##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
 (Mark One)
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 Commission file number: 001-33750
 Maxcom Telecomunicaciones, S.A.B. de C.V.
 (Exact name of Registrant as specified in its charter)
 
 Maxcom Telecommunications, Inc.
(Translation of Registrants name into English)
 (Jurisdiction of incorporation or organization)
 
 (Address of principal executive offices)
 
 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Certificados de Participación Ordinarios CPOs
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:   (Title of Class)
 
 o þ
 o þ
 þ o
 o o
  o Large accelerated filer
    
    o Accelerated filer
    
    þ Non-accelerated filer
  o U.S. GAAP
    
    o International Financial Reporting Standards as issued by the
International Accounting Standards Board
    
    þ Other
 o þ
 o þ




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##### 



TABLE OF CONTENTS
 PagePART IITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    5ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    5ITEM 3. KEY INFORMATION
    
    
    5A. Selected financial data
    
    
    5B. Capitalization and indebtedness
    
    
    8C. Reasons for offer and use of proceeds
    
    
    8D. Risk factors
    
    
    8ITEM 4. INFORMATION ON THE COMPANY
    
    
    20A. History and development of the Company
    
    
    20B. Business overview
    
    
    21C. Organizational structure
    
    
    48D. Property, plant and equipment
    
    
    49ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    50ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    50A. Operating Results
    
    
    53B. Liquidity and capital resources
    
    
    67C. Research and development, patents and licenses, etc.
    
    
    80D. Trend information
    
    
    80E. Off  balance sheet arrangements
    
    
    80F. Tabular disclosure of contractual obligations
    
    
    80G. Safe Harbor
    
    
    81ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    81A. Directors and senior management
    
    
    81B. Compensation
    
    
    84C. Board practices
    
    
    86D. Employees
    
    
    89E. Share ownership
    
    
    89ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    90A. Major Shareholders
    
    
    90B. Related party transactions
    
    
    92C. Interests of experts and counsel
    
    
    92ITEM 8. FINANCIAL INFORMATION
    
    
    92A. Consolidated statements and other financial information
    
    
    92B. Significant changes
    
    
    92ITEM 9. THE OFFER AND LISTING
    
    
    94ITEM 10. ADDITIONAL INFORMATION
    
    
    95A. Share capital
    
    
    95B. Memorandum and articles of association
    
    
    95C. Material contracts
    
    
    114D. Exchange controls
    
    
    116E. Taxation
    
    
    116F. Dividends and paying agents
    
    
    127G. Statement by experts
    
    
    127H. Documents on display
    
    
    127I. Subsidiary information
    
    
    127ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    127ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    128Exhibit 6.1Exhibit 7.1Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2
   2




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PagePART IIITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    128ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    128ITEM 15T. CONTROLS AND PROCEDURES
    
    
    129ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    129ITEM 16B. CODE OF ETHICS
    
    
    130ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    130ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    130ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    131ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    131ITEM 16G. CORPORATE GOVERNANCE
    
    
    132PART IIIITEM 17. FINANCIAL STATEMENTS
    
    
    133ITEM 18. FINANCIAL STATEMENTS
    
    
    133ITEM 19. EXHIBITS
    
    
    135Glossary of Telecommunications Terms
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PRESENTATION OF FINANCIAL INFORMATION AND OTHER DATA
   SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
   
    
    competition in local services, data, Internet and Voice over Internet Protocol services;
    
    our ability to service our debt;
    
    limitations on our access to sources of financing on competitive terms;
    
    significant economic or political developments in Mexico and the U.S.;
    
    changes in our regulatory environment, particularly developments affecting the regulation of the telecommunications industry;
    
    our need for substantial capital;
    
    general economic conditions, including the economic slow-down in the U.S. and Mexico, due to the global financial crisis;
    
    the global telecommunications downturn;
    
    performance of financial markets and thus our ability to refinance our financial obligations when they come due;
    
    our history of operating losses;
  4




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##### Table of Contents




    
    the risks associated with our ability to implement our growth strategy;
    
    customer attrition;
    
    technological innovations;
    
    currency fluctuations and inflation in Mexico;
    
    currency exchange rates, including the Mexican Peso  U.S. dollar exchange rate;
    
    changes in the policies of central banks and/or foreign governments; and
    
    the risk factors discussed under Risk Factors.
   
 PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 
 A. Selected financial data
   5




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##### Table of Contents



Normas de Información
Financiera)
 As of the Year Ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2008(1)(unaudited)(Thousands of constant December 31, 2007 and nominal December 31, 2008 pesos and thousands of U.S.dollars(1), except per share data)Statement of Operations Data:MFRSNet revenues
    
    Ps.
    968,604
    
    
    Ps.
    1,242,104
    
    
    Ps.
    1,741,692
    
    
    Ps.
    2,345,719
    
    
    Ps.
    2,683,229
    
    
    
    U.S.$198,171Operating costs and expenses:Network operating costs
    
    
    (341,823
    )
    
    
    (414,332
    )
    
    
    (676,977
    )
    
    
    (976,979
    )
    
    
    (1,120,167
    )
    
    
    (82,730
    )Selling, general and administrative expenses
    
    
    (417,683
    )
    
    
    (505,566
    )
    
    
    (607,505
    )
    
    
    (722,618
    )
    
    
    (819,642
    )
    
    
    (60,535
    )Depreciation and amortization
    
    
    (373,606
    )
    
    
    (304,066
    )
    
    
    (300,468
    )
    
    
    (370,227
    )
    
    
    (551,889
    )
    
    
    (40,760
    )Total operating costs and expenses
    
    
    (1,133,112
    )
    
    
    (1,223,964
    )
    
    
    (1,584,950
    )
    
    
    (2,069,824
    )
    
    
    (2,491,698
    )
    
    
    (184,025
    )Operating (loss) income
    
    
    (164,508
    )
    
    
    18,140
    
    
    
    156,742
    
    
    
    275,895
    
    
    
    191,531
    
    
    
    14,146Other expenses
    
    
    (884
    )
    
    
    (6,883
    )
    
    
    (18,777
    )
    
    
    (12,819
    )
    
    
    (12,616
    )
    
    
    (932
    )Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,491
    )
    
    
    (3,655
    )Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (532,315
    )
    
    
    (39,314
    )Employeesstatutory profit changes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,257
    )
    
    
    (1,173
    )
    
    
    (87
    )Other expense, net
    
    
    (884
    )
    
    
    (6,883
    )
    
    
    (18,777
    )
    
    
    (16,076
    )
    
    
    (595,595
    )
    
    
    (43,988
    )Comprehensive financial results:Interest expense and commissions, net
    
    
    (41,818
    )
    
    
    (109,351
    )
    
    
    (144,032
    )
    
    
    (232,912
    )
    
    
    (255,662
    )
    
    
    (18,882
    )Interest gain
    
    
    
    
    
    
    4,494
    
    
    
    8,591
    
    
    
    55,793
    
    
    
    53,994
    
    
    
    3,988Exchange (gain) loss, net
    
    
    (1,567
    )
    
    
    41,902
    
    
    
    (6,568
    )
    
    
    4,826
    
    
    
    (149,048
    )
    
    
    (11,008
    )Effects of valuation of financial instruments
    
    
    
    
    
    
    (20,338
    )
    
    
    13,324
    
    
    
    20,421
    
    
    
    83,323
    
    
    
    6,154Gain on monetary position
    
    
    96,132
    
    
    
    23,849
    
    
    
    21,503
    
    
    
    25,231
    
    
    
    
    
    
    
    Total comprehensive income (cost) of
financing
    
    
    52,747
    
    
    
    (59,444
    )
    
    
    (107,182
    )
    
    
    (126,641
    )
    
    
    (267,393
    )
    
    
    (19,748
    )Total income taxes
    
    
    (31,277
    )
    
    
    (28,725
    )
    
    
    (60,050
    )
    
    
    (96,982
    )
    
    
    233,694
    
    
    
    17,260Net (loss) income
    
    
    (143,922
    )
    
    
    (76,912
    )
    
    
    (29,267
    )
    
    
    36,196
    
    
    
    (437,763
    )
    
    
    (32,331
    )Earnings per share:Basic
    
    
    (0.49
    )
    
    
    (0.19
    )
    
    
    (0.07
    )
    
    
    0.06
    
    
    
    (0.55
    )
    
    
    (0.04
    )Diluted
    
    
    (0.49
    )
    
    
    (0.19
    )
    
    
    (0.07
    )
    
    
    0.06
    
    
    
    
    
    
    
    U.S. GAAPOperating (loss) income
    
    
    (215,782
    )
    
    
    (5,891
    )
    
    
    (50,610
    )
    
    
    217,182
    
    
    
    44,139
    
    
    
    3,260Net (loss) income
    
    
    1,319,220
    
    
    
    185,616
    
    
    
    12,459
    
    
    
    160,999
    
    
    
    (240,058
    )
    
    
    (17,730
    )Earnings per share:Basic
    
    
    6.55
    
    
    
    0.67
    
    
    
    (2.13
    )
    
    
    0.29
    
    
    
    (0.30
    )
    
    
    (0.022
    )Diluted
    
    
    6.55
    
    
    
    0.67
    
    
    
    (2.13
    )
    
    
    0.27
    
    
    
    (0.30
    )
    
    
    (0.022
    )Balance Sheet Data:MFRSCash and cash equivalents
    
    
    67,142
    
    
    
    241,218
    
    
    
    739,291
    
    
    
    2,539,535
    
    
    
    1,591,405
    
    
    
    232,558Restricted cash
    
    
    6,198
    
    
    
    
    
    
    
    23,462
    
    
    
    
    
    
    
    
    
    
    
    Working capital(3)
    
    
    (24,469
    )
    
    
    (126,398
    )
    
    
    29,083
    
    
    
    281,811
    
    
    
    447,199
    
    
    
    33,028Restricted cash to long term
    
    
    14,149
    
    
    
    8,283
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Frequency rights, net
    
    
    105,178
    
    
    
    92,960
    
    
    
    88,374
    
    
    
    80,930
    
    
    
    66,716
    
    
    
    4,927Telephone network systems and equipment, net
    
    
    1,925,911
    
    
    
    2,248,685
    
    
    
    3,157,197
    
    
    
    4,188,946
    
    
    
    4,684,413
    
    
    
    345,969Preoperating expenses, net
    
    
    171,240
    
    
    
    132,046
    
    
    
    98,340
    
    
    
    77,902
    
    
    
    50,863
    
    
    
    3,756Intangible assets, net
    
    
    408,463
    
    
    
    327,701
    
    
    
    334,489
    
    
    
    208,802
    
    
    
    209,683
    
    
    
    15,486Labor obligations upon retirement
    
    
    
    
    
    
    15,977
    
    
    
    15,068
    
    
    
    17,650
    
    
    
    
    
    
    
    Rent deposits and other assets
    
    
    297,856
    
    
    
    470,905
    
    
    
    580,600
    
    
    
    618,524
    
    
    
    578,401
    
    
    
    42,718Total assets
    
    
    2,971,668
    
    
    
    3,411,377
    
    
    
    5,065,904
    
    
    
    8,014,100
    
    
    
    7,916,472
    
    
    
    584,673Long-term liabilities
    
    
    767,163
    
    
    
    953,927
    
    
    
    1,882,104
    
    
    
    2,380,424
    
    
    
    2,818,630
    
    
    
    208,171Total liabilities
    
    
    1,204,114
    
    
    
    1,485,455
    
    
    
    2,788,990
    
    
    
    2,983,261
    
    
    
    3,415,303
    
    
    
    252,238Capital stock
    
    
    2,700,151
    
    
    
    2,963,206
    
    
    
    3,327,482
    
    
    
    5,410,251
    
    
    
    5,410,244
    
    
    
    399,575Additional paid-in capital
    
    
    966,817
    
    
    
    237,114
    
    
    
    253,096
    
    
    
    888,056
    
    
    
    816,443
    
    
    
    60,299Accumulated deficit
    
    
    (1,899,414
    )
    
    
    (1,274,398
    )
    
    
    (1,303,664
    )
    
    
    (1,267,468
    )
    
    
    (1,705,231
    )
    
    
    (125,940
    )Repurchase of shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,287
    )
    
    
    (1,498
    )Total shareholders equity
    
    
    1,767,554
    
    
    
    1,925,922
    
    
    
    2,276,914
    
    
    
    5,030,839
    
    
    
    4,501,169
    
    
    
    332,435Total number of shares
    
    
    277,224,018
    
    
    
    277,224,018
    
    
    
    482,334,778
    
    
    
    789,818,829
    
    
    
    789,818,829
    
    
    
    789,818,829U.S. GAAPLong-term liabilities
    
    
    517,766
    
    
    
    756,921
    
    
    
    1,882,104
    
    
    
    2,380,424
    
    
    
    2,818,630
    
    
    
    208,171Total Shareholders equity
    
    
    1,091,245
    
    
    
    1,276,860
    
    
    
    1,676,612
    
    
    
    4,555,341
    
    
    
    4,218,046
    
    
    
    311,525Other Financial Data:MFRSCapital expenditures(4)
    
    
    387,982
    
    
    
    482,669
    
    
    
    1,041,877
    
    
    
    1,248,407
    
    
    
    1,631,001
    
    
    
    120,458Ratio of earnings to fixed charges(5)
    
    
    
    
    
    
    
    
    
    
    1.05
    
    
    
    1.51
    
    
    
    
    
    
    
    Resources arising from operating activities
    
    
    298,753
    
    
    
    322,353
    
    
    
    87,898
    
    
    
    303,158
    
    
    
    446,171
    
    
    
    32,952Resources derived from financing activities
    
    
    107,390
    
    
    
    334,394
    
    
    
    1,452,052
    
    
    
    2,745,493
    
    
    
    219,632
    
    
    
    16,221Resources used in investing activities
    
    
    (387,982
    )
    
    
    (482,669
    )
    
    
    (1,041,877
    )
    
    
    (1,248,407
    )
    
    
    (1,613,933
    )
    
    
    (119,197
    )U.S. GAAPCash (used in) provided by operating activities
    
    
    156,994
    
    
    
    761,531
    
    
    
    (120,905
    )
    
    
    164,439
    
    
    
    438,861
    
    
    
    32,413Cash
provided by (used in) financing activities
    
    
    155,835
    
    
    
    103,205
    
    
    
    1,531,744
    
    
    
    2,916,477
    
    
    
    (105,440
    )
    
    
    (7,787
    )Cash used in investing activities
    
    Ps.
    (267,264
    )
    
    Ps.
    (470,451
    )
    
    Ps.
    (904,888
    )
    
    Ps.
    (1,245,081
    )
    
    Ps.
    (1,281,551
    )
    
    
    U.S.$(94,652
    )Ratio of earnings to fixed charges(5)
    
    
    
    
    
    
    2.9
    
    
    
    1.6
    
    
    
    2.2
    
    
    
    
    
    
    
    
  6




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##### Table of Contents



(1)
    
    Peso amounts were converted to U.S. dollars at the exchange rate of Ps.13.54 per U.S.$1.00
reported by the Banco de México as its buying rate for pesos on December 31, 2008. Such
conversions are for the convenience of the reader and should not be construed as
representations that the peso amounts actually represent such U.S. dollar amounts or could be
converted into U.S. dollars at the rate indicated, or at any other rate.(2)
    
    Pursuant to MFRS, financial data for all periods up to 2007 in the financial statements have,
unless otherwise indicated, been restated in constant pesos as of December 31, 2007.
Restatement into December 31, 2007 pesos is made by multiplying the relevant nominal peso
amount by the inflation index for the period between the end of the period to which such
nominal peso amount relates and December 31, 2007. The inflation index used in this annual
report for 2004 figures is 1.1156, for 2005 is 1.0796 and for 2006 is 1.0376.(3)
    
    Working capital is defined as current assets (excluding cash and cash equivalents and
restricted cash) less current liabilities (excluding short-term debt and current maturities of
long-term debt, which includes interest payable).(4)
    
    Capital expenditures include telephone network systems and equipment, intangible assets and
other assets. Investing activities in the consolidated statements of changes in financial
position for the years ended December 31, 2004, 2005, 2006 and 2007 are net of dispositions.
For the year ended December 31, 2008 the capital expenditures are presented accordingly to the
statement of cash flows and only include acquisitions.(5)
    
    Ratio of earnings to fixed charges
is defined as fixed charges divided by earnings. Fixed charges are defined as
the sum of: (a) interest expensed and capitalized, (b) amortized
premiums, discounts and capitalized expenses related to indebtedness,
(c) preference security dividends requirements. Earnings are defined as
the sum of: (a) pre-tax income from continuing operations; (b) fixed
charges; and (c) amortization of capitalized interest; less the following
items: (a) interest capitalized; and (b) preference security dividend
requirements of consolidated subsidiaries. Fixed charges include interest expense, capitalized interest and the portion of operating
lease rental expense that represents the interest factor. The fixed charge coverage deficiency
under MFRS was Ps. 112.1 million in 2004, Ps.47.7 million in 2005 and Ps. 721.8 million in
2008. Under U.S. GAAP, the fixed charge coverage deficiency was Ps.1,349.9 million in 2004 and
Ps.395.9 million in 2008. EXCHANGE RATES
  Buying Rate(1)Period End
    
    
    Average(2)
    
    
    High
    
    
    Low2004
    
    Ps.
    11.26
    
    
    Ps.
    11.31
    
    
    Ps.
    11.63
    
    
    Ps.
    10.822005
    
    
    10.71
    
    
    
    10.93
    
    
    
    11.40
    
    
    
    10.412006
    
    
    10.88
    
    
    
    10.92
    
    
    
    11.48
    
    
    
    10.432007
    
    
    10.87
    
    
    
    10.94
    
    
    
    11.27
    
    
    
    10.662008
    
    
    13.54
    
    
    
    11.17
    
    
    
    13.92
    
    
    
    9.92December 2008
    
    
    13.54
    
    
    
    13.37
    
    
    
    13.76
    
    
    
    13.12January 2009
    
    
    14.20
    
    
    
    13.86
    
    
    
    14.22
    
    
    
    13.35February 2009
    
    
    14.93
    
    
    
    14.47
    
    
    
    14.85
    
    
    
    14.14March 2009
    
    
    14.33
    
    
    
    14.72
    
    
    
    15.37
    
    
    
    14.05April 2009
    
    
    13.87
    
    
    
    13.48
    
    
    
    14.39
    
    
    
    13.05May 2009
    
    
    13.23
    
    
    
    13.25
    
    
    
    13.84
    
    
    
    12.87June 2009
    
    
    13.31
    
    
    
    13.36
    
    
    
    13.65
    
    
    
    13.16
 
 (1)
    
    Source: Banco de México.(2)
    
    Represents the average rates for each period indicated, calculated by using the average of
the exchange rates on the last day of each month during the period.
  7




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##### Table of Contents



B. Capitalization and indebtedness
  
 C. Reasons for the offer and use of proceeds
  
 D. Risk factors
 Global economic conditions may adversely affect us.
  Risks Relating to Maxcom
 We may not be able to generate sufficient cash flows to meet our debt service obligations and
implement our business plan.
  Because we have a history of losses and may continue to incur significant expenses, we cannot be
certain that we will achieve profitability.
   8




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##### Table of Contents



We may be unable to build out our network in a timely manner or without undue cost.
  
    
    municipal or regional political events or local rulings;
    
    our ability to obtain permits to use public rights of way;
    
    our ability to generate cash flow or to obtain future financing necessary for such build
out;
 
    
    unforeseen delays, costs or impediments relating to the granting of municipal and state
permits for our build out;
 
    
    delays or disruptions resulting from physical damage, power loss, defective equipment or
the failure of third party suppliers or contractors to meet their obligations in a timely
and cost-effective manner; and
 
    
    regulatory and political risks relating to Mexico, such as the revocation or termination
of our concessions, the temporary seizure or permanent expropriation of assets, import and
export controls, political instability, changes in the regulation of telecommunications and
any future restrictions or easing of restrictions on the repatriation of profits or on
foreign investment.
  The loss of key personnel could harm our business, results of operations and financial condition.
  We may not have sufficient personnel to grow as rapidly as we would like.
  If we have to pay Telmex local interconnection fees, we may not be able to provide services at
competitive rates.
   9




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Our inability to successfully upgrade our accounting, billing, customer service and management
information systems as new technology becomes available could increase our churn rates, inhibit
our ability to attract new customers and result in decreased revenue and increased costs.
  Service interruptions due to natural disasters or unanticipated problems with our network
infrastructure could result in customer loss.
  We could be negatively affected by by-pass international traffic.
 Comisión Federal
de Telecomunicaciones
   10




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Our telecommunications network infrastructure has several vulnerabilities and limitations.
  
    
    physical damage;
    
    power loss;
    
    capacity limitations;
    
    software defects as well as hardware and software obsolescence;
    
    breaches of security, whether by computer virus, break-in or otherwise;
    
    failure to interconnect with carriers linking us with our customers;
    
    denial of access to our sites for failure to obtain required municipal or other
regulatory approvals; and
    
    other factors which may cause interruptions in service or reduced capacity for our
customers.
 Our results may be negatively impacted by high levels of churn.
  
    
    customer delinquency;
    
    our limited coverage area that restricts our ability to continue providing service when a
customer moves;
 
    
    our failure to meet service levels required by our customers;
    
    our failure to provide, efficiently or on competitive terms, other services demanded by
our customers;
    
    a decline in the national or international economic conditions (in particular with our
residential customers); and
    
    promotional and pricing strategies of our competitors;
  11




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Our substantial indebtedness could have a material adverse effect on our financial condition,
including our ability to fulfill our obligations under our senior notes due 2014 and our ability
to operate our business and implement our business plan.
  
    
    make it more difficult for us to satisfy our obligations with respect to our
indebtedness;
 
    
    require us to dedicate a substantial portion of our cash flow from operations to debt
service payments, reducing the funds available for working capital, capital expenditures,
acquisitions and other general corporate purposes;
 
    
    limit our flexibility in planning for, or reacting to, changes in the telecommunications
industry;
 
    
    limit our ability to take advantage of opportunities for acquisitions and other business
combinations;
 
    
    place us at a competitive disadvantage compared to our less leveraged competitors;
 
    
    increase our vulnerability to both general and industry-specific adverse economic
conditions; and
 
    
    limit our ability to obtain additional financing or obtain it on commercially reasonable
terms, to fund future working capital, capital expenditures, acquisitions or other general
corporate requirements and increasing our cost of borrowing.
  The indenture governing our senior notes due 2014 contains restrictions on our ability to operate
our business and to pursue our business strategies. Our failure to comply with these covenants
could result in an acceleration of our indebtedness.
  
    
    incur additional indebtedness;
 
    
    pay dividends or make other distributions on our capital stock or repurchase our capital
stock or subordinated indebtedness;
 
    
    make investments or other specified restricted payments;
 
    
    create liens;
 
    
    enter into mergers, consolidations, sales of substantially all of our assets and other
forms of business combinations;
 
    
    enter into change of control transactions;
 
    
    sell assets and subsidiary stock; and
    
    enter into transactions with affiliates.
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Risks Relating to the Mexican Telecommunications Industry
 The telecommunications industry in Mexico is increasingly competitive, which may result in lower
prices for telecommunications services, lower margins and/or a loss of market share.
   Rate pressure could have a material adverse effect on our business, results of operation and our
financial condition.
  
    
    increased competition and focus by our competitors on increasing market share;
 
    
    recent technological advances that permit substantial increases in the transmission
capacity of both new and existing fiber-optic networks, resulting in long-distance
overcapacity;
 
    
    increased participation of traditional fixed-line competitors;
 
    
    the entrance of cable television operators into certain markets where we currently offer
service; and
 
    
    the entrance of new competitors, such as broadcasting companies or the Comisión Federal
de Electricidad.
  If the Mexican government grants more concessions, the value of our concessions could be severely
impaired.
  (Secretaría de Comunicaciones y
Transportes
  13




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We could lose our concessions if we do not fully comply with their terms or if we are not able to
renew our existing concessions.
    Fraudulent use of telecommunications networks increases our expenses.
  Rapid technological advances may require us to make significant capital expenditures to maintain
and improve the competitiveness of our service offerings.
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Under Mexican law, our concessions could be expropriated or temporarily seized.
 (Ley Federal de
Telecomunicaciones)
 
    
    rights and obligations granted under the concessions to install, operate and develop
public telecommunications networks may only be assigned with the prior authorization of the
SCT;
 
    
    neither the concession nor the rights thereunder or the related assets may be assigned,
pledged, mortgaged or sold to any government or country; and
 
    
    the Mexican government (through the SCT) may permanently expropriate any
telecommunications concession and claim any related asset for reason of public interest or
may temporarily seize the assets related to the concessions in the event of natural
disasters, war, significant public disturbance or threats to internal peace or for other
reasons relating to economic or public order.
   Long-distance Calling Party Pays system could result in a loss of customer traffic and revenue.
   Foreign ownership restrictions may limit our ability to raise equity capital.
 Ley Federal de Inversión Extranjera Ley Federal de Telecomunicaciones Comisión Nacional de Inversiones Extranjeras
  15




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We operate in a highly regulated industry which is currently experiencing broad-based regulatory
changes.
  Reglamento Interior de la Secretaría de Comunicaciones y Transportes
 (Ley Federal
de Competencia Económica) Comisión Federal de Competencia
  Risks Relating to Mexico
 Political conditions in Mexico may significantly affect our business, results of operations and
financial condition.
  Political situation
 (Tribunal Federal Electoral del Poder Judicial de la Federación) Partido Acción Nacional Partido Acción
Nacional
   16




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Legal and regulatory situation
 Ley Federal de Radio y Televisión
 If Mexico continues to experience economic crisis, our business could be affected negatively.
     Changes to Mexican laws, regulations and decrees applicable to us could have a material adverse
effect on our business, results of operations and financial condition.
  Peso devaluation relative to the U.S. dollar could make it more difficult for us to service our
indebtedness and could decrease the value of our securities.
   17




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Exchange rate control rules enacted in the future could make it more difficult for us to service
our U.S. dollar-denominated debt, raise capital outside of Mexico and make capital expenditures.
  The price of our securities could decrease due to events in other countries, especially the
United States and emerging market countries.
  Less information about our Company may be publicly available because we are subject to different
corporate disclosure and accounting standards than U.S. companies.
  You may suffer a U.S. dollar shortfall if you obtain a judgment against us.
 (Banco de
México) (Diario Oficial de la Federación)
  18




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If we were to be declared bankrupt, holders of our senior notes due 2014 may find it difficult to
collect payment on the notes.
 (Ley de Concursos Mercantiles) (en quiebra) (concurso mercantil) Unidades de Inversión
 High inflation rates in Mexico may decrease demand for our services while increasing our costs.
  
    
    inflation can adversely affect consumer purchasing power, thereby adversely affecting
consumer demand for our services and products; and
 
    
    to the extent inflation exceeds our price increases, our prices and revenues will be
adversely affected in real terms.
 High interest rates in Mexico could increase our financing costs.
  Minority shareholders may be less able to enforce their rights against us, our directors, or our
controlling shareholders in Mexico.
 (Ley del Mercado de Valores)
 Investors may experience difficulties in enforcing civil liabilities against us or our directors,
officers and controlling persons.
 órden
público
  19




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ITEM 4. INFORMATION ON THE COMPANY
 
 A. History and development of the Company
 sociedad anónima bursátil de capital variable
      Bolsa Mexicana de Valores
    20




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##### Table of Contents



B. Business overview
 Industry Overview
    Market Liberalization
  Acuerdo de Convergencia de Servicios Fijos de Telefonía Local y Televisión y/o Audio
Restringidos que se Proporcionan a través de Redes Públicas Alámbricas e Inalámbricas
     21




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##### Table of Contents



Local Telephony Market
   
    
    450 MHz, 1.9 GHz (Personal Communications Services) and 3.4-3.7 GHz (fixed wireless local
loop) nationwide and regional frequency bands;
 
    
    7, 15, 23 and 38 GHz frequency bands for nationwide point-to-point microwave transmission
links; and
    
    10.5 GHz frequency band for regional point-to-multipoint microwave transmission service.
   Long-Distance Telephony Market
   
    
    Axtel, S.A.B. de C.V.;
    
    Alestra, S. de R.L. de C.V.;
    
    Bestel, S.A. de C.V.;
    
    Iusatel, S.A. de C.V.; and
    
    Marcatel, S.A. de C.V.
   22




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##### Table of Contents



Mobile Telephony Market
  
    
    Telcel, S.A. de C.V. with nationwide Personal Communications Services and cellular
concessions;
 
    
    Movistar (Telefónica Móviles) with nationwide Personal Communications Services and
regional cellular (regions 1 through 4) concessions;
 
    
    Grupo Iusacell, S.A.B. de C.V. with regional cellular (regions 5 through 9) and
nationwide Personal Communications Services concessions;
 
    
    Unefón, S.A.B. de C.V., an affiliate of Grupo Iusacell, S.A.B. de C.V., with a nationwide
Personal Communications Services concession; and
 
    
    Nextel de México, S.A. de C.V. (NII Holdings, Inc.) through enhanced specialized mobile
radio licenses.
   Our Company
  .
  23




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24




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##### Table of Contents



Competitive Strengths
  Wide Range of Service Offerings .
 History of High Penetration Rates.
 Cost Efficient, Flexible, Reliable Technology.
 Valuable Last-Mile Ownership.
 Recognized Brand Name and Customer Perception for Quality Services .
 History of Developing Strategic Alliances .
  25




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##### Table of Contents



Strategy
  Increase Penetration of Niche Markets with Unmet Demand for Telecommunication Services. (Instituto Nacional de Estadística, Geografía e Informática)
 Seize Wireline Opportunity Created by Highly Priced Wireless Offering .
 Expand Our Network on a Disciplined Demand-Driven, Modular Basis.
 Enhance Residential Penetration Rates and Average Revenue per User through Bundling .
 Maintain Our Service Quality Differentiation and Focus.
  26




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##### Table of Contents



Overview of Our Services
    Our Products
   
    
    LineaMax Residencial.This service provides a high-quality wireline telephone line with
value-added features available, including voice mail, call waiting, call forwarding,
three-way calling, call blocking, speed dialing and unlisted numbers.
 
    
    Larga Distancia Max.This product provides domestic and international long-distance
services to those of our local telephony customers who require long-distance service. We do
not offer our long-distance service separately from our local telephony service.
 
    
    CentralMax.This service provides customers in residential developments with all of the
functions of a private branch exchange using centrex technology (central functionality for
simulating a private branch exchange), without having to acquire and maintain equipment. It
allows customers to communicate with the common areas of the development with four-digit
internal calling. The features offered under this product include call waiting, call
forwarding, three-way calling, direct inward dialing, direct outward dialing, intercom
dialing, call transfer, speed dialing, call hold, call pick up, outgoing call blocking and
distinctive ringing.
 
    
    I-line.This is our Voice over Internet Protocol service, which uses an analog-to-digital
telephone adapter to allow any conventional telephone to access the telephone network
through any broadband connection around the world.
 
    
    Internet Max.This service uses a traditional telephone line and modem to provide dial-up
Internet access at speeds of up to 56 Kbps. We provide this service to customers, regardless
of whether they have a Maxcom telephone line.
 
    
    SpeediMax(ADSL). This is our broadband Internet access service with speeds of 128, 256
and 512 Kbps and also 1 and 2 Mbps using Asymmetric Digital Subscriber Line (ADSL)
transmission technology over ordinary telephone lines.
 
    
    AsistelMax.This service provides basic telephone medical and home assistance to our
residential customers in case of emergency.
  27




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##### Table of Contents




    
    Paid TV services.This service provides digital television content to our residential
customers over our copper network using Internet Protocol including value added features
such as video on demand, digital video recording and interactive guide.
 
    
    MaxcomCel:This is our residential mobile communication service. Which is provided
through a cellular network. This postpaid service is only available for our existing
customers.
  
    
    LineaMax Comercial.This service is identical to LineaMax Residencial, except that it
also includes multi-line hunting.
 
    
    CentralMax.This service provides business customers with all of the functions of a
private branch exchange using centrex technology, without having to acquire and maintain
equipment. The features offered under this product include four-digit internal calling, call
waiting, call forwarding, three-way calling, direct inward dialing, direct outward dialing,
intercom dialing, call transfer, speed dialing, call hold, call pick up, outgoing call
blocking, single digit access to attendant and distinctive ringing. Optional solutions
include voice mail, music-on-hold, multi-line hunting and operator services.
 
    
    TroncalMax Digital.This service provides digital trunks for business customers that need
highly reliable access to and from the public telephone network through their existing
Private Branch Exchange. This service is sold in groups of 10, 20 or 30 trunks. The groups
can be configured with direct inward dial, direct outward dial, caller identification or
main telephone number assignments.
 
    
    TroncalMax Analógica.This service provides business customers with connectivity to their
analog private branch exchange or key systems. The features available with this product are
multi-line hunting, caller identification and call barring.
 
    
    MaxcomCel:This is our business mobile communication service. Which is provided through a
cellular network. This postpaid service is only available for our existing customers.
 
    
    SpeediMax. This is our broadband Internet access service for small businesses with speeds
of 128, 256 and 512 Kbps and also 1 and 2 Mbps using Asymmetric Digital Subscriber Line
transmission technology over ordinary telephone lines. An Asymmetric Digital Subscriber Line
provides a secure, dedicated link to the Internet or a companys internal data network.
 
    
    1-800 Numbers.This service is available to our customers interested in receiving
toll-free calls into their call centers or businesses.
 
    
    Dedicated Internet Access.This service offers Internet access at high speed within a
clear channel access to the Internet backbone.
 
    
    Digital private lines.This service provides highly reliable dedicated circuits between
two or more physical locations.
 
    
    Hosted Private Branch Exchange.This service provides our business customers with all of
the functions of an Internet Protocol Private Branch Exchange using Voice over Internet
Protocol technology, without having to acquire and maintain expensive equipment. The
features offered under this service include those of CentralMax as well as other Internet
Protocol enhanced services such as web portal setup, click to dial, hosted directory and
Microsoft Outlook integration.
 
    
    I-line.This is our Voice over Internet Protocol service, which uses an analog-to-digital
telephone adapter to allow any conventional telephone to access the telephone network
through a customers broadband connection. We market this service to customers who make and
receive a significant volume of international and domestic long-distance calls. This service
includes additional voice features such as call waiting, caller identification and voice
mail.
 
    
    E-Security.This service provides managed security including perimetral anti-virus,
content filter and spyware solutions. Maxcom supplies all of the software and hardware
equipment as an integrated solution for our customers.
 
    
    SOSMax.This service provides preventive and corrective maintenance to our customers IT
equipment.
 
    
    Audio Conference.This service provides our business customers with operator-assisted and
non-attendant teleconferencing services, with value-added features including recording of
the conference, sound options, warning entry, password and e-mail notification.
  28




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Pricing
  Income Distribution
  Year Ended December 31Segments*
    
    2008
    
    
    2007
    
    
    2006(In millions)Residential
    
    Ps.
    1,055.6
    
    
    Ps.
    897.9
    
    
    Ps.
    685.5Business
    
    
    809.1
    
    
    
    648.2
    
    
    
    495.4Public Telephony
    
    
    428.7
    
    
    
    386.4
    
    
    
    253.1Wholesale
    
    
    359.5
    
    
    
    376.0
    
    
    
    262.4Other Revenue
    
    
    30.2
    
    
    
    37.2
    
    
    
    45.3Total Revenues
    
    Ps.
    2,683.2
    
    
    Ps.
    2,345.7
    
    
    Ps.
    1,741.7
 
 *
    
    The above segments are comprised of homogeneous customers.  29




---



##### Table of Contents



Metropolitan
    
    
    CentralServices
    
    Area
    
    
    South
    
    
    North
    
    
    Total(In millions)Local
    
    Ps.
    1,558.0
    
    
    Ps.
    726.4
    
    
    Ps.
    20.5
    
    
    Ps.
    2,304.9Long Distance
    
    
    236.7
    
    
    
    74.4
    
    
    
    9.0
    
    
    
    320.1Rent of dedicated links
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Sale of equipment to customers
    
    
    8.7
    
    
    
    1.9
    
    
    
    0.1
    
    
    
    10.7Capacity Leasing
    
    
    47.1
    
    
    
    
    
    
    
    
    
    
    
    47.1Total Revenues
    
    Ps.
    1,850.9
    
    
    Ps.
    802.7
    
    
    Ps.
    29.6
    
    
    Ps.
    2,683.2
 Metropolitan
    
    
    CentralServices
    
    Area
    
    
    South
    
    
    North
    
    
    Total(In millions)Local
    
    Ps.
    1,398.7
    
    
    Ps.
    517.2
    
    
    
    
    
    
    Ps.
    1,915.9Long Distance
    
    
    171.3
    
    
    
    175.2
    
    
    Ps.
    10.3
    
    
    
    356.8Rent of dedicated links
    
    
    0.2
    
    
    
    0.1
    
    
    
    
    
    
    
    0.3Sale of equipment to customers
    
    
    10.7
    
    
    
    3.7
    
    
    
    
    
    
    
    14.4Capacity Leasing
    
    
    58.3
    
    
    
    
    
    
    
    
    
    
    
    58.3Total Revenues
    
    Ps.
    1,639.2
    
    
    Ps.
    696.2
    
    
    Ps.
    10.3
    
    
    Ps.
    2,345.7
 Metropolitan
    
    
    CentralServices
    
    Area
    
    
    South
    
    
    North
    
    
    Total(In millions)Local
    
    Ps.
    934.5
    
    
    Ps.
    385.3
    
    
    
    
    
    
    Ps.
    1,319.8Long Distance
    
    
    220.1
    
    
    
    121.6
    
    
    Ps.
    28.4
    
    
    
    370.1Rent of dedicated links
    
    
    0.3
    
    
    
    0.2
    
    
    
    
    
    
    
    0.5Sale of equipment to customers
    
    
    6.1
    
    
    
    8.4
    
    
    
    
    
    
    
    14.5Capacity Leasing
    
    Ps.
    36.8
    
    
    
    
    
    
    
    
    
    
    
    36.8Total Revenues
    
    Ps.
    1,197.8
    
    
    Ps.
    515.5
    
    
    Ps.
    28.4
    
    
    Ps.
    1,741.7
 Our Markets
 Concession Areas
     30




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Clusters and Single Sites
   
    
    Identify clusters through market research. Our market research is designed to identify
residential customers and small- and medium-sized businesses. Once we identify potential
customers within the clusters, based on the marketing sales forecast we design the
deployment of the access network to cover them. We perform a return on investment and
profitability analysis for each cluster to assure that the investment made in such cluster
meets our return benchmarks.
 
    
    Deploy clusters through the implementation of a sales plan for each cluster based on our
network deployment schedule. We commence promoting our services at the same time we build
our network. These coordinated and parallel efforts help reduce the time between network
deployment and revenue generation.
 
    
    Fill in clusters by offering our services to all customers within the cluster. Marketing
efforts are focused on achieving the highest penetration within our clusters.
  Our Network
 Build out Strategy
    31




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Network Backbone
     Last-mile Connectivity
 Comisión Federal de Electricidad Compañía de Luz y
Fuerza del Centro
   32




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Switching
    Operational support systems
   
    
    offer a flexible, large selection of services;
    
    provide tailored service packages;
    
    quickly introduce products and services;
    
    deliver near real-time activation and disconnection;
    
    deliver a high quality of service;
    
    minimize activation errors; and
    
    provide accurate and timely billing services.
  33




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##### Table of Contents




    
    Spanish language support for invoices and documentation;
 
    
    a high degree of integration among all operational support systems components;
    
    flow-through of information, provisioning and service activation;
    
    capabilities to monitor, manage and resolve network problems;
    
    allowance for growth on a modular scalable basis; and
    
    support of administrative operations for financial controls.
 ,
    Strategic Alliances
 Megacable
   Alcatel Internet Protocol Television Supply Agreement
   34




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##### Table of Contents



Marketing and Sales
 General
  Sales and Distribution Channels
     Customer Service
  Centralized Call Center.
 Walk-in Center.
 Centralized Trouble-Shooting Center.
   35




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Credit, Billing and Collection
       Competition
      36




---



##### Table of Contents



Telmex
  Other Competitors
         37




---



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Market Liberalization
 (Comisión Federal de Electricidad or
CFE)
  Employees
 (Sindicato Nacional de Trabajadores de Telecomunicaciones,
Telefonía, Comunicaciones, Cibernética, Productos Eléctricos, Electrónicos, Similares y Conexos de
la República Mexicana)
 Facilities
    38




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Legal Matters and Administrative Proceedings
  Mexican Federal Power Commission (Comisión Federal de Electricidad) Litigation
   Lucent Technologies Claim
 (prescripción)
 Telereunións Tax Audit for the Year 2004
 (crédito fiscal)
  39




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REGULATION
 Overview
 (Ley Federal de Telecomunicaciones) (Ley de Vías Generales de Comunicación) (Reglamento de Telecomunicaciones)
  
    
    enacting regulations and technical standards for the telecommunications industry;
    
    ensuring that holders fulfill the terms of their concessions and permits;
    
    suspending operators without concessions;
    
    resolving interconnection controversies between competitors; and
    
    maintaining a registry of applicable rates.
  (fianzas)
  40




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Concessions and Permits
   
    
    the type and technical specifications of the network, system or services that may be
provided;
    
    the allocated spectrum frequencies, if applicable;
    
    the geographical region in which the holder of the concession may provide the service;
    
    the required capital expenditure program;
    
    the term during which such service may be provided;
    
    the payment, where applicable, required to be made to acquire the concession, including,
where applicable, the participation of the Mexican government in the revenues of the holder
of the concession;
    
    the amount of the performance bond; and
    
    rights granted to and obligations imposed on the concession holder.
  Ownership Restrictions
 (Ley Federal
de Inversión Extranjera
 
    
    Mexican individuals; and
    
    Mexican corporations in which non-Mexicans own 49% or less of the full voting stock and
that are not otherwise controlled by non-Mexicans, except in the case of concessions for
cellular and personal communications services, where foreign investment participation may
exceed 49% of the voting stock with prior approval of the Mexican Foreign Investment Bureau
of the Mexican Ministry of Economy (Secretaría de Economía).
 (certificados de participación ordinarios)
  41




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Transfer
  Termination
  
    
    expiration of its term;
    
    resignation by the concession holder or the permit holder;
    
    revocation; or
    
    dissolution or bankruptcy of the concession holder or the permit holder.
  
    
    failure to exercise the rights of the concession within 180 days of the grant;
    
    failure to provide interconnection services to other holders of telecommunications
concessions and permits without reason;
    
    loss of the concession or permit holders Mexican nationality;
    
    unauthorized assignment, transfer or encumbrance of the concession or permit;
    
    unauthorized interruption of service;
    
    taking any action that impairs the rights of other concessionaires or permit holders;
    
    failure to comply with the obligations or conditions specified in the concession or
permit (including making any necessary investments and capital expenditures); and
    
    failure to pay to the Mexican government its fee for the concession or, where applicable,
its participation in the revenues of the holder of the concession.
  Temporary Seizure
   42




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##### Table of Contents



Expropriation
   Rates for Telecommunications Services
  (Comisión
Federal de Competencia)
 Our Concessions
  Local Telephony
   
    
    basic local telephony;
    
    the sale or lease of network capacity for the generation, transmission or reception of
signs, signals, writings, images, voice, sounds or other information of any nature;
    
    the purchase and lease of network capacity from other carriers, including the lease of
digital circuits;
    
    value-added services;
    
    operator services;
    
    data, video, audio and video conference services, except for cable or other restricted
television, continuous music or digital audio;
    
    credit or debit telephone cards; and
    
    public telephony.
  43




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##### Table of Contents



Long-distance
   
    
    the carrying of switched traffic between two different local calling areas that requires
the use of a dialing prefix for its routing;
 
    
    the sale or lease of network capacity for the generation, transmission or reception of
signs, signals, writings, images, voice, sounds or other information of any nature;
 
    
    the purchase and lease of network capacity from other carriers and domestic and
international long-distance telephony.
  
    
    those which require a concession for frequency bands of the radio electric spectrum for
specific uses;
 
    
    those which require a concession to occupy and exploit geostationary orbital positions
and satellite orbits assigned to Mexico;
    
    those which require a concession to operate radio or television broadcasting systems; and
    
    cable or other restricted television.
    44




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##### Table of Contents



Microwave Transmissions
 Point-to-point
  
    
    two consecutive frequency segments in the 15 GHz band, with a 56 MHz bandwidth;
    
    three consecutive frequency segments in the 23 GHz band, with a 56 MHz bandwidth; and
    
    two consecutive frequency segments in the 23 GHz band, with a 100 MHz bandwidth.
  Point-to-multipoint
     45




---



##### Table of Contents



Cable Television
   Mobile Network Operation
   Material Ongoing Obligations Relating to Our Concessions
  
    
    File information related to each concessionaires shareholders on the first quarter of
every year;
    
    Prepare a monthly report on any failures and interruptions of the services;
 
    
    Prepare quarterly quality of services reports which shall be filed before the SCT if
required;
 
    
    Prepare commercial practices guidelines which shall be available for review by any third
party;
 
    
    Prepare an emergency response plan which shall be filed before the SCT during the
following six months after the relevant concession granting date;
 
    
    Notify the SCT of any relevant event that could affect the provision of the services or
the performance of the network;
    
    Register its service fees with the COFETEL each time they are modified;
 
    
    File within the following 150 days after the last day of the preceding fiscal year (i)
the corresponding audited financial statements, (ii) a description of the principal assets
of the network, and (iii) a report on the employee training and teaching programs that are
being implemented;
    
    Prepare a quarterly report on the status of the expansion and coverage of the network;
 
    
    Make available the internal statistics on traffic, routing and performance of the
network;
 
    
    Grant a surety bond in favor of the Federal Government to guarantee its obligations under
the concession;
 
    
    File with the SCT within the following 60 days after the concession granting date a plan
describing the coverage and extension of the network; and
 
    
    File with the SCT the form of agreement to be entered with the concessionaires
subscribers.
  46




---



##### Table of Contents



Interconnection
  Local Interconnection
     Mobile Interconnection
  Long-distance Interconnection
   47




---



##### Table of Contents



Mexican Ministry of Communications and Transportation Approvals
 (Comisión Federal de Competencia)
 Antitrust Approvals
   Municipal and Other Regulatory Approvals
  
 C. Organizational structure
   48




---



##### Table of Contents



D. Property, plant and equipment
    49




---



##### Table of Contents



ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 All peso amounts for the year ended December 31, 2008 and henceforth are presented in nominal
pesos. All peso amounts for the years ended December 31, 2004, 2005, 2006 and 2007 are presented in
constant pesos up to December 31, 2007. The peso amounts presented are adjusted to reflect changes
in purchasing power due to inflation accumulated until December 31, 2007 in accordance with MFRS,
except as otherwise indicated. You should read the following discussion and analysis in conjunction
with the audited consolidated financial statements as of December 31, 2007 and 2008 and for the
years ended December 31, 2006, 2007 and 2008 and accompanying notes appearing elsewhere in this
annual report, which are henceforth referred to as financial statements. The U.S. dollar
translations provided in this annual report are solely for the convenience of the reader and are,
unless otherwise indicated, calculated utilizing the buying rate at December 31, 2008, which was
Ps13.54 per U.S.$1.00 as reported by the Banco de México (Central Bank of México). Sums may not add
due to rounding.
  50




---



##### Table of Contents



Recent Developments
 Designation of the Grupo Telereunión companies as Guarantors.
  Formation of our Board of Directors and Audit and Corporate Practices Committee.
  New appointment of our Chief Executive Officer.
  Engagement of the new Independent Auditor.
  Reclassification of Capital Stock and 2007 Initial Public Offering
 (Certificados de Participación
Ordinarios),
  51




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##### Table of Contents



Acquisition of Sierra Comunicaciones Globales
    Private Placement of Senior Notes due 2014
  Currency Swap Transaction
   52




---



##### Table of Contents



Capital Stock Increase and Acquisition of Grupo Telereunión
   (Capital Contable)
  
 A. Operating Results
 Devaluation and Inflation
  Gross InternationalMexican GDP
    
    
    Reserves as of theInflation
    
    
    Average
    
    
    Annual Growth
    
    
    End of Each YearYear Ended December 31
    
    Rate
    
    
    28-day Cetes
    
    
    Rate*
    
    
    (Billion)2004
    
    
    5.2
    %
    
    
    6.8
    %
    
    
    4.2
    %
    
    
    U.S.$64.22005
    
    
    3.3
    %
    
    
    9.2
    %
    
    
    3.0
    %
    
    
    U.S.$74.12006
    
    
    4.1
    %
    
    
    7.2
    %
    
    
    4.8
    %
    
    
    U.S.$76.32007
    
    
    3.8
    %
    
    
    7.2
    %
    
    
    3.3
    %
    
    
    U.S.$87.22008
    
    
    6.5
    %
    
    
    7.7
    %
    
    
    2.8
    %
    
    
    U.S.$95.3
 
  *
    
    The Central Bank of Mexico no longer publishes the Mexican GDP and/or its variations according to
the calculation methodology used for the figures presented for the years ended December 2004, 2005,
2006 and 2007, hence calculation methodology for the figures for the year ended December 31, 2008
differs.  53




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##### Table of Contents




    
    increasing the peso-carrying costs of our U.S. dollar-denominated debt and capital
expenditure requirements;
 
    
    decreasing the purchasing power of Mexican consumers, resulting in a decrease in demand
for telephony services; and
 
    
    resulting in our inability, due to competitive pressures, to increase our prices in
response to such inflation.
  Impact of Foreign Currency Fluctuations
        Flat Rate Business Tax ( Impuesto Empresarial a Tasa Única )
   54




---



##### Table of Contents



Capitalization of Pre-operating Expenses
   Revenues
   
    
    installation charges of voice lines;
 
    
    monthly fees for the rental of voice lines, which depending on the product, include a
certain number of free local calls;
 
    
    usage charges of voice lines, which can include a combination of local calls above those
already included in the monthly fees, long distance minutes, as well as minutes to mobile
numbers under the Long Distance Calling Party Pays system; and
 
    
    charges relating to value-added services such as voice mail, call waiting, call
forwarding, three-way calling and caller identification;
 
    
    public telephony services;
 
    
    mobile services;
 
    
    revenues derived from our strategic and commercial alliances with cable television
operators, which are offset by the corresponding amount we are charged by the cable
television operator; and
 
    
    the sale of telephone sets.
  55




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##### Table of Contents




    
    Internet dial-up access;
 
    
    asymmetric digital subscriber line;
 
    
    dedicated Internet access;
 
    
    managed services;
 
    
    digital private lines; and
 
    
    lease of backbone capacity.
   Average Revenue Per User (ARPU)
   Revenue Generating Units
   Operating Costs and Expenses
  
    
    network operating costs, which include: (i) technical expenses (comprised of electric
power, site leases and maintenance of telecommunications equipment); (ii) installation
expenses, when applicable; and (iii) disconnection expenses;
 
    
    selling, general and administrative expenses, which primarily include: (i) salaries,
wages and benefits; (ii) fees, which are primarily related to consulting, legal and
accounting services; (iii) leasing costs, which are primarily related to our headquarters,
warehouses and other facilities; (iv) marketing expenses, which are primarily related to the
implementation of our branding campaign, general advertising and promotions; and (v)
allowance for doubtful accounts (related to past due accounts receivable); and
 
    
    depreciation and amortization mainly related to pre-operating expenses, frequency rights,
telephone network systems and equipment and intangibles.
  56




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##### Table of Contents



Comprehensive Cost of Financing
  
    
    interest expense and interest income;
 
    
    effects of valuation of financial instruments;
 
    
    net foreign exchange gains or losses; and
 
    
    net gains or losses on monetary position up to December 31, 2007.
 Critical Accounting Policies
 Applications of Critical Accounting Policies and Estimates
   
    
    it requires us to make assumptions because information was not available at the time
or it included matters that were highly uncertain at the time we were making the estimate;
and
 
    
    changes in the estimate or different estimates that we could have selected would have
had a material impact on our financial condition or results of operations.
 Fair Value of Stock Options and Warrants
   57




---



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Allowance of Doubtful Accounts Receivable
   Revenue Recognition
         58




---



##### Table of Contents



Installation Revenues and Costs
  Valuation of Long-Lived Assets
    59




---



##### Table of Contents



Deferred Taxes
    Year of Loss

    
    Amount
    
    
    Year of Maturity(in thousands of pesos)1999
    
    Ps.
    18,109
    
    
    
    20092000
    
    
    102,156
    
    
    
    20102001
    
    
    32,292
    
    
    
    20112002
    
    
    282,004
    
    
    
    20122003
    
    
    35,388
    
    
    
    20132004
    
    
    79,533
    
    
    
    20142005
    
    
    138,698
    
    
    
    20152006
    
    
    74,058
    
    
    
    20162007
    
    
    269,142
    
    
    
    20172008
    
    
    437,467
    
    
    
    2018Total
    
    Ps.
    1,468,847
   60




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##### Table of Contents



Results of Operations
  Year Ended December 312008
    
    
    2007
    
    
    2006Net revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Operating cost and expenses:Network operating costs
    
    
    41.7
    
    
    
    41.6
    
    
    
    38.9Selling, general and administrative expenses
    
    
    30.5
    
    
    
    30.9
    
    
    
    34.9Depreciation and amortization
    
    
    20.6
    
    
    
    15.8
    
    
    
    17.3Total operating cost and expenses
    
    
    92.8
    
    
    
    88.3
    
    
    
    91.0Operating profit (loss)
    
    
    7.1
    
    
    
    11.7
    
    
    
    9.0Other expenses:Other expenses
    
    
    (0.6
    )
    
    
    (0.5
    )
    
    
    (1.1
    )Restructuring charges
    
    
    (1.8
    )
    
    
    
    
    
    
    Impairment of long-lived assets
    
    
    (19.8
    )
    
    
    
    
    
    
    Comprehensive (income)/cost of financing
    
    
    (10.0
    )
    
    
    (5.4
    )
    
    
    (6.2
    )Income tax
    
    
    8.7
    
    
    
    (4.1
    )
    
    
    (3.4
    )Net loss
(income) for the year
    
    
    16.3
    %
    
    
    (1.5
    )%
    
    
    1.7
    %
 Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 Net revenues
  
    
    Residential revenues represented 39.3% of total revenues during 2008, compared with 38.3%
in the previous year of 2007. Revenues in the residential business reached Ps. 1,055.6
million in 2008, an increase of 17.6% in comparison to Ps. 897.9 million in 2007. The
increase was mainly driven by an increase in mobile services, residential Paid TV RGUs and
data followed by voice in comparison to 2007.
 
    
    Commercial revenues represented 30.2% of total revenues during 2008, compared with 27.6%
in 2007. Revenues in the commercial business totaled Ps. 809.1 million in 2008, an increase
of 24.8% in comparison to Ps. 648.2 million in the year 2007. This increase in revenues was
explained by an increase in the average revenue per customer that we recorded and a 20%
increase in the number of RGUs.
 
    
    Public Telephony represented 16.0% of total revenues during 2008 in comparison with 16.5%
in 2007. Revenues in this segment totaled Ps. 428.7 million in 2008, an increase of 10.9% in
compared to Ps. 386.4 million in 2007. The growth in the public telephony business was
primarily driven by the increase in number of public telephones, which grew 42.2%.
 
    
    In 2008, wholesale revenues totaled Ps. 359.5 million, a decrease of 4.4% in comparison
to Ps.376.0 million in the same period in 2007. This year-over-year decrease in the
Wholesale business was mainly driven by a decrease in the on-net equal access termination
rates earlier in the year due to a more competitive market environment in particular with
national calling party pays.
 
    
    Revenue from other services accounted for 1.1% or Ps. 30.3 million of total revenues in
2008, a decrease from the Ps. 37.2 million recorded in the same period last year. Other
revenues are primarily comprised of lease of microwave frequencies and CPE sales.
  61




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Year Ended December 312008
    
    
    2007
    
    
    %(In millions)Residential
    
    Ps.
    1,055.6
    
    
    Ps.
    897.9
    
    
    
    17.6
    %Commercial
    
    
    809.1
    
    
    
    648.2
    
    
    
    24.8
    %Public Telephony
    
    
    428.7
    
    
    
    386.4
    
    
    
    10.9
    %Wholesale
    
    
    359.5
    
    
    
    376.0
    
    
    
    (4.4
    )%Other Revenue
    
    
    30.3
    
    
    
    37.2
    
    
    
    (18.5
    %)Total revenues
    
    Ps.
    2,683.2
    
    
    Ps.
    2,345.7
    
    
    
    14.4
    %
  ARPU2008
    
    
    2007
    
    
   %(In U.S. dollars)CompanyMonthly charges
    
    $
    17.3
    
    
    $
    15.7
    
    
    
    10.2
    %Usage
    
    
    29.4
    
    
    
    29.0
    
    
    
    1.4
    %Subtotal
    
    
    46.7
    
    
    
    44.7
    
    
    
    4.5
    %Non-recurring
    
    
    2.0
    
    
    
    2.3
    
    
    
    (13.0
    )%Total company
    
    $
    48.7
    
    
    $
    47.0
    
    
    
    3.6
    %
  Revenue Generating Units
   At December 312008
    
    
    2007
    
    
    %RGUs:Residential
    
    
    331,368
    
    
    
    242,888
    
    
    
    36.4
    %Commercial
    
    
    84,891
    
    
    
    70,749
    
    
    
    20.0
    %Public Telephony
    
    
    35,415
    
    
    
    24,910
    
    
    
    42.2
    %Wholesale lines
    
    
    22,860
    
    
    
    22,395
    
    
    
    2.1
    %Total lines
    
    
    474,534
    
    
    
    360,942
    
    
    
    31.5
    %
  62




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Operating Costs and Expenses
  
    
    a Ps. 134.5 million, or 16.4% increase in network operating services resulting mainly
from:
 
    
    a Ps. 48.9 million higher fixed-to-mobile interconnection costs due to an increase of 18.3% in overall RGUs;
 
    
    a Ps. 36.8 million increase related to our paid TV content and internet services;
 
    
    a Ps. 24.3 million increase in costs related to circuit leases and
ports required for our backbone and last mile connectivity as a result of the
network expansion during the year;
 
    
    a Ps. 20.8 million higher operational cost of public telephony
services due to an increase of 42.2% in RGU s in service;
 
    
    a Ps. 17.1 million higher long distance interconnection costs as a
result of increased long distance traffic related to the wholesale business; and,
 
    
    This increase was partially offset by a Ps. 13.4 million decrease in
CATV network costs as we terminated our strategic alliance with Megacable during
2008.
 
    
    a Ps. 8.6 million, or 6.3% increase in technical expenses primarily due to:
 
    
    a Ps. 8.3 million increase in costs associated with leases of sites and poles; and,
 
    
    a Ps. 0.3 million increase in other technical expenses.
 
    
    Installation expenses for 2008 amounted to Ps. 18.7 million which is the same as the amount recorded in 2007.
 
    
    a Ps.181.7 million, or 49.0%, increase in depreciation and amortization expenses mainly related to:
 
    
    a Ps. 175.6 million increase due to new capital investments; and,
 
    
    a Ps. 6.1 million increase due to MFRS inflation recognition
adjustments in accordance with Standard B-10 of the NIFs.
 
    
    Selling general and administrative expenses increased Ps. 97.0 million, or 13.4%
primarily due to:
 
    
    a Ps. 82.6 million increase in salaries, wages and benefits related to an increasing headcount;
 
    
    a Ps. 26.2 million increase in bad debt expense due to an increase in sales volume and customers;
 
    
    a Ps. 20.0 million increase in external commissions and external advisors;
 
    
    a Ps. 3.9 million increase in office space leases; and,
 
    
    These expenses were partially offset by Ps. 35.7 million in lower
employee stock option plan, insurance and other sales, general and administrative
expenses.
 Comprehensive Cost of Financing
   63




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Year Ended December 312008
    
    
    2007
    
    
    %(In millions)Interest expense  Net
    
    Ps.
    (263.7
    )
    
    Ps.
    (230.1
    )
    
    
    14.6
    %Exchange gain (loss)  Net
    
    
    (178.5
    )
    
    
    25.2
    
    
    
    (808.3
    )%Gain on monetary position
    
    
    
    
    
    
    42.6
    
    
    
    
    %Capitalized interest
    
    
    174.8
    
    
    
    35.7
    
    
    
    389.6
    %Total comprehensive cost of financing
    
    Ps.
    (267.4
    )
    
    Ps.
    (126.6
    )
    
    
    111.2
    %
  
    
    a Ps. 33.6 million or 14.6% increase in interest paid as a result of a higher average
outstanding balance of debt during 2008 compared to 2007;
 
    
    a Ps. 178.5 million exchange rate loss compared to a net exchange rate gain of Ps.
25.2 million recognized in the same period last year mainly due to a depreciation of the
Mexican peso of 24.6% during 2008 compared with a peso appreciation of 0.1% during 2007;
 
    
    The company recorded a monetary position gain of Ps. 42.6 million which does not
compare to 2008 as a result in the change in the accounting standards in Mexico;
inflationary accounting is not required in a low-inflationary environment; and
 
    
    a Ps. 139.1 million higher capitalized interest mainly due to a higher depreciation
of the Mexican peso as previously explained.
 Tax Provisions
  Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Net revenues
  
    
    Residential revenues represented 38.3% of total revenues during 2007, compared with 39.4%
in the year of 2006. Revenues in the residential business reached Ps. 897.9 million in 2007,
an increase of 31.0% in comparison to Ps. 685.5 million in 2006. The increase was mainly
driven by the introduction of mobile services, residential Paid TV RGUs, followed by data
and voice in comparison to 2006.
 
    
    Commercial revenues represented 27.6% of total revenues during 2007, compared with 28.4%
in 2006. Revenues in the commercial business totaled Ps. 648.2 million in 2007, an increase
of 30.8% in comparison to Ps. 495.4 million in the year 2006. This increase in revenues was
mainly attributed to a higher number of RGUs from other services, mobile services, voice
lines and data services in comparison to 2006.
 
    
    Public Telephony represented 16.5% of total revenues during 2007 in comparison with 14.5%
in 2006. Revenues in this segment totaled Ps. 386.4 million in 2007, an increase of 52.6%
compared to Ps. 253.1 million in 2006. The growth in the public telephony business was
primarily driven by the increase in number of public telephones, which grew 48.1%.
 
    
    In 2007, Wholesale revenues totaled Ps. 376.0 million, an increase of 43.4% or Ps. 113.6
million in comparison to Ps.262.4 million in the same period in 2006. This year-over-year
increase in the Wholesale business was mainly driven by the increase in the long distance
termination business lines in service.
 
    
    Revenue from other services accounted for 1.6% or Ps. 37.2 million of total revenues in
2007, a decrease from the Ps. 45.3 million recorded in the same period last year. Other
revenues are primarily comprised of lease of microwave frequencies and CPE sales.
  64




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Year Ended December 312007
    
    
    2006
    
    
    %(In millions)Residential
    
    Ps.
    897.9
    
    
    Ps.
    685.5
    
    
    
    31.0
    %Commercial
    
    
    648.2
    
    
    
    495.4
    
    
    
    30.8
    %Public Telephony
    
    
    386.4
    
    
    
    253.1
    
    
    
    52.6
    %Wholesale
    
    
    376.0
    
    
    
    262.4
    
    
    
    43.4
    %Other Revenue
    
    
    37.2
    
    
    
    45.3
    
    
    
    (17.9
    %)Total revenues
    
    Ps.
    2,345.7
    
    
    Ps.
    1,741.7
    
    
    
    34.7
    %
  ARPU2007
    
    
    2006
    
    
    %(In U.S. dollars)CompanyMonthly charges
    
    $
    15.7
    
    
    $
    15.5
    
    
    
    1.3
    %Usage
    
    
    29.0
    
    
    
    24.9
    
    
    
    16.5
    %Subtotal
    
    
    44.7
    
    
    
    40.4
    
    
    
    10.6
    %Non-recurring
    
    
    2.3
    
    
    
    2.4
    
    
    
    (4.2
    )%Total company
    
    $
    47.0
    
    
    $
    42.8
    
    
    
    9.8
    %
  Revenue Generating Units
   At December 312007
    
    
    2006
    
    
    %RGUs:Residential
    
    
    242,888
    
    
    
    201,911
    
    
    
    20.3
    %Commercial
    
    
    70,749
    
    
    
    55,922
    
    
    
    26.5
    %Public Telephony
    
    
    24,910
    
    
    
    16,815
    
    
    
    48.1
    %Wholesale lines
    
    
    22,395
    
    
    
    9,840
    
    
    
    127.6
    %Total lines
    
    
    360,942
    
    
    
    284,488
    
    
    
    26.9
    %
  65




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Operating Costs and Expenses
  
    
    a Ps.275.8 million, or 50.5%, increase in network operating services resulting mainly from:
 
    
    a Ps.89.3 million higher operational cost of public telephony services due to a
48.1% increase in lines in service;
 
    
    a Ps.84.7 million increase in long distance interconnection costs as a result of
increased long distance traffic related to the 43.4% increase in the wholesale business;
 
    
    a Ps.60.1 million increase in local-to-mobile interconnection costs associated with
a significant increase in local-to-mobile traffic due to a 26.9% increase in overall RGU
business;
 
    
    a Ps.35.5 million increase in costs related to the lease of ports and circuits
required for our backbone and last mile connectivity as a result of our network
expansion; and
 
    
    a Ps.6.2 million increase in other cost related to our paid TV content, internet
services, and CATV network cost, among others.
 
    
    a Ps.23.1 million, or 20.3%, increase in technical expenses primarily due to:
 
    
    a Ps.26.0 million increase in maintenance costs as a result of an increasing
telephone network; and
 
    
    a Ps.5.8 million increase in the cost associated with power and electricity
services.
  
    
    a Ps.1.1 million, or 6.3%, increase in installation expenses were mainly due to a 21.6%
increase in RGUs installed in the residential and commercial division.
 
    
    a Ps.69.8 million, or 23.2%, increase in depreciation and amortization expenses mainly
related to:
 
    
    a Ps.15.4 million increase due to new capital investments;
 
    
    a Ps.16.6 million increase due to a reduction in the useful life for public
telephony; and
 
    
    a Ps.37.8 million increase due to MFRS inflation recognition adjustments in
accordance with Statement B-10 of the Mexican Institute of Public Accountants.
 
    
    Selling, general and administrative expenses increased Ps.90.8 million, or 14.9% primarily
due to:
 
    
    a Ps.108.8 million increase in salaries, wages and benefits related to an
increasing headcount including the Ps.3.3 million paid for employee profit sharing;
 
    
    a Ps.16.2 million increase in bad debt due to an increase in sales volume and
customers;
 
    
    a Ps.7.3 million increase in marketing, promotional and advertising expenses; and
  Comprehensive Cost of Financing
   66




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Year Ended December 312007
    
    
    2006
    
    
    %(In millions)Interest expense  Net
    
    Ps.
    (177.1
    )
    
    Ps.
    (127.3
    )
    
    
    39.2
    %Exchange gain (loss)  Net
    
    
    25.2
    
    
    
    (1.4
    )
    
    
    (1,878.6
    )%Gain on monetary position
    
    
    25.2
    
    
    
    21.5
    
    
    
    17.3
    %Total comprehensive cost of financing
    
    Ps.
    (126.6
    )
    
    Ps.
    (107.2
    )
    
    
    18.2
    %
  
    
    a Ps.49.7 million, or 39.2%, increase in interest paid as a result of a higher average
outstanding balance of debt during 2007 compared to 2006;
 
    
    a Ps.26.6 million exchange loss on our dollar-denominated debt due to the effect of peso
appreciation of 0.1% during 2007 compared with 1.5% peso depreciation during 2006; and
 
    
    a Ps.3.7 million, or 17.3%, increase in gain on net monetary position, as a result of the
effect on higher liabilities during 2007 when compared to 2006.
 Tax Provisions
   
 B. Liquidity and capital resources
 Financing Sources and Liquidity
 1
   
 1
    
    Working capital is defined as current assets (excluding
cash and cash equivalents and restricted cash) less current liabilities
(excluding short-term debt and current maturities of long-term debt, which
includes interest payable).  67




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##### Table of Contents




    
    indebtedness, not to exceed U.S.$10.0 million at any time outstanding, represented by
capital lease obligations, financings or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost of design,
construction, installation or improvement of property, plant or equipment used in the
permitted business of the company, in an aggregate principal amount, including all permitted
refinancing indebtedness incurred to renew, refund, refinance, replace, defease or discharge
any such indebtedness;
 
    
    hedging obligations for the purpose of managing our exposure to fluctuations in interest
rates with respect to indebtedness permitted to be incurred by us pursuant to the indenture
or protecting us against currency fluctuations in the ordinary course of business and not
for speculative purposes; and
 
    
    indebtedness not to exceed U.S.$10.0 million in an aggregate principal amount at any time
outstanding, including all permitted refinancing indebtedness incurred to renew, refund,
refinance, replace, defease or discharge such indebtedness.
  68




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Indebtedness
   69




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As of December 31,
    
    
    As of December 31,2008(1)
    
    
    2007(2)Pesos
    
    
    Dollars
    
    
    Pesos
    
    
    Dollars(In thousands)Short Term and Long Term Vendor Financing:Vendor financing denominated in pesos
    
    Ps.
    4,354.0
    
    
    
    U.S.$321.6
    
    
    Ps.
    11,479.2
    
    
    
    U.S.$1,056.4Vendor financing denominated in
dollars
    
    
    
    
    
    
    
    
    
    
    1,293.8
    
    
    
    119.1Total vendor financing
    
    
    4,354.0
    
    
    
    321.6
    
    
    
    12,773.0
    
    
    
    1,175.5Long Term Payable Bonds Denominated in U.S.
Dollars:U.S.$200 million senior notes due 2014
(U.S.$150 million issued on December 20,
2006, U.S.$25 million issued on January
10, 2007 and U.S.$25 million issued on
September 5, 2007) bearing interest at a
rate of 11%, maturing on December 15,
2014
    
    
    2,707,660.0
    
    
    
    200,000.0
    
    
    
    2,173,240.0
    
    
    
    200,000.0Accrued interest
    
    
    13,919.5
    
    
    
    1,028.2
    
    
    
    11,172.2
    
    
    
    1,028.2Total long term payable bonds denominated
in U.S. dollars
    
    Ps.
    2,721,579.5
    
    
    
    U.S.$201,028.2
    
    
    Ps.
    2,184,412.2
    
    
    
    U.S.$201,028.2
 
 (1)
    
    Nominal pesos as of December 31, 2008. Peso amounts were converted to U.S. dollars solely for
the convenience of the reader at the rate of Ps.13.5383 per U.S.$1.00 as reported by the Banco
de México on December 31, 2008. Such conversions should not be construed as a representation
that the peso amounts actually represent such U.S. dollar amounts or could be converted into
U.S. dollars at the rate indicated, or at any other rate.(2)
    
    Constant pesos as of December 31, 2007. Peso amounts were converted to U.S. dollars solely
for the convenience of the reader at the rate of Ps.10.8662 per U.S.$1.00 as reported by the
Banco de México on December 31, 2007. Such conversions should not be construed as a
representation that the peso amounts actually represent such U.S. dollar amounts or could be
converted into U.S. dollars at the rate indicated, or at any other rate. Resources from Operating, Financing and Investing Activities
  i.
    
    Instead of the statement of changes in financial position, the financial
statements shall include the statements of cash flows for all the periods presented
comparatively with those of the current year, except for financial statements of periods
prior to 2008;
 ii.
    
    Cash inflows and cash outflows are reported in nominal currency units, thus not
including the effects of inflation;
 iii.
    
    Two alternative preparation methods (direct and indirect) are established,
without stating preference for either method. Furthermore, cash flows from operating
activities are to be reported first, followed by cash flows from investing activities
and lastly by cash flows from financing activities;
 iv.
    
    Captions of principal items are to be reported gross, with certain exceptions and
require disclosure of the composition of items considered cash equivalents.
  70




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At December 31, 2008(Thousands of nominal pesos)Net resources provided by operating activities
    
    Ps.
    446,171.2Net resources used in investing activities
    
    
    (1,613,933.0
    )Net resources provided by financing activities
    
    
    219,632.0
 At December 31,2007
    
    
    2006
    
    
    %(Thousands of constant pesos)Net resources provided by operating activities
    
    Ps.
    303,158.0
    
    
    Ps.
    87,898.3
    
    
    
    244.9
    %Net resources used in investing activities
    
    
    (1,248,407.4
    )
    
    
    (1,041,877.4
    )
    
    
    19.8
    %Net resources provided by financing activities
    
    
    2,745,493.3
    
    
    
    1,452,052.4
    
    
    
    89.1
    %
   Resources Provided by Operating Activities
   
    
    Ps.86.1 million increase in resources resulting from an decrease in accounts receivable
when compared to the Ps.285.0 million used in 2007 with the Ps.199.0 million used in 2008;
 
    
    Ps.66.4 million decrease in resources resulting from a decrease in liabilities and other
assets when compared to the Ps.90.0 million increase in resources provided in 2007 with the
Ps.23.6 million increase in resources provided in 2008; and
 
    
    Ps.10.2 million decrease in resources resulting from an increase in inventory, when
compared to the Ps. 2.5 million decrease in 2007 with the Ps. 7.6 million increase in 2008.
  
    
    Ps.34.0 million decrease in resources resulting from an increase in accounts receivable
when compared to the Ps.251.0 million used in 2006 with the Ps.285.0 million used in 2007 as
a result of our incremental operations, including a larger customer base and higher
revenues;
 
    
    Ps.77.2 million increase in resources resulting from a increase in liabilities and other
assets when compared to the Ps.14.7 million decrease in resources provided in 2006 with the
Ps.62.5 million increase in resources provided in 2007;
  71




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
    
    Ps.38.6 million increase in resources resulting from a decrease in restricted cash when
compared to the Ps.15.2 million used in 2006 with the Ps.23.4 reduced in 2007 due to the
cancellation of bank credits with IXE, Banorte and one swap transaction made on December
2007;
 
    
    Ps.21.7 million increase in resources resulting from an decrease in inventory, when
compared to the Ps.19.2 million used in 2006 with the Ps.2.5 million reduced in 2007; and
 
    
    Ps.14.3 million decrease in resources resulting from a increase in prepaid expenses, when
compared to the Ps.18.4 million used in 2006 with the Ps.4.1 million used in 2007.
  
    
    Ps.183.4 million decrease in resources resulting from an increase in accounts receivable
as a result of our incremental operations;
 
    
    Ps.178.2 million decrease in resources resulting from a decrease in short term
liabilities;
 
    
    Ps.15.1 million decrease in resources resulting from an increase in inventory; and
 
    
    Ps.29.9 million increase in case resulting from a decrease in prepaid expenses.
 Resources Provided by Financing Activities
  
    
    Ps.2,643.4 million provided from the net proceeds of our initial public offering in
2007;
 
    
    Ps.210.7 million used to the payment of Ps. 214.4 millions of the senior notes interest,
Ps. 20.3 paid in the share repurchase program when compared with Ps.24.0 of hedging
valuation on 2007;
 
    
    Ps.71.6 million used to exercise of the stock option program in 2008;
 
    
    Ps. 8.4 million used to pay vendor financing in 2008; and
 
    
    Ps.408.3 million increase in resources from Ps.534.4 million senior notes revaluation
compared with the payment of Ps.126.1 million of the used to redeem U.S.$11,590 of our
133/4% B series bonds maturing on April 1, 2007.
  
    
    Ps.2,643.4 million provided from the net proceeds of our initial public offering in 2007
when compared to with the Ps.364 million generated in 2006 by the sale of our common stock
to Grupo VAC;
 
    
    Ps.456.6 million provided by the senior notes due 2014 issuance (U.S.$50 million) in 2007
including a hedge valuation of Ps. 24.0 million when compared with Ps. 1,209.2 million net
proceeds for senior notes due 2014 issuance (issuance of US$150 million and payment of
US$42.7 million) made in 2006;
 
    
    Ps.130.8 million used to redeem U.S.$11,590 of our 133/4% B series bonds maturing on
April 1, 2007;
  72




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
    
    Ps.155.6 million used to redeem Ps. 150.0 million plus accrued interest of our commercial
paper maturing May 17, 2007;
 
    
    Ps. 80.8 million used to pay vendor financing in 2006 compared to Ps. 12.8 million used
in 2007, a Ps.68.0 million decrease. Most of our vendor financing is related to vehicles,
telecommunications and office equipment; and
 
    
    Ps.157.3 million used to pay bank financing (a Ps. 78.4 million credit facility with IXE
Bank and a Ps.78.9 million credit facility with Banorte Bank) and Ps.36.0 million used to
pay other financing activities in 2006.
  
    
    Ps.364.3 million provided by the sale of our common stock to Grupo VAC Investors for
U.S.$ 31.2 million;
 
    
    Ps.1,692.6 million provided by the senior notes due 2014 issuance;
 
    
    Ps.483.4 million used to pay (i) $5.1 million of senior notes due 2007 and (ii) $ 36.1
million of senior step-up note due 2009;
 
    
    Ps.157.3 million used to pay (i) Ps.51.4 million on the Ixe Banco short term credit
facility, (ii) Ps.20.5 million on the Banco Mercantil del Norte short term credit facility,
(iii) Ps.27.0 million on the Ixe Banco long term credit facility, and (iv) Ps.58.4 million
on the Banco Mercantil del Norte long term credit facility;
 
    
    Ps.235.4 million used for the capitalization of liabilities held with a related party in
connection with the acquisition and sale of a subsidiary; and
 
    
    Ps.63.1 million used for other operating activities.
 Resources Used for Investing Activities
    Capital Expenditures
   73




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Dividend Policy
  
    
    a minimum consolidated leverage ratio of less than 4.00 to 1.00 on or after January 1,
2008 and on or before December 31, 2009 and 3.50 to 1.00 on or after January 1, 2010;
 
    
    a minimum fixed charge coverage ratio of 2.00 to 1.00;
 
    
    no default (as defined in the indenture) must have occurred and be continuing or result
from the payment of the cash dividend; and
 
    
    the dividend payments together with the aggregate amount of all other restricted payments
(as defined in the indenture) do not exceed certain amount determined in the indenture based
on, among other things: (i) the consolidated net income of the company, (ii) the net cash
flows from equity offerings, (iii) the lesser of the return on the restricted investments or
the original amount of the restricted investment, (iv) the lesser of the fair market value
(as defined in the indenture) of the companys investment on a subsidiary after its
redesignation as a restricted subsidiary or the original fair value as of the date in which
such subsidiary was originally designated as unrestricted subsidiary.
  Effects of Inflation on Financial Information
   InflationDecember 31,
    
    NCPI
    
    
    Year
    
    
    Accumulated2008
    
    
    133.761
    
    
    
    6.53
    %
    
    
    18.85
    %2007
    
    
    125.564
    
    
    
    3.76
    %
    
    
    11.56
    %2006
    
    
    121.015
    
    
    
    4.05
    %
    
    
    7.52
    %2005
    
    
    116.301
    
    
    
    3.33
    %
    
    
    3.33
    %
     74




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Principal Differences between MFRS and U.S. GAAP
  Recent United States Accounting Pronouncements
    75




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##### Table of Contents



Subsequent Events
 Accounting for Transfers of
Financial Assets – an amendment of Statement No. 140
 Amendments to FASB Interpretation
No. 46(R) Consolidation of Variable Interest Entities
  Recent Mexican Accounting Pronouncements
     76




---



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77




---



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78




---



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79




---



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C. Research and development, patents and licenses, etc.
  
 D. Trend information
  
    
    The growth in broadband access;
 
    
    The convergence of services and industries, as evidenced by the introduction of voice,
data and video bundles in the market;
 
    
    Industry competitors forming alliances to sell and package bundles under one simple price
strategies;
 
    
    Multi-service IP services; and
 
    
    Mobile services.
   
 E. Off  balance sheet arrangements
  
 F. Tabular disclosure of contractual obligations
  Payment Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years(In thousands of pesos)Contractual Obligations:Long-Term Debt Obligations*
    
    Ps.
    2,707,660.0
    
    
    Ps.
    
    
    
    Ps.
    
    
    
    Ps.
    
    
    
    Ps.
    2,767,660.0Capital (Finance) Lease Obligation
    
    
    4,354.0
    
    
    
    4,354.0
    
    
    
    
    
    
    
    
    
    
    
    Vendor Financing
    
    
    17,725.9
    
    
    
    17,725.9
    
    
    
    
    
    
    
    
    
    
    
    Capital Lease and Vendor
Financing Accrued Interest at
December 31, 2008
    
    
    44.3
    
    
    
    44.3
    
    
    
    
    
    
    
    
    
    
    
    Accounts Payable to Grupo VAC**
    
    
    36,091.4
    
    
    
    2,167.3
    
    
    
    2,552.3
    
    
    
    2,552.3
    
    
    
    28,819.5Debt Obligations Interest
    
    
    1,787,055.6
    
    
    
    310,252.7
    
    
    
    595,685.2
    
    
    
    595,685.2
    
    
    
    285,432.5Operating Lease Obligation
    
    
    325,779.5
    
    
    
    73,789.7
    
    
    
    132,089.3
    
    
    
    115,713.1
    
    
    
    4,187.4Interest to Account Payable to
Grupo VAC**
    
    
    48,693.7
    
    
    
    3,461.5
    
    
    
    6,540.2
    
    
    
    6,029.8
    
    
    
    32,662.1Total
    
    Ps.
    4,927,404.3
    
    
    Ps.
    411,795.4
    
    
    Ps.
    736,867.0
    
    
    Ps.
    719,980.4
    
    
    Ps.
    3,058,761.5
 *
    
    For further information see Item 5. Operating and Financial Review and Prospects  B. Liquidity
and capital resources -Financing sources and liquidity**
    
    For further information see Item 4. Information on the Company  B. Business overview-Legal
Matters and Administrative Proceedings-Mexican Federal Power Commission (Comisión Federal de
Electricidad) Litigation  80




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##### Table of Contents



G.
  
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
 A. Directors and senior management
 Directors
    Name
    
    Age
    
    PositionEduardo Vázquez
    
    
    46
    
    
    Director and Chairman of the BoardAdrián Aguirre Gómez
    
    
    58
    
    
    Director and Vice Chairman of the BoardGabriel Vázquez
    
    
    48
    
    
    DirectorLauro A. González Moreno (*)
    
    
    47
    
    
    DirectorMarco Provencio Muñoz (*)
    
    
    50
    
    
    DirectorRodrigo Guerra Botello (*)
    
    
    67
    
    
    DirectorJacques Gliksberg
    
    
    51
    
    
    DirectorLorenzo Barrera Segovia(*)
    
    
    50
    
    
    DirectorJuan Jaime Petersen Farah (*)
    
    
    50
    
    
    DirectorJorge Garcia Segovia (*)
    
    
    51
    
    
    Director
 
 *
    
    Independent Directors pursuant to New York Stock Exchange listing standards, applicable
federal U.S. securities laws including Rule 10 A-3, and the Mexican Securities Market Law.     81




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##### Table of Contents



Eduardo Vázquez
 Adrián Aguirre Gómez .
 Gabriel Vázquez
 Lauro González Moreno .
 Marco Provencio Muñoz
 Rodrigo Guerra Botello
  82




---



##### Table of Contents



Jacques Gliksberg .
 Lorenzo Barrera Segovia.
 Jorge García Segovia.
 Juan Jaime Petersen Farah.
 Senior Management
    83




---



##### Table of Contents



Name
    
    Age
    
    PositionEduardo Vázquez
    
    
    46
    
    
    Chief Executive OfficerWilliam Nazaret
    
    
    48
    
    
    Chief Operating OfficerJosé Antonio Solbes
    
    
    42
    
    
    Chief Financial OfficerJuvenal Gárnica
    
    
    52
    
    
    Chief Technology OfficerEduardo Legorreta
    
    
    43
    
    
    Vice President of Commercial Sales
  William Nazaret
 José Antonio Solbes
 Juvenal Gárnica
 Eduardo Legorreta
 
 B. Compensation
    84




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##### Table of Contents



(Ley Federal del Trabajo)
 First Executive Stock Option Plan
   Second Executive Stock Option Plan
      85




---



##### Table of Contents



Composition of the Board of Directors
 Comisión Nacional Bancaria y de Valores
  Authority of the Board of Directors
   
    
    our general strategy;
 
    
    guidelines for the use of corporate assets;
 
    
    on an individual basis, any transactions with related parties, subject to certain limited
exceptions;
 
    
    unusual or non-recurrent transactions and any transactions that imply the acquisition or
sale of assets with a value equal to or exceeding 5% of our consolidated assets or the
provision of collateral or guarantees or the assumption of liabilities equal to or exceeding
5% of our consolidated assets;
 
    
    the appointment or removal of the chief executive officer;
 
    
    accounting and internal control policies; and
 
    
    policies for disclosure of information.
  
 C. Board practices
     86




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##### Table of Contents



Committees
  Audit and Corporate Practices Committee
     
    
    advise the board of directors with respect to matters assigned to it under the Mexican
Securities Market Law, including: (a) our internal control and internal audit guidelines,
(b) our accounting policies by referenced to financial reporting standards, (c) our
financial statements, (d) the appointment of our external auditors, and (e) transactions
that either are outside the ordinary course of our business or, in relation to the results
of the immediately preceding fiscal quarter, constitute (i) the acquisition or disposition
of assets or (ii) the provision of guaranties or the assumption of liabilities, in each
case, equal to or greater than 5% of our consolidated assets;
 
    
    evaluate, analyze and supervise the work performed by our external auditors, including
(a) review with them our annual and interim financial statements; (b) approve non-audit
services provided by them; (c) resolve any disagreements between them and management; and
(d) ensure their independence and objectivity;
 
    
    discuss our financial statements with the chief financial officer for their preparation
and review and issue a recommendation to the board of directors with respect to committees
approval;
 
    
    inform the board of directors of the status of the internal control and internal audit
system, including any detected irregularities;
 
    
    advise the board of directors with respect to the annual report of our chief financial
officer;
 
    
    assist the board of directors in preparation of the report on our principal accounting
and financial information policies and criteria;
 
    
    seek the opinion of independent experts and other advisors when required or deemed
necessary;
 
    
    investigate possible violations of operational guidelines and policies or of the internal
control, internal audit and accounting records system;
 
    
    request periodic meetings with management and any information related to internal control
and internal audit;
  87




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##### Table of Contents




    
    call a shareholders meeting and request the inclusion of matters it considers
appropriate on the agenda;
 
    
    supervise and discuss with the board of directors our internal control system relating to
risk management and compliance with applicable laws;
 
    
    ensure the existence of control mechanisms to provide that consistent unaudited financial
information is presented to the board of directors;
 
    
    report to the board of directors on any detected significant irregularities and on its
activities in general and review and propose amendments to its rules;
 
    
    supervise, review and discuss the audit procedures of our internal audit;
 
    
    receive from our external auditors a report that includes an analysis of: (a) all
critical accounting policies utilized by us; (b) all policies and financial reporting
standards that differ from those utilized by us and that have been discussed with
management, including the implications of using such policies and practices; and (c) any
other written communications regarding significant matters between our external auditors and
management, including the annual letter to management, in which our external auditors
summarize their recommendations regarding our internal controls identified during the audit
process;
 
    
    establish procedures for receiving, retaining and addressing complaints regarding
accounting, internal controls and audit matters, including procedures for confidential
submission of such complaints;
 
    
    review and analyze with management and our external auditors this annual report and the
quarterly results presented to the Securities and Exchange Commission, or SEC;
 
    
    oversee the execution of resolutions adopted at shareholders meetings by the board of
directors; and
 
    
    perform any other functions pursuant to its mandate or expressly conferred by the board
of directors.
  Operating Advisory Committee
  Director and Officer Indemnification and Limitation on Liability
   88




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##### Table of Contents



D. Employees
  
 E. Share ownership
  Series A Common StockBeneficial Ownership
    
    
    SharesShareholders
    
    Number
    
    
    Percentage
    
    
    Underlying CPOsJacques Gliksberg(1)
    
    
    319,484,851
    
    
    
    40.5
    %
    
    
    287,484,851Marco Viola(1)**
    
    
    319,146,856
    
    
    
    40.4
    %
    
    
    287,146,856Eduardo Vázquez (3)
    
    
    76,831,006
    
    
    
    9.7
    %
    
    
    48,831,006Jesus Gustavo Martinez (3)**
    
    
    76,831,006
    
    
    
    9.7
    %
    
    
    48,831,006Gabriel Vázquez (3)
    
    
    76,831,006
    
    
    
    9.7
    %
    
    
    48,831,006Efrain Ruvalcaba (3)**
    
    
    76,831,006
    
    
    
    9.7
    %
    
    
    48,831,006Adrián Aguirre Gómez(2)
    
    
    14,549,048
    
    
    
    1.84
    %
    
    
    11,549,043Lauro González Moreno
    
    
    *
    
    
    
    *
    
    
    
    Maria Guadalupe Aguirre Gómez(2)**
    
    
    14,549,048
    
    
    
    1.84
    %
    
    
    11,549,043Rodrigo Guerra Botello
    
    
    *
    
    
    
    *
    
    
    
    Marco Provencio Muñoz
    
    
    *
    
    
    
    *
    
    
    
    Lorenzo Barrera Segovia
    
    
    *
    
    
    
    *
    
    
    
    Juan Jaime Petersen Farah
    
    
    *
    
    
    
    *
    
    
    
    Jorge Garcia Segovia
    
    
    *
    
    
    
    *
    
    
    
    José Antonio Solbes
    
    
    *
    
    
    
    *
    
    
    
    All executive officers and
directors as a group (14 persons)
    
    
    410,864,905
    
    
    
    52.04
    %
    
    
    347,864,900
 
 *
    
    Less than one percent. Pursuant to the Instruction to Item 6E of Form 20-F, individual share
ownership is not disclosed.**
    
    Alternate director.  89




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##### Table of Contents



ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
 A. Major Shareholders
   Series A Common StockBeneficial Ownership
    
    
    SharesShareholders
    
    Number
    
    
    Percentage
    
    
    Underlying CPOsBank of America Corporation(1)
    
    
    319,484,851
    
    
    
    40.5
    %
    
    
    287,484,851Nexus Maxcom Holdings (1)
    
    
    319,484,851
    
    
    
    40.5
    %
    
    
    287,484,851The Bank of New York Mellon Corporation(2)
    
    
    55,894,104
    
    
    
    7.07
    %
    
    
    55,894,104
 
 *
    
    Less than one percent. Pursuant to the Instruction to Item 6E of Form 20-F, individual share
ownership is not disclosed.(1)
    
    Based upon information set forth in the Schedule 13G/A filed on February 13, 2009,
includes shares of Series A common stock beneficially owned, directly or indirectly by the
following reporting persons: Nexus-Maxcom Holdings I, LLC, Nexus Partners I, LLC, Nexus-Banc
of America Fund II, L.P., Nexus Partners II, L.P., Jacques Gliksberg, Marco Viola.
Additionally, Bank of America Corporation has retained Nexus Partners and Messrs. Gliksberg
and Viola to manage all shares of Series A Common Stock beneficially owned by BAS Capital
Funding Corporation (BAS Capital), which is the direct beneficial owner of 3,055,035
shares of Series A Common Stock, or approximately 0.4% of the total outstanding Series A
Common Stock, BankAmerica Investment Corporation (BAIC), which is the direct beneficial
owner of 338,347 shares of Series A Common Stock, or approximately 0.04% of the total
outstanding Series A Common Stock, BASCFC-Maxcom Holdings I, LLC (BASCFC), which is the
direct beneficial owner of 85,741,832 shares of Series A Common Stock, or approximately
10.9% of the total outstanding Series A Common Stock and Nexus-Maxcom Holdings. As a result,
Nexus Partners and Messrs. Gliksberg and Viola may be deemed to be the indirect beneficial
owners of the shares beneficially owned directly by BAS Capital, BAIC, BASCFC and
Nexus-Maxcom Holdings.(2)
    
    Based upon information set forth in the Schedule 13G filed on March 17, 2009, includes
shares of Series A common stock beneficially owned, directly or indirectly by the following
reporting persons: MBC Investments Corporation, Neptune LLC, Mellon International Holding
SARL, Mellon International Ltd., Newton Management Ltd. and Newton Investment Management
Ltd.   90




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##### Table of Contents



Significant Changes in Share Ownership
  Differences in Voting Rights
  Securityholders Agreement
  Registration Rights Agreement
  Demand Rights.
 Piggyback Rights.
 Conditions and Limitations; Expenses.
   91




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##### Table of Contents



B. Related party transactions
 General policy
  Acquisition of Sierra Comunicaciones Globales
  
 C. Interests of experts and counsel
  
 ITEM 8. FINANCIAL INFORMATION
 
 A. Consolidated statements and other financial information
 Financial Statements
  Legal Proceedings
  Dividend Policy
  
 B. Significant changes
 Designation of the Grupo Telereunión companies as Guarantors.
  Formation of our Board of Directors and Audit and Corporate Practices Committee.
   92




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##### Table of Contents



New appointment of our Chief Executive Officer.
  Engagement of the new Independent Auditor.
  Reclassification of Capital Stock and 2007 Initial Public Offering
 (Certificados de Participación
Ordinarios),
  Capital Stock Increase and Acquisition of Grupo Telereunión
   (Capital Contable)
  93




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##### Table of Contents



ITEM 9. THE OFFER AND LISTING
 Trading Market
   Mexican Stock Exchange
    
    
    New York Stock Exchange(Mexican pesos per CPO)
    
    
    (U.S. dollars per ADS)High
    
    
    Low
    
    
    High
    
    
    LowAnnual Highs and Lows2009(through June 23, 2009)
    
    Ps.
    8.35
    
    
    Ps.
    4.20
    
    
    $
    4.26
    
    
    $
    1.702008
    
    
    23.70
    
    
    
    5.29
    
    
    
    16.03
    
    
    
    2.162007 (beginning October 19, 2007)
    
    
    31.00
    
    
    
    19.00
    
    
    
    19.98
    
    
    
    12.17Quarterly Highs and Lows
2009:First Quarter
    
    Ps.
    8.35
    
    
    Ps.
    4.20
    
    
    $
    4.26
    
    
    $
    1.86Second
Quarter (through June 23,  2009)
    
    
    6.90
    
    
    
    4.51
    
    
    
    3.50
    
    
    
    1.702008:First Quarter
    
    Ps.
    20.39
    
    
    Ps.
    16.50
    
    
    $
    13.25
    
    
    $
    9.89Second Quarter
    
    
    23.70
    
    
    
    16.10
    
    
    
    16.03
    
    
    
    9.44Third Quarter
    
    
    18.91
    
    
    
    11.00
    
    
    
    12.75
    
    
    
    7.01Fourth Quarter
    
    
    12.86
    
    
    
    5.29
    
    
    
    8.00
    
    
    
    2.162007:Fourth Quarter (beginning October 19, 2007)
    
    Ps.
    31.00
    
    
    Ps.
    19.00
    
    
    $
    19.98
    
    
    $
    12.17Monthly
2009:January
    
    Ps.
    8.35
    
    
    Ps.
    6.20
    
    
    $
    4.26
    
    
    $
    3.03February
    
    
    7.50
    
    
    
    5.80
    
    
    
    3.43
    
    
    
    2.74March
    
    
    6.19
    
    
    
    4.20
    
    
    
    2.90
    
    
    
    1.86April
    
    
    6.50
    
    
    
    4.55
    
    
    
    3.06
    
    
    
    2.13May
    
    
    6.90
    
    
    
    4.51
    
    
    
    3.50
    
    
    
    1.70June (through June 23, 2009)
    
    
    6.53
    
    
    
    5.30
    
    
    
    3.45
    
    
    
    2.702008:January
    
    Ps.
    19.94
    
    
    Ps.
    16.50
    
    
    $
    12.90
    
    
    $
    9.89February
    
    
    20.39
    
    
    
    18.53
    
    
    
    13.25
    
    
    
    11.76March
    
    
    19.28
    
    
    
    17.29
    
    
    
    12.52
    
    
    
    11.02April
    
    
    19.20
    
    
    
    16.38
    
    
    
    12.53
    
    
    
    9.44May
    
    
    21.80
    
    
    
    16.10
    
    
    
    14.66
    
    
    
    10.61June
    
    
    23.70
    
    
    
    17.51
    
    
    
    16.03
    
    
    
    11.79July
    
    
    18.91
    
    
    
    14.10
    
    
    
    12.75
    
    
    
    9.73August
    
    
    14.54
    
    
    
    11.05
    
    
    
    10.02
    
    
    
    7.60September
    
    
    14.39
    
    
    
    11.00
    
    
    
    9.56
    
    
    
    7.01October
    
    
    12.86
    
    
    
    5.80
    
    
    
    8.00
    
    
    
    2.52November
    
    
    8.90
    
    
    
    5.29
    
    
    
    5.03
    
    
    
    2.16December
    
    
    9.00
    
    
    
    7.16
    
    
    
    4.66
    
    
    
    3.552007:October (beginning October 19, 2007)
    
    Ps.
    31.00
    
    
    Ps.
    26.60
    
    
    $
    19.98
    
    
    $
    17.01November
    
    
    27.70
    
    
    
    22.67
    
    
    
    18.80
    
    
    
    14.35December
    
    
    26.32
    
    
    
    19.00
    
    
    
    17.83
    
    
    
    12.17
  94




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##### Table of Contents



Trading on the Mexican Stock Exchange
 sociedad anónima bursátil de capital variable
 (Comisión Nacional Bancaria y de Valores) S.D. Indeval,
Institución para el Deposito de Valores, S.A. de C.V.,
  
 ITEM 10. ADDITIONAL INFORMATION
 
 A. Share capital
  
 B. Memorandum and articles of association
 General
     % of TotalNumber
    
    
    CapitalClass of Shares
    
    of Shares
    
    
    StructureSeries A common stock
    
    
    789,818,829
    
    
    
    100
    %Total
    
    
    789,818,829
    
    
    
    100
    %
 Dirección
General de Inversión Extranjera
  95




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##### Table of Contents



DESCRIPTION OF CAPITAL STOCK
 The following information describes our outstanding capital stock and provisions of our
bylaws. This description may not contain all of the information that is important to you. To
understand them fully, you should read our bylaws, a copy of which is filed with the SEC as an
exhibit to the registration statement filed with the SEC on October 17, 2007. The following
descriptions are qualified in their entirety by reference to the bylaws and to applicable
provisions of Mexican law.
 Outstanding Capital Stock
  Changes to Capital Stock
  Registration and Transfer
  Shareholders Meetings
  
    
    our board of directors and the president or secretary of the board;
 
    
    shareholders representing at least 10% of our outstanding capital stock who request the
board of directors or the audit and corporate practices committee to call a shareholders
meeting;
 
    
    a Mexican court of competent jurisdiction, in the event the board of directors does not
comply with a valid request of the shareholders described immediately above;
 
    
    the audit and corporate practices committee; and
 
    
    any shareholder, provided that no annual ordinary meeting has been held for two
consecutive years or the annual shareholders meeting did not to address the matters required
to be addressed in an annual shareholders meeting.
  96




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##### Table of Contents



General Ordinary Shareholders Meetings.
 
    
    approve the financial statements for the preceding fiscal year;
 
    
    elect directors;
 
    
    discuss and approve the audit and corporate practices committees, the board of
directors and the chief executive officers annual report;
 
    
    determine how to allocate net profits for the preceding year (including, if applicable,
the payment of dividends); and
 
    
    determine the maximum amount of resources allocated to share repurchases.
   General Extraordinary Shareholders Meetings.
 
    
    an extension of our duration or voluntary dissolution;
 
    
    an increase or decrease in the fixed portion of our capital stock;
 
    
    any change in our corporate purpose or nationality;
 
    
    any merger or transformation into another type of company;
 
    
    any issuance of preferred stock;
 
    
    the redemption of shares with retained earnings;
 
    
    any amendments to our bylaws;
 
    
    any other matters provided for by law or our bylaws; or
 
    
    the cancellation of the registration of our class A common stock or CPOs representing
such shares at the Mexican National Securities Registry or any stock exchange (except for
automated quotation systems).
  97




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Special Shareholders Meetings.
 Cumulative Voting.
 Voting Rights
  Ownership Restrictions
  Preemptive Rights
   98




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##### Table of Contents



Dividends
  Redemption
 pro rata pro rata
 Dissolution or Liquidation
  Certain Minority Protections
  
    
    Holders of at least 5% of our outstanding shares, whether directly or through CPOs or
ADSs, are required to initiate action against some or all of our directors for violations of
their duty of care or duty of loyalty, for our benefit, in an amount equal to the damages or
losses caused to us. Actions initiated on these grounds have a five year statute of
limitations.
 
    
    Holders of at least 10% of our outstanding share capital, whether directly or through
CPOs or ADSs, are able to:
 
    
    request a call for a shareholders meeting;
 
    
    request that resolutions with respect to any matter on which they were not
sufficiently informed be postponed; and
 
    
    appoint one member of our board of directors and one alternate member of our
board of directors except that for non-Mexican holders of CPOs or ADSs this right will
only be exercisable if a majority of our directors are appointed by Mexican investors.
See Description of the CPO Trust.
 
    
    Holders, whether directly or through CPOs or ADSs, of 20% of our outstanding share
capital to oppose any resolution adopted at a shareholders meeting and file a petition for
a court order to suspend the resolution within 15 days following the adjournment of the
meeting at which the action was taken, provided that the challenged resolution violates
Mexican law or our bylaws, the opposing shareholders either did not attend the meeting or
voted against the challenged resolution, and the
opposing shareholders deliver a bond to the court to secure payment of any damages that we
may suffer as a result of suspending the resolution in the event that the court ultimately
rules against the opposing shareholder.
  99




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##### Table of Contents



Other Provisions
 Foreign Investment Regulations
 (Dirección General de Inversión Extranjera)
 Purchase of Shares by Us
 Comisión Nacional Bancaria y de Valores or CNBV
 Purchases of Shares by our Subsidiaries
  Conflicts of Interest
    100




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##### Table of Contents



Exclusive Jurisdiction
  Withdrawal Rights
  Cancellation of Registration in the Mexican National Securities Registry
  
    
    the average quotation price on the Mexican Stock Exchange for the 30 days prior to the date of
the offer; or
 
    
    the book value, as reflected in the report filed with the CNBV and the Mexican Stock Exchange.
   Elimination of Foreign Ownership Restrictions
  
    
    concurrently with the termination of the CPO trust and distribution of the underlying
 shares, the registration of the Series A common stock with the Mexican National Securities
Registry maintained by the CNBV and, if necessary, the registration of the distribution of
such shares under the Securities Act;
 
    
    the listing of the shares on the Mexican Stock Exchange;
 
    
    those required to modify our bylaws to permit unrestricted foreign ownership and/or
control of our capital stock (and the CPOs);
 
    
    the preparation of proxy materials for and the solicitation of shareholder, and CPO
holder, approval of the termination of CPO trust and any required or advisable amendments to
our bylaws; and
 
    
    causing all filings, notices, applications and permits related to, and obtaining
approvals and authorizations of, such termination and distribution.
   101




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Forfeiture of Stock
 (Secretaría de Relaciones Exteriores)
 Duration and Dissolution
  
    
    the impossibility of continuing with our current line of business;
 
    
    the resolution of our shareholders at an extraordinary general shareholders meeting;
 
    
    the reduction of the number of our shareholders to fewer than two; and
 
    
    the loss of two-thirds of our capital stock.
 Anti-takeover Provisions
   DESCRIPTION OF THE CPO TRUST
 The following information describes our outstanding CPOs. This description may not contain all
of the information that is important to you. To understand it fully, you should read the CPO trust
agreement, a translated copy of which is filed with the SEC as an exhibit to our registration
statement filed with the SEC on October 17, 2007.
 The following descriptions are qualified in their entirety by reference to the CPO trust agreement
and to the applicable provisions of Mexican law.
  102




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##### Table of Contents



General
  Nacional Financiera, Sociedad Nacional de Crédito, Institución de Banca de
Desarrollo,
 
    
    the CPO trust agreement between us and the CPO trustee (and persons contributing shares
of Series A common stock to the trust from time to time); and
 
    
    a CPO trust deed, pursuant to which the CPO trustee will issue CPOs in accordance with
the CPO trust agreement.
  Authorization
 (Secretaría de Economía)
 Voting Rights with Respect to Underlying Shares
     103




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Deposit and Withdrawal of Shares
   Registration and Transfer
  Dividends and Other Distributions
 (Secretaría de Salud)
 Cash Dividends and Distributions.
  104




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Stock Dividends.
 Other Distributions.
 Preemptive Rights
   Withdrawal Rights
  Changes Affecting the CPOs
  
    
    a split or a consolidation of our Series A common stock;
 
    
    a capitalization affecting or redemption of our Series A common stock;
 
    
    any other reclassification or restructuring of our Series A common stock; or
 
    
    any merger, consolidation, or spin-off.
  105




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Administration of the CPO Trust
  The Common Representative
  
    
    verification of the due execution and terms of the CPO trust;
 
    
    verification of the existence of the shares Series A common stock being held in the CPO
trust;
 
    
    authentication, by its signature, of the certificates evidencing the CPOs;
 
    
    exercise the rights of CPO holders in connection with the payment of any dividend to
which they are entitled;
 
    
    undertaking of any other action required to protect the rights, actions or remedies to
which they are entitled;
 
    
    calling and presiding over general meetings of CPO holders; and
 
    
    execution of decisions adopted at general meetings of CPO holders.
  General Meetings of CPO Holders
   106




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##### Table of Contents



Enforcement of Rights of CPO Holders
  
    
    the right to cause the CPO trustee to distribute dividends or other distributions it has
received;
 
    
    the right to cause the common representative to enforce and protect rights of CPO
holders; and
 
    
    the right to bring action against the common representative, for civil liabilities in the
event of willful misconduct.
 Termination of the CPO Trust
  
    
    distribute the shares of Series A common stock underlying CPOs held by Mexican holders of
on a pro rata basis; and
 
    
    with respect to shares of Series A common stock underlying CPOs held by non-Mexicans, the
CPO trustee will:
 
    
    sell or distribute the applicable shares Series A common stock in the CPO trust,
and then distribute the proceeds to CPO holders on a pro rata basis;
 
    
    extend the period for the CPO trust agreement; or
 
    
    create a new trust similar to the CPO trust to which it will transfer all of the
applicable shares of Series A common stock, so that the non-Mexican holders may be the
beneficiaries of economic rights in respect of such shares on a pro rata basis.
 Fees of the CPO Trustee and the Common Representative
   107




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DESCRIPTION OF AMERICAN DEPOSITARY SHARES
 The following information describes the material terms of the ADS deposit agreement. This
description may not contain all of the information that is important to you. To understand it
fully, you should read the deposit agreement and the form of American Depository Receipt, a copy of
which is filed with the SEC as an exhibit to the registration statement filed with the SEC on
October 17, 2007.
 General
     Dividends and Other Distributions
  Cash Dividends and Distributions.
 Share Dividends and Distributions.
  108




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Rights to Purchase Additional CPOs.
 Other Distributions.
 Unlawful or Impracticable Distributions.
 Deposit, Withdrawal and Cancellation
 Issuance of ADS Securities.
 Withdrawal of Deposited Securities.
 Interchange between certificated ADSs and uncertificated ADSs.
 Voting Rights
   109




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Right to Deliver Notices to the Company and the Common Representative
  Fees and Expenses
   Payment of Taxes
   110




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##### Table of Contents



Reclassifications, Recapitalizations and Mergers
  
    
    Change the nominal or par value of the CPOs;
 
    
    Reclassify, split or consolidate any of the deposited securities;
 
    
    Distribute securities on the CPOs that are not distributed to ADS holders;
 
    
    Recapitalize, reorganize, merge, liquidate, sell all or substantially all of our assets,
or take any similar action
  
    
    The cash, shares or other securities received by the depositary will become deposited
securities. Each ADS will automatically represent its equal share of the new deposited
securities.
 
    
    The depositary may, and will if we ask it to, distribute some or all of the cash, shares
or other securities it received. It may also deliver new ADRs or ask ADR holders to
surrender their outstanding ADRs in exchange for new ADRs identifying the new deposited
securities.
 Amendment and Termination
    Limits on our Obligations and the Obligations of the Depositary, Limits on Liability to Holders of
ADSs
  
    
    are only obligated to take the actions specifically set forth in the deposit agreement
without negligence or bad faith;
 
    
    are not liable if either of us is prevented or delayed by law or circumstances beyond our
control from performing our obligations under the deposit agreement;
 
    
    are not liable if either of us exercises discretion permitted under the deposit
agreement;
 
    
    are not liable for the inability of any holder of ADSs to benefit from any distribution
on deposited securities that is not made available to holders of ADSs under the terms of the
deposit agreement;
  111




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
    
    are not liable for any special, consequential or punitive damages for any breach of the
terms of the deposit agreement;
 
    
    have no obligation to become involved in a lawsuit or other proceeding related to the
ADSs or the deposit agreement on an ADS holders behalf or on behalf of any other person; and
 
    
    may rely upon any documents we believe in good faith to be genuine and to have been
signed or presented by the proper person.
  Requirements for Depositary Actions
  
    
    payment of stock transfer or other taxes or other governmental charges and transfer or
registration fees charged by third parties for the transfer of any CPOs or other deposited
securities;
 
    
    satisfactory proof of the identity and genuineness of any signature or other information
it deems necessary; and
 
    
    compliance with regulations it may establish, from time to time, consistent with the
deposit agreement, including presentation of transfer documents.
  ADS Holders Right to Receive the CPOs Underlying ADRs
  
    
    when temporary delays arise because: (i) the depositary, the CPO trustee or the Foreign
Registrar has closed its transfer books or we have closed our transfer books; (ii) the
transfer of CPOs is blocked to permit voting at a shareholders meeting; or (iii) we are
paying a dividend on our Series A common stock or any other security deposited with the CPO
trustee;
 
    
    if the ADS holder owes money to pay fees, taxes and similar charges; and
 
    
    when it is necessary to prohibit withdrawals in order to comply with any laws or
governmental regulations that apply to the ADSs or to the withdrawal of CPOs or other
deposited securities.
  Pre-release of ADSs
   112




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Direct Registration System
   Shareholder Communications and Inspection of Register of Holders of ADSs
  DIVIDEND POLICY
      113




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##### Table of Contents




    
    a minimum consolidated leverage ratio of less than 4.25 to 1.00 on or before December 31,
2007, 4.00 to 1.00 on or after January 1, 2008 and on or before December 31, 2009 and 3.50
to 1.00 on or after January 1, 2010;
 
    
    no default (as defined in the indenture) must have occurred and be continuing or result
from the payment of the cash dividend; and
 
    
    the dividend payments together with the aggregate amount of all other restricted payments
(as defined in the indenture) do not exceed a certain amount determined in the indenture
based on, among other things: (i) the consolidated net income of the company, (ii) the net
cash flows from equity offerings, (iii) the lesser of the return on the restricted
investments or the original amount of the restricted investment, (iv) the lesser of the fair
market value (as defined in the indenture) of the companys investment on a subsidiary after
its redesignation as a restricted subsidiary or the original fair value as of the date in
which such subsidiary was originally designated as unrestricted subsidiary.
   
 C. Material contracts
 Sale of the Telereunión Concession
   Securityholders Agreement
   114




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Grupo VAC Investors Agreements
    Senior Notes due 2014
  Currency Swap Agreement
  Alcatel IPTV Supply Agreement
 ®
  115




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##### Table of Contents



D. Exchange Controls
   
 E. Taxation
 Certain Material United States Federal Income Tax Considerations
 IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the U.S.
Internal Revenue Service, we inform you that any tax advice contained in this document (including
any attachments) was not intended or written to be used, and cannot be used, by any taxpayer for
the purpose of avoiding tax-related penalties under the U.S. Internal Revenue Code. The tax advice
contained in this document (including any attachments) was written to support the promotion or
marketing of the transaction(s) or matter(s) addressed by the document. Each taxpayer should seek
advice based on the taxpayers particular circumstances from an independent tax advisor.
     116




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EACH HOLDER IS URGED TO CONSULT ITS TAX ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL AND
FOREIGN INCOME AND OTHER TAX CONSIDERATIONS OF HOLDING CPOs, ADSs, OR SENIOR NOTES.
 Senior Notes due 2014
  U.S. Tax Characterization of the Senior Notes
    U.S. Holders of Senior Notes
 Payments of Interest
  Sale or Other Taxable Disposition of the Senior Notes
   117




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##### Table of Contents



Acquisition Premium
  Market Discount
    Mexican Withholding Tax
    118




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##### Table of Contents



Information Reporting and Backup Withholding
   Non-U.S. Holders of Senior Notes
    CPOs or ADSs
   119




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##### Table of Contents



U.S. Holders of CPOs or ADSs
 Taxation of Dividends and Other Distributions.
      120




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Sale or Other Disposition of the CPOs or ADSs.
   Passive Foreign Investment Company Considerations
      121




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Controlled Foreign Corporation Considerations
   122




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##### Table of Contents



U.S. Information Reporting and Backup Withholding.
   Non-U.S. Holders of CPOs or ADSs
  U.S. Information Reporting and Backup Withholding.
     123




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THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES
ONLY. HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE FEDERAL, STATE AND LOCAL
AND NON-U.S. TAX CONSIDERATIONS OF OWNING OUR SENIOR NOTES, OR CPOs, OR ADSs.
 Mexican Income Tax Considerations
 Ley
del Impuesto sobre la Renta
   Mexican Tax Residence
   United States of America/Mexico and Other Tax Treaties
   124




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Mexican Tax Consequences to Foreign Holders of the Senior Notes
 Taxation of Interest and Principal
  
    
    the senior notes are placed through banks or brokerage houses in a country with
which Mexico has entered into a tax treaty for the avoidance of double taxation that is
in force;
 
    
    we have delivered notice of the offering of the senior notes to the Mexican
National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores)
pursuant to Article 7 of the Mexican Securities Market Law (Ley del Mercado de Valores);
and
 
    
    certain periodic information requirements by the Mexican Ministry of Finance
(Secretaría de Hacienda y Crédito Público) are complied with.
  Secretaría de Hacienda y
Crédito Público
  
    
    our shareholders who own, directly or indirectly, individually or jointly with
related parties, more than 10% of our voting stock; or
 
    
    legal entities 20% or more of whose stock is owned, directly or indirectly,
individually or jointly with related parties, by the us or by persons related to us.
 Secretaría de Hacienda y Crédito Público
     125




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##### Table of Contents



Sale or disposition of the senior notes
  Other Taxes
 IETU)
 Mexican Tax Consequences to Foreign Holders of the CPOs and ADSs
 Taxation of Dividends and Other Distributions
    Sale or Disposition of CPOs or ADSs
     126




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##### Table of Contents



Other Taxes
 IETU),
 
 F. Dividends and paying agents
  
 G. Statement by experts
  
 H. Documents on display
   
 I. Subsidiary information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
   127




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##### Table of Contents



Foreign Exchange Risk
    
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 Reclassification of Capital Stock and 2007 Initial Public Offering
 (Certificados de Participación
Ordinarios),
   128




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##### Table of Contents



ITEM 15T . CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting
     Changes in Internal Control over Financial Reporting
   
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
   129




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ITEM 16B. CODE OF ETHICS
    
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Year Ended December 312008
    
    
    2007(In millions)Audit Fees(1)
    
    Ps.
    0.0
    
    
    Ps.
    8.1Audit-Related Fees(2)
    
    
    0.6
    
    
    
    1.1Tax Fees (3)
    
    
    0.0
    
    
    
    0.4All Other Fees
    
    Ps.
    0.0
    
    
    Ps.
    0.0
  Year EndedDecember 312008(In millions)Audit Fees(1)
    
    Ps.
    5.2Audit-Related Fees(2)
    
    
    0.0Tax Fees (3)
    
    
    0.0All Other Fees(4)
    
    Ps.
    0.2
 
 (1)
    
    Audit Fees include fees associated with the annual audit of our consolidated financial
statements. Audit fees also include fees associated with Securities and Exchange Commission
statutory, annual reporting audit requirements and internal control over financial reporting.(2)
    
    Audit-Related Fees are fees that support the auditing and reporting process, but are not
directly related to it.(3)
    
    Tax Fees include fees associated with preparation of tax filings and fees for assistance with
tax planning and tax compliance matters.(4)
    
    Other Fees includes fees for
advisory and training services.  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
   130




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ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
   Approximate value ofTotal number of CPOs
    
    
    CPOs that may yet beTotal number of
    
    
    Average price paid
    
    
    purchased for the repurchase
    
    
    purchased under thePeriod
    
    Dates
    
    CPOs purchased
    
    
    per CPO (1)
    
    
    program
    
    
    repurchase program (2)2008:January
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    February
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ps.
    36.2April
    
    From April 15 toApril 29, 2008
    
    
    1,841,900
    
    
    Ps.
    17.7094
    
    
    
    1,841,900
    
    
    Ps.
    29.2May
    
    From May 5 to May30, 2008
    
    
    2,198,800
    
    
    Ps.
    18.3854
    
    
    
    2,198,800
    
    
    Ps.
    24.5June
    
    From June 3 to June30, 2008
    
    
    702,800
    
    
    Ps.
    19.4713
    
    
    
    702,800
    
    
    Ps.
    22.2July
    
    From July 2 to July31, 2008
    
    
    387,100
    
    
    Ps.
    16.8034
    
    
    
    387,100
    
    
    Ps.
    18.1August
    
    From August 1 toAugust 28, 2008
    
    
    580,800
    
    
    Ps.
    12.9328
    
    
    
    580,800
    
    
    Ps.
    11.1September
    
    From September 9 toSeptember 29, 2008
    
    
    272,800
    
    
    Ps.
    12.4724
    
    
    
    272,800
    
    
    Ps.
    10.9October
    
    From October 1 toOctober 27, 2008
    
    
    388,800
    
    
    Ps.
    9.8259
    
    
    
    388,800
    
    
    Ps.
    9.1November
    
    From November 4 toNovember 21, 2008
    
    
    89,900
    
    
    Ps.
    7.0312
    
    
    
    89,900
    
    
    Ps.
    8.5December
    
    From December 1 toDecember 31, 2008
    
    
    147,100
    
    
    Ps.
    7.8380
    
    
    
    147,100
    
    
    Ps.
    8.52009:January
    
    From January 7 toJanuary 29, 2009
    
    
    196,200
    
    
    Ps.
    7.0726
    
    
    
    196,200
    
    
    Ps.
    7.8
 (1)
    
    Average price paid is presented in nominal pesos.(2)
    
    Approximate value of CPOs that may yet be purchased under the repurchase program is
presented in millions of nominal pesos.  
 ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
   131




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ITEM 16G. CORPORATE GOVERNANCE
   NYSE Standards
    
    Our Corporate Governance PracticesDirector Independence.
Majority of board of
directors must be
independent. §303A.01
    
    Director Independence.Pursuant to the
Mexican Securities Market Law and our
bylaws, our shareholders are required to
appoint a Board of Directors of no more
than 21 members, 25% of whom must be
independent. Certain persons are per se
non-independent, including insiders,
control persons, major suppliers and any
relatives of such persons. In accordance
with the Mexican Securities Market Law, our
shareholders meeting is required to make a
determination as to the independence of our
directors, though such determination may be
challenged by the CNBV. There is no
exemption from the independence requirement
for controlled companies.Executive Sessions.
Non-management directors must
meet regularly in executive
sessions without management.
Independent directors should
meet alone in an executive
session at least once a year.
§303A.03
    
    Executive Sessions.Our non-management
directors have not held executive sessions
without management in the past, and under
our bylaws and applicable Mexican law, they
are not required to do so.Nominating/Corporate
Governance Committee.
Nominating/corporate
governance committee of
independent directors is
required. The committee must
have a charter specifying the
purpose, duties and
evaluation procedures of the
committee. §303A.04
    
    Nominating Committee.We currently do not
have, and are not required to have, a
nominating committee. However, Mexican law
requires us to have one or more committees
that oversee the corporate governance
function. We have an audit and corporate
practices committee which performs
corporate governance functions.Compensation Committee.
Compensation committee of
independent directors is
required, which must evaluate
and approve executive officer
compensation. The committee
must have a charter
specifying the purpose,
duties and evaluation
procedures of the committee.
§303A.05
    
    Compensation Committee.We are not required
to have a compensation committee. We have
an audit and corporate practices committee,
which assists our board of directors in
evaluating and compensating our senior
executives. All of the members of the audit
and corporate practices committee are
independent.Audit Committee.Audit
committee satisfying the
independence and other
requirements of Exchange Act
Rule 10A-3 and the more
stringent requirements under
the NYSE standards is
required. §§303A.06, 303A.07
    
    Audit Committee.We have an audit and
corporate practices committee of three
members. Each member of this committee is
independent, as independence is defined
under the Mexican Securities Market Law,
and also meets the independence
requirements of Exchange Act Rule 10A-3.
Our audit committee operates primarily
pursuant to (1) a written charter adopted
by our board of directors and (2) Mexican
law. For a detailed description of the
duties of our audit and corporate practices
committee, see Management  Committees 
Audit and Corporate Practices Committee.Equity Compensation Plans.
Equity compensation plans
require shareholder approval,
subject to limited
exemptions. §§303A.08 &
312.03
    
    Equity Compensation Plans.Shareholder
approval is required for the adoption and
amendment of an equity-compensation plan.Shareholder Approval for
Issuance of Securities.
Issuances of securities (1)
that will result in a change
of control of the issuer, (2)
that are to a related party
or someone closely related to
a related party, (3) that
have voting power equal to at
least 20% of the outstanding
common stock voting power
before such issuance or (4)
that will increase the number
of shares of common stock by
at least 20% of the number of
outstanding shares before
such issuance require
shareholder approval.
§§312.03(b)-(d)
    
    Shareholder Approval for Issuance of
Securities.Mexican law and our bylaws
require us to obtain shareholder approval
of the issuance of equity securities.
Treasury stock, however, may be issued by
the board of directors without shareholder
approval.
  132




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NYSE Standards
    
    Our Corporate Governance PracticesCorporate Governance
Guidelines.Listed companies
are required to adopt and
maintain corporate governance
guidelines, addressing, among
other things, director
qualification standards,
director responsibilities,
director access to management
and independent advisors,
management succession and
annual performance
evaluations of the board.
§303A.09
    
    Corporate Governance GuidelinesWe operate
under corporate governance principles that
we believe are consistent with the
principles of Rule 303A.09, and which are
described in the Companys website under
Corporate Governance.Code of Business Conduct and
Ethics.A code of business
conduct and ethics is
required, with disclosure of
any waiver for directors or
executive officers. The code
must contain compliance
standards and procedures that
will facilitate the effective
operation of the code.
§303A.10
    
    Code of Business Conduct and Ethics.We
have adopted a code of ethics, which has
been accepted by all of our directors and
executive officers and other personnel. We
also will post all waivers therefrom by any
of our directors or executive officers on
our website. We will provide a
complimentary copy of our code of ethics
upon request.Conflicts of Interest.
Determination of how to
review and oversee related
party transactions is left to
the listed company. The audit
committee or comparable body,
however, could be considered
the forum for such review and
oversight. §307.00. Certain
issuances of common stock to
a related party require
shareholder approval.
§312.03(b)
    
    Conflicts of Interest.In accordance with
Mexican law and our bylaws, the audit and
corporate practices committee must provide
an opinion regarding any transaction with a
related party that is outside of the
ordinary course of business, which
transactions must also be approved by the
board of directors. Pursuant to the Mexican
Securities Market Law, our Board of
Directors will establish certain guidelines
regarding related party transactions that
do not require Board approval.Solicitation of Proxies.
Solicitation of proxies and
provision of proxy materials
is required for all meetings
of shareholders. Copies of
such proxy solicitations are
to be provided to NYSE.
§§402.00 & 402.04
    
    Solicitation of Proxies.We are required
under Mexican law to solicit proxies and
provide proxy materials for meetings of
shareholders. In accordance with Mexican
law and our bylaws, we are also required to
inform shareholders of all meetings by
public notice, which states the
requirements for admission to the meeting,
provides a mechanism by which shareholders
can vote by proxy and makes proxies
available. Under the deposit agreement
relating to the ADSs, holders of the ADSs
receive notices of shareholders meetings
and, where applicable, instructions on how
to vote at the shareholders meeting either
in person or through a person having a
proxy specifically designated by the
shareholder.
 
 PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
 PageMaxcom Telecomunicaciones, S.A.B. de C.V. and Subsidiaries
    
    
    F-1Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    F-2Consolidated Income Statements for the years ended December 31, 2008, 2007 and 2006
    
    
    F-3Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2008 and 2007
    
    
    F-4Consolidated Statements of Cashflows for the year ended December 31, 2008
    
    
    F-5Consolidated Statements of Changes in Financial Position for the years ended December 31, 2008 and 2007
    
    
    F-6Notes to the Consolidated Financial Statements for the years ended December 31, 2008, 2007 and 2006
    
    
    F-7
  133




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
  F-1




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
    2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,591,405
    
    
    
    2,539,535Accounts receivable:Customers, net of allowance for doubtful accounts of
$161,936 and $107,652 for 2008 and 2007, respectively
    
    
    716,203
    
    
    
    517,254Value added tax recoverable
    
    
    164,448
    
    
    
    198,583Other accounts receivable
    
    
    77,650
    
    
    
    54,676958,301
    
    
    
    770,513Inventory  Net
    
    
    40,876
    
    
    
    33,249Prepaid expenses  Net
    
    
    30,778
    
    
    
    40,341Total current assets
    
    
    2,621,360
    
    
    
    3,383,638Long lived assets:Telephone network systems and equipment  Net (Note 7)
    
    
    4,684,413
    
    
    
    4,188,946Intangible assets  Net (Note 8)
    
    
    209,683
    
    
    
    208,802Preoperating expenses  Net
    
    
    50,863
    
    
    
    77,902Frequency rights  Net (Note 9)
    
    
    66,716
    
    
    
    80,930Other assets:Intangible asset derived from employee benefits (Notes 6b. and 14)
    
    
    
    
    
    
    17,650Deferred income taxes  Net (Note 19)
    
    
    148,114
    
    
    
    Prepaid expenses  Net
    
    
    15,381
    
    
    
    21,289Guaranty deposits
    
    
    8,315
    
    
    
    6,943Derivative financial instruments (Notes 5o. and 13)
    
    
    105,270
    
    
    
    13,475Other assets
    
    
    6,357
    
    
    
    14,525Total assets
    
    $
    7,916,472
    
    
    
    8,014,100Liabilities and Shareholders EquityCurrent liabilities:Trade accounts payable
    
    $
    469,328
    
    
    
    489,486Accruals
    
    
    45,505
    
    
    
    24,109Current installments of obligations under capital leases
    
    
    4,354
    
    
    
    8,087Customer deposits
    
    
    2,518
    
    
    
    2,801Other taxes payable
    
    
    61,048
    
    
    
    67,182Accrued interests (Note 11)
    
    
    13,920
    
    
    
    11,172Total current liabilities
    
    
    596,673
    
    
    
    602,837Long-term liabilities :Senior notes (Note 11)
    
    
    2,707,660
    
    
    
    2,173,240Obligation under capital leases, excluding current installments
    
    
    
    
    
    
    4,686Other accounts payable
    
    
    80,872
    
    
    
    78,174Derivative financial instruments (Notes 5o. and 13)
    
    
    8,472
    
    
    
    Deferred income taxes  Net (Note 19)
    
    
    
    
    
    
    97,742Labor obligations upon retirement (Note 14)
    
    
    21,626
    
    
    
    26,582Total long-term liabilities
    
    
    2,818,630
    
    
    
    2,380,424Total liabilities
    
    
    3,415,303
    
    
    
    2,983,261Shareholders equity (Notes 15 and 16)Capital stock
    
    
    5,410,244
    
    
    
    5,410,251Additional paid-in capital
    
    
    816,443
    
    
    
    888,056Deficit
    
    
    (1,705,231
    )
    
    
    (1,267,468
    )Repurchase of shares
    
    
    (20,287
    )
    
    
    Total shareholders equity
    
    
    4,501,169
    
    
    
    5,030,839Commitments and contingencies (Note 20)Total liabilities and shareholders equity
    
    $
    7,916,472
    
    
    
    8,014,100
   F-2




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
    2008
    
    
    2007
    
    
    2006Net revenues (Note 17)
    
    $
    2,683,229
    
    
    
    2,345,719
    
    
    
    1,741,692Operating costs and expenses:Network operating costs
    
    
    (1,120,167
    )
    
    
    (976,979
    )
    
    
    (676,977
    )Selling, general and administrative expenses (Note 6)
    
    
    (819,642
    )
    
    
    (722,618
    )
    
    
    (607,505
    )Depreciation and amortization
    
    
    (551,889
    )
    
    
    (370,227
    )
    
    
    (300,468
    )Total operating costs and expenses
    
    
    (2,491,698
    )
    
    
    (2,069,824
    )
    
    
    (1,584,950
    )Operating income
    
    
    191,531
    
    
    
    275,895
    
    
    
    156,742Other expenses:Other expenses
    
    
    (12,616
    )
    
    
    (12,819
    )
    
    
    (18,777
    )Restructuring charges (Notes 5n and 14)
    
    
    (49,491
    )
    
    
    
    
    
    
    Impairment of long-lived assets (Notes 5(h), 5(i), 7, 8 and 9)
    
    
    (532,315
    )
    
    
    
    
    
    
    Employees statutory profit sharing (Notes 6 and 19)
    
    
    (1,173
    )
    
    
    (3,257
    )
    
    
    Other expenses, net
    
    
    (595,595
    )
    
    
    (16,076
    )
    
    
    (18,777
    )Comprehensive financing cost  Net (Note 18)
    
    
    (267,393
    )
    
    
    (126,641
    )
    
    
    (107,182
    )(Loss) income before income taxes
    
    
    (671,457
    )
    
    
    133,178
    
    
    
    30,783Income taxes (Note 19):Current tax expense
    
    
    (12,162
    )
    
    
    (50,700
    )
    
    
    Deferred tax benefit (expense)
    
    
    245,856
    
    
    
    (46,282
    )
    
    
    (60,050
    )Total income tax benefit (expense)
    
    
    233,694
    
    
    
    (96,982
    )
    
    
    (60,050
    )Net (loss) income for the year
    
    $
    (437,763
    )
    
    
    36,196
    
    
    
    (29,267
    )(Loss) earnings per share (Note 5t):Basic (loss) earnings per common share (pesos)
    
    $
    (0.55
    )
    
    
    0.06
    
    
    
    (0.07
    )Diluted (loss) earnings per common share (pesos)
    
    $
    (0.53
    )
    
    
    0.06
    
    
    
    (0.06
    )Weighted average basic shares (thousands)
    
    
    789,819
    
    
    
    560,176
    
    
    
    442,928Weighted average diluted shares (thousands)
    
    
    829,337
    
    
    
    606,144
    
    
    
    467,628
   F-3




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
    Additional
    
    
    Retained
    
    
    
    
    
    
    TotalCapital
    
    
    paid-in
    
    
    earnings
    
    
    Repurchase
    
    
    stockholdersstock
    
    
    capital
    
    
    (deficit)
    
    
    of shares
    
    
    equityBalances as of December 31, 2005
    
    $
    2,963,206
    
    
    
    237,114
    
    
    
    (1,274,397
    )
    
    
    
    
    
    
    1,925,923Increase in capital stock (Note 15)
    
    
    364,276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    364,276Stock options plans (Note 16)
    
    
    
    
    
    
    15,982
    
    
    
    
    
    
    
    
    
    
    
    15,982Comprehensive net loss
    
    
    
    
    
    
    
    
    
    
    (29,267
    )
    
    
    
    
    
    
    (29,267
    )Balances as of December 31, 2006
    
    
    3,327,482
    
    
    
    253,096
    
    
    
    (1,303,664
    )
    
    
    
    
    
    
    2,276,914Increase in capital stock (Note 15)
    
    
    2,082,769
    
    
    
    597,836
    
    
    
    
    
    
    
    
    
    
    
    2,680,605Stock options plans (Note 16)
    
    
    
    
    
    
    37,124
    
    
    
    
    
    
    
    
    
    
    
    37,124Comprehensive net income
    
    
    
    
    
    
    
    
    
    
    36,196
    
    
    
    
    
    
    
    36,196Balances as of December 31, 2007
    
    
    5,410,251
    
    
    
    888,056
    
    
    
    (1,267,468
    )
    
    
    
    
    
    
    5,030,839Decrease in capital stock (Note 15)
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Stock options plans (Notes 15 and
16)
    
    
    
    
    
    
    (71,613
    )
    
    
    
    
    
    
    
    
    
    
    (71,613
    )Repurchase of shares (Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,287
    )
    
    
    (20,287
    )Comprehensive net loss
    
    
    
    
    
    
    
    
    
    
    (437,763
    )
    
    
    
    
    
    
    (437,763
    )Balances as of December 31, 2008
    
    $
    5,410,244
    
    
    
    816,443
    
    
    
    (1,705,231
    )
    
    
    (20,287
    )
    
    
    4,501,169
   F-4




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
    2008Cash flows from operating activities:Loss before taxes
    
    $
    (671,457
    )Items related to investing activities:Depreciation and amortization
    
    
    551,889Impairment of long lived assets
    
    
    532,315Loss on sale of telephone network systems and equipment
    
    
    82,496Items related to financing activities:Financial instruments
    
    
    (83,323
    )Interest expense
    
    
    217,210Subtotal
    
    
    629,130Customer accounts receivable
    
    
    (198,949
    )Recoverable value added tax
    
    
    34,135Other accounts receivable
    
    
    (22,974
    )Inventory
    
    
    (7,627
    )Prepaid expenses
    
    
    9,563Trade accounts payable, provisions and other acumulated liabilities
    
    
    1,238Income taxes paid
    
    
    (7,320
    )Customer deposits
    
    
    (283
    )Other liabilities and taxes payable
    
    
    (3,436
    )Changes in employees benfits and provisions
    
    
    12,694Net cash provided by operating activities
    
    
    446,171Cash flows from investing activities:Capital expenditures (including interest capitalized
in the amount of $62,029 in 2008)
    
    
    (1,631,001
    )Proceeds from sale of telephone network systems and equipment
    
    
    4,364Increase in other non-current assets
    
    
    12,704Net cash used in investing activities
    
    
    (1,613,933
    )Cash flows from financing activities:Bonds payable
    
    
    534,420Decrease in capital stock
    
    
    (7
    )Stock options plans
    
    
    (71,613
    )Interest paid
    
    
    (214,462
    )Capital lease, payment of credits
    
    
    (8,419
    )Repurchase of shares
    
    
    (20,287
    )Net cash provided by financing
activities
    
    
    219,632Net decrease in cash and equivalents
    
    
    (948,130
    )Cash and cash equivalents:At beginning of year
    
    
    2,539,535At end of year
    
    $
    1,591,405
   F-5




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
    2007
    
    
    2006Operating activities:Net income (loss)
    
    $
    36,196
    
    
    
    (29,267
    )Add charges (deduct credits) to operations not requiring (providing) funds:Depreciation and amortization
    
    
    370,227
    
    
    
    300,468Deferred income taxes
    
    
    46,282
    
    
    
    60,050Stock options plan
    
    
    37,124
    
    
    
    15,982Accelerated amortization of debt
    
    
    
    
    
    
    17,671Employee benefits
    
    
    5,752
    
    
    
    4,642Net financing from (investing in) operating accounts:Accounts receivable
    
    
    (285,004
    )
    
    
    (251,021
    )Inventories
    
    
    2,540
    
    
    
    (19,160
    )Prepaid expenses
    
    
    4,109
    
    
    
    18,414Restricted cash and other current assets and liabilities
    
    
    85,932
    
    
    
    (29,881
    )Resources provided by operating activities
    
    
    303,158
    
    
    
    87,898Financing activities:Capital stock increases
    
    
    2,643,369
    
    
    
    364,276Proceeds from loans and bonds payable, net of payments and capitalizations
    
    
    126,160
    
    
    
    1,092,993Derivative financial instruments
    
    
    (24,036
    )
    
    
    (5,217
    )Resources provided by financing activities
    
    
    2,745,493
    
    
    
    1,452,052Investing activities:Telephone network systems and equipment, net of dispositions
    
    
    (1,160,359
    )
    
    
    (1,130,118
    )Acquisition of subsidiaries
    
    
    (33,576
    )
    
    
    (101,173
    )Intangible assets
    
    
    (54,472
    )
    
    
    190,425Other assets
    
    
    
    
    
    
    (1,011
    )Resources used in investing activities
    
    
    (1,248,407
    )
    
    
    (1,041,877
    )Increase of cash and cash equivalents
    
    
    1,800,244
    
    
    
    498,073Cash and cash equivalents:At beginning of year
    
    
    739,291
    
    
    
    241,218At end of year
    
    $
    2,539,535
    
    
    
    739,291
   F-6




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
   NOTE 1  ENTITY, INCORPORATION AND CHANGE OF INCORPORATION STRUCTURE
   NOTE 2  CONCESSIONS, FREQUENCY RIGHTS AND INTERCONNECTION AGREEMENTS
 Concessions
   F-7




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
      Frequency rights
    F-8




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   Convergence agreement
   Interconnection agreements
      F-9




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    NOTE 3  RELEVANT CORPORATE EVENTS
 a.
    
    Acquisition of Sierra Comunicaciones Globales:
    Net assetsBook Value
    
    
    
    
    
    
    recognized atof net assets as
    
    
    
    
    
    
    fair value as ofof November 15,
    
    
    Goodwill
    
    
    November 15,2007
    
    
    allocation
    
    
    2007Assets:Current assets
    
    $
    45
    
    
    
    
    
    
    
    45Fixed assets
    
    
    10,935
    
    
    
    21,814
    
    
    
    32,74910,980
    
    
    
    21,814
    
    
    
    32,794Liabilities:Current liabilities
    
    
    (112
    )
    
    
    
    
    
    
    (112
    )Net acquired assets
    
    
    10,868
    
    
    
    21,814
    
    
    
    32,682Net assets fair value
    
    
    (32,682
    )
    
    
    
    
    
    
    (32,682
    )Cost in excess of
book value of subsidiaries
    
    $
    (21,814
    )
    
    
    21,814
    
    
    
    
  F-10




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
     b.
    
    Acquisition of Grupo Telereunion:
    Net assetsBook value of
    
    
    Negative
    
    
    recognized atnet assets as of
    
    
    goodwill
    
    
    fair value as ofJune 30, 2006
    
    
    allocation
    
    
    June 30,2006Assets:Current assets
    
    $
    56,530
    
    
    
    
    
    
    
    56,530Fixed assets
    
    
    421,572
    
    
    
    (166,944
    )
    
    
    254,628Intangible assets
    
    
    224,844
    
    
    
    (224,844
    )
    
    
    Deferred taxes
    
    
    37,467
    
    
    
    (37,467
    )
    
    
    740,413
    
    
    
    (429,255
    )
    
    
    311,158Liabilities:Current liabilities
    
    
    (211,278
    )
    
    
    
    
    
    
    (211,278
    )Net acquired assets
    
    
    529,135
    
    
    
    (429,255
    )
    
    
    99,880Net assets fair value
    
    
    (99,880
    )
    
    
    
    
    
    
    (99,880
    )Book value in excess of
cost of subsidiaries
(negative goodwill)
    
    $
    429,255
    
    
    
    (429,255
    )
    
    
    
  F-11




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
      Net revenues
    
    $
    88,414Cost
    
    
    (61,223
    )Expenses
    
    
    (1,259
    )Depreciation
    
    
    (10,418
    )Operating income
    
    $
    15,514Net income
    
    $
    26,755
  F-12




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NOTE 4  CONSOLIDATION BASIS
  Subsidiary company
    
    %
    
    
    Line of businessCorporativo en Telecomunicaciones, S. A. de C. V.
    
    
    99.9
    
    
    Technical personnel servicesMaxcom Servicios Administrativos, S. A. de C. V.
    
    
    99.9
    
    
    Administrative personnel servicesMaxcom SF, S. A. de C. V.
    
    
    99.9
    
    
    Financial servicesOutsourcing Operadora de Personal, S. A. de C. V.
    
    
    99.9
    
    
    Technical personnel servicesTECBTC
Estrategias de Promoción, S. A. de C. V.
    
    
    99.9
    
    
    Technical personnel servicesMaxcom TV, S. A. de C. V. *
    
    
    99.9
    
    
    Cable television services
 Subsidiary company
    
    %
    
    
    Line of businessMaxcom USA, Inc. *
    
    
    100.0
    
    
    International telecommunications servicesTelereunion, S. A. de C. V.
    
    
    99.9
    
    
    Long distance and infrastructure leasingTelscape de México, S. A. de C. V.
    
    
    99.9
    
    
    Real estate servicesSierra USA Communications, Inc.
    
    
    100.0
    
    
    International telecommunication servicesSierra Comunicaciones Globales, S. A. de C. V.
    
    
    99.9
    
    
    Infrastructure leasing
 *
    
    Dormant companies.    F-13




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    NOTE 5  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        F-14




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   a.
    
    Recognition of the effects of the inflation
   InflationDecember 31,
    
    NCPI
    
    
    Year
    
    
    Accumulated2008
    
    
    133.761
    
    
    
    6.53
    %
    
    
    18.85
    %2007
    
    
    125.564
    
    
    
    3.76
    %
    
    
    11.56
    %2006
    
    
    121.015
    
    
    
    4.05
    %
    
    
    7.52
    %2005
    
    
    116.301
    
    
    
    3.33
    %
    
    
    3.33
    %
 b.
    
    Cash and cash equivalents
   F-15




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   c.
    
    Inventories
  d.
    
    Telephone network systems and equipment
        F-16




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
     e.
    
    Intangible assets
      F-17




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   f.
    
    Concessions
  g.
    
    Frequency rights
  h.
    
    Preoperating expenses
   i.
    
    Impairment of long lived assets.
   F-18




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    j.
    
    Liabilities and accruals
  k.
    
    Transactions in foreign currencies
  l.
    
    Income Tax (IT), Asset Tax (AT), Flat Rate Business Tax (IETU), and Employees Statutory
Profit Sharing (ESPS)
    F-19




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   m.
    
    Employees Statutory Profit Sharing (ESPS)
  n.
    
    Employee benefits
   o.
    
    Derivative financial instruments
   Risk Coverage
   F-20




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    Embedded Derivatives
  p.
    
    Revenue recognition
      F-21




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
           F-22




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   q.
    
    Business and credit concentration
   r.
    
    Stock-options compensation
       F-23




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
     2007
    
    
    2006Volatility of expected price per share
    
    
    30.00
    %
    
    
    30.00
    %Risk-free interest rate
    
    
    4.89
    %
    
    
    5.00
    %Expected life of options
    
    
    3.25
    
    
    
    3.50
  s.
    
    Information by segments
 
    F-24




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   t.
    
    (Loss) earnings per share
   u.
    
    New accounting standards
  NIF B-7 Business acquisitions 
  NIF B-8 Consolidated and combined financial statements
 (i.)
    
    The obligation to consolidate special purpose entities (SPEs) when controlled.
 (ii.)
    
    The possibility, under certain rules, of presenting unconsolidated financial statements
when the parent is, in turn, a subsidiary with no minority interest or when the minority
stockholders do not object to the fact that consolidated financial statements are not
issued.
 (iii.)
    
    Consideration is given to the existence of potential voting rights that might be exercised
or converted in favor of the entity as parent and that may change its involvement in
decision making at the time of assessing the existence of control.
 (iv.)
    
    Additionally, regulations relating to the valuation of permanent investments have been
transferred to a different bulletin.
  F-25




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    NIF C-7 Investments in associates and other permanent investments
 (i)
    
    Equity method of accounting is required for SPEs where significant influence is
exercised.
 (ii)
    
    Consideration is given to the existence of potential voting rights that might be
exercised or converted in favor of the entity as parent and that may change its involvement
in decision making at the time of assessing the existence of significant influence.
 (iii)
    
    A specific procedure and a limit for recognizing the associated entitys losses are
provided.
  NIF C-8 Intangible assets
 (i)
    
    The definition of intangible assets is narrowed to establish that separability is not the
only condition for the intangible asset to be identifiable;
 (ii)
    
    Subsequent outlays for research and development projects in progress should be expensed as
earned if they are part of the research phase or as an intangible asset if they meet the
criteria to be recognized as such;
 (iii)
    
    Greater detail is provided to account for the exchange of an asset, in accordance with
the provisions of international standards and other NIF;
 (iv)
    
    The presumption that an intangible asset may not exceed a useful life of twenty years was
eliminated;
  F-26




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    NIF D-8 Share based payments
    NOTE 6  ACCOUNTING CHANGES AND RECLASSIFICATIONS:
  (a) NIF B-10 Effects of inflation  Recognition of the effects
of inflation on the financial information
 (i)
    
    Recognition of the effects of inflation  An entity operates in a) an inflationary economic
environment when cumulative inflation over the immediately preceding 3-year period is equal to
or greater than 26%; and b) non-inflationary economic environment, when inflation over the
aforementioned period is less than 26%.
   F-27




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   (ii)
    
    Price index  the use of the National Consumer Price Index (NCPI) or the change in the value
of the Investment Unit (UDI) may be used for determining the inflation for a given period.
 (iii)
    
    Valuation of inventories and of foreign machinery and equipment  The possibility of using
replacement costs for inventories and specific indexation for foreign machinery and equipment
is no longer allowed.
 (iv)
    
    Equity adjustment for non-monetary Assets  On the effective date of this NIF, the unrealized
portion of the equity adjustment for non monetary assets, which is maintained in stockholders
equity, should be identified to be reclassified to earnings of the year when the originating
item is realized. The realized portion or when is not practical to identify the unrealized
portion, the realized and unrealized portions should be reclassified to retained earnings.
 (v)
    
    Monetary Position Gains or Losses (included in Deficit/Excess in Equity Restatement) will be
reclassified to retained earnings on the effective date of this NIF.
  (b) NIF D-3 Employee benefits  NIF Labor Obligations
 (i)
    
    Elimination of the recognition of an additional liability and the related intangible asset or
any comprehensive item as a separate element of stockholders equity.
 (ii)
    
    Employee benefits are classified in four principal categories; direct short-term and long
term, termination and post-employment benefits. NIF D-3 establishes a maximum five-year
period for amortizing unrecognized/unamortized items while actuarial gains or losses may be
recognized as earned or incurred. Unlike termination benefits, post-employment benefits
actuarial gains or losses may be immediately recognized in results of operations or amortized
over the expected service life of the employees.
  F-28




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   (iii)
    
    The use of nominal rates and the incorporation of the term salary increases due to
promotions.
 (iv)
    
    ESPS, including deferred ESPS, shall be presented in the statement of income as ordinary
operations, preferably within other income and expenses. Furthermore, NIF D-3 establishes
that the asset and liability method should be used for determining deferred ESPS; any effects
arising from the change in method shall be recognized in retained earnings, without
restatement of prior years financial statements.
  (c) NIF D-4 Taxes on income Accounting for income and asset
taxes and employee statutory profit sharing
 (i)
    
    the balance of the cumulative IT effects resulting from the initial adoption of Bulletin D-4
in 2000 is reclassified to retained earnings, unless identified with any other comprehensive
item pending reclassification. On January 1, 2008 there were no IT effects reclassified to
retained earnings.
 (ii)
    
    the accounting treatment of ESPS (current and deferred) is transferred to NIF D-3, as
mentioned in paragraph (b) above.
 (d) NIF B-2 Statement of cash flows Statement of changes in
financial position
 (i)
    
    Instead of the statement of changes in financial position, the financial statements shall
include the statements of cash flows for all the periods presented comparatively with those of
the current year, except for financial statements of periods prior to 2008;
 (ii)
    
    Cash inflows and cash outflows are reported in nominal currency units, thus not including the
effects of inflation;
 (iii)
    
    Two alternative preparation methods (direct and indirect) are established, without stating
preference for either method. Furthermore, cash flows from operating activities are to be
reported first, followed by cash flows from investing activities and lastly by cash flows from
financing activities;
 (iv)
    
    Captions of principal items are to be reported gross, with certain exceptions and require
disclosure of the composition of items considered cash equivalents.
  F-29




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    (e) NIF B-15 Translation of foreign currencies Foreign
currency transactions and translation of financial statements of foreign operations
 (i)
    
    Replacing integrated foreign operation and foreign entity concepts by those of recording,
functional and reporting currencies, requiring that translation be made based on the economic
environment in which the entity operates, regardless of its dependency on the holding company.Includes translation procedures for instances where the recording and reporting currencies
differ from the functional currency and provides for the option not to conduct such
translation in companies not subject to consolidation or valuation based on the equity
method.
 (ii)
    
    The accounting changes produced by the initial application of this standard shall be
recognized based on the prospective method; that is, in a non-inflationary economic
environment, without modifying the translation already recognized in the consolidated
financial statements of prior periods, at the time of issue.
 Reclassifications-
   F-30




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NOTE 7  TELEPHONE NETWORK SYSTEMS AND EQUIPMENT  NET
  Estimateduseful2008
    
    
    2007
    
    
    life (years)Telecommunications network and equipment
    
    $
    3,440,327
    
    
    $
    2,944,366
    
    
    
    17Public telephony equipment
    
    
    582,734
    
    
    
    377,916
    
    
    
    8Leasehold improvements
    
    
    1,076,420
    
    
    
    821,883
    
    
    
    10Radio equipment
    
    
    397,444
    
    
    
    330,736
    
    
    
    30Line installation cost
    
    
    533,473
    
    
    
    402,306
    
    
    
    20Electronic equipment
    
    
    266,047
    
    
    
    266,047
    
    
    
    25Capitalized expenses due to construction
of networks
    
    
    425,636
    
    
    
    337,159
    
    
    
    30Capitalized comprehensive financing cost
    
    
    241,235
    
    
    
    66,525
    
    
    
    10Computer equipment
    
    
    222,413
    
    
    
    147,703
    
    
    
    5Transportation equipment
    
    
    65,138
    
    
    
    52,112
    
    
    
    4Office furniture
    
    
    39,661
    
    
    
    26,863
    
    
    
    10Other
    
    
    28,179
    
    
    
    20,476
    
    
    
    10Engineering equipment
    
    
    20,450
    
    
    
    13,227
    
    
    
    10Subtotal
    
    
    7,339,157
    
    
    
    5,807,319Accumulated depreciation and amortization
    
    
    (2,566,889
    )
    
    
    (2,082,785
    )Impairment charge (See note 5i)
    
    
    (500,684
    )
    
    
    Subtotal
    
    
    4,271,584
    
    
    
    3,724,534Construction in progress
    
    
    412,829
    
    
    
    464,412$
    4,684,413
    
    
    $
    4,188,946
     F-31




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
       2008
    
    
    2007Transportation equipment
    
    $
    4,740
    
    
    
    3,534Total
    
    $
    4,740
    
    
    
    3,534
 NOTE 8  INTANGIBLE ASSETS
  Useful2008
    
    
    2007
    
    
    life (years)Infrastructure rights
    
    $
    178,964
    
    
    $
    178,964
    
    
    30 and 15Debt issuance costs
    
    
    62,283
    
    
    
    60,340
    
    
    
    8Software licenses
    
    
    273,941
    
    
    
    213,543
    
    
    
    3.3515,188
    
    
    
    452,847Accumulated amortization
    
    
    (285,238
    )
    
    
    (244,045
    )Impairment charges
for intangible assets (See note 5i)
    
    
    (20,267
    )
    
    
    $
    209,683
    
    
    $
    208,802
  F-32




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
      NOTE 9  FREQUENCY RIGHTS
  2008
    
    
    2007Frequency rights
    
    $
    155,309
    
    
    $
    155,309Less  Accumulated amortization
    
    
    (82,144
    )
    
    
    (74,379
    )Impairment charges (See note 5i)
    
    
    (6,449
    )
    
    
    $
    66,716
    
    
    $
    80,930
   F-33




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NOTE 10  BALANCES AND TRANSACTIONS WITH RELATED PARTIES
  2008
    
    
    2007
    
    
    2006Commission and administrative services paid to:BBG Wireless (1)
    
    $
    7,709
    
    
    
    
    
    
    
    Electromecánica de Guadalajara, S. A. de C. V. (2)
    
    
    5,697
    
    
    
    7,425     -Automotriz Rio Sonora (3)
    
    
    5,122
    
    
    
    
    
    
    
    Road Telco & Consulting, S. A. de C. V. (5)
    
    
    1,975
    
    
    
    2,309
    
    
    
    1,639GS Comunicación (6)
    
    
    1,063
    
    
    
    
    
    
    
    Autokam Regiomontana, S. A. de C. V. (3)
    
    
    844
    
    
    
    343
    
    
    
    Ingeniería Avanzada en Construcción, S.A. de C.V. (7)
    
    
    765
    
    
    
    
    
    
    
    Vázquez Eduardo (8)
    
    
    480
    
    
    
    459
    
    
    
    Vázquez Gabriel Agustín (8)
    
    
    480
    
    
    
    459
    
    
    
    Solís Gilberto (6)
    
    
    332
    
    
    
    
    
    
    
    Bank of America, Co. (9)
    
    
    315
    
    
    
    378
    
    
    
    397Inmobiliaria Radio Centro (8)
    
    
    264
    
    
    
    
    
    
    
    MG Radio (4)
    
    
    101
    
    
    
    
    
    
    
    Inmobiliaria AutoKam, S. A. de C. V. (8)
    
    
    101
    
    
    
    98
    
    
    
    Aguirre Adrián (10)
    
    
    31
    
    
    
    
    
    
    
    Sierra Madre Automotriz, S. A. de C. V. (3)
    
    
    
    
    
    
    318
    
    
    
    Comercializadora Road el Camino, S. A. de C. V. (11)
    
    
    
    
    
    
    
    
    
    
    323Advertisement services provided by
Difusión Panorámica, S. A. de C. V. (4)
    
    
    
    
    
    
    
    
    
    
    22Total
    
    $
    25,279
    
    
    $
    11,789
    
    
    $
    4,351Revenues from telephony services collected from
related parties
    
    $
    966
    
    
    $
    1,020
    
    
    $
    940
 (1)
    
    Corresponds to cluster construction.(2)
    
    Corresponds to interest payments and a portion of the capital pertaining to a
loan to settle Telereunions debt with the Comisión Federal de Electricidad
(CFE). See note 20.(3)
    
    Corresponds to costs related to the purchase of vehicles.(4)
    
    Corresponds to advertising services.(5)
    
    Mr. Adrián Aguirre (Maxcom shareholder) is also a shareholder of Road Telco & Consulting, S.
A. de C. V. The transactions correspond to administrative services and sale of telephone
lines.  F-34




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   (6)
    
    Corresponds to payments regarding marketing consulting services.(7)
    
    Corresponds to the installation of public telephones.(8)
    
    Corresponds to lease of sites and offices owned by a relative of a Maxcom shareholder.(9)
    
    Corresponds to expenses related to the debt restructuring and travel expenses of Bank of
America (Maxcom shareholder).(10)
    
    Corresponds to expenses reimbursed.(11)
    
    Mr. Adrián Aguirre (Maxcom shareholder) is also a shareholder of Comercializadora Road el
Camino, S. A. de C. V. Transactions correspond to administrative services and sale of
telephone lines.  2008
    
    
    2007Accounts Receivable:Porcelanatto, S. A. de C. V.
    
    $
    29
    
    
    
    Guijarro de Pablo y Asociados, S.C.
    
    
    21
    
    
    
    Difusión Panorámica, S. A. de C. V.
    
    
    15
    
    
    
    Proa Mensaje y Comunicación, S. A. de C. V.
    
    
    11
    
    
    
    Road Telco & Consulting, S. A. de C. V.
    
    
    9
    
    
    
    Sport and Therapy Center, S. A. de C. V.
    
    
    8
    
    
    
    Safe Iberoamericana, S. A. de C. V.
    
    
    1
    
    
    
    Shareholder María Guadalupe Aguirre Gómez
    
    
    1
    
    
    
    Shareholder María Elena Aguirre Gómez
    
    
    1
    
    
    
    Shareholder Gabriel Vazquez
    
    
    1
    
    
    
    Shareholder Ricardo Arevalo Ruíz
    
    
    
    
    
    
    2$
    97
    
    
    
    2
  F-35




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   2008
    
    
    2007Accounts Payable:Electromecánica de Guadalajara, S. A. de C. V.
    
    $
    36,091
    
    
    
    36,370Autokam Regiomontana, S. A. de C. V.
    
    
    441
    
    
    
    GS Comunicación, S. A. de C. V.
    
    
    244
    
    
    
    Automotriz Río Sonora, S. A. de C. V.
    
    
    236
    
    
    
    Ingenieria Avanzada en Construcción, S. A. de C. V.
    
    
    112
    
    
    
    Nexus Partners
    
    
    30
    
    
    
    Inmobiliaria Radio Centro
    
    
    25
    
    
    
    Shareholder Adrián Aguirre Palme
    
    
    22
    
    
    
    Shareholder Eduardo Vazquez
    
    
    
    
    
    
    36Shareholder Gabriel Vazquez
    
    
    
    
    
    
    36Road Telco & Consulting, S. A. de C. V.
    
    
    
    
    
    
    23Inmobiliaria Autokam, S. A. de C. V.
    
    
    
    
    
    
    8$
    37,201
    
    
    
    36,473
  NOTE 11  BONDS PAYABLE
  2008
    
    
    2007Long term:Senior Notes maturing in 2014, bearing interest at a fixed
annual rate of 11%, payable semiannually as from June 15,
2007.
    
    $
    2,707,660
    
    
    $
    2,173,240
    F-36




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
          F-37




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    NOTE 12  FOREIGN CURRENCY POSITION
   2008
    
    
    2007Assets
    
    
    121,987
    
    
    
    223,278Liabilities
    
    
    (221,164
    )
    
    
    (223,196
    )Net (liabilities) assets in dollars
    
    
    (99,177
    )
    
    
    82Exchange rate at end of the year ($1 to the 1.00 dollar)
    
    $
    13.54
    
    
    $
    10.87
   F-38




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NOTE 13  DERIVATIVE FINANCIAL INSTRUMENTS
 Explicit Derivatives
  Cross Currency Swaps:
 Effects in operationsCounter-party
    
    Notional
    
    Basic conditions
    
    2008
    
    
    2007Bank Morgan
    
    75,000
    
    Interest Received: 11%
    
    
    (52,820
    )
    
    
    (4,563
    )Stanley AG
    
    USD
    
    Periodicity: Semi-annualMaturity: December 15, 2010(808,200)
    
    Interest Paid: 11.505% (Fixed)MXP
    
    Periodicity: Semi-annualMaturity: December 15, 2010Merrill Lynch
    
    75,000
    
    Interest Received: 11%
    
    
    (52,450
    )
    
    
    (4,352
    )Capital Markets
    
    USD
    
    Periodicity: Semi-annualAG
    
    
    
    Maturity: December 15, 2010(808,200)
    
    Interest Paid: 11.505% (Fixed)MXP
    
    Periodicity: Semi-annualMaturity: December 15, 2010
  F-39




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   Embedded Derivatives.
 forwards forwards
 Host Leasing
    
    
    
    
    
    Effects in operationsContract
    
    Notional
    
    Maturity
    
    2008MATC Digital
    
    0.5
    
    October 2009
    
    
    0.02(San Marcos)
    
    USDMATC Digital
    
    0.8
    
    September 2009
    
    
    23(E. Zapata)
    
    USDMATC Digital
    
    0.3
    
    June 2009
    
    
    5(Chiquihuite)
    
    USDGrande River
    
    0.9
    
    October 2009
    
    
    26Communications
    
    USDEnlace Digital
    
    2.5
    
    September 2009
    
    
    (34
    )Telecomunicaciones
    
    USDCarrierCOM
    
    1.5
    
    February 2009
    
    
    12USDGrupo Promotor
    
    151
    
    December 2012
    
    
    8,440Jomer
    
    USD
 NOTE 14  LABOR OBLIGATIONS UPON RETIREMENT
     F-40




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   Benefits2008Termination
    
    
    Retirement
    
    
    Total
    
    
    2007Net cost for the year:Labor cost
    
    $
    1,552
    
    
    
    2,983
    
    
    
    4,535
    
    
    
    3,629Financial cost
    
    
    698
    
    
    
    2,027
    
    
    
    2,725
    
    
    
    1,091Actuarial loss
    
    
    5,899
    
    
    
    
    
    
    
    5,899
    
    
    
    Prior service (2007
unamortized items):Amortization of prior service cost
and plan modifications
    
    
    964
    
    
    
    2,951
    
    
    
    3,915
    
    
    
    Amortization of transition liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,032Net cost for the year
    
    $
    9,113
    
    
    
    7,961
    
    
    
    17,07
    
    
    
    4            5,752
  BenefitsTermination
    
    
    Retirement
    
    
    TotalCurrent benefit obligation (CBO)
    
    $
    11,514
    
    
    
    25,836
    
    
    
    37,350Unrecognized items:Transition liability
    
    
    (3,856
    )
    
    
    (11,175
    )
    
    
    (15,031
    )Actuarial loss
    
    
    
    
    
    
    (693
    )
    
    
    (693
    )Projected liability, net
    
    $
    7,658
    
    
    
    13,968
    
    
    
    21,626
  F-41




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    Benefits obligationsby concept of:SeniorityPremium
    
    
    SeveranceCurrent benefit obligation (CBO)
    
    $
    1,283
    
    
    
    24,906Present liability, net
    
    
    1,283
    
    
    
    24,906Minus: projected liability, net
    
    
    (1,283
    )
    
    
    (7,256
    )Additional liability
    
    $
    
    
    
    
    17,650Projected benefit obligation (PBO)
    
    $
    1,480
    
    
    
    33,002Unrecognized items:Transition asset (liability)
    
    
    507
    
    
    
    (19,295
    )Actuarial loss
    
    
    (310
    )
    
    
    (6,452
    )Projected liability, net
    
    $
    1,677
    
    
    
    7,255
  BenefitsTermination
    
    
    Retirement
    
    
    TotalCBO at the beginning of the year
    
    $
    33,002
    
    
    
    1,480
    
    
    
    34,482Current labor cost
    
    
    4,049
    
    
    
    487
    
    
    
    4,536Financial Cost
    
    
    2,608
    
    
    
    118
    
    
    
    2,726Yearly real payments charged to the allowance
    
    
    (3,939
    )
    
    
    (442
    )
    
    
    (4,381
    )Actuarial (loss) gain for the period
    
    
    (64
    )
    
    
    51
    
    
    
    (13
    )CBO at the end of the year
    
    $
    35,656
    
    
    
    1,694
    
    
    
    37,350
  F-42




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    2008
    
    
    2007
    
    
    2006Retirement/Seniority Premium:CBO
    
    $
    1,694
    
    
    
    1,480
    
    
    
    1,125Total actuarial loss
    
    
    360
    
    
    
    311
    
    
    
    246Termination:CBO
    
    $
    35,656
    
    
    
    33,002
    
    
    
    25,979Total actuarial loss
    
    
    6,233
    
    
    
    6,452
    
    
    
    1,365
 Benefits2008
    
    
    2007Discount rate reflecting the value of the current obligations
    
    
    8.16
    %
    
    
    8.16
    %Compensation increase rate
    
    
    5.56
    %
    
    
    5.56
    %Employee Remnant Average Labor Life
(Applicable to benefits upon retirement)
    
    29.5 years
    
    
    28.90 years
 NOTE 15  SHAREHOLDERS EQUITY
  (Dirección General de Inversión Extranjera)
  F-43




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
      
    
    6,088,896 Series A-1 shares to Series A shares, at a one to one ratio;
    
    10,181,950 Series B-1 shares to Series B shares, at a one to one ratio;
    
    220,714,874 Series N-1 shares to Series N shares, at a one to one ratio, and
    
    26,867,820 Series N-2 shares to Series N shares, at a one to one ratio.
     F-44




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
      1.
    
    To make a public offering of Ordinary Participation Certificates (CPO) in Mexico, in the form
of shares by offering these securities at the Bolsa Mexicana de Valores, S.A. B. de C.V. and
other foreign markets in the form of American Depositary Shares (ADS) or other securities or
instruments representing the CPOs or the shares of the Company, in accordance with applicable
laws, including, without limitation, the US Securities Act of 1933, and upon registration of
the corresponding securities with the Securities and Exchange Commission, so that the
necessary funds may be raised in order to continue the development and growth of the Company
and pay its debts. The CPOs are equivalent to three shares and the ADSs are equivalent to
seven CPOs.2.
    
    The conversion and/or reclassification of all the shares under the Series A, B, and N,
into new common and registered Series A shares with no par value, representing both the
fixed and the variable portion of the capital stock, as applicable.3.
    
    Amend the Companys overall bylaws, including the creation of a number of intermediate
management bodies, and other changes required under the Mexican Stock Market Law to convert
the Company to a publicly traded company (Sociedad Anónima Bursátil or S. A. B.).4.
    
    Cancel 45,768,803 of the Companys treasury shares.5.
    
    Increase the variable capital stock by issuing up to 260,000,000 common and registered Series
A shares with no par value, representing the variable portion of the capital stock of the
Company and 45,768,803 registered Series A shares, with no par value, representing the
variable portion of the capital stock, to be kept at the treasury.
  F-45




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   
        F-46




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
     Series and Class of Shares
    
    2008
    
    
    2007
    
    
    2006Issued and outstanding:Series A Class I (fixed portion)
    
    
    1,528,827
    
    
    
    1,528,827
    
    
    
    1,528,827Series A Class II (variable portion)
    
    
    788,290,002
    
    
    
    788,290,002
    
    
    
    15,760,793Series A1 Class II (variable portion)
    
    
    
    
    
    
    
    
    
    
    Series B Class II (variable portion)
    
    
    
    
    
    
    
    
    
    
    16,611,595Series B1 Class II (variable portion)
    
    
    
    
    
    
    
    
    
    
    Series N Class II (variable portion)
    
    
    
    
    
    
    
    
    
    
    448,433,563Series N1 Class II (variable portion)
    
    
    
    
    
    
    
    
    
    
    Series N2 Class II (variable portion)
    
    
    
    
    
    
    
    
    
    
    Subtotal
    
    
    789,818,829
    
    
    
    789,818,829
    
    
    
    482,334,778
 Authorized shares not outstanding:
 2008
    
    
    2007
    
    
    2006Series A
    
    
    11,000,000
    
    
    
    307,010
    
    
    
    Series N
    
    
    
    
    
    
    
    
    
    
    45,901,176Series N1
    
    
    
    
    
    
    
    
    
    
    Subtotal
    
    
    11,000,000
    
    
    
    307,010
    
    
    
    45,901,176Total authorized shares
    
    
    800,818,829
    
    
    
    790,125,839
    
    
    
    528,235,954
  F-47




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
     2008
    
    
    2007Capital stock
    
    $
    4,814,428
    
    
    
    4,814,435Restatement effect
    
    
    595,816
    
    
    
    595,816Total capital stock
    
    $
    5,410,244
    
    
    
    5,410,251
 NOTE 16  STOCK OPTION PLAN
  a.
    
    Executive plan  under the aforesaid plan, there were 575,000 stock options available
as a grant for officers performance for the years of 1998, 1999 and 2000.b.
    
    New stock option plan for executives  As of December 31, 2005, the Board of
Directors and shareholders of the Company authorized an aggregate of 17,998,500 options to
remunerate officers for the services they rendered during the years 2002, 2003 and 2004.
Also, part of these options served as extraordinary remunerations granted to certain key
officers in case of a change in the control of the Company.c.
    
    Members of the Board of Directors and members of various committees  For each
meeting of the Board or of the different committees of the Company where directors and members
of the different committees attend, they receive an option to purchase 2,500 shares at an
exercise price of 0.01 dollars per share. The chairman of the Board or of the different
committees is entitled to receive options to subscribe 5,000 shares at the same above
mentioned exercise price. Options granted in each meeting may be exercised immediately and
expire three years after, beginning on the date when granted, except when the same Board or
the shareholders meeting provides another mechanism.d.
    
    Signing bonuses and other bonuses for officers or directors  From time to time the
Company has granted signing bonuses, special bonuses and other bonuses by way of stock
options. There was a reserve of 246,215 N1 Series, Class II treasury shares, available so
that the management or the Board of Directors may grant options on these shares as part of the
signing bonuses negotiated and signed to contract new key officers with the Company.
  F-48




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
     2008
    
    
    2007
    
    
    2006Weighed
    
    
    
    
    
    
    Weighed
    
    
    
    
    
    
    WeighedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseOptions
    
    

Price
USD
    
    
    Options
    
    

Price
USD
    
    
    Options
    
    

Price
USDOutstanding at beginning of year
    
    
    37,277
    
    
    $
    0.37
    
    
    
    36,651
    
    
    $
    0.38
    
    
    
    18,099
    
    
    $
    0.65Granted
    
    
    552
    
    
    
    0.01
    
    
    
    5,151
    
    
    
    0.25
    
    
    
    36,076
    
    
    
    0.24Exercised
    
    
    (11,041
    )
    
    
    0.06
    
    
    
    (339
    )
    
    
    0.31
    
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    
    
    
    
    (4,186
    )
    
    
    0.27
    
    
    
    (17,524
    )
    
    
    0.65Outstanding at the end of the year
    
    
    26,788
    
    
    
    0.31
    
    
    
    37,277
    
    
    
    0.37
    
    
    
    36,651
    
    
    
    0.38Options exercisable at the end of the year
    
    
    14,751
    
    
    
    0.31
    
    
    
    21,208
    
    
    
    0.41
    
    
    
    7,112
    
    
    
    0.99Weighted average price of options granted
during the year (denominated in U.S.
dollars)
    
    
    
    
    
    $
    0.01
    
    
    
    
    
    
    $
    0.25
    
    
    
    
    
    
    $
    0.24
  Weightedaveragegrant-dateNon vested granted Options
    
    Options
    
    
    fair valueBalance at January 1, 2008
    
    
    13,656
    
    
    USD
    0.10Vested
    
    
    (5,118
    )
    
    
    0.10Forfeited
    
    
    (5,373
    )
    
    
    0.10Balance at December 31, 2008
    
    
    3,165
    
    
    USD
    0.10
  F-49




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    2008
    
    
    2007Granted
    
    
    17,916
    
    
    
    35,272Granted/Vested
    
    
    14,751
    
    
    
    21,616Granted nonvested
    
    
    3,165
    
    
    
    13,656Available
    
    
    8,872
    
    
    
    2,005Total authorized options
    
    
    26,788
    
    
    
    37,277
  Weightedaveragegrant-dateGranted/Vested Options
    
    Options
    
    
    fair valueBalance at January 1, 2008
    
    
    21,616
    
    
    USD
    0.12Granted
    
    
    552
    
    
    
    0.15Exercised
    
    
    (11,041
    )
    
    
    0.07Vested
    
    
    5,118
    
    
    
    0.10Forfeited
    
    
    (1,494
    )
    
    
    0.12Balance at December 31, 2008
    
    
    14,751
    
    
    USD
    0.14
   F-50




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedStock
    
    
    average
    
    
    Directors
    
    
    average
    
    
    
    
    
    
    averageOption
    
    
    unit price
    
    
    &
    
    
    unit price
    
    
    
    
    
    
    unit pricePlan
    
    
    USD
    
    
    Officers
    
    
    USD
    
    
    Total
    
    
    USDCash out for share acquisition
    
    
    72,450
    
    
    
    6.6
    
    
    
    9,384
    
    
    
    6.3
    
    
    
    81,834
    
    
    
    6.5Cash in from exercised options
    
    
    (7,082
    )
    
    
    (0.6
    )
    
    
    (4,079
    )
    
    
    (2.7
    )
    
    
    (11,161
    )
    
    
    (0.9
    )Total
    
    
    65,368
    
    
    
    5.9
    
    
    
    5,305
    
    
    
    3.5
    
    
    
    70,672
    
    
    
    5.6
    Modified plan
    
    
    Previous2007
    
    
    2006
    
    
    PlanRequisite service period
    
    3 years
    
    
    3 years
    
    
    5 years
    (*)Fair value on modification date (dollars)
    
    
    0.149
    
    
    
    0.090
    
    
    
    0.000Exercise price (dollars)
    
    
    0.31
    
    
    
    0.31
    
    
    
    0.50Unrecognized compensation cost in
July 2006 (in dollars: 0 x 23,837,331
options)
    
    
    
    
    
    
    
    
    
    
    N/A
 (*)
    
    At the modification date most options had been already vested.  F-51




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    DollarsFair value of modified option at July 2007
    
    
    0.149Fair value of modified option at July 2006
    
    
    0.090Fair value of original option at July 2006
    
    
    0.000Incremental value of modified option at July 2007
    
    
    0.149Incremental value of modified option at July 2006
    
    
    0.090Incremental value of modified option at July 2007
    
    
    0.149Incremental value of modified option at July 2006
    
    
    0.090Unrecognized compensation cost for original option
    
    
    0.000Total compensation cost to be recognized in 2007
    
    
    0.149Total compensation cost to be recognized in 2006
    
    
    0.090
    F-52




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    New
    
    
    Plan for the
    
    
    Options for Boardemployee stock
    
    
    Chairman
    
    
    members andoption plan
    
    
    of the Board
    
    
    executives
    
    
    TotalGranted
    
    
    17,339,922
    
    
    
    4,385,781
    
    
    
    1,827,845
    
    
    
    23,553,548Expected forfeitures
    
    
    (3,467,984
    )
    
    
    
    
    
    
    
    
    
    
    (3,467,984
    )Outstanding options
authorized
    
    
    17,871,587
    
    
    
    
    
    
    
    1,057,055
    
    
    
    18,928,642Options vested during the year
    
    
    1,817,543
    
    
    
    1,330,800
    
    
    
    9,357,457
    
    
    
    12,505,800
 2008
    
    
    2007Authorized options
    
    
    43,961,391
    
    
    
    44,915,241Options granted
    
    
    (25,032,749
    )
    
    
    (42,471,437
    )Available options
    
    
    18,928,642
    
    
    
    2,443,804
  Black-Scholes assumptions at 2007
 Vesting Period
    
    Volatility
    
    
    Exercise Price
    
    
    Risk Free Rate
    
    
    Fair value3.25 years
    
    
    30
    %
    
    0.31 dollars
    
    
    4.89
    %
    
    0.149 dollars
 Black-Scholes assumptions at 2006
 Vesting Period
    
    Volatility
    
    
    Exercise Price
    
    
    Risk Free Rate
    
    
    Fair value3.5 years
    
    
    30
    %
    
    0.31 dollars
    
    
    5.00
    %
    
    0.090 dollars
  F-53




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    A)
    
    Employee Incentive Program.
 a.
    
    The yearly incentive goal, which may be given to the Companys officers
and employees who are eligible under the scope of the Executive Incentive Program,
is to reward management for value generation to the Company in a given period of
time.b.
    
    The minimum requirement for the incentives to be awarded is a value
generation of 15% year versus year. The following formula is how value generation
is calculated:Value Generation for the year = EBITDA * 8 (eight)  net indebtedness +
shareholders dividends  shareholders increase to the capital stock.c.
    
    The amount of the yearly incentive is allocated individually and is
subject to the yearly performance evaluation.d.
    
    The yearly incentive is divided into three parts:
 i.
    
    One part will be awarded through cash.ii.
    
    One part will be awarded through stock options in
order to receive ADRs, CPOs or any other instrument whose underlying
values represent Maxcoms capital stock.iii.
    
    One part will be awarded through stock options in
order to receive ADRs, CPOs or any other instrument whose underlying
values represent Maxcoms capital stock.
  B)
    
    Compensation for Directors and Committee members.
 a.
    
    Directors and Committee members will receive each year options to
purchase up to $120 in the form of CPOs, with the exception of the Chairman of the
Board who will receive each year options to purchase up to $240 in the form of
CPOs.
  F-54




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    2008Issuance expenses, net
    
    $
    (6,055
    )Stock option plan cost
    
    
    5,114Cost of
shares acquired for issuance upon exercise of stock options net
    
    
    (70,672
    )$
    (71,613
    )
 NOTE 17  FINANCIAL INFORMATION BY SEGMENTS AND BY GEOGRAPHICAL LOCATION
   Segment
    
    2008
    
    
    2007
    
    
    2006Residential
    
    $
    1,055,639
    
    
    
    897,855
    
    
    
    685,492Business
    
    
    809,130
    
    
    
    648,165
    
    
    
    495,433Public Telephony
    
    
    428,733
    
    
    
    386,404
    
    
    
    253,136Wholesale
    
    
    359,518
    
    
    
    376,092
    
    
    
    262,304Others
    
    
    30,209
    
    
    
    37,203
    
    
    
    45,327Total revenues
    
    $
    2,683,229
    
    
    
    2,345,719
    
    
    
    1,741,692Operating costs and expenses
    
    
    (2,491,698
    )
    
    
    (2,069,824
    )
    
    
    (1,584,950
    )Operating income
    
    $
    191,531
    
    
    
    275,895
    
    
    
    156,742
  F-55




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
     Metropolitan
    
    
    Central-Services
    
    Area
    
    
    South
    
    
    North
    
    
    TotalYear ended December 31, 2008:Local
    
    $
    1,558,015
    
    
    
    726,438
    
    
    
    20,488
    
    
    
    2,304,941Long distance
    
    
    236,706
    
    
    
    74,374
    
    
    
    9,014
    
    
    
    320,094Rent of dedicated links
    
    
    402
    
    
    
    
    
    
    
    
    
    
    
    402Sale of equipment to customers
    
    
    8,740
    
    
    
    1,873
    
    
    
    77
    
    
    
    10,690Capacity leasing
    
    
    47,102
    
    
    
    
    
    
    
    
    
    
    
    47,102Total revenue
    
    $
    1,850,965
    
    
    
    802,685
    
    
    
    29,579
    
    
    
    2,683,229Total assets as of December 31,
2008
    
    $
    9,578,452
    
    
    
    1,298,685
    
    
    
    308,373
    
    
    
    11,185,510Accumulated depreciation
and amortization
    
    
    (2,949,318
    )
    
    
    (232,333
    )
    
    
    (87,387
    )
    
    
    (3,269,038
    )Total assets
    
    $
    6,629,134
    
    
    
    1,066,352
    
    
    
    220,986
    
    
    
    7,916,472Acquisition of telephone
network systems and
equipment during 2008
    
    $
    1,339,919
    
    
    
    269,019
    
    
    
    22,063
    
    
    
    1,631,001
  F-56




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   Metropolitan
    
    
    Central-Services
    
    Area
    
    
    South
    
    
    North
    
    
    TotalYear ended December 31, 2007:Local
    
    $
    1,398,683
    
    
    
    517,154
    
    
    
    
    
    
    
    1,915,837Long distance
    
    
    171,308
    
    
    
    175,234
    
    
    
    10,375
    
    
    
    356,917Rent of dedicated links
    
    
    180
    
    
    
    119
    
    
    
    
    
    
    
    299Sale of equipment to customers
    
    
    10,698
    
    
    
    3,646
    
    
    
    
    
    
    
    14,344Capacity leasing
    
    
    58,322
    
    
    
    
    
    
    
    
    
    
    
    58,322Total revenue
    
    $
    1,639,191
    
    
    
    696,153
    
    
    
    10,375
    
    
    
    2,345,719Total assets as of December 31,
2007
    
    $
    8,728,860
    
    
    
    814,161
    
    
    
    553,864
    
    
    
    10,096,885Accumulated depreciation
and amortization
    
    
    (1,735,440
    )
    
    
    (71,547
    )
    
    
    (275,798
    )
    
    
    (2,082,785
    )Total assets
    
    $
    6,993,420
    
    
    
    742,614
    
    
    
    278,066
    
    
    
    8,014,100Acquisition of telephone
network systems and
equipment during
2007
    
    $
    651,006
    
    
    
    476,519
    
    
    
    32,834
    
    
    
    1,160,359
 Metropolitan
    
    
    Central-Services
    
    Area
    
    
    South
    
    
    North
    
    
    TotalYear ended December 31, 2006:Local
    
    $
    934,524
    
    
    
    385,265
    
    
    
    
    
    
    
    1,319,789Long distance
    
    
    220,131
    
    
    
    121,633
    
    
    
    28,459
    
    
    
    370,223Rent of dedicated links
    
    
    342
    
    
    
    157
    
    
    
    
    
    
    
    499Sale of equipment to customers
    
    
    6,062
    
    
    
    8,360
    
    
    
    
    
    
    
    14,422Capacity leasing
    
    
    36,759
    
    
    
    
    
    
    
    
    
    
    
    36,759Total revenue
    
    $
    1,197,818
    
    
    
    515,415
    
    
    
    28,459
    
    
    
    1,741,692Total assets as of December 31,
2006
    
    $
    5,867,306
    
    
    
    325,527
    
    
    
    386,778
    
    
    
    6,579,611Accumulated depreciation
and amortization
    
    
    (1,463,580
    )
    
    
    (50,039
    )
    
    
    (88
    )
    
    
    (1,513,707
    )Total assets
    
    $
    4,403,726
    
    
    
    275,488
    
    
    
    386,690
    
    
    
    5,065,904Acquisition of telephone
network systems and
equipment during
2006
    
    $
    987,954
    
    
    
    141,454
    
    
    
    710
    
    
    
    1,130,118
  F-57




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NOTE 18  COMPREHENSIVE FINANCIAL RESULTS
  2008
    
    
    2007
    
    
    2006Comprehensive financial results:Interest expense and commissions
    
    $
    (317,633
    )
    
    
    (285,858
    )
    
    
    (178,153
    )Interest
income
    
    
    53,994
    
    
    
    55,793
    
    
    
    8,591Exchange
gain income (loss)  Net
    
    
    (261,787
    )
    
    
    4,826
    
    
    
    (6,568
    )Effect of valuation of financial
instruments
    
    
    83,323
    
    
    
    20,421
    
    
    
    13,324Gain on monetary position
    
    
    
    
    
    
    42,586
    
    
    
    33,753$
    (442,103
    )
    
    
    (162,232
    )
    
    
    (129,053
    )Capitalized in telecommunications
equipment and network (Note 7)
    
    $
    174,710
    
    
    
    35,591
    
    
    
    21,871Total recorded in results of operations
    
    $
    (267,393
    )
    
    
    (126,641
    )
    
    
    (107,182
    )
 NOTE
19  INCOME TAX (IT), ASSET TAX (AT), FLAT RATE BUSINESS TAX
(IETU) AND EMPLOYEES
STAUTORY PROFIT SHARING (ESPS)
   F-58




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
          December 31,2008
    
    
    2007
    
    
    2006(Loss) profit before income tax expense
    
    $
    (671,457
    )
    
    
    133,178
    
    
    
    30,783Statutory income tax rate
    
    
    28
    %
    
    
    28
    %
    
    
    29
    %Income tax expense (benefit)
    
    
    (188,008
    )
    
    
    37,290
    
    
    
    8,927Increase (decrease) on income tax expense resulting from:Inflationary effects
    
    
    (19,163
    )
    
    
    2,080
    
    
    
    24,021
  F-59




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   December 31,2008
    
    
    2007
    
    
    2006Non-deductible expenses
    
    
    10,254
    
    
    
    14,017
    
    
    
    1,301Change in valuation allowance
    
    
    (34,498
    )
    
    
    39,272
    
    
    
    Cancellation of allowance on asset tax
for prior years(1)
    
    
    
    
    
    
    
    
    
    
    31,679Non-taxable income
    
    
    (2,888
    )
    
    
    
    
    
    
    Others
    
    
    609
    
    
    
    4,323
    
    
    
    (5,878
    )Income tax expense (benefit)
    
    
    (233,694
    )
    
    
    96,982
    
    
    
    60,050Effective income tax rate
    
    
    35
    %
    
    
    73
    %
    
    
    195
    %
 (1)
    
    As of December 31, 2005, the Company believed it had possibilities of recovering asset tax paid in
prior years, based on the results of legal proceedings initiated and the fact that the prior Asset
Tax Law allowed for deduction of liabilities in computing net assets. However, during the last
quarter of 2006, the conditions of the legal process changed radically and together with the
changes to the Asset Tax Law, effective as from January 1, 2007, which now precludes the inclusion
of liabilities in determining the asset tax base, the Company concluded that there were not enough
grounds to obtain a favorable resolution, and decided to record a valuation allowance in the total
amount of said tax. Asset tax is incurred at the rate of 1.25% over the net amount of certain
assets only when this tax exceeds income tax payable.  F-60




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    2008
    
    
    2007IT
    
    
    ESPS
    
    
    IT
    
    
    ESPSDeferred assets:Allowance for doubtful accounts
    
    $
    39,372
    
    
    
    
    
    
    
    21,775
    
    
    
    Labor obligations upon retirement
    
    
    6,055
    
    
    
    2,162
    
    
    
    2,076
    
    
    
    741Derivative financial instruments
    
    
    2,372
    
    
    
    
    
    
    
    
    
    
    
    Provisions
    
    
    37,691
    
    
    
    13,461
    
    
    
    9,656
    
    
    
    3,449Tax credit carryforwards
    
    
    39,272
    
    
    
    
    
    
    
    39,272
    
    
    
    Tax loss carryforwards
    
    
    411,277
    
    
    
    
    
    
    
    267,420
    
    
    
    Total gross deferred assets
    
    
    536,039
    
    
    
    15,623
    
    
    
    340,199
    
    
    
    4,190Less valuation allowance
    
    
    184,948
    
    
    
    14,995
    
    
    
    129,073
    
    
    
    3,953Deferred assets, net
    
    
    351,091
    
    
    
    628
    
    
    
    211,126
    
    
    
    237Deferred liabilities:Prepaid expenses
    
    
    13,190
    
    
    
    628
    
    
    
    17,269
    
    
    
    237Telephone network system and
equipment,
frequency rights,
intangible assets
and preoperating
expenses  Net
    
    
    189,787
    
    
    
    
    
    
    
    291,599
    
    
    
    Total gross deferred liabilities
    
    
    202,977
    
    
    
    628
    
    
    
    308,868
    
    
    
    237Net deferred assets (liabilities)
    
    $
    148,114
    
    
    
    
    
    
    
    (97,742
    )
    
    
    
   F-61




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    2008
    
    
    2007Net change in deferred income tax asset (liability)
    
    $
    (245,856
    )
    
    
    9,046Tax effect of deductible expenses related to
the issuance of shares recorded net in the
additional paid-in capital
    
    
    
    
    
    
    37,236Deferred income tax expense (benefit)
    
    $
    (245,856
    )
    
    
    46,282
   F-62




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    Year of
    
    
    
    
    
    Year ofloss
    
    Amount
    
    
    expiration1999
    
    $
    18,109
    
    
    
    20092000
    
    
    102,156
    
    
    
    20102001
    
    
    32,292
    
    
    
    20112002
    
    
    282,004
    
    
    
    20122003
    
    
    35,388
    
    
    
    20132004
    
    
    79,533
    
    
    
    20142005
    
    
    132,644
    
    
    
    20152006
    
    
    74,058
    
    
    
    20162007
    
    
    269,142
    
    
    
    20172008
    
    
    443,521
    
    
    
    2018$
    1,468,847
  NOTE 20  COMMITMENTS AND CONTINGENT LIABILITIES
     2009
    
    $
    73,7902010
    
    
    69,5902011
    
    
    62,4992012
    
    
    58,7542013 and thereafter:
    
    
    61,146$
    325,779
   F-63




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
     2009
    
    $
    31,7102010
    
    
    30,9102011
    
    
    29,5392012
    
    
    22,3292013 and thereafter:
    
    
    5,636$
    120,124
    2009
    
    $
    4,396Total
    
    $
    4,396
    F-64




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
             F-65




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
       i.
    
    Claim brought by the Secretaría de Hacienda y Crédito Público as a result of a tax audit of
Telereunion for the fiscal year 2004:
    F-66




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NOTE 21  SIGNIFICANT DIFFERENCES BETWEEN MEXICAN AND THE UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES:
  Recently adopted accounting standards
   F-67




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
        Fair value
  Quoted prices
    
    
    Significantin active
    
    
    other
    
    
    SignificantBalance at
    
    
    markets for identical
    
    
    observable
    
    
    unobservableDecember 31,
    
    
    assets
    
    
    inputs
    
    
    inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Short-term investments(1)
    
    
    1,500,270
    
    
    
    11,702
    
    
    
    1,488,568
    
    
    
    Derivative Instruments, (net)
    
    
    96,798
    
    
    
    
    
    
    
    96,798Total
    
    $
    1,597,068
    
    
    $
    11,702
    
    
    $
    1,585,366
    
    
    $
    
 (1)
    
    Short-term investments are classified in the balance sheet as cash and cash
equivalents. The carrying value and fair value of cash and cash equivalents as of December 31, 2008
is $1,591,405, of which $1,500,270 represents the fair value of the short term investments.  F-68




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
       F-69




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
       F-70




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    Years Ended December 31,2008
    
    
    2007
    
    
    2006Net (loss) income under MFRS
    
    $
    (437,763
    )
    
    $
    36,196
    
    
    $
    (29,267
    )Adjustments:Amortization of pre-operating expenses (a)
    
    
    22,123
    
    
    
    20,438
    
    
    
    32,030Capitalization of interest (b)
    
    
    (112,738
    )
    
    
    (716
    )
    
    
    49,945Amortization of capitalized interest (b)
    
    
    (12,118
    )
    
    
    (11,896
    )
    
    
    (27,136
    )Installation revenues and related costs (c)
    
    
    (2,824
    )
    
    
    (6,758
    )
    
    
    858Installation costs not charged to customers (d)
    
    
    (154,716
    )
    
    
    (60,640
    )
    
    
    (213,247
    )Debt restructuring (e)
    
    
    
    
    
    
    
    
    
    
    197,006Capitalized internal compensation cost (f)
    
    
    143
    
    
    
    143
    
    
    
    143Impairment charge (g)
    
    
    532,315
    
    
    
    
    
    
    
    Severance Indemnity liability (h)
    
    
    2,405
    
    
    
    (682
    )
    
    
    (908
    )Reversal of SAB 108 (j)
    
    
    
    
    
    
    
    
    
    
    3,035Recognition of deferred taxes (k)
    
    
    (76,885
    )
    
    
    184,914
    
    
    
    Total US GAAP adjustments
    
    
    197,705
    
    
    
    124,803
    
    
    
    41,726Net (loss) income under U.S. GAAP
    
    $
    (240,058
    )
    
    $
    160,999
    
    
    $
    12,459Basic and diluted earnings per share:Numerator:Net (loss) income under U.S. GAAP
    
    $
    (240,058
    )
    
    $
    160,999
    
    
    $
    12,459less: preferred stock dividend(1)
    
    
    
    
    
    
    
    
    
    
    (539,738
    )Net (loss) income under U.S. GAAP available for common
shareholders, used for basic computation
    
    
    (240,058
    )
    
    
    160,999
    
    
    
    (527,279
    )Net (loss) Income under U.S. GAAP available for common
shareholders, used for dilutive computation
    
    
    (240,058
    )
    
    
    160,999
    
    
    
    (527,279
    )Denominator:Weighted
average of common shares used in basic computation (thousand)
    
    
    789,819
    
    
    
    560,176
    
    
    
    247,853Add: dilutive impact of stock options and warrants(2)
    
    
    
    
    
    
    45,968
    
    
    
    Weighted
average of common shares used in dilutive computation (thousand)
    
    
    789,819
    
    
    
    606,144
    
    
    
    247,853Earnings per share, basic
    
    
    (0.30
    )
    
    
    0.29
    
    
    
    (2.13
    )Earnings per share, diluted
    
    
    (0.30
    )
    
    
    0.27
    
    
    
    (2.13
    )
 (1)
    
    Earnings available to the common shareholders in 2006 were
reduced for the fair value of a stock dividend paid to the
preferred shareholders in the form of the Companys common
shares in the amount of $ 539.8 million. The weighted
average number of shares for 2006 reflects the application
of the two-class method specified by EITF 03-06.(2)
    
    According to FAS 128.  F-71




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   As of December 31,2008
    
    
    2007Shareholders equity under MFRS
    
    $
    4,501,169
    
    
    $
    5,030,839Accumulated adjustments:Preoperating expenses (a)
    
    
    (391,951
    )
    
    
    (391,951
    )Amortization of preoperating expenses (a)
    
    
    336,172
    
    
    
    314,049Capitalization of interest (b)
    
    
    8,440
    
    
    
    121,178Amortization of capitalized interest (b)
    
    
    (64,465
    )
    
    
    (52,347
    )Installation revenues and related costs (c)
    
    
    (76,805
    )
    
    
    (73,981
    )Installation costs not charged to customers (d)
    
    
    (738,412
    )
    
    
    (583,696
    )Capitalized internal compensation cost (f)
    
    
    (2,000
    )
    
    
    (2,143
    )Impairment charge (g)
    
    
    532,315
    
    
    
    Severance Indemnity liability (h)
    
    
    (11,297
    )
    
    
    (1,590
    )SAB 108 initial effects (i)
    
    
    7,034
    
    
    
    7,034SAB 108 effects for the year (j)
    
    
    3,035
    
    
    
    3,035Recognition of deferred taxes (k)
    
    
    111,420
    
    
    
    184,914Total U.S. GAAP adjustments
    
    $
    (286,514
    )
    
    $
    (475,498
    )Shareholders equity under U.S. GAAP
    
    $
    4,214,655
    
    
    $
    4,555,341
  Year EndedDecember 31,2008
    
    
    2007Balance at the beginning of the year
    
    $
    4,555,341
    
    
    $
    1,676,612Net (loss) income under U.S. GAAP
    
    
    (240,058
    )
    
    
    160,999(Decrease) increase in capital stock
    
    
    (7
    )
    
    
    2,045,646Increase in premium on issuance of shares
    
    
    
    
    
    
    634,960Stock option plan
    
    
    (71,613
    )
    
    
    37,124Repurchase of shares
    
    
    (20,287
    )
    
    
    Severance
Indemnity liability (FAS 158 effects), net of tax of $3,391
    
    
    (8,721
    )
    
    
    Balance at the end of the year
    
    $
    4,214,655
    
    
    $
    4,555,341
 I. Explanation of reconciling items
     F-72




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
              F-73




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
      3 3 3
  (a)
    
    The exchange with the primary holder is accounted for as a combination
of types as the primary holder received both New Senior Notes and
stock in exchange for the Old Senior Notes exchanged. A gain was
recorded, as the adjusted carrying value of the Old Senior Notes
exchanged was greater than the total future cash payments of the New
Senior Notes at the time of the exchange. To calculate the gain on the
restructuring, the carrying value of the Old Senior Notes was reduced
by the fair value of the equity interest granted as well as all legal
and other costs in relation to the restructuring, to determine the
adjusted carrying value, which was compared to the gross future cash
payments under the terms of the New Senior Notes to determine the
gain.(b)
    
    The other holders exchanged Old Senior Notes for New Senior Notes,
which is accounted for as a modification of terms under FAS 15 due to
the extension of the maturity date and the increase in total interest
payments. Since the carrying amount of the Old Senior Notes on October
2004 did not exceed the total future cash payments of the New Senior
Notes, no gain on the exchange with the other holders was recognized.
   F-74




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
           F-75




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
       2007Labor obligation at retirement asset as of December 31, 2006
    
    $
    15,068Labor obligation at retirement asset as of December 31, 2007
    
    
    17,650Amortization of past service cost
    
    
    2,582Amortization of variances in assumptions
    
    
    (992
    )Cost reduction under US GAAP*
    
    $
    1,590
 *
    
    As mentioned previously, for Mexican FRS purposes the Company eliminated the related intangible
asset. This effect was reversed for US GAAP purposes, resulting in a Ps. 1,590 increase in net
income.   Accumulated Other Comprehensive Income (AOCI) roll-forward and Comprehensive Income:
 OCI
    
    
    AOCIAOCI beginning balance at January 1, 2008Net loss
    
    $
    (240,058
    )SFAS 158 effect of the year (net of deferred
income tax effect of $3,391)
    
    
    (8,722
    )Other comprehensive income
    
    
    (8,722
    )
    
    $
    (8,722
    )Comprehensive income
    
    $
    (248,780
    )AOCI ending balance at December 31, 2008
    
    
    
    
    
    $
    (8,722
    )
    F-76




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
         F-77




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    Period in which the
    
    
    Period in which the
    
    
    Period in which theMisstatement
    
    
    Misstatement
    
    
    MisstatementOriginated (1)
    
    
    Originated (1)
    
    
    Originated (1)
    
    
    Adjustment recordedYear Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    as ofDecember 31, 2003
    
    
    December 31, 2004
    
    
    December 31, 2005
    
    
    January 1, 2006Labor liabilities (2)
    
    $
    (15,977
    )
    
    $
    
    
    
    $
    (647
    )
    
    $
    (16,624
    )Capitalized interest (3)
    
    
    (4,576
    )
    
    
    (1,310
    )
    
    
    613
    
    
    
    (5,273
    )Increasing-debt rate (4)
    
    
    
    
    
    
    (3,682
    )
    
    
    (8,321
    )
    
    
    (12,003
    )Stock-option plan (5)
    
    
    
    
    
    
    (603
    )
    
    
    (2,890
    )
    
    
    (3,493
    )Embedded derivatives (6)
    
    
    
    
    
    
    
    
    
    
    7,292
    
    
    
    7,292Debt restructuring (7)
    
    
    
    
    
    
    137,597
    
    
    
    6
    
    
    
    137,603Installation costs not
charged (7)
    
    
    
    
    
    
    (111,511
    )
    
    
    1,593
    
    
    
    (109,918
    )Installation revenues and
costs (8)
    
    
    
    
    
    
    
    
    
    
    11,593
    
    
    
    11,593Other (9)
    
    
    11,346
    
    
    
    (9,534
    )
    
    
    (3,955
    )
    
    
    (2,143
    )Deferred income taxes (10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impact on net income(11)
    
    $
    (9,207
    )
    
    $
    10,957
    
    
    $
    5,284Retained earnings(12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,034
 (1)
    
    We previously quantified these errors under the roll-over method and concluded that they were immaterial,
individually and in the aggregate.(2)
    
    We were not recognizing this difference for severance indemnity as required by U.S. generally accepted
accounting principles (see reconciling item h.). As a result of this error, our severance indemnity expense
was understated by $16.0 million in 2003 and by $0.6 million in 2005, no expense recognition is applicable
for 2004. We recorded a $16.6 million increase in our liability for severance indemnity as of January 1,
2006 with a corresponding reduction in retained earnings to correct these misstatements.(3)
    
    We incorrectly amortized capitalized interest expenses in 2005 and prior years. As a result of this error,
our expenses were understated in 2003 by $4.6 million, in 2004 by $1.3 and overstated by $0.6 million in
2005. We recorded a $5.3 million decrease in our capitalized interest as of January 1, 2006 with a
corresponding reduction in retained earnings to correct these misstatements.(4)
    
    We were not adjusting our expenses for increasing-debt rate as required by U.S. generally accepted
accounting principles to the interest method. As a result of this error, our interest expense was
understated by $3.7 million in 2004 and by $8.3 million in 2005. We recorded a $12.0 million increase in
our liability for interest payable as of January 1, 2006 with a corresponding reduction in retained
earnings to correct these misstatements (see item j. below for reversal in 2006).(5)
    
    We were not recognizing compensation cost expense as required by U.S. generally accepted accounting
principles. As a result of this error, our compensation expense was understated by $0.6 million in 2004 and
by $2.9 million in 2005. We recorded a $3.5 million increase in our additional-paid in capital for
stock-option plans as of January 1, 2006 with a corresponding reduction in retained earnings to correct
these misstatements.  F-78




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   (6)
    
    We were not recognizing the effect in income generated by embedded derivatives as required by U.S.
generally accepted accounting principles. As a result of this error in both GAAPs in 2005, our income was
understated by $7.3 million. We recorded a $7.3 million increase in our assets as of January 1, 2006 with a
corresponding increase in retained earnings to correct these misstatements. This balance does not represent
a difference between GAAPs, however for MFRS purposes this effect was immaterial for being adjusted (see
item j. below for reversal in 2006).(7)
    
    We were incorrectly presenting the accumulated amortization related to debt restructuring and installation
costs not charged to customers. As a result of both reclassification errors, our income was understated by
$26.1 million in 2004 and by $1.6 million in 2005 (amounts presented net). We recorded a $27.7 million
increase in our assets as of January 1, 2006 with a corresponding increment in retained earnings to correct
these misstatements.(8)
    
    We were incorrectly recognizing the effect in income generated by the amortization installation revenues
and costs. As a result of this error, our income was understated by $11.6 million in 2005. We recorded a
$11.6 million increase in our assets as of January 1, 2006 with a corresponding increment in retained
earnings to correct these misstatements.(9)
    
    We incorrectly recorded minor entries representing preoperating expenses, leasehold improvements and
revenue recognition. As a result of these errors, our expense was overstated by $11.3 million in 2003 and
understated by $9.5 million in 2004 and $4.0 million in 2005. We recorded a $2.2 million increase in the
Companys liabilities for these concepts as of January 1, 2006 with a corresponding reduction in retained
earnings to correct these misstatements.(10)
    
    No deferred taxes were calculated in the application of the SAB 108 as those balances would represent a
deferred tax asset for the net balance to be adjusted on January 1, 2006, that is not deemed recoverable
and should be fully reserved for accounting purposes.(11)
    
    Represents the net over-statement of net income for the indicated periods resulting from these misstatements(12)
    
    Represents the net reduction to retained earnings recorded as of January 1, 2006 to record the initial
application of SAB 108.   December 31, 2006Preoperating expenses
    
    $
    (1,676
    )Increasing debt rate (1)
    
    
    12,003Embedded derivatives (2)
    
    
    (7,292
    )$
    3,035
 (1)
    
    These notes were called in advance during 2006 and thus, outstanding
payable balances under U.S. GAAP were eliminated.(2)
    
    In 2006, the Company started recognizing embedded derivatives in their
local books, therefore, this reconciling item is reversed.  F-79




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
     II.
Disclosures
   
    
    borrow money;
    
    pay dividends on our capital stock;
    
    purchase stock or repay subordinated indebtedness;
    
    sell assets; and
    
    consolidate or merge into other companies.
     F-80




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
        Quoted prices
    
    
    SignificantFair value at
    
    
    in active
    
    
    other
    
    
    SignificantDecember 31,
    
    
    markets for
    
    
    observable
    
    
    unobservable2008
    
    
    identical assets
    
    
    inputs
    
    
    inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Senior Notes(1)
    
    $
    2,044,283
    
    
    
    
    
    
    
    2,044,283
    
    
    
    
 (1)
    
    Senior notes are carried at amortized cost and their carrying value as of December
31, 2008 is $2,707,660. The $2,044,283 represents the estimated fair value of the notes. See Note
11 Bonds Payable.      F-81




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
       F-82




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    F-83




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    SFAS 109
    
    
    SFAS 109Applied to
    
    
    Applied toMFRS
    
    
    U.S. GAAPDecember 31, 2008:
    
    Balances
    
    
    Balances
    
    
    TotalDeferred tax assetsAllowance for doubtful accounts
    
    $
    39,372
    
    
    
    
    
    
    $
    39,372Labor obligations upon retirement
    
    
    6,055
    
    
    
    (1,970
    )
    
    
    4,085Derivative financial instruments
    
    
    2,372
    
    
    
    
    
    
    
    2,372Provisions
    
    
    37,691
    
    
    
    
    
    
    
    37,691Installation revenues
    
    
    
    
    
    
    21,505
    
    
    
    21,505Installation costs not charged to customers
    
    
    
    
    
    
    206,755
    
    
    
    206,755Tax credit carryforwards
    
    
    39,272
    
    
    
    
    
    
    
    39,272Tax loss carryforwards
    
    
    411,277
    
    
    
    
    
    
    
    411,277Total gross deferred tax assets
    
    
    536,039
    
    
    
    226,290
    
    
    
    762,329Less valuation allowance
    
    
    (184,948
    )
    
    
    
    
    
    
    (184,948
    )Net deferred tax assets
    
    $
    351,091
    
    
    
    226,290
    
    
    
    577,381Deferred tax liabilitiesTelephone network equipment and leasehold
improvements, frequency rights, intangible
assets, impairment and preoperating
expenses
    
    $
    (189,787
    )
    
    
    (114,870
    )
    
    
    (304,657
    )Prepaid expenses
    
    
    (13,190
    )
    
    
    
    
    
    
    (13,190
    )Total gross deferred tax liabilities
    
    
    (202,977
    )
    
    
    (114,870
    )
    
    
    (317,847
    )Net deferred tax asset
    
    $
    148,114
    
    
    
    111,420
    
    
    
    259,534
  SFAS 109
    
    
    SFAS 109Applied to
    
    
    Applied toMFRS
    
    
    U.S. GAAPBalances
    
    
    Balances
    
    
    TotalDecember 31, 2007:Deferred tax assets:Bad debt allowance
    
    $
    21,775
    
    
    
    
    
    
    $
    21,775Tax loss carry forwards
    
    
    267,420
    
    
    
    
    
    
    
    267,420Accruals
    
    
    51,004
    
    
    
    
    
    
    
    51,004Installation revenues
    
    
    
    
    
    
    20,715
    
    
    
    20,715Installation costs not charged to customers
    
    
    
    
    
    
    163,435
    
    
    
    163,435Total gross deferred tax assets
    
    
    340,199
    
    
    
    184,150
    
    
    
    524,349Valuation allowance
    
    
    (129,073
    )
    
    
    
    
    
    
    (129,073
    )Net deferred tax assets
    
    
    211,126
    
    
    
    184,150
    
    
    
    395,276Deferred tax liabilities:Prepaid expenses
    
    
    (17,269
    )
    
    
    
    
    
    
    (17,269
    )Telephone network equipment and leasehold
improvements, frequency rights, intangible
assets and preoperating expenses
    
    
    (291,599
    )
    
    
    764
    
    
    
    (290,835
    )Total gross deferred tax liabilities
    
    
    (308,868
    )
    
    
    764
    
    
    
    (308,104
    )Net deferred tax (liability) asset
    
    $
    (97,742
    )
    
    $
    184,914
    
    
    $
    87,172
  F-84




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
          F-85




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   Year Ended December 31,2008
    
    
    2007
    
    
    2006Operating activities:Net (loss) income under U.S. GAAP
    
    $
    (240,058
    )
    
    $
    160,999
    
    
    $
    12,459Adjustments to reconcile net income (loss) to net cash flow provided by operating activities:Depreciation and amortization
    
    
    476,813
    
    
    
    328,269
    
    
    
    167,721Hedging valuation
    
    
    (83,323
    )
    
    
    (24,036
    )
    
    
    (5,217
    )Allowance for doubtful accounts
    
    
    39,956
    
    
    
    5,318
    
    
    
    36,556Monetary gain
    
    
    
    
    
    
    (15,533
    )
    
    
    (21,503
    )Deferred income tax
    
    
    (168,971
    )
    
    
    (138,632
    )
    
    
    60,051Severance indemnity
    
    
    14,669
    
    
    
    6,434
    
    
    
    4,642Stock option plan
    
    
    5,114
    
    
    
    37,124
    
    
    
    15,982Loss on sale of fixed assets
    
    
    82,496
    
    
    
    6,166
    
    
    
    1,369Other
    
    
    
    
    
    
    67,255
    
    
    
    (1,000
    )Foreign currency exchange gain (loss)
    
    
    534,420
    
    
    
    (47,957
    )
    
    
    (90,781
    )661,116
    
    
    
    385,407
    
    
    
    180,279Changes in operating assets and liabilities:Accounts receivable
    
    
    (227,744
    )
    
    
    (319,003
    )
    
    
    (321,562
    )Inventory
    
    
    (7,627
    )
    
    
    2,540
    
    
    
    (19,160
    )Prepaid expenses
    
    
    9,563
    
    
    
    2,091
    
    
    
    14,271Other assets and liabilities
    
    
    3,353
    
    
    
    93,404
    
    
    
    25,267Cash flow provided by (used in) operating activities
    
    
    438,861
    
    
    
    164,439
    
    
    
    (120,905
    )Investing activities:Acquisition of fixed assets
    
    
    (1,298,619
    )
    
    
    (1,126,022
    )
    
    
    (772,773
    )Proceeds on sale of fixed assets
    
    
    4,364
    
    
    
    (6,371
    )
    
    
    4,428Purchase of Telereunion, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (101,173
    )Purchase of Sierra, net of cash acquired
    
    
    
    
    
    
    (33,576
    )
    
    
    Acquisition of intangible assets
    
    
    12,704
    
    
    
    (79,112
    )
    
    
    (35,370
    )Cash flow used in investing activities
    
    
    (1,281,551
    )
    
    
    (1,245,081
    )
    
    
    (904,888
    )Financing activities:Restricted cash
    
    
    
    
    
    
    23,462
    
    
    
    (15,179
    )Capital (decrease) increase  Net of equity issuance cost
    
    
    (7
    )
    
    
    2,643,369
    
    
    
    357,348Cost of shares acquired for issuance upon exercise of stock options, and issuance costs
    
    
    (76,727
    )Bank financing and debt payments
    
    
    (8,419
    )
    
    
    131,432
    
    
    
    (460,666
    )Repurchase of shares
    
    
    (20,287
    )
    
    
    
    
    
    
    Senior notes issued  Net of debt issuance cost
    
    
    
    
    
    
    118,214
    
    
    
    1,650,241Cash flow (used in) provided by financing activities
    
    
    (105,440
    )
    
    
    2,916,477
    
    
    
    1,531,744Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    (35,591
    )
    
    
    (7,878
    )Net increase in cash and cash equivalents
    
    
    (948,130
    )
    
    
    1,800,244
    
    
    
    498,073Cash and cash equivalents at beginning of the year
    
    
    2,539,535
    
    
    
    739,291
    
    
    
    241,218Cash and cash equivalents at end of the year
    
    
    1,591,405
    
    
    
    2,539,535
    
    
    
    739,291Interest paid
    
    $
    276,434
    
    
    $
    271,973
    
    
    $
    139,716Income taxes paid
    
    $
    7,320
    
    
    $
    25,530
    
    
    $
    1,396Supplemental disclosures about non-cash activities Optical fiber and links reclassification
    
    
    
    
    
    
    
    
    
    
    144,241(Decrease) increase on fixed assets acquired Under capital lease
    
    
    4,740
    
    
    
    (50,791
    )
    
    
    15,620
  F-86




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
    
     F-87




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
        F-88




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   Subsequent Events
 Accounting for Transfers of Financial Assets  an
amendment of Statement No. 140
 Amendments to FASB Interpretation No. 46(R) Consolidation of Variable Interest Entities
  F-89




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
       F-90




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    SCG
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedBalance sheet as of December 31, 2008:Cash and cash equivalents and Current
restricted cash
    
    $
    1,585,470
    
    
    
    185
    
    
    
    1,037
    
    
    
    377
    
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    29
    
    
    
    112
    
    
    
    3,800
    
    
    
    
    
    
    
    0
    
    
    
    1,591,405Accounts receivable  net
    
    
    1,061,998
    
    
    
    12,140
    
    
    
    75,368
    
    
    
    15,948
    
    
    
    191,314
    
    
    
    110
    
    
    
    50
    
    
    
    2,427
    
    
    
    212
    
    
    
    71,902
    
    
    
    2,609
    
    
    
    1,163
    
    
    
    (476,940
    )
    
    
    958,301Inventory  net
    
    
    40,876
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,876Prepaid expenses
    
    
    24,167
    
    
    
    1,124
    
    
    
    4,985
    
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    373
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    30,778Investment in subsidiaries
    
    
    341,530
    
    
    
    
    
    
    
    8,820
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (350,350
    )
    
    
    0Frequency rights  net
    
    
    66,716
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,716Telephone network system and Equipment net
    
    
    4,503,806
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,143
    
    
    
    139,939
    
    
    
    8,540
    
    
    
    20,985
    
    
    
    
    
    
    
    4,684,413Preoperating expenses  net
    
    
    50,595
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,863Intangible assets  net
    
    
    209,683
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209,683Deposits
    
    
    2,151
    
    
    
    406
    
    
    
    7
    
    
    
    
    
    
    
    4,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,235
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    8,315Prepaid expenses long term
    
    
    15,381
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,381Derivative financial instruments
    
    
    105,270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,270Deferred taxes
    
    
    90,996
    
    
    
    864
    
    
    
    5,931
    
    
    
    77
    
    
    
    16,280
    
    
    
    
    
    
    
    1
    
    
    
    8
    
    
    
    3,145
    
    
    
    29,995
    
    
    
    
    
    
    
    817
    
    
    
    
    
    
    
    148,114Other assets
    
    
    6,377
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    6,357Total assets
    
    $
    8,105,016
    
    
    
    14,719
    
    
    
    96,148
    
    
    
    16,494
    
    
    
    212,316
    
    
    
    110
    
    
    
    319
    
    
    
    2,627
    
    
    
    14,529
    
    
    
    243,556
    
    
    
    14,963
    
    
    
    22,965
    
    
    
    (827,290
    )
    
    
    7,916,472Total liabilities
    
    $
    3,603,847
    
    
    
    13,777
    
    
    
    70,834
    
    
    
    8,633
    
    
    
    3,394
    
    
    
    7
    
    
    
    292
    
    
    
    1,669
    
    
    
    111
    
    
    
    184,491
    
    
    
    4,565
    
    
    
    624
    
    
    
    (476,941
    )
    
    
    3,415,303
  F-91




---



##### Table of Contents



NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    SCG
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedShareholders Equity:Capital Stock and Additional Paid- In Capital
    
    
    6,226,687
    
    
    
    96
    
    
    
    66
    
    
    
    55
    
    
    
    171,497
    
    
    
    127
    
    
    
    56
    
    
    
    54
    
    
    
    11,308
    
    
    
    712,814
    
    
    
    13,044
    
    
    
    97,874
    
    
    
    (1,006,991
    )
    
    
    6,226,687Accumulated
deficit
    
    
    (1,705,231
    )
    
    
    846
    
    
    
    25,248
    
    
    
    7,806
    
    
    
    37,425
    
    
    
    (24
    )
    
    
    (29
    )
    
    
    904
    
    
    
    3,110
    
    
    
    (653,749
    )
    
    
    (2,646
    )
    
    
    (75,533
    )
    
    
    656,642
    
    
    
    (1,705,231
    )Repurchase of shares
    
    
    (20,287
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,287
    )Total shareholders equity
    
    
    4,501,169
    
    
    
    942
    
    
    
    25,314
    
    
    
    7,861
    
    
    
    208,922
    
    
    
    103
    
    
    
    27
    
    
    
    958
    
    
    
    14,418
    
    
    
    59,065
    
    
    
    10,398
    
    
    
    22,341
    
    
    
    (350,349
    )
    
    
    4,501,169Total liabilities and shareholders  equity
    
    $
    8,105,016
    
    
    
    14,719
    
    
    
    96,148
    
    
    
    16,494
    
    
    
    212,316
    
    
    
    110
    
    
    
    319
    
    
    
    2,627
    
    
    
    14,529
    
    
    
    243,556
    
    
    
    14,963
    
    
    
    22,965
    
    
    
    (827,290
    )
    
    
    7,916,472
  F-92




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    SCG
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedTotal shareholders equity under Mexican GAAP
    
    $
    4,501,169
    
    
    
    942
    
    
    
    25,314
    
    
    
    7,861
    
    
    
    208,922
    
    
    
    103
    
    
    
    27
    
    
    
    958
    
    
    
    14,418
    
    
    
    59,065
    
    
    
    10,398
    
    
    
    22,341
    
    
    
    (350,349
    )
    
    
    4,501,169Preoperating expenses
    
    $
    (391,951
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391,951
    )Amortization of preoperating expenses
    
    
    336,172
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    336,172Capitalization of interest
    
    
    8,440
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,440Amortization of capitalized interest
    
    
    (64,465
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,465
    )Installation revenues
    
    
    (76,805
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76,805
    )Installation costs
    
    
    (738,412
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (738,412
    )Capitalized internal compensation cost
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,000
    )Impairment charge
    
    
    532,315
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    532,315Severance indemnity liability
    
    
    (11,297
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,297
    )SAB 108 initial effect
    
    
    7,034
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,034SAB effects for the year
    
    
    3,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,035Recognition of deferred taxes
    
    
    111,420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,420Total shareholders equity under US. GAAP
    
    $
    4,214,655
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,214,655
  F-93




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    SCG
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedStatements of Operations for the year ended December 31, 2008:Revenues
    
    $
    2,676,392
    
    
    
    80,022
    
    
    
    502,434
    
    
    
    90,880
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,535
    
    
    
    213
    
    
    
    42,644
    
    
    
    2,535
    
    
    
    1,164
    
    
    
    (730,590
    )
    
    
    2,683,229Operating cost and expenses
    
    
    (2,581,692
    )
    
    
    (75,630
    )
    
    
    (424,476
    )
    
    
    (86,651
    )
    
    
    (11
    )
    
    
    
    
    
    
    (11
    )
    
    
    (16,725
    )
    
    
    (203
    )
    
    
    (35,321
    )
    
    
    (2,092
    )
    
    
    (15
    )
    
    
    731,129
    
    
    
    (2,491,698
    )Integral (cost) income of financing
    
    
    (267,025
    )
    
    
    (126
    )
    
    
    (1,683
    )
    
    
    (159
    )
    
    
    17,728
    
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    3
    
    
    
    (16,066
    )
    
    
    (29
    )
    
    
    (1
    )
    
    
    
    
    
    
    (267,393
    )Other income (expenses)
    
    
    (265,438
    )
    
    
    (3,368
    )
    
    
    (51,066
    )
    
    
    (999
    )
    
    
    15,284
    
    
    
    
    
    
    
    (3
    )
    
    
    4
    
    
    
    3,126
    
    
    
    (18,206
    )
    
    
    74
    
    
    
    (1,590
    )
    
    
    (39,719
    )
    
    
    (361,901
    )Net (loss) income
    
    $
    (437,763
    )
    
    
    898
    
    
    
    25,209
    
    
    
    3,071
    
    
    
    33,001
    
    
    
    0
    
    
    
    (14
    )
    
    
    779
    
    
    
    3,139
    
    
    
    (26,949
    )
    
    
    488
    
    
    
    (442
    )
    
    
    (39,180
    )
    
    
    (437,763
    )Net (loss) income for the year under Mexican GAAP
    
    $
    (437,763
    )
    
    
    898
    
    
    
    25,209
    
    
    
    3,071
    
    
    
    33,001
    
    
    
    0
    
    
    
    (14
    )
    
    
    779
    
    
    
    3,139
    
    
    
    (26,949
    )
    
    
    488
    
    
    
    (442
    )
    
    
    (39,180
    )
    
    
    (437,763
    )Amortization of preoperating expenses
    
    
    22,123
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,123Capitalization of interest
    
    
    (112,738
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (112,738
    )Amortization of capitalized Interest
    
    
    (12,118
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,118
    )Installation revenues
    
    
    (2,824
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,824
    )Installation costs
    
    
    (154,716
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (154,716
    )Capitalized internal compensation cost
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143Impairment
    
    
    532,315
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    532,315Severance indemnity liability
    
    
    2,405
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,405Recognition at deferred taxes
    
    
    (76,885
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76,885
    )Net loss (income) for the year Under U.S. GAAP
    
    $
    (240,058
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (240,058
    )
  F-94




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    SCG
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedStatement of Cash Flows under U.S. GAAP for the
Year Ended December 31, 2008:Net (loss) income the year under U.S. GAAP
    
    
    (240,058
    )
    
    
    898
    
    
    
    25,209
    
    
    
    3,071
    
    
    
    33,001
    
    
    
    0
    
    
    
    (14
    )
    
    
    779
    
    
    
    3,139
    
    
    
    (26,949
    )
    
    
    488
    
    
    
    (442
    )
    
    
    (39,180
    )
    
    
    (240,058
    )Depreciation and amortization
    
    
    440,104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203
    
    
    
    20,150
    
    
    
    938
    
    
    
    
    
    
    
    15,418
    
    
    
    476,813Other adjustments to reconcile net income to cash
provided by operating activities
    
    
    428,588
    
    
    
    (852
    )
    
    
    (1,648
    )
    
    
    (76
    )
    
    
    (16,280
    )
    
    
    
    
    
    
    (1
    )
    
    
    (8
    )
    
    
    (3,146
    )
    
    
    (29,995
    )
    
    
    
    
    
    
    (817
    )
    
    
    48,596
    
    
    
    424,361Net change in working capital
    
    
    (213,818
    )
    
    
    (1,258
    )
    
    
    (25,367
    )
    
    
    (3,053
    )
    
    
    (19,295
    )
    
    
    0
    
    
    
    15
    
    
    
    (840
    )
    
    
    (193
    )
    
    
    (17,409
    )
    
    
    (1,910
    )
    
    
    1,259
    
    
    
    59,614
    
    
    
    (222,255
    )Resources (used in) provided by Operating activities
    
    
    414,816
    
    
    
    (1,212
    )
    
    
    (1,806
    )
    
    
    (58
    )
    
    
    (2,574
    )
    
    
    0
    
    
    
    0
    
    
    
    (69
    )
    
    
    3
    
    
    
    (54,203
    )
    
    
    (484
    )
    
    
    0
    
    
    
    84,448
    
    
    
    438,861Resources used in financing activities
    
    
    (102,692
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,510
    
    
    
    
    
    
    
    
    
    
    
    (13,258
    )
    
    
    (105,440
    )Resources (used in) provided by investing activities
    
    
    (1,252,698
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,320
    
    
    
    17
    
    
    
    
    
    
    
    (71,190
    )
    
    
    (1,281,551
    )Cash and cash equivalents:Net increase (decrease) in cash and cash equivalents
    
    
    (940,574
    )
    
    
    (1,212
    )
    
    
    (1,806
    )
    
    
    (58
    )
    
    
    (2,574
    )
    
    
    0
    
    
    
    0
    
    
    
    (69
    )
    
    
    3
    
    
    
    (1,373
    )
    
    
    (467
    )
    
    
    0
    
    
    
    (0
    )
    
    
    (948,130
    )Beginning balances
    
    
    2,526,044
    
    
    
    1,398
    
    
    
    2,842
    
    
    
    435
    
    
    
    2,799
    
    
    
    
    
    
    
    0
    
    
    
    239
    
    
    
    26
    
    
    
    1,485
    
    
    
    4,267
    
    
    
    0
    
    
    
    0
    
    
    
    2,539,535Ending balances
    
    
    1,585,470
    
    
    
    185
    
    
    
    1,037
    
    
    
    377
    
    
    
    225
    
    
    
    0
    
    
    
    0
    
    
    
    170
    
    
    
    29
    
    
    
    112
    
    
    
    3,800
    
    
    
    0
    
    
    
    (0
    )
    
    
    1,591,405
  F-95




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    SCG
    
    
    Elimination
    
    
    ConsolidatedBalance sheet as of December 31, 2007:Cash and cash equivalents and Current restricted cash
    
    
    2,526,044
    
    
    
    1,398
    
    
    
    2,842
    
    
    
    435
    
    
    
    2,799
    
    
    
    
    
    
    
    
    
    
    
    239
    
    
    
    1,485
    
    
    
    4,267
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    2,539,535Accounts receivable  net
    
    
    742,528
    
    
    
    6,338
    
    
    
    53,419
    
    
    
    11,748
    
    
    
    170,804
    
    
    
    110
    
    
    
    51
    
    
    
    1,552
    
    
    
    16,406
    
    
    
    14,550
    
    
    
    2,081
    
    
    
    19
    
    
    
    (249,093
    )
    
    
    770,513Inventory  net
    
    
    33,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,249Prepaid expenses
    
    
    49,471
    
    
    
    339
    
    
    
    1,966
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,830
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,630Investment in subsidiaries
    
    
    299,637
    
    
    
    
    
    
    
    4,969
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (304,606
    )
    
    
    Frequency rights  net
    
    
    80,930
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,930Telephone network system and Equipment net
    
    
    3,944,727
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202,410
    
    
    
    9,478
    
    
    
    20,985
    
    
    
    11,346
    
    
    
    
    
    
    
    4,188,946Preoperating expenses  net
    
    
    77,634
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,902Intangible assets  net
    
    
    208,802
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    208,802Obligations
    
    
    
    
    
    
    1,890
    
    
    
    15,760
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,650Deposits
    
    
    1,038
    
    
    
    257
    
    
    
    7
    
    
    
    
    
    
    
    4,276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,350
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,943Derivative financial instruments
    
    
    13,475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,475Other assets
    
    
    9,270
    
    
    
    
    
    
    
    5,272
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    14,525Total assets
    
    
    7,986,805
    
    
    
    10,222
    
    
    
    84,235
    
    
    
    12,192
    
    
    
    177,879
    
    
    
    110
    
    
    
    319
    
    
    
    1,791
    
    
    
    231,481
    
    
    
    28,325
    
    
    
    23,066
    
    
    
    11,391
    
    
    
    553,716
    )
    
    
    8,014,100Total liabilities
    
    
    2,955,966
    
    
    
    10,178
    
    
    
    84,130
    
    
    
    7,402
    
    
    
    1,958
    
    
    
    7
    
    
    
    278
    
    
    
    1,612
    
    
    
    151,374
    
    
    
    18,415
    
    
    
    400
    
    
    
    112
    
    
    
    (248,571
    )
    
    
    2,983,261Shareholders Equity:Capital Stock and Additional Paid- In Capital
    
    
    6,298,307
    
    
    
    96
    
    
    
    66
    
    
    
    55
    
    
    
    171,496
    
    
    
    127
    
    
    
    56
    
    
    
    53
    
    
    
    702,304
    
    
    
    13,044
    
    
    
    97,875
    
    
    
    11,308
    
    
    
    (996,480
    )
    
    
    6,298,307Accumulated deficit
    
    
    (1,267,468
    )
    
    
    (52
    )
    
    
    39
    
    
    
    4,735
    
    
    
    4,425
    
    
    
    (24
    )
    
    
    (15
    )
    
    
    126
    
    
    
    (622,197
    )
    
    
    (3,134
    )
    
    
    (75,209
    )
    
    
    (29
    )
    
    
    691,335
    
    
    
    (1,267,468
    )Total shareholders equity
    
    
    5,030,839
    
    
    
    44
    
    
    
    105
    
    
    
    4,790
    
    
    
    175,921
    
    
    
    103
    
    
    
    41
    
    
    
    179
    
    
    
    80,107
    
    
    
    9,910
    
    
    
    22,666
    
    
    
    11,279
    
    
    
    (305,145
    )
    
    
    5,030,839Total liabilities and shareholders  equity
    
    
    7,986,805
    
    
    
    10,222
    
    
    
    84,235
    
    
    
    12,192
    
    
    
    177,879
    
    
    
    110
    
    
    
    319
    
    
    
    1,791
    
    
    
    231,481
    
    
    
    28,325
    
    
    
    23,066
    
    
    
    11,391
    
    
    
    (553,716
    )
    
    
    8,014,100Total shareholders equity under Mexican GAAP
    
    
    5,030,839
    
    
    
    44
    
    
    
    105
    
    
    
    4,790
    
    
    
    175,921
    
    
    
    103
    
    
    
    41
    
    
    
    179
    
    
    
    80,107
    
    
    
    9,910
    
    
    
    22,666
    
    
    
    11,279
    
    
    
    (305,145
    )
    
    
    5,030,839
  F-96




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    SCG
    
    
    Elimination
    
    
    ConsolidatedPreoperating expenses
    
    
    (391,951
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391,951
    )Amortization of preoperating expenses
    
    
    314,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314,049Capitalization of interest
    
    
    121,178
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,178Amortization of capitalized interest
    
    
    (52,347
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52,347
    )Installation revenues
    
    
    (73,981
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,981
    )Installation costs
    
    
    (583,696
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (583,696
    )Capitalized internal compensation cost
    
    
    (2,143
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,143
    )Severance Indemnity liability
    
    
    (1,590
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,590
    )SAB 108 initial effect
    
    
    7,034
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,034SAB effects for the year
    
    
    3,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,035Recognition of deferred taxes
    
    
    184,914
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184,914Total shareholders equity under US. GAAP
    
    
    4,555,341
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,555,341
  F-97




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    SCG
    
    
    Elimination
    
    
    ConsolidatedStatements of Operations for the year ended December 31, 2007:Revenues
    
    
    2,339,795
    
    
    
    56,594
    
    
    
    409,537
    
    
    
    78,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,521
    
    
    
    42,294
    
    
    
    6,675
    
    
    
    
    
    
    
    
    
    
    
    (590,772
    )
    
    
    2,345,719Operating cost and expenses
    
    
    (2,052,063
    )
    
    
    (54,565
    )
    
    
    (415,628
    )
    
    
    (73,266
    )
    
    
    (17
    )
    
    
    (7
    )
    
    
    (10
    )
    
    
    (3,339
    )
    
    
    (55,897
    )
    
    
    (8,523
    )
    
    
    
    
    
    
    
    
    
    
    590,234
    
    
    
    (2,073,081
    )Integral (cost) income of financing
    
    
    (112,592
    )
    
    
    (46
    )
    
    
    1,026
    
    
    
    (253
    )
    
    
    391
    
    
    
    (4
    )
    
    
    (2
    )
    
    
    (22
    )
    
    
    (13,541
    )
    
    
    (1,520
    )
    
    
    (78
    )
    
    
    
    
    
    
    
    
    
    
    (126,641
    )Other income (expenses)
    
    
    (138,944
    )
    
    
    (890
    )
    
    
    2,553
    
    
    
    (1,360
    )
    
    
    11,889
    
    
    
    
    
    
    
    
    
    
    
    (52
    )
    
    
    17,701
    
    
    
    322
    
    
    
    (400
    )
    
    
    
    
    
    
    (620
    )
    
    
    (109,801
    )Net (loss) income
    
    
    36,196
    
    
    
    1,093
    
    
    
    (2,512
    )
    
    
    3,196
    
    
    
    12,263
    
    
    
    (11
    )
    
    
    (12
    )
    
    
    108
    
    
    
    (9,443
    )
    
    
    (3,046
    )
    
    
    (478
    )
    
    
    
    
    
    
    (1,158
    )
    
    
    36,196Net (loss) income for the year under Mexican GAAP
    
    
    36,196
    
    
    
    1,093
    
    
    
    (2,512
    )
    
    
    3,196
    
    
    
    12,263
    
    
    
    (11
    )
    
    
    (12
    )
    
    
    108
    
    
    
    (9,443
    )
    
    
    (3,046
    )
    
    
    (478
    )
    
    
    
    
    
    
    (1,158
    )
    
    
    36,196Preoperating expensesAmortization of preoperating expenses
    
    
    20,438
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,438Capitalization of interest
    
    
    (716
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (716
    )Amortization of capitalized Interest
    
    
    (11,896
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,896
    )Installation revenues
    
    
    (6,758
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,758
    )Installation costs
    
    
    (60,640
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,640
    )Debt restructuringCapitalized internal compensation cost
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143Severance indemnity liability
    
    
    (682
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (682
    )Reversal of SAB 108Net loss (income)Recognition at deferred taxes
    
    
    184,914
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184,914Net loss (income)For the year Under U.S. GAAP
    
    
    160,999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,999
  F-98




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    SCG
    
    
    Elimination
    
    
    ConsolidatedStatement of Cash Flows under U.S. GAAP for the Year Ended December 31, 2007:Net (loss) income the year under U.S. GAAP
    
    
    160,999
    
    
    
    1,093
    
    
    
    (2,512
    )
    
    
    3,196
    
    
    
    12,263
    
    
    
    (11
    )
    
    
    (12
    )
    
    
    108
    
    
    
    (9,443
    )
    
    
    (3,046
    )
    
    
    (478
    )
    
    
    
    
    
    
    (1,158
    )
    
    
    160,999Depreciation and amortization
    
    
    314,601
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,668
    
    
    
    328,269Other adjustments to reconcile net income to cash provided by operating activities
    
    
    (93,909
    )
    
    
    414
    
    
    
    (5,200
    )
    
    
    
    
    
    
    (11,958
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,499
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,291
    
    
    
    (103,861
    )Net change in working capital
    
    
    (246,075
    )
    
    
    (1,046
    )
    
    
    12,734
    
    
    
    (2,793
    )
    
    
    (954
    )
    
    
    11
    
    
    
    280
    
    
    
    121
    
    
    
    4,273
    
    
    
    4,527
    
    
    
    478
    
    
    
    93
    
    
    
    7,383
    
    
    
    (220,968
    )Resources (used in) provided by Operating activities
    
    
    135,616
    
    
    
    461
    
    
    
    5,022
    
    
    
    403
    
    
    
    (649
    )
    
    
    
    
    
    
    268
    
    
    
    229
    
    
    
    (9,669
    )
    
    
    1,481
    
    
    
    
    
    
    
    93
    
    
    
    31,184
    
    
    
    164,439Resources used in financing activities
    
    
    2,913,462
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (927
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,939
    
    
    
    2,916,477Resources (used in) provided by investing activities
    
    
    (1,215,275
    )
    
    
    
    
    
    
    (3,303
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (268
    )
    
    
    
    
    
    
    7,180
    
    
    
    1,370
    
    
    
    
    
    
    
    (67
    )
    
    
    (34,718
    )
    
    
    (1,245,081
    )Effect of inflation on cash and cash equivalents
    
    
    (35,186
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (405
    )
    
    
    (35,591
    )Cash and cash equivalents:Net increase (decrease) in cash and cash equivalents
    
    
    1,798,617
    
    
    
    464
    
    
    
    1,719
    
    
    
    403
    
    
    
    (649
    )
    
    
    
    
    
    
    
    
    
    
    229
    
    
    
    (3,416
    )
    
    
    2,851
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    1,800,244Beginning balances
    
    
    727,427
    
    
    
    934
    
    
    
    1,123
    
    
    
    32
    
    
    
    3,448
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    4,901
    
    
    
    1,416
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    739,291Ending balances
    
    
    2,526,044
    
    
    
    1,398
    
    
    
    2,842
    
    
    
    435
    
    
    
    2,799
    
    
    
    
    
    
    
    
    
    
    
    239
    
    
    
    1,485
    
    
    
    4,267
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    2,539,535
  F-99




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TET
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedBalance sheet as of December 31, 2006:Cash and cash equivalents and Current restricted cash
    
    
    750,889
    
    
    
    934
    
    
    
    1,123
    
    
    
    32
    
    
    
    3,448
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    4,901
    
    
    
    1,416
    
    
    
    
    
    
    
    
    
    
    
    762,753Accounts receivable  net
    
    
    439,423
    
    
    
    30,098
    
    
    
    220,461
    
    
    
    45,443
    
    
    
    167,741
    
    
    
    114
    
    
    
    52
    
    
    
    673
    
    
    
    57,386
    
    
    
    12,833
    
    
    
    2,159
    
    
    
    (491,126
    )
    
    
    485,257Inventory  net
    
    
    35,790
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,790Prepaid expenses
    
    
    64,412
    
    
    
    264
    
    
    
    988
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    65,740Investment in subsidiaries
    
    
    306,567
    
    
    
    
    
    
    
    1,666
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (308,233
    )
    
    
    Frequency rights  net
    
    
    88,374
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,374Telephone network system and Equipment net
    
    
    3,060,002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209,590
    
    
    
    10,861
    
    
    
    20,984
    
    
    
    
    
    
    
    3,301,437Preoperating expenses  net
    
    
    98,340
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,340Intangible assets  net
    
    
    190,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,249Obligations
    
    
    
    
    
    
    1,600
    
    
    
    13,468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,068Deposits
    
    
    369
    
    
    
    391
    
    
    
    7
    
    
    
    
    
    
    
    4,449
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    742
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    5,973Deferred tax
    
    
    
    
    
    
    
    
    
    
    2,393
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,393Other assets
    
    
    14,548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    14,530Total assets
    
    
    5,048,963
    
    
    
    33,287
    
    
    
    240,106
    
    
    
    45,485
    
    
    
    175,638
    
    
    
    114
    
    
    
    52
    
    
    
    683
    
    
    
    272,670
    
    
    
    25,122
    
    
    
    23,143
    
    
    
    (799,359
    )
    
    
    5,065,904Total liabilities
    
    
    2,772,049
    
    
    
    34,338
    
    
    
    237,491
    
    
    
    43,890
    
    
    
    11,979
    
    
    
    
    
    
    
    
    
    
    
    611
    
    
    
    182,194
    
    
    
    12,170
    
    
    
    
    
    
    
    (505,732
    )
    
    
    2,788,990Shareholders Equity:Capital Stock and Additional Paid- In Capital
    
    
    3,580,578
    
    
    
    93
    
    
    
    66
    
    
    
    55
    
    
    
    171,497
    
    
    
    127
    
    
    
    55
    
    
    
    54
    
    
    
    703,231
    
    
    
    13,045
    
    
    
    97,873
    
    
    
    (986,096
    )
    
    
    3,580,578Accumulated deficit
    
    
    (1,303,664
    )
    
    
    (1,144
    )
    
    
    2,549
    
    
    
    1,540
    
    
    
    (7,838
    )
    
    
    (13
    )
    
    
    (3
    )
    
    
    18
    
    
    
    (612,755
    )
    
    
    (93
    )
    
    
    (74,730
    )
    
    
    692,469
    
    
    
    (1,303,664
    )Total shareholders equity
    
    
    2,276,914
    
    
    
    (1,051
    )
    
    
    2,615
    
    
    
    1,595
    
    
    
    163,659
    
    
    
    114
    
    
    
    52
    
    
    
    72
    
    
    
    90,476
    
    
    
    12,952
    
    
    
    23,143
    
    
    
    (293,627
    )
    
    
    2,276,914Total liabilities and Shareholders  equity
    
    
    5,048,963
    
    
    
    33,287
    
    
    
    240,106
    
    
    
    45,485
    
    
    
    175,638
    
    
    
    114
    
    
    
    52
    
    
    
    683
    
    
    
    272,670
    
    
    
    25,122
    
    
    
    23,143
    
    
    
    (799,359
    )
    
    
    5,065,904Total shareholders equity under Mexican GAAP
    
    
    2,276,914
    
    
    
    (1,051
    )
    
    
    2,615
    
    
    
    1,595
    
    
    
    163,659
    
    
    
    114
    
    
    
    52
    
    
    
    72
    
    
    
    90,476
    
    
    
    12,952
    
    
    
    23,143
    
    
    
    (293,627
    )
    
    
    2,276,914
  F-100




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TET
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedPreoperating expenses
    
    
    (391,951
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391,951
    )Amortization of preoperating expenses
    
    
    293,611
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    293,611Capitalization of interest
    
    
    121,894
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,894Amortization of capitalized interest
    
    
    (40,451
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,451
    )Installation revenues
    
    
    (67,225
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,225
    )Installation costs
    
    
    (523,056
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (523,056
    )Capitalized internal compensation cost
    
    
    (2,285
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,285
    )Severance Indemnity liability
    
    
    (908
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (908
    )SAB 108 initial effect
    
    
    7,034
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,034SAB effects for the year
    
    
    3,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,035Total shareholders equity under US. GAAP
    
    
    1,676,612
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,676,612
  F-101




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   ON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TET
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedStatements of Operations for the year ended December 31, 2006:Revenues
    
    
    1,716,316
    
    
    
    45,170
    
    
    
    338,295
    
    
    
    63,114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    907
    
    
    
    88,308
    
    
    
    14,171
    
    
    
    
    
    
    
    (524,589
    )
    
    
    1,741,692Operating cost and expenses
    
    
    (1,585,904
    )
    
    
    (43,871
    )
    
    
    (334,952
    )
    
    
    (61,413
    )
    
    
    4,455
    
    
    
    
    
    
    
    
    
    
    
    (886
    )
    
    
    (71,801
    )
    
    
    (15,167
    )
    
    
    
    
    
    
    524,589
    
    
    
    (1,584,950
    )Integral (cost) income of financing
    
    
    (122,543
    )
    
    
    10
    
    
    
    (100
    )
    
    
    (114
    )
    
    
    4,360
    
    
    
    (4
    )
    
    
    (2
    )
    
    
    (3
    )
    
    
    10,488
    
    
    
    798
    
    
    
    (72
    )
    
    
    
    
    
    
    (107,182
    )Other income (expenses)
    
    
    (37,136
    )
    
    
    (308
    )
    
    
    1,811
    
    
    
    (51
    )
    
    
    (13,742
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    29
    
    
    
    
    
    
    
    (29,431
    )
    
    
    (78,827
    )Net (loss) income
    
    
    (29,267
    )
    
    
    1,001
    
    
    
    5,054
    
    
    
    1,536
    
    
    
    (4,927
    )
    
    
    (4
    )
    
    
    (2
    )
    
    
    18
    
    
    
    26,996
    
    
    
    (169
    )
    
    
    (72
    )
    
    
    (29,431
    )
    
    
    (29,267
    )Net (loss) income for the year under Mexican GAAP
    
    
    (29,267
    )
    
    
    1,001
    
    
    
    5,054
    
    
    
    1,536
    
    
    
    (4,927
    )
    
    
    (4
    )
    
    
    (2
    )
    
    
    18
    
    
    
    26,996
    
    
    
    (169
    )
    
    
    (72
    )
    
    
    (29,431
    )
    
    
    (29,267
    )Preoperating expensesAmortization of preoperating expenses
    
    
    32,030
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,030Capitalization of interest
    
    
    49,945
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,945Amortization of capitalized Interest
    
    
    (27,136
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,136
    )Installation revenues
    
    
    858
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    858Installation costs
    
    
    (213,247
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (213,247
    )Debt restructuring
    
    
    197,006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    197,006Capitalized internal compensation cost
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143Severance Indemnity liability
    
    
    (908
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (908
    )Reversal of SAB 108
    
    
    3,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,035Net loss (income) for the year Under U.S. GAAP
    
    
    12,459
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,459
  F-102




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##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
   NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TET
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedStatement of Cash Flows under U.S. GAAP for the Year Ended December 31, 2006:Net (loss) income the year under U.S. GAAP
    
    
    12,459
    
    
    
    1,001
    
    
    
    5,054
    
    
    
    1,536
    
    
    
    (4,927
    )
    
    
    (4
    )
    
    
    (2
    )
    
    
    18
    
    
    
    26,996
    
    
    
    (169
    )
    
    
    (72
    )
    
    
    (29,431
    )
    
    
    12,459Depreciation and amortization
    
    
    159,284
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,437
    
    
    
    167,721Other adjustments to reconcile net income to cash provided by operating activities
    
    
    (47,558
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,657
    
    
    
    99Net change in working capital
    
    
    (87,032
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (214,152
    )
    
    
    (301,184
    )Resources (used in) provided by Operating activities
    
    
    37,153
    
    
    
    1,001
    
    
    
    5,054
    
    
    
    1,536
    
    
    
    (4,927
    )
    
    
    (4
    )
    
    
    (2
    )
    
    
    18
    
    
    
    26,996
    
    
    
    (169
    )
    
    
    (72
    )
    
    
    (187,489
    )
    
    
    (120,905
    )Resources used in financing activities
    
    
    1,326,567
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205,177
    
    
    
    1,531,744Resources (used in) provided by investing activities
    
    
    (861,744
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,144
    )
    
    
    (904,888
    )Effect of inflation on cash and cash equivalents
    
    
    (7,560
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (318
    )
    
    
    (7,878
    )Cash and cash equivalents:Net increase (decrease) in cash and cash equivalents
    
    
    494,416
    
    
    
    1,001
    
    
    
    5,054
    
    
    
    1,536
    
    
    
    (4,927
    )
    
    
    (4
    )
    
    
    (2
    )
    
    
    18
    
    
    
    26,996
    
    
    
    (169
    )
    
    
    (72
    )
    
    
    (25,774
    )
    
    
    498,073Beginning balances
    
    
    233,011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,207
    
    
    
    241,218Ending balances
    
    
    727,427
    
    
    
    1,001
    
    
    
    5,054
    
    
    
    1,536
    
    
    
    (4,927
    )
    
    
    (4
    )
    
    
    (2
    )
    
    
    18
    
    
    
    26,996
    
    
    
    (169
    )
    
    
    (72
    )
    
    
    (17,567
    )
    
    
    739,291
  F-103




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##### Table of Contents



Balance at
    
    
    Charged toBeginning of
    
    
    Cost and
    
    
    
    
    
    
    Balance at EndPeriod
    
    
    Expenses
    
    
    Deductions
    
    
    of PeriodAllowance for doubtful accounts
    
    
    2008
    
    
    $
    107.7
    
    
    $
    106.3
    
    
    $
    (52.0
    )
    
    $
    161.92007
    
    
    $
    92.7
    
    
    $
    63.4
    
    
    $
    (48.4
    )
    
    $
    107.72006
    
    
    $
    74.3
    
    
    $
    59.6
    
    
    $
    (41.2
    )
    
    $
    92.7Allowance for obsolete and slow- moving supply inventories
    
    
    2008
    
    
    $
    0.3
    
    
    
    (0.3
    )
    
    $
    
    
    
    $
    2007
    
    
    $
    0.3
    
    
    
    
    
    
    
    (0.3
    )
    
    $
    0.12006
    
    
    $
    0.3
    
    
    
    
    
    
    
    
    
    
    $
    0.3Allowance for obsolete and slow- moving network inventories
    
    
    2008
    
    
    $
    9.3
    
    
    
    21.7
    
    
    $
    (17.3
    )
    
    $
    13.72007
    
    
    $
    10.0
    
    
    
    
    
    
    $
    (0.7
    )
    
    $
    9.32006
    
    
    $
    10.2
    
    
    
    
    
    
    $
    (0.1
    )
    
    $
    10.0
  F-104




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##### Table of Contents



ITEM 19. EXHIBITS
 1.1
    *
    
    Amended and Restated Bylaws (estatutos)of Maxcom Telecomunicaciones, S.A. de C.V. (English translation).2.1
    
    
    Senior Note Indenture, dated December 20, 2006, among Maxcom Telecomunicaciones, S.A. de C.V., Maxcom
Servicios Administrativos, S.A. de C.V., Outsourcing Operadora de Personal, S.A. de C.V., Técnicos
Especializados en Telecomunicaciones, S.A. de C.V., Corporativo en Telecomunicaciones, S.A. de C.V.,
Maxcom SF, S.A. de C.V., Maxcom TV, S.A. de C.V., Maxcom USA, Inc. and Deutsche Bank Trust Company
Americas, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 26, 2007, is
incorporated herein by reference.2.2
    
    
    First Supplemental Indenture, dated September 5, 2007, among Maxcom, the guarantors a party thereto and
Deutsche Bank Trust Company Americas, as trustee, filed as an exhibit to our registration statement on
Form F-1/A (No. 333-145800), filed with the SEC on November 1, 2007, is incorporated herein by
reference.2.3
    *
    
    Second Supplemental Indenture, dated January 25, 2008, among Sierra Comunicaciones Globales, S.A. de
C.V., the existing guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee.2.4
    
    
    Form of Deposit Agreement among Maxcom, the Depositary named therein and all holders of American
Depositary Shares issued thereunder, filed as an exhibit to our registration statement on Form F-1/A
(No. 333-144771), filed with the SEC on October 2, 2007, is incorporated herein by reference.2.5
    
    
    Form of Registration Rights Agreement by and among Maxcom, Nexus-Maxcom Holdings I, LLC, BASCFC-Maxcom
Holding I, LLC, BAS Capital Funding Corporation, BankAmerica Investment Corporation and the other
stockholders party thereto, filed as an exhibit to our registration statement on Form F-1/A (No.
333-144771), filed with the SEC on October 2, 2007, is incorporated herein by reference.2.6
    
    
    Third Amended and Restated Securityholders Agreement, dated July 20, 2006, among Maxcom
Telecomunicaciones, S.A. de C.V. and certain of its shareholders, filed as an exhibit to our annual
report on Form 20-F, filed with the SEC on June 26, 2007, is incorporated herein by reference.3.1
    
    
    CPO Trust Agreement effective April 25, 2002 among Maxcom., its shareholders and Banco Nacional de
México, S.A., Institución de Banca Múltiple, Grupo Financiero Banamex Accival, as trustee, filed as an
exhibit to our annual report on Form 20-F, filed with the SEC on July 1, 2002, is incorporated herein by
reference.3.2
    
    
    CPO Trust Agreement, dated October 17, 2007, among Maxcom Telecomunicaciones, S.A. de C.V., its
shareholders and Nacional Financiera, S.N.C. (English translation), filed as an exhibit to our
registration statement on Form F-1/A (No. 333-144771), filed with the SEC on October 17, 2007, is
incorporated herein by reference.3.3
    
    
    CPO Deed, dated October 17, 2007, among Nacional Financiera, S.N.C., Institución de Banca de Desarrollo,
Monex Casa de Bolsa, S.A. de C.V., Grupo Financiero Monex and Comisíon Nacional Bancaria y de Valores
(English translation), filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771),
filed with the SEC on October 17, 2007, is incorporated herein by reference.4.1
    
    
    Agreement for the use of infrastructure and installation of fiber optic cable on the highways between
Puebla and México, dated August 18, 1998, between Amaritel, S.A. de C.V. (the predecessor of Maxcom
Telecomunicaciones, S.A. de C.V.) and Iusatel, S.A. de C.V., filed as an exhibit to our registration
statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by
reference.4.2
    
    
    Interconnection Agreement for long-distance services, dated January 22, 1999, between Amaritel and
Teléfonos de México (Telmex) valid for an initial period of two years between February 1, 1999 and
January 1, 2001, and in effect thereafter in accordance with article 42 of the Mexican
Telecommunications law, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910),
filed with the SEC on May 5, 2000, is incorporated herein by reference.4.3
    
    
    Local Interconnection Service Agreement, dated November 24, 1998, between Amaritel, S.A. de C.V. and
Teléfonos de México, S.A. de C.V., filed as an exhibit to our registration statement on Form F-4 (No.
333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.
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##### Table of Contents



4.4
    
    
    Amendment to Local Interconnection Service Agreement, dated February 25, 1999, between Amaritel, S.A. de
C.V. and Teléfonos de México, S.A. de C.V., originally entered into on November 24, 1998, filed as an
exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is
incorporated herein by reference.4.5
    
    
    Metropolitan Network Capacity Sale Agreement, dated April 28, 2000, between Maxcom Telecomunicaciones,
S.A. de C.V. and Metro Net, S.A. de C.V., as amended on December 21, 2000, filed as an exhibit to our
annual report on Form 20-F, filed with the SEC on June 29, 2001, is incorporated herein by reference.4.6
    
    
    Telecommunications Service Agreement, dated November 15, 1999, between Maxcom and Teléfonos de México,
S.A. de C.V. , filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with
the SEC on May 5, 2000, is incorporated herein by reference.4.7
    
    
    Telecommunications Service Agreement, dated March 9, 1999, between Maxcom and Bestel S.A. de C.V.,
pursuant to which Bestel will provide long-distance and private call services to Maxcom, filed as an
exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is
incorporated herein by reference.4.8
    
    
    Concession for the installation and operation of telecommunications services granted to Amaritel, S.A.
de C.V. by the Secretary of Telecommunications and Transport on December 20, 1996, filed as an exhibit
to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is
incorporated herein by reference.4.9
    
    
    Amendment to Concession for the installation and operation of telecommunications services granted to
Amaritel by the Secretary of Telecommunications and Transport on December 20, 1996, dated September 8,
1999, extending the coverage of such concession to include various additional municipalities of the
State of Mexico, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed
with the SEC on May 5, 2000, is incorporated herein by reference.4.10
    
    
    Amendment to Concession for the installation and operation of telecommunications services granted to
Amaritel by the Secretary of Telecommunications and Transport on December 20, 1996, dated December 7,
1999, authorizing Maxcom to employ whatever technologies it deems appropriate in providing
telecommunications services to various municipalities, filed as an exhibit to our registration statement
on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.4.11
    
    
    Amendment to Annex A and B of Concession for the installation and operation of telecommunications
services granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on
December 20, 1996, dated September 27, 2001, extending the coverage of such concession to include all of
Mexico, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the
SEC on May 5, 2000, is incorporated herein by reference.4.12
    
    
    Concession for a public telecommunications network in telecommunications regions 3, 5 and 8 granted to
Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 29, 1998, filed as
an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000,
is incorporated herein by reference.4.13
    
    
    Concession for the operation of point-to-multipoint microwave telecommunications services in Region 5
granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 23,
1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC
on May 5, 2000, is incorporated herein by reference.4.14
    
    
    Concession for the operation of point-to-multipoint microwave telecommunications services in Region 3
granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 23,
1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC
on May 5, 2000, is incorporated herein by reference.4.15
    
    
    Concession for the operation of point-to multipoint microwave telecommunications services in Region 8
granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 29,
1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC
on May 5, 2000, is incorporated herein by reference.4.16
    
    
    Concessions for the nationwide operation of point-to-point microwave telecommunications services using
five frequency bands in the 56 MHz bandwidth, each granted to Amaritel, S.A. de C.V. by the Secretary of
Telecommunications and Transport on June 4, 1998, filed as an exhibit to our registration statement on
Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.
  136




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##### Table of Contents



4.17
    
    
    Concessions for the nationwide operation of point-to-point microwave telecommunications services using
two frequency bands in the 100 MHz bandwidth, each granted to Amaritel, S.A. de C.V. by the Secretary of
Telecommunications and Transport on June 4, 1998, filed as an exhibit to our registration statement on
Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.4.18
    
    
    Amendment to Concession for the operation of point-to-multipoint telecommunications services in Regions
3, 5, 8 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April
1, 1998, dated October 12, 1999, regarding the start date for the initiation of services, filed as an
exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is
incorporated herein by reference.4.19
    
    
    Amendment to Concession for the installation and operation of telecommunications services granted to
Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on December 20, 1996, dated
September 24, 1999 eliminating financial restrictions, filed as an exhibit to our registration statement
on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.4.20
    
    
    Warrant Agreement, dated as of March 17, 2000, between Maxcom Telecomunicaciones, S.A. de C.V. and The
Bank of New York, as warrant agent, filed as an exhibit to our annual report on Form 20-F, filed with
the SEC on June 29, 2001, is incorporated herein by reference.4.21
    
    
    Dark Fiber Optic Purchase Agreement, dated as of August 13, 2002, between Maxcom Telecomunicaciones,
S.A. de C.V. and Bestel S.A. de C.V., filed as an exhibit to our annual report on Form 20-F, filed with
the SEC on June 30, 2003, is incorporated herein by reference.4.22
    
    
    Transactional Lease Termination Agreement, dated as of May 20, 2003, among Maxcom Telecomunicaciones,
S.A. de C.V. and Jacobo Zaga Romano, Jacobo Zaga Buzali, et.al., filed as an exhibit to our annual
report on Form 20-F, filed with the SEC on June 30, 2003, is incorporated herein by reference.4.23
    
    
    Capacity Sale Agreement, dated as of October 15, 2003, between Maxcom Telecomunicaciones, S.A. de C.V.
and Axtel, S.A. de C.V., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on
June 24, 2004, is incorporated herein by reference.4.24
    
    
    Credit Agreement, dated April 28, 2004, by and among Banco Santander Mexicano, S.A., Institución de
Banca Mútiple Grupo Financiero Santander Serfin, as lenders, and Maxcom, as borrower, filed as an
exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2005, is incorporated herein
by reference.4.25
    
    
    Credit Agreement, dated April 13, 2005, by and among Ixe Banco, S.A., Institución de Banca Mútiple, Ixe
Grupo Financiero., as lenders, and Maxcom, as borrower, filed as an exhibit to our annual report on Form
20-F, filed with the SEC on June 30, 2005, is incorporated herein by reference.4.26
    
    
    Amendment dated August 5, 2004 to Exhibit B of the Master Agreement to Supply Local Interconnection
Services, dated February 25, 1999, between Maxcom and Telefonos de México, S.A. de C.V., filed as an
exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2005, is incorporated herein
by reference.4.27
    
    
    Credit Agreement, dated April 13, 2005, by and among Ixe Banco, S.A., Institución de Banca Múltiple, Ixe
Grupo Financiero, as lenders, and Maxcom, as borrower, filed as an exhibit to our annual report on Form
20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference.4.28
    
    
    Credit Agreement, dated October 25, 2005, by and among Ixe Banco, S.A., Institución de Banca Múltiple,
Ixe Grupo Financiero, as lenders, Maxcom, as borrower and Maxcom SF, S.A. de C.V. as joint and several
obligor, and amendment dated December 13, 2005, filed as an exhibit to our annual report on Form 20-F,
filed with the SEC on June 30, 2006, is incorporated herein by reference.4.29
    
    
    Credit Agreement, dated October 21, 2005, by and among Banco Mercantil del Norte, S.A., Institución de
Banca Múltiple, Grupo Financiero Banorte, as lenders and Maxcom, as borrower, filed as an exhibit to our
annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference.4.30
    
    
    Irrevocable Trust Agreement, dated November 21, 2005, by and among Maxcom, as settlor, Banco Mercantil
del Norte, S.A., Institución de Banca Múltiple, Grupo Financiero Banorte and Ixe Banco, S.A.,
Institución de Banca Múltiple, Ixe Grupo Financiero, as trust beneficiaries and HSBC México, S.A.,
Institución de Banca Múltiple, Grupo Financiero HSBC, Trust Division, as trustees, filed as an exhibit
to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by
reference.4.31
    
    
    Minutes of Maxcom Shareholders Meeting dated August 31, 2005 approving the spin-off, filed as an exhibit
to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by
reference.
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4.32
    
    
    Stock Purchase Agreement, dated November 22, 2005, by and among Maxcom and Maxcom SF, S.A. de C.V., as
sellers and Tiendas Comercial Mexicana, S.A. de C.V. and Controladora Comercial Mexicana, S.A. de C.V.,
as buyers, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006,
is incorporated herein by reference.4.33
    
    
    Supply and Installation Agreement of Video Through DSL (IPTV) System dated December 15, 2006 by and
among Maxcom Telecomunicaciones, S.A. de C.V., Alcatel Bell N.V. and Alcatel México, S.A. de C.V., filed
as an exhibit to our annual report on Form 20-F, filed with the SEC on June 26, 2007, is incorporated
herein by reference.4.34
    
    
    The First Executive Stock Option Plan, which includes a Trust Agreement, dated May 31, 1999, among
Maxcom Telecomunicaciones, S.A. de C.V. and Banco Nacional de México (English translation) , filed as an
exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on September
12, 2007, is incorporated herein by reference.4.35
    
    
    Second Executive Stock Option Plan, dated July 17, 2006 (English translation), filed as an exhibit to
our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on September 12, 2007, is
incorporated herein by reference.6.1
    *
    
    Computation of earnings per share.7.1
    *
    
    Computation of ratio earnings to fixed charges8.1
    *
    
    Subsidiaries of the Registrant.11.1
    
    
    Maxcoms Code of Ethics adopted March 2006, filed as an exhibit to our annual report on Form 20-F, filed
with the SEC on June 30, 2006, is incorporated herein by reference.12.1
    *
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).12.2
    *
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).13.1
    *
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.13.2
    *
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Filed herewith.  138




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GLOSSARY OF TELECOMMUNICATIONS TERMS
 ADSL
    
    (Asymmetrical Digital Subscriber Line) ADSL is a physical-layer protocol that supports up
to 8 Mbps bandwidth downstream and up to 1 Mbps upstream. The asymmetrical aspect of ADSL
technology makes it ideal for Internet browsing, video on demand, and remote LAN access.
Users of these applications typically download more information than they send. ADSL also
allows simultaneous voice communication by transmitting data signals outside of the voice
frequency range.Band
    
    A range of frequencies between two defined limits.Bandwidth
    
    The relative range of analog frequencies or digital signals that can be passed through a
transmission medium, such as glass fibers, without distortion. The greater the bandwidth,
the greater the information carrying capacity. Bandwidth is measured in Hertz (analog) or
Bits Per Second (digital).Capacity
    
    Refers to the ability to transmit voice or data over telecommunications networksCarrier
    
    A licensed provider of telecommunications transmission services by fiber, wire or radio.Centrex service
    
    A business telephone service developed originally by Lucent Technologies which offers
private branch exchange type features directly from the local telephone company central
office, such as voicemail, call pick-up group, abbreviated dialing and multi-line hunting.Churn
    
    Refers to customer line attrition and is measured as the percentage of disconnects from
service relative to the total subscriber base over a given period of time.COFETEL
    
    Comisión Federal de Telecomunicaciones,the Mexican Federal Telecommunications Commission.Digital
    
    Describes a method of storing, processing and transmitting information through the use of
distinct electronic or optical pulses that represent the binary digits 0 and 1. Digital
transmission/switching technologies employ a sequence of discrete, distinct pulses to
represent information, as opposed to the continuously variable analog signal.DSLAM
    
    Digital Subscriber Line Access Multiplexer. A technology to concentrate traffic in ADSL
implementations through time division multiplexing at the central office.E1
    
    A digital telephony format that carries data at the rate of 2.048 Mbps (DS-1 level). E-1 is
the European and Latin American version of North American T-1, though T-1 is 1.544 Mbps.Fiber optic technology
    
    Fiber optic systems use laser-generated light to transmit voice, data and video in digital
format through ultra-thin strands of glass. Fiber optic systems are characterized by large
circuit capacity, good sound quality, resistance to external signal interference and direct
interface to digital switching equipment and digital microwave systems. A pair of fiber
optic strands using advanced transmission technologies is capable of carrying multiple 2.5
or 10 Gbps communication streams. Because optical signals disperse over distance, they must
be regenerated/amplified at sites located along the fiber optic cable. Fiber optic systems
using earlier generation fiber require frequent intervals between regeneration/amplifier
sites. Greater distances between regeneration/amplifier sites afforded by the use of
advanced fiber generally translate into substantially lower installation and operating
costs and fewer potential points of failure.Fixed wireless local loop
    
    A wireless local telephony service using the 3.4-3.7 GHz frequency band.FTTH
    
    Fiber-to-the-home, reference to an all fiber-optic public telephone network design, where
broadband services are delivered to the customer premises/network interface by fiber optic.Gbps
    
    Gigabits per second. A measurement of speed for digital signal transmission expressed in
billions of bits per second (Gbps).Gulf region
    
    115 cities and towns in eleven states in eastern Mexico, which includes the cities of
Puebla, Tampico, Veracruz, Reynosa, Cancún, Chetumal, Mérida, Ciudad del Carmen, Campeche,
Coatzacoalcos and Tuxtla Gutiérrez, among others.Hertz
    
    The unit measuring the frequency with which an alternating electromagnetic signal cycles
through the zero-value state between lowest and highest states. One hertz(abbreviated Hz)
equals one cycle per second. KHz (kilohertz) stands for thousands of hertz; MHz (megahertz)
stands for millions of hertz and GHz (gigahertz) stands for billions of hertz.
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ISDN
    
    Integrated Services Digital Network ISDN is an international standard that provides
end-to-end digital connectivity to support a wide range of voice, data and video services.Kbps
    
    Kilobits per second, a measurement of speed for digital signal transmission expressed in
thousands of bits per second.Lambdas
    
    Lambdas are used as the symbol for wavelength in lightwave systems. Fiber optic systems may
use multiple wavelengths of light, with each range of wavelengths appearing in a window,
roughly corresponding to a color in the visible light spectrum.LAN
    
    Local area network, a private data communications network linking a variety of data
devices, such as computer terminals, personal computer terminals, personal computers and
microcomputers, all housed in a defined building, plant or geographic area.Microwave technology
    
    Although limited in capacity compared with fiber optic systems, digital microwave systems
offer an effective and reliable means of transmitting lower volume and narrower bandwidths
of voice, data and video signals over short and intermediate distances. Microwaves are very
high frequency radio waves that can be reflected, focused and beamed in a line-of-sight
transmission path. As a result of their electro-physical properties, microwaves can be used
to transmit signals through the air, with relatively little power. To create a
communications circuit, microwave signals are transmitted through a focusing antenna,
received by an antenna at the next station in the network, then amplified and
retransmitted. Because microwaves disperse as they travel through the air, this
transmission process must be repeated at repeater stations, which consist of radio
equipment, antennae and back-up power sources, located on average every 30 kilometers along
the transmission route.Mbps
    
    MegaBits per second. A measurement of speed for digital signal transmission expressed in
millions of bits per second (Mbps).Multi-line hunting
    
    A value-added service that allows for multiple calls to be received with a single telephone
number.PCS
    
    Personal Communications Services. PCS has come to represent two things: first, a digital
wireless communications service operating over the 1.9 GHz band; and second, more
generically, a wireless communications service utilizing a digital network that offers
typical features such as voice, video and data applications, short messaging, voicemail,
caller identification, call conferencing and call forwarding. Generic PCS suppliers promote
this service on the ability of its features to be customized, or bundled, to the needs of
the individual customers.Point- to-multipoint 
microwave transmission
    
    A transmission using microwave technology by which a single signal goes from one
origination point to many destination points.Point-to-point microwave 
transmission
    
    A transmission using microwave technology by which a signal goes from one point to another,
usually connected by a dedicated transmission line.POTS
    
    Plain Old Telephone Service. The basic service supplying standard single line telephones,
telephone lines and access to the public switched network.Revenue Generated Unit
(RGU)
    
    Represents an individual service subscriber who generates recurrent revenue for the Company.SCT
    
    Secretaría de Comunicaciones y Transportes, the Mexican Ministry of Communications and
Transportation.Switch
    
    A device that opens or closes circuits or selects the paths or circuits to be used for
transmission of information. Switching is the process of interconnecting circuits to form a
transmission path between users.Teledensity
    
    Teledensity is a measure of telephony service in a population. It is calculated by dividing
the total subscriber base (number of lines in service) by the inhabitants and multiplying
by 100. It is generally used as a comparative measure of network development. All
teledensity figures are reported in subscribers per 100 inhabitants.Triple play services
    
    Triple play services consist combination of voice, data, and video services offered as a
bundled service for a price that is less than the price of the individual services acquired
individually.
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VoIP
    
    Voice over Internet Protocol services consist in the technology that provides telephone
companies with the ability to carry normal telephony-style voice over an Internet
Protocol-based Internet with POTS-like functionality, reliability, and voice quality.VPN
    
    Virtual Private Network. A network design offering the appearance and functionality of a
dedicated private network.Web-hosting
    
    A service performed by Internet service providers (also known as ISPs) and Internet access
providers (also known as IAPs) consisting in the hosting of outside companies web pages to
be displayed on the Internet.xDSL
    
    XDSL is a physical-layer protocol that supports bandwidth downstream and upstream.
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SIGNATURES
  MAXCOM TELECOMUNICACIONES, S.A.B. DE C.V.By:
    /s/ Jose Antonio SolbesJosé Antonio SolbesChief Financial Officer   142




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EXHIBIT INDEX
 6.1
    
    
    Computation of earnings per share.7.1
    
    
    Computation of ratio earnings to fixed charges8.1
    
    
    Subsidiaries of the Registrant.12.1
    
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).12.2
    
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).13.1
    
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.13.2
    
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
  143