whatsoever to the employee; it being provided that in those
cases in which the Company understands the use of overalls to be necessary, in
addition to uniforms, it shall provide the employees two (2) overalls upon entry
and two (2) on the anniversary or one year after the previous ones have been
handed over. The employee shall utilize these uniforms only when they are
performing essential functions of their job, with the employee having to make
good use of the same.

SECTION 2

         In those situations in which because of provisions of law applicable to
the Company or when the Company itself requires the use of safety shoes, the
same shall be provided to the employee without cost. These shoes shall be
utilized only when the employee is performing his functions, with the employee
having to make good use of them.

SECTION 3

         If the Company does not hand over the uniforms on the scheduled dates,
this does not have the effect that it is not obligated to hand over the same;
then, at the next handing over, it must supply the totality of the uniforms owed
up to that moment.


                                       37
<PAGE>   39

                                   ARTICLE 53
                              NO-STRIKE AND LOCKOUT

Section 1

         The Brotherhood agrees that neither if, nor the employees of the
Company who are part of the Bargaining Unit covered by this Agreement, may,
collectively, in a concerted fashion or individually devote themselves to
participate directly or indirectly in strikes of any nature, reduction in the
production or slow-down, interruption and/or paralysis of work, picketing,
boycotts or any other type of interference and/or interruption of the Company's
operations and activities.

Section 2

         During the effective period of this Agreement, the Brotherhood commits
itself to going to the Grievance Procedure provided by this same Agreement
instead of going to strike. To honor the terms of this Article and guaranteeing
a permanent and constructive industrial peace, the Brotherhood shall utilize all
the available resources and the ones that are in agreement with this Article.

Section 3

         In like manner, the Company commits itself, during the effective period
of this Agreement, to not make use of the lockout in any way whatsoever.

         To honor the terms of this Article and guarantee a permanent and
constructive industrial peace, the Company shall utilize all the available
resources and the ones which are themselves in consonance with this Article.

Section 4

         The Company reserves to itself the right to separate any employee from
the Bargaining Unit who carries out any of the actions stipulated above.

                                   ARTICLE 54
                               GRIEVANCE PROCEDURE

SECTION 1

         The term "grievance" comprises any controversy that involves the
interest of one or more employee and/or complaint, grievance or claim relating
to the construction, application, administration or alleged violation of this
Agreement.

SECTION 2

         The complaints of grievances may be presented by the Union or by the
Company.

SECTION 3

         All complaints or grievances shall be exclusively dealt with in
conformity to the mechanisms created in this article. The parties agree in this
Agreement that if controversies were to arise during the effective period of the
same, these shall not be resolved exclusively through the procedure which is
provided as follows.

SECTION 4 - First Stage

         a. Any grievance which arises shall be presented in writing in the
first instance within the term of fifteen (15) working days from the time that
the grievance arises or the employee has knowledge of it and the same shall be
presented by the Union delegate and/or the employee to the employee's immediate
supervisor.

         b. The supervisor, the delegate and the employee shall meet to discuss
and analyze the grievance and try to resolve the same. The supervisor will have
up to ten (10) working days, from the time that the grievance has been received,
to answer the same.

SECTION 5 - Second Stage

         If the Union or the employee are not in conformity with the decision in
this case, or once the term in which to answer has elapsed, the same shall be
appealed in writing within the seven (7) working days following the receipt of
the decision or the termination of the period for the first step, to the
immediate boss of the corresponding supervisor who shall have up to five (5)
working days in which to answer the grievance. The Union or the employee must
present in writing to the immediate boss of the supervisor a summary of what
happened during the first stage.

SECTION 6 - Third Stage

         a. If the Union is not in conformity with the decision issued in the
second stage of the case or once the term in which to answer has elapsed, any
Union officer may appeal filing the same within the ten (10) working days
following the receipt of the decision or the termination of the period to answer
in the previous stage if it has not been answered.


                                       38
<PAGE>   40

                  The appeal shall be presented in writing before the office of
the Director of the Labor and Employee Affairs in writing accompanied by a
summary of the facts, as well as the results of the previous stage.

         b. The Director of Labor and Employee Affairs or his representative
shall summon the President of the Union or his representative once the grievance
has been received within ten (10) working days following the receipt of the
grievance indicating the time, place and date, which shall be no later than ten
(10) days following the date of the summons.

         c. The Director of the Department of Labor and Employee Affairs or his
Representative, the President of the Union or his representative, the person who
took the action which gave basis for the grievance when the allegations of the
grievance so require it, as well as the grievant shall meet to the effect of
trying to resolve or conciliate the grievance. It being provided that in this
stage in those cases of suspension or dismissal the Company shall supply the
employee or the Union, with a copy of the documentary evidence on which the
disciplinary action is based.

         d. Once the grievance has been discussed, the Director of Labor and
Employee Affairs, or his representative, shall answer the same in writing, by
means of certified mail, within the next ten (10) working days. The decision
issued in the case may:

            1.  Confirm the determination.
            2.  Modify the determination including the reduction of the
                disciplinary measures.
            3.  File and leave the determination without effect.
            4.  Expand the investigation of the case if the need for it is
                determined.
            5.  Grant any other remedy which is consider appropriate.

         e. If the Union is not in agreement with the answer from the Director
of Labor and Employee Affairs, he may resort to arbitration as indicated further
on.

         f. The complaints regarding salary claims shall be filed in writing in
the first instance in the third stage within the term of fifteen (15) working
days from the time that the grievance arises or that the employee obtains
knowledge about it. The Director of Labor and Employee Affairs or his
representative shall summon the President of the Union or his representative
once the grievance has been received within the ten (10) following working days
upon the receipt of the grievance, indicating the time, place and date, which
shall be no later than the ten (10) days following the date of the summons. The
Director of Labor and Employee Affairs, or his Representative, shall have a term
of fifteen (15) working days in which to answer the grievance after the meeting
for the consideration of the same has been held.

SECTION 7 - Arbitration

         a. When the grievance has not been resolved in the previous stage, the
same may be submitted to arbitration within the following twenty (20) working
days following the receipt of the decision of the Director of Labor and Employee
Affairs once the term to answer has elapsed, whichever happens first. The Union
will submit to the Company a copy of the request and the date in which it was
submitted to Arbitration. The arbitrators to be utilized shall be those from the
Bureau of Conciliation and Arbitration of the Department of Labor and Human
Resources, except when another thing has been agreed upon between the parties,
and the same shall be selected in conformity to the procedure for the selection
of three candidates presented for selection and to the norms of said Bureau. The
decision of the Arbitrator shall be final and unappealable, which shall be
followed and complied with by the parties, as long as it is in conformity to the
Law. The parties shall submit to the Arbitrator the written submission of the
grievance to be resolved.

         b. The salary claims are excluded from this Arbitration procedure.
Notwithstanding, the salary claims up to $1,500.00 shall be dealt with in
accordance to the arbitration procedure established herein. The Union reserves
for itself the right to carry the cases of claims for salaries in excess of
$1,500.00 to the courts as long as it complies with the procedural terms
provided herein. It is made clear that all the other types of cases, such as but
without limitation, petitions for reclassification, per diems, promotions and/or
claims that they are performing work belonging to another classification, shall
continue to be dealt with through arbitration.

SECTION 8 - Cases of Suspension and Dismissal

         a. The Union acknowledges that it is a managerial prerogative inherent
to the administration of the business of the Company to establish norms of
conduct for its employees during the operation of the business and to apply
disciplinary norms due to just cause when said norms are violated.

         b. The Company, in its turn, acknowledges that in the administration
process and in the application of the norms of conduct and discipline applicable
to the employees, said processes must be fair and reasonable, for the purpose of
maintaining healthy employee-employer relations. The processes shall comply with
the following:


                                       39
<PAGE>   41

         1. The application of the disciplinary norm shall be carried out within
a reasonable term, after the violation or fault of which the employee is being
accused is known.

         2. The Company will carry out an investigation of the facts on which a
disciplinary action is based.

         3. The employee shall be notified in writing, with copy to the Union
about the violations of which he is accused and the disciplinary measure to be
imposed and the approximate date of the meeting which is described in the number
4 of this Section, 8b.

         4. The Company, whenever it is possible, shall hold a meeting with the
employee when imposing a disciplinary measure on him.

         5. In the cases of suspension or dismissal of employees, the following
procedure shall be followed when the Union or the employee consider the
suspension or the dismissal action to be unfair:

            a) If the employee considers his suspension or dismissal to be
unfair, he must present his grievance before the Union.

            b) In the event that the Union also considers the suspension or
dismissal of the employee unfair, the Union shall present a grievance in writing
within the fifteen (15) working days following the suspension or notice of
separation of the employee before the Director of Labor and Employee Affairs or
the person from the Company upon whom he delegates. If the grievance is not
resolved, the Union may request a meeting with the Director of Labor and
Employee Affairs, personally. The procedure before this Department shall be an
expedited one, it being understood that the cases of suspension and dismissal
shall be dealt with and investigated with priority over any other case submitted
prior to it and in like manner, in these cases, the expedited arbitration, if it
were necessary, shall be requested.

            c) The Director of Labor and Employee Affairs, upon evaluating the
action taken, shall have the same faculties provided for in Section 6(d) of this
Article.

            d) From here on, it shall be proceeded with, as provided in Section
6, clause e, which is the aforementioned one.

SECTION 9 - Cases of Publication and Adjudication of Positions, Transfers and
Promotions

         a. The grievances which arise in which an employee claims to be
entitled to a vacant position or that the article regarding "Publication
Adjudication of Positions and Appointments" has been violated shall be filed in
writing before the Director of Labor and Employee Affairs, indicating the
position that is being claimed, the requisition number for the position, and the
person with whom it was covered. The grievance must be presented within the
seven (7) working days following the adjudication of the position or from the
time that the employee has knowledge of the adjudication of the position.

         b. And it shall be proceeded with from here on as provided from Section
6, clause b of this article onwards.

         c. In all proceedings regarding the present section, the person to whom
the position has been adjudicated shall be notified and shall have the right to
participate and intervene in said proceeding.

SECTION 10 - Cases of Reclassification of Positions

         The grievances which arise as a result of a petition for
reclassification for a position shall be presented before the Company's Director
of Labor and Employee Affairs.

         In the event that the Union is not in agreement with the determination
of the Department in charge of the certification of positions with regard to the
petition for reclassification of a position and that it determines to file a
grievance, the same shall be filed before the Director of Labor and Employee
Affairs within seven (7) working days following the receipt of the notice of the
determination or seven (7) working days after the time to inform the Union about
the determination regarding the petition has elapsed. And from here on it shall
be proceeded with as provided in Section 6, clause b. of this article onwards.

         During the discussion of the grievance in this stage, the Union must
establish that the position has had some functions or duties assigned to it
which belonged to a superior position or that the duties and functions of the
same have evolved in a substantial and permanent manner toward a position of a
superior level or that functions or duties of greater complexity have been
assigned.

SECTION 11 - Grievances between the Parties

         The grievances of the Company shall be initiated by means of the
sending of a letter on the part of the Director of Labor and Employee Affairs to
the President of the Union. The grievances which the Union has regarding alleged
violations of the Union's rights or violations to the rights of groups or
classes consigned in this Agreement, shall be initiated by means of the sending
of a letter on the part of the President of the Union to the Director of Labor
and Employee Affairs.

         In both cases, these grievances shall be initiated in the third stage.
When the grievance is a Company


                                       40
<PAGE>   42
grievance, the President of the Union or his representative shall meet with the
Director of Labor and Employee Affairs within ten (10) working days after the
receipt of the grievance on the part of the Union. When the grievance is a Union
grievance, the Director of Labor and Employee Affairs shall meet with the
President of the Union within ten (10) working days after the receipt of the
grievance on the part of the Company. If the meeting is not held in the terms
indicated herein, the injured party may recur directly to arbitration in the
terms indicated in Section 7 (Arbitration) once the term has expired.

         The grievances of the Union and the Company shall have to be presented
within a period of ten (10) working days after the facts which motivated the
grievances have occurred or from the time that the grievant party obtains
knowledge of the events which motivated the grievance.

         If an agreement is not able to be reached between the parties, they
shall be proceeded in conformity to what is established in Section 7
(Arbitration) of this article.

SECTION 12 - General Provisions

         a. It is agreed that at no time whatsoever will the grievant employee
or the delegates or representatives of the Union be accompanied by more than one
employee although the grievance covers more than one, except in the cases of
separation when the grievants are not working. The parties, may by mutual
agreement in cases which so require it, excuse more than one employee as long as
the services are not affected.

         b. The Department of Labor and Employee Affairs shall hold meetings and
shall have at its discretion authority to investigate the cases referred to this
Department, obtain evidence and call witnesses one at a time.

         c. The terms to begin the different stages of this procedure are of a
jurisdictional nature.

         d. In those cases in which the Director of Labor and Employee Affairs
summons a worker for the purpose of this article, he must do so within his
working hours with pay.

SECTION 13 - Substantive Matters

         a. A stenographic transcript of the arbitration hearings shall be
prepared by the stenographer supplied by the Bureau of Conciliation and
Arbitration if there is one available. In the event that the Bureau were not
able to supply said Stenographer, the Arbitrator will notify the parties prior
to the Arbitration Hearing so that any of them, if they wish to obtain a
stenographic transcript, shall supply the Stenographer and pay the cost for the
same.

            If both parties wish a copy of the stenographic transcript, they
shall pay for it in equal parts. In the event that any of the parties decides to
submit a brief, the Arbitrator shall grant a term no greater then thirty (30)
working days in which to submit the same.

         b. The Arbitrator shall not have power or faculty to in any way
whatsoever alter, amend, change, modify, add or subtract in any way whatsoever
from any of the provisions of this Agreement, even from any of the provisions of
the article regarding "Management Rights". An award in violation of what has
been indicated above shall be null and without effect.

         c. The Arbitrator shall not have authority to grant damages.

                                   ARTICLE 55
                           STABILITY OF THE AGREEMENT

SECTION 1

         In the event that the merger of the Company or of any of its
dependencies with a private or public entity or that the Company divides into
separate or subsidiary structures, sells, transfers or leases property where
employees covered by this Agreement work, the Union must be notified with no
less than twenty (20) days of advance notice before the merger, division into
separate or subsidiary structures, sale, closing, transfer, lease, or
expropriation. In addition, the Company is obligated to inform the
aforementioned new entity about the existence of this Agreement.

SECTION 2

         In the event that as a result to said merger, division into separate or
subsidiary structures, sale, transfer, lease, closing or expropriation,
employees from the Bargaining Unit are displaced, the regular employees who are
affected shall be considered for relocation to other activities of the
Enterprise in conformity to the provisions of this Agreement.

SECTION 3

         If during the effective period of this Agreement the Company were to
acquire any facility or service which at the present time were being
administrated by another Company and it were integrated into the Company's
program, the new positions that are created, as well as any vacant position in
said new facility or service, which corresponds to the Bargaining Unit shall be
covered in accordance to the provisions of this Agreement. The time of seniority
for the purpose of this Agreement for all the personnel passing through the
Company by means of this procedure shall begin to count from the effective date
of their appointment as employees of the Company.


                                       41
<PAGE>   43

SECTION 4

         In the event that any transfer, sale, merger, division into separate or
subsidiary structures, lease of facilities or expropriation were to take place,
the Company, notwithstanding what is provided in the article regarding the
Effectiveness with regard to the duration of this Agreement, shall be released
from there on from all obligation under the same, except with regard to
obligations which had already been incurred in under the article regarding
Procedure for Grievances.

         This Collective Bargaining Agreement shall bind during its effective
period all successor employers of the Company even when the transfer, sale,
merger, lease or expropriation were a partial one.

                                   ARTICLE 56
                                  SEPARABILITY

SECTION 1

         In the event that part of any of the provisions of this Agreement were
to turn out to be illegal by virtue of the effective laws or the ones approved
in the future or by means of a judicial decree or a final judgment, issued by a
court of competent jurisdiction, or by any other government entity, such law,
decree, decision, order or judgment shall affect only the part or provision that
is declared illegal, but the same shall not invalidate the rest of the
Agreement, it being the express intention of the contracting parties that all
the portions not declared illegal shall remain in their full force and effect
during the effective period of this agreement. And in addition, it is stated
that nothing of what is agreed upon herein in shall in any way whatsoever
prevent any of the contracting parties to exercise their right to appeal the
judgment or judicial decision, order or judgment of the concerned government
entity.

SECTION 2

         In the event that any article or section were to be declared null or
the compliance or observation of such article or section were declared in
suspense, the parties affected by such action will enter into immediate
collective negotiations, for the purpose of agreeing a mutually satisfactory
substitute provision for such article or section.

SECTION 3

         In the event that in any matter or controversy more than one provision
of this Agreement may be applied or where more than one interpretation of the
same is possible, that provision or interpretation which turns out to be more
consistent with the Collective Bargaining Agreement interpreted in its entirety
shall be the one that will be applied.

                                   ARTICLE 57
                                SPECIAL TRAINING

SECTION 1

a. When the introduction of new specialized equipment, which requires special
training to operate the same, affects the work of the personnel from the
bargaining unit, the Company shall select the employees to be trained from among
the affected employees who meet the training requirements for the position and
approve the written examinations and/or practical tests which the Company
designs for said training.

b. The requirements, examinations and tests shall be established by the Company
prior to the selection of candidates for the training. The Company shall
determine in its criterion, the number of persons to receive the special
training, but when choosing among the candidates who qualify the Company shall
apply the following criteria: seniority; evaluations already written and
prepared in the normal course of employment during the past two (2) years;
attendance and timeliness records for the past two (2) years; disciplinary
records for the past two (2) years; related experience and training. Seniority
shall prevail over all the other factors if these were to turn out to be equal
among the employees to be trained.

c. If there do not arise sufficient candidates who qualify from among the
affected employees, the Company shall publish the position or positions in
conformity with Section 1 of Article 11 regarding "Publication, Adjudication of
Positions and Appointments". If sufficient internal candidates who qualify do
not arise, the Company will retain the right to include qualified personnel from
outside hiring in the training.

SECTION 2

         The Company shall extend to the selected candidates appointments
conditioned to the approval of the training. During the training period the
daily hourly schedule and the weekly work program may vary in accordance to the
needs and conditions of the training to be offered and the service rendered.

SECTION 3

         The employees who approve the trainings in which they participate shall
be maintained in said positions. However, those employees who do not approve
their training satisfactorily or who were not selected for the same shall


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<PAGE>   44
be reassigned to another position, as long as there exists another vacant
position and that they qualify for the same. If there does not exist a vacant
position or if the employee does not qualify for the vacant positions that may
exist, it shall be proceeded with in accordance to the article regarding
"Reduction of Personnel and Re-employment".

                                   ARTICLE 58
                                 TEMPORARY WORK

SECTION 1

         When the Company requires an employee to perform on a temporary basis
the tasks of another position, superior to his, on a temporary basis for a
period greater than one (1) working day, of any bi-weekly pay period, the
Company shall pay a differential, equivalent to the increase in salary that were
to correspond, if the employee were promoted to the superior position. This
differential shall be paid from the beginning of the temporary assignment, and
for the total of hours worked in this superior position. This differential shall
be established utilizing Section ___ of Article ____.

SECTION 2

Technical or Operational Training

A. For the purpose of being able to utilize and acknowledge the knowledge,
skills and experience of the members of the Bargaining Unit, the Company and the
Union agree, with the consent of the employee that, when it is necessary and
required by the Department of Training and Development of the Employee or the
Department of Centralized Traffic Services, these personnel shall be temporarily
transferred for the purpose of offering and developing courses during the
regular work shift related to his specialty, in conformity to the requests
received from the different areas with need in the Company.

B. A supplementary compensation, in other words, a differential, is established
as an economic incentive for all employees who devote time to teach courses
and/or specialized training in the area of telecommunications. A differential of
$1.30 from the basic salary per hour shall be granted, for the amount of hours
devoted, required by the Department of Training and Development of the Employee
or the operational area. The trainings mentioned herein are formal trainings
with an established curriculum for groups of employees, which shall not include
on the job training geared toward improving the skills of the individual
employees.

C. The $1.30 differential from the basic salary per hour shall apply to the
necessary hours before, during and after the time during which the training is
offered for the purpose of making it more effective: preparation of documents,
utilization of audiovisual equipment and other necessary resources for the
effectiveness of the training.

D. In those cases where it applies, the employee shall receive the corresponding
per diem and mileage.

E. The participation of the members of the UIET in these training functions
shall not be utilized by PRT to request that they be excluded from the
Bargaining Unit. Neither will they perform tasks from personnel included in
other Bargaining Units and they shall not supervise any personnel whatsoever.

                                   ARTICLE 59
                                  WELFARE FUND

SECTION 1

         The Company agrees to contribute the amount of six cents ($0.06) for
each hour worked for each employee covered by this Collective Bargaining
Agreement during the effective period of the same, for the Welfare Fund
established in accordance to the trust created by the parties. During the third
year of effectiveness of the Collective Bargaining Agreement, the Company agrees
to contribute the amount of seven cents ($0.07) for each hour worked for each
employee covered by this Collective Bargaining Agreement.

SECTION 2

         When any audit reveals a pattern of violations to the regulation or
that the administration of the fund has strayed away from the principles and
purposes for which this fund was created, the Company may discontinue the
contributions to the Fund until the violations have been corrected.

SECTION 3

         If this article, or the Trust created under the same were to be
declared illegal by a Court with competent jurisdiction, the Company shall
discontinue the contributions to said Fund and all existing funds as of that
moment shall be returned to the Company.


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<PAGE>   45
                                   ARTICLE 60
                            SUPPLYING OF INFORMATION

         The Company shall supply the Union, simultaneously, a copy of all
communications, documents, notices, memorandums, bulletins or brochures sent or
circulated to the employees comprising the bargaining unit.

         In addition, the Company shall supply a copy of all administrative
practices, procedures or policies, which are of application to the employees
covered by this Collective Bargaining Agreement, or which affect in any way
whatsoever, the terms and conditions of employment of these employees.

                                   ARTICLE 61
                                LEGAL ASSISTANCE

         The Company shall provide free of cost, services of attorneys selected
by the Company, to those employees who in the fulfillment of their duties were
to suffer an accident while driving motor vehicles on official matters and were
summoned and/or arraigned due to such events, or when being on official
endeavors, they are accused of a public crime, for events allegedly occurred
while they were rendering service to a client, except sexual crimes, murder or
controlled substances in any of its modes.

                                   ARTICLE 62
                                 CHILD DAY CARE

SECTION 1

         During the effective period of this Collective Bargaining Agreement,
the Company shall pay on a monthly basis to institutions devoted to daily child
care which count with the corresponding permits required by the laws applicable
to it, under the conditions provided further on. Said payment shall be for the
concept of the day care for the children of employees covered by this Agreement,
which maximum age is up to five (5) years or until the moment when they enter
the school system.

SECTION 2

         The number of children who may benefit from the provisions of this
Article, as well as from the maximum monthly contribution that the Company shall
forward, shall be in conformity to the following table:

         A maximum number of ninety (90) children with a maximum monthly benefit
of one hundred dollars ($100.00) per child during the effective period of this
Collective Bargaining Agreement.

SECTION 3

         These amounts shall be payable directly to the Day Care Center by means
of the prior presentation of an invoice by the corresponding center or through
the employee and in such situation the Company shall issue, on a monthly basis,
a check to the order of said Center, within the fifteen (15) calendar days
following the receipt of the invoice.

         It shall be the responsibility of the employee to pay the Day Care
Center for any difference between the rate and the maximum benefit paid for by
the Company, pursuant to what is provided in this article.

         The payment corresponding to the first year shall have effectiveness
from the beginning of the corresponding school year to the year 2000.

SECTION 4

         The children of employees who belong to the Union, whose parents shall
benefit from this help, shall be chosen by means of a raffle to be held no later
than the month of June of each year, during the effective period of this
Collective Bargaining Agreement. Each employee must request this benefit for a
son or daughter, in a manner that the greater number of employees may enjoy the
benefits. There shall participate in the raffle the employees who certify to the
Company, prior to the raffle, that they have young children, of up to five (5)
years of age. Said raffle shall be coordinated between the Company and the
Union. In the event that the total number of children is not covered, a second
raffle shall be held, in which another child of the employees who have resulted
benefitted in the first raffle may be included.

SECTION 5

         The employee selected shall certify that he has his son or daughter
registered in the duly authorized Child Day Care Center, which is operating with
all the necessary permits. The Company reserves for itself the faculty to
require any other relevant information and evidence of the required permits.

                                   ARTICLE 63
                                   CONTRACTING

SECTION 1

         The sub-contracting of work, tasks, services and functions shall not be
utilized to lay off or bump off employees covered by the bargaining unit.

SECTION 2

         If it were determined that it has a negative effect on the work
performed by the members of the bargaining unit the parties shall meet to
discuss what measures, if any, may be adopted geared toward preventing or
minimizing said negative effect.

SECTION 3

         In the event of an alleged controversy which arises from the
construction or application of this article, the Union shall be entitled to
proceed in accordance to what is provided in Article 55 of this Collective
Bargaining Agreement.

                                   ARTICLE 64
                              CHAUFFEUR'S INSURANCE

         The Company will pay the corresponding contributions under the
Chauffeur Social Security Act in its entirety (Act 428 of May 15, 1950, as
amended).


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<PAGE>   46

                                   ARTICLE 65
                       TIME SUBJECT TO BE CALLED "ON CALL"

SECTION 1

         In those cases in which the Company determines the need to have
qualified personnel subject to be called outside of the regular work schedule in
certain specialized classifications and areas of work where an on call personnel
schedule is required to be established, this article shall apply.

         The employees in work shifts subject to be called, must provide the
telephone number where they may be reached. If it were necessary, they shall be
provided with a beeper to make their location easier.

         The work shifts shall be assigned in an equitable manner whenever
possible.

SECTION 2

         The employee who is assigned to be on call shall be paid a bonus of
$12.00 per day, for assignment to this work shift, during the time that he is
assigned to be subject to be called. The minimum hours to be worked when called
and reporting to work shall be for a period no lesser than two (2) hours,
including the travelling time up to a maximum of thirty (30) minutes to reach
the designated place for work and thirty (30) minutes for the return to his
residence.

         If the employee were called to work, he shall be compensated in the
corresponding manner and as it is indicated in the Work Day and Overtime
Article, pursuant to how it is provided in this Collective Bargaining Agreement.
The bonus mentioned in this section shall also apply.

SECTION 3

         If the employee is called to work and does not answer the request to
report himself to the work site, he shall not be entitled to collect what is
provided in section 2 for that day's assigned schedule. If the employee to whom
a work shift corresponds for that day has not been able to be located on a
timely basis after several attempts to locate him, the supervisor shall state it
in writing with copy to the delegate of the Union.

         If the employee expresses not being available for the work requested,
the same shall be offered to another employee who follows him in turn.


         PRT PROPOSAL



    (signed)                                        (signed)
---------------------                       --------------------------
Jose R. Ponce - PRT                         Jose Juan Hernandez- UIET
                                            Approved October 6, 2000


                                       45
<PAGE>   47

                                   ARTICLE 66
                                  EFFECTIVENESS

         This Collective Bargaining Agreement shall be in effect during
thirty-six (36) months and shall begin to rule from January 18, 2000 until
midnight of January 17, 2003.

         However, the terms and conditions of the Collective Bargaining
Agreement between January 18, 2000 and October 6, 2000, shall be limited to:

1. All regular employees shall be eligible to receive a payment of $0.85 per
hour, for hours worked during this period.

2. For the calculation of the hours worked, the overtime hours shall be included
and the total payment shall be taken into account for the calculation of the
Christmas Bonus.

3. The regular employees who, as of the date of the ratification of the
Collective Bargaining Agreement on the part of the Union, are regular employees
in the Company's registries, shall be eligible.

4. This payment shall have the required legal deductions made and 50% shall be
paid on the date of the payment of the Christmas Bonus and the remaining 50%, on
January 18, 2001.

                                   ARTICLE 67
                                 TOTAL AGREEMENT

         The contracting parties recognize that, during the negotiations which
culminated in this Collective Bargaining Agreement, each one of them had the
right and the unlimited opportunity to formulate requirements and proposals with
regard to all the matters not excluded by law in the area of collective
bargaining and that all the agreements and collective bargaining agreements
reached by them by means of the exercise of such rights and opportunities,
appear stated in this Collective Bargaining Agreement.

         In like manner, the parties acknowledge that this Collective Bargaining
Agreement contains all the work conditions agreed upon by both and that from
this date onwards they shall be the only work conditions which shall rule the
relations between the parties.

         This Collective Bargaining Agreement may not be modified, amended,
changed or considered as terminated except by means of a written stipulation
duly signed by the authorized representatives for the parties, and it is the
intention of the contracting parties to reserve for any other future Collective
Bargaining Agreement that begins to rule after the expiration of this Collective
Bargaining Agreement any and all matters which are not expressly covered by this
Collective Bargaining Agreement.


Approved October 6, 2000


         PRT PROPOSAL



    (signed)                                        (signed)
---------------------                       --------------------------
Jose R. Ponce - PRT                         Jose Juan Hernandez- UIET


                                            Approved October 6, 2000


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