Case 3 - Nextel Peru For submission of the case please use the submission link on BB (under "Case Submission). You should submit a PDF file. The peer evaluation form must be submitted by Sunday November 8 at midnight; failure to submit the Peer Evaluation Form will results in a penalty of 25% of your individual grade. If I have convincing evidence that one (or more) members did not adequately participate in the case assignment, I will make appropriate adjustments to that member(s) score. In your submission, include answers to all the questions below and any supporting material you think is helpful. Make it presentable to a "client, or a prospective employer. It should be user friendly, concise, well-written, neat and convincing. Include supporting material in the appendix. The assignment should be maximum three pages (excluding any appendix). The total length including the Appendix is six pages. In other words, if you have three pages of text, your Appendix can at most be an additional three pages). There are a total of twenty points available. Next to each question it is noted how many points pertain to that question. If you need to refer to an Exhibit in the case you can just refer to the Exhibit (i.e., assume your client has a copy of the case readily available to look up any Exhibits). Please state and justify any assumptions you make. 1. (2 points) Consider the data in Exhibit 1. What does it say about the competitive position of Nextel in the marketplace relative to its competitors? Explain. 2. (2 points) "Nextel has no choice but to sell some of its South American subsidiaries. Agree or disagree. Why? 3. (2 points) Is Nextel Peru likely to be better off if it is acquired by Entel? Discuss. 4. (2 points) Assume that the yield on 1-month Treasury Bills is 3.08%. What is the cost of equity of Nextel (NII Holdings) assuming investors are (1) diversified in the US, (ii) globally diversified and (iii) diversified in Latin America? Use the methods covered in class to compute the cost of equity. 5. (2 points) How does the cost of equity of NII Holdings compare to two of its competitors America Movil and Telefonica de Peru? Assume investors are globally diversified. Discuss. 6. (2 points) Explain conceptually what the MSCI Latin Equity Beta is. As part of your answer explain what the MSCI Latin Equity index is as well as why this index may be useful to investors. 7. (3 points) Estimate the cost of capital of NII Holdings assuming investors are globally diversified. Use your answer to Question 4 part ii as your estimate of the cost of equity. 8. (2 points) What do you think the appropriate growth rate of expected cash flows should be for Nextel Peru. Explain your choice. 9. (3 points) Estimate the value of Nextel Peru. How does it compare to the price Entel is offering? How much confidence do you have in your answer? Explain why you are or are not confident. 5 USD Equity Value USD Net Debt Enterprise Value 1,000 500 1,500 Debt D/ 33.3% Historic D/V (2) 17.73% 25.18% 13.74% 41.68% 32.48% -13.91% 3.28% 26.57% 6.78% 7 (Local Currency in Millions) 8 9 10 Equity Net Minority Enterprise Current 11 Companies: Value (1) Interest Value DAV 12 America Movil 963,882 363,978 8,990 1,336,850 27.23% 13 Embratel Participacoes S.A 13,173 2,238 4.842 20.252 11.05% 14 Empresa Nacional De Telecomunicaciones 2,356,959 385,754 0 2.742.713 14.06% 15 NII Holdings 943 3,774 0 4,716 80.01% 16 Oi SA 10,152 28,921 0 39,073 74.02% 17 Telecom Argentina 24,167 (3,969) 200 20,398 -19.46% 18 Telefonica Brasil 59,983 975 0 60,957 1.60% 19 Telefonica Del Peru 2,213 0 10,045 22.03% 20 TIM Participacoes S.A. 21.196 1,632 0 22,828 7.15% 21 22 Source: All information except equity betas S&P Capital Q accessed 3/14/14. 23 (1) Stock prices as of 4/1/13, except NII Holdings, which was 4/5/13. 24 (2) Quarterly average over the past three years. 25 (3) Source: Bloomberg accessed 3/14/14. Raw three year monthly betas. 26 (4) Source: Bloomberg accessed 3/14/14. Raw three year monthly betas based on US dollar denominated returns. 27 (5) Source: Bloomberg accessed 3/14/14. Raw three year monthly betas based on US dollar denominated returns. 28 O Source: Bloomberg accessed 3/14/14. Raw three year monthly betas based on local currencies. 29 (7) Case writer estimates 30 S&P Equity Beta (3) 1.12 0.53 0.83 0.65 1.08 1.31 0.73 0.38 0.82 MSCI World Equity Beta (4) 1.01 0.63 0.80 0.77 1.14 1.17 1.58 0.35 0.81 MSCI Latin Equity Beta (5) 0.75 0.64 0.81 0.67 1.08 0.89 0.63 0.24 0.74 Local Equity Beta (6) 0.91 0.56 0.77 0.65 0.86 1.05 0.47 0.49 0.58 Debt Beta (7) 0.12 0.05 0.07 0.18 0.15 0.00 0.00 0.17 0.07 Local Equity Value Local Net Debt Local Enterprise Value #REF! #REF! #REF! 7.833 DV REF! Local Risk-Free Rate US Cost of Capital 4.00% 8.25% 3 #REF! #REF! #REF! #REF! US EMRP 5.00% #REF! 31 8.6% 33 (Local Currency in Millions) 34 35 Revenue 36 Companies Growth 37 America Movil 13.0% 38 Embratel Participacoes S.A. 45.0% 39 Empresa Nacional De Telecomunicaciones 14.8% 40 NII Holdings -11.7% 41 Oi SA 165.1% 42 Telecom Argentina 18.3% 43 Telefonica Brasil 2.1% 44 Telefonica Del Peru 5.3% 45 TIM Participacoes S.A. 6.8% 46 47 48 Average 28.7% 49 Median 13.0% 50 51 (1) EBIAT = EBIT(1-t) using the effective tax rate. 52 (3) 5 year revenue growth is on a compund annual basis. 53 Source: Data from S&P CapitallQ accessed on 2/27/13. 54 Last 12 Months: EBIT EBITDA EBIAT Margin Margin Margin (1) 19.7% 33.0% 21.8% 11.5% 26.9% 5.9% 17.4% 38.4% 14.5% 0.9% 14.2% NM 18.6% 30.1% 12.3% 18.3% 26.3% 11.9% 20.2% 35.9% 12.8% 19.3% 34.7% 11.3% 13.8% 28.0% 9.5% FCF Revenue Margin Growth (2) 10.6% 19.1% -11.0% 17.2% 3.0% 8.1% -6.7% 10.4% 2.4% 20.5% 8.5% 19.4% 19.2% 18.1% 12.8% 6.3% 2.3% 8.6% 5 Year Average: EBIT EBITDA EBLAT Margin Margin Margin (1) 12.0% 14.4% 10.3% 12.1% 13.1% 21.6% 42.7% 18.2% 14.0% 24.2% 9.1% 22.2% 33.9% 15.9% 20.8% 13.5% 21.4% 36.9% 15.0% 19.2% 39.7% 10.9% 8.6% 26.6% 5.2% FCF Margin 11.1% 1.3% 5.6% 3.0% 16.0% 12.1% 16.9% 15.7% 4.2% 30.5% 15.5% 18.3% 29.7% 30.1% 12.5% 12.1% 4.6% 3.0% 14.2% 17.2% 16.9% 19.2% 29.1% 30.5% 11.9% 10.9% 9.5% 11.1% 4 NII Holdings & Nextel Peru Subscriber Information 5 2010 9,027 1,685 8,816 21.0% 607 2011 10.712 650 10,491 19.0% 610 2012 11,362 629 11,121 6.0% 520 6 7 NII Holdings Subscriber Data: 8 Total Handsets in Use 9 Net Sbscriber Increase 10 Estimated Average Subscribers 11 Growth in Subscribers 12 ARPU (1) 13 14 Nextel Peru Subscriber Data: 15 Total Handsets in Use 16 Net Sbscriber Increase 17 Estimated Average Subscribers 18 Growth in Subscribers 19 ARPU (1) 20 21 (1) Calculated as service revenue divided by estimated average subscribers. 22 Source: Company 10-Ks 23 1,128 286 985 34.0% 286 1,435 307 1.282 27.2% 251 1,660 225 1,548 15.7% 203 3 2010 281,995 30,021 312,016 100,048 62.810 149,158 55,783 71,112 22,263 2011 321,942 32,187 354,129 107,710 71.857 174,562 63,575 75,672 35,315 2012 314,039 29,302 343,341 116,137 85,261 141,943 72,375 83,549 (13,981) 5 Historical Operating Results ($ 000's) 6 7 Operating Results (1): 8 Service Revenue 9 Plus: Handset Revenue 10 Total Operating Revenue 11 Less: Cost of Services (2) 12 Less: Cost of Handset Sales 13 Gross Profit 14 Less: Selling & Marketing Expenses (3) 15 Less: General & Administrative Expenses 16 Segment EBITDA 17 18 Estimated Depreciation (4) 19 Total Assets 20 Capital Expenditures 21 22 Net Reinvestment in Long-Term Assets 23 24 25 Service Revenue Growth 26 Handset Revenue Growth 27 Growth in Operating Revenue 28 Gross Profit on Services 29 Gross Profit on Handsets 30 Total Gross Profit 31 EBITDA Margin 32 EBIT Margin 33 34,137 556,752 94,000 35,858 597,891 105,500 35,088 498,230 77,700 59,863 69,642 42,612 Margins: 16.9% 10.8% 16.3% 64.5% -109.2% 47.8% 7.1% -3.8% 14.2% 7.2% 13.5% 66.5% -123.2% 49.3% 10.0% -0.2% -2.5% -9.0% -3.0% 63.0% -191.0% 41.3% -4.1% -14.3% Market Returns Data 5 3 3 Monthly Stock Market Returns: O 1 Date: 2 01/31/1998 3 02/28/1998 4 03/31/1998 5 04/30/1998 6 05/31/1998 7 06/30/1998 8 07/31/1998 9 08/31/1998 0 09/30/1998 1 10/31/1998 2 11/30/1998 3 12/31/1998 1 01/31/1999 5 02/28/1999 6 03/31/1999 7 04/30/1999 8|05/31/1999 9 06/30/1999 0 07/31/1999 1 08/31/1999 2 09/30/1999 3 10/31/1999 1 11/30/1999 5 12/31/1999 6 01/31/2000 7 02/29/2000 Peru -9.37% -2.39% 7.57% 10.77% -3.94% % -9.56% 4.45% -26.20% -1.47% -1.23% 28.42% -15.54% -1.15% 7.38% 3.69% 11.84% 1.29% 0.29% -1.25% 0.24% 12.16% -3.28% 1.47% 0.85% -0.71% -0.87% Chile - 13.13% 5.70% 6.09% -4.92% -6.46% -8.61% 1.82% -22.03% 1.79% 4.88% 15.30% - 10.26% -4.11% 5.10% S&P 1.20% 7.20% 5.13% 1.13% -1.77% 4.10% -1.01% -14.31% 6.32% 8.01% 6.22% 5.97% 4.28% -3.19% 3.90% 3.76% -2.32% 5.44% -3.02% -0.50% -2.81% 6.42% 2.08% 6.26% -4.96% -1.75% MSCI Global Index 2.77% 6.75% 4.21% 0.96% -1.27% 2.36% -0.18% -13.35% 1.75% 9.02% 5.93% 4.87% 2.18% -2.67% 4.15% 3.93% -3.67% 4.65% -0.31% -0.19% -0.98% 5.18% 2.80% 8.08% -5.74% 0.26% Daily Yields: Peruvian 30-Yr Date: Rate 4/1/08 6.92% 4/2/08 6.84% 4/3/08 6.79% 4/4/08 6.85% 4/7/08 6.83% 4/8/08 6.95% 4/9/08 7.00% 4/10/08 7.00% 4/11/08 7.03% 4/14/08 7.03% 4/15/08 6.90% 4/16/08 6.88% 4/17/08 6.89% 4/18/08 6.90% 4/21/08 6.94% 4/22/08 7.00% 4/23/08 7.01% 1/24/08 6.91% 4/25/08 7.00% 4/28/08 7.00% 4/29/08 6.99% 4/30/08 7.00% 5/1/08 7.00% 5/2/08 7.03% 5/5/08 5/6/08 6.99% US 30-Yr Rate 4.40% 4.38% 4.40% 4.32% 4.36% 4.37% 4.31% 4.34% 4.30% 4.35% 4.42% 4.54% 4.54% 4.51% 4.48% 4.46% 4.49% 4.56% 4.61% 4.57% 4.55% 4.49% 4.49% 4.57% 4.58% 4.64% 11.29% 8.05% -1.04% 0.99% -0.22% -1.96% -3.17% -4.00% 7.64% 8.36% 7.37% -1.42% 7.01% Cybibit 1 Evbibit Evbibit A Cybibit 2 Cybibit bibit A 331.427 6 Historical Consolidated Income Statements foi (8000's) 7 8 Operating Results: 9 Service Revenue 10 Plus: Handset & Accessory Revenue 11 Total Operating Revenue 12 Less: Cost of Service (Excluding Depreciation & Amortization) 12.... 13 Less: Cost of Handset Sales 14 Gross Profit 15 Less: Selling & Marketing (1) 16 EBITDA 17 Less: Depreciation & Amortization 18 18 Operating Income 19 Less: Interest Expense 20 Plus: Interest Income 21 Plus: Foreign Currency Gains 22 Less: Other Expenses 23 Earnings Before Taxes 24 Less: Taxes 25 Net Income 26 2010 2011 2012 5,348,400 6,403,519 6,403,5195,779,159 257,407 307.304 5,605,807 6,734,946 6,086,463 1,504,603 SA 2 600464 1,789,402 1,690,464 719.219 855.929 915.120 on 3,381,985 4,089,615 3,480,879 asi oss 1.946.706 2.504.976 2.875.359 1,435,279 _1,584,639 605 590 605,520 ssa poc 554.886 653.087 658 087 950 728.780 880,393 931,552 (123,260) 344 000 344,999 322,111 373,253 om 34,224 28,841 2412 34,143 52,374 (36,975) (53,415) 18.686 37.305 27.355 597,923 569,385 (543,140) 259.465 344.189 222.109 338,458 225,196 (765,249) 2010 2011 2012 1,767,501 2,322,919 1,383,491 537,539 343,422 204,834 788,000 858,471 705,737 227,191 277,291 349,704 186,988 203,012 175,753 393,658 331.407 515.513 3,900,877 4,336,522 3,335,032 2,960,046 3,481,869 3,884,947 433,208 1,182,380 1,164,672 486,098 410,162 367,182 410458 411.203 471.245 8,190,687 9.822.136 9.223,078 28 Historical Consolidated Balance Sheets for N1 (5000's) 29 30 Assets 31 Cash & Cash Equivalents 32 Plus: Short-Term Investments 33 Plus: Net Accounts Receivable 34 Plus: Handset Inventory 35 Plus: Deferred Taxes : Plus: Prepaid Expenses & Other Current Assets 37 Total Current Assets 38 Net Property, Plant & Equipment 40 Plus: Net Intangible Assets 41 Plus: Deferred Taxes 42 Plus: Other Assets 43 Total Assets 44 45 Liabilities of Owners' Equity 46 Accounts Payable 47 Plus: Accrued & Other Expenses 48 Plus: Deferred Revenue : 49 Plus: Current Portion of Long-Term Debt 50 Total Curent Liabilities 51 52 Long-Term Debt 53 Plus: Deferred Revenue 54 Plus: Deferred Tax Liabilities 55 Plus: Other Long-Term Liabilities 56 Total Liabilities 57 58 Total Stockholders' Equity Total Liabilities & Stockholders' Equity 60 Source: Company annual 10-Ks. 61 62 63 64 65 300.030 377,679 485,542 827,253 1,008,932 1,015,788 158,690 159,150 161,451 446.995 573.465 97.244 1,732,968 2,119,226 1,760,025 2,818,423 4,244,752 4,768,958 20,476 15,585 14,007 88,068 61,156 58,189 211.179 243.335 305.450 4,871,114 6,684,054 6,906,629 3,319,573 3,138,082 2,316,449 8,190,687 9,822,136 9,223,078 66 67 Case 3 - Nextel Peru For submission of the case please use the submission link on BB (under "Case Submission). You should submit a PDF file. The peer evaluation form must be submitted by Sunday November 8 at midnight; failure to submit the Peer Evaluation Form will results in a penalty of 25% of your individual grade. If I have convincing evidence that one (or more) members did not adequately participate in the case assignment, I will make appropriate adjustments to that member(s) score. In your submission, include answers to all the questions below and any supporting material you think is helpful. Make it presentable to a "client, or a prospective employer. It should be user friendly, concise, well-written, neat and convincing. Include supporting material in the appendix. The assignment should be maximum three pages (excluding any appendix). The total length including the Appendix is six pages. In other words, if you have three pages of text, your Appendix can at most be an additional three pages). There are a total of twenty points available. Next to each question it is noted how many points pertain to that question. If you need to refer to an Exhibit in the case you can just refer to the Exhibit (i.e., assume your client has a copy of the case readily available to look up any Exhibits). Please state and justify any assumptions you make. 1. (2 points) Consider the data in Exhibit 1. What does it say about the competitive position of Nextel in the marketplace relative to its competitors? Explain. 2. (2 points) "Nextel has no choice but to sell some of its South American subsidiaries. Agree or disagree. Why? 3. (2 points) Is Nextel Peru likely to be better off if it is acquired by Entel? Discuss. 4. (2 points) Assume that the yield on 1-month Treasury Bills is 3.08%. What is the cost of equity of Nextel (NII Holdings) assuming investors are (1) diversified in the US, (ii) globally diversified and (iii) diversified in Latin America? Use the methods covered in class to compute the cost of equity. 5. (2 points) How does the cost of equity of NII Holdings compare to two of its competitors America Movil and Telefonica de Peru? Assume investors are globally diversified. Discuss. 6. (2 points) Explain conceptually what the MSCI Latin Equity Beta is. As part of your answer explain what the MSCI Latin Equity index is as well as why this index may be useful to investors. 7. (3 points) Estimate the cost of capital of NII Holdings assuming investors are globally diversified. Use your answer to Question 4 part ii as your estimate of the cost of equity. 8. (2 points) What do you think the appropriate growth rate of expected cash flows should be for Nextel Peru. Explain your choice. 9. (3 points) Estimate the value of Nextel Peru. How does it compare to the price Entel is offering? How much confidence do you have in your answer? Explain why you are or are not confident. 5 USD Equity Value USD Net Debt Enterprise Value 1,000 500 1,500 Debt D/ 33.3% Historic D/V (2) 17.73% 25.18% 13.74% 41.68% 32.48% -13.91% 3.28% 26.57% 6.78% 7 (Local Currency in Millions) 8 9 10 Equity Net Minority Enterprise Current 11 Companies: Value (1) Interest Value DAV 12 America Movil 963,882 363,978 8,990 1,336,850 27.23% 13 Embratel Participacoes S.A 13,173 2,238 4.842 20.252 11.05% 14 Empresa Nacional De Telecomunicaciones 2,356,959 385,754 0 2.742.713 14.06% 15 NII Holdings 943 3,774 0 4,716 80.01% 16 Oi SA 10,152 28,921 0 39,073 74.02% 17 Telecom Argentina 24,167 (3,969) 200 20,398 -19.46% 18 Telefonica Brasil 59,983 975 0 60,957 1.60% 19 Telefonica Del Peru 2,213 0 10,045 22.03% 20 TIM Participacoes S.A. 21.196 1,632 0 22,828 7.15% 21 22 Source: All information except equity betas S&P Capital Q accessed 3/14/14. 23 (1) Stock prices as of 4/1/13, except NII Holdings, which was 4/5/13. 24 (2) Quarterly average over the past three years. 25 (3) Source: Bloomberg accessed 3/14/14. Raw three year monthly betas. 26 (4) Source: Bloomberg accessed 3/14/14. Raw three year monthly betas based on US dollar denominated returns. 27 (5) Source: Bloomberg accessed 3/14/14. Raw three year monthly betas based on US dollar denominated returns. 28 O Source: Bloomberg accessed 3/14/14. Raw three year monthly betas based on local currencies. 29 (7) Case writer estimates 30 S&P Equity Beta (3) 1.12 0.53 0.83 0.65 1.08 1.31 0.73 0.38 0.82 MSCI World Equity Beta (4) 1.01 0.63 0.80 0.77 1.14 1.17 1.58 0.35 0.81 MSCI Latin Equity Beta (5) 0.75 0.64 0.81 0.67 1.08 0.89 0.63 0.24 0.74 Local Equity Beta (6) 0.91 0.56 0.77 0.65 0.86 1.05 0.47 0.49 0.58 Debt Beta (7) 0.12 0.05 0.07 0.18 0.15 0.00 0.00 0.17 0.07 Local Equity Value Local Net Debt Local Enterprise Value #REF! #REF! #REF! 7.833 DV REF! Local Risk-Free Rate US Cost of Capital 4.00% 8.25% 3 #REF! #REF! #REF! #REF! US EMRP 5.00% #REF! 31 8.6% 33 (Local Currency in Millions) 34 35 Revenue 36 Companies Growth 37 America Movil 13.0% 38 Embratel Participacoes S.A. 45.0% 39 Empresa Nacional De Telecomunicaciones 14.8% 40 NII Holdings -11.7% 41 Oi SA 165.1% 42 Telecom Argentina 18.3% 43 Telefonica Brasil 2.1% 44 Telefonica Del Peru 5.3% 45 TIM Participacoes S.A. 6.8% 46 47 48 Average 28.7% 49 Median 13.0% 50 51 (1) EBIAT = EBIT(1-t) using the effective tax rate. 52 (3) 5 year revenue growth is on a compund annual basis. 53 Source: Data from S&P CapitallQ accessed on 2/27/13. 54 Last 12 Months: EBIT EBITDA EBIAT Margin Margin Margin (1) 19.7% 33.0% 21.8% 11.5% 26.9% 5.9% 17.4% 38.4% 14.5% 0.9% 14.2% NM 18.6% 30.1% 12.3% 18.3% 26.3% 11.9% 20.2% 35.9% 12.8% 19.3% 34.7% 11.3% 13.8% 28.0% 9.5% FCF Revenue Margin Growth (2) 10.6% 19.1% -11.0% 17.2% 3.0% 8.1% -6.7% 10.4% 2.4% 20.5% 8.5% 19.4% 19.2% 18.1% 12.8% 6.3% 2.3% 8.6% 5 Year Average: EBIT EBITDA EBLAT Margin Margin Margin (1) 12.0% 14.4% 10.3% 12.1% 13.1% 21.6% 42.7% 18.2% 14.0% 24.2% 9.1% 22.2% 33.9% 15.9% 20.8% 13.5% 21.4% 36.9% 15.0% 19.2% 39.7% 10.9% 8.6% 26.6% 5.2% FCF Margin 11.1% 1.3% 5.6% 3.0% 16.0% 12.1% 16.9% 15.7% 4.2% 30.5% 15.5% 18.3% 29.7% 30.1% 12.5% 12.1% 4.6% 3.0% 14.2% 17.2% 16.9% 19.2% 29.1% 30.5% 11.9% 10.9% 9.5% 11.1% 4 NII Holdings & Nextel Peru Subscriber Information 5 2010 9,027 1,685 8,816 21.0% 607 2011 10.712 650 10,491 19.0% 610 2012 11,362 629 11,121 6.0% 520 6 7 NII Holdings Subscriber Data: 8 Total Handsets in Use 9 Net Sbscriber Increase 10 Estimated Average Subscribers 11 Growth in Subscribers 12 ARPU (1) 13 14 Nextel Peru Subscriber Data: 15 Total Handsets in Use 16 Net Sbscriber Increase 17 Estimated Average Subscribers 18 Growth in Subscribers 19 ARPU (1) 20 21 (1) Calculated as service revenue divided by estimated average subscribers. 22 Source: Company 10-Ks 23 1,128 286 985 34.0% 286 1,435 307 1.282 27.2% 251 1,660 225 1,548 15.7% 203 3 2010 281,995 30,021 312,016 100,048 62.810 149,158 55,783 71,112 22,263 2011 321,942 32,187 354,129 107,710 71.857 174,562 63,575 75,672 35,315 2012 314,039 29,302 343,341 116,137 85,261 141,943 72,375 83,549 (13,981) 5 Historical Operating Results ($ 000's) 6 7 Operating Results (1): 8 Service Revenue 9 Plus: Handset Revenue 10 Total Operating Revenue 11 Less: Cost of Services (2) 12 Less: Cost of Handset Sales 13 Gross Profit 14 Less: Selling & Marketing Expenses (3) 15 Less: General & Administrative Expenses 16 Segment EBITDA 17 18 Estimated Depreciation (4) 19 Total Assets 20 Capital Expenditures 21 22 Net Reinvestment in Long-Term Assets 23 24 25 Service Revenue Growth 26 Handset Revenue Growth 27 Growth in Operating Revenue 28 Gross Profit on Services 29 Gross Profit on Handsets 30 Total Gross Profit 31 EBITDA Margin 32 EBIT Margin 33 34,137 556,752 94,000 35,858 597,891 105,500 35,088 498,230 77,700 59,863 69,642 42,612 Margins: 16.9% 10.8% 16.3% 64.5% -109.2% 47.8% 7.1% -3.8% 14.2% 7.2% 13.5% 66.5% -123.2% 49.3% 10.0% -0.2% -2.5% -9.0% -3.0% 63.0% -191.0% 41.3% -4.1% -14.3% Market Returns Data 5 3 3 Monthly Stock Market Returns: O 1 Date: 2 01/31/1998 3 02/28/1998 4 03/31/1998 5 04/30/1998 6 05/31/1998 7 06/30/1998 8 07/31/1998 9 08/31/1998 0 09/30/1998 1 10/31/1998 2 11/30/1998 3 12/31/1998 1 01/31/1999 5 02/28/1999 6 03/31/1999 7 04/30/1999 8|05/31/1999 9 06/30/1999 0 07/31/1999 1 08/31/1999 2 09/30/1999 3 10/31/1999 1 11/30/1999 5 12/31/1999 6 01/31/2000 7 02/29/2000 Peru -9.37% -2.39% 7.57% 10.77% -3.94% % -9.56% 4.45% -26.20% -1.47% -1.23% 28.42% -15.54% -1.15% 7.38% 3.69% 11.84% 1.29% 0.29% -1.25% 0.24% 12.16% -3.28% 1.47% 0.85% -0.71% -0.87% Chile - 13.13% 5.70% 6.09% -4.92% -6.46% -8.61% 1.82% -22.03% 1.79% 4.88% 15.30% - 10.26% -4.11% 5.10% S&P 1.20% 7.20% 5.13% 1.13% -1.77% 4.10% -1.01% -14.31% 6.32% 8.01% 6.22% 5.97% 4.28% -3.19% 3.90% 3.76% -2.32% 5.44% -3.02% -0.50% -2.81% 6.42% 2.08% 6.26% -4.96% -1.75% MSCI Global Index 2.77% 6.75% 4.21% 0.96% -1.27% 2.36% -0.18% -13.35% 1.75% 9.02% 5.93% 4.87% 2.18% -2.67% 4.15% 3.93% -3.67% 4.65% -0.31% -0.19% -0.98% 5.18% 2.80% 8.08% -5.74% 0.26% Daily Yields: Peruvian 30-Yr Date: Rate 4/1/08 6.92% 4/2/08 6.84% 4/3/08 6.79% 4/4/08 6.85% 4/7/08 6.83% 4/8/08 6.95% 4/9/08 7.00% 4/10/08 7.00% 4/11/08 7.03% 4/14/08 7.03% 4/15/08 6.90% 4/16/08 6.88% 4/17/08 6.89% 4/18/08 6.90% 4/21/08 6.94% 4/22/08 7.00% 4/23/08 7.01% 1/24/08 6.91% 4/25/08 7.00% 4/28/08 7.00% 4/29/08 6.99% 4/30/08 7.00% 5/1/08 7.00% 5/2/08 7.03% 5/5/08 5/6/08 6.99% US 30-Yr Rate 4.40% 4.38% 4.40% 4.32% 4.36% 4.37% 4.31% 4.34% 4.30% 4.35% 4.42% 4.54% 4.54% 4.51% 4.48% 4.46% 4.49% 4.56% 4.61% 4.57% 4.55% 4.49% 4.49% 4.57% 4.58% 4.64% 11.29% 8.05% -1.04% 0.99% -0.22% -1.96% -3.17% -4.00% 7.64% 8.36% 7.37% -1.42% 7.01% Cybibit 1 Evbibit Evbibit A Cybibit 2 Cybibit bibit A 331.427 6 Historical Consolidated Income Statements foi (8000's) 7 8 Operating Results: 9 Service Revenue 10 Plus: Handset & Accessory Revenue 11 Total Operating Revenue 12 Less: Cost of Service (Excluding Depreciation & Amortization) 12.... 13 Less: Cost of Handset Sales 14 Gross Profit 15 Less: Selling & Marketing (1) 16 EBITDA 17 Less: Depreciation & Amortization 18 18 Operating Income 19 Less: Interest Expense 20 Plus: Interest Income 21 Plus: Foreign Currency Gains 22 Less: Other Expenses 23 Earnings Before Taxes 24 Less: Taxes 25 Net Income 26 2010 2011 2012 5,348,400 6,403,519 6,403,5195,779,159 257,407 307.304 5,605,807 6,734,946 6,086,463 1,504,603 SA 2 600464 1,789,402 1,690,464 719.219 855.929 915.120 on 3,381,985 4,089,615 3,480,879 asi oss 1.946.706 2.504.976 2.875.359 1,435,279 _1,584,639 605 590 605,520 ssa poc 554.886 653.087 658 087 950 728.780 880,393 931,552 (123,260) 344 000 344,999 322,111 373,253 om 34,224 28,841 2412 34,143 52,374 (36,975) (53,415) 18.686 37.305 27.355 597,923 569,385 (543,140) 259.465 344.189 222.109 338,458 225,196 (765,249) 2010 2011 2012 1,767,501 2,322,919 1,383,491 537,539 343,422 204,834 788,000 858,471 705,737 227,191 277,291 349,704 186,988 203,012 175,753 393,658 331.407 515.513 3,900,877 4,336,522 3,335,032 2,960,046 3,481,869 3,884,947 433,208 1,182,380 1,164,672 486,098 410,162 367,182 410458 411.203 471.245 8,190,687 9.822.136 9.223,078 28 Historical Consolidated Balance Sheets for N1 (5000's) 29 30 Assets 31 Cash & Cash Equivalents 32 Plus: Short-Term Investments 33 Plus: Net Accounts Receivable 34 Plus: Handset Inventory 35 Plus: Deferred Taxes : Plus: Prepaid Expenses & Other Current Assets 37 Total Current Assets 38 Net Property, Plant & Equipment 40 Plus: Net Intangible Assets 41 Plus: Deferred Taxes 42 Plus: Other Assets 43 Total Assets 44 45 Liabilities of Owners' Equity 46 Accounts Payable 47 Plus: Accrued & Other Expenses 48 Plus: Deferred Revenue : 49 Plus: Current Portion of Long-Term Debt 50 Total Curent Liabilities 51 52 Long-Term Debt 53 Plus: Deferred Revenue 54 Plus: Deferred Tax Liabilities 55 Plus: Other Long-Term Liabilities 56 Total Liabilities 57 58 Total Stockholders' Equity Total Liabilities & Stockholders' Equity 60 Source: Company annual 10-Ks. 61 62 63 64 65 300.030 377,679 485,542 827,253 1,008,932 1,015,788 158,690 159,150 161,451 446.995 573.465 97.244 1,732,968 2,119,226 1,760,025 2,818,423 4,244,752 4,768,958 20,476 15,585 14,007 88,068 61,156 58,189 211.179 243.335 305.450 4,871,114 6,684,054 6,906,629 3,319,573 3,138,082 2,316,449 8,190,687 9,822,136 9,223,078 66 67
