##### 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
 For the fiscal year ended December 31, 2009
 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
 Commission file number: 001-33750
 Maxcom Telecomunicaciones, S.A.B. de C.V.
 (Exact name of Registrant as specified in its charter)
 
 Maxcom Telecommunications, Limited Liability Public Stock Corporation
(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)
 
 Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes o No þ
  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
 Item 17 o Item 18 þ
 Yes o No þ




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##### Table of Contents



TABLE OF CONTENTS
 PART I
    
    
    5ITEM 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
    
    
    7C. Reasons for the offer and use of proceeds
    
    
    7D. Risk factors
    
    
    8ITEM 4. INFORMATION ON THE COMPANY
    
    
    19A. History and development of the Company
    
    
    19B. Business overview
    
    
    20C. Organizational structure
    
    
    47D. Property, plant and equipment
    
    
    48ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    49ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    49A. Operating Results
    
    
    51B. Liquidity and capital resources
    
    
    65C. Research and development, patents and licenses, etc.
    
    
    81D. Trend information
    
    
    81E. Off  balance sheet arrangements
    
    
    81F. Tabular disclosure of contractual obligations
    
    
    82G. Safe Harbor
    
    
    82ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    82A. Directors and senior management
    
    
    82B. Compensation
    
    
    86C. Board practices
    
    
    88D. Employees
    
    
    90E. Share ownership
    
    
    91ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    91A. Major Shareholders
    
    
    91B. Related party transactions
    
    
    93C. Interests of experts and counsel
    
    
    93ITEM 8. FINANCIAL INFORMATION
    
    
    93A. Consolidated statements and other financial information
    
    
    93B. Significant changes
    
    
    93ITEM 9. THE OFFER AND LISTING
    
    
    95
  2




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##### Table of Contents



ITEM 10. ADDITIONAL INFORMATION
    
    
    96A. Share capital
    
    
    96B. Memorandum and articles of association
    
    
    97C. Material contracts
    
    
    115D. Exchange Controls
    
    
    116E. Taxation
    
    
    116F. Dividends and paying agents
    
    
    126G. Statement by experts
    
    
    126H. Documents on display
    
    
    127I. Subsidiary information
    
    
    127ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    127ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    128PART II
    
    
    128ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    128ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    128ITEM 15 . CONTROLS AND PROCEDURES
    
    
    128ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    130ITEM 16B. CODE OF ETHICS
    
    
    130ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    131ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    131ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    131ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    132ITEM 16G. CORPORATE GOVERNANCE
    
    
    132PART III
    
    
    135ITEM 17. FINANCIAL STATEMENTS
    
    
    135ITEM 18. FINANCIAL STATEMENTS
    
    
    135ITEM 19. EXHIBITS
    
    
    136GLOSSARY OF TELECOMMUNICATIONS TERMS
    
    
    G-1Exhibit 1.1Exhibit 6.1Exhibit 7.1Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2
   3




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##### Table of Contents



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;
 
    
    the risks associated with our ability to implement our growth strategy;
  4




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##### Table of Contents




    
    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
  Normas de Información
Financiera Instituto
Mexicano de Contadores Públicos
  5




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##### Table of Contents



As of and for the Year Ended December 31,2009(1)
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Thousands of constant December 31, 2007 and nominal December 31, 2008 and 2009 pesos and thousands ofU.S. dollars(1), except per share data)Statement of Operations Data:MFRSNet revenues
    
    U.S.$
    196,215
    
    
    Ps.
    2,562,570
    
    
    Ps.
    2,683,229
    
    
    Ps.
    2,345,719
    
    
    Ps.
    1,741,692
    
    
    Ps.
    1,242,104Operating costs and expenses:Network operating costs
    
    
    (86,627
    )
    
    
    (1,131,353
    )
    
    
    (1,120,167
    )
    
    
    (976,979
    )
    
    
    (676,977
    )
    
    
    (414,332
    )Selling, general and administrative expenses
    
    
    (61,178
    )
    
    
    (798,986
    )
    
    
    (819,642
    )
    
    
    (722,618
    )
    
    
    (607,505
    )
    
    
    (505,566
    )Depreciation and amortization
    
    
    (48,959
    )
    
    
    (639,398
    )
    
    
    (551,889
    )
    
    
    (370,227
    )
    
    
    (300,468
    )
    
    
    (304,066
    )Total operating costs and expenses
    
    
    (196,764
    )
    
    
    (2,569,737
    )
    
    
    (2,491,698
    )
    
    
    (2,069,824
    )
    
    
    (1,584,950
    )
    
    
    (1,223,964
    )Operating (loss) income
    
    
    (549
    )
    
    
    (7,167
    )
    
    
    191,531
    
    
    
    275,895
    
    
    
    156,742
    
    
    
    18,140Other expenses
    
    
    (3,871
    )
    
    
    (50,559
    )
    
    
    (12,616
    )
    
    
    (12,819
    )
    
    
    (18,777
    )
    
    
    (6,883
    )Restructuring charges
    
    
    (558
    )
    
    
    (7,282
    )
    
    
    (49,491
    )
    
    
    
    
    
    
    
    
    
    
    Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    (532,315
    )
    
    
    
    
    
    
    
    
    
    
    Employees statutory profit changes
    
    
    (252
    )
    
    
    (3,292
    )
    
    
    (1,173
    )
    
    
    (3,257
    )
    
    
    
    
    
    
    Other expense, net
    
    
    (4,681
    )
    
    
    (61,133
    )
    
    
    (595,595
    )
    
    
    (16,076
    )
    
    
    (18,777
    )
    
    
    (6,883
    )Comprehensive financial results:Interest expense and commissions, net
    
    
    (23,127
    )
    
    
    (302,035
    )
    
    
    (255,662
    )
    
    
    (232,912
    )
    
    
    (144,032
    )
    
    
    (109,351
    )Interest gain
    
    
    462
    
    
    
    6,031
    
    
    
    53,994
    
    
    
    55,793
    
    
    
    8,591
    
    
    
    4,494Exchange (gain) loss, net
    
    
    4,417
    
    
    
    57,687
    
    
    
    (149,048
    )
    
    
    4,826
    
    
    
    (6,568
    )
    
    
    41,902Effects of valuation of financial instruments
    
    
    (4,478
    )
    
    
    (58,478
    )
    
    
    83,323
    
    
    
    20,421
    
    
    
    13,324
    
    
    
    (20,338
    )Gain on monetary position
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,231
    
    
    
    21,503
    
    
    
    23,849Total comprehensive financial results
    
    
    (22,726
    )
    
    
    (296,795
    )
    
    
    (267,393
    )
    
    
    (126,641
    )
    
    
    (107,182
    )
    
    
    (59,444
    )Total income taxes
    
    
    4,712
    
    
    
    61,537
    
    
    
    233,694
    
    
    
    (96,982
    )
    
    
    (60,050
    )
    
    
    (28,725
    )Net (loss) income
    
    
    (23,243
    )
    
    
    (303,558
    )
    
    
    (437,763
    )
    
    
    36,196
    
    
    
    (29,267
    )
    
    
    (76,912
    )Earnings per share:Basic
    
    
    (0.03
    )
    
    
    (0.38
    )
    
    
    (0.55
    )
    
    
    0.06
    
    
    
    (0.07
    )
    
    
    (0.19
    )Diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.06
    
    
    
    (0.07
    )
    
    
    (0.19
    )U.S. GAAPOperating (loss) income
    
    
    (8,480
    )
    
    
    (110,740
    )
    
    
    44,139
    
    
    
    217,182
    
    
    
    (50,610
    )
    
    
    (5,891
    )Net (loss) income
    
    
    (28,900
    )
    
    
    (377,435
    )
    
    
    (240,058
    )
    
    
    160,999
    
    
    
    12,459
    
    
    
    185,616Earnings per share:Basic
    
    
    (0.04
    )
    
    
    (0.48
    )
    
    
    (0.30
    )
    
    
    0.29
    
    
    
    (2.13
    )
    
    
    0.67Diluted
    
    
    (0.04
    )
    
    
    (0.48
    )
    
    
    (0.30
    )
    
    
    0.27
    
    
    
    (2.13
    )
    
    
    0.67Balance Sheet Data:MFRSCash and cash equivalents
    
    
    75,601
    
    
    
    987,343
    
    
    
    1,591,405
    
    
    
    2,539,535
    
    
    
    739,291
    
    
    
    241,218Restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,462
    
    
    
    Restricted cash to long term
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,283Frequency rights, net
    
    
    4,569
    
    
    
    59,674
    
    
    
    66,716
    
    
    
    80,930
    
    
    
    88,374
    
    
    
    92,960Telephone network systems and equipment, net
    
    
    378,390
    
    
    
    4,941,770
    
    
    
    4,684,413
    
    
    
    4,188,946
    
    
    
    3,157,197
    
    
    
    2,248,685Preoperating expenses, net
    
    
    
    
    
    
    
    
    
    
    50,863
    
    
    
    77,902
    
    
    
    98,340
    
    
    
    132,046Intangible assets, net
    
    
    15,255
    
    
    
    199,224
    
    
    
    209,683
    
    
    
    208,802
    
    
    
    334,489
    
    
    
    327,701Labor obligations upon retirement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,650
    
    
    
    15,068
    
    
    
    15,977Rent deposits and other assets
    
    
    68,274
    
    
    
    891,674
    
    
    
    578,401
    
    
    
    618,524
    
    
    
    580,600
    
    
    
    470,905Total assets
    
    
    575,618
    
    
    
    7,517,576
    
    
    
    7,916,472
    
    
    
    8,014,100
    
    
    
    5,065,904
    
    
    
    3,411,377Long-term liabilities
    
    
    209,884
    
    
    
    2,741,090
    
    
    
    2,818,630
    
    
    
    2,380,424
    
    
    
    1,882,104
    
    
    
    953,927Total liabilities
    
    
    270,091
    
    
    
    3,357,603
    
    
    
    3,415,303
    
    
    
    2,983,261
    
    
    
    2,788,990
    
    
    
    1,485,455Capital stock
    
    
    414,261
    
    
    
    5,410,244
    
    
    
    5,410,244
    
    
    
    5,410,251
    
    
    
    3,327,482
    
    
    
    2,963,206Additional paid-in capital
    
    
    61,912
    
    
    
    808,566
    
    
    
    816,443
    
    
    
    888,056
    
    
    
    253,096
    
    
    
    237,114Accumulated deficit
    
    
    (156,731
    )
    
    
    (2,046,912
    )
    
    
    (1,705,231
    )
    
    
    (1,267,468
    )
    
    
    (1,303,664
    )
    
    
    (1,274,398
    )Repurchase of shares
    
    
    (913
    )
    
    
    (11,925
    )
    
    
    (20,287
    )
    
    
    
    
    
    
    
    
    
    
    Total shareholders equity
    
    
    318,529
    
    
    
    4,159,973
    
    
    
    4,501,169
    
    
    
    5,030,839
    
    
    
    2,276,914
    
    
    
    1,925,922Total number of shares
    
    
    789,818,829
    
    
    
    789,818,829
    
    
    
    789,818,829
    
    
    
    789,818,829
    
    
    
    482,334,778
    
    
    
    277,224,018U.S. GAAPLong-term liabilities
    
    
    209,884
    
    
    
    2,741,090
    
    
    
    2,818,630
    
    
    
    2,380,424
    
    
    
    1,882,104
    
    
    
    756,921Total Shareholders equity
    
    
    294,937
    
    
    
    3,851,883
    
    
    
    4,214,655
    
    
    
    4,555,341
    
    
    
    1,676,612
    
    
    
    1,276,860Other Operational and Financial Data:MFRSWorking capital(3)
    
    
    36,218
    
    
    
    473,012
    
    
    
    447,202
    
    
    
    281,811
    
    
    
    29,083
    
    
    
    (126,398
    )Capital expenditures(4)
    
    
    71,334
    
    
    
    931,623
    
    
    
    1,631,001
    
    
    
    1,248,407
    
    
    
    1,041,877
    
    
    
    482,669Ratio of earnings to fixed charges(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.51
    
    
    
    1.05
    
    
    
    Resources arising from operating activities
    
    
    53,073
    
    
    
    693,132
    
    
    
    446,171
    
    
    
    303,158
    
    
    
    87,898
    
    
    
    322,353Resources derived from financing activities
    
    
    (29,648
    )
    
    
    (387,205
    )
    
    
    219,632
    
    
    
    2,745,493
    
    
    
    1,452,052
    
    
    
    334,394Resources used in investing activities
    
    
    (69,678
    )
    
    
    (909,989
    )
    
    
    (1,613,933
    )
    
    
    (1,248,407
    )
    
    
    (1,041,877
    )
    
    
    (482,669
    )U.S. GAAPCash provided by operating activities
    
    
    10,552
    
    
    
    137,805
    
    
    
    438,861
    
    
    
    164,439
    
    
    
    (120,905
    )
    
    
    761,531Cash provided by (used in) financing activities
    
    
    (904
    )
    
    
    (11,812
    )
    
    
    (105,440
    )
    
    
    2,916,477
    
    
    
    1,531,744
    
    
    
    103,205Cash used in investing activities
    
    U.S.$
    (55,900
    )
    
    Ps.
    (730,055
    )
    
    Ps.
    (1,281,551
    )
    
    Ps.
    (1,245,081
    )
    
    Ps.
    (904,888
    )
    
    Ps.
    (470,451
    )Ratio of earnings to fixed charges(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.2
    
    
    
    1.6
    
    
    
    2.9
 
 (1)
    
    Peso amounts were converted to U.S. dollars at the exchange rate of Ps.13.06 per U.S.$1.00
reported by the Banco de México as its buying rate for pesos on December 31, 2009. 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. For items
in the statements of operations, 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, for
non-monetary balance sheet line items restatement into December 31, 2007 pesos is made by
multiplying the relevant peso amounts at acquisition by the inflation index up to December 31,
2007. The inflation index used in this annual report for 2006 figures is 1.0405 and for 2005
is 1.0333.(3)
    
    Working capital is defined by us 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) which is different from the common definition of total current assets in excess of total current liabilities.  6




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##### Table of Contents



(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, 2007, 2006 and 2005 are net of dispositions. For the
years ended December 31, 2009 and 2008 the capital expenditures are presented according 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. Earnings are defined as
the sum of: (a) pre-tax income from continuing operations; (b) fixed charges; and (c)
amortization of capitalized interest; less interest capitalized. 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.359.3
million in 2009 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. (See Exhibit 7.1) EXCHANGE RATES
  Buying Rate(1)Period End
    
    
    Average(2)
    
    
    High
    
    
    LowMay 2010
    
    Ps.
    12.88
    
    
    Ps.
    12.68
    
    
    Ps.
    13.18
    
    
    Ps.
    12.25April 2010
    
    
    12.37
    
    
    
    12.26
    
    
    
    12.41
    
    
    
    12.16March 2010
    
    
    12.46
    
    
    
    12.60
    
    
    
    12.85
    
    
    
    12.46February 2010
    
    
    12.85
    
    
    
    12.96
    
    
    
    13.18
    
    
    
    12.80January 2010
    
    
    13.00
    
    
    
    12.83
    
    
    
    13.07
    
    
    
    12.65December 2009
    
    
    13.06
    
    
    
    12.86
    
    
    
    13.06
    
    
    
    12.602009
    
    
    13.06
    
    
    
    13.57
    
    
    
    15.37
    
    
    
    12.602008
    
    
    13.54
    
    
    
    11.17
    
    
    
    13.92
    
    
    
    9.922007
    
    
    10.87
    
    
    
    10.94
    
    
    
    11.27
    
    
    
    10.662006
    
    
    10.88
    
    
    
    10.92
    
    
    
    11.48
    
    
    
    10.432005
    
    
    10.71
    
    
    
    10.93
    
    
    
    11.40
    
    
    
    10.41
 
 (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.   
 B. Capitalization and indebtedness
  
 C. Reasons for the offer and use of proceeds
   7




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D. Risk factors
 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.
  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.
   8




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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.
  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.
   9




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We could be negatively affected by by-pass international traffic.
 Comisión Federal
de Telecomunicaciones
  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;
  10




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
    
    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;
 Our 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 (item 16E);
 
    
    make investments or other specified restricted payments;
 
    
    create liens;
  11




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
    
    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 of the following nature:
 (i)
    
    the transaction is on terms no less favorable to Maxcom or the relevant
restricted subsidiary than those that would have been obtained in a comparable
transaction by the Maxcom or such restricted subsidiary with an unrelated entity;
 (ii)
    
    in transactions involving in excess of U.S.$1.0 million, a majority of the
disinterested directors have determined that the transaction complies with (i); and
 (iii)
    
    in transactions involving in excess of U.S.$6.0 million, Maxcom shall deliver to
the trustee a fairness opinion from an investment banking firm of national standing.
   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;
  12




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
    
    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.
 
    
    The merge or consolidation of some concessionaries (fix-mobile-cable) may affect market
penetration
  If the Mexican government grants more concessions, the value of our concessions could be severely
impaired.
  (Secretaría de Comunicaciones y
Transportes
 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.
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Rapid technological advances may require us to make significant capital expenditures to maintain
and improve the competitiveness of our service offerings.
  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.
   14




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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
 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
   15




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Risks Relating to Mexico
 Global economic conditions may adversely affect us.
  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
 Legal and regulatory situation
 Ley Federal de Radio y Televisión
 If Mexico continues to experience economic crisis, our business could be affected negatively.
      16




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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.
     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.
   17




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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)
 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.
  18




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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
 
 ITEM 4.
    
    INFORMATION ON THE COMPANY
 
 A. History and development of the Company
 sociedad anónima bursátil de capital variable sociedad anónima bursátil de capital
variable
    19




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##### Table of Contents



Certificados de Participación Ordinarios
  Bolsa Mexicana de Valores
   
 B. Business overview
 Industry Overview
    Market Liberalization
   20




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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
    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.
   21




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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.
  Mobile Telephony Market
  
    
    Radiomóvil DIPSA, S.A. de C.V. (also known as Telcel) with nationwide Personal
Communications Services and cellular concessions;
 
    
    Grupo de Telecomunicaciones Mexicana, S.A. de C.V. (also known as Movistar or
Telefónica Móviles) with nationwide Personal Communications Services and regional cellular
(regions 1 through 4) concessions;
 
    
    Grupo Iusacell, S.A. de C.V. (also known as Iusacell) with regional cellular (regions 5
through 9) and nationwide Personal Communications Services concessions;
 
    
    Unefón, S.A.B. de C.V. (also known as Unefón), 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. (also known as Nextel), an affiliate of NII Holdings,
Inc., through enhanced specialized mobile radio licenses.
   22




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Our Company
  .
     23




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##### Table of Contents



Competitive Strengths
  Wide Range of Service Offerings .
 History of High Penetration Rates.
  24




---



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Cost Efficient, Flexible, Reliable Technology.
 Valuable Last-Mile Ownership.
 Recognized Brand Name and Customer Perception for Quality Services .
 History of Developing Strategic Alliances .
 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.
  25




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Enhance Residential Penetration Rates and Average Revenue per User through Bundling .
 Maintain Our Service Quality Differentiation and Focus.
 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.
Approximately 97% of our local telephony customers also subscribe to Larga Distancia Max. We
do not offer our long-distance service separately from our local telephony service.
  26




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##### Table of Contents




    
    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,
512 Kbps, 1Mbps, 2 Mbps and 4Mbps 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.
 
    
    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 (VOD), Digital Video Recording (DVR) and interactive programming
guide (EPG).
 
    
    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.
 
    
    TroncalSip.This service provides sip trunks (Session Internet Protocol) for business
customers that need highly reliable access to and from the public telephone network through
their existing IP Private Branch Exchange. This service can be delivered through a Maxcom
Internet Dedicated Access or a third party provider.
 
    
    Hosted Contact Center.This service provides virtual agents infrastructure through a
Maxcom outsourcing model to deliver software licenses and troncalsip sessions to customers
that needs extra call agents . This services is oriented to call center that needs virtual
infrastructure with no investment an gives them flexibility and scalability to grow their
campaigns on demand.
  27




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##### Table of Contents




    
    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.
 
    
    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.
 
    
    1-800 Numbers.This service is available to our customers interested in receiving
toll-free calls into their call centers or businesses for domestic and international toll
free services.
 
    
    SpeediMax. This is our broadband Internet access service for small businesses with speeds
of 128, 256 and 512 Kbps and also 1Mbps,2 Mbps and 4 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.
 
    
    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.
 
    
    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.
  Pricing
   28




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Income Distribution
  Year Ended December 31Segments*
    
    2009
    
    
    2008
    
    
    2007(In millions)Residential
    
    Ps.
    928.7
    
    
    Ps.
    1,055.6
    
    
    Ps.
    897.9Business
    
    
    788.0
    
    
    
    809.1
    
    
    
    648.2Public Telephony
    
    
    460.7
    
    
    
    428.7
    
    
    
    386.4Wholesale
    
    
    372.2
    
    
    
    359.5
    
    
    
    376.0Other Revenue
    
    
    12.9
    
    
    
    30.2
    
    
    
    37.2Total Revenues
    
    Ps.
    2,562.5
    
    
    Ps.
    2,683.2
    
    
    Ps.
    2,345.7
 
 *
    
    The above segments are comprised of homogeneous customers.  2009
 Metropolitan
    
    
    CentralServices
    
    Area
    
    
    South
    
    
    North
    
    
    Total(In millions)Local
    
    Ps.
    1,448.8
    
    
    Ps.
    634.2
    
    
    Ps.
    75.5
    
    
    Ps.
    2,158.6Long Distance
    
    
    256.9
    
    
    
    63.9
    
    
    
    3.9
    
    
    
    324.8Rent of dedicated links
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Sale of equipment to customers
    
    
    2.2
    
    
    
    1.4
    
    
    
    
    
    
    
    3.7Capacity Leasing
    
    
    75.2
    
    
    
    
    
    
    
    
    
    
    
    75.2Total Revenues
    
    Ps.
    1,783.5
    
    
    Ps.
    699.6
    
    
    Ps.
    79.4
    
    
    Ps.
    2,562.6
 2008
 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
 2007
 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
    
    Ps.
    58.3
    
    
    
    
    
    
    
    
    
    
    
    58.3Total Revenues
    
    Ps.
    1,639.2
    
    
    Ps.
    696.2
    
    
    Ps.
    10.3
    
    
    Ps.
    2,345.7
  29




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Our Markets
 Concession Areas
      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.
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Our Network
 Build out Strategy
    Network Backbone
      31




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




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Strategic Alliances
 Megacable
   Alcatel Internet Protocol Television Supply Agreement
  Marketing and Sales
 General
  Sales and Distribution Channels
      34




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Customer Service
  Centralized Call Center.
 Walk-in Center.
 Centralized Trouble-Shooting Center.
  Credit, Billing and Collection
       35




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Competition
     Telmex
  Other Competitors
     36




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st
    Market Liberalization
 (Comisión Federal de Electricidad or
CFE)
   37




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##### Table of Contents



Employees
 (Sindicato Nacional de Trabajadores de Telecomunicaciones, Telefonía, Comunicaciones,
Cibernética, Productos Eléctricos, Electrónicos, Similares y Conexos de la República Mexicana)
 Facilities
   Legal Matters and Administrative Proceedings
  Mexican Federal Power Commission (Comisión Federal de Electricidad or CFE) Litigation
   38




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Lucent Technologies Claim
 (prescripción)
 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.
   39




---



##### Table of Contents



(fianzas)
 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).
  40




---



##### Table of Contents



(certificados de participación ordinarios)
 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.
   41




---



##### Table of Contents



Temporary Seizure
  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;
  42




---



##### Table of Contents




    
    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.
   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.
    43




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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
     44




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##### 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.
   45




---



##### Table of Contents



Interconnection
  Local Interconnection
     Mobile Interconnection
  Long-distance Interconnection
    46




---



##### Table of Contents



Mexican Ministry of Communications and Transportation Approvals
 (Comisión Federal de Competencia)
 Antitrust Approvals
   Municipal and Other Regulatory Approvals
  
 C. Organizational structure
   47




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##### Table of Contents



D. Property, plant and equipment
    48




---



##### 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, 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, 2008 and 2009 and for the
years ended December 31, 2007, 2008 and 2009 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, 2009, which was
Ps13.06 per U.S.$1.00 as reported by the Banco de México (Central Bank of México). Sums may not add
due to rounding.
   49




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##### Table of Contents



Recent Developments
 Formation of our Board of Directors and Audit and Corporate Practices Committee.
   New appointment of our Chief Executive Officer.
  Private Placement of Senior Notes due 2014
   50




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##### Table of Contents



Currency Swap Transaction
    
 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)2009
    
    
    3.6
    %
    
    
    5.4
    %
    
    
    3.5
    %
    
    U.S.$
    99.92008
    
    
    6.5
    %
    
    
    7.7
    %
    
    
    2.8
    %
    
    U.S.$
    95.32007
    
    
    3.8
    %
    
    
    7.2
    %
    
    
    3.3
    %
    
    U.S.$
    87.22006
    
    
    4.1
    %
    
    
    7.2
    %
    
    
    4.8
    %
    
    U.S.$
    76.32005
    
    
    3.3
    %
    
    
    9.2
    %
    
    
    3.0
    %
    
    U.S.$
    74.1
 
 Source:
    
    Central Bank of Mexico*
    
    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 2007, 2006 and 2005, hence calculation methodology for the figures for the years
ended December 31, 2009 and 2008 differs.  
    
    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.
   51




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##### Table of Contents



Impact of Foreign Currency Fluctuations
         Flat Rate Business Tax ( Impuesto Empresarial a Tasa Única )
    52




---



##### 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.
  
    
    Internet dial-up access;
 
    
    asymmetric digital subscriber line;
  53




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##### Table of Contents




    
    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.
   54




---



##### 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
   55




---



##### Table of Contents



Allowance of Doubtful Accounts Receivable
   Revenue Recognition
           56




---



##### Table of Contents



Installation Revenues and Costs
  Valuation of Long-Lived Assets
     57




---



##### Table of Contents



Deferred Taxes
    Year of Loss
    
    Amount
    
    
    Year of Maturity(in thousands of pesos)2008
    
    Ps.
    459,357
    
    
    
    20182007
    
    
    278,753
    
    
    
    20172006
    
    
    76,703
    
    
    
    20162005
    
    
    129,675
    
    
    
    20152004
    
    
    82,373
    
    
    
    20142003
    
    
    36,650
    
    
    
    20132002
    
    
    276,276
    
    
    
    20122000
    
    
    104,073
    
    
    
    2010Total
    
    Ps.
    1,443,860
   58




---



##### Table of Contents



Results of Operations
  Year Ended December 312009
    
    
    2008
    
    
    2007Net revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Operating cost and expenses:Network operating costs
    
    
    44.1
    
    
    
    41.7
    
    
    
    41.6Selling, general and administrative expenses
    
    
    31.2
    
    
    
    30.5
    
    
    
    30.9Depreciation and amortization
    
    
    25.0
    
    
    
    20.6
    
    
    
    15.8Total operating cost and expenses
    
    
    100.3
    
    
    
    92.8
    
    
    
    88.3Operating profit (loss)
    
    
    (0.3
    )
    
    
    7.1
    
    
    
    11.7Other expenses:Other expenses
    
    
    (2.1
    )
    
    
    (0.6
    )
    
    
    (0.5
    )Restructuring charges
    
    
    (0.3
    )
    
    
    (1.8
    )
    
    
    Impairment of long-lived assets
    
    
    
    
    
    
    (19.8
    )
    
    
    Comprehensive cost of financing
    
    
    11.6
    
    
    
    10.0
    
    
    
    5.4Income tax
    
    
    2.4
    
    
    
    8.7
    
    
    
    (4.1
    )Net loss (income) for the year
    
    
    11.8
    %
    
    
    16.3
    %
    
    
    (1.5
    )%
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Net revenues
  
    
    Residential revenues represented 36.2% of total revenues during 2009, compared with 39.3%
in the previous year of 2008. Revenues in the residential business reached Ps.928.7 million
in 2009, a decrease of 12.0% or Ps. 127 million in comparison to Ps.1,055.6 million in 2008.
The decrease in revenues is a combination of a decrease in usage charge for local, mobile
and long distance by approximately Ps.119 million due to the duration and the number of
calls and higher installation charges for the year which decrease by Ps.45 million. However,
that was partially offset by an increase of Ps.37 million due to a larger contribution of
data and TV products.
 
    
    Commercial revenues represented 30.7% of total revenues during 2009, compared with 30.2%
in 2008. Revenues in the commercial business totaled Ps.788.0 million in 2009, a decrease of
2.6% or Ps.21 million in comparison to Ps.809.1 million in the year 2008. This decrease in
revenues was explained by a decrease of Ps.30 million in installation charges and a decrease
of Ps.1 million in usage. However, this was partially offset by an increase of recurrent
charges (rent, etc.) by Ps.10 million.
 
    
    Public Telephony represented 17.9% of total revenues during 2009 in comparison with 16.0%
in 2008. Revenues in this segment totaled Ps.460.7 million in 2009, an increase of 7.5%
compared to Ps.428.7 million in 2008. The growth in the public telephony business was
primarily driven by the increase in number of public telephones, which grew 16.8%.
 
    
    In 2009, wholesale revenues totaled Ps.372.2 million, an increase of 3.5% in comparison
to Ps.359.5 million in the same period in 2008. The increase in the wholesale business was
mainly driven by higher traffic.
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---



##### Table of Contents




    
    Revenue from other services accounted for 0.5% or Ps.12.9 million of total revenues in
2009 a decrease, from the Ps.30.3 million recorded in the same period last year. Other
revenues are primarily comprised of lease of microwave frequencies and Customer Premise
Equipment (CPE) sales.
  Year Ended December 312009
    
    
    2008
    
    
    %(In millions)Residential
    
    Ps.
    928.7
    
    
    Ps.
    1,055.6
    
    
    
    (12.0
    )%Commercial
    
    
    788.0
    
    
    
    809.1
    
    
    
    (2.6
    )%Public Telephony
    
    
    460.7
    
    
    
    428.7
    
    
    
    7.5
    %Wholesale
    
    
    372.2
    
    
    
    359.5
    
    
    
    3.5
    %Other Revenue
    
    
    12.9
    
    
    
    30.3
    
    
    
    (57.4
    )%Total revenues
    
    Ps.
    2,562.5
    
    
    Ps.
    2,683.2
    
    
    
    (4.5
    )%
  ARPU2009
    
    
    2008
    
    
    %(In U.S. dollars)Monthly charges
    
    $
    12.4
    
    
    $
    17.3
    
    
    
    (28.3
    )%Usage
    
    
    19.1
    
    
    
    29.4
    
    
    
    (35.4
    )%Subtotal
    
    
    31.5
    
    
    
    46.7
    
    
    
    (32.5
    )%Non-recurring
    
    
    0.4
    
    
    
    2.0
    
    
    
    (80
    )%Total
    
    $
    31.8
    
    
    $
    48.7
    
    
    
    (34.7
    )%
  Revenue Generating Units
   At December 312009
    
    
    2008
    
    
    %Residential
    
    
    366,001
    
    
    
    331,368
    
    
    
    10.5
    %Commercial
    
    
    81,081
    
    
    
    84,891
    
    
    
    (4.5
    )%Public Telephony
    
    
    41,393
    
    
    
    35,415
    
    
    
    16.8
    %Wholesale lines
    
    
    25,110
    
    
    
    22,860
    
    
    
    9.8
    %Total lines
    
    
    513,585
    
    
    
    474,534
    
    
    
    8.2
    %
  60




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##### Table of Contents



Operating Costs and Expenses
  
    
    a Ps.29.1 million, or 3.0% increase in network operating services resulting mainly from:
 
    
    a Ps.61.9 million higher fixed-to-mobile interconnection costs.
    
    a Ps.14.9 million increase related to our paid TV content and internet services;
    
    a Ps.20.9 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;
    
    This increase was partially offset by a Ps.51.6 million decrease on long
distance interconnection costs as a result of lower customer usage, Ps.10.9 million
lower operational cost of public telephony services and Ps.6.1 million other cost
reductions.
 
    
    a Ps.11.3 million, or 7.8% decrease in technical expenses primarily due to:
 
    
    a Ps.1.2 million increase in costs associated with leases of sites and poles; and,
    
    a Ps.12.5 million decrease in other technical expenses.
 
    
    Installation expenses for 2009 decrease to Ps.6.7 million or 35.7%.
    
    a Ps.87.5 million, or 15.9%, increase in depreciation and amortization expenses mainly related to:
 
    
    a Ps.144.8 million increase due to new capital investments; and,
    
    a Ps.57.3 million decrease due to change in useful lives of long-lived assets.
 
    
    Selling, general and administrative expenses decreased Ps.20.6 million, or 2.5% primarily due to:
 
    
    a Ps.15.7 million decrease in marketing expenses;
    
    a Ps.9.6 million decrease in maintenance;
    
    a Ps.12.4 million decrease in salaries, wages and benefits;
    
    a Ps. 3.4 million decrease on external sales commissions,
    
    These expenses were partially offset by Ps.20.5 million in higher bad debt
reserve, leases expenses, insurance and other selling, general and administrative
expenses.
  61




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Comprehensive Cost of Financing
   Year Ended December 312009
    
    
    2008
    
    
    %(In millions)Interest expense  Net
    
    Ps.
    (322.9
    )
    
    Ps.
    (263.7
    )
    
    
    22.5
    %Exchange gain (loss)  Net
    
    
    8.0
    
    
    
    (178.5
    )
    
    
    95.5
    %Capitalized interest
    
    
    18.1
    
    
    
    174.8
    
    
    
    (89.6
    )%Total comprehensive cost of financing
    
    Ps.
    (296.8
    )
    
    Ps.
    (267.4
    )
    
    
    (11.0
    )%
  
    
    a Ps.59.2 million or 22.5% increase in interest paid as a result of a higher average
outstanding balance of debt during 2009 compared to 2008;
 
    
    a Ps.8.0 million exchange rate gain compared to a net exchange rate loss of Ps.178.5
million recognized in the same period last year mainly due to an appreciation of the Mexican
peso of 3.5% during 2009 compared with a peso depreciation of 24.6% during 2008;
 
    
    a Ps.156.7 million lower capitalized interest mainly due to an appreciation of the
Mexican peso as previously explained and a reduction on the CAPEX program for 2009.
 Tax Provisions
  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.
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
    
    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.
  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)Monthly 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
    
    $
    48.7
    
    
    $
    47.0
    
    
    
    3.6
    %
   Revenue Generating Units
   At December 312008
    
    
    2007
    
    
    %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
    %
  63




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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.
  64




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Comprehensive Cost of Financing
   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
    
    
    
    0
    %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 an depreciation of the
Mexican peso as previously explained.
 Tax Provisions
  
 B. Liquidity and capital resources
 Financing Sources and Liquidity
    65




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##### Table of Contents



1
    
    
    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.
 
 1
    
    Working capital is defined by us 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), which is different than the common
definition of total current assets in excess of total current liabilities.  66




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Indebtedness
   As of December 31,
    
    
    As of December 31,2009(1)
    
    
    2008(2)Pesos
    
    
    Dollars
    
    
    Pesos
    
    
    Dollars(In thousands)Short Term and Long Term Vendor Financing:Vendor financing denominated in pesos
    
    Ps.
    
    
    
    U.S.$
    
    
    
    Ps.
    4,354.0
    
    
    U.S.$
    321.6Vendor financing denominated in dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total vendor financing
    
    
    
    
    
    
    
    
    
    
    4,354.0
    
    
    
    321.6Long 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
    
    
    2,611,740.0
    
    
    
    200,000
    
    
    
    2,707,660.0
    
    
    
    200,000.0Accrued interest
    
    
    13,426.4
    
    
    
    1,028.2
    
    
    
    13,919.5
    
    
    
    1,028.2Total long term payable bonds denominated in U.S. dollars
    
    Ps.
    2,625,166.4
    
    
    U.S.$
    201,028.2
    
    
    Ps.
    2,721,579.5
    
    
    U.S.$
    201,028.2
 
 (1)
    
    Nominal pesos as of December 31, 2009. Peso amounts were converted to U.S. dollars solely for
the convenience of the reader at the rate of Ps.13.06 per U.S.$1.00 as reported by the Banco
de México on December 31, 2009. 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, 2008. Peso amounts were converted to U.S. dollars solely
for the convenience of the reader at the rate of Ps.13.54 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.  67




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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.
  At December 31,2009
    
    
    2008
    
    
    %(Thousands of constant pesos)Net resources provided by operating activities
    
    Ps.
    693,132.0
    
    
    Ps.
    446,171.2
    
    
    
    58.7
    %Net resources used in investing activities
    
    
    (909,989.0
    )
    
    
    (1,613,933.0
    )
    
    
    (153.6
    )%Net resources (used in) provided by financing activities
    
    
    (387,205.0
    )
    
    
    219,632.0
    
    
    
    (103.5
    )%
 At December 31, 2007(Thousands of nominal pesos)Net resources provided by operating activities
    
    Ps.
    303,158.0Net resources used in investing activities
    
    
    (1,248,407.4
    )Net resources provided by financing activities
    
    
    2,745,493.3
   Resources Provided by Operating Activities
   
    
    Ps.218.6 million increase in resources resulting from an increase in accounts receivable
when compared to the Ps.199.0 million used in 2008 with the Ps.19.6 million generated in
2009;
    
    Ps.24.1 million decrease in resources resulting from a decrease in liabilities and
increase in other assets when compared to the Ps.23.6 million increase in resources provided
in 2008 with the Ps.0.4 million used in resources provided in 2009; and
    
    Ps.32.1 million increase in resources resulting from a decrease in inventory, when
compared to the Ps.7.6 million usage in 2008 with the Ps.24.5 million generated in 2009.
  68




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
    
    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;
 
    
    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.
 Resources Provided by Financing Activities
  
    
    Ps.66.7 million used to the payment for the senior notes interest,
 
    
    Ps.63.7 million generated from the stock option program in 2009;
 
    
    Ps.4.1 million generated from the vendor financing in 2009; and
 
    
    Ps.630.3 million decrease due to the Mexican peso appreciation during 2009, resulting in
a net effect of Ps.95.9 million compared to the depreciation of the Mexican peso during
2008, resulting in a net effect of Ps.534.4 million.
 
    
    Ps.28.6 million used from shares repurchase program and other financing activities in
2009;
  69




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
    
    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;
 
    
    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.
 Resources Used for Investing Activities
    Capital Expenditures
   70




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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
    
    
    Accumulated2009
    
    
    138.541
    
    
    
    3.57
    %
    
    
    14.48
    %2008
    
    
    133.761
    
    
    
    6.53
    %
    
    
    15.01
    %2007
    
    
    125.564
    
    
    
    3.76
    %
    
    
    11.56
    %2006
    
    
    121.015
    
    
    
    4.05
    %
    
    
    13.10
    %
     71




---



##### Table of Contents



Principal Differences between MFRS and U.S. GAAP
  Recent United States Accounting Pronouncements
 Accounting Standards Codification
  Amendments to ASC 855, Subsequent Events (formerly FAS 165, Subsequent Events)
  ASC 810 Consolidation (FAS 167, Amendments to FASB Interpretation No. 46(R))
  EITF 08-1 Revenue Arrangements with Multiple Deliverables (included in ASC 605-25 Multiple-Element
Arrangements)
   72




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EITF 08-7, Accounting for Defensive Intangible Assets (ASC 350  IntangiblesGoodwill & Other )
 IntangiblesGoodwill & Other
 Amendments to ASC 715 (formerly FSP No. FAS 132(R)-1 Employers Disclosures about Pensions and
Other Postretirement Benefits
 Employers Disclosures about Pensions and Other Postretirement Benefits
  Amendments to ASC 805 Business Combinations (formerly FASB Statement No. 141(R)):
 Business Combinations
   73




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Determination of the Useful Life of Intangible Assets (FSP FAS No. 142-3, codified into ASC Topic
350 Intangibles  Goodwill and Other)
 Determination of the Useful
Life of Intangible Assets Goodwill
and Other Goodwill and Other Intangible Assets
 Amendments to ASC 810 Consolidation (formerly FAS 160 Non-controlling Interests in Consolidated
Financial Statements  an amendment of ARB 51):
 Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51 (FAS 160)) Consolidation
 FASB Statement No. 161 Disclosures about Derivative Instruments and Hedging Activities, an
amendment of FASB Statement No. 133 (codified under FASB ASC 815, Derivatives and Hedging):
   74




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75




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Accounting for Transfers of Financial Assets  an
amendment of Statement No. 140
  76




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##### Table of Contents



Recent Mexican Accounting Pronouncements
  (a)
    
    FRS B-5Segment informationFRS B-5 is effective as of January 1, 2011.
Changes as compared to superseded Bulletin B-5 Segment Information include the
following:
 
    
    The information to be disclosed by operating segment is that regularly used by
senior management and it does not require the segmentation into primary and
secondary information, nor is it to be referred to segments identified based on
products or services (economic segments), geographical areas and homogeneous groups.
Additionally, disclosure of information on the whole entitys products or services
geographical areas and principal clients and suppliers is required.
 
    
    FRS B-5 does not require that the entitys business areas be subject to different
risks to qualify as operating segments.
 
    
    FRS B-5 allows business areas in pre-operating stage to be catalogued as
operating segments.
 
    
    FRS B-5 requires disclosure by segment and separately, revenue and interest
expense as well as all other components of comprehensive financial results (CFR). In
specific cases, the FRS B-5 permits disclosure of net interest income.
 
    
    FRS B-5 requires disclosure of the liability amounts included in the usual
operating segment information normally used by senior management in making the
entitys operating decisions.
  (b)
    
    FRS B-9Interim financial reportingFRS B-9 is effective as of January 1,
2010. Changes as compared to superseded Bulletin B-9 Interim financial reporting
include the following:
 
    
    FRS B-9 requires that the interim financial information includes a comparative and
condensed balance sheet, income statement, statement of shareholders equity and
statement of cash flows and, for non-profit entities, it expressly requires the
presentation of a statement of activities.
 
    
    FRS B-9 establishes that the financial information at the end of an interim period
should be presented comparatively with the equivalent interim period of the
immediately preceding year and, in the case of the balance sheet, compared also to
such financial statement at the immediately preceding year-end date.
 
    
    FRS B-9 includes and defines new terminology.
  (c)
    
    FRS C-1Cash and cash equivalentsFRS C-1 supersedes Bulletin C-1 Cashand
is effective as of January 1, 2010. The principal changes with respect to the former
standard include the following:
 
    
    FRS C-1 requires the presentation of cash and cash equivalents, restricted, within
the balance sheet caption of Cash and cash equivalents.
 
    
    The term demand temporary investments is replaced by available demand
investments.
  77




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##### Table of Contents




    
    To be identified as cash equivalents, the investments should be highly liquid, for
example those with original maturities of three months or less when purchased.
 
    
    FRS C-1 includes the definition of the terms: acquisition cost, restricted cash and
cash equivalents, highly liquid investments, net realizable value, nominal value and
fair value.
                    78




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79




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##### Table of Contents



80




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##### Table of Contents



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
   81




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##### Table of Contents



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.
    2,611,740.0
    
    
    Ps.
    
    
    
    Ps.
    
    
    
    Ps.
    2,611,740.0
    
    
    Ps.
    Capital (Finance) Lease Obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vendor Financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital Lease and Vendor Financing
Accrued Interest at December 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accounts Payable to Grupo VAC**
    
    
    28,819.5
    
    
    
    1,276.1
    
    
    
    2,552.3
    
    
    
    2,552.3
    
    
    
    22,438.8Debt Obligations Interest
    
    
    1,511,309.0
    
    
    
    315,520.0
    
    
    
    604,188.0
    
    
    
    591,601.0
    
    
    
    Operating Lease Obligation
    
    
    310,155.0
    
    
    
    98,080.5
    
    
    
    109,458.0
    
    
    
    99,832.0
    
    
    
    2,784.5Interest to Account Payable to Grupo VAC**
    
    
    34,425.9
    
    
    
    2,975.9
    
    
    
    5,548.3
    
    
    
    5,010.3
    
    
    
    20,891.3Total
    
    Ps.
    4,496,482.4
    
    
    Ps.
    417,852.5
    
    
    Ps.
    721,746.6
    
    
    Ps.
    3,310,735.6
    
    
    Ps.
    46,147.6
 
 *
    
    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 
 G. Safe Harbor
  
 ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
 A. Directors and senior management
 Directors
    82




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##### Table of Contents



Name
    
    Age
    
    PositionEduardo Vázquez
    
    
    47
    
    
    Director and Chairman of the BoardAdrián Aguirre Gómez
    
    
    59
    
    
    Director and Vice Chairman of the BoardGabriel Vázquez
    
    
    49
    
    
    DirectorMarco Provencio Muñoz *
    
    
    51
    
    
    DirectorRodrigo Guerra Botello *
    
    
    68
    
    
    DirectorJacques Gliksberg
    
    
    52
    
    
    DirectorLorenzo Barrera Segovia *
    
    
    51
    
    
    DirectorJuan Jaime Petersen Farah *
    
    
    51
    
    
    DirectorJorge Garcia Segovia *
    
    
    52
    
    
    DirectorEduardo Augusto José Molina Llovera *
    
    
    61
    
    
    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.     Eduardo Vázquez
 Adrián Aguirre Gómez .
 Gabriel Vázquez
  83




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##### Table of Contents



Marco Provencio Muñoz
 Rodrigo Guerra Botello
 Jacques Gliksberg .
 Lorenzo Barrera Segovia.
 Jorge García Segovia.
 Juan Jaime Petersen Farah.
  84




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Eduardo Augusto José Molina Llovera.
 Senior Management
    Name
    
    Age
    
    PositionEduardo Vázquez
    
    
    47
    
    
    Executive PresidentWilliam Nazaret
    
    
    49
    
    
    Chief Executive OfficerJosé Antonio Solbes
    
    
    43
    
    
    Chief Financial OfficerJuvenal Gárnica
    
    
    53
    
    
    Chief Technology OfficerEduardo Legorreta
    
    
    44
    
    
    Vice President of Commercial SalesRoberto Matt Konigs
    
    
    56
    
    
    Vice President of Residential SalesYara Elena Maldonado Arceo
    
    
    52
    
    
    Vice President of Customer Services
  William Nazaret
 José Antonio Solbes
 Juvenal Gárnica
  85




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##### Table of Contents



Eduardo Legorreta
 Roberto Matt Konigs
 Yara Elena Maldonado Arceo
 
 B. Compensation
    (Ley Federal del Trabajo)
 First Executive Stock Option Plan
    86




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Second Executive Stock Option Plan
      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.
   87




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##### Table of Contents



C. Board practices
    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;
  88




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##### Table of Contents




    
    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;
 
    
    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.
   89




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Operating Advisory Committee
  Director and Officer Indemnification and Limitation on Liability
      
 D. Employees
   90




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##### Table of Contents



E. Share ownership
  Series A Common StockBeneficial Ownership
    
    
    SharesShareholders
    
    Number
    
    
    Percentage
    
    
    Underlying CPOsJacques Gliksberg(1)
    
    
    320,143,614
    
    
    
    40.5
    %
    
    
    288,143,613Marco Viola(1)**
    
    
    320,026,098
    
    
    
    40.5
    %
    
    
    288,026,097Eduardo Vázquez (2)
    
    
    80,396,806
    
    
    
    10.2
    %
    
    
    52,396,806Jesus Gustavo Martinez (2)**
    
    
    80,396,806
    
    
    
    10.2
    %
    
    
    52,396,806Gabriel Vázquez (2)
    
    
    80,396,806
    
    
    
    10.2
    %
    
    
    52,396,806Efrain Ruvalcaba (2)**
    
    
    80,396,806
    
    
    
    10.2
    %
    
    
    52,396,806Adrián Aguirre Gómez
    
    
    *
    
    
    
    *
    
    
    
    Maria Guadalupe Aguirre Gómez**
    
    
    *
    
    
    
    *
    
    
    
    Rodrigo 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)
    
    
    400,540,420
    
    
    
    50.7
    %
    
    
    340,540,419
 
 *
    
    Less than one percent. Pursuant to the Instruction to Item 6E of Form 20-F, individual
share ownership is not disclosed.**
    
    Alternate director.(1)
    
    The shares of Series A Common Stock beneficially owned by (a) the Nexus-Maxcom
Holdings entities as well as (b) the Bank of America Corporation entities set forth in Item 7A
below may be deemed to be beneficially owned indirectly by Messrs. Gliksberg and Viola, as the
managers of Nexus Partners I, LLC. The shares of Series A Common Stock directly owned by Nexus
Partners I, LLC may be deemed to be beneficially owned indirectly by Messrs. Gliksberg and Viola, its managers.(2)
    
    Includes shares of Series A common stock beneficially owned, directly or indirectly, by the Vazquez Family.  
 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)
    
    
    320,143,614
    
    
    
    40.5
    %
    
    
    288,143,613Nexus Maxcom Holdings (1)
    
    
    320,143,614
    
    
    
    40.5
    %
    
    
    288,143,613
 
 *
    
    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 10, 2010, 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 3,055,038 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 338,331
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 85,741,824 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.  91




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Significant Changes in Share Ownership
  Differences in Voting Rights
  Securityholders Agreement
  Registration Rights Agreement
  Demand Rights.
 Piggyback Rights.
 Conditions and Limitations; Expenses.
  92




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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.
   93




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##### Table of Contents



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),
  Capital Stock Increase and Acquisition of Grupo Telereunión
    94




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##### Table of Contents



(Capital Contable)
  
 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 Lows2010(through June 21, 2010)
    
    Ps.
    12.10
    
    
    Ps.
    6.85
    
    
    $
    6.58
    
    
    $
    3.002009
    
    
    12.40
    
    
    
    4.20
    
    
    
    6.49
    
    
    
    1.702008
    
    
    23.70
    
    
    
    5.29
    
    
    
    16.03
    
    
    
    2.162007
    
    
    31.00
    
    
    
    19.00
    
    
    
    19.98
    
    
    
    12.17Quarterly Highs and Lows:2010:First Quarter
    
    Ps.
    12.10
    
    
    Ps.
    8.20
    
    
    $
    6.58
    
    
    $
    4.32Second Quarter (through June 21, 2010)
    
    
    9.40
    
    
    
    6.85
    
    
    
    5.36
    
    
    
    3.002009:First Quarter
    
    Ps.
    8.35
    
    
    Ps.
    4.20
    
    
    $
    4.26
    
    
    $
    1.86Second Quarter
    
    
    6.90
    
    
    
    4.51
    
    
    
    3.50
    
    
    
    1.70Third Quarter
    
    
    7.50
    
    
    
    4.95
    
    
    
    3.99
    
    
    
    2.52Fourth Quarter
    
    
    12.40
    
    
    
    6.00
    
    
    
    6.49
    
    
    
    3.142008: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 2010:January
    
    Ps.
    12.10
    
    
    Ps.
    9.50
    
    
    $
    6.58
    
    
    $
    4.92February
    
    
    10.85
    
    
    
    9.60
    
    
    
    5.87
    
    
    
    5.00March
    
    
    10.55
    
    
    
    8.20
    
    
    
    5.86
    
    
    
    4.32April
    
    
    9.40
    
    
    
    8.00
    
    
    
    4.36
    
    
    
    4.45May
    
    
    8.40
    
    
    
    6.85
    
    
    
    4.64
    
    
    
    3.00June (through June 21, 2010)
    
    
    8.45
    
    
    
    7.26
    
    
    
    4.50
    
    
    
    3.95
  95




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Mexican Stock Exchange
    
    
    New York Stock Exchange(Mexican pesos per CPO)
    
    
    (U.S. dollars per ADS)High
    
    
    Low
    
    
    High
    
    
    LowMonthly 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
    
    
    6.53
    
    
    
    5.06
    
    
    
    3.45
    
    
    
    2.61July
    
    
    5.80
    
    
    
    4.95
    
    
    
    3.04
    
    
    
    2.52August
    
    
    7.28
    
    
    
    4.99
    
    
    
    3.87
    
    
    
    2.65September
    
    
    7.50
    
    
    
    6.10
    
    
    
    3.99
    
    
    
    3.07October
    
    
    7.60
    
    
    
    6.00
    
    
    
    4.04
    
    
    
    3.14November
    
    
    8.70
    
    
    
    6.04
    
    
    
    4.67
    
    
    
    3.20December
    
    
    12.40
    
    
    
    8.45
    
    
    
    6.49
    
    
    
    4.022008: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
 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
   96




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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
 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
   97




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##### Table of Contents



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.
  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.
   98




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##### Table of Contents



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).
  Special Shareholders Meetings.
 Cumulative Voting.
 Voting Rights
   99




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Ownership Restrictions
  Preemptive Rights
  Dividends
  Redemption
 pro rata pro rata
 Dissolution or Liquidation
   100




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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.
 Other Provisions
 Foreign Investment Regulations
 (Dirección General de Inversión Extranjera)
 Purchase of Shares by Us
 Comisión Nacional Bancaria y de Valores or CNBV
  101




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Purchases of Shares by our Subsidiaries
  Conflicts of Interest
   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;
  102




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##### Table of Contents




    
    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.
  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
    103




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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.
 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
    104




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Deposit and Withdrawal of Shares
   Registration and Transfer
  Dividends and Other Distributions
 (Secretaría de Salud)
  105




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##### Table of Contents



Cash Dividends and Distributions.
 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;
  106




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
    
    any other reclassification or restructuring of our Series A common stock; or
    
    any merger, consolidation, or spin-off.
  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
   107




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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
   108




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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.
  109




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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
   110




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##### Table of Contents



Right to Deliver Notices to the Company and the Common Representative
  Fees and Expenses
   Payment of Taxes
  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
Then,
  111




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
    
    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;
    
    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.
  112




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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
  Direct Registration System
   113




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Shareholder Communications and Inspection of Register of Holders of ADSs
  DIVIDEND POLICY
        
    
    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
  114




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##### Table of Contents




    
    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 re-designation 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
   Senior Notes due 2014
  Currency Swap Agreement
   115




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Alcatel IPTV Supply Agreement
 ®
 
 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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##### Table of Contents



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
   117




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Sale or Other Taxable Disposition of the Senior Notes
  Acquisition Premium
  Market Discount
     118




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Mexican Withholding Tax
    New Legislation Affecting Taxation of Net Investment Income of Certain U.S. Holders
  Information Reporting and Backup Withholding
  New Legislation Affecting Taxation of Notes, CPOs and ADSs Held By or Through Foreign Entities
  IRS Circular 230 Disclosure:
  Non-U.S. Holders of Senior Notes
   New Legislation Affecting Taxation of Notes, CPOs and ADSs Held By or Through Foreign Entities
  IRS Circular 230 Disclosure:
   119




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CPOs or ADSs
   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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New Legislation Affecting Taxation of Net Investment Income of Certain U.S. Holders
  U.S. Information Reporting and Backup Withholding.
  New Legislation Affecting Taxation of Notes, CPOs and ADSs Held By or Through Foreign Entities
  IRS Circular 230 Disclosure:
  Non-U.S. Holders of CPOs or ADSs
  U.S. Information Reporting and Backup Withholding.
   New Legislation Affecting Taxation of Notes, CPOs and ADSs Held By or Through Foreign Entities
  IRS Circular 230 Disclosure:
  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.
  123




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Mexican Income Tax Considerations
 Ley
del Impuesto sobre la Renta
   Mexican Tax Residence
   United States of America/Mexico and Other Tax Treaties
  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;
  124




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##### Table of Contents




    
    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 us or by persons related to us.
 Secretaría de Hacienda y
Crédito Público
     Sale or disposition of the senior notes
  Other Taxes
 IETU)
  125




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##### Table of Contents



Mexican Tax Consequences to Foreign Holders of the CPOs and ADSs
 Taxation of Dividends and Other Distributions
    Sale or Disposition of CPOs or ADSs
     Other Taxes
 IETU),
 
 F. Dividends and paying agents
  
 G. Statement by experts
   126




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##### Table of Contents



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
  Foreign Exchange Risk
   127




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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
  
 ITEM 15
    
    . CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   128




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Managements Annual Report on Internal Control over Financial Reporting
     Attestation Report of the Independent Registered Public Accounting Firm
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   Internal Control  Integrated
Framework
    129




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Internal Control  Integrated Framework
   
 Changes in Internal Control over Financial Reporting
  
 ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B.
    
    CODE OF ETHICS
     130




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ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Year Ended December 312009
    
    
    2008(In millions)Audit Fees(1)
    
    Ps.
    5.7
    
    
    Ps.
    5.2All Other Fees(2)
    
    Ps.
    0.0
    
    
    Ps.
    0.2Total
    
    Ps.
    5.7
    
    
    Ps.
    5.4
 
 (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)
    
    Other Fees includes fees for advisory and training services.  
 ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 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 to April 29, 2008
    
    
    1,841,900
    
    
    Ps.
    17.7094
    
    
    
    1,841,900
    
    
    Ps.
    29.2May
    
    From May 5 to May 30, 2008
    
    
    2,198,800
    
    
    Ps.
    18.3854
    
    
    
    2,198,800
    
    
    Ps.
    24.5June
    
    From June 3 to June 30, 2008
    
    
    702,800
    
    
    Ps.
    19.4713
    
    
    
    702,800
    
    
    Ps.
    22.2July
    
    From July 2 to July 31, 2008
    
    
    387,100
    
    
    Ps.
    16.8034
    
    
    
    387,100
    
    
    Ps.
    18.1August
    
    From August 1 to August 28, 2008
    
    
    580,800
    
    
    Ps.
    12.9328
    
    
    
    580,800
    
    
    Ps.
    11.1September
    
    From September 9 to September 29, 2008
    
    
    272,800
    
    
    Ps.
    12.4724
    
    
    
    272,800
    
    
    Ps.
    10.9October
    
    From October 1 to October 27, 2008
    
    
    388,800
    
    
    Ps.
    9.8259
    
    
    
    388,800
    
    
    Ps.
    9.1November
    
    From November 4 to November 21, 2008
    
    
    89,900
    
    
    Ps.
    7.0312
    
    
    
    89,900
    
    
    Ps.
    8.5
  131




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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)December
    
    From December 1 to December 31, 2008
    
    
    147,100
    
    
    Ps.
    7.8380
    
    
    
    147,100
    
    
    Ps.
    8.52009:January
    
    From January 7 to January 29, 2009
    
    
    196,200
    
    
    Ps.
    7.0726
    
    
    
    196,200
    
    
    Ps.
    7.8February
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    April
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    May
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    July
    
    From July 30 to July 31, 2009
    
    
    160,100
    
    
    Ps.
    5.1756
    
    
    
    160,100
    
    
    Ps.
    7.9August
    
    From August 4 to August 26, 2009
    
    
    547,100
    
    
    Ps.
    5.7586
    
    
    
    547,100
    
    
    Ps.
    7.6September
    
    From September 9 to September 30, 2009
    
    
    352,300
    
    
    Ps.
    6.9345
    
    
    
    352,300
    
    
    Ps.
    7.6October
    
    From October 1 to October 26, 2009
    
    
    309,300
    
    
    Ps.
    6.9268
    
    
    
    309,300
    
    
    Ps.
    7.7November
    
    From November 3 to November 11, 2009
    
    
    30,000
    
    
    Ps.
    6.3680
    
    
    
    30,000
    
    
    Ps.
    8.1December
    
    From December 1 to December 31, 2009
    
    
    250,500
    
    
    Ps.
    9.5015
    
    
    
    250,500
    
    
    Ps.
    7.02010:January
    
    From January 11 to January 14, 2010
    
    
    96,200
    
    
    Ps.
    11.0100
    
    
    
    96,200
    
    
    Ps.
    7.7
 
 (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
  
 ITEM 16G.
    
    CORPORATE GOVERNANCE
   132




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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.Corporate 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 Guidelines.We 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.
  133




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NYSE Standards
    
    Our Corporate Governance PracticesCode 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.
  134




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##### Table of Contents



PART III
 
 ITEM 17.
    
    FINANCIAL STATEMENTS
  
 ITEM 18.
    
    FINANCIAL STATEMENTS
 PageMaxcom Telecomunicaciones, S.A.B. de C.V. and Subsidiaries
    
    
    F-1Reports of Independent Registered Public Accounting Firms
    
    
    F-1Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007
    
    
    F-4Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2009, 2008 and 2007
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008
    
    
    F-6Consolidated Statements of Changes in Financial Position for the year ended December 31, 2007
    
    
    F-7Notes to the Consolidated Financial Statements for the years ended December 31, 2009, 2008 and 2007
    
    
    F-8
  135




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        Internal Control Integrated Framework
  Manuel Jimenez LaraMexico City, MexicoJune 25, 2010
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    /s/ Humberto Pacheco SoriaHumberto Pacheco SoriaAudit PartnerMexico City, March 4, 2008, except for Note 21 which the date is May 30, 2008.
  F-2




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
    2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    987,343
    
    
    
    1,591,405Derivative financial instruments (Note 13)
    
    
    35,121
    
    
    
    Accounts receivable:Customers, net of allowance for doubtful accounts of
$232,905 and $161,936 for 2009 and 2008,
respectively
    
    
    696,557
    
    
    
    716,203Value added tax recoverable
    
    
    210,819
    
    
    
    164,448Other accounts receivable
    
    
    87,079
    
    
    
    77,650994,455
    
    
    
    958,301Inventory  Net
    
    
    16,374
    
    
    
    40,876Prepaid expenses  Net
    
    
    30,149
    
    
    
    30,778Total current assets
    
    
    2,063,442
    
    
    
    2,621,360Long lived assets:Telephone network systems and equipment  Net (Note 7)
    
    
    4,941,770
    
    
    
    4,684,413Intangible assets  Net (Note 8)
    
    
    199,224
    
    
    
    209,683Preoperating expenses  Net (Note 6)
    
    
    
    
    
    
    50,863Frequency rights  Net (Note 9)
    
    
    59,674
    
    
    
    66,716Other assets:Deferred income taxes  Net (Note 19)
    
    
    230,324
    
    
    
    148,114Prepaid expenses  Net
    
    
    10,524
    
    
    
    15,381Guaranty deposits
    
    
    7,269
    
    
    
    8,315Derivative financial instruments (Note 13)
    
    
    3,198
    
    
    
    105,270Other assets
    
    
    2,151
    
    
    
    6,357Total assets
    
    $
    7,517,576
    
    
    
    7,916,472Liabilities and Shareholders EquityCurrent liabilities:Trade accounts payable
    
    $
    485,687
    
    
    
    469,328Accruals
    
    
    45,526
    
    
    
    45,505Current installments of obligations under capital leases
    
    
    
    
    
    
    4,354Customer deposits
    
    
    2,214
    
    
    
    2,518Other taxes payable
    
    
    69,660
    
    
    
    61,048Accrued interests (Note 11)
    
    
    13,426
    
    
    
    13,920Total current liabilities
    
    
    616,513
    
    
    
    596,673Long-term liabilities :Senior notes (Note 11)
    
    
    2,611,740
    
    
    
    2,707,660Other accounts payable
    
    
    97,887
    
    
    
    80,872Derivative financial instruments (Note 13)
    
    
    
    
    
    
    8,472Labor obligations upon retirement (Note 14)
    
    
    31,463
    
    
    
    21,626Total long-term liabilities
    
    
    2,741,090
    
    
    
    2,818,630Total liabilities
    
    
    3,357,603
    
    
    
    3,415,303Shareholders equity (Notes 15 and 16) :Capital stock
    
    
    5,410,244
    
    
    
    5,410,244Additional paid-in capital
    
    
    808,566
    
    
    
    816,443Deficit
    
    
    (2,046,912
    )
    
    
    (1,705,231
    )Repurchase of shares
    
    
    (11,925
    )
    
    
    (20,287
    )Total shareholders equity
    
    
    4,159,973
    
    
    
    4,501,169Commitments and contingencies (Note 20)Total liabilities and shareholders equity
    
    $
    7,517,576
    
    
    
    7,916,472
   F-3




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
    2009
    
    
    2008
    
    
    2007Net revenues (Note 17)
    
    $
    2,562,570
    
    
    
    2,683,229
    
    
    
    2,345,719Operating costs and expenses (Note 10):Network operating costs
    
    
    (1,131,353
    )
    
    
    (1,120,167
    )
    
    
    (976,979
    )Selling, general and administrative expenses
    
    
    (798,986
    )
    
    
    (819,642
    )
    
    
    (722,618
    )Depreciation and amortization
    
    
    (639,398
    )
    
    
    (551,889
    )
    
    
    (370,227
    )Total operating costs and expenses
    
    
    (2,569,737
    )
    
    
    (2,491,698
    )
    
    
    (2,069,824
    )Operating (loss) income
    
    
    (7,167
    )
    
    
    191,531
    
    
    
    275,895Other expenses:Other expenses
    
    
    (50,559
    )
    
    
    (12,616
    )
    
    
    (12,819
    )Restructuring charges (Notes 5(n) and 14)
    
    
    (7,282
    )
    
    
    (49,491
    )
    
    
    Impairment of long-lived assets (Note 5)
    
    
    
    
    
    
    (532,315
    )
    
    
    Employees statutory profit sharing (Note 19)
    
    
    (3,292
    )
    
    
    (1,173
    )
    
    
    (3,257
    )Other expenses, net
    
    
    (61,133
    )
    
    
    (595,595
    )
    
    
    (16,076
    )Comprehensive financing cost  Net (Note 18)
    
    
    (296,795
    )
    
    
    (267,393
    )
    
    
    (126,641
    )(Loss) income before income taxes
    
    
    (365,095
    )
    
    
    (671,457
    )
    
    
    133,178Income taxes (Note 19):Current tax expense
    
    
    (7,934
    )
    
    
    (12,162
    )
    
    
    (50,700
    )Deferred tax benefit (expense)
    
    
    69,471
    
    
    
    245,856
    
    
    
    (46,282
    )Total income tax benefit (expense)
    
    
    61,537
    
    
    
    233,694
    
    
    
    (96,982
    )Net (loss) income for the year
    
    $
    (303,558
    )
    
    
    (437,763
    )
    
    
    36,196(Loss) earnings per share (Note 5t):Basic (loss) earnings per common share (pesos)
    
    $
    (0.38
    )
    
    
    (0.55
    )
    
    
    0.06Diluted earnings per common share (pesos)
    
    $
    
    
    
    
    
    
    
    
    0.06Weighted average basic shares (thousands)
    
    
    789,819
    
    
    
    789,819
    
    
    
    560,176Weighted average diluted shares (thousands)
    
    
    833,543
    
    
    
    829,337
    
    
    
    606,144
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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
    Additional
    
    
    Retained
    
    
    
    
    
    
    TotalCapital
    
    
    paid-in
    
    
    earnings
    
    
    Repurchase
    
    
    shareholdersStock
    
    
    capital
    
    
    (deficit)
    
    
    of shares
    
    
    equityBalances 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 option plan (Note 16)
    
    
    
    
    
    
    37,124
    
    
    
    
    
    
    
    
    
    
    
    37,124Comprehensive net loss
    
    
    
    
    
    
    
    
    
    
    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 option plan (Note 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
    )
    
    
    4,501,169Stock option plan (Notes 15 and 16)
    
    
    
    
    
    
    (7,877
    )
    
    
    
    
    
    
    
    
    
    
    (7,877
    )Repurchase of shares (Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,362
    
    
    
    8,362Comprehensive net loss
    
    
    
    
    
    
    
    
    
    
    (341,681
    )
    
    
    
    
    
    
    (341,681
    )Balances as of December 31, 2009
    
    $
    5,410,244
    
    
    
    808,566
    
    
    
    (2,046,912
    )
    
    
    (11,925
    )
    
    
    4,159,973
   F-5




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
    2009
    
    
    2008Cash flows from operating activities:Loss before taxes
    
    $
    (365,095
    )
    
    
    (671,457
    )Items related to investing activities:Depreciation and amortization
    
    
    639,398
    
    
    
    551,889Impairment of long-lived assets
    
    
    
    
    
    
    532,315Loss on sale of telephone network systems and equipment
    
    
    42,113
    
    
    
    82,496Profit on sale of subsidiary company
    
    
    (6,126
    )
    
    
    Items related to financing activities:Financial instruments
    
    
    58,479
    
    
    
    (83,323
    )Interest expense
    
    
    280,649
    
    
    
    217,210Subtotal
    
    
    649,418
    
    
    
    629,130Customer accounts receivable
    
    
    19,646
    
    
    
    (198,949
    )Recoverable value added tax
    
    
    (46,371
    )
    
    
    34,135Other accounts receivable
    
    
    (3,055
    )
    
    
    (22,974
    )Inventory
    
    
    24,502
    
    
    
    (7,627
    )Prepaid expenses
    
    
    5,486
    
    
    
    9,563Trade accounts payable, provisions and other acumulated liabilities
    
    
    16,380
    
    
    
    1,238Income taxes paid
    
    
    (14,308
    )
    
    
    (7,320
    )Customer deposits
    
    
    (304
    )
    
    
    (283
    )Other liabilities and taxes payable
    
    
    31,901
    
    
    
    (3,436
    )Changes in employees benfits and provisions
    
    
    9,837
    
    
    
    12,694Net cash provided by operating activities
    
    
    693,132
    
    
    
    446,171Cash flows from investing activities:Capital expenditures (including interest capitalized in the amount of $26,914 and $62,029 in 2009 and 2008, respectively)
    
    
    (931,623
    )
    
    
    (1,631,001
    )Proceeds from sale of telephone network systems and equipment
    
    
    10,256
    
    
    
    4,364Proceeds from sale of subsidiary company
    
    
    6,126
    
    
    
    Increase in other non-current assets
    
    
    5,252
    
    
    
    12,704Net cash used in investing activities
    
    
    (909,989
    )
    
    
    (1,613,933
    )Cash flows from financing activities:Bonds payable
    
    
    (95,920
    )
    
    
    534,420Decrease in capital stock
    
    
    
    
    
    
    (7
    )Stock option plan
    
    
    (7,877
    )
    
    
    (71,613
    )Interest paid
    
    
    (281,142
    )
    
    
    (214,462
    )Capital lease, payment of credits
    
    
    (4,354
    )
    
    
    (8,419
    )Repurchase of shares
    
    
    8,362
    
    
    
    (20,287
    )Other financing activities
    
    
    (6,274
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (387,205
    )
    
    
    219,632Net decrease in cash and equivalents
    
    
    (604,062
    )
    
    
    (948,130
    )Cash and cash equivalents:At beginning of year
    
    
    1,591,405
    
    
    
    2,539,535At end of year
    
    $
    987,343
    
    
    
    1,591,405
   F-6




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MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
 
    2007Operating activities:Net income
    
    $
    36,196Add charges (deduct credits) to operations not requiring (providing) funds:Depreciation and amortization
    
    
    370,227Deferred income taxes
    
    
    46,282Stock option plan
    
    
    37,124Employee benefits
    
    
    5,752Net financing from (investing in) operating accounts:Accounts receivable
    
    
    (285,004
    )Inventories
    
    
    2,540Prepaid expenses
    
    
    4,109Restricted cash and other current assets and liabilities
    
    
    85,932Resources provided by operating activities
    
    
    303,158Financing activities:Capital stock increase
    
    
    2,643,369Proceeds from loans and bonds payable, net of payments and capitalizations
    
    
    126,160Derivative financial instruments
    
    
    (24,036
    )Resources provided by financing activities
    
    
    2,745,493Investing activities:Telephone network systems and equipment, net of dispositions
    
    
    (1,160,359
    )Acquisition of subsidiaries
    
    
    (33,576
    )Intangible assets
    
    
    (54,472
    )Resources used in investing activities
    
    
    (1,248,407
    )Increase of cash and cash equivalents
    
    
    1,800,244Cash and cash equivalents:At beginning of year
    
    
    739,291At end of year
    
    $
    2,539,535
   F-7




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##### Table of Contents



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
     Frequency rights
   F-8




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##### Table of Contents



Convergence agreement
   Interconnection agreements
      NOTE 3  RELEVANT CORPORATE EVENTS
 Sale of subsidiary
  Acquisition of Sierra Comunicaciones Globales
    F-9




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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
    
    
    
    
   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 servicesAsesores Telcoop, S.A. de C.V. (ii)
    
    99.9
    
    Business advisory servicesTECBTC Estrategias de Promoción, S. A. de C. V.
    
    99.9
    
    Technical personnel servicesMaxcom TV, S. A. de C. V. (i)
    
    99.9
    
    Cable television servicesMaxcom USA, Inc. (i)
    
    100.0
    
    International telecommunications servicesTelereunion, S. A. de C. V. (iii)
    
    99.9
    
    Long distance and infrastructure leasingTelscape de México, S. A. de C. V. (iii)
    
    99.9
    
    Real estate servicesSierra USA Communications, Inc. (iii)
    
    100.0
    
    International telecommunication servicesSierra Comunicaciones Globales, S. A. de C. V.
    
    99.9
    
    Infrastructure leasing
 
 (i)
    
    These companies are in pre-operational stage.(ii)
    
    Subsidiary established on November 30, 2009, also in pre-operational stage.(iii)
    
    These companies were formerly part of VAC Group (former ownerstatements of Telereunion
Group), whichtogether and hereinafter referred to as Grupo Telereunion.    F-10




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NOTE 5  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       a.
    
    Recognition of the effects of the inflationThe consolidated financial statements of the Company have been prepared in accordance with
Mexican Financial Reporting Standards (MFRS) in effect as of the balance sheet date and
include the recognition of the effects of inflation on the financial information through
December 31, 2007, based on the Mexican National Consumer Price Index (NCPI) published by
Banco de México (central bank of México).The accumulated percentage of inflation for the previous three year periods and the indexes used
to recognize the effects of inflation for the year, are the following:
 InflationDecember 31,
    
    NCPI
    
    
    Year
    
    
    Accumulated2009
    
    
    138.541
    
    
    
    3.57
    %
    
    
    14.48
    %2008
    
    
    133.761
    
    
    
    6.53
    %
    
    
    15.01
    %2007
    
    
    125.564
    
    
    
    3.76
    %
    
    
    11.56
    %
 b.
    
    Cash and cash equivalentsThe temporary investments include investments denominated in local currency and dollars.
Investments in national currency are usually daily liquidity investments and are made in
government treasury bonds and/or repurchase agreements. The dollar investments are made with
financial institutions in the United States of America, in investment funds of U.S. Treasury
Bills. These funds provide daily liquidity and its main objective is preserving the value of the
principal invested. During 2009, the Company held most of its investments with UBS International
Inc. At any given time, temporary investments are valued at market value.
  F-11




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c.
    
    InventoriesInventory consists of materials used to install telephone lines and network build-out, as well
as its sale cost, are originally registered at average cost and up to December 31, 2007 were
subsequently updated by the application of factors derived from the NCPI. The values thus
determined do not exceed their market value. The allowance for obsolescence and slow-moving was
evaluated on a three months basis during 2009 and on a six months basis during 2008 and 2007,
and according to the results of this evaluation, products are subject to a slow-moving or
obsolescence allowance.d.
    
    Telephone network systems and equipmentTelephone network systems and equipment are recorded at acquisition cost and until December 31,
2007 were restated by applying factors derived from the NCPI.The Company constructs certain of its own network systems and related facilities. Internal costs
directly related to the construction of such facilities are capitalized. The amounts capitalized
during 2009, 2008 and 2007 were $85,596, $88,478 and $72,052, respectively. During 2009, the
Company proportionally increased its network and related facilities with internal resources
rather than with external resources.The Company capitalizes the comprehensive financing costs attributable to assets under
construction. Capitalized comprehensive financing cost includes interest expense, gains from
monetary position (until December 31, 2007), and foreign exchange losses, and are determined by
reference to the Companys average interest cost on borrowings. See Note 18.Installation costs include labor, tools and supplies. Installation costs related to commercial
customers are capitalized and amortized on a straight line basis for a period of 20 years.
Installation costs capitalized are expensed once the relationship with the customer is
terminated.When the Company invoices its residential customers for installation fees, any associated cost
is recognized as an expense in the statement of operations.Depreciation is calculated by the straight-line method over the restated cost, based on the
estimated useful lives of the assets. Depreciation is charged to results of operations.During 2009, the Company performed a technical study on the remaining useful lives of the public
telephony, fiber-optic networks and IPTV (Internet Protocol Television) equipment, based on the
opinion of a specialist. As a result thereof, useful lives were increased from 17 to 23 years
for public telephony equipment, from 17 to 24 years for fiber-optic networks equipment and from
10 to 23 years for IPTV equipment. The Company recalculated the amount of depreciation expense
related to these assets for the year 2009, which amounted to $242,267. If depreciation would
have been estimated based on the previous remaining useful lives, the depreciation expense for
the year 2009 would have been of $299,536.During 2007, the Company performed a technical study on the remaining useful lives of the public
telephony equipment, based on the opinion of a specialist. As a result thereof, useful lives
were decreased from 17 to 8 years. The Company recalculated the amount of depreciation expense
related to these assets for the year 2007, which amounted to $33,231. If depreciation would have
been estimated based on the previous remaining useful lives, the depreciation expense for the
year 2007 would have been of $16,011.Maintenance and minor repair costs are charged to results as incurred; replacement and
improvement costs are capitalized. The cost and related allowances of assets sold or retired are
removed from the accounts, and any resulting profit or loss is reflected in the statement of
results of operations.
  F-12




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##### Table of Contents



e.
    
    Intangible assetsIntangible assets are recognized in the balance sheet as long as they are identifiable, they
provide future economic benefits, and the Company has control over such benefits. Intangible
assets with a definite useful life are amortized systematically based on the best estimation of
its useful life, as determined in accordance with the expected future economic benefits.Purchased software and certain activities of developing internal-use software are capitalized
and amortized over their expected useful lives. Other activities, such as training, maintenance
and re-engineering are recognized in the results of the period, as incurred.Debt issuance costs are amortized on a straight-line basis over the term of the related debt. As
of December 31, 2009 and 2008, capitalized expenses for the new debt issuance amount to $64,342.
See Note 8.f.
    
    ConcessionsAs previously mentioned (Note 2), the SCT awarded the Company, at no cost, a concession to
install and operate a public telecommunications network for a 30-year period. In accordance with
Statement C-8 Intangible Assets of NIF, this concession has no recorded value for financial
reporting purposes and it is only disclosed in a Note to these consolidated financial
statements.g.
    
    Frequency rightsFrequency rights are recorded at their acquisition cost and until and up to December 31, 2007
were restated by applying factors derived from the NCPI as from the acquisition date.
Amortization is calculated by the straight-line method over 20 years, which is the term of the
frequency rights. See Note 9.h.
    
    Pre-operating expensesAll expenses incurred during the development stage or in specific projects in progress up to
December 31, 2002 were capitalized. Those expenses are amortized by the straight-line method
over a 10-year period. The amortization period begins when the corresponding project starts up
operations.For the years ended December 31, 2008 and 2007, the Company recorded amortization expense in the
amounts of $22,123 and $20,705, respectively. Also as of December 31, 2008 the Company made an
adjustment based on the impairment recorded of $4,915. Accumulated amortization was $334,767 and
$312,644 as of December the 31, 2008 and 2007, respectively.On January 1, 2009, the Company wrote off the unamortized balance at December 31, 2008 of
pre-operating expenses for $50,863, with a charge to the accumulated deficit, in accordance with
the new NIF C-8 Intangible Assets. See Note 6.i.
    
    Impairment of long-lived assets.The Company evaluates values of long-lived assets when there are events or changes that reveal
an indication of potential impairment. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net income expected to be generated
by the asset. If the carrying amount of an asset exceeds its estimated net income, an impairment
charge is recognized by the amount that the carrying amount of the asset exceeds the fair value
of the asset. Given the current economic situation there is a strong reliance on judgment to
evaluate if the indication of potential impairment to long-lived assets should give rise to an
impairment valuation.As of December 31, 2008, the carrying amount of long-lived assets was higher than the expected
discounted income at the Companys theoretical rate for weighted average cost of capital under
current market conditions. The impairment charge (a non-cash item) calculated for 2008 amounted
to $532,315. Said charge was proportionately distributed throughout the different asset classes.
See Notes 5(h), 7, 8, and 9.j.
    
    Liabilities and accrualsThe Companys liabilities and accruals recognized in the balance sheet represent current
obligations which will probably require disbursement of economic resources. These provisions
have been recorded based on managements best estimate to cover the current obligation; however,
actual results could differ from the provisions recognized.
  F-13




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##### Table of Contents



k.
    
    Transactions in foreign currenciesTransactions in foreign currencies are recorded at the prevailing exchange rates at the date of
the transaction, with the related exchange gain or loss recorded within the statement of
operations. Assets and liabilities denominated in said currencies are valued at the exchange
rate in force at the close of the period, with the related exchange gain or loss recognized as
part of the comprehensive financing cost.l.
    
    Income Tax (IT), Asset Tax (AT), Flat Rate Business Tax (IETU), and Employees Statutory
Profit Sharing (ESPS)IT, IETU and ESPS payable for the year are determined in conformity with the tax provisions in
effect.Deferred IT, IETU and, from January 1, 2008 deferred ESPS, are accounted for under the asset and
liability method. Deferred tax and ESPS assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and in the case of IT and IETU,
for tax loss and credit carryforwards. Deferred tax and ESPS assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax and
ESPS assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. See Note 19.m.
    
    Employees Statutory Profit Sharing (ESPS)As of December 31, 2009, 2008 and 2007, the Company recorded a provision of $3,292, $1,173 and
$3,257 respectively for ESPS, which in accordance with NIF B-3 Income Statement was included
under other income and expenses in the statement of operations.n.
    
    Employee benefitsTermination benefits for reasons other than restructuring and retirement to which employees are
entitled are charged to operations for each year, based on actuarial computations using the
projected unit credit method considering projected salaries. At December 31, 2009, and for
purposes of recognizing benefits upon retirement, the remaining average service life of
employees entitled to plan benefits approximates 33.4 years.Actuarial gain or loss is recognized directly in profit or loss as accrued.In conformity with NIF D-3 Employee benefits restructuring costs are presented in other
expenses in the statement of operations.o.
    
    Derivative financial instrumentsPrimary Financial InstrumentsAll rights and obligations of primary financial instruments, are disclosed in the Balance Sheet
and are classified as trading and available for sale.The primary financial instruments are valuated to its fair market value, determined using quoted
market prices. Changes in the primary financial instruments classified as trading and available
for sale (including computed interests), and trading costs are are registered in the
comprehensive financing cost within the results of operationsDerivative financial instrumentsThe Company applied the provisions of NIF C-10, Derivative Financial Instruments and Hedge
Operations, which, sets forth the criteria for recording, valuation and disclosure of all
derivative financial instruments and embedded derivative financial instruments. The Company
records assets and liabilities arising from such operations at its fair value on the balance
sheet without any differentiation of their purpose or origin. The fair value of these
derivatives is calculated within the accepted financial industry methods and data.
 Changes in the fair value of such assets not qualified solely as hedging instruments according
to NIF C-10 are registered in the comprehensive financing cost within the results of operations
  F-14




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##### Table of Contents



Risk Coverage
 To mitigate exposure to Peso/Dollar foreign exchange fluctuation risks, the Company sparingly
uses derivative financial instruments such as interest rate and cross currency swaps.For accounting purposes, these derivative instruments, although intended for hedging purposes
from an economic perspective, have been designated as trading instruments as they do not comply
with all the requirements to qualify for hedge accounting. Changes in the fair value of these
derivative instruments are recognized in the statement of operations for the year in which such
changes occur, under comprehensive financing cost.Embedded DerivativesThe Company reviews the contracts it enters into to identify the existence of embedded
derivatives. Identified embedded derivatives are subject to assessment under NIF C-10 to
determine compliance with the required segregation conditions. If conditions are met, they are
segregated from the host contract and valued at their fair value. Where the embedded derivative
is classified as being for trading purposes, the gain or loss from changes in fair value is
recognized in the comprehensive financing cost in the statement of operations.p.
    
    Revenue recognitionRevenues from the sale of telephone equipment to clients are recognized at the time of delivery
of said equipment and the risk and rewards are transferred to the customer. Revenues from
services are recognized as rendered.Generally, installation expenses are charged to our residential customers and related revenues
are recognized when installation is complete.Revenues from public telephony services are recognized based on the cash collected and the
estimated uncollected cash from services rendered at the date of the financial statements.Revenues from interconnection services are recognized on accrual basis. The Company entered into
local interconnection agreements with various telephone companies under the bill and keep
compensatory clause. In accordance with these agreements, if the imbalance between local calls
originated from the other telephony concessionaire and completed by Maxcom, and the calls
originated from Maxcom and completed by the other telephony company over the course of one month
do not exceed an established percentage, there will be no payment of an interconnection rate
charge to the user for interconnection services. However, if the imbalance exceeds that
percentage in a particular month, the Company or the telephony concessionaire is subject to a
charge per minute. The aforementioned allowed percentage of imbalance was 5% during 2009, 2008
and 2007.The Company also has interconnection agreements for long-distance and mobile services with
other concessionary telephony companies. However, they do not include the clause of the bill
and keepcompensatory agreement.Revenues from pay television services are recognized as rendered.Revenues from mobile telephone services are recognized on monthly basis when the traffic with
suppliers of mobile telephony has been reconciled and the charge to the client has been
recorded.Also, for the mobile telephony revenues the Company recognizes through the suppletory
application of ASC 605 -25 Revenue Recognition Multiple-Element Arrangements that evaluates
the time and manner in which revenues for the different accounting units should be recognized.
For the Company, the separated accounting units are the sale of mobile telephony equipment and
mobile services.Revenue from bundled services is recognized in the month in which the services are provided.
Bundle revenues are distributed among voice, data, pay TV or mobile services.Revenues from lease of transmission capacity through the fiber optic ring are recorded in
deferred revenue when billed in advance and then recognized ratably into revenue over the term
of the contract.
  F-15




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The Company records an allowance in the amount of 90% of accounts receivable with balances due
over 90 but less than 119 days old, and of 100% of accounts receivable due over 120 days old,
except when there is a collection agreement with a client. In such cases, the allowance amount
is 30% with balances due over 90 days if there is not a settlement negotiated with the client.
Accounts handed over to the companys legal collection services are reserved up to a 100%, or
less depending on the success rate indicated by the attorney handling the account.q.
    
    Business and credit concentrationThe Company provides its services to a vast array of customers, thus avoiding dependency on any
single customer.The Companys main suppliers are Radiomóvil Dipsa, S.A. de C.V., Telmex and Pegaso PCS, S.A. de
C.V.. The cost percentage related to them for the years 2009, 2008 and 2007 were 69%, 72% and
73%, respectively.r.
    
    Stock-options compensationIn July 2006, the Company decided to amend its different stock option plans to give better
benefits to the holders of the options of those plans. Consequently, the Company changed the
requisite service period as well as the strike price and vesting period on the different stock
option plans. Granting conditions are included in the assumptions regarding the number of
shares that are expected to become payable or the number of shares that employees receive. This
estimate is revised annually and differences, if any, are charged or credited to the statement
of operations, with an adjustment to shareholders equity.Stock options are granted to members of the Board of Directors, Company officers and employees,
as described in Note 16.From January 1, 2009, the Company applies Mexican Financial Reporting Standard (MFRS) D-8
Share-based Payments, for recognition, valuation and recording of the costs of these plans.
The adoption of this MFRS generated no effect, because the Company suppletorily applied IFRS-2
Share-based Payments, which was effective since 2005, until December 31, 2008, as
established by MFRS A-8 Suppletory.MFRS requires that valuation of the cost of stock options granted to employees must be
estimated by applying the fair value method. The cost of the plans granted options estimated
under this method is amortized throughout the vesting period, excluding the impact of any
situation not related to market performance.For the years ended December 31, 2009, 2008 and 2007, the Company recognized stock option plan
costs of $1,669, $5,114 and $37,124, respectively.The net amount of the stock options exercised, excluding any expenses or cost due to
transactions related to the payment, are credited to shareholders equity and to additional
paid-in capital at face value. On the other hand, cash received from exercised stock options is
recorded as equity in additional paid-in capital. During 2009, 2008 and 2007, options were
exercised in the amount of $799, $70,672 and $1,281, respectively.The fair value of options is estimated by an independent expert on the date they are granted,
applying the binomial valuation model, by the Black & Scholes method, considering the following
weighted-averages for stock options granted during the years ended December 31, 2009, 2008 and
2007, based on the following:
 2009
    
    
    2008
    
    
    2007Volatility of expected price per share
    
    
    85.20
    %*
    
    
    30.00
    %
    
    
    30.00
    %Risk-free interest rate
    
    
    0.20
    %
    
    
    3.07
    %
    
    
    4.89
    %Expected life of options
    
    
    2.00
    
    
    
    4.00
    
    
    
    3.25
 *
    
    During 2009, the Company used and historic behavior of the price per share from October 2007
to March 2009 to determine fair value of the stocks granted.  F-16




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##### Table of Contents



s.
    
    Segment information
    t.
    
    (Loss) earnings per share
   u.
    
    New accounting standards
  MFRS B-5 Financial Information by Segments 
 (i.)
    
    The information to be disclosed by operating segment is that regularly used by senior
management and it does not require the segmentation into primary and secondary information,
nor is it to be referred to segments identified based on products or services (economic
segments), geographical areas and homogeneous groups. Additionally, disclosure of
information on the whole entitys products or services geographical areas, principal
clients and suppliers is required.
 (ii.)
    
    MFRS B-5 does not require that the entitys business areas be subject to different
risks to qualify as operating segments.
 (iii.)
    
    MFRS B-5 allows business areas in pre-operating stage to be catalogued as operating
segments.
 (iv.)
    
    MFRS B-5 requires disclosure by segment and separately, revenue and interest expense
as well as alland other components of comprehensive financial results (CFR). In specific
cases, the FRS B-5 permits disclosure of net interest income.
 (v.)
    
    MFRS B-5 requires disclosure of the liability amounts included in the usual operating
segment information normally used by senior management in making the entitys operating
decisions.
  MFRS B-9 Interim Financial Statements
 (i.)
    
    Requires that the interim financial information includes a comparative and condensed
balance sheet, income statement, statement of shareholders equity and statement of cash
flows and, for non-profit entities, it expressly requires the presentation a statement of
submission of the activities.
  F-17




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##### Table of Contents



(ii.)
    
    Establishes that the financial information at the end of an interim period should
beis presented comparatively with the equivalent interim period of the immediately
precedingprevious year and, in the case of the balance sheet, compared also to such
financial statement at the immediately preceding year-end date.
 (iii.)
    
    Includes and defines new terminology.
  MFRS C-1 Cash and cash equivalents Cash
 (i)
    
    Requires the presentation of cash and cash equivalents, restricted, within the
balance sheet caption of Cash and cash equivalents.
 (ii)
    
    The term demand temporary investments is replaced by available demand
investments.
 (iii)
    
    Included as a feature to identify the investments available, values should be
readily available, such investments with a expiration up to 3 months from date of
purchase.
 (iv)
    
    Includes the definition of the terms: acquisition cost, restricted cash and cash
equivalents, highly liquid investments, net realizable value, nominal value and fair
value.
  NOTE 6  ACCOUNTING CHANGES AND RECLASSIFICATIONS:
  MFRS C-8 Intangible Assets
 (i)
    
    Redefinition of intangible assets, establishing that separability is not the only
condition for the intangible asset to be identifiable.
 (ii)
    
    The acquisition cost must be considered for the initial valuation, identifying
whether it is an individual acquisition, business combination or it is internally
generated. Additionally, future financial benefits should be generated.
 (iii)
    
    The presumption that the useful life of an intangible asset may not exceed twenty
years was eliminated.
  MFRS D-8 Share based payments
 (i)
    
    Equity-settled share-based payment transactions, such as stock or stock options,
issued by the entity or a related entity in consideration for goods or services.
 (ii)
    
    Cash-settled share-based payment transactions, where goods or services are acquired
by the entity, thus incurring a liability to the supplier of the goods or services for
amounts based on the price (or value) of the stock or other equity instruments of the
entity or a related entity.
 (iii)
    
    Cash- or equity-settled share-based payment transactions, where goods or services
are acquired by the entity. Under the relevant agreement terms, the settlement option
rests with the entity or the supplier of goods or services.
  F-18




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##### Table of Contents



NOTE 7  TELEPHONE NETWORK SYSTEMS AND EQUIPMENT  NET
  Estimateduseful2009
    
    
    2008
    
    
    life (years)Telecommunications network and equipment
    
    $
    3,808,104
    
    
    
    3,440,327
    
    
    Between 23 and 24Public telephony equipment
    
    
    701,665
    
    
    
    582,734
    
    
    
    8Leasehold improvements
    
    
    1,313,573
    
    
    
    1,076,420
    
    
    Between 2 and 20
    *Radio equipment
    
    
    409,836
    
    
    
    397,444
    
    
    
    30Line installation cost
    
    
    636,620
    
    
    
    533,473
    
    
    
    20Electronic equipment
    
    
    266,047
    
    
    
    266,047
    
    
    
    25Capitalized expenses due to construction of networks
    
    
    511,232
    
    
    
    425,636
    
    
    
    30Capitalized comprehensive financing cost
    
    
    259,243
    
    
    
    241,235
    
    
    
    10Computer equipment
    
    
    246,709
    
    
    
    222,413
    
    
    
    5Transportation equipment
    
    
    65,581
    
    
    
    65,138
    
    
    
    4Office furniture
    
    
    47,397
    
    
    
    39,661
    
    
    
    10Other
    
    
    36,846
    
    
    
    28,179
    
    
    
    10Engineering equipment
    
    
    21,046
    
    
    
    20,450
    
    
    
    10Subtotal
    
    
    8,323,899
    
    
    
    7,339,157Accumulated depreciation and amortization
    
    
    (3,023,371
    )
    
    
    (2,566,889
    )Cumulative impairment charges (See note 5i)
    
    
    (500,684
    )
    
    
    (500,684
    )Subtotal
    
    
    4,799,844
    
    
    
    4,271,584Construction in progress
    
    
    141,926
    
    
    
    412,829$
    4,941,770
    
    
    
    4,684,413
   *
    
    Leasehold improvements are amortized at the lower of the useful life of the improvement or the
contract term.     F-19




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##### Table of Contents



2009
    
    
    2008Transportation equipment
    
    $
    6,327
    
    
    
    4,740Accumulated depreciation
    
    $
    (4,918
    )
    
    
    (4,123
    )Total
    
    $
    1,409
    
    
    
    617
 NOTE 8  INTANGIBLE ASSETS
  Useful2009
    
    
    2008
    
    
    life (years)Infrastructure rights
    
    $
    180,040
    
    
    
    180,040
    
    
    30 and 15Debt issuance costs
    
    
    64,342
    
    
    
    64,342
    
    
    8Software licenses
    
    
    313,087
    
    
    
    270,806
    
    
    3.3557,469
    
    
    
    515,188Accumulated amortization
    
    
    (337,978
    )
    
    
    (285,238
    )Cumulative impairment charges for intangible assets (See Note 5i)
    
    
    (20,267
    )
    
    
    (20,267
    )$
    199,224
    
    
    
    209,683
  NOTE 9  FREQUENCY RIGHTS
  2009
    
    
    2008Frequency rights
    
    $
    155,309
    
    
    
    155,309Less  Accumulated amortization
    
    
    (89,186
    )
    
    
    (82,144
    )Impairment charges (See Note 5i)
    
    
    (6,449
    )
    
    
    (6,449
    )$
    59,674
    
    
    
    66,716
   F-20




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##### Table of Contents



NOTE 10  BALANCES AND TRANSACTIONS WITH RELATED PARTIES
  2009
    
    
    2008
    
    
    2007Expenses paid to:BBG Wireless (1)
    
    $
    45,841
    
    
    
    7,709
    
    
    
    Electromecánica de Guadalajara, S. A. de C. V. (2)
    
    
    4,262
    
    
    
    5,697
    
    
    
    7,425Autokam Regiomontana, S. A. de C. V. (3)
    
    
    3,262
    
    
    
    844
    
    
    
    343GS Comunicación (6)
    
    
    3,326
    
    
    
    1,063
    
    
    
    Vázquez Eduardo (8)
    
    
    591
    
    
    
    480
    
    
    
    459Vázquez Gabriel Agustín (8)
    
    
    589
    
    
    
    480
    
    
    
    459Servicios corporativos VAC (11)
    
    
    584
    
    
    
    
    
    
    
    Bank of America, Co. (9)
    
    
    422
    
    
    
    315
    
    
    
    378Automotriz Rio Sonora (3)
    
    
    324
    
    
    
    5,122
    
    
    
    Road Telco & Consulting, S. A. de C. V. (5)
    
    
    319
    
    
    
    1,975
    
    
    
    2,309Inmobiliaria Radio Centro (8)
    
    
    280
    
    
    
    264
    
    
    
    Sierra Madre Automotriz, S. A. de C. V. (3)
    
    
    219
    
    
    
    
    
    
    
    318Ingeniería Avanzada en Construcción, S.A. de C.V. (7)
    
    
    211
    
    
    
    765
    
    
    
    Solís Gilberto (6)
    
    
    201
    
    
    
    332
    
    
    
    Inmobiliaria AutoKam, S. A. de C. V. (8)
    
    
    100
    
    
    
    101
    
    
    
    98Aguirre Adrián (10)
    
    
    91
    
    
    
    31
    
    
    
    MG Radio (4)
    
    
    86
    
    
    
    101
    
    
    
    Total
    
    
    60,708
    
    
    
    25,279
    
    
    
    11,789Revenues from telephony services collected from related parties
    
    $
    772
    
    
    
    966
    
    
    
    1,020
 
 (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.(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 travel expenses related to a risk capital
investment fund of Bank of America (Maxcom shareholder).(10)
    
    Corresponds to expenses reimbursed.(11)
    
    Corresponds to representation expenses.  F-21




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##### Table of Contents



2009
    
    
    2008Accounts Receivable:Difusión Panorámica, S. A. de C. V.
    
    
    16
    
    
    
    15Porcelanatto, S. A. de C. V.
    
    
    12
    
    
    
    29Guijarro de Pablo y Asociados, S.C.
    
    
    12
    
    
    
    21Proa Mensaje y Comunicación, S. A. de C. V.
    
    
    10
    
    
    
    11Shareholder María Guadalupe Aguirre Gómez
    
    
    2
    
    
    
    1Shareholder María Elena Aguirre Gómez
    
    
    1
    
    
    
    1Road Telco & Consulting, S. A. de C. V.
    
    
    
    
    
    
    9Sport and Therapy Center, S. A. de C. V.
    
    
    
    
    
    
    8Safe Iberoamericana, S. A. de C. V.
    
    
    
    
    
    
    1Shareholder Gabriel Vazquez
    
    
    
    
    
    
    1$
    53
    
    
    
    97
 2009
    
    
    2008Accounts Payable:BBG Wireless
    
    $
    7,539
    
    
    
    Autokam Regiomontana, S. A. de C. V.
    
    
    1,272
    
    
    
    441GS Comunicación, S. A. de C. V.
    
    
    343
    
    
    
    244Nexus Partners
    
    
    65
    
    
    
    30Servicios corporativos VAC
    
    
    58
    
    
    
    Inmobiliaria Autokam, S. A. de C. V.
    
    
    19
    
    
    
    Electromecánica de Guadalajara, S. A. de C. V.
    
    
    29,153
    
    
    
    36,091Automotriz Río Sonora, S. A. de C. V.
    
    
    
    
    
    
    236Ingenieria Avanzada en Construcción, S. A. de C. V.
    
    
    
    
    
    
    112Inmobiliaria Radio Centro
    
    
    
    
    
    
    25Shareholder Adrián Aguirre Palme
    
    
    
    
    
    
    22$
    38,449
    
    
    
    37,201
   NOTE 11  SENIOR NOTES
  2009
    
    
    2008Long term:Senior Notes maturing in 2014, bearing
interest at a fixed annual rate of 11%,
payable semiannually as from June 15, 2007.
    
    $
    2,611,740
    
    
    
    2,707,660
     F-22




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##### Table of Contents



NOTE 12  FOREIGN CURRENCY POSITION
   2009
    
    
    2008Assets
    
    
    74,852
    
    
    
    121,987Liabilities
    
    
    (213,696
    )
    
    
    (221,164
    )Net (liabilities) assets in dollars
    
    
    (138,844
    )
    
    
    (99,177
    )Exchange rate at end of the year (Mexican pesos per one dollar)
    
    $
    13.06
    
    
    $
    13.54
  NOTE 13  DERIVATIVE FINANCIAL INSTRUMENTS
 Embedded Derivatives
   F-23




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##### Table of Contents



Cross currency swaps:
 Effects in operationsCounter-party
    
    Notional
    
    Basic conditions
    
    2009
    
    
    2008Bank Morgan
    
    37,500
    
    Interest Received: 11%
    
    
    799
    
    
    
    Stanley AG
    
    USD
    
    Periodicity: Semi-annualMaturity: December 15, 2014(478,125) MXP
    
    Interest Paid: TIIE 28 days + 4.570%Periodicity: Semi-annualMaturity: December 15, 2014Bank Morgan
    
    37,500
    
    Interest Received: 11%
    
    
    (8,489
    )
    
    
    Stanley AG
    
    USD
    
    Periodicity: Semi-annualMaturity: December 15, 2010(478,125) MXP
    
    Interest Paid: 9.92%Periodicity: Semi-annualMaturity: December 15, 2010Bank Morgan
    
    37,500
    
    Interest Received: 11%
    
    
    (10,284
    )
    
    
    Stanley AG
    
    USD
    
    Periodicity: Semi-annualMaturity: December 15, 2010(478,125) MXP
    
    Interest Paid: TIIE 28 days + 4.010%Periodicity: Semi-annualMaturity: December 15, 2010Bank Morgan
    
    37,500
    
    Interest Received: 11%
    
    
    (1,170
    )
    
    
    Stanley AG
    
    USD
    
    Periodicity: Semi-annualMaturity: December 15, 2014(478,125) MXP
    
    Interest Paid: 12.75%Periodicity: Semi-annualMaturity: December 15, 2014Bank Morgan
    
    75,000
    
    Interest Received: 11%
    
    
    
    
    
    
    (52,820
    )Stanley AG
    
    USD
    
    Periodicity: Semi-annualMaturity: December 15, 2010(808,200) MXP
    
    Interest Paid: 11.505%Periodicity: Semi-annualMaturity: December 15, 2010Merrill Lynch
    
    75,000
    
    Interest Received: 11%
    
    
    (16,338
    )
    
    
    (52,450
    )Capital Markets AG
    
    USD
    
    Periodicity: Semi-annualMaturity: December 15, 2010(808,200) MXP
    
    Interest Paid: 11.505%Periodicity: Semi-annualMaturity: December 15, 2010
  F-24




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##### Table of Contents



Embedded Derivatives.
 forwards
 Effects in operationsHost Leasing Contract
    
    Notional
    
    Maturity
    
    2009
    
    
    2008MATC Digital
    
    0.5
    
    October 2010
    
    
    (10
    )
    
    
    (San Marcos)
    
    USDMATC Digital
    
    0.8
    
    November 2009
    
    
    
    
    
    
    23(E. Zapata)
    
    USDMATC Digital
    
    0.3
    
    June 2010
    
    
    
    
    
    
    5(Chiquihuite)
    
    USDGrande River
    
    0.9
    
    October 2009
    
    
    
    
    
    
    26Communications
    
    USDEnlace Digital
    
    3.0
    
    September 2014
    
    
    (119
    )
    
    
    (34
    )Telecomunicaciones
    
    USDCarrierCOM
    
    1.5
    
    February 2009
    
    
    
    
    
    
    12USDHotelera Galerias
    
    3.4
    
    December 2013
    
    
    (298
    )
    
    
    USDGrupo Promotor
    
    156.8
    
    December 2012
    
    
    (2,410
    )
    
    
    8,440Jomer
    
    USD
 Primary Financial Instruments
  For trading
    
    Book Value
    
    
    Fair Value
    
    
    Interest RateRepurchase agreement (governmental)
    
    $
    22,333
    
    
    
    22,333
    
    
    
    4.49
    %Repurchase agreement (governmental)
    
    
    72,500
    
    
    
    72,500
    
    
    
    4.55
    %Institutional Fund Treasury Reserves
    
    
    756
    
    
    
    756
    
    
    
    0.03
    %AIM Fund Treasury PF Corporate
    
    
    817,747
    
    
    
    817,805
    
    
    
    0.05
    %$
    913,336
    
    
    
    913,394
  F-25




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##### Table of Contents



For trading
    
    Book Value
    
    
    Fair Value
    
    
    Interest RateRepurchase agreement (governmental)
    
    $
    101,902
    
    
    
    101,902
    
    
    
    8.28
    %Institutional Fund Treasury Reserves
    
    
    1,387,997
    
    
    
    1,387,997
    
    
    
    1.31
    %JPMorgan Treasury Fund
    
    
    10,371
    
    
    
    10,371
    
    
    
    0.02
    %$
    1,500,270
    
    
    
    1,500,270
 NOTE 14  LABOR OBLIGATIONS UPON RETIREMENT
    BenefitsTermination
    
    
    Retirement2009
    
    
    2008
    
    
    2009
    
    
    2008Net cost for the year:Labor cost
    
    $
    1,967
    
    
    
    1,552
    
    
    
    3,313
    
    
    
    2,983Financial cost
    
    
    824
    
    
    
    698
    
    
    
    2,108
    
    
    
    2,027Actuarial (gain) loss, net
    
    
    (2,160
    )
    
    
    5,899
    
    
    
    26
    
    
    
    Prior service:Amortization of transition liability
    
    
    964
    
    
    
    964
    
    
    
    2,794
    
    
    
    2,951Net cost for the year
    
    $
    1,595
    
    
    
    9,113
    
    
    
    8,241
    
    
    
    7,961
  BenefitsTermination
    
    
    Retirement2009
    
    
    2008
    
    
    2009
    
    
    2008Current benefit obligation (CBO)
    
    $
    12,145
    
    
    
    11,514
    
    
    
    32,433
    
    
    
    25,836Unrecognized items:Transition liability
    
    
    (2,892
    )
    
    
    (3,856
    )
    
    
    (8,381
    )
    
    
    (11,175
    )Actuarial loss
    
    
    
    
    
    
    
    
    
    
    (1,842
    )
    
    
    (693
    )Projected liability, net
    
    $
    9,253
    
    
    
    7,658
    
    
    
    22,210
    
    
    
    13,968
  BenefitsTermination
    
    
    Retirement2009
    
    
    2008
    
    
    2009
    
    
    2008CBO at the beginning of the year
    
    $
    11,514
    
    
    
    9,644
    
    
    
    25,836
    
    
    
    24,840Current labor cost
    
    
    1,967
    
    
    
    1,552
    
    
    
    3,313
    
    
    
    2,983Financial cost
    
    
    824
    
    
    
    698
    
    
    
    2,108
    
    
    
    2,027Yearly real payments charged to the allowance
    
    
    
    
    
    
    (4,381
    )
    
    
    
    
    
    
    Actuarial (loss) gain for the period
    
    
    2,160
    
    
    
    (4,001
    )
    
    
    1,176
    
    
    
    4,014CBO at the end of the year
    
    $
    12,145
    
    
    
    11,514
    
    
    
    32,433
    
    
    
    25,836
  F-26




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Retirement/Seniority Premium:CBO
    
    $
    2,129
    
    
    
    1,694
    
    
    
    1,480Total actuarial loss
    
    
    (267
    )
    
    
    360
    
    
    
    311
 Benefits2009
    
    
    2008Discount 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)
    
    33.4 years
    
    
    29.5 years
 NOTE
15  SHAREHOLDERS EQUITY
   (Dirección General de Inversión Extranjera)
  
    
    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-27




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##### Table of Contents



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 Companys shares, in accordance with applicable laws,
including, without limitation, the US Securities Act of 1933, and upon registration of the
corresponding securities with the SEC, 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.), mode with
variable capital.
 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.
        Series and Class of Shares
    
    2009
    
    
    2008
    
    
    2007Issued 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
    
    
    
    788,290,002Subtotal
    
    
    789,818,829
    
    
    
    789,818,829
    
    
    
    789,818,829
  F-28




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##### Table of Contents



Authorized shares not outstanding:
 2009
    
    
    2008
    
    
    2007Series A
    
    
    11,000,000
    
    
    
    11,000,000
    
    
    
    307,010Total authorized shares
    
    
    800,818,829
    
    
    
    800,818,829
    
    
    
    790,125,839
   2009
    
    
    2008Capital stock
    
    $
    4,814,428
    
    
    
    4,814,428Restatement effect
    
    
    595,816
    
    
    
    595,816Total capital stock
    
    $
    5,410,244
    
    
    
    5,410,244
   2009
    
    
    2008Net loss for the year
    
    $
    303,558
    
    
    
    437,763MFRS C-8 recognition (Note 6)
    
    
    38,123
    
    
    
    Comprehensive loss
    
    $
    341,681
    
    
    
    437,763
    NOTE 16  STOCK BASED COMPENSATION
  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.
  F-29




---



##### Table of Contents



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.
   2009
    
    
    2008
    
    
    2007Weighed
    
    
    
    
    
    
    Weighed
    
    
    
    
    
    
    WeighedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseOptions
    
    
    Price USD
    
    
    Options
    
    
    Price USD
    
    
    Options
    
    
    Price USDOutstanding at beginning of year
    
    
    17,916
    
    
    $
    0.31
    
    
    
    28,405
    
    
    $
    0.37
    
    
    
    27,779
    
    
    $
    0.38Granted
    
    
    2,807
    
    
    
    0.31
    
    
    
    552
    
    
    
    0.01
    
    
    
    5,151
    
    
    
    0.25Exercised
    
    
    
    
    
    
    
    
    
    
    (11,041
    )
    
    
    0.06
    
    
    
    (339
    )
    
    
    0.31Cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,186
    )
    
    
    0.27Outstanding at the end of the year
    
    
    20,723
    
    
    
    0.31
    
    
    
    17,916
    
    
    
    0.31
    
    
    
    28,405
    
    
    
    0.37Options exercisable at the end of the year
    
    
    16,459
    
    
    
    0.31
    
    
    
    14,176
    
    
    
    0.31
    
    
    
    21,208
    
    
    
    0.41Weighted average price of options granted
during the year (denominated in U.S.
dollars)
    
    
    
    
    
    $
    0.31
    
    
    
    
    
    
    $
    0.01
    
    
    
    
    
    
    $
    0.25
  Weightedaveragegrant-dateNon vested granted Options
    
    Options
    
    
    fair valueBalance at January 1, 2009
    
    
    3,165
    
    
    USD 0.10Vested
    
    
    (1,920
    )
    
    
    0.10New granted non vested
    
    
    3,297
    
    
    
    0.04Forfeited
    
    
    (853
    )
    
    
    0.10Balance at December 31, 2009
    
    
    3,689
    
    
    USD 0.05
  2009
    
    
    2008Granted
    
    
    20,723
    
    
    
    17,916Granted/Vested
    
    
    17,034
    
    
    
    14,751Granted non vested
    
    
    3,689
    
    
    
    3,165Available
    
    
    6,065
    
    
    
    8,872Total authorized options
    
    
    26,788
    
    
    
    26,788
  F-30




---



##### Table of Contents



Weightedaveragegrant-dateGranted/Vested Options
    
    Options
    
    
    fair valueBalance at January 1, 2009
    
    
    14,751
    
    
    USD
    0.14Granted
    
    
    1,698
    
    
    
    0.04Vested
    
    
    1,920
    
    
    
    0.10Forfeited
    
    
    (1,335
    )
    
    
    0.10Balance at December 31, 2009
    
    
    17,034
    
    
    USD
    0.13
   Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedStock
    
    
    average
    
    
    Directors
    
    
    average
    
    
    
    
    
    
    averageOption
    
    
    unit price
    
    
    &
    
    
    unit price
    
    
    
    
    
    
    unit pricePlan
    
    
    USD
    
    
    Officers
    
    
    USD
    
    
    Total
    
    
    USDCash out for share acquisition
    
    
    
    
    
    
    
    
    
    
    798,887
    
    
    
    0.154
    
    
    
    798,887
    
    
    
    0.154Cash in from exercised options
    
    
    
    
    
    
    
    
    
    
    (50,176
    )
    
    
    (0.10
    )
    
    
    (50,176
    )
    
    
    (0.10
    )Total
    
    
    
    
    
    
    
    
    
    
    748,161
    
    
    
    0.153
    
    
    
    748,161
    
    
    
    0.153
    Modified plan
    
    Previous2007
    
    PlanRequisite service period
    
    3 years
    
    5 years *Fair value on modification date (dollars)
    
    0.149
    
    0.000Exercise price (dollars)
    
    0.31
    
    0.50
 
 *
    
    At the modification date most options had been already vested.  DollarsFair value of modified option at July 2007
    
    
    0.149Incremental value of modified option at July 2007
    
    
    0.149Incremental value of modified option at July 2007
    
    
    0.149Unrecognized compensation cost for original option
    
    
    0.000Total compensation cost to be recognized in 2007
    
    
    0.149
  F-31




---



##### Table of Contents



New
    
    
    Plan for the
    
    
    Options for Boardemployee stock
    
    
    Chairman
    
    
    members andoption plan
    
    
    of the Board
    
    
    executives
    
    
    TotalGranted
    
    
    20,147,810
    
    
    
    4,475,781
    
    
    
    1,330,740
    
    
    
    25,954,331Expected forfeitures
    
    
    (4,029,365
    )
    
    
    
    
    
    
    
    
    
    
    (4,029,365
    )Outstanding options authorized
    
    
    15,064,684
    
    
    
    
    
    
    
    1,081,275
    
    
    
    16,145,959Options vested during the year
    
    
    
    
    
    
    
    
    
    
    381,900
    
    
    
    381,900
 2009
    
    
    2008Authorized options
    
    
    43,579,491
    
    
    
    43,961,391Options granted
    
    
    27,433,532
    
    
    
    25,032,749Available options
    
    
    16,145,959
    
    
    
    18,928,642
 Black & Scholes
 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
  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.
  F-32




---



##### Table of Contents



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.
  2009
    
    
    2008Issuance expenses, net
    
    $
    
    
    
    
    (6,055
    )Stock option plan cost
    
    
    1,669
    
    
    
    5,114Exercised options
    
    
    (9,546
    )
    
    
    (70,672
    )Cost of shares acquired for issuance upon exercise of stock options net
    
    
    
    
    
    
    $
    (7,877
    )
    
    
    (71,613
    )
 NOTE 17  FINANCIAL INFORMATION BY SEGMENTS AND BY GEOGRAPHICAL LOCATION
   Segment
    
    2009
    
    
    2008
    
    
    2007Residential
    
    $
    928,686
    
    
    
    1,055,639
    
    
    
    897,855Business
    
    
    788,033
    
    
    
    809,130
    
    
    
    648,165Public Telephony
    
    
    460,687
    
    
    
    428,733
    
    
    
    386,404Wholesale
    
    
    372,184
    
    
    
    359,518
    
    
    
    376,092Others
    
    
    12,980
    
    
    
    30,209
    
    
    
    37,203Total revenues
    
    $
    2,562,570
    
    
    
    2,683,229
    
    
    
    2,345,719Operating costs and expenses
    
    
    (2,569,737
    )
    
    
    (2,491,698
    )
    
    
    (2,069,824
    )Operating (loss) income
    
    $
    (7,167
    )
    
    
    191,531
    
    
    
    275,895
   Metropolitan
    
    
    Central-Services
    
    Area
    
    
    South
    
    
    North
    
    
    TotalYear ended December 31, 2009:Local
    
    $
    1,448,810
    
    
    
    634,220
    
    
    
    75,532
    
    
    
    2,158,562Long distance
    
    
    256,897
    
    
    
    63,954
    
    
    
    3,947
    
    
    
    324,798Rent of dedicated links
    
    
    377
    
    
    
    
    
    
    
    
    
    
    
    377Sale of equipment to customers
    
    
    2,219
    
    
    
    1,437
    
    
    
    
    
    
    
    3,656Capacity leasing
    
    
    75,177
    
    
    
    
    
    
    
    
    
    
    
    75,177Total revenue
    
    $
    1,783,480
    
    
    
    699,611
    
    
    
    79,479
    
    
    
    2,562,570Total assets as of December, 2009
    
    $
    5,966,289
    
    
    
    1,152,262
    
    
    
    399,025
    
    
    
    7,517,576Acquisition of telephone network systems and equipment during 2009
    
    $
    597,558
    
    
    
    178,155
    
    
    
    155,910
    
    
    
    931,623
  F-33




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##### Table of Contents



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
    
    $
    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
 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
    
    $
    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
 NOTE 18  COMPREHENSIVE FINANCIAL RESULTS
  2009
    
    
    2008
    
    
    2007Comprehensive financial results:Interest expense and commissions
    
    $
    (328,949
    )
    
    
    (317,633
    )
    
    
    (285,858
    )Interest income
    
    
    6,031
    
    
    
    53,994
    
    
    
    55,793Exchange gain (loss)  Net
    
    
    66,497
    
    
    
    (261,787
    )
    
    
    4,826Effect of valuation of financial instruments
    
    
    (58,478
    )
    
    
    83,323
    
    
    
    20,421Gain on monetary position
    
    
    
    
    
    
    
    
    
    
    42,586$
    (314,899
    )
    
    
    (442,103
    )
    
    
    (162,232
    )Capitalized in telecommunications equipment and network (Note 7)
    
    $
    18,104
    
    
    
    174,710
    
    
    
    35,591Total recorded in results of operations
    
    $
    (296,795
    )
    
    
    (267,393
    )
    
    
    (126,641
    )
 NOTE 19  INCOME TAX (IT), ASSET TAX (AT), FLAT RATE BUSINESS TAX (IETU) AND EMPLOYEES
STAUTORY PROFIT SHARING (ESPS)
    F-34




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##### Table of Contents



December 31,2009
    
    
    2008(Loss) profit before income tax expense
    
    $
    (365,095
    )
    
    
    (671,457
    )Statutory income tax rate
    
    
    28
    %
    
    
    28
    %Income tax benefit
    
    
    (102,226
    )
    
    
    (188,008
    )ESPS expense
    
    
    922
    
    
    
    328Increase (decrease) on income tax expense resulting from:Inflationary effects
    
    
    (39,194
    )
    
    
    (19,163
    )Non-deductible expenses
    
    
    14,167
    
    
    
    10,254Change in valuation allowance
    
    
    35,409
    
    
    
    (34,498
    )Non-taxable income
    
    
    
    
    
    
    (2,888
    )Change in rates
    
    
    (30,045
    )
    
    
    Tax effect for sale of subsidiary
    
    
    56,035
    
    
    
    Others permanent items
    
    
    3,395
    
    
    
    281Income tax expense (benefit)
    
    $
    (61,537
    )
    
    
    (233,694
    )Effective income tax rate
    
    
    17
    %
    
    
    35
    %
  2009
    
    
    2008Balance at beginning of year
    
    $
    (148,114
    )
    
   

97,742Credit to income
    
    
    (69,471
    )
    
    
    (245,856
)Cancellation of deferred
tax liability in
recognition of NIF C-8
Intangible Assets (Note 6)
    
    
    (12,739
    )
    
    
    Balance at December 31
    
    $
    (230,324
    )
    
    
    (148,114
    )
  F-35




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##### Table of Contents



2009
    
    
    2008IT
    
    
    ESPS
    
    
    IT
    
    
    ESPSDeferred assets:Allowance for doubtful accounts
    
    $
    60,928
    
    
    
    
    
    
    
    39,372
    
    
    
    Labor obligations upon retirement
    
    
    9,439
    
    
    
    3,146
    
    
    
    6,055
    
    
    
    2,162Derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    2,372
    
    
    
    Provisions
    
    
    56,920
    
    
    
    865
    
    
    
    37,691
    
    
    
    13,461Tax credit carryforwards
    
    
    39,272
    
    
    
    
    
    
    
    39,272
    
    
    
    Tax loss carryforwards
    
    
    433,158
    
    
    
    
    
    
    
    411,277
    
    
    
    Total gross deferred assets
    
    
    599,717
    
    
    
    4,011
    
    
    
    536,039
    
    
    
    15,623Less valuation allowance of tax loss carryforwards
    
    
    220,357
    
    
    
    3,915
    
    
    
    184,948
    
    
    
    14,995Deferred assets, net
    
    
    379,360
    
    
    
    96
    
    
    
    351,091
    
    
    
    628Deferred liabilities:Prepaid expenses and advances to suppliers
    
    
    15,126
    
    
    
    96
    
    
    
    13,190
    
    
    
    628Telephone network system and equipment, frequency
rights, intangible assets and preoperating
expenses  Net
    
    
    133,059
    
    
    
    
    
    
    
    189,787
    
    
    
    Derivative financial instruments
    
    
    851
    
    
    
    
    
    
    
    
    
    
    
    Total gross deferred liabilities
    
    
    149,036
    
    
    
    96
    
    
    
    202,977
    
    
    
    628Net deferred assets
    
    $
    230,324
    
    
    
    
    
    
    
    148,114
    
    
    
    
   Year of
    
    
    
    
    
    Year ofloss
    
    Amount
    
    
    expiration2000
    
    $
    104,073
    
    
    
    20102002
    
    
    276,276
    
    
    
    20122003
    
    
    36,650
    
    
    
    20132004
    
    
    82,373
    
    
    
    20142005
    
    
    129,675
    
    
    
    20152006
    
    
    76,703
    
    
    
    20162007
    
    
    278,753
    
    
    
    20172008
    
    
    459,357
    
    
    
    2018$
    1,433,860
   F-36




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##### Table of Contents



NOTE 20  COMMITMENTS AND CONTINGENT LIABILITIES
  a.
    
    Operating lease agreements:
   2010
    
    $
    98,0802011
    
    
    57,4142012
    
    
    52,0432013
    
    
    49,5612014 and thereafter
    
    
    53,057$
    310,155
 b.
    
    Lease agreement for the building currently housing the Companys corporate offices.
   2010
    
    $
    42,7042011
    
    
    27,9162012
    
    
    22,0762013
    
    
    1,1872014 and thereafter
    
    
    4,087$
    97,970
 c.
    
    Geographic expansion commitment:
    d.
    
    Commitment related to frequency rights:
  e.
    
    Commitment pertaining to the sale of capacity:
    F-37




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##### Table of Contents



f.
    
    Comisión Federal de Electricidad (CFE):
      g.
    
    Claim brought by the Secretaría de Hacienda y Crédito Público as a result of a tax audit of
Maxcom Telecomunications for the fiscal year 2004:
  h.
    
    Claim brought by the Secretaría de Hacienda y Crédito Público as a result of a tax audit of
Maxcom Telecomunications for the fiscal year 2005:
  i.
    
    Claim brought by the Secretaría de Hacienda y Crédito Público as a result of a tax audit of
Maxcom Telecomunications for the fiscal year 2004:
   F-38




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##### Table of Contents



NOTE 21  SIGNIFICANT DIFFERENCES BETWEEN MEXICAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES:
  Recently adopted accounting standards
    IntangiblesGoodwill & Other
 Employers Disclosures about Pensions and Other Postretirement Benefits
  ASC 825-10 Financial
Instruments-Fair Value Option ASC 825-10 Derivatives and
Hedging
       F-39




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##### Table of Contents



Fair value
  Quoted pricesin active
    
    
    Significantmarkets for
    
    
    other
    
    
    SignificantBalance at
    
    
    identical
    
    
    observable
    
    
    unobservableDecember 31,
    
    
    assets
    
    
    inputs
    
    
    inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Short-term investments(1)
    
    
    913,332
    
    
    
    22,333
    
    
    
    890,999
    
    
    
    Derivative Instruments, (net)
    
    
    38,319
    
    
    
    
    
    
    
    38,319Total
    
    $
    951,651
    
    
    $
    22,333
    
    
    $
    929,318
    
    
    $
    
 
 (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, 2009 is $987,343
of which $913,332 represents the fair value of the short term investments.   Fair Value Measurements and
Disclosures
 Fair Value Measurements and
Disclosures
   F-40




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##### Table of Contents



Years Ended December 31,2009
    
    
    2008
    
    
    2007Net (loss) income under MFRS
    
    $
    (303,558
    )
    
    $
    (437,763
    )
    
    $
    36,196Adjustments:Amortization of pre-operating expenses (a)
    
    
    
    
    
    
    22,123
    
    
    
    20,438Capitalization of interest (b)
    
    
    8,810
    
    
    
    (112,738
    )
    
    
    (716
    )Amortization of capitalized interest (b)
    
    
    (516
    )
    
    
    (12,118
    )
    
    
    (11,896
    )Installation revenues and related costs (c)
    
    
    9,231
    
    
    
    (2,824
    )
    
    
    (6,758
    )Installation costs not charged to customers (d)
    
    
    (111,616
    )
    
    
    (154,716
    )
    
    
    (60,640
    )Capitalized internal compensation cost (e)
    
    
    143
    
    
    
    143
    
    
    
    143Impairment charge (f)
    
    
    
    
    
    
    532,315
    
    
    
    Severance Indemnity liability (g)
    
    
    (815
    )
    
    
    2,405
    
    
    
    (682
    )Recognition of deferred taxes (j)
    
    
    20,886
    
    
    
    (76,885
    )
    
    
    184,914Total US GAAP adjustments
    
    
    (73,877
    )
    
    
    197,705
    
    
    
    124,803Net (loss) income under U.S. GAAP
    
    $
    (377,435
    )
    
    $
    (240,058
    )
    
    $
    160,999Basic and diluted earnings per share:Numerator:Net (loss) income under U.S. GAAP
    
    $
    (377,435
    )
    
    $
    (240,058
    )
    
    $
    160,999Net (loss) Income under U.S. GAAP available for common shareholders,
used for dilutive computation
    
    
    (377,435
    )
    
    
    (240,058
    )
    
    
    160,999Denominator:Weighted average of common shares used in basic computation (thousand)
    
    
    789,819
    
    
    
    789,819
    
    
    
    560,176Add: dilutive impact of stock options and warrants(1)
    
    
    
    
    
    
    
    
    
    
    45,968Weighted average of common shares used in dilutive computation (thousand)
    
    
    789,819
    
    
    
    789,819
    
    
    
    606,144Earnings per share, basic
    
    
    (0.48
    )
    
    
    (0.30
    )
    
    
    0.29Earnings per share, diluted
    
    
    (0.48
    )
    
    
    (0.30
    )
    
    
    0.27
 
 (1)
    
    According to ASC 260. As of December 31,2009
    
    
    2008Shareholders equity under MFRS
    
    $
    4,159,972
    
    
    $
    4,501,169Accumulated adjustments:Preoperating expenses (a)
    
    
    (391,951
    )
    
    
    (391,951
    )Amortization of preoperating expenses (a)
    
    
    391,951
    
    
    
    336,172Capitalization of interest (b)
    
    
    17,250
    
    
    
    8,440Amortization of capitalized interest (b)
    
    
    (64,981
    )
    
    
    (64,465
    )Installation revenues and related costs (c)
    
    
    (67,574
    )
    
    
    (76,805
    )Installation costs not charged to customers (d)
    
    
    (850,028
    )
    
    
    (738,412
    )Capitalized internal compensation cost (e)
    
    
    (1,857
    )
    
    
    (2,000
    )Impairment charge (f)
    
    
    527,400
    
    
    
    532,315Severance Indemnity liability (g)
    
    
    (10,404
    )
    
    
    (11,297
    )SAB 108 initial effects (h)
    
    
    7,034
    
    
    
    7,034SAB 108 effects for the year (i)
    
    
    3,035
    
    
    
    3,035Recognition of deferred taxes (j)
    
    
    132,036
    
    
    
    111,420Total U.S. GAAP adjustments
    
    $
    (308,089
    )
    
    $
    (286,514
    )Shareholders equity under U.S. GAAP
    
    $
    3,851,883
    
    
    $
    4,214,655
  F-41




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##### Table of Contents



Year EndedDecember 31,2009
    
    
    2008Balance at the beginning of the year
    
    $
    4,214,655
    
    
    $
    4,555,341Net loss under U.S. GAAP
    
    
    (377,435
    )
    
    
    (240,058
    )Decrease in capital stock
    
    
    
    
    
    
    (7
    )Stock option plan
    
    
    (7,877
    )
    
    
    (71,613
    )Repurchase of shares
    
    
    8,362
    
    
    
    (20,287
    )Adoption NIF
    
    
    12,740
    
    
    
    Severance Indemnity liability (FAS 158 effects), net of tax of $3,121
    
    
    1,438
    
    
    
    (8,721
    )Balance at the end of the year
    
    $
    3,851,883
    
    
    $
    4,214,655
 I. Explanation of reconciling items
             F-42




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##### Table of Contents



Compensation-Nonretirement Postemployment Benefits.
   MEX GAAP
    
    
    US GAAPD3
    
    
    FASB 87 & 112Seniority Premium  Severance Payment
    
    $
    (1,377
    )
    
    $
    (20,713
    )Severance Payment
    
    
    (21,108
    )
    
    
    (10,947
    )Seniority Premium  Severance Benefits
    
    
    (1,102
    )
    
    
    (2,515
    )Severance Benefits
    
    
    (7,876
    )
    
    
    Total
    
    
    (31,463
    )
    
    
    (34,175
    )Difference US GAAP vs MEX GAAP
    
    
    
    
    
    
    (2,712
    )Amortization of net loss (gaing)
    
    
    
    
    
    
    (2
    )Amortization of transition obligation
    
    
    
    
    
    
    (2,433
    )Others
    
    
    
    
    
    
    727Total Severance Benefits
    
    
    
    
    
    
    (4,420
    )
  F-43




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##### Table of Contents



CompensationRetirement Benefits
  Accumulated Other Comprehensive Income (AOCI) roll-forward and Comprehensive Income:
 OCI
    
    
    AOCIAOCI beginning balance at January 1, 2008Net loss
    
    $
    (398,051
    )ASC 715 effect of the year (net of deferred income tax effect of $3,121)
    
    
    1,277
    
    
    $
    (8,721
    )Other comprehensive income
    
    
    1,277
    
    
    
    1,277Comprehensive income
    
    $
    (396,774
    )AOCI ending balance at December 31, 2008
    
    
    
    
    
    $
    (7,444
    )
         F-44




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##### Table of Contents



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.(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.  F-45




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##### Table of Contents



(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.   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.
   Accounting Changes and Error Corrections,
  F-46




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##### Table of Contents



Nonmonetary
Transactions
    Quoted prices
    
    
    SignificantFair value at
    
    
    in active
    
    
    other
    
    
    SignificantDecember 31,
    
    
    markets for
    
    
    observable
    
    
    unobservable2009
    
    
    identical assets
    
    
    inputs
    
    
    inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Senior Notes(1)
    
    $
    2,567,863
    
    
    
    2,567,863
    
    
    
    
    
    
    
    
 
 (1)
    
    Senior notes are carried at amortized cost and their carrying value as of December 31, 2009
is $2,611,740. The $2,567,863 represents the estimated fair value of the notes. See Note 11
Bonds Payable.  Income Taxes
     F-47




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##### Table of Contents



Income Taxes
   ASC 740
    
    
    ASC 740Applied to
    
    
    Applied toMFRS
    
    
    U.S. GAAPDecember 31, 2009:
    
    Balances
    
    
    Balances
    
    
    TotalDeferred tax assetsAllowance for doubtful accounts
    
    $
    60,928
    
    
    
    
    
    
    $
    60,928Labor obligations upon retirement
    
    
    9,439
    
    
    
    
    
    
    
    9,439Provisions
    
    
    56,920
    
    
    
    
    
    
    
    56,920Installation revenues
    
    
    
    
    
    
    20,272
    
    
    
    20,272Installation costs not charged to customers
    
    
    
    
    
    
    255,008
    
    
    
    255,008Tax loss carryforwards
    
    
    472,430
    
    
    
    
    
    
    
    472,430Total gross deferred tax assets
    
    
    599,717
    
    
    
    275,280
    
    
    
    874,997Less valuation allowance
    
    
    (220,357
    )
    
    
    
    
    
    
    (220,357
    )Net deferred tax assets
    
    $
    379,360
    
    
    
    275,280
    
    
    
    654,640Deferred tax liabilitiesTelephone network equipment and leasehold
improvements, frequency rights, intangible
assets, impairment and preoperating
expenses
    
    $
    (133,059
    )
    
    
    (143,244
    )
    
    
    (276,303
    )Derivative financial instruments
    
    
    (851
    )
    
    
    
    
    
    
    (851
    )Prepaid expenses
    
    
    (15,126
    )
    
    
    
    
    
    
    (15,126
    )Total gross deferred tax liabilities
    
    
    (149,036
    )
    
    
    (143,244
    )
    
    
    (292,280
    )Net deferred tax asset
    
    $
    230,324
    
    
    
    132,036
    
    
    
    362,360
  F-48




---



##### Table of Contents



ASC 740
    
    
    ASC 740Applied 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 carry forwards
    
    
    39,272
    
    
    
    
    
    
    
    39,272Tax loss carry forwards
    
    
    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
  F-49




---



##### Table of Contents



Statement of Cash Flows
   F-50




---



##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007Operating activities:Net (loss) income under U.S. GAAP
    
    $
    (377,435
    )
    
    $
    (240,058
    )
    
    $
    160,999Adjustments to reconcile net income (loss) to net cash flow
provided by operating activities: Depreciation and amortization
    
    
    562,643
    
    
    
    476,813
    
    
    
    328,269Hedging valuation
    
    
    58,479
    
    
    
    (83,323
    )
    
    
    (24,036
    )Allowance for doubtful accounts
    
    
    32,269
    
    
    
    39,956
    
    
    
    5,318Monetary gain
    
    
    
    
    
    
    
    
    
    
    (15,533
    )Deferred income tax
    
    
    (90,357
    )
    
    
    (168,971
    )
    
    
    (138,632
    )Severance indemnity
    
    
    10,652
    
    
    
    14,669
    
    
    
    6,434Stock option plan
    
    
    1,669
    
    
    
    5,114
    
    
    
    37,124Loss on sale of fixed assets
    
    
    42,113
    
    
    
    82,496
    
    
    
    6,166Gain on sale of subsidiary
    
    
    (6,126
    )
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    67,255Foreign currency exchange (loss) gain
    
    
    (95,920
    )
    
    
    534,420
    
    
    
    (47,957
    )137,987
    
    
    
    661,116
    
    
    
    385,407Changes in operating assets and liabilities:Accounts receivable
    
    
    (62,049
    )
    
    
    (227,744
    )
    
    
    (319,003
    )Inventory
    
    
    24,502
    
    
    
    (7,627
    )
    
    
    2,540Prepaid expenses
    
    
    5,486
    
    
    
    9,563
    
    
    
    2,091Other assets and liabilities
    
    
    31,879
    
    
    
    3,353
    
    
    
    93,404Cash flow provided by operating activities
    
    
    137,805
    
    
    
    438,861
    
    
    
    164,439Investing activities:Acquisition of fixed assets
    
    
    (751,689
    )
    
    
    (1,298,619
    )
    
    
    (1,126,022
    )Proceeds on sale of fixed assets
    
    
    10,256
    
    
    
    4,364
    
    
    
    (6,371
    )Purchase of Sierra, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (33,576
    )Proceeds on sale of subsidiary
    
    
    6,126
    
    
    
    
    
    
    
    Acquisition of intangible assets
    
    
    5,252
    
    
    
    12,704
    
    
    
    (79,112
    )Cash flow used in investing activities
    
    
    (730,055
    )
    
    
    (1,281,551
    )
    
    
    (1,245,081
    )Financing activities:Restricted cash
    
    
    
    
    
    
    
    
    
    
    23,462Capital (decrease) increase  Net of equity issuance cost
    
    
    
    
    
    
    (7
    )
    
    
    2,643,369Cost of shares acquired for issuance upon exercise of stock
options, and issuance costs
    
    
    (9,546
    )
    
    
    (76,727
    )
    
    
    Bank financing and debt payments
    
    
    (4,354
    )
    
    
    (8,419
    )
    
    
    131,432Repurchase of shares
    
    
    8,362
    
    
    
    (20,287
    )
    
    
    Other financing items
    
    
    (6,274
    )
    
    
    
    
    
    
    Senior notes issued  Net of debt issuance cost
    
    
    
    
    
    
    
    
    
    
    118,214Cash flow (used in) provided by financing activities
    
    
    (11,812
    )
    
    
    (105,440
    )
    
    
    2,916,477Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (35,591
    )Net increase (decrease) in cash and cash equivalents
    
    
    (604,062
    )
    
    
    (948,130
    )
    
    
    1,800,244Cash and cash equivalents at beginning of the year
    
    
    1,591,405
    
    
    
    2,539,535
    
    
    
    739,291Cash and cash equivalents at end of the year
    
    
    987,343
    
    
    
    1,591,405
    
    
    
    2,539,535Interest paid
    
    $
    281,142
    
    
    $
    276,434
    
    
    $
    271,973Income taxes paid
    
    $
    14,308
    
    
    $
    7,320
    
    
    $
    25,530Increase (decrease) on fixed assets acquired Under capital lease
    
    
    6,327
    
    
    
    4,740
    
    
    
    (50,791
    )
  F-51




---



##### Table of Contents



Business Combinations Consolidation
 Derivatives and Hedging
 Intangible-Goodwill and Other
 Debt
 Generally Accepted Accounting Principles
 Compensation-Retirement Benefits
  F-52




---



##### Table of Contents



Subsequent Events
 Transfers and Servicing
 Consolidation Consolidation
of Variable Interest Entities Transfers and Servicing
 Revenue
Arrangements with Multiple Deliverables Revenue Arrangements with Multiple
Deliverables.
   
  F-53




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Thousands of Mexican pesos  note 5)
 NonMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    Sierra
    
    
    
    
    
    
    
    
    
    
    GuarantorMaxcom
    
    
    MSA
    
    
    CTE
    
    
    OOP
    
    
    TECBTC
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    SCG
    
    
    ATE
    
    
    Elimination
    
    
    ConsolidatedBalance sheet as of December 31, 2009:Cash and cash equivalents and Current restricted cash
    
    $
    981,710
    
    
    
    412
    
    
    
    206
    
    
    
    177
    
    
    
    246
    
    
    
    196
    
    
    
    
    
    
    
    
    
    
    
    1,056
    
    
    
    3,312
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    987,343Accounts receivable  net
    
    
    1,130,668
    
    
    
    95,738
    
    
    
    16,978
    
    
    
    12,593
    
    
    
    8,958
    
    
    
    6,124
    
    
    
    110
    
    
    
    50
    
    
    
    120,909
    
    
    
    4,010
    
    
    
    2,659
    
    
    
    3,184
    
    
    
    50
    
    
    
    (407,576
    )
    
    
    994,455Inventory  net
    
    
    16,374
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,374Prepaid expenses
    
    
    28,927
    
    
    
    660
    
    
    
    211
    
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    4
    
    
    
    327
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,149Investment in subsidiaries
    
    
    150,183
    
    
    
    11,183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (161,366
    )
    
    
    Frequency rights  net
    
    
    59,674
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,674Telephone network system and Equipment net
    
    
    4,780,074
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,963
    
    
    
    7,416
    
    
    
    20,985
    
    
    
    10,332
    
    
    
    
    
    
    
    
    
    
    
    4,941,770Intangible assets  net
    
    
    199,224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199,224Deposits
    
    
    6,209
    
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    635
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,269Prepaid expenses long term
    
    
    10,524
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,524Derivative financial instruments
    
    
    38,319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,319Deferred taxes
    
    
    184,394
    
    
    
    9,808
    
    
    
    1,714
    
    
    
    106
    
    
    
    118
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    29,995
    
    
    
    
    
    
    
    528
    
    
    
    3,654
    
    
    
    
    
    
    
    
    
    
    
    230,324Other assets
    
    
    2,152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,151Total assets
    
    $
    7,588,432
    
    
    
    117,801
    
    
    
    19,516
    
    
    
    12,878
    
    
    
    9,324
    
    
    
    6,328
    
    
    
    110
    
    
    
    54
    
    
    
    275,885
    
    
    
    14,770
    
    
    
    24,172
    
    
    
    17,198
    
    
    
    50
    
    
    
    (568,942
    )
    
    
    7,517,576Total liabilities
    
    $
    3,428,459
    
    
    
    83,431
    
    
    
    17,508
    
    
    
    4,670
    
    
    
    6,400
    
    
    
    
    
    
    
    7
    
    
    
    466
    
    
    
    218,684
    
    
    
    4,403
    
    
    
    716
    
    
    
    435
    
    
    
    
    
    
    
    (407,576
    )
    
    
    3,357,603Shareholders Equity:Capital Stock and Additional Paid- In Capital
    
    
    6,218,810
    
    
    
    66
    
    
    
    96
    
    
    
    55
    
    
    
    53
    
    
    
    171,497
    
    
    
    127
    
    
    
    55
    
    
    
    715,200
    
    
    
    13,044
    
    
    
    97,874
    
    
    
    11,308
    
    
    
    50
    
    
    
    (1,009,427
    )
    
    
    6,218,808Accumulated deficit
    
    
    (2,046,912
    )
    
    
    34,304
    
    
    
    1,912
    
    
    
    8,153
    
    
    
    2,871
    
    
    
    (165,169
    )
    
    
    (24
    )
    
    
    (467
    )
    
    
    (657,999
    )
    
    
    (2,677
    )
    
    
    (74,418
    )
    
    
    5,455
    
    
    
    
    
    
    
    848,061
    
    
    
    (2,046,910
    )Repurchase of shares
    
    
    (11,925
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,925
    )Total shareholders equity
    
    
    4,159,973
    
    
    
    34,370
    
    
    
    2,008
    
    
    
    8,208
    
    
    
    2,924
    
    
    
    6,328
    
    
    
    103
    
    
    
    (412
    )
    
    
    57,201
    
    
    
    10,367
    
    
    
    23,456
    
    
    
    16,763
    
    
    
    50
    
    
    
    (161,366
    )
    
    
    4,159,973Total liabilities and shareholders  equity
    
    
    7,588,432
    
    
    
    117,801
    
    
    
    19,516
    
    
    
    12,878
    
    
    
    9,324
    
    
    
    6,328
    
    
    
    110
    
    
    
    54
    
    
    
    275,885
    
    
    
    14,770
    
    
    
    24,172
    
    
    
    17,198
    
    
    
    50
    
    
    
    (568,942
    )
    
    
    7,517,576
  F-54




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Thousands of Mexican pesos  note 5)
 Maxcom
    
    
    Maxcom
    
    
    
    
    
    
    Sierra
    
    
    
    
    
    
    
    
    
    
    Non GuarantorMaxcom
    
    
    MSA
    
    
    CTE
    
    
    OOP
    
    
    TECBTC
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    SCG
    
    
    ATE
    
    
    Elimination
    
    
    ConsolidatedAs of December 31, 2009Total shareholders equity under Mexican GAAP
    
    $
    4,159,973
    
    
    
    34,370
    
    
    
    2,008
    
    
    
    8,208
    
    
    
    2,924
    
    
    
    6,328
    
    
    
    103
    
    
    
    (412
    )
    
    
    57,201
    
    
    
    10,367
    
    
    
    23,456
    
    
    
    16,763
    
    
    
    50
    
    
    
    (161,366
    )
    
    
    4,159,973Preoperating expenses
    
    
    (391,951
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391,951
    )Amortization of preoperating expenses
    
    
    391,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    391,951Capitalization of interest
    
    
    17,252
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,252Amortization of capitalized interest
    
    
    (64,981
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,981
    )Installation revenues
    
    
    (67,574
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,574
    )Installation costs
    
    
    (850,028
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (850,028
    )Capitalized internal compensation cost
    
    
    (1,857
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,857
    )Impairment charge
    
    
    527,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527,400Severance indemnity liability
    
    
    (10,404
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,404
    )SAB 108 initial effect
    
    
    7,034
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,034SAB effects for the year
    
    
    3,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,035Recognition of deferred taxes
    
    
    132,036
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,036Total shareholders equity under US. GAAP
    
    $
    3,851,886
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,851,886
  F-55




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Thousands of Mexican pesos  note 5)
 NonMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    Sierra
    
    
    
    
    
    
    
    
    
    
    GuarantorMaxcom
    
    
    MSA
    
    
    CTE
    
    
    OOP
    
    
    TECBTC
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    SCG
    
    
    ATE
    
    
    Elimination
    
    
    ConsolidatedStatements of Operations for the year ended December 31, 2009:Revenues
    
    $
    2,563,577
    
    
    
    435,839
    
    
    
    88,639
    
    
    
    23,851
    
    
    
    74,827
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,644
    
    
    
    1,568
    
    
    
    1,148
    
    
    
    2,556
    
    
    
    
    
    
    
    (672,079
    )
    
    
    2,562,570Operating cost and expenses
    
    
    (2,603,978
    )
    
    
    (421,946
    )
    
    
    (85,329
    )
    
    
    (23,165
    )
    
    
    (71,821
    )
    
    
    8
    
    
    
    
    
    
    
    (152
    )
    
    
    (33,052
    )
    
    
    (1,484
    )
    
    
    (68
    )
    
    
    (830
    )
    
    
    
    
    
    
    672,080
    
    
    
    (2,569,737
    )Integral (cost) income of financing
    
    
    (297,606
    )
    
    
    (164
    )
    
    
    (55
    )
    
    
    (85
    )
    
    
    (70
    )
    
    
    13,797
    
    
    
    
    
    
    
    
    
    
    
    (12,478
    )
    
    
    (133
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (296,795
    )Other income (expenses)
    
    
    (44,125
    )
    
    
    (1,175
    )
    
    
    (1,702
    )
    
    
    184
    
    
    
    (131
    )
    
    
    (200,128
    )
    
    
    
    
    
    
    (22
    )
    
    
    (1,363
    )
    
    
    15
    
    
    
    1
    
    
    
    111
    
    
    
    
    
    
    
    187,202
    
    
    
    (61,133
    )Taxes
    
    
    80,658
    
    
    
    (2,266
    )
    
    
    (390
    )
    
    
    (150
    )
    
    
    (788
    )
    
    
    (15,187
    )
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    (288
    )
    
    
    508
    
    
    
    
    
    
    
    (561
    )
    
    
    61,537Net (loss) income
    
    $
    (301,474
    )
    
    
    10,288
    
    
    
    1,163
    
    
    
    635
    
    
    
    2,017
    
    
    
    (201,510
    )
    
    
    0
    
    
    
    (173
    )
    
    
    (4,249
    )
    
    
    (34
    )
    
    
    793
    
    
    
    2,344
    
    
    
    0
    
    
    
    186,642
    
    
    
    (303,558
    )Net (loss) income for the year under Mexican GAAP
    
    $
    (301,474
    )
    
    
    10,288
    
    
    
    1,163
    
    
    
    635
    
    
    
    2,017
    
    
    
    (201,510
    )
    
    
    0
    
    
    
    (173
    )
    
    
    (4,249
    )
    
    
    (34
    )
    
    
    793
    
    
    
    2,344
    
    
    
    0
    
    
    
    186,642
    
    
    
    (303,558
    )Capitalization of interest
    
    
    8,810
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,810Amortization of capitalized Interest
    
    
    (516
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (516
    )Installation revenues
    
    
    9,231
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,231Installation costs
    
    
    (111,616
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (111,616
    )Capitalized internal compensation cost
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143Severance indemnity liability
    
    
    (815
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (815
    )Recognition of deferred taxes
    
    
    20,886
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,886Net (loss) income for the year Under U.S. GAAP
    
    $
    (375,351
    )
    
    
    10,288
    
    
    
    1,163
    
    
    
    635
    
    
    
    2,017
    
    
    
    (201,510
    )
    
    
    0
    
    
    
    (173
    )
    
    
    (4,249
    )
    
    
    (34
    )
    
    
    793
    
    
    
    2,344
    
    
    
    0
    
    
    
    186,642
    
    
    
    (377,435
    )
  F-56




---



##### Table of Contents



MAXCOM TELECOMUNICACIONES, S. A. B. DE C. V. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Thousands of Mexican pesos  note 5)
 NonMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    Sierra
    
    
    
    
    
    
    
    
    
    
    GuarantorMaxcom
    
    
    MSA
    
    
    CTE
    
    
    OOP
    
    
    TECBTC
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    SCG
    
    
    ATE
    
    
    Elimination
    
    
    ConsolidatedStatement of Cash Flows under U.S. GAAP for the Year Ended December 31, 2009:Net (loss) income the year under U.S. GAAP
    
    $
    (375,351
    )
    
    
    10,288
    
    
    
    1,163
    
    
    
    635
    
    
    
    2,017
    
    
    
    (201,510
    )
    
    
    0
    
    
    
    (173
    )
    
    
    (4,249
    )
    
    
    (34
    )
    
    
    793
    
    
    
    2,344
    
    
    
    0
    
    
    
    186,642
    
    
    
    (377,435
    )Depreciation and amortization
    
    
    544,757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,058
    
    
    
    1,124
    
    
    
    
    
    
    
    811
    
    
    
    
    
    
    
    (8,107
    )
    
    
    562,643Other adjustments to reconcile net income to cash provided by operating activities
    
    
    (148,227
    )
    
    
    (2,650
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,093
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,749
    
    
    
    (47,221
    )Net change in working capital
    
    
    (151,741
    )
    
    
    (8,263
    )
    
    
    (1,142
    )
    
    
    (835
    )
    
    
    (1,941
    )
    
    
    196,984
    
    
    
    
    
    
    
    173
    
    
    
    (8,495
    )
    
    
    (1,581
    )
    
    
    (793
    )
    
    
    (3,156
    )
    
    
    (50
    )
    
    
    (19,342
    )
    
    
    (182
    )Resources (used in) provided by Operating activities
    
    
    (130,562
    )
    
    
    (625
    )
    
    
    21
    
    
    
    (200
    )
    
    
    76
    
    
    
    (4,526
    )
    
    
    0
    
    
    
    0
    
    
    
    4,221
    
    
    
    (491
    )
    
    
    0
    
    
    
    (1
    )
    
    
    (50
    )
    
    
    269,942
    
    
    
    137,805Resources used in financing activities
    
    
    (5,587
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,888
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    (2,387
    )
    
    
    (11,812
    )Resources (used in) provided by investing activities
    
    
    (743,729
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,497
    
    
    
    
    
    
    
    
    
    
    
    611
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,566
    
    
    
    (730,055
    )Cash and cash equivalents:Net increase (decrease) in cash and cash equivalents
    
    
    (879,878
    )
    
    
    (625
    )
    
    
    21
    
    
    
    (200
    )
    
    
    76
    
    
    
    (29
    )
    
    
    0
    
    
    
    0
    
    
    
    944
    
    
    
    (491
    )
    
    
    0
    
    
    
    (1
    )
    
    
    0
    
    
    
    276,121
    
    
    
    (604,062
    )Beginning balances
    
    
    1,585,470
    
    
    
    1,037
    
    
    
    185
    
    
    
    377
    
    
    
    170
    
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    3,800
    
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    0
    
    
    
    1,591,405Ending balances
    
    $
    705,592
    
    
    
    412
    
    
    
    206
    
    
    
    177
    
    
    
    246
    
    
    
    196
    
    
    
    0
    
    
    
    0
    
    
    
    1,056
    
    
    
    3,309
    
    
    
    0
    
    
    
    28
    
    
    
    0
    
    
    
    276,121
    
    
    
    987,343
  F-57




---



##### Table of Contents



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-58




---



##### Table of Contents



NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    SCG
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedShareholders Equity as of December 31, 2008: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-59




---



##### Table of Contents



NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    SCG
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    Elimination
    
    
    ConsolidatedAs of December 31, 2008Total 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-60




---



##### Table of Contents



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-61




---



##### Table of Contents



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-62




---



##### Table of Contents



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-63




---



##### Table of Contents



NON-GUARANTORSUBSIDIARIESMaxcom
    
    
    Maxcom
    
    
    
    
    
    
    
    
    
    
    SierraMaxcom
    
    
    CTE
    
    
    MSA
    
    
    OOP
    
    
    MSF
    
    
    USA
    
    
    TV
    
    
    TECBTC
    
    
    Telereunión
    
    
    USA
    
    
    Telscape
    
    
    SCG
    
    
    Elimination
    
    
    ConsolidatedAs of December 31, 2007Preoperating 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-64




---



##### Table of Contents



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 expenses Amortization 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 restructuring Capitalized 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-65




---



##### Table of Contents



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
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Balance at
    
    
    Charged toBeginning of
    
    
    Cost and
    
    
    
    
    
    
    Balance at EndPeriod
    
    
    Expenses
    
    
    Deductions
    
    
    of PeriodAllowance for doubtful accounts
    
    
    2009
    
    
    $
    161.9
    
    
    $
    184.1
    
    
    $
    (112.8
    )
    
    $
    233.32008
    
    
    $
    107.7
    
    
    $
    106.3
    
    
    $
    (52.0
    )
    
    $
    161.92007
    
    
    $
    92.7
    
    
    $
    63.4
    
    
    $
    (48.4
    )
    
    $
    107.7Allowance for obsolete and slow-moving supply inventories
    
    
    2009
    
    
    $
    0.0
    
    
    
    7.1
    
    
    $
    
    
    
    $
    7.12008
    
    
    $
    0.3
    
    
    
    (0.3
    )
    
    
    
    
    
    $
    2007
    
    
    $
    0.3
    
    
    
    
    
    
    
    (0.3
    )
    
    $
    0.1Allowance for obsolete and slow-moving network inventories
    
    
    2009
    
    
    $
    13.7
    
    
    
    (7.0
    )
    
    $
    
    
    
    $
    6.72008
    
    
    $
    9.3
    
    
    
    21.7
    
    
    $
    (17.3
    )
    
    $
    13.72007
    
    
    $
    10.0
    
    
    
    
    
    
    $
    (0.7
    )
    
    $
    9.3
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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
shareholders 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.2.7
    
    
    Third Supplemental Indenture dated as of December 31, 2008, among Telereunion, S.A. de C.V., Telescape,
S.A. de C.V., Sierra US Communication, Inc. an each a direct or indirect subsiciary of Maxcom
Telecomunicaciones S.A.B. de C.V., a limited liability public stock corporation.2.8
    
    
    Fourth Supplemental Indenture dated as of February 23, 2010, among Asesores Telcoop, S.A. de C.V. an
indirect subsiciary of Maxcom Telecomunicaciones S.A.B. de C.V., a limited liability public stock
corporation.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.
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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.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.
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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.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.
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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.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.  139




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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.
  G-1




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##### Table of Contents



Gbps
    
    Gigabits per second. A measurement of speed for digital signal transmission
expressed in billions of bits per second (Gbps).Gulf region
    
    115 cities and towns in eleven states in eastern Mexico, which includes the
cities of Puebla, Tampico, Veracruz, Reynosa, Cancún, Chetumal, Mérida, Ciudad
del Carmen, Campeche, Coatzacoalcos and Tuxtla Gutiérrez, among others.Hertz
    
    The unit measuring the frequency with which an alternating electromagnetic signal
cycles through the zero-value state between lowest and highest states. One
hertz(abbreviated Hz) equals one cycle per second. KHz (kilohertz) stands for
thousands of hertz; MHz (megahertz) stands for millions of hertz and GHz
(gigahertz) stands for billions of hertz.ISDN
    
    Integrated Services Digital Network ISDN is an international standard that
provides end-to-end digital connectivity to support a wide range of voice, data
and video services.IPTV
    
    Internet Protocol Television is also called Internet Television or TV over IP and
it refers to the transmission of television signals through the Internet using
Internet Protocol.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.
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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.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




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EXHIBIT INDEX
 1.1
    
    
    Amended and Restated Bylaws (estatutos) of Maxcom
Telecomunicaciones, S.A. de C.V. (English translation).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 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.13.2
    
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.