0000912057-01-535138.txt : 20011019 0000912057-01-535138.hdr.sgml : 20011019 ACCESSION NUMBER: 0000912057-01-535138 CONFORMED SUBMISSION TYPE: 20-F/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20011011 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRICOM SA CENTRAL INDEX KEY: 0001052124 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20-F/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-14816 FILM NUMBER: 1757016 BUSINESS ADDRESS: STREET 1: AVE LOPE DE VEGA NO 95 CITY: SANTO DOMINGO STATE: G8 BUSINESS PHONE: 8094766000 MAIL ADDRESS: STREET 1: AVE LOPE DE VEGA NO 95 CITY: SANTO DOMINGO STATE: G8 ZIP: 00000 20-F/A 1 a2060683z20-fa.txt 20-F/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM 20-F/A [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: [LOGO] TRICOM, S.A. (Exact name of Registrant as specified in its charter) DOMINICAN REPUBLIC (Jurisdiction of incorporation or organization) AVENIDA LOPE DE VEGA NO. 95, SANTO DOMINGO, DOMINICAN REPUBLIC (Address of principal executives offices) Securities registered pursuant to Section 12(b) of the Act. AMERICAN DEPOSITARY SHARES CLASS A COMMON STOCK, PAR VALUE RD$10 PER SHARE Securities 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. 11-3/8% SENIOR NOTES DUE SEPTEMBER 1, 2004 Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. AT DECEMBER 31, 2000, THERE WERE 9,700,000 SHARES OF CLASS A COMMON STOCK AND 19,144,538 SHARES OF CLASS B STOCK ISSUED AND OUTSTANDING. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark which financial statement item the Registrant has elected to follow: Item 17 Item 18 X ----- ----- -ii- TABLE OF CONTENTS
PAGE ---- GENERAL INTRODUCTION..............................................................................................5 PART I 6 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS*..............................................6 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE*............................................................6 ITEM 3. KEY INFORMATION.....................................................................................6 ITEM 4. INFORMATION ON THE COMPANY.........................................................................17 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.......................................................42 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.........................................................51 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..................................................55 ITEM 8. FINANCIAL INFORMATION..............................................................................60 ITEM 9. THE OFFER AND LISTING..............................................................................60 ITEM 10. ADDITIONAL INFORMATION.............................................................................62 ITEM 11. QUANTATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........................................68 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES*............................................69 PART II 70 ITEM 13. DEFAULTS, DIVIDED ARREARAGES AND DELINQUENCIES.....................................................70 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS*......................70 ITEM 15. [RESERVED].........................................................................................70 ITEM 16. [RESERVED].........................................................................................70 PART III 70 ITEM 17. FINANCIAL STATEMENTS**.............................................................................70 ITEM 18. FINANCIAL STATEMENTS...............................................................................70 ITEM 19. EXHIBITS...........................................................................................70
------------- * Omitted because the Item is not applicable or the answer is negative. ** The Company has completed Item 18 in lieu of this Item. -iii- (This page has been left blank intentionally.) -iv- GENERAL INTRODUCTION UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES TO (I) THE "COMPANY" OR "TRICOM" REFER TO TRICOM, S.A. AND ITS CONSOLIDATED SUBSIDIARIES AND THEIR RESPECTIVE OPERATIONS, AND INCLUDE TRICOM'S PREDECESSORS, AND (II) "GFN" REFERS TO GFN CORPORATION LTD. AND ITS DIRECT AND INDIRECT SUBSIDIARIES, OTHER THAN THE COMPANY AND ITS SUBSIDIARIES, AND INCLUDES GFN'S PREDECESSORS. PRESENTATION OF CERTAIN FINANCIAL INFORMATION The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States. The Company adopted the United States dollar as its functional currency effective January 1, 1997. See "Item 5. Operating and Financial Review and Prospects" and Note 2 of Notes to the audited consolidated financial statements of the Company at December 31, 1999 and 2000 and for the years ended December 31, 1998, 1999 and 2000 (the "Consolidated Financial Statements"). Unless otherwise stated, Dominican peso amounts that appear in this Annual Report have been translated into United States dollars. As of December 31, 1999 and 2000, the rates used by the Company to translate Dominican peso-denominated accounts at the year-end were RD$16.05 and RD$16.69, respectively. In this Annual Report references to "$," "US$" or "U.S. dollars" are to United States dollars, and references to "Dominican pesos" or "RD$" are to Dominican pesos. This Annual Report contains translations of certain Dominican peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the Dominican peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. The average of prices of one U.S. dollar quoted by certain private commercial banks (the "Private Market Rate") as reported by Banco Central de la Republica Dominicana (the "Central Bank") on December 31, 2000 was RD$16.65 = US$1.00, the date of the most recent financial information included in this Annual Report. The Federal Reserve Bank of New York does not report a noon buying rate for Dominican pesos. On April 27, 2001, the Private Market Rate was RD$16.86 = US$1.00. FORWARD-LOOKING STATEMENTS The statements contained in this Annual Report which are not historical facts are forward-looking statements that involve risks and uncertainties. Management cautions the reader that these forward-looking statements are only predictions; actual events or results may differ materially as a result of risks facing the Company. Such risks include, but are not limited to, the following factors: competition; declining rates for international long distance traffic; reliance on resellers; our inability to minimize credit risks; customer churn; rapid technological change; rejection of our concession agreement in the Dominican Republic; cellular fraud; our ability to implement our business plan on schedule, including our Central American strategy; social, political and economic conditions in our existing and target markets; our significant capital expenditure and working capital requirements and our need to finance such expenditures; the effect of our indebtedness on our ability to fund expansion and remain competitive and of restrictions contained in such indebtedness; concerns about health risks associated with wireless equipment; our inability to manage effectively our rapid expansion; our inability to obtain licenses or concessions in markets outside the Dominican Republic; the continued growth of the Dominican and Central American economies, demand for telecommunication services in the Dominican Republic and Central America and moderation of inflation; and the continuation of a favorable political, economic and regulatory environment in each of the Dominican Republic and Central America. PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not Applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not Applicable. ITEM 3. KEY INFORMATION SELECTED FINANCIAL DATA The following table provides selected financial and operating data of TRICOM for the periods indicated. We have derived the selected financial data from our consolidated financial statements, which have been audited by KPMG, independent auditors. You should read the information in the following tables in conjunction with "Operating and Financial Review and Prospects" and the consolidated financials included in this Annual Report.
YEAR ENDED DECEMBER 31, 1996 1997 1998 1999 2000 (IN THOUSANDS)(1) STATEMENTS OF OPERATIONS DATA: Operating revenues: Toll $ 13,108 15,511 17,645 23,118 28,666 International 42,069 39,432 50,332 60,592 84,187 Local service 1,770 6,412 12,942 33,859 54,771 Cellular and PCS 11,011 13,073 20,364 26,474 35,796 Paging 5,170 5,079 4,528 2,696 1,704 Sale of equipment 3,969 5,502 4,115 7,690 5,263 Installation and activation fees 1,943 5,071 12,937 15,502 13,749 Other 24 21 2,640 889 162 Total operating revenues 79,064 90,102 125,501 170,819 224,298 Operating costs: Satellite connections and carrier 30,172 31,271 32,309 43,688 68,608 Network depreciation 5,797 7,433 11,382 15,983 29,342 Expense in lieu of income taxes(2) 5,348 6,248 9,562 12,764 10,174 General and administrative expenses 22,185 25,631 39,379 51,501 70,691 Other 1,021 3,659 3,391 5,421 4,462 Total operating costs 64,523 74,242 96,024 129,357 183,276 Operating income 14,540 15,860 29,478 41,462 41,022 Other income (expenses): Interest expense, net (10,699) (12,047) (12,873) (20,041) (30,736) Foreign currency exchange gain (loss) 23 (706) 104 (203) (303) Gain on sale of land - - - 898 - Gain on sale of equipment - - - - 30 Other, net 233 (83) 845 179 (197) Other expenses, net (10,443) (12,836) (11,924) (19,166) (31,206) Earnings before income taxes, extraordinary item and cumulative effect of accounting change 4,098 3,023 17,554 22,296 9,816 Income taxes - - 352 (142) (588) Extraordinary item - (5,453)(3) - - - Cumulative effect of accounting change: - - - - - Organization costs - - - (120) - -6- Installations and activations revenues - - - - (16,453)(4) Net earnings (loss) $ 4,098 (2,430) 17,906 22,035 (7,226) Basic earnings per common share: Earnings before extraordinary item and cumulative effect of accounting change $ 0.41 0.17 0.78 0.89 0.33 Extraordinary item - (0.31)(3) - - - Cumulative effect of accounting change - - - - (0.59)(4) Net earnings (loss) $ 0.41 (0.14) 0.78 0.89 (0.26) Average number of common shares outstanding 9,880 17,600 22,945 24,845 27,724 BALANCE SHEET DATA: Cash and cash equivalents $ 4,292 5,733 15,377 13,460 18,200 Working capital (deficit) (43,586) 4,846 (19,600) (83,659) (125,299) Property, plant and equipment, net 119,334 202,978 330,456 455,045 586,224 Total assets 163,480 321,144 444,815 531,478 682,440 Long-term debt and capital leases (excluding current portion) 60,000 232,000 200,000 240,413(5) 276,744(5) Total indebtedness 128,677 242,755 279,257 336,468 398,809 Shareholders' equity 24,523 42,093 127,561 149,869 210,796 OTHER FINANCIAL DATA: Capital expenditures $ 32,104 92,668 142,101 145,426(5) 168,913(5) Net cash provided (used) by operating activities (2,908) 39,095 26,912 31,526 42,339 Net cash used in investing activities (32,440) (168,636) (121,171) (64,360) (149,395) Net cash provided by financing activities 35,419 132,059 104,065 30,966 111,796 EBITDA(6) 26,407 31,497 53,662 75,063 87,681 Ratio of EBITDA to net interest expense 2.5x 2.6x 4.2x 3.7x 2.9x Ratio of total indebtedness to EBITDA 4.9x 7.8x 5.2x 4.5x 4.5x OTHER OPERATING DATA: International minutes (in thousands) 126,484 157,411 231,075 360,532 597,204 Local access lines in service (at period end) 17,071 43,195 80,616 118,926 148,312 Mobile subscribers (at period end) 16,136 41,107 108,532 176,080 284,991
----------- (1) Except per share, ratios and other operating data. (2) Since 1996, we have made payments in lieu of income tax to the Dominican government, in accordance with the terms of our concession agreement. These payments represent 10% of gross domestic revenues, after deducting charges for access to the local network, plus 10% of net international revenues. Expense in lieu of income taxes also includes a tax, implemented in 1998, of 2% on international settlement revenues collected. This tax amounted to $0.3 million in 1998, $0.6 million in 1999 and $0.4 million in 2000. (3) Represents a write-off related to the refinancing of indebtedness. (4) Effective January 1, 2000, we adopted the U.S. Securities and Exchange Commission's Staff Accounting Bulletin No. 101, concerning the recognition of revenue. This pronouncement provides that we recognize net revenues from installations and activations over the period in which we retain our clients, which based on our experience is approximately 35 months. Since we previously recognized these revenues when they were collected, this change in revenue recognition resulted in a one-time, non-cash charge to earnings in 2000 of $16,452,799. At December 31, 2000, deferred revenues for installations and activations aggregated $14,654,886, which will be recognized as follows: $9,010,741 in 2001; $4,793,662 in 2002; and $850,483 in 2003. See Note 12 of Notes to Consolidated Financial Statements. (5) Includes capital lease obligations incurred during 1999 of $26.2 million and during 2000 of $17.7 million. (6) EBITDA typically consists of earnings (loss) before interest and other income and expenses, income taxes and depreciation and amortization. As described in note 2 above we make payments to the Dominican government in lieu of income taxes. As a result, we calculate EBITDA prior to the deduction of payments to the Dominican government in lieu of income taxes. Our calculation of EBITDA may not be comparable to EBITDA calculated by other companies. We believe that EBITDA is useful to investor because it commonly is used in the telecommunications industry to analyze companies on the basis of operating performance, leverage and liquidity. However, it does not purport to represent cash generated or used by operating activities and should not be considered in isolation or as a substitute for a measure of performance in accordance with generally accepted accounting principles. For 1999 and 2000, we have also added back to EBITDA amortization of radio frequency rights of $198,333 and $320,186, respectively. -7- EXCHANGE RATES The Federal Reserve Bank of New York does not report a noon buying rate for Dominican pesos. The following table sets forth the average official rate for each of the five most recent years and each fiscal quarter within those years, and the high and low official exchange rates for each of the previous six months, all as reported by the Central Bank. The average official rate has been calculated by using the average of the exchange rates on the last day of each month during the period. At October 5, 2001, the average official exchange rate was RD$16.66 per $1.00 while the average private market rate was RD$16.90 per $1.00.
AVERAGE OFFICIAL RATE AVERAGE PRIVATE RATE (RD$ PER $) (RD$ PER $) --------------------- -------------------- YEAR ENDED DECEMBER 31, 1996.................... 13.19 13.66 YEAR ENDED DECEMBER 31, 1997.................... 13.97 14.25 YEAR ENDED DECEMBER 31, 1998.................... 14.70 15.23 YEAR ENDED DECEMBER 31, 1999.................... 15.83 16.03 YEAR ENDED DECEMBER 31, 2000.................... 16.18 16.37
PREVIOUS SIX MONTHS FOR YEAR ENDING OFFICIAL RATE PRIVATE RATE DECEMBER 31, 2001 (RD$ PER $) (RD$) -------------------- -------------------- HIGH LOW HIGH LOW ---- --- ---- --- April........................................... 16.66 16.66 16.90 16.85 May............................................. 16.66 16.66 16.85 16.85 June............................................ 16.66 16.66 16.85 16.85 July............................................ 16.66 16.66 16.85 16.84 August.......................................... 16.66 16.66 16.85 16.84 September....................................... 16.66 16.66 16.90 16.85
RISK FACTORS You should carefully consider the risks described below and other information in this report. RISKS RELATING TO OUR CAPITAL STRUCTURE OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR ABILITY TO FUND EXPANSION AND OUR COMPETITIVE POSITION. We are highly leveraged. At December 31, 2000, we had outstanding approximately $398.8 million in aggregate principal amount of indebtedness, including capital leases. At December 31, 2000, we had approximately $210.8 million total shareholders' equity. The degree to which we are leveraged could have important consequences to us, including the following: - a substantial portion of our cash flow must be used to pay interest on our indebtedness. Therefore, our cash flow available for use in our business will be reduced; - our high degree of leverage could increase our vulnerability to changes in general economic conditions; - our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes could be impaired; - we are much more leveraged than our principal competitor, which may be a competitive disadvantage in our principal market; and - our failure to comply with covenants and restrictions contained in our notes' indenture could lead to a default which could cause that and other debt to become immediately payable. WE MAY NOT BE ABLE TO GENERATE SUFFICIENT CASH FLOW FROM OPERATIONS TO MEET OUR DEBT SERVICE REQUIREMENTS. Our ability to pay interest on our indebtedness and meet our debt service obligations will depend on our future performance, which in turn depends on successful implementation of our strategy and on financial, competitive, regulatory, technical and other factors, many of which are beyond our control. Our interest expense for the year ended December 31, 2000 was $34.0 million and our cash flow from operations for the year ended December 31, 2000 was $42.3 million. Approximately $122.0 million of our indebtedness will mature during the year ending December 31, 2001, however, most of these borrowings will be renewed or rolled over at maturity. Our ability to refinance any of this indebtedness will depend on our financial condition at the time it matures, the restrictions in the agreements governing our indebtedness and other factors, including general market and economic conditions. If refinancing were not possible, we could be forced to dispose of assets at unfavorable prices. In addition, our inability to refinance these obligations could result in our defaulting on our other debt obligations. WE DEPEND ON SHORT-TERM BORROWINGS IN THE DOMINICAN FINANCIAL MARKETS, WHICH BEAR HIGH INTEREST RATES AND WE CANNOT BE CERTAIN THAT THEY WILL CONTINUE TO BE AVAILABLE. We fund a substantial portion of our capital expenditure and working capital requirements with short-term borrowings in the Dominican financial markets. As of December 31, 2000, we had with Dominican financial institutions RD peso-denominated debt equivalent to $3.5 million with interest rates at 26% and U.S. dollar-denominated debt of $35.0 million, with interest rates ranging from 9.69% per annum to 12% per annum. These borrowings have maturities ranging up to 180 days and often are rolled over and payable on demand. However, our current lenders may be unable or unwilling to lend to us in the future. Even if these short term borrowings continue to -9- be available to us, due to their short-term maturities, we may be required to repay them at times when replacement financing is not available on commercially attractive terms. RISKS RELATED TO OUR OPERATIONS OUR PRINCIPAL COMPETITOR IN THE DOMINICAN REPUBLIC, CODETEL, HAS SUBSTANTIALLY GREATER MARKET SHARE AND RESOURCES, WHICH MAY PREVENT US FROM MAINTAINING OR INCREASING OUR MARKET SHARE. We compete primarily with Compania Dominicana de Telefonos C. por A., or Codetel, a wholly owned subsidiary of Verizon Communications Inc. Codetel has an established market presence, networks and resources substantially greater than ours. More than 75% of the Dominican Republic's local access line customers are customers of Codetel. The growth of our market share depends upon our ability to obtain customers in areas that currently are not served, or are underserved, by Codetel and to convince Codetel customers to either add, or switch to, the telephony services we offer. If Codetel implements significant price reductions for particular services we may be forced to reduce our rates in response in order to remain competitive. In addition, Codetel could expend significantly greater amounts of capital than are available to us in order to upgrade its network and/or sustain price reductions over a prolonged period. As a result we may not be able to maintain or increase our market share. THERE ARE NEW ENTRANTS IN THE DOMINICAN MARKETS, PARTICULARLY FOR WIRELESS SERVICES, WHICH COULD INCREASE COMPETITION FOR OUR SERVICES, REDUCE OUR MARKET SHARE OR INCREASE PRICE COMPETITION. The Dominican government has granted telecommunications concessions to a number of companies in the last several years. In 1999, France Telecom acquired a company which has a concession to provide telecommunication services. France Telecom has used the concession to offer wireless services. France Telecom's marketing efforts has included offering services at discounts. In January 2000, Centennial Cellular Corp. acquired 70% of All America Cables and Radio, Inc., an integrated telecommunications provider. Centennial is attempting to expand All America's share of the Dominican market for cellular and PCS services. In the international long distance market, investment by U.S. telecommunications companies in Dominican markets could limit the number of U.S. carriers that would send a significant number of minutes to us or otherwise adversely affect our ability to generate international settlement revenues. As a result of these and other potential new entrants, we expect to face more competition in the Dominican telecommunications market in the future, which could adversely affect our ability to maintain our market share or require us to lower prices. -10- SETTLEMENT RATES FOR INTERNATIONAL TRAFFIC FROM THE UNITED STATES AND PUERTO RICO COULD CONTINUE TO DECLINE, WHICH COULD REDUCE OUR INTERNATIONAL SETTLEMENT REVENUES AND PROFIT MARGINS FROM THESE REVENUES. Revenues from incoming international long distance calls represented approximately 40% of our operating revenues in 1998, 36% in 1999 and 38% in 2000. Approximately 98% of these revenues were attributable to calls originating in the United States and Puerto Rico. Settlement rates for traffic between the United States and the Dominican Republic have declined from $0.41 per minute during 1996 to $0.10 per minute during 2000. We believe that competitive and regulatory pressures could continue to push settlement rates lower. Future decreases in settlement rates, without a corresponding increase in our international long distance traffic from the United States, would reduce our international settlement revenues and adversely affect the profit margins that we realize on these revenues. BECAUSE WE ARE RECEIVING AN INCREASING PORTION OF OUR INTERNATIONAL MINUTES FROM U.S.-BASED RESELLERS, WE MAY EXPERIENCE SUBSTANTIAL FLUCTUATION IN OUR INTERNATIONAL REVENUES. Since 1997, we have derived an increasing proportion of international revenues from U.S.-based resellers, which are companies that typically buy long distance minutes in bulk and resell the minutes to other companies or individual end users. During 2000, resellers originated approximately 45% of our international long distance minutes from the United States to the Dominican Republic. While we enter into agreements with resellers, they are not required to provide us with any specified amount of traffic. The volume of minutes and revenues we receive from these resellers may vary significantly because of their uncertain financial condition. INTENSE COMPETITION IN U.S. MARKETS AMONG INTERNATIONAL LONG DISTANCE CARRIERS HAS RESULTED IN BANKRUPTCY FILINGS BY A NUMBER OF OUR RESELLER CLIENTS. WE MAY NOT BE ABLE TO COLLECT MONIES THAT THESE CLIENTS OWE TO US. During 2001, six U.S. carriers with which we exchanged, exchange or contracted at one time to exchange long distance service filed voluntary petitions for bankruptcy. In four cases, our subsidiary, TRICOM USA, is an unsecured, pre-petition creditor and has claims aggregating approximately US$1.5 million. We may not be able to recover the amounts owed to us and we may face substantial delays in resolving our claims. In two cases, the bankrupt carriers applied to prevent us from altering, refusing or discontinuing services, although the courts in these cases did not grant the requests of these carriers. We may be compelled to provide service to other carriers in bankruptcy under terms mandated by the court, which may not be as favorable to us as terms that we receive from other resellers. EFFORTS TO MINIMIZE CREDIT RISKS MAY ADVERSELY AFFECT OUR EFFORTS TO EXPAND OUR CUSTOMER BASE. During 1996, we terminated service for a significant number of mobile subscribers due to credit considerations, which adversely affected our results of operations. Since that time, we have instituted measures to minimize consumer credit risks. However, our efforts to minimize consumer credit risks may not be successful as we expand and offer our services across many different social and economic markets, including our expansion in Central America. Moreover, efforts to minimize credit risks may limit the number of our new subscribers. OUR NET GROWTH IN SUBSCRIBERS MAY BE REDUCED BY CUSTOMER DISCONNECTIONS OR CHURN. Our results of operations in the past have been, and in the future may be, affected by subscriber disconnections. In order to realize net growth in subscribers, we must replace disconnected subscribers and add new subscribers. The sales and marketing costs associated with attracting new subscribers are substantial, relative to the costs of providing service to existing subscribers. Our average monthly disconnection rate, or "churn rate," during 2000 was 3.1% for cellular and PCS subscribers and 2.3% for local access line subscribers. If we are not able to maintain our credit policies, or not otherwise able to limit churn, we will not experience net growth in subscribers. WE MAY NOT HAVE SUFFICIENT RESOURCES TO KEEP PACE WITH CHANGES IN TECHNOLOGIES USED TO PROVIDE TELECOMMUNICATIONS SERVICES OR THE TECHNOLOGIES THAT WE HAVE CHOSEN TO PROVIDE SERVICE MAY BE LESS POPULAR AMONG USERS THAN OTHER TECHNOLOGIES. -11- If we do not offer the latest technology, we may not be able to retain our existing customers or attract new ones. Our digital mobile technology could become obsolete. Our investment, to date, in our Dominican market exceeds $700 million and we would require substantial investment to replace all or a substantial part of it or our Central American network. SPECIAL TAX PROVISIONS CONTAINED IN OUR CONCESSION AGREEMENT ARE REQUIRED TO BE APPROVED BY THE DOMINICAN CONGRESS BUT HAVE NOT BEEN TO DATE, WHICH MAY CAUSE OUR FUTURE TAXES PAYABLE TO THE DOMINICAN GOVERNMENT TO INCREASE. Our concession agreement with the Dominican government, which grants us our right to operate as a telecommunications provider, provides for payments to the Dominican government, in lieu of income tax imposed on other Dominican corporations. Under the Dominican Constitution, provisions of agreements with the Dominican government that contain exemptions from income tax only become effective upon approval by the Dominican Congress. Neither our existing concession agreement, nor the concession agreements of Codetel and other competitors, all of which contain tax provisions identical to ours, has been submitted to the Dominican Congress for approval. We are not aware of any plans of the Dominican government to submit any concession agreements to the Dominican Congress for approval. If our concession agreement is presented to the Dominican Congress, it may not approve or validate those provisions of the concession agreement relating to the payment of taxes. If the provisions relating to the payment of taxes in our concession agreement were to be disapproved by the Dominican Congress, we believe that Dominican tax law would require the payment of a tax equal to 25% of our adjusted net income, but never less than 1.5% of gross revenues, payable in advance on a monthly basis, which is the current tax regime generally applicable to Dominican corporate taxpayers. For 2000, this would have resulted in our paying income taxes of $2.5 million compared to taxes in lieu of income taxes of $10.2 million for 2000. However, the calculation of taxes on the basis applicable to other Dominican corporations could result in our paying greater taxes than we would otherwise pay under the terms of our concession agreement. WE MAY LOSE REVENUE OR INCUR INCREASED COST AS A RESULT OF FRAUDULENT USE OF OUR PCS AND CELLULAR NETWORKS. During 2000, we estimate that our lost revenues from fraudulent use of our PCS and cellular networks totaled $711,000. Anti-fraud technology continually becomes obsolete, and we will have to make future expenditures to acquire and use anti-fraud technology. OUR NETWORK OPERATIONS MAY BE VULNERABLE TO HACKING, VIRUSES AND OTHER DISRUPTIONS. "Hacking" involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment. Hackers, if successful, could misappropriate proprietary information or cause disruptions in our services. Security breaches could have a material adverse effect on our business. In addition, the inadvertent transmission of computer viruses could expose us to a material risk of loss or litigation and possible liability. Moreover, if a computer virus affecting our system is highly publicized, our reputation could be materially damaged and our user traffic may decrease. RISKS RELATING TO OUR EXPANSION STRATEGY WIRELESS TELECOMMUNICATIONS SERVICES COMPANIES HAVE A LIMITED HISTORY IN OUR EXISTING AND TARGETED MARKETS, ACCEPTANCE OF OUR SERVICES IS UNCERTAIN, AND WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS PLAN. Due, in part, to the limited history of wireless communications services in our existing market in the Dominican Republic and our targeted markets in Central America, we face many uncertainties in our markets that may affect our ability to grow or implement our business plan. These uncertainties include: -12- - the size of the markets for wireless communications services; - the penetration rates of these markets; - the ability of potential subscribers to pay subscription and other fees; - the extent and nature of the competitive environment in these markets; and - the immediate and long-term commercial viability of wireless communications service in these markets. As a result of these uncertainties, we may make significant investments in developing a network and promoting our digital mobile services in markets where we may not achieve significant market acceptance for our services. If this occurs we may be unable to recover our investment in these markets. WE MAY NOT BE ABLE TO FINANCE OUR CAPITAL EXPENDITURE NEEDS WHICH COULD RESULT IN THE DELAY OR ABANDONMENT OF SOME OR ALL OF OUR DEVELOPMENT AND EXPANSION PLANS AND EXPENDITURES. We currently anticipate that our capital expenditures will be approximately $122 million in 2001. We believe that we will continue to expend substantial amounts in subsequent years. We believe our cash generated by operations and borrowings available to us will be sufficient to fund our expected capital expenditures through the end of 2001. In the event additional funds are required, we would be forced to obtain them through additional borrowings, including, if available, vendor financing or through the public or private sale of debt or equity securities. Acquisitions or investments may require additional financing. There can be no assurance that additional financing will be available to us or, if available, that it can be obtained on terms acceptable to us or within limitations that are contained in our current or future financing arrangements. Our ability to access additional funds may be limited by: - the terms of our existing financing agreements, including restrictive covenants; - conditions in the U.S. and in international markets that may adversely affect the availability or cost of capital; - the volatility of the economies of Latin America and Asia, or in the local markets in which we operate, which may make lenders less likely to extend credit to us; - our high level of indebtedness, which may affect our attractiveness as a potential borrower; and - the market's perception of our performance. Failure to obtain additional financing could result in the delay or abandonment of some or all of our development and expansion plans and expenditures, including the building of our iDEN network in Central America. WE DO NOT HAVE EXPERIENCE IN OPERATING A CABLE TELEVISION BUSINESS AND IF WE ARE UNABLE TO SUCCESSFULLY INTEGRATE TELECABLE, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS COULD BE ADVERSELY AFFECTED. We have not previously operated a cable television business. The success of our acquisition, in part, will depend on our ability to integrate it into our existing systems. Some of our existing operational, financial and management systems may be incompatible with or inadequate to effectively integrate and manage the Telecable systems. In addition, we may not be able to retain or recruit qualified personnel which may be required. We also may encounter unexpected operating difficulties, liabilities or contingencies. Any of these or other factors could significantly delay or even preclude our realizing synergies or other benefits from our acquisition or place significant demands on our management and financial resources. SOCIAL, POLITICAL AND ECONOMIC CONDITIONS IN CENTRAL AMERICAN MARKETS, INTO WHICH WE PLAN TO EXPAND, MAY CAUSE VOLATILITY IN OUR OPERATIONS AND ADVERSELY AFFECT OUR REVENUES FROM THESE MARKETS. We plan to expand into Central American telecommunications markets in which we have not operated previously and these markets will present numerous challenges to us. Poor social, political and economic conditions, matters over which we have no control, could inhibit our market entry and subsequent performance. Social and -13- political conditions in parts of the Central American markets are volatile and may cause the nature and results of our operations to fluctuate. Historically, volatility in parts of the Central American markets has been caused by: - significant governmental influence over many aspects of local economies; - political and economic instability; - unexpected changes in regulatory requirements; - social unrest; - slow or negative growth; - imposition of trade barriers; - wage and price controls; - natural disasters; and - this volatility could make it difficult for us to sustain our operations in these markets, which could adversely affect our business. GOVERNMENT REGULATIONS IN VARIOUS COUNTRIES MAY HAMPER OUR ABILITY TO GROW AND IMPLEMENT OUR STRATEGY. In each market that we are considering, one or more regulatory entities regulate the licensing, construction, acquisition, ownership and operation of our wireless communications systems. Adoption of new regulations, changes in the current telecommunications laws or regulations or changes in the manner in which they are interpreted or applied could adversely affect our operations. Because of the uncertainty as to the interpretation of regulations in some countries in which we may operate, we may not always be able to provide the services we have planned in each market. It is possible that, in the future, we may face additional regulatory prohibitions or limitations on our services or on foreign ownership of telecommunications companies. Inability to provide planned services could make it more difficult for us to compete in the affected markets. These issues could affect our ability to operate in targeted markets, and therefore impact our growth and strategy plans. IN CENTRAL AMERICAN MARKETS, GOVERNMENT-OWNED OR AFFILIATED TELECOMMUNICATIONS COMPANIES, WIRELINE MONOPOLY OPERATORS AND MULTINATIONAL TELECOMMUNICATION COMPANIES MAY HAVE SIGNIFICANT COMPETITIVE ADVANTAGES THAT WOULD HINDER THE DEVELOPMENT OF OUR WIRELESS BUSINESS THERE. In some markets in Central America, we may not be able to compete effectively against: - incumbent government-owned telecommunications companies; - formerly government-owned companies in which the government may or may not retain a significant interest; - wireline monopoly operators; and - multinational telecommunications companies. We may be at a competitive disadvantage in these markets because these competitors may have: - close ties with national regulatory authorities; - control over connections to local telephone lines; - larger customer base; - greater managerial and technical talent; - ability to cut prices; - better name recognition; -14- - larger spectrum positions; - greater managerial and technical talent; - ability to cut prices; - larger coverage areas than those of our operating companies; or - the ability to subsidize competitive services with revenues generated from other services they provide. For example, in Panama, Cable & Wireless has temporary exclusivity over wireline services and only an affiliate of Bell South and Cable & Wireless are licensed to provide wireless services. These competitors, among others, may adversely affect our ability to develop our wireless business in Central America. INITIALLY, OUR COVERAGE IN CENTRAL AMERICAN MARKETS WILL NOT BE AS EXTENSIVE AS THOSE OF OTHER WIRELESS SERVICE PROVIDERS IN OUR MARKETS, WHICH MAY LIMIT OUR ABILITY TO ATTRACT AND RETAIN CUSTOMERS. At first, we plan to provide wireless services only in the metropolitan areas and large business centers of Central America. Since our digital mobile networks will not initially offer nationwide coverage in the countries in which we are considering and our technology limits our potential roaming partners, we may not be able to compete effectively with other wireless providers in our markets. Many of the wireless providers in our targeted markets have entered into roaming agreements with each other, which permit these providers to offer coverage to their subscribers in each other's networks. While the iDEN technology that we will deploy is compatible with GSM technology (Global System for Mobile Communications), it is not compatible with any other wireless technology operating in our spectrum. As a result, we cannot enter into roaming agreements with the operators of these other networks. Our customers also will not be able to roam on other systems using technology identical to or compatible with ours where we do not have a roaming agreement. As a result, we will not be able to provide coverage to our subscribers outside of our planned operating digital mobile markets until: - we build out additional networks in areas outside our initially planned markets; - other operators deploy technology compatible to the technology that we will deploy in markets outside of our planned coverage areas and we enter into roaming agreements with those operators; or - handsets that can be used on both our wireless communications networks and networks deploying other technologies become available and we enter into roaming agreements with the operators of those networks. OUR EQUIPMENT IS MORE EXPENSIVE THAN THAT OF SOME COMPETITORS IN CENTRAL AMERICA MARKETS, WHICH MAY AFFECT OUR ABILITY TO ESTABLISH AND MAINTAIN A SIGNIFICANT SUBSCRIBER BASE. We will market multi-function digital handsets. The higher cost of our equipment, as compared to analog handsets and some digital handsets that do not incorporate a comparable multi-function capability, may make it more difficult or less profitable for us to attract customers. This may reduce our growth opportunities or profitability. WE MAY FACE DELAYS CONSTRUCTING OUR DIGITAL MOBILE NETWORK IN CENTRAL AMERICA WHICH WOULD HARM OUR OPERATIONS. We may not be able to complete our currently planned construction successfully or in a timely manner. If we do not, our ability to establish a subscriber base, improve the transmission quality of our digital mobile services and expand our service area could be impaired. It may be necessary to substantially change our proposed plans or otherwise alter our currently anticipated time frames or budgets because we are not able to: - locate suitable sites for communications sites or towers; - obtain any required zoning variances or other governmental or local regulatory approvals; -15- - negotiate acceptable purchase, lease, or other agreements; or - obtain quality supplies in a timely manner, if at all. We also may encounter delays caused by - frequency cross-interference with other radio spectrum users, including television stations; - shortages of equipment or skilled labor; - engineering or environmental problems; - work stoppages; - weather interference; and - unanticipated cost increases. WE ARE NOT EXPERIENCED IN SELLING AND MARKETING IDEN SERVICES OR IN CENTRAL AMERICAN MARKETS WHICH COULD AFFECT OUR ABILITY TO ESTABLISH OR MAINTAIN A SIGNIFICANT SUBSCRIBER BASE. Once our digital mobile network operations are in place in a particular market, the development of a significant, quality subscriber base depends on the success of our sales and marketing efforts and the receptiveness of the marketplace to our services. We have limited experience in marketing iDEN services and local conditions in our target markets may require us to modify our sales and marketing efforts or rely, in part, on the efforts of independent dealers and distributors to market our services. If the sales and marketing teams of our operating companies and the independent dealers and distributors are not able to establish a large subscriber base consisting of quality customers in our new markets, our revenues will not grow as planned. SINCE WE RELY PRINCIPALLY ON ONE SUPPLIER TO IMPLEMENT OUR DIGITAL MOBILE NETWORKS, ANY FAILURE OF THAT SUPPLIER TO PERFORM COULD HURT OUR OPERATIONS. Motorola is currently our sole source for the iDEN digital network equipment and handsets used throughout our markets. If Motorola fails to deliver necessary technology improvements and enhancements and system infrastructure equipment and handsets on a timely, cost-effective basis, or discontinues providing this technology altogether we would not be able to service our existing subscribers or add new subscribers. MOTOROLA MAY SUPPLY IDEN TECHNOLOGY TO OTHER COMPANIES WHICH COULD NEGATIVELY AFFECT OUR COMPETITIVE POSITION IN THE CENTRAL AMERICA. Motorola, which supplies the iDEN system that we use in Central America, agreed that it would not sell iDEN technology to anybody else for use, before agreed upon dates, in Panama, Costa Rica, Guatemala, Honduras, El Salvador and Nicaragua. Its agreement was conditioned upon our placing orders for systems in each of those countries by specified dates. Except for Panama, we have not placed the orders necessary to preserve the head start afforded to us by Motorola's agreement. As a result, Motorola is free to provide the technology in those countries to anybody else. If it did so, we could lose an important competitive advantage to us. CONCERNS ABOUT HEALTH RISKS ASSOCIATED WITH WIRELESS EQUIPMENT MAY REDUCE THE DEMAND FOR OUR SERVICES. Portable communications devices have been alleged to pose health risks, including cancer, due to radio frequency emissions from these devices. The actual or perceived risk of mobile communications devices could adversely affect us through a reduction in subscribers, reduced network usage per subscriber or through reduced financing available to the mobile communications industry. Studies performed by wireless telephone equipment manufacturers have investigated these allegations and additional studies are ongoing. -16- RISKS RELATING TO OUR PRINCIPAL MARKET, THE DOMINICAN REPUBLIC OUR FINANCIAL CONDITION AND RESULTS OF OPERATION COULD BE ADVERSELY AFFECTED BY DOWNTURNS IN THE DOMINICAN ECONOMY. Most of our operations are conducted in, and most of our customers are located in, the Dominican Republic. Accordingly, our financial condition and results of operations are substantially dependent on economic conditions in the Dominican Republic. While the Dominican Republic's GDP has grown every year since 1991, this growth may not continue in the future. Future developments in the Dominican economy could impair our ability to proceed with our business strategies, our financial condition or our results of operations. Our financial condition and results of operations also could be adversely affected by changes in economic or other policies of the Dominican government or other political or economic developments in or affecting the Dominican Republic, as well as regulatory changes or administrative practices of Dominican authorities, over which we have no control. POVERTY, SOCIAL UNREST AND SHORTAGES OF BASIC SERVICES IN THE DOMINICAN REPUBLIC COULD AFFECT THE USE OF TELECOMMUNICATIONS SERVICES, WHICH WOULD DECREASE OUR REVENUES. The Dominican Republic has widespread poverty. As recently as November 1997, the country experienced riots, partly as a result of price increases and shortages of water and electricity. Several state-owned companies have been privatized, including the country's state-owned electric utility company, and there can be no assurance that the implementation of these privatizations will not cause social unrest. Any increase of poverty, social unrest or shortage of basic services could adversely affect the use of telecommunications services. ALTHOUGH INFLATION IN THE DOMINICAN REPUBLIC HAS BEEN MODERATE SINCE 1990, INCREASES IN THE INFLATION RATE WOULD ADVERSELY AFFECT THE DOMINICAN REPUBLIC'S ECONOMY AND THE DEMAND FOR OUR TELECOMMUNICATIONS SERVICES. Inflation has moderated in the Dominican Republic since 1991, following an austerity program instituted by the Dominican government. According to the Central Bank, the annual rates of inflation were 3.9% for 1996, 8.4% for 1997, 7.8% for 1998, 5.1% for 1999 and 9.0% for 2000. However, the country has experienced high levels of inflation in the past, including an inflation rate of 79.9% for 1990. Any increase in the value of the U.S. dollar against the Dominican peso directly affects the Dominican Republic's inflation rate because the Dominican Republic relies heavily on imports from the United States of raw materials and consumer goods. High inflation levels could adversely affect the Dominican Republic's economy and reduce demand for telecommunications services. THE VOLATILITY AND DEPRECIATION OF THE DOMINICAN PESO AGAINST THE U.S. DOLLAR COULD REDUCE THE AMOUNT OF CASH WE WILL HAVE TO REPAY OUR INDEBTEDNESS OR FUND OUR OPERATIONS, INCLUDING THE PURCHASE OF TELECOMMUNICATIONS EQUIPMENT. For 1998, 1999 and 2000, we earned between 55% and 65% of our operating revenues in Dominican pesos and the remainder of our operating revenues in foreign currency, primarily in U.S. dollars. The percentage of operating revenues in Dominican pesos could increase if we successfully increase our share in Dominican local markets in accordance with our strategy. The Dominican peso has depreciated in value against the U.S. dollar in the past and may be subject to fluctuations in the future. Most of our outstanding indebtedness is U.S. dollar-denominated and must be paid in U.S. dollars. Vendors of telecommunications equipment all require that we pay for equipment in U.S. dollars. The devaluation of the Dominican peso could affect adversely our ability to purchase U.S. dollars in order to service our debt obligations and pay our equipment vendors. Our purchase of substantial amounts of U.S. currency in Dominican markets could adversely affect the value of the Dominican peso in relation to the U.S. dollar, and make these purchases more costly for us. ITEM 4. INFORMATION ON THE COMPANY TRICOM, S.A. is incorporated in the Dominican Republic. Our operations are headquartered at Ave. Lope de Vega No. 95, Santo Domingo, Dominican Republic and our telephone number at the above address is 809-476-4000. - 17 - Our website address is www.tricom.net. Our agent in the United States is CT Corporation System. This agent can be reached at 1633 Broadway, New York, NY 10019 and at telephone number (212) 664-1666. BUSINESS OVERVIEW OVERVIEW We are a leading full service communications service provider in the Dominican Republic. We offer local, long distance, mobile, Internet and broadband data transmission services. Our wireless network covers approximately 85% of the population in the Dominican Republic. Our network providing local service is 100% digital, the only such network in the Dominican Republic. Telecommunications networks that employ digital technology can transmit higher quality signals at lower cost. We also own interests in undersea fiber optic cable networks that connect and transmit telecommunications signals between Central America, the Caribbean, the United States and Europe. Fiber optic cable is composed of glass strands and transmits telecommunications signals in the form of light. Through our subsidiary, TRICOM USA, Inc., we own telecommunication switching facilities in New York, Miami and Puerto Rico. Using these facilities, we originate, transport and terminate international long-distance traffic. We are one of the few Latin American long distance carriers that is licensed by the U.S. Federal Communications Commission to use switching facilities that it operates to connect long distance traffic. Since our inception in 1992, we have diversified our operations, and have captured a significant share in key markets entirely through internal growth. In 1999, we carried approximately 40% of the southbound voice and data traffic from the United States to the Dominican Republic. Since we introduced wireless services in 1995, we have achieved an approximate 40% market share as of year-end 2000, based upon data published by the Instituto Dominicano de las Telecomunicaciones, or INDOTEL, the Dominican agency that regulates telecommunications. From 1996 to 2000, we increased revenues from $79.1 million to $224.3 million, representing a compounded annual growth rate of 30%. We were the leader in the Dominican Republic for 1998 and 1999 in net new customer additions in the market for local service and in 1998 for net new customer additions for mobile services, based upon data published by INDOTEL. Our recent success is reflected in the following period-to-period changes in operating statistics from 1999 to 2000: - Local access lines increased 24.7% to 148,312; - Cellular and PCS subscribers increased 61.9% to 284,991; and - International long distance traffic increased 65.6% to 597.2 million minutes. Our growth has resulted from aggressive marketing, excellent customer service, rapid deployment of state-of-the-art technologies and the use of highly integrated management information systems. Our experienced core management team, in place since 1996, has successfully executed our business strategy, implementing our entry into new markets and introducing new product offerings. We have built a strong brand name in the Dominican Republic. Today, our wireless network covers approximately seven million people. In 1999, as part of our local services product offering, we launched a wireless local loop system in areas of Santo Domingo and Santiago, the two largest cities in the Dominican Republic, as well as in nine other cities. Using wireless local loop technology, we can connect a customer within 48 hours, substantially less time than required for wireline installation. We plan to establish in selected Central American markets a mobile service network targeted at business customers that will provide uninterrupted connection throughout the region without any change in service provider or equipment. We will deploy an advanced integrated radio-telephone and dispatch communications system known as IDEN-Registered Trademark-, developed by Motorola. This technology enables us to use spectrum efficiently and offer multiple wireless services on one digital handset. We plan to capitalize on the increasing demand by business customers for a product that provides advanced mobile services and a complete solution for their intra-regional communication needs. - 18 - We have purchased a 51% interest in a Panamanian company, Cellular Communications of Panama, S.A., now TRICOM Panama, S.A., which owns the frequency rights for 107 channels of 25 megahertz each. TRICOM Panama has approximately 1,600 analog mobile users. These frequencies will give us access to nationwide coverage, covering a population of approximately 2.81 million people. Currently, we are constructing an iDEN network, at a cost as of June 30, 2001 of approximately $30 million, in Panama City and Colon, the two largest cities in Panama, and in important transportation corridors in other parts of the country. Our expected completion date for this phase of the buildout is the fourth quarter of 2001. We will offer digital mobile integrated services, including two-way radio, paging and interconnect services. In 2000, we were awarded, in a government auction, radio frequency rights in Guatemala to 172 channels of 25 megahertz, providing us with nationwide coverage. We also have acquired in El Salvador radio frequency rights for an aggregate of 185 channels of 25 megahertz, that provides spectrum to operate our iDEN network. We currently do not intend to develop a network in either Guatemala or El Salvador in 2001 MARKET OPPORTUNITIES We believe that the Dominican and Central American telecommunications markets represent attractive opportunities and that the following factors will drive growth in these markets: - UNDERSERVED DOMINICAN MARKET. At December 31, 1999, teledensity, the ratio of local access lines per 100 inhabitants, in the Dominican Republic was 9.3 and the ratio of wireless subscribers per 100 inhabitants was 3.1, according to the International Telecommunications Union, or ITU. The ratios in Puerto Rico were 32.7 for teledensity and 15.0 for wireless. - DOMINICAN ECONOMY AMONG THE FASTEST GROWING IN LATIN AMERICA. Gross Domestic Product in the Dominican Republic grew at an average annual rate exceeding 7.9% from 1996 through 2000, according to the Central Bank of the Dominican Republic. The Dominican Republic experienced real Gross Domestic Product growth of 8.3% in 1999 and 7.8% in 2000 according to the Central Bank. This has made it one of the fastest growing economies in Latin America. The World Bank projects growth for the Dominican Republic to exceed 7% in 2001. - STRONG GROWTH IN THE DOMINICAN TELECOMMUNICATIONS MARKET. In 2000, the total telecommunications market in the Dominican Republic was approximately $1.1 billion, according to the Central Bank. The telecommunications market in the Dominican Republic grew at an average annual rate of 17.5% from 1995 to 2000 according to the Central Bank. - UNDERSERVED CENTRAL AMERICAN BUSINESS MARKETS. Markets in Central America share many of the characteristics of markets in the Dominican Republic, including: -rapidly growing economies; -the development of intra-regional trading markets fostered by the adoption of free trade agreements; -low penetration of telecommunications services, continuing privatization and liberalization of markets for telecommunications services; and -and current limited competition in the telecommunications service sector. COMPETITIVE STRENGTHS We believe that the following factors give us a competitive advantage in our existing and targeted markets: ADVANCED NETWORK. We have the only network providing 100% digital local service in the Dominican Republic and a wireless network covering approximately 85% of the population. Our local network features a wireless local loop system that enables us to connect a customer within 48 hours, substantially less time than required - 19 - for wireline installation. We currently have switching facilities in New York and Puerto Rico, and interests in international fiber optic cable undersea systems that connect Central America and the Caribbean with the United States and Europe. These facilities enable us to originate, transport and terminate traffic at reduced costs. Our advanced networks also provide our customers with high quality voice and data transmission. STRONG BRAND NAME RECOGNITION AND MARKETING CAPABILITIES. Our creative marketing and excellent customer service have allowed us to build a strong brand in our existing markets and to achieve substantial market share in each of our service offerings. We capitalize on our brand name recognition and marketing programs both in the Dominican Republic and to target ethnic communities in New York, New Jersey, New England, Florida and Puerto Rico. In the Dominican Republic we consistently lead the market in introducing innovative business practices and products using advanced technology. We were the first operator in the Dominican Republic to offer prepaid cellular, international calling cards, Internet service and offerings combining different services and pricing options. STRONG TRACK RECORD OF REVENUE AND EBITDA GROWTH. We have increased revenue and earnings before interest, taxes depreciation and amortization sequentially in each of the last five years. We have increased our revenue and cash flow by internal growth and without acquiring other operations. This enables us to minimize our reliance on borrowings in funding our network build-out. We believe that the revenue and cash flow growth characteristics of our existing businesses will give us the financial flexibility to capitalize on future expansion opportunities. EXPERIENCED MANAGEMENT. Our management team has significant experience in the telecommunications industry and a track record of building revenues and positive cash flows in telecommunications markets. The core team has been with us since the inception of commercial service in the Dominican Republic. Our ability to identify market opportunities and adapt to new technologies has enabled us to attain significant market share while competing with a dominant provider with greater resources. OUR STRATEGY Our goal is to capitalize on our key strengths to further build our market share and penetrate new markets, while maximizing revenues and cash flows. We intend to: EXPAND EXISTING MARKET COVERAGE IN THE DOMINICAN REPUBLIC AND THE UNITED STATES BY: DEPLOYING CAPITAL PRUDENTLY TO ENHANCE REVENUE GROWTH AND MARGINS In building our networks in the Dominican Republic, we have managed our investments to respond to the demand for our services, market conditions and the availability and cost of financial resources. In implementing our expansion programs, we plan to build on our business model, targeting markets in Central America with characteristics similar to markets in which we have competed to date. We will manage our expenditures to respond to the success of our different programs and will deploy our financial resources where the combination of demand and the likelihood of returns are greatest. In Central America, we intend to build out our network in one local market or country at a time, initiating service in Panama, for example, before making a significant commitment to other countries. We believe this should allow us to measure the results of our strategy before committing additional resources. FOCUSING ON HIGH-GROWTH MARKET SEGMENTS IN THE DOMINICAN REPUBLIC, INCLUDING RESIDENTIAL LOCAL AND WIRELESS SERVICES. Substantial unmet demand for residential local service remains in the Dominican Republic as large segments of the Dominican population still have limited access to this service. Based upon information published by the Instituto Dominicano de las Telecomunicaciones or INDOTEL, at December 31, 2000, there were approximately 894,164 local access lines in service, representing a teledensity rate of approximately 10.5%. As part of our local service offering, we plan to expand our wireless loop system into three additional cities in 2001 and increase capacity in the areas currently covered by the system. In December 1999, we introduced prepaid local access service, which accounted for the addition of 43,920 gross line in 2000. - 20 - The mobile wireless market has been the fastest growing segment of the Dominican telecommunications market since 1996. Based on information published by INDOTEL, we believe that, since 1996, the mobile wireless market has grown at an annual average rate of 71%. We believe that there potentially is a market of approximately 1.5 million subscribers. Our cellular network covers approximately 85% of the population and our PCS network covers approximately 66% of the population. With these two networks we are able to offer dual-band service, allowing PCS customers to use their mobile phone over our analog service as well. We intend to expand our PCS system into additional cities over the next several years, resulting in coverage of 75% of the Dominican population. EXPANDING OUR LONG DISTANCE OPERATIONS IN THE UNITED STATES TO TARGET ADDITIONAL ETHNIC AND GEOGRAPHIC MARKETS AND TO EXPAND OUR OWNERSHIP AND CONTROL OF DISTRIBUTION CHANNELS As we expand our long distance network in Central America and the Caribbean, we plan to target additional ethnic and geographic markets in the United States through TRICOM USA. We will then be able to offer end-to-end long distance services to these new markets by connecting calls in each country through telecommunications facilities that we own and operate in each country. TRICOM USA relies on distributors and resellers for the placement of its prepaid calling cards and the generation of international traffic to the Dominican Republic and other destinations. Resellers do not operate their own telecommunications networks but purchase minutes and re-sell them to consumers. In order to expand our market presence, and at the same time enhance the profitability to us of traffic generated by our prepaid cards, we will consider opportunities to acquire distributors of prepaid calling cards. Through the acquisition of resellers, we can capture a greater share of the market for outgoing minutes and increase direct access to customers, which should enhance our profit margins. Resellers also give us greater access to ethnic markets in which we already participate and access to new ethnic markets. CAPITALIZING ON OPPORTUNITIES IN THE DOMINICAN REPUBLIC CREATED BY THE GROWING DIGITAL ECONOMY TO EXPAND OUR BROADBAND DATA TRANSMISSION BUSINESS AND INTERNET OPERATIONS. As the Dominican economy has expanded, there has been greater demand for broadband data transmission and Internet services. Our fully digital network positions us to provide broadband access and high speed data transmission to both the corporate and residential markets. During 2000, we introduced: - digital subscriber lines, or xDSL, that provides high-bandwidth transmission of voice and data over regular telephone lines - very small aperture terminal, or VSAT, a relatively small satellite antenna used for high speed satellite-based single to multiple point data transmissions, including for the internet, and - local multipoint distribution service, or LMDS, technologies, which is a broadband wireless single to multiple point communication system that can be used to provide digital two-way voice, data, Internet and video services. The implementation of these technologies on a commercial basis enhances our delivery of broadband service. We will also consider acquiring or investing in cable television systems that would enhance our access to the market for voice and high speed data transmission. EXPAND INTO SELECTED CARIBBEAN AND CENTRAL AMERICAN MARKETS BY: OFFERING A DIFFERENTIATED SET OF SERVICES DIRECTED TO CORPORATE CUSTOMERS, FOCUSING ON HIGHLY CONCENTRATED BUSINESS CENTERS IN OUR TARGETED CENTRAL AMERICAN MARKETS. We believe that several countries in Central America have markets that have demographic, regulatory and demand characteristics similar to those in the Dominican market at the time we initiated our operations. These characteristics include underserved markets and increased liberalization of the telecommunications industry. In these countries, we believe we have the opportunity to export our business model. We will target business customers - 21 - because they offer certain advantages, including a stronger credit profile and, on average, higher revenue per user. In other markets, including the United States and in Latin America, the deployment of iDEN technology has resulted in some of the highest revenues per unit within the wireless markets. We will offer a package of services and features that combines multiple communications services in one digital subscriber unit. We intend to emphasize the differentiated features of iDEN technology and our networks, including digital mobile telephone services, mobile dispatching, two-way messaging, push-to-talk and one-to-many connections. APPLYING WIRELESS OPERATING EXPERTISE, SCALABLE BACK OFFICE SYSTEMS AND MARKETING KNOW-HOW TO DEVELOP OUR IDEN CENTRAL AMERICAN OPERATIONS. We will rely on the technical expertise that we have developed to deploy wireless technologies to enter new markets. Our deployment of a CDMA-based wireless network has enabled us to enhance our mobile services capabilities while also accelerating the expansion of our local access presence in the Dominican market. Our scalable back office systems, which integrate sales, customer service, collections and financial control functions will allow us to expand our operations in a cost-efficient manner. We believe that our marketing know-how is an integral part of our sales model. This model features proactive sales efforts, targeted sales campaigns and reduction of credit risk through promotion of prepaid services. We believe this model can be exported to other markets in Central America. LEVERAGING OUR EXISTING RELATIONSHIPS WITH KEY SUPPLIERS, INCLUDING MOTOROLA, NORTEL AND HARRIS, TO CONTINUE OUR BUILDOUT IN THE DOMINICAN REPUBLIC AND TO PROVIDE TURNKEY SOLUTIONS IN OUR TARGETED CENTRAL AMERICAN MARKETS. Our relationships with our suppliers, including Motorola, Nortel and Harris, are important as we continue to upgrade and deploy our digital mobile networks and provide new products and services to expand our subscriber base. Access to the technology, supplier relationships, network development and marketing expertise of these companies could afford us significant competitive advantages. We intend to continue to leverage their expertise in the future as we enhance and expand our networks and launch new products and services. SERVICE OFFERINGS Our service offerings include: - Local service; - Mobile services; - International long distance; and - Broadband data transmission and Internet. LOCAL SERVICE We are a competitive local exchange carrier in the Dominican Republic and had 148,312 local access lines in service at December 31, 2000, including 29,386 net line additions during 2000. We were the leader in net line additions in 1998 and 1999. Our local access network covers areas with approximately 85% of the population of Santo Domingo, Santiago and eight additional cities. All of our basic telephone service customers have access to a range of value-added services, including call forwarding, three-way calling, call waiting, caller ID and voicemail applications. In addition to local service, we provide direct-dialed, collect and operator-assisted international and domestic long distance services and Internet access to our residential and corporate customers. We offer our customers broad flexibility in assembling customized packages of services, which provide our customers with cost savings and enhanced control over their consumption of telephone services. Customers may choose from a menu of services, including domestic and international long distance services, local service and value- - 22 - added services. They also may bundle their local access service with cellular or PCS, paging and Internet services. Service packages permit customers to preset their monthly bills based upon, for example, local service minutes as well as long distance minutes and specified destinations. Customers are responsible for paying for usage levels in excess of preset package amounts, at regular per minute rates. We believe that providing customers with such budgeting capability increases consumer confidence in using telecommunications services, consequently allowing for increased service penetration, higher levels of customer satisfaction and lower incidence of delinquent payments. We have accelerated our local access network expansion program by deploying a wireless local loop. The wireless local loop consists of receivers, that are installed at a customer's house, and digital switches. The receiver is connected by cable to a standard telephone jack that connects to a standard telephone. The receiver is powered by the customer's home power supply and also contains a battery that allows operation to continue for up to approximately 24 hours of standby and eight hours of talk time in the event of a power outage. The wireless local loop offers voice quality as clear as telephones connected by wirelines. We also sell fully integrated systems and components for both turnkey systems and private telephone networks used within enterprises. We are an exclusive distributor in the Dominican Republic for Mitel and Comdial equipment, two leading manufacturers of private branch exchanges and key telephone systems. We are also a leading provider of computer telephony integration systems in the Dominican Republic. MOBILE SERVICES Our mobile network covers approximately 85% of the Dominican Republic's population. We currently offer both cellular and PCS service. According to INDOTEL, there were approximately 705,431 analog and PCS cellular subscribers in the Dominican Republic at December 31, 2000. At December 31, 2000, we had 284,991 cellular subscribers, including 32,809 PCS subscribers, representing approximately 40% of the Dominican mobile telephony market. Our net addition of cellular and PCS subscribers in 2000 was 108,911, which represents 39% of net subscriber additions for 2000 in the Dominican Republic. We were the leader in net addition of mobile wireless subscribers in 1998. The number of our cellular and PCS subscribers grew by 62% during 2000. We attribute a substantial portion of this growth to our prepaid cellular and PCS card, the Amigo card. At December 31, 2000, prepaid cellular and PCS subscribers accounted for 285,038, or 94%, of our 302,613 total cellular and PCS subscribers in the Dominican Republic. We estimate that other companies accounted for an additional 158,600 prepaid cellular and PCS subscribers, and that the total Dominican market base for cellular and PCS was 856,613 subscribers, so that prepaid cellular and PCS accounted for 52% of the entire cellular and PCS market of the Dominican Republic at December 31, 2000. Our Amigo card program has expanded our cellular and PCS customer subscriber base because it offers cellular and PCS service to individuals who would not satisfy our current credit policies and because it appeals to customers who prefer to budget their cellular and PCS telephone spending. We have offered PCS service since April 1999. This technology provides for added security and privacy compared with traditional analog systems, and it also offers greater capacity. PCS customers are able to receive all of the benefits related to a digital service, including digital messaging, caller ID and voicemail. Our PCS network covers areas with approximately 66% of the population in the Dominican Republic and is less extensive than our analog network. We offer a dual-band service, allowing customers to use seamlessly their mobile phones nationwide over both digital and analog networks. We also have entered into arrangements with major consumer electronics retailers and a network of independent cellular and PCS dealers to offer our cellular and PCS services in conjunction with their sale of handsets. As a result of our arrangements with major electronics retailers for the sale by them of handsets in conjunction with subscriptions for our services, we sold handsets to less than 15% of our new subscribers in 2000. We do not subsidize or provide credit on the sale of cellular and PCS handsets. We have provided paging services since April 1995. At December 31, 2000, we provided paging services to 21,622 subscribers, representing approximately 16.1% of the Dominican paging market. In 1999 we stopped soliciting new paging subscribers. We believe that the success of our prepaid cellular and PCS program has contributed - 23 - to the decline of paging as a significant part of our business because customers have replaced paging services with prepaid cellular services. INTERNATIONAL LONG DISTANCE In the Dominican Republic, we provide international long distance services to our local access, cellular and PCS customers. In addition, we offer prepaid calling cards for international long distance, the Efectiva and Conexion cards, that can be used from any telephone in the Dominican Republic. We operate telephone centers that provide access to telephone services to individual customers who either do not have telephone services in their own homes or who are attracted by the competitive pricing of the telephone centers. The centers offer a wide range of telephone services, including bill payments and sales of service in addition to long distance. In the United States, our subsidiary TRICOM USA provides international carrier services primarily to resellers, which account for an increasing share of international long distance traffic between the United States and the Dominican Republic. Through our telecommunications switching facilities in the United States, we have been able to provide resellers with an alternate channel for sending international long distance traffic. In addition, by controlling the origination, transport and termination of international long distance traffic between the United States and the Dominican Republic, we believe that we are able to send and receive such traffic at a lower cost to us than by exchanging traffic with traditional international carriers. Each year since the initiation of TRICOM USA's operations, we have derived a greater percentage of international revenues from resellers. During 2000, resellers originated approximately 45% of the international long distance minutes from the United States to the Dominican Republic that we received. Minutes delivered by resellers may fluctuate significantly. While we enter into agreements with resellers, they are not required to provide to us any amount of traffic. The price per minute charged by us to a reseller is negotiated as often as dictated by the market. At December 31, 2000, we received traffic from approximately 38 resellers. TRICOM USA also markets a number of prepaid cards to ethnic communities in New York, New Jersey, Rhode Island, Massachusetts, Illinois, California, Saint Thomas, Puerto Rico and Canada. Each prepaid card is assigned a unique identification number and a face value ranging from $2 to $20. The prepaid card's dollar balance is reduced by the cost of each call. TRICOM USA sells the cards to distributors that resell the cards to retail outlets. BROADBAND DATA TRANSMISSION AND INTERNET We provide broadband data transmission services to 119 of the 400 largest business customers in the Dominican Republic based on assets, through several means of delivery including fiber optic cable and digital wireless point-to-point radio links. In addition, we provide these large customers with data circuits Internet access, private networks and frame relay services with branches in the different cities in the country. We recently increased transmission capacity to provide larger bandwidths and data services are expected to have a strong growth with the commercial launch of both the digital subscriber lines, or xDSLs, that provide high-bandwidth transmission of voice and data over regular telephone lines and the very small aperture terminals, or VSATs, relatively small satellite antennas used for high speed satellite-based single to multiple point data transmissions, including for the internet. In the Dominican Republic we are the second largest Internet Service Provider. We provide Internet connectivity to the residential and corporate markets through traditional dial-up connections, dedicated lines and very small aperture terminals, or VSATs, relatively small satellite antennas used for high speed satellite-based single to multiple point data transmissions, including for the internet, with speeds ranging from 56 kilobytes per second to 2 megabytes per second. During 2000, we deployed our digital subscriber lines, or xDSLs, that provides high-bandwidth transmission of voice and data over regular telephone lines, and wireless broadband delivery solutions. Our PCS and paging services are now fully integrated with our Internet service, offering short messaging services, including email and digital messaging through our website, www.tricom.net. In March 2000, we entered into a five-year $25 million contract with the Dominican Republic Department of Education to provide broadbased satellite Internet access and Intranet services to every public high school in the Dominican Republic. We have been utilizing Intellicom's, a wholly owned subsidiary of SoftNet Systems, state-of- - 24 - the-art content caching technology and comprehensive family of value-added services to deliver fast and efficient end-user access to the Internet. Intellicom is a wholly owned subsidiary of SoftNet Systems. MARKETING AND SALES Our advertising and promotional materials in the Dominican Republic emphasize that we are a full-service provider of local, cellular, data and long distance services and that customers can realize significant savings from the packaging of services. We use targeted marketing programs, concentrating on those areas of urban centers where we currently provide services and employ marketing techniques often used to promote consumer products, including television, radio and newspaper advertising, door-to-door sales for basic local service and the use of credit card lists and other databases to identify and contact potential users of cellular and PCS services. We distribute gifts to potential and new subscribers, including prepaid calling cards, bonus coupons and other promotional goods bearing our logo. Other means of advertising include billboards, block parties and telemarketing. LOCAL AND MOBILE SERVICE In the initial stages of our deployment of local services, we relied primarily on door-to-door sales, reflecting the limited geographic extent of our conventional local telephone network buildout. Since the deployment of the wireless local loop which gave us ubiquitous presence in the major cities of the country, we have used mass media to a greater extent to promote our local telephone services. Approximately 65% of gross additions of local access lines are by direct sales and 35% are completed at our commercial points of sale. We have achieved our mobile market share growth through direct sales and database marketing techniques, telemarketing and aggressive massive advertising. We sell mobile services from 13 of our offices and more than 246 other offices operated by independent distributors. Through direct sales, we also pursue additional corporate and commercial accounts which, in 2000, accounted for as much as 10% of airtime but represented only 2% of our cellular and PCS subscriber base. We also have entered into arrangements with major consumer electronics retailers to offer our cellular and PCS services in conjunction with their sale of handsets. Our advertising for PCS services emphasizes voice quality, clarity and value-added services. Our advertising for prepaid cellular services emphasizes convenience, the ability to budget telecommunication expenses and accessibility to customers without credit history. Our corporate sales and marketing approach to large business customers is to offer comprehensive and customized telecommunications solutions for each corporate customer's needs. Our sales staff works with each customer to gain a better understanding of that customer's operations and to develop application-specific solutions that are appropriate for each customer. Many of our sales executives have engineering backgrounds and are supported by product development and customer service teams. INTERNATIONAL LONG DISTANCE In the Dominican Republic, in addition to our local access and mobile subscribers, we target individual customers who do not have telephone services in their own homes for our long distance services. In the United States, we target the large immigrant Dominican community and other ethnic populations. We feature our prepaid cards, Efectiva and Conexion, in our advertisements for our basic services, as well as in separate advertising. Our advertising emphasizes the accuracy and reliability of our billing and the savings that subscribers can realize. The Efectiva and Conexion cards are distributed at our commercial offices, call centers and through wholesalers and retailers. In the Dominican Republic, we have six wholesale distributors and an internal sales force targeting smaller retailers totaling 3,200 points of sale for our prepaid cards. TRICOM USA advertises its prepaid cards on radio and through print media targeted at Dominican and other ethnic communities. Advertisements emphasize price, voice quality as well as patriotic or ethnic themes. Cards are distributed to wholesalers under the TRICOM name and are sold primarily in small retail stores, including groceries, beauty parlors, drugstores and newsstands. - 25 - BROADBAND DATA TRANSMISSION AND INTERNET For broadband data transmission services, we target the Dominican Republic's 400 largest businesses, which require more sophisticated technology and demand more service and support. Our marketing professionals target these businesses in the Dominican Republic, including large multinationals, local business conglomerates and the largest hotels. In the residential market we offer packages that bundle Internet access together with our local, wireless and other services. We have entered into arrangements for the distribution of Internet access services through major Dominican computer retailers, by pre-installing our services and offering the first month of service free of charge. In a promotion to increase computer penetration in the country, we have also launched our "ENTER-NET" plan offering financing provided by Bancredito, a bank affiliated with GFN, our largest shareholders, for computer equipment bundled with Internet access via our service. We recently launched a number of broadband delivery systems. These platforms will enable us to increase our penetration into markets requiring high speed data transmission and Internet access. CUSTOMER SERVICE In the Dominican Republic, we provide customer service for all of our services through 11 service centers and 16 commercial offices. We plan to add eight service centers during 2001. We also allow customers to pay bills at offices of Bancredito. There are approximately 275 such offices, all of which are linked to our central billing and collection system. Our customers may subscribe for telephone services, pay and obtain information about monthly bills and inquire about billing adjustments at our offices. To enhance customer service, our representatives use our customer service system linked to our central billing and service order system, enabling them to handle expeditiously both billing and service inquiries. We provide a 24-hour interactive voice response service through which customers can register claims and make billing inquiries. In addition, customers may access their account information online 24 hours a day, 7 days a week, on our website, www.tricom.net. Our website provides information about our services and can be used to purchase products including prepaid cards, cellular phones and accessories. We seek to provide installation and repair services to our customers on par with such services provided by the best telecommunications companies throughout the world. In order to achieve this goal, we have established service benchmarks for, among other things, network availability, installation and repair intervals. Our customer service department gathers information from our customers, which we then use to tailor our products and services to meet customer needs. We contact customers shortly after initial installation to address any service concerns or problems that they may have. We regularly survey our customers to determine their satisfaction with our services and to improve services based upon the explanations offered by customers who voluntarily cancel their services. Furthermore, we have a customer retention department that works to determine the cause for customer churn and also to develop appropriate retention strategies to target this segment. During 2000, in an effort to improve our customer service, we retained Cambridge Technology Partners to develop a customer relationship management system, integrating our information systems and our customer relationship management software. This system allows customer service representatives to access all billing, service order and other client specific information. This enables us to offer speedier service and more efficient follow through and to monitor every step of the customer service relationship. We expect to complete the implementation of these systems by the end of 2001. BILLING AND CREDIT POLICIES - 26 - We have developed an integrated billing system for local, long distance, cellular, paging and value-added services. The integrated billing system enables our customers to obtain a single bill, providing detailed information about charges for all services rendered. We have led the Dominican telecommunications market in the introduction of billing packages that provide detailed call reports with time-of-day, day-of-week and destination information as well as flexible billing discount programs which are similar to those found in the most competitive markets outside the Dominican Republic. Our subscribers can call our center and speak with a customer care representative and obtain account and statement information. Our customers also can access information over the telephone through "FONOCOM," an interactive voice response system that enables customers to consult their most recent calls and account balances. Our customers also may request a copy of their bill, which is then delivered to them via facsimile transmission. Cash payments may be made at walk-in commercial offices, centers and affiliated bank branches, or funds may be debited from credit cards or bank accounts. Our customers also may pay their bills at any one of our over 200 payment stations, which are located in neighborhood gas stations, grocery stores and other retail outlets. Residential customers, who are not prepaid customers, subscribing for basic telephone service are required to pay an installation fee of up to RD$1,495 ($88) in cash. If the customer chooses to pay the installation fee in installments, he must pay a 50% down payment and the balance within two months. Each residential basic telephone service subscriber has a credit limit of approximately $313. We contact any customer exceeding this credit limit and request that such customer pay all or part of the outstanding bill. In December 1999, we introduced a prepaid local access line program. This program appeals to customers who prefer to budget their telephone spending and allows us to expand our market to customers who otherwise would not qualify under our credit policies. We require all individuals wishing to subscribe for cellular and PCS services to own a credit card or prepay either by using the Amigo card or making a deposit through the Cellflex prepayment program. Our service contracts do not cover a specified amount of time and remain in effect as long as each customer remains active and current in paying its bills. Each cellular and PCS service subscriber is assigned a credit limit, which varies depending upon the individual's monthly usage and payment history. Since 1996, our policy has been to suspend service for all residential basic telephone service subscribers if payment is not received within 45 days after a bill is issued and to terminate service 45 days after the suspension date. Cellular, PCS and paging services are suspended when the prepayment balance is exhausted or when a customer's credit limit is reached. Customers must pay RD$215 ($13) for wireline services, RD$73 ($5) for paging services and RD$255 ($16) for Internet services in order to reinstate service after termination. Cellular subscribers whose service has been terminated may reconnect only by purchasing an Amigo prepaid card or by paying RD$188 ($12) to obtain Cellflex services. We had an average monthly churn rate for cellular and PCS subscribers of 3.1% in 2000 compared to an average monthly churn rate of 1.8% in 1999, reflecting primarily our decision in the fourth quarter to eliminate lower revenue-generating prepaid customers by shortening the expiration of our prepaid calling cards to 30 days. We calculate average monthly churn by dividing the number of subscribers disconnected during the year by the sum of subscribers at the beginning of each month during such year. TRICOM USA distributes its prepaid cards through wholesale distributors. Depending on their credit history and the length of their relationship with TRICOM USA, wholesalers are required to pay in full for calling cards upon delivery or are extended credit for up to 15 days. All distributors of prepaid cards in the Dominican Republic are extended credit for up to 30 days. TRICOM USA requires that new and smaller reseller customers pay on a weekly basis for long distance services. Some customers that have a previous relationship with TRICOM USA are extended a 15-30 day credit, on average, depending on proven reliable finance conditions. Traditional long distance carriers generally pay TRICOM USA within 60 to 90 days for traffic. MANAGEMENT INFORMATION SYSTEMS - 27 - Our management information systems are designed to provide two principal functions. First, they must generate accurate information in real time, which employees at all levels of the organization can readily access, particularly those employees who deal directly with customers. Second, our customers must be able to access directly pertinent information from our computer network. We have designed a fully integrated, open architecture computer network with a view to providing these functions. We use Oracle as our unified database and software application development tool set. We use Oracle Financials for accounts payable, accounts receivable, general ledger, purchase orders, inventory control and fixed asset accounting. We have developed an integrated billing system that runs on the Oracle platform. Our billing system rates calls in one-second increments for calls made from our retail telephone centers, six-second increments for calls made with our prepaid calling cards and one-minute increments for calls made from local access lines, cellular and PCS telephones. The billing system also enables us to rate calls according to each customer's specific service package, thus permitting us to offer tailored packages. NETWORK INFRASTRUCTURE Our state-of-the-art network includes: - Our local access network; - A digital wireless point-to-point transmission system; - Our mobile network ; - Two satellite earth stations in the Dominican Republic and capacity in eleven international undersea cables; and - Switches in New York, Puerto Rico and in Miami to connect international traffic originating in the U.S. We invested over $700 million from 1992 through 2000 to develop our network, which is fully digital except for portions of our cellular network. LOCAL SERVICE AND MOBILE NETWORK The core of our network is composed of Nortel International gateway switches. These switches have switching capacity of more than 4,300 digital trunk lines and possess special features such as ultra-high-speed, port-to-port call switching that can handle 240,000 calls per second. Our switch time-of-day capability allows us to distribute efficiently our telecommunications traffic and provide, as a result, more competitive pricing. Our switches also provides statistical call distribution information, which allows us to control our flow of traffic. Without such capabilities, we would have to conduct these monitoring tasks manually. The switches also enable us to use one common channel for signaling purposes, optimizing the channels available for voice transmission. Without this capability, a network must use each of its channels to signal the origination and termination for each call, which often results in uncompleted calls and poor circuit utilization. Our wireline local access network is composed of Northern Telecom and Nortel International central switches, 38 remote switches and 33 digital loop carriers. Each of the central switches is capable of supporting up to 90,000 customers. Our Northern Telecom switches enable us to offer value-added services including caller identification, three-way calling and automatic recall. Our intra-city network is comprised of 500 route miles of fiber optic cable and over 3,000 miles of copper cable in seven cities. We use digital loop carrier technology, which is digital network transmission equipment used to provide multiple phone conversations, and fiber optic cable to connect to local access lines. Our central office switches are -28- connected by fiber optic cable to various digital loop carriers located throughout the three largest cities in the Dominican Republic. The digital loop carriers can be located up to 160 kilometers away from the central office switch. The digital loop carriers are small in size and can be easily installed at relatively low cost. These digital loop carriers, in turn, carry telecommunications traffic by copper or fiber optic lines to the customer. All these activities are remotely monitored by our management system, located at our central office. Without the use of the digital loop carriers, we would have to maintain additional central office switches, which would require us to incur substantial additional costs, including land acquisition, obtaining the necessary rights-of-way and hiring additional personnel to manage these operations. We transmit our domestic traffic through a fully redundant digital wireless point-to-point backbone system, which provides both intra-city and inter-city telecommunications services. A point-to-point backbone system is a dedicated connection between two endpoints of a communications network. The backbone system links approximately 85% of the country's population, including Santo Domingo, Santiago, San Francisco de Macoris and certain key areas in the eastern and northern regions of the country that are centers of the tourist and agricultural business industries. The wireless point-to-point system serves the areas that have high telecommunications usage, including large industrial and commercial areas. We interconnect with Codetel in 11 cities of the Dominican Republic. To oversee and monitor the activities of our network infrastructure, we have installed a network management system. This system allows us to manage our central office switches and remotely monitor all network components. The management system provides continuous information regarding our equipment, any equipment failure, and the security of the network. In addition, it allows the central office to send commands and to test our network. Our cellular network in the Dominican Republic uses analog technology and our PCS network uses CDMA or digital protocol. Our analog mobile network currently has 86 cell sites and two mobile switching centers, in Santo Domingo and Santiago which enable us to provide mobile coverage to those regions of the Dominican Republic with the greatest demand for mobile services. To provide PCS service, we use two Motorola digital switches, 72 cell sites and ten digital repeaters, which allow us to provide PCS service in 12 main cities and continuous coverage in the main highway routes of the country. INTERNATIONAL LONG DISTANCE NETWORK In July 1998, we installed our own state-of-the-art switching facility in the New York metropolitan area, which we subsequently upgraded to allow us to provide multiple international signaling protocols. We also installed a switch in Puerto Rico that became operational in the second half of 2000, and an additional switch was installed in Miami and became operational in the first quarter of 2001. By having our own switching facilities, we can provide termination of international long distance traffic at very competitive rates to several countries in addition to the Dominican Republic. By purchasing and leasing international traffic capacity from various systems, we have diverse options to route our international traffic, and are fully connected to the international network. We have purchased capacity in international submarine fiber optic cables that have been built to send and receive international traffic to and from various countries. These submarine cables include Americas I, Columbus II, Columbus III, TAINO CARIB and Antilles 1, which directly provide service, or connect with other cables that provide service to Latin America, the Caribbean and Europe. We own 23% of the Antilles 1 submarine cable, which connects the Dominican Republic to the United States via Americas I, Columbus II, Taino Carib, Americas II and Arcos I. In addition, we have an earth station which connects to the PanAmSat satellite system and an earth station which connects to the INTELSAT satellite system serving the Atlantic region, Africa and Europe. The use of these satellite facilities also allows us to route international traffic between the Dominican Republic and most other countries in the world. BROADBAND DATA TRANSMISSION AND INTERNET NETWORK Our Internet Services is provided by a Sun, 3Com and Cisco platform. The network has equipment to connect to international carriers, including Teleglobe, UUNET and Sprint. Currently, we have the capacity to handle more than 10,000 dial-up users and provide email, Internet connection, web hosting,news and real audio/video. -29- Other new services are under development through a Nortel Network Shasta Platform. This platform will enable us to offer virtual private networks to our customers, which provides security, filtering content, bandwidth guarantee and other services. Data communications services are primarily targeted to the business community and provided at a variety of speeds. Our data communications network consists of Newbridge data multiplexing nodes, which are network connection points that allow for the transmission of two or more signals over a single channel, linked to fiber optic ring and digital wireless point-to-point radio links. The "last mile" to the customer is provided through fiber optic cable and/or digital wireless point-to-point radio links. Currently we have 3,269 access lines offering speeds in excess of 56 kilobytes per second. Our data network has the capability to monitor the communications link all the way to customer desktop level and to support multiple data protocols such as ATM and frame relay. Our technology infrastructure is built and maintained to assure reliability, security and flexibility and is administered by our technical staff. Each of our servers can function separately, and key components of our server architecture are served by multiple redundant machines. We maintain our central production servers at the data center of our headquarters. Our operations depend on the ability of the network operating centers to protect their systems against damage from fire, hurricanes, power loss, telecommunications failure, break-ins or other events. We employ in-house and third-party monitoring software to monitor access to our production and development servers. Our reporting and tracking systems generate daily traffic, demographic and advertising reports, which are copied to backup tapes each night. COMPETITION LOCAL AND MOBILE OPERATIONS We currently compete against four other telecommunications companies in the Dominican market: Codetel, Centennial Dominicana, Orange and Skytel. Codetel, a wholly owned subsidiary of Verizon, is an integrated communications service provider which has the largest number of local access lines in the country. In January 2000, Centennial Cellular Corp. announced its acquisition of 70% of All America Cables and Radio and during the last quarter of 2000, introduced PCS service in Santo Domingo. Skytel, a U.S. paging service provider, has been granted a license by the Dominican government and now provides paging services in the Dominican Republic. In 1999, France Telecom acquired a company which had been granted a concession and launched cellular services during the last quarter of 2000. The Dominican government also has granted concessions to the following telecommunications companies which either have not commenced operations yet or have minimal operations: Telecomunicaciones America, C. por A., Compania Telefonica del Norte, S.A., Servicios Globales de Telecomunicaciones, S.A., Defisa, S.A., Comunicaciones Dominicanas S.A., Turitel S.A. Economitel C. por A., and Servicios Moviles de Comunicacion, S.A., (MOVICELL). Each of the concessions allows for the provision of the same telecommunications services that we provide. In addition, we believe that international telecommunications companies, from time to time, have considered investments in the Dominican market. The growth of our market presence in the Dominican Republic depends upon our ability to obtain customers in areas that currently are not served or are underserved by Codetel and to convince these customers to either add or switch to the telephony services provided by us. We initially attempted to compete with Codetel by providing lower rates. From time to time, Codetel has implemented significant price reductions for certain categories of calls in response to our marketing initiatives and, as a result, forced us to modify rates for certain services. We will continue our efforts to compete by reaching unmet demand and providing innovative products and competitive pricing, reliable -30- communications, responsive customer service and accurate billing. We emphasize that customers can realize savings through our packaged service offerings. In addition, we will leverage our fully integrated and completely digital wireline network to continue to provide accurate and reliable basic and value-added telephone services. However, i.e. Codetel, if it decided to do so, could spend significantly greater amounts of capital than are available to us. Codetel also could upgrade its network or sustain price reductions over a prolonged period. Any such efforts by Codetel could have a material adverse effect on our ability to increase or maintain our market share and on our results of operations. INTERNATIONAL LONG DISTANCE The international telecommunications industry is intensely competitive and subject to rapid change precipitated by changes in the regulatory environment and advances in technology. Our success depends upon our ability to compete with a variety of other telecommunications providers in the United States and in each of our international markets. Our competitors include large facilities-based multinational carriers including AT&T, MCI/WorldCom and Sprint, smaller facilities- based wholesale long distance service providers in the United States and overseas that have emerged as a result of deregulation and switched-based resellers of international long distance services. We compete on the basis of price, reliability, quality of transmission, capacity at any time to terminate traffic and customer service. We expect that competition will continue to intensify as the number of new entrants increases as a result of the new opportunities created by the 1996 Telecommunications Act, implementation by the FCC of the United States' commitments under the World Trade Organization and basic telecommunications agreements and changes in legislation and regulation in various foreign target markets. CENTRAL AMERICA MOBILE SERVICES STRATEGIC FOCUS We have targeted markets in Central America in which we intend to offer mobile services using Motorola's iDEN technology. These services include digital mobile telephone services, mobile dispatching, two way messaging, push-to-talk and one-to-many connection. We believe that Central America is an attractive market to target as one congruous telecommunications region for the following reasons: (a) FIRST ENTRANT PROVIDER OF MOTOROLA'S IDEN SERVICES IN CENTRAL AMERICA We plan to be the first telecommunications operator to establish a seamless intra regional mobile network targeted at business customers using a single transmission technology, iDEN, in the major business centers in Central America where the majority of the urban population reside. iDEN is a proven technology, principally used by Nextel, which had over 7.6 million subscribers worldwide and 4.5 million subscribers in Latin America as of December 31, 2000. Currently there are no iDEN subscribers in Central America which is a logical strategic extension of the iDEN network since it fills out the systems between North and South America. As the first market entrant to offer iDEN in Central America, we plan to capitalize on the demand by business customers for a product that provides advanced mobile services. (b) HIGH OVERALL ECONOMIC GROWTH The economies in Central America in our target markets are experiencing a high rate of growth in real Gross Domestic Product. The average compounded annual growth rate in real Gross Domestic Product for those countries was 3.8% from 1995 to 2000, and is projected to be 4% in 2001. (c) STRONG DEMAND IN THE WIRELESS SECTOR In 1999, cellular penetration in Central America was approximately 6.7% compared to 8.1% in Latin America and 30.8% in the U.S. Total cellular subscribers in Central America grew by 259% between 1998 and 1999, according to Pyramid Research. Growth in the wireless sector is expected to continue in the region as a result of (1) increased liberalization of telecommunications markets; (2) continued deregulation within the telecommunications sector; and (3) the expansion of wireless infrastructure. -31- (d) CLOSE INTRA-REGIONAL BUSINESS PRACTICES Central America consists of seven countries - Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama, linked together by common borders with a total population of approximately 35 million people. The Mercado Comun Central Americano (Central American Common Market), started in the mid 1970s, established the framework which allows the free flow of trade throughout the Central American region (with the exception of Belize). Since being enacted, an increasing number of multinational companies have established operations throughout the region and, consequently, have developed similar business practices. We believe that a seamless wireless network will provide the right solution to allow business customers to roam across borders and through myriad networks. (e) LOGICAL EXTENSION OF OUR EXISTING NETWORK We have interests in international fiber optic submarine cable systems that connect Central America and the Caribbean with the United States and Europe. These facilities will enhance the implementation of our intra-regional strategy, as well as contributing to our share of international traffic. Our interests in submarine cable systems and our ownership of switching facilities enable us to originate, transport and terminate traffic at reduced costs. We also will capitalize on our scalable back office systems, which integrate sales, customer service, collections and financial control functions. These allow us to expend our operations in a cost-efficient manner. Our objective is to provide roaming throughout the region using a unified platform. This will allow us to achieve cost savings in network buildout. Our undersea fiber optic facilities provide connections between each of our targeted markets and our support systems in the Dominican Republic. To date, we have obtained rights to frequencies in El Salvador and Guatemala and have acquired a majority interest in a company that owns frequencies in Panama. We also will consider offering services in two other countries, Costa Rica and Honduras. Generally, in implementing our digital mobile network strategy, we intend to form an affiliation with a local group in each country to expand our telecom services and to promote and use the TRICOM name in each market. We believe that affiliations with local groups will provide the following benefits: - familiarity with compliance of regulatory matters; - knowledge in adapting to the local markets; and - access to an existing customer base. (f) TECHNOLOGY We intend to create a digital mobile network in each of our targeted markets using Motorola's proprietary iDEN-Registered Trademark- technology. iDEN technology provides one network with four communications systems: dispatch radio, full-duplex telephone interconnect, short message service and data transmission, including packet data and circuit data. Developed by Motorola, iDEN uses a number of technologies, including single transmission technology, to provide services with maximum spectrum efficiency. Through the use of TDMA technology, which is a technology used in digital cellular telephone communication that divides each cellular channel into three time slots in order to increase the amount of data that can be carried, iDEN is able to divide channels into time slots. Thus, one channel can perform multiple voice and data functions. VSELP technology further increases the iDEN technology by compressing and digitally coding data signals, reducing the amount of data that is transmitted on the multiple channels provided by TDMA. The implementation of a digital mobile network using iDEN technology will significantly increase the capacity of our proposed channels and will permit us to use our specialized mobile radio spectrum more efficiently. iDEN is used in Argentina, Brazil, Canada, China, Colombia, Israel, Japan, Korea, Mexico, Peru, the Philippines, Singapore and the United States. Some of the advantages of the iDEN technology for us include: -32- - marketing primarily to businesses which have a stronger credit profile; - ability to transmit more information in a timely manner; - on average, higher revenue per user; and - increased capabilities and value-added services, including a one-to-one mode, a group mode, a pager mode and two-way messaging. Some of the advantages of the iDEN technology for our customers include: - instant access; - lower cost with bundled pricing; - work productivity tool; - worldwide roaming; - packet data solutions; and - vertical data applications. In addition to the iDEN technology, it will be necessary for us to purchase additional technologies and site components from third parties, including microwave radios, towers, shelters and power generators. We have engaged in negotiations for the additional technology and site components for our Panama system and have not concluded any agreements for them to date. However, we believe that there are alternate sites or suppliers available and that we will be able to satisfy our requirements for the technology and site components for Panama and our other targeted Central American markets. On July 31, 2000, we entered into an infrastructure supply agreement to buy systems and license the iDEN technology from Motorola. This serves as a regional frame agreement for our purchase of systems for each country in the region, except Belize. The system components to be supplied include switches, radio subsystems dispatch systems, packet data and intelligent network components. Motorola will provide installation, integration, optimization, management and system engineering, software maintenance and training services. The agreement provides that Motorola will provide us with preferred deployment consisting of priority production, manufacturing and delivery of the entire initial system purchase order before the initiation of any work for any purchase orders of other customers. In Panama and Costa Rica, the period of our preferred deployment will be until the earlier of the date our system is first in commercial operation and in the case of Panama, 24 months from the execution of the agreement and in the case of Costa Rica, 24 months from the placement of our initial system purchase order. For each of Guatemala, El Salvador, Nicaragua and Honduras, the agreement provides that Motorola will provide us with a headstart and will not place another iDEN system into commercial service in each such country until 24 months after the date of our initial system purchase order in that country. Motorola's obligation to provide preferred deployment or a headstart, in each case, is subject to applicable local laws and is conditioned upon our placing an initial system purchase order from that country by April 30, 2001. We placed an order for an initial system for Panama concurrently with the execution of the agreement but have not placed any other orders to date. The agreement also provides price discounts for enhanced base transceiver stations, or EBTS, which are antennae located at base sites to provide radio coverage in specific geographic areas, based on the volume of our orders. The agreement contains a warranty for Motorola manufactured hardware equipment for 12 months following the date of shipment and other customary terms and provisions. REGULATORY MATTERS The licensing, construction, ownership and operation of wireless communications systems are regulated by governmental entities in each of the Central American countries we have identified. The grant, maintenance, and renewal of applicable licenses and radio frequency allocations are also subject to regulation. In addition, these matters -33- and other aspects of wireless communications systems operations, including rates charged to customers and the resale of wireless communications services, may be subject to public utility regulation in the jurisdiction in which service is provided. Changes in the current regulatory environments, the interpretation or application of current regulations or future judicial intervention in those countries could impact our business. These changes may affect interconnection arrangements, requirements for increased capital investments, prices we may charge for our services or foreign ownership limitations, among other things. EXISTING INVESTMENT Set forth below is a description of our existing investments in Panama, Guatemala and El Salvador: PANAMA OVERVIEW We have purchased a 51% interest in a Panamanian company, Cellular Communications of Panama, S.A., known as Celcom, which owns the frequency rights for 107 channels of 25 megahertz each. Based upon information provided to us by Celcom, it has approximately 2,300 analog mobile users. These frequencies will give us access to nationwide coverage, covering a population of approximately 2.81 million people. In Panama, frequency rights are granted for 20 years and are automatically renewable for additional 20 year terms. Currently we are constructing a digital network in Panama City and Colon, the two largest cities in Panama, and in important transportation corridors in other parts of the country. To date, we have invested $18.0 million in this deployment, primarily for the purchase of - a switching office for telephone and radio communications dispatch through which mobile service traffic is originated or terminated, - enhanced base transceiver stations, which are antennae located at base sites to provide radio coverage in specific geographic areas, and - site acquisition and construction. Our expected completion date for this phase of the buildout is the fourth quarter of 2001. MARKET OPPORTUNITY. At December 31, 1999, Panama had a population of approximately 2.81 million, with an estimated Gross Domestic Product of $9.6 billion in 1999, and a Gross Domestic Product growth rate of 3.2% for that year. Approximately 56% of the population lives in urban areas. The cellular penetration for Panama in 1999 was 8.6% while wireline penetration was 16.5%. -34- MARKETING PLANS We will offer digital mobile integrated services, including two-way radio, paging and interconnect services. We plan to offer our digital services mainly to business customers, offering a wide range of bundled programs with different services and pricing plans, customized to meet our clients' specific needs. We intend to market our services primarily through direct sales and independent dealers. COMPETITION The mobile market in Panama has been open to competition since 1996. TRICOM Panama's digital mobile services will compete with two wireless communications providers in the country, Cable & Wireless Panama and BellSouth, both operating 800 megahertz PCS networks using TDMA technology. The Panamanian government granted a 10-year duopoly service concession to both wireless operators in 1997 as part of the privatization of the telecommunications industry. Panama has the highest wireless penetration in the Central American region, 8.6% at 1999. REGULATORY AND LEGAL OVERVIEW To provide telecommunications services, a Panamanian or foreign company must obtain a service concession from the Ente Regulador de Servicios Publicos, or ENTE. There are two types of service concessions, Type "A" and Type "B". Type "A" service concessions currently are awarded on an exclusive basis. Services under a Type "A" category concession include basic telecommunications and cellular services. Additional concessions of this type will not be granted again until 2003. Type "B" service concessions are awarded to companies which meet specific requirements and complete the application procedures for the services they wish to provide. Applicants must include a form of the contract they intend to enter into with potential customers and a diagram of the system that will be operated in order to provide the contemplated services, among other information. Applicants may submit their applications to provide Type "B" services on any one of four specified dates a year. Additionally, since Type "B" telecommunications service concessions are open to all companies which meet the requirements, the terms of the concession are the same for all concession holders. However, each concession holder must comply with fair competition practices in providing services to its clients and in relation to other concession holders. Concession holders also must provide services in a nondiscriminatory manner. Concession holders may also assign or transfer their concessions to other companies which meet the same requirements that ENTE considered at the time it awarded the concession, subject to ENTE's authorization. ENTE may only deny a transfer or assignment when the transfer or assignment would be prohibited by law or against fair competition practices. Telecommunications providers are required to pay annual fees to the government of 1% of their total gross revenues. Celcom has two of the twenty-four Type "B" service concessions. One to provide service for conventional trunking systems for public or private use and one for pager service. Panamanian telecommunications law prohibits companies using trunking operations to handle telephone calls from handing off calls in certain circumstances, even if the hand-off would be from one site to another site owned by the same company. Therefore, we intend to build additional ETBS in Panama to minimize the number of calls which would be handed off. We believe that additional ETBS will prevent a higher percentage of dropped calls than would otherwise occur due to this Panamanian law. In addition, Panamanian telecommunications law requires that all concession holders permit and maintain nondiscriminatory interconnection of other concession holders to their networks. A concession holder is required to use its best efforts to reach an interconnection agreement within 120 days from the date on which another concession holder sends a copy of an interconnection request to the ENTE, with confirmation that the concession holder with which interconnection is sought also has received the request. After this 120-day period, any of the parties may request the intervention of the ENTE in negotiations. The ENTE may intervene in the process if interconnection is not negotiated by the parties or is not provided on terms at least equal to those that other concession holders have obtained in similar circumstances. -35- Celcom has requested interconnection with Cable and Wireless, one of two principal wireless providers. Cable and Wireless has refused interconnection but Celcom has not yet requested the intervention of the ENTE. Panama has no restrictions on repatriation or monetary transfers to and from Panama nor does it have any exchange controls. The unit of currency, the Balboa, is issued only in coins which are identical in size and value with those of the United States. Panama's paper currency is the U.S. dollar. There are few limitations or restrictions on foreign investment, especially for international business operations based in Panama. One of the few exceptions is that certain sales to consumers of retail goods are reserved for Panamanian nationals. As a telecommunications business, we will have to pay a monthly regulatory fee to ENTE of 1% of our previous month's gross income in addition to the 1% of gross revenue annual fee required to be paid by telecommunications providers. We are also subject to certain taxes, including income, franchise, dividend and commercial license taxes. GUATEMALA AND EL SALVADOR In 2000, we were awarded, in a government auction, radio frequency rights in Guatemala to 172 channels of 25 megahertz, providing us with nationwide coverage. We have also acquired the spectrum to operate our iDEN network in El Salvador through the purchase of radio frequency rights for an aggregate of 185 channels of 25 megahertz, 175 of which from a U.S. telecommunications company that previously owned the rights and 15 of which through a government auction. We currently do not intend to develop a network in either Guatemala or El Salvador in 2001. LEGISLATION AND REGULATION Our operations are subject to the Telecommunications Law of the Dominican Republic and the Dominican system of regulating and structuring the telecommunications sector. Our U.S. operations are subject to U.S. laws and Federal Communications Commission regulations. The following summary of these laws and regulations is not intended to be, and does not purport to be, comprehensive, and the laws and regulations described may be amended, repealed or otherwise modified. GENERAL The legal framework of the telecommunications sector in the Dominican Republic consists of General Telecommunications Law No. 153-98, enacted on May 27, 1998, resolutions promulgated under that law and the concession agreements entered into by the Dominican government or the regulator with individual service providers. In addition to the industry-specific legal framework, the Constitution of the Dominican Republic affects the telecommunications sector. Among other individual and social rights, the Dominican Constitution guarantees Dominican citizens the freedom of trade. The Constitution specifically provides that monopolies must be established by law and only for the benefit of the Dominican government. None of the existing concession agreements grants a monopoly in any sector of the telecommunications industry to any carrier, and the Dominican government has announced a policy of encouraging growth through competition in the telecommunications industry. In 1930, Codetel was granted a concession to operate telecommunications services in the Dominican Republic. Over the years, while other service providers entered the Dominican telecommunications market, none was successful in becoming a full-service telephone company able to compete with Codetel because Codetel was not required to allow other service providers to interconnect their services with its physical infrastructure. To provide services, a company would have to install its own wireline telecommunications network. The economics of this requirement hindered competition. As a result, Codetel held a de facto monopoly for more than 60 years. To substantially broaden the number of Dominican citizens with access to a telephone and to allow for the establishment and growth of other modern telecommunications services, the Dominican government adopted a policy of liberalization of the telecommunications sector beginning in the late 1980s. In 1990, the Dominican government granted us a concession to provide a full range of telecommunications services within, from and to the country. -36- Additionally, advancements in wireless technologies made it more cost-effective for companies to penetrate the market even without being able to interconnect to Codetel's network. However, interconnection remained important for full-service competition. In 1994, the Dominican government enacted a series of interconnection resolutions which require all service providers in the Dominican Republic to interconnect with all other service providers pursuant to contracts between them; the guidelines for those contracts are set forth in those resolutions. In May 1994, we entered into an interconnection agreement with Codetel which became effective in November 1994. This agreement allowed us to become the second full-service telecommunications provider in the Dominican Republic. GENERAL TELECOMMUNICATIONS LAW NO. 153-98 OF 1998 Former Telecommunications Law No. 118 of February 1, 1966 was repealed by Law No. 153-98 of May 27, 1998. Law No. 153-98 is the result of a joint government and industry project conducted with the assistance of the ITU, which studied the telecommunications sector in the Dominican Republic. As part of this process, the ITU drafted a proposed telecommunications law and various regulations, including interconnection and tariff regulations, in consultation with Dominican telecommunications carriers. The project was requested by the Technical Secretariat of the Dominican Presidency and the country's telecommunications carriers and was funded by the carriers. Law No. 153-98 established a basic framework to regulate the installation, maintenance and operation of telecommunications networks and the provision of telecommunications services and equipment. The law adopted the "Universal Service Principle," by guaranteeing access to telecommunications services at affordable prices in low-income rural and urban areas. The law creates a fund for the development of the telecommunications sector that is supported by a 2% tax payable by customers and collected by telecommunications providers from them based on billings to customers for telecommunications services. At the same time, the law eliminated the 10% tax previously charged on billings to customers for international and domestic long distance traffic to customers. In addition, the law created an independent regulator with strong regulatory powers, the Dominican Institute of Telecommunications (Instituto Dominicano de las Telecomunicaciones, or INDOTEL), and established the regulator's responsibilities, authorities and procedures. The regulator is headed by a five-member council, the members of which serve a four-year term, and includes a representative from the telecommunications industry. Among other responsibilities, INDOTEL is charged with implementing telecommunications development projects to satisfy the requirements of the Universal Service Principle. Law No. 153-98 grants INDOTEL control over all frequency bands and channels of radio transmission and communications within the country and over its jurisdictional waters. Law No. 153-98 encourages competition in all telecommunications services by enforcing the right to interconnect with existing participants and ensuring against monopolistic practices, and at the same time upholding those concessions that are operational. The law establishes mechanisms to set cost-based interconnection charges and to resolve interconnection disputes by requiring existing operators to amend their interconnection agreements consistent with the new requirements. The law also eliminates cross subsidies and provides for progressive rate rebalancing of those tariffs that traditionally have been subsidized, in order to reflect costs more closely. This rates rebalancing process was completed on December 31, 2000 in accordance with article 120 of Law No. 153-98. We believe that this legislation, combined with technological advances and the sustained growth of private investment will significantly contribute to the development of the telecommunications sector in the Dominican Republic. Additionally, we expect the increase in demand for long distance services stemming from reduced long distance fees to encourage continued long distance traffic growth. OUR CONCESSION AGREEMENT In accordance with former Law No. 118, we entered into a concession agreement with the Dominican government in 1990 under which we were issued a non-exclusive license to establish, maintain and operate a system of telecommunications services throughout the Dominican Republic, as well as between the Dominican Republic and international points. The services which we were permitted to provide under the 1990 concession agreement included telegraphy, radio communications, paging, cellular and local, domestic and international telephone services. -37- In February 1996, we entered into a new concession agreement with the Dominican government which superseded the 1990 concession agreement. Under the 1996 concession agreement, we were granted the same non-exclusive license as provided in the 1990 concession agreement to establish, maintain and operate a telecommunications system throughout the Dominican Republic until June 30, 2010. Under our original provisions, the concession agreement and the license granted under it are renewable automatically for 20-year periods unless, at least three years prior to the end of the then existing term, either we or the Dominican government advise each other of our intention not to renew. Law No. 153-98 establishes that the renewal must be requested during the one year immediately prior to the expiration of the concession, and that the reasons for non-renewal shall be only those set forth in the law. Law No. 153-98 established that within one year after its effectiveness each concession must be adjusted to the provisions of the new law. INDOTEL has issued Resolution No. 005-99 on December 1999 for such purposes, requesting, as a first step, information on each of the telecommunications companies with valid concession agreements. We have complied with these requirements. Nonetheless, it seems that INDOTEL is still evaluating all cases and has not yet completed the process of adjustment for any of the currently existing concession agreements. The provisions of our 1996 concession agreement relating to our tax obligations differ from those of the 1990 concession agreement. Under the 1996 concession agreement, we do not pay income tax imposed on other Dominican corporations but make payments to the Dominican government in lieu of income tax on the same basis as Codetel pursuant to its concession agreement. We must pay to the Dominican government, within the first ten days of each month: (1) 10% of gross domestic revenues collected by us during the preceding month for telephone services, telegraph services, paging services, cellular services, local, national and international call services, as well as for any data transmission or broadcast services, and any other related telecommunications services provided by us to our clients, minus any access charges paid to Codetel and to any other company for interconnection, and (2) 10% of net settlement revenues collected from foreign correspondent carriers for the use of our network for termination of international long distance calls. The minimum payment to the Dominican government in lieu of income tax by us is RD$18.0 million ($1.2 million) per annum. We have the right to deduct monthly up to one percent of our tax for outstanding debts from the government of 180 days or more and are entitled to the same exemptions granted to other telecommunications companies under their concessions, with the exception of the following taxes: - import duties - selective consumption tax - Taxes on the Transfer of Industrialized Goods and Services and exchanging commission. The 10% selective consumption tax previously charged on billings of international and domestic long distance traffic to customers was repealed by Law No. 153-98 and substituted with the 2% CDT tax. In addition, under the 1996 concession agreement, the Dominican government is obligated to grant to us any term or condition that it grants by concession to any other telecommunications provider in the Dominican Republic more favorable than those contained in the 1996 concession agreement. Under the Dominican Constitution, agreements with the Dominican government which contain exemptions from income tax, such as our concession agreement, only become effective upon approval by the Dominican Congress. Neither our concession agreement nor the concession agreements of Codetel, All America Cables & Radio and other companies have been submitted to the Dominican National Congress. We are not aware of any plans of the Dominican government to submit our concession agreement for approval to the Dominican Congress. If our concession agreement is presented to the Dominican Congress, it may not validate the provisions of our concession agreement relating to the payment of taxes. Prior to entering into our existing concession agreement in - 38 - 1996, Dominican tax authorities asserted that we were required to make payments in lieu of taxes equal to 18% of gross domestic revenues, as was provided in our 1990 concession agreement. If the provisions relating to the payment of taxes in the 1996 concession agreement were to be disapproved by the Dominican Congress, we believe that Dominican tax law would require the payment of a tax equal to 25% of our adjusted net income, and never less than 1.5% of gross revenues, advanced on a monthly basis, the current tax regime generally applicable to Dominican corporate taxpayers. CODETEL'S CONCESSION AGREEMENT Codetel's concession from the Dominican government, originally granted in 1930, was modified on January 23, 1995. The terms of Codetel's concession are substantially identical to those of our 1996 concession agreement. Codetel's concession, like our concession agreement, must be approved by the Dominican Congress because it contains an exemption from the income tax applicable to Dominican corporations. The license provides it with the right to construct, maintain and operate a telecommunications system throughout the Dominican Republic and between the Dominican Republic and other countries. Codetel's concession agreement is valid until April 30, 2010; our concession agreement is valid until June 30, 2010. Codetel's concession agreement, as well as our concession agreement, must be revised and adjusted to the provisions and general principles of the new legislation one year after the law takes effect. Codetel, like us, has complied with the information requirements of INDOTEL, under Resolution No. 005-99, but it is still in the process of adjusting its concession agreement in accordance with the provisions of Law No. 153-98. Codetel, like us, is required to pay a fixed monthly tax imposed on gross domestic income, and net revenues from international settlement payments. Codetel's minimum tax payment is RD$360.0 million ($23.0 million) per annum compared to our minimum of RD$18.0 million ($1.1 million). INTERCONNECTION RESOLUTIONS Article 123 of Law No. 153-98 provides that the new regulator, INDOTEL, must issue an Interconnection Regulation. On August 1, 1998, the Directorate General, acting provisionally until INDOTEL was formed, enacted Resolution No. 98-01, which contains the provisional regulation for the application and collection of the contribution for the development of the telecommunications. On August 10, 1998, the Directorate General enacted Resolution No. 98-03, which reorganizes the general assignment of the cellular frequency bands and granted us a license to operate all of Band A and its frequency expansions under sub-bands A, and it also granted a license to Codetel to operate Band B completely, and its expansion under sub-bands B. OUR INTERCONNECTION AGREEMENT WITH CODETEL In May 1994, we entered into an interconnection agreement with Codetel which sets forth the terms and conditions for interconnection between each party's network in the Dominican Republic. The interconnection agreement, which has an indefinite term, requires each of us to provide access to the other's respective network on equal, nondiscriminatory and transparent terms. Additionally, the interconnection agreement obligates each party to provide to the other any terms or conditions more favorable than it provides to any other telecommunications entity for interconnection. Under the interconnection agreement, the parties began paying an interconnection charge for local-to-local traffic in 1996, which is revised annually. Additionally, use of the network by either us or Codetel to originate or terminate cellular, domestic long distance and international long distance calls requires payment of an access charge, which is reviewed annually and is calculated based upon an established formula. The access charge consists of a usage charge and a subsidy charge which only is incurred with respect to international calls. On January 2, 1998, we and Codetel executed an addendum to the interconnection agreement which provides, among other things, that it will: (1) remove any technical or operational impediment to telephone users accessing our network from Codetel's network; - 39 - (2) automatically deliver to us the identification number of any call originating on Codetel's network which is subject to our access charge; (3) install interconnection facilities without delay upon our request, provided that we bear the expense of installing any such facilities; (4) connect calls to emergency services and toll-free numbers on Codetel's network, and make operators available to assist calls from our network to numbers on Codetel's network; and (5) make Codetel's database of telephone numbers available to us at no charge on a trimonthly basis. On January 11, 2000, we and Codetel executed a second addendum to the interconnection agreement to: (1) provide that local interconnection of each company's respective Internet nodes and to enable the clients of each company to access both our respective servers and nodes to access the Internet; (2) simplify the billing and collection process for interconnection services; and (3) amend the regulation on interconnection costs. In addition, the second interconnection amendment adjusted the access charges by: (1) lowering the charge for international long distance calls from RD$0.86 ($0.05) per minute to RD$0.84 ($0.05) per minute for the first quarter of 2000, RD$0.80 ($0.05) per minute for the second quarter of 2000, RD$0.76 ($0.05) per minute for the third quarter of 2000, RD$0.72 ($0.04) per minute for the fourth quarter of 2000, and RD$0.68 ($0.04) starting January 1, 2001; (2) increasing the charges for national long distance calls and calls made from cellular telephones from RD$0.63 ($0.04) to RD$0.68 ($0.04); and (3) charging for "calling party pays" traffic a use charge of RD$0.68 ($0.04) per minute and a variable complementary charge depending on the amount of cellular lines on service. Law No. 153-98 establishes that interconnection agreements entered into by the providers must be revised and readjusted to reflect and incorporate the provisions and general principles set forth in the new law within one year from the effectiveness of the law. INDOTEL is expected to issue a regulation for these purposes, but has not, to this date, done so. Codetel and we have, through our second addendum to the interconnection agreement, adjusted our interconnection agreement to the provisions of Law No. 153-98. U.S. TELECOMMUNICATIONS REGULATION The following summary of United States regulatory developments does not purport to describe all present and proposed regulations and legislation affecting the telecommunications industry. Other existing federal and state regulations are currently the subject of judicial proceedings, legislative hearings and administrative proposals which could change, in varying degrees, the regulation of telecommunications companies in the United States. Certain FCC international policies apply to all carriers that originate or terminate telecommunications services in the United States. Through several policy initiatives in the last several years, the FCC has encouraged greater competition in foreign markets. A particular focus of the FCC has been "accounting rates" or "settlement rates," which are the amount of payment negotiated between carriers for the termination of international telephone calls. On August 7, 1997, the FCC adopted a Report and Order regarding the regulation of international accounting rates. The order establishes certain settlement rate benchmarks based on foreign carriers' publicly available tariffed - 40 - rates and data published by the International Telecommunications Union, which the FCC refers to as the "tariffed components price" or "TCP" methodology. Under the TCP methodology, the FCC analyzes three tariffed network elements: (1) international transmission facilities; (2) international switching facilities; and (3) national extension (domestic transport and termination). The FCC also considers each country's level of economic development in determining country-specific settlement benchmark rates. The FCC has grouped each country into one of four categories based on its level of economic development -- upper income, upper middle income, lower middle income and lower income. The settlement rate benchmark for each category is calculated using the average of the TCPs for all countries in each respective category. The per-minute benchmark settlement rates are $0.15 for upper income, $0.19 for upper middle income, $0.19 for lower middle income and $0.23 for lower income. Under the FCC's income categories, the Dominican Republic is in the lower middle income group and our benchmark settlement rate would be $0.19 cents per minute. Pursuant to the order, U.S. carriers were required to enter into settlement rate arrangements with foreign carriers in lower middle income countries at or below the applicable benchmark rate by January 1, 2001. Currently, TRICOM's settlement benchmark rate for the Dominican Republic is within the prescribed limits. In April 1999, the FCC adopted an order approving sweeping reform of the international settlements policy. The 1999 order deregulated inter-carrier settlement arrangements between U.S. carriers and foreign non-dominant carriers on competitive routes. Among other rule amendments, the FCC's April 1999 order eliminated the international settlements policy and contract filing requirements for arrangements with foreign carriers that lack market power. On February 15, 1997, 69 countries (including the United States and the Dominican Republic) signed a global agreement on basic telecommunications services. Under the auspices of the World Trade Organization, the global agreement aims to increase competition among its signatories through the removal or lowering of entry barriers to foreign markets and the implementation of pro-competitive regulatory principles. On February 5, 1998, the global agreement went into effect. In an order released in November 1997, the FCC took the steps necessary to open the U.S. market to increased competition, in accordance with U.S. commitments in the WTO Basic Telecom Agreement. The FCC adopted an open entry standard for applicants from WTO Members seeking to: (1) obtain Section 214 authority from the FCC to provide international facilities-based, resold switched and resold non-interconnected private line services; (2) receive authorization to exceed the 25 percent indirect foreign ownership benchmark in Section 310(b)(4) of the Communications Act for wireless licenses; and (3) receive submarine cable landing licenses. The FCC's open entry standard includes a presumption in favor of foreign participation by applicants from WTO member countries. On September 11, 1995, the FCC issued an order approving the application of Domtel Communications, Inc., which later changed its name to TRICOM USA, Inc., to provide, on a facilities-based basis, voice, data and private line services between the United States and various international points, including the Dominican Republic. The FCC also approved Domtel Communications, Inc. as a non-dominant provider on all routes, including to the Dominican Republic. We began initiating U.S. traffic pursuant to this authorization in 1997. Domtel Communications, Inc. was also granted global resale authority by the FCC in 1996. - 41 - Since the effectiveness of the interconnection agreement with Codetel, we have entered into operating agreements with U.S. correspondents. TRICOM USA, Inc. also has the ability as a U.S. carrier to develop its own business plan for markets other than the Dominican Republic, and has been approved by the FCC to communicate from the United States with 186 countries via satellite and with 28 countries via fiber optic submarine cables. As a carrier holding an international authorization from the FCC, TRICOM USA is subject to various statutory and regulatory telecommunications mandates, including the duty to offer services at just and reasonable rates, the obligation to file and maintain tariffs at the FCC setting forth TRICOM USA's rates, terms and conditions, and the requirement to obtain prior approval for most transfers of control and assignments of authorizations, except those considered non-substantial, or "pro forma" under FCC rules. The FCC may address regulatory non-compliance with a variety of enforcement mechanisms, including monetary forfeitures, refund orders, injunctive relief, license conditions, and/or license revocation. We believe we are in compliance with all material laws and regulations in the countries in which we operate. Future regulatory, judicial, or legislative activities could have a material adverse effect on our financial condition, results of operations or cash flow. We are certified by the public utility commissions of Puerto Rico, Florida and New York, and are currently in the process of obtaining certification in Alaska, California, Georgia, Illinois, Maryland, Massachusetts, New Jersey, Pennsylvania, Rhode Island, U.S. Virgin Islands, including St. Thomas and St. John, and Washington, D.C. In addition, TRICOM USA obtained on July 7, 2000 a Class B License for the provision of international telecommunications services, and is in the process of registering to do business in Ontario and Quebec. TRICOM USA does not operate telecommunications facilities used in transporting basic telecommunications service traffic between Canada and other countries. TRICOM USA's services in Canada are provided through a service arrangement with MCI WorldCom, to handle traffic originated from the prepaid calling cards sold in Canada. As we expand our operations into other countries, we may become subject to varying degrees of regulation in those jurisdictions where we provide service. Laws and regulations regarding telecommunications differ significantly from country to country. PROPERTY, PLANT AND EQUIPMENT Our principal properties consist of our fiber optic network, satellite earth stations, nodes and real estate. At December 31, 2000, the net book value of our real estate and equipment was approximately $586.2 million. Our real estate holdings are strategically located throughout the Dominican Republic, providing the infrastructure for the telecommunications network and sales facilities. Most of our properties are related directly to our telecommunications operations and are used for network equipment of various types, such as telephone exchanges, transmission stations, wireless point-to-point radio equipment and digital switching nodes. Our current headquarters are located in downtown Santo Domingo in a building that we own. ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS REVENUE OVERVIEW We derive our operating revenues primarily from toll revenues, international settlement revenues, cellular and PCS services, local services, the sale of equipment and installations. The components of each of these services are as follows: Toll revenues are amounts we receive from our customers in the Dominican Republic for international and domestic long distance calls, as well as interconnection charges received from Codetel, the incumbent local service provider, and other carriers, for calls that originate in or transit their networks but terminate in our network. Toll revenues are generated by residential and commercial customers, calling card users, cellular and PCS subscribers and retail telephone centers, - 42 - and large corporate accounts. Toll revenues are recognized as they are billed to customers, except for revenues from prepaid calling cards which are recognized as the calling cards are used or expire. International revenues represent amounts recognized by us for termination of traffic from foreign telecommunications carriers to the Dominican Republic. Traffic is based on the minutes that the foreign telecommunications companies have terminated in the Dominican telecommunications network, either on our own network or on Codetel's network, including revenues derived from our U.S.-based international long distance prepaid calling cards. Local service revenues consist of monthly fees, local measured service and local measured charges for value-added services, including call forwarding, three-way calling, call waiting and voicemail, as well as calls made to cellular users under the calling-party-pays system and revenues from other miscellaneous local access services. Local measured service includes monthly phone line rental for a specified number of calls within a defined area, plus a charge for additional calls. Cellular and PCS revenues represent fees received for mobile cellular and PCS services, including interconnection charges for calls incoming to our cellular and PCS subscribers from other companies' subscribers. Cellular and PCS revenues do not include fees received for international long distance calls generated by our cellular and PCS subscribers. Cellular and PCS fees consist of fixed monthly fees, per minute usage charges and additional charges for value-added services, including call waiting, call forwarding, three-way calling and voicemail, and for other miscellaneous cellular and PCS services. Paging revenues consist of fixed monthly charges for nationwide service and use of paging equipment and activation fees. Beginning in 1999, we determined that paging will not play a major role in our future marketing programs. Revenues from the sale of equipment consist of sales fees for customer premise equipment, including private automatic branch exchanges, which are small versions of a phone company's central switching system often used by private companies, and key telephone systems, residential telephones, cellular and PCS handsets and paging units. Installation revenues consist of fees we charge for installing local access lines, private branch exchanges and key telephone systems as well as fees for activating cellular phones and PCS. Beginning with January 1, 2000, we have recognized these revenues over the estimated period in which, based on our experience, we retain such clients, approximately 35 months. In prior periods, we recognized these revenues when they were collected. Other revenues consist of revenues that are not generated from our core businesses, including commissions received for providing package handling services for a courier and commissions received for collection services for utility companies. The following table sets forth the percentage contribution of each category of revenues to total operating revenues for the period indicated: - 43 -
YEAR ENDED DECEMBER 31, ------------------------------------- 1998 1999 2000 ---- ---- ---- Toll................................................. 14.1% 13.5% 12.8% International........................................ 40.1 35.5 37.5 Local service........................................ 10.3 19.8 24.4 Cellular and PCS..................................... 16.2 15.5 16.0 Paging............................................... 3.6 1.6 0.8 Sale of equipment.................................... 3.3 4.5 2.3 Installation and activation fees..................... 10.3 9.1 6.1 Other................................................ 2.1 0.5 0.1 ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== =====
The following table sets forth certain items in the statements of operations and EBITDA expressed as a percentage of total operating revenues for the period indicated:
YEAR ENDED DECEMBER 31, ------------------------------------- 1998 1999 2000 ---- ---- ---- Operating costs...................................... 76.5% 75.7% 81.7% Operating income..................................... 23.5 24.3 18.3 Interest expense, net................................ 10.3 11.7 13.7 Other income (expenses).............................. (9.5) (11.2) (13.9) Earnings before income taxes and cumulative effect of accounting change............................. 14.0 13.1 4.4 Net earnings (loss).................................. 14.3 12.9 (3.2) EBITDA............................................... 42.8 43.9 39.3
2000 COMPARED TO 1999 OPERATING REVENUES. Our total operating revenues increased 31.3% to $224.3 million in 2000 from $170.8 million in 1999. This growth stemmed primarily from increases in revenues from our international, local service, wireless and toll services, offset, in part, by decreased revenues from the sale and lease of equipment and installations. TOLL. Toll revenues increased 24.0% to $28.7 million during 2000 from $23.1 million for 1999, as a result of higher domestic long distance and outbound international traffic derived from the growth of our customer base. Domestic long distance minutes increased by 47.4% to 45.9 million minutes during 2000 from 31.1 million minutes during 1999. Outbound international minutes increased by 9.4% to 32.5 million minutes in 2000 from 29.7 million minutes in 1999. The increase in numbers of minutes was offset by an decrease of approximately 15% during 2000 of our average per minute long distance tariff. The increases in domestic long distance and outbound minutes resulted from higher traffic volume from our wireless and local service customers. Wireless and local service customers respectively accounted for 32.3% and 31.3% of our total long distance minutes in 2000 compared to 22.3% and 27.9% in 1999. Calls from our call centers account for our remaining minutes. INTERNATIONAL. Our international revenues grew 38.9% to $84.2 million in 2000 from $60.6 million in 1999. This increase was due principally to the growth of inbound traffic volume received from our U.S.-based international carrier, TRICOM USA. Inbound minutes increased by 70.9% to 563.4 million minutes in 2000 from 329.7 million in 1999. TRICOM USA accounted for 71.1% of our total inbound minutes in 2000 compared to 59.4% in 1999. The increase in international revenues was achieved despite the continued trend of decreasing settlement rates for traffic between the United States and the Dominican Republic. Our average settlement rate was $0.14 per minute during 1999 and $0.10 per minute during 2000. We have been able to increase revenues from the provision of international long distance services by increasing the volume of international traffic carried through our network. Future decreases in settlement rates, without corresponding increases in our long distance traffic from the United States, would reduce our international settlement revenues, adversely affect the profit margins that we realize on such traffic and could have a material adverse effect on our business, financial condition and results of operations. - 44 - LOCAL SERVICE. Local service revenues grew 61.8% to $54.8 million in 2000 from $33.9 million in 1999, primarily as the result of the continued growth in the number of local lines in service. In 2000, we added 29,386 net local access lines compared to 38,310 net local access lines added in 1999. At December 31, 2000, we had 148,312 local access lines in service, including 48,765 wireless local loop lines, compared to 118,926 local access lines in service at December 31, 1999, including 19,284 wireless local lines. The increase in local service revenues also reflects an approximate 15% increase in local access rates. In addition, local service revenues include internet service revenues which increased to $3.0 million in 2000 from $500,000 in 1999. As a result of a higher number of lines in service, interconnection revenues for local calls received from Codetel and other carriers increased 113.8% to $6.2 million in 2000 from $2.9 million in 1999. Our average monthly churn rate for local service was 2.3% for 2000 compared to 1.8% in 1999. We calculate our average monthly churn rate by dividing the number of subscribers disconnected during a given period by the sum of subscribers at the beginning of each month during such period. The increase reflected our policy of financing installation fees for local access adopted in 1999. In October 1999, we reduced installation fees and stopped providing financing, which resulted in decreased monthly churn. CELLULAR AND PCS. Our cellular and PCS revenues grew 35.2% to $35.8 million in 2000 from $26.5 million in 1999. The growth in our wireless operations was the result of a 61.9% increase in subscribers. At December 31, 2000, we had 284,991 cellular and PCS subscribers compared to 176,080 at December 31, 1999. As a result of a higher average subscriber base, airtime minutes increased 27.8% to 166.6 million minutes in 2000 from 130.4 million minutes in 1999. We attribute the substantial growth of our subscriber base to the continued success of our prepaid cellular program. Prepaid cellular and PCS services generated approximately 59% of our total airtime minutes and 58.7% of total cellular and PCS revenues in 2000. Prepaid revenues increased by 44.1% to $20.9 million in 2000 from $14.5 million in 1999. Our average monthly churn rate for cellular and PCS services increased to 3.1% in 2000 from 1.8% in 1999 reflecting primarily our decision in the fourth quarter to eliminate lower revenue-generating prepaid customers by shortening the expiration of our prepaid cards to 30 days. Interconnection revenues attributed to airtime traffic received from Codetel and other carriers increased by 22.4% to $4.3 million in 2000 from $3.5 million in 1999 due to a larger subscriber base, as well as a higher volume of incoming minutes received by prepaid cellular and PCS subscribers. PAGING. Paging revenues decreased 36.8% to $1.7 million in 2000 from $2.7 million in 1999, primarily as a result of the Company's decision to focus on having new customers move away from paging services and into prepaid cellular services. At December 31, 2000, we had 21,622 paging subscribers compared to 28,737 paging subscribers at December 31, 1999. Our average monthly churn rate for paging services increased to 3.4% in 2000 from 2.3% in 1999. SALE OF EQUIPMENT. Revenues from the sale of equipment decreased 31.6% to $5.3 million in 2000 from $7.7 million in 1999, primarily as a result of lower sales of customer premise equipment and cellular and PCS handsets. We have entered into arrangements for the distribution of cellular and PCS services through major electronics retailers. We believe that these arrangements will decrease equipment sales revenues but will add subscribers and increase cellular and PCS service revenues. INSTALLATION AND ACTIVATION. Installation and activation revenues decreased 11.3% to $13.7 million in 2000 from $15.5 million in 1999. The decrease in installation and activation revenues was due to an aggressive promotional marketing strategy undertaken during 2000, which included lowering subscriber activation fees for wireless and local access service, and the effect of adopting a new accounting pronouncement, SAB 101, resulting in the deferral of the recognition of installation revenues and activation fees over a period of approximately 35 months. OPERATING COSTS. Major components of operating costs are: satellite connections and carrier costs, which include amounts owed to foreign carriers for the use of their networks for termination of outbound traffic and payments for international satellite circuit leases; - 45 - interconnection costs, which are access charges paid primarily to Codetel; and payments for international satellite circuit leases; depreciation of network equipment and leased terminal equipment, and non-network depreciation expense; expenses in lieu of income tax; and general and administrative expenses, which include salaries and other compensation to personnel, maintenance expenses, marketing expenses and other related costs. Our operating costs increased to $183.3 million in 2000 from $129.4 million in 1999. These results reflect increased satellite connection and carrier costs associated with higher volumes of international traffic; higher general and administrative expenses primarily from increased commissions due to the growth of our retail operations in the U.S.; and higher network depreciation expenses resulting from our capital investment and domestic and international network expansion programs. As a percentage of revenues, operating costs increased to 81.7% in 2000 from 75.7% in 1999. SATELLITE CONNECTIONS AND CARRIER COSTS. Satellite connections and carrier costs increased by 57.0% to $68.6 million in 2000 from $43.7 million in 1999, primarily as a result of higher outbound carrier costs, as well as higher interconnection costs. Outbound carrier costs increased by 86.1% to $35.6 million in 2000 from $19.1 million in 1999. The increase was attributable to increased international traffic through our TRICOM USA hubbing operations. Interconnection costs increased by 37.9% to $27.0 million in 2000 from $19.8 million in 1999, the result of a higher volume of inbound traffic terminating in Codetel's network. NETWORK DEPRECIATION AND DEPRECIATION EXPENSE. Network depreciation increased 83.6% to $29.3 million in 2000 from $16.0 million in 1999, as a result of the continued investments in our local and international networks, including telecommunications equipment and facilities. Depreciation expense with respect to other fixed assets grew 40.6% to $6.8 million in 2000 from $4.9 million in 1999. EXPENSE IN LIEU OF INCOME TAXES. We make payments to the Dominican government in lieu of income tax equal to 10% of gross domestic revenues, after deducting charges for access to the local network, plus 10% of net international revenues. Expense in lieu of income taxes also includes a tax of 2% on international settlement revenues collected. Expense in lieu of income taxes during 2000 decreased by 20.3% to $10.2 million from $12.8 million in 1999. The decrease reflects increases in international costs, interconnection costs and accounts receivable reserve which are deducted from revenues in calculating the tax and which increased at a greater rate than the increase in domestic revenues on which the tax is based. GENERAL AND ADMINISTRATIVE. General and administrative expenses, excluding depreciation expense, increased 36.9% to $63.9 million in 2000 from $46.6 million in 1999. The increase in the amount of general administrative expenses reflected the greater amount of commissions paid to wholesale distributors of prepaid cards as a result of higher revenues from sales of the cards and increased personnel costs due to a higher employee headcount. At December 31, 2000, we had 1,740 employees compared to 1,534 employees at December 31, 1999. As a percentage of total operating revenues, general and administrative expenses, excluding depreciation expense, increased to 28.5% in 2000 compared to 27.3% in 1999. Commissions paid to wholesale distributors of prepaid cards grew 89.3% to $11.6 million in 2000 from $6.1 million in 1999, primarily as a result of the expansion of our prepaid cellular subscriber base, and a 113% increase in the number of prepaid cards sold in the United States in 2000. OTHER COSTS. Other costs which consist of the cost of sale from local, wireless and prepaid services decreased by 17.7% to $4.5 million in 2000 from $5.4 million in 1999, primarily as a result of the lower cost of sale from residential telephones, cellular and PCS handsets and paging units. OPERATING INCOME. Operating income was approximately $41.0 million in 2000 compared to $41.5 million in 1999. Operating income as a percentage of total operating revenues decreased to 18.3% in 2000 from 24.3% in 1999. OTHER INCOME (EXPENSES). Other expenses increased to $31.2 million in 2000 from $19.2 million in 1999, reflecting increased interest expenses resulting from higher short-term bank borrowings and vendor financing used to purchase network and telecommunications equipment. - 46 - NET EARNINGS (LOSS). Earnings before cumulative effect or accounting change totaled $9.2 million, or $0.33 per share, in 2000 compared to $22.2 million, or $0.89 per share, in 1999. Including the $16.5 million cumulative effect of accounting change for the adoption of SAB 101, we had a net loss of $7.2 million, or $0.26 per share, in 2000. EBITDA. Earnings before interest and other income, taxes and depreciation and amortization increased by 16.8% to $87.7 million in 2000 from $75.1 million in 1999. We calculate earnings before interest and other income and expenses, taxes and depreciation and amortization prior to the deduction of payments to the government in lieu of income taxes. 1999 COMPARED TO 1998 OPERATING REVENUES. Our total operating revenues increased 36.1% to $170.8 million in 1999 from $125.5 million in 1998. This growth stemmed primarily from increases in revenues generated by the expansion of our local exchange network, international business and of our cellular services. TOLL. Toll revenues increased 31.0% to $23.1 million in 1999 from $17.6 million in 1998. This resulted from both higher domestic long distance and outbound international traffic. Domestic long distance minutes increased by 54.2% to 31.1 million minutes in 1999 from 20.2 million minutes in 1998 due to a higher number of local access lines in service. Outbound international minutes increased by 32.2% to 29.7 million minutes in 1999 from 22.5 million minutes in 1998, reflecting increased traffic volume from our local and Efectiva prepaid calling card customers. Local access lines and Efectiva accounted for 27.9% and 26.2% of our total outbound minutes in 1999 compared to 29.2% and 29.1% for 1998. Interconnection revenues increased by approximately 63.1% to $5.2 million in 1999 from $3.2 million in 1998. INTERNATIONAL. Our international revenues increased 20.4% to $60.6 million in 1999 from $50.3 million in 1998, primarily as a result of the growth of inbound traffic volume received from our U.S.-based international carrier, TRICOM USA. Inbound minutes increased by 59.6% to 329.7 million minutes in 1999 from 206.6 million in 1998. TRICOM USA accounted for 57% of our total inbound minutes in 1999 compared to 53.2% in 1998. The increase in international revenues was achieved despite the continued trend of decreasing settlement rates for traffic between the United States and the Dominican Republic. Our average settlement rate was $0.21 per minute during 1998 and $0.14 per minute during 1999. We have been able to increase revenues from the provision of international long distance services by increasing the volume of international traffic carried through our network. Future decreases in settlement rates, without corresponding increases in our long distance traffic from the United States, would reduce our international settlement revenues, adversely affect the profit margins that we realize on such traffic and could have a material adverse effect on our business, financial condition and results of operations. LOCAL SERVICE. Local service revenues increased 161.6% to $33.9 million in 1999 from $12.9 million in 1998. Higher local service rates and continued growth in the number of local lines in service resulted in increased local service revenues for 1999. In 1999, we added 38,310 net local access lines compared to 37,421 net local access lines added in 1998. At December 31, 1999, we had 118,926 local access lines in service, including 19,289 wireless local loop lines, compared to 80,616 local access lines in service at December 31, 1998. There were not any wireless local loop lines in service at December 31, 1998. On January 14, 1999, we announced price increases, effective as of January 1, 1999, for residential monthly fees and for measured local service rates as part of the industry's process of price rebalancing initiated under the new Telecommunications Law No. 153-98. Residential monthly fees increased by approximately 86%. Local service rent revenues increased by 188.6% to $22.3 million in 1999 from $7.7 million in 1998. We adjusted the price per minute of measured local service in increments of RD$0.01 until the per-minute rate reached RD$0.25 ($0.015) at December 31, 1999. Measured local service revenues increased by 80.2% to $3.8 million in 1999 from $2.1 million in 1998, reflecting increased rates. -47- As a result of a higher number of lines in service and higher rates for service, interconnection revenues for local calls received from Codetel increased 193.5% to $2.9 million in 1999 from $1.0 million in 1998. Our average monthly churn rate for local service was 1.8% for 1999 compared to 0.8% in 1998. Average monthly churn increased as a result of disconnections due to Hurricane Georges, institution of our policy of offering financing of installation fees for local access and rate rebalancing. We calculate our average monthly churn rate by dividing the number of subscribers disconnected during a given period by the sum of subscribers at the beginning of each month during such period. CELLULAR AND PCS. Cellular and PCS revenues increased 30.0% to $26.5 million in 1999 from $20.4 million in 1998, primarily as a result of the increase in the number of cellular and PCS subscribers. In 1999, we added 67,548 net cellular and PCS subscribers, compared to 67,425 net cellular subscribers added in 1998. At December 31, 1999, we had 169,656 cellular and 6,424 PCS subscribers compared to 108,532 cellular subscribers at December 31, 1998. We attribute the substantial growth of our subscriber base to the continued success of the Amigo prepaid program introduced in the third quarter of 1997. As a result of a higher average subscriber base, airtime minutes increased 38.7% from 94.0 million in 1998 to 130.4 million in 1999. Interconnection revenues attributed to airtime traffic received from Codetel increased by 123.7% to $3.5 million in 1999 from $1.6 million in 1998 due to a higher volume of incoming minutes received by prepaid cellular and PCS subscribers, as well as to a larger subscriber base. Prepaid cellular and PCS services generated approximately 52.0% of our total airtime minutes and 53.2% of total cellular and PCS revenues in 1999. Prepaid revenues increased by 83.4% to $14.5 million in 1999 from $7.9 million in 1998. Our average monthly churn rate for cellular and PCS services declined to 1.8% in 1999 from 3.6% in 1998 resulting from the increased proportion of prepaid subscribers in our subscriber base. PAGING. Paging revenues decreased 40.5% to $2.7 million in 1999 from $4.5 million in 1998. This reflects increased competition which lowered prices and margins for paging services. Paging revenues represented 1.6% of total operating revenues in 1999 compared to 3.6% of total operating revenues in 1998. At December 31, 1999, we had 28,737 paging subscribers compared to 28,873 paging subscribers at December 31, 1998. Our average monthly churn rate for paging services declined to 2.3% in 1999 from 3.4% in 1998. SALE OF EQUIPMENT. Revenues from the sale of equipment increased 86.9% to $7.7 million in 1999 from $4.1 million in 1998. The increase was attributable to higher sales of customer premise equipment, including private branch exchanges and key telephone systems, residential telephones and cellular and PCS handsets in 1999. We have entered into arrangements for the distribution of cellular and PCS services through major electronics retailers. We believe that these arrangements will decrease equipment sales revenues but will add subscribers and increase cellular and PCS service revenues. INSTALLATION AND ACTIVATION. Installation and activation revenues increased 19.8% to $15.5 million in 1999 from $12.9 million in 1998, as a result of our adding 59,513 gross local access lines and 96,363 gross cellular and PCS customers during 1999 compared to 43,198 gross local access lines and 97,778 gross cellular additions in 1998. The increase in installations in 1999 helped offset reductions in installation fees for local lines as part of the rate rebalancing plan that took effect January 1, 1999. OPERATING COSTS. Our operating costs increased 34.7% to $129.4 million in 1999 from $96.0 million in 1998. The increase in operating costs was primarily the result of higher satellite connection and carrier costs, increased general and administrative expenses reflecting our continued expansion, and depreciation associated with our continued capital expenditure program. However, operating costs as a percentage of operating revenues declined in 1999, representing 75.7% of total operating revenues in 1999 compared to 76.5% in 1998. -48- SATELLITE CONNECTIONS AND CARRIER COSTS. Satellite connections and carrier costs increased by 35.2% to $43.7 million in 1999 from $32.3 million in 1998 primarily as a result of the 54.2% increase in outbound traffic and higher interconnection costs. Outbound carrier costs increased by 62.1% from $11.8 million in 1998 to $19.1 million in 1999. Interconnection costs increased by 47.9% to $19.8 million in 1999 from $13.4 million in 1998, the result of a higher volume of inbound traffic terminating in Codetel's network. NETWORK DEPRECIATION. Network depreciation increased 40.4% from $11.4 million in 1998 to $16.0 million in 1999, as a result of our continued investments in plant and equipment. EXPENSE IN LIEU OF INCOME TAXES. We make payments to the Dominican government in lieu of income tax equal to 10% of gross domestic revenues, after deducting charges for access to the local network, plus 10% of net international revenues. Expense in lieu of income taxes also includes a tax of 2% on international settlement revenues collected. Expense in lieu of income taxes increased by 33.5% to $12.8 million in 1999 from $9.6 million in 1998 reflecting the increase in revenues derived from our domestic and international business. GENERAL AND ADMINISTRATIVE. General and administrative expenses, including non-network depreciation expenses, increased 30.8% to $51.5 million in 1999 from $39.4 million in 1998 primarily as a result of increased personnel costs due to a higher employee headcount, a higher level of allowance for doubtful accounts, and higher commissions paid to sales staff and intermediaries. At December 31, 1999, we had 1,534 employees compared to 1,341 employees at December 31, 1998. As a result, personnel costs, net of capitalized labor expenses, increased by 29% to $22.2 million in 1999 from $17.2 million in 1998. Commissions increased by 26.4% to $17.0 million in 1999 from $13.4 million in 1998. Commissions paid to wholesale distributors of prepaid cards grew 91.2% to $6.1 million in 1999 from $3.2 million in 1998, primarily as a result of the expansion of our prepaid cellular subscriber base, and a 83% increase in the number of prepaid cards sold in the United States in 1999. Our expense for doubtful accounts increased by $3.6 million to $4.3 million in 1999 from $0.7 million in 1998 as the result of the disconnection of local service customers who had unpaid balances reaching as far back as 1998, and who contested the bills as a result of Hurricane Georges' interruption of telephone service. We allowed these customers to be reconnected and provided for the deferral of payment of this debt. Those clients who did not accept the payment plan were considered in default and were disconnected. We set aside an amount equal to 100% of the outstanding debt as an additional provision during the second quarter of 1999. As a percentage of total operating revenues, general and administrative expenses represented 30.1% in 1999 compared to 31.4% in 1998. OTHER COSTS. Other costs increased by 59.9% to $5.4 million in 1999 from $3.4 million in 1998, primarily as a result of increases in the costs of sale of customer premise equipment, residential telephones and cellular handsets in 1999. OPERATING INCOME. Operating income increased 40.7% to $41.5 million in 1999 from $29.5 million in 1998. Our operating income as a percentage of total operating revenues improved to 24.3% in 1999 from 23.5% of total operating revenues in 1998. This reflects increased economies of scale in our operations. OTHER INCOME (EXPENSES). Other expenses increased by 60.7% to $19.2 million in 1999 from $11.9 million in 1998, reflecting increased short-term bank borrowings and reduced interest income as a result of the application of pledged securities to pay interest on the senior notes due 2004 and the principal amount of loans from the Caribbean Basin Project Financing Authority, and additional short-term financing during 1999. NET EARNINGS. Net earnings increased by 23.1% to $22.0 million in 1999 from $17.9 million in 1998. On a per share basis, earnings increased to $0.89 per share in 1999 from $0.78 per share in 1998. The weighted average number of shares outstanding used in the calculation at December 31, 1998 was 22,944,544 compared to 24,844,544 at December 31, 1999. Net earnings represented 12.9% of total operating revenues in 1999 compared to 14.3% in 1998. EBITDA. Earnings before interest and other income and expenses, taxes and depreciation and amortization increased by 39.9% to $75.0 million for 1999 from $53.7 million for 1998. We calculate earnings before interest and other income and expenses, taxes and depreciation and amortization prior to the deduction of payments to the government in lieu of income taxes. -49- EFFECTS OF INFLATION The annual inflation rate in the Dominican Republic was 7.8% for 1998, 5.1% for 1999 and 9.0% for 2000. The effects of inflation on our operations have not been significant. CHANGE IN FUNCTIONAL AND REPORTING CURRENCY Through December 31, 1996, we used the Dominican peso as our functional and reporting currency. While a significant portion of our revenues, assets and liabilities historically were denominated in U.S. dollars, a clear determination of the functional currency was difficult, and we used the Dominican peso as our functional currency. However, in our opinion, with the issuance of the 11 3/8% senior notes due 2004, in August 1997, our cash flows and financial results of operations are more appropriately presented in the U.S. dollar as the functional currency. Effective January 1, 1997, we changed our functional currency from the Dominican peso to the U.S. dollar. Our financial statements for periods prior to January 1, 1997 have not been restated for this change in the functional currency. However, we did retroactively change our reporting currency to the U.S. dollar. LIQUIDITY AND CAPITAL RESOURCES Substantial capital is required to expand and operate our telecommunications networks. For 2000, we made capital expenditures of $167.1 million for the installation of additional local access lines, enhancement of our cellular and PCS network, expansion of international facilities and other network improvements. Expansion of international facilities included the installation of a switch in New York and investments in submarine fiber optic cables. We currently anticipate making capital expenditures of approximately $133 million in 2001 for increasing capacity and coverage in our local access and mobile networks, expanding our international facilities to support increased traffic volume, expanding our local network and other international expansion and for the implementation of our Central American strategy. In Central America, capital expenditures will consist of investments in a mobile switching office in Panama and enhanced base transceiver stations and mobile backhaul for Panama, Guatemala and El Salvador. However, the amounts to be invested for these purposes will depend upon a number of factors, including primarily the demand for our services. In addition, as we expand our operations into new areas we will be required to support increased working capital and capital expenditure needs. We have satisfied our working capital requirements and funded capital expenditures from cash generated from operations, short and long-term borrowings, trade finance, capital leases, vendor financing and equity and debt issuances. We believe our cash generated by operations and borrowings available to us will be sufficient to fund our expected capital expenditures through the end of 2001. We frequently evaluate potential acquisitions and joint venture investments. Acquisitions or investments may require us to obtain additional financing. There can be no assurance that additional funding sources will be available to us on terms which we find acceptable or at all. Net cash provided by operating activities was $31.5 million for 1999 and $42.3 million for 2000. We had net accounts receivable of $26.1 million and $32.1 million at December 31, 1999 and December 31, 2000. Our indebtedness was approximately $398.8 million at December 31, 2000, of which $200.0 million was our 113/8% senior notes due 2004, $76.7 million was in long-term borrowings and capital leases, with maturities ranging from two to six years, and $122.1 million was short-term bank loans, telecommunications equipment financings, trade financings and current portion of capital leases and of long-term debt. At December 31, 2000, our U.S. dollar borrowings, other than the 11 3/8% senior notes due 2004, had interest rates ranging from 9.8% per annum to 12.9% per annum, and our peso borrowings had interest rates ranging from 24% per annum to 26% per annum. At December 31, 2000, our U.S. dollar borrowings, other than the 11 3/8 senior notes due 2004, totaled $189.1 million and our peso borrowings totaled $9.7 million. -50- We have credit facilities which, in the aggregate, permit us to borrow up to $265.7 million. At December 31, 2000, there was $198.8 million outstanding under these facilities. We had approximately $66.9 million available for borrowing under these facilities, of which $31.2 million was under facilities with maturities of less than one year. At December 31, 2000, we had $79.7 million of short-term and long-term credit facilities with Dominican banks and institutions and $186.1 million of U.S. dollar-denominated credit facilities with international banks. We expect that we will reborrow amounts we pay with such proceeds to fund a portion of our capital expenditures and our working capital requirements beginning in 2002. However, our current lenders may be unable or unwilling to lend to us in the future. At December 31, 2000, our current liabilities exceeded our current assets by $125.3 million. This reflects our short-term borrowings in the Dominican Republic with related companies, local and international banks. Dominican banks lend on a short-term basis in order to negotiate interest rates should market conditions change, without necessarily demanding the repayment of credit facilities. It is our belief that the existence of negative working capital does not affect adversely the continuity of our business. We will seek additional credit facilities with international banks to refinance our short-term credit facilities. During 2000, we obtained credit guarantees from Export-Import Bank of the United States of up to $56 million for loans made by The International Bank of Miami, N.A. to be used for purchases of communications equipment and material from Motorola and other U.S. suppliers. At December 31, 2000, the amount of $20.2 million has been disbursed under this facility. The credit guarantees will be available for disbursement over a 12-month period and will be repayable over five years. We have discussed with Export-Import Bank of the United States a new facility that would provide additional credits of as much as $125 million. ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES We are managed by a Board of Directors, the members of which, in accordance with our by-laws, are elected at the annual shareholders' meeting and serve for a period of one year. The Board of Directors is composed of a Chairman, Vice President, Treasurer, Secretary and eight additional members. The Board of Directors meets at least once every three months. Special meetings of the Board of Directors may be held at any time. The names of our executive officers and directors are set forth below together with their ages at December 31, 2000 and current positions.
NAME AGE POSITION -------------------------------- --- ------------------------------------------------ BOARD OF DIRECTORS NAMED BY GFN CORPORATION, LTD.: Manuel Arturo Pellerano Pena 46 Chairman Hector Castro Noboa 59 Vice President Marcos J. Troncoso 52 Secretary Carl H. Carlson 43 Treasurer Juan Felipe Mendoza 46 Director Anibal De Castro 52 Director NAMED BY MOTOROLA, INC.: Kevin J. Wiley 41 Director Jesus Barona 39 Director Carl O. Barry 41 Director Peter Rojas 45 Director INDEPENDENT DIRECTORS: Fernando Antonio Rainieri 53 Director -51- Jose Manuel Villalvazo 54 Director EXECUTIVE OFFICERS Manuel Arturo Pellerano Pena 46 President Marcos J. Troncoso 52 Executive Vice President of International Business Development and Member of the Office of the President Carl H. Carlson 43 Executive Vice President and Member of the Office of the President Carlos F. Vargas 47 Vice President of Corporate Center and Chief Financial Officer Virgilio Cadena del Rosario 48 Vice President, Engineering TRICOM Latin American Division Carlos Ramon Romero 48 Vice President, Customer Relationship Management Lorenzo Vicens 43 Vice President, Planning, Marketing and Business Division Valeriano Valerio 42 Vice President, Network Engineering and Operations Ramon Tarrago 37 Vice President, International Division
Each of the current members of the Board of Directors has been elected pursuant to an amended and restated shareholders agreement, dated as of May 8, 1998, among Motorola, Inc., Oleander Holdings, Inc., Zona Franca San Isidro, S.A. and certain individuals, Oleander and Zona, are wholly owned subsidiaries of GFN, and the individual parties to the agreement are all affiliates of either GFN or TRICOM. The Directors are elected annually at the Annual General Meeting of Shareholders. Each Director (when ever elected) holds office until the next Annual General Meeting of Shareholders following his election and until his successor is elected or until his earlier resignation or removal. As of this date, no date has been set for the Annual General Meeting of Shareholders. MANUEL ARTURO PELLERANO PENA has served as our Chairman of the Board of Directors and President since August 1994 and as a member of our Board of Directors since our formation in January 1988. Mr. Pellerano has served as the Vice President of Bancredito, a bank affiliated with GFN and one of the largest commercial banks in the Dominican Republic, since March 1989. Mr. Pellerano has been a member and the Vice President of the Board of Directors of GFN since April 1989. Mr. Pellerano graduated from Universidad Nacional Pedro Henriquez Urena with a degree in economics. HECTOR CASTRO NOBOA has served as the Vice President of our Board of Directors since August 1994 and has served as a member of our Board of Directors since our formation in January 1988. He has served as a director and Executive Vice President of GFN since April 1989. Between March 1993 and September 1997, Mr. Castro served as the Executive Vice President of Bancredito. Mr. Castro also held various positions at the Deutsche Sudamerikanische Bank (Germany), Citibank (as Marketing Vice President), Bonanza Dominicana (as Financial Vice President), Banco Metropolitano (as Financial Advisor) and Universidad Nacional Pedro Henriquez Urena (as a professor of international economics and macroeconomics). Mr. Castro graduated from Madrid's Universidad Complutense where he studied business economics. MARCOS J. TRONCOSO has served as our Executive Vice President since March 1992, as Secretary of the Board of Directors since our formation in January 1988 and as Member of the Office of the President since September 1995. Prior to assuming these positions, Mr. Troncoso served as Executive Vice President of GFN beginning in May 1979. Mr. Troncoso received a law degree from Universidad Nacional Pedro Henriquez Urena and a BS degree in business administration with a major in accounting from the University of Puerto Rico. CARL H. CARLSON, our Executive Vice President since March 1998, has served as Treasurer of the Board of Directors since January 2000 and as a Member of the Office of the President since September 1995. Mr. Carlson was a Senior Vice President from March 1993 until March 1998 and Chief Financial Officer from September 1993 until September 1995. Mr. Carlson served as a Vice President of Finance and Administration from December 1989 until September 1993. Mr. Carlson was an Assistant Vice President for GFN's insurance division from 1987 until -52- December 1989. From 1983 to 1987, Mr. Carlson was a Vice President at Chase Manhattan Bank. Mr. Carlson is a graduate of Instituto Technologico de Santo Domingo where he majored in business administration and accounting and finance. Mr. Carlson earned an MBA from a joint program between the University of South Carolina and Pontifica Universidad Catolica Madre y Maestra. CARLOS F. VARGAS has served as our First Vice President of the Finance and Administrative Division and as the Chief Financial Officer since July 1996. Immediately prior to his arrival, Mr. Vargas was employed by Bancomercio, S.A., where he held the positions of Vice President, Assistant to the President and Executive Vice President of Finance and Operations from May 1992 until July 1996. Mr. Vargas served as Executive Vice President of Finance and Operations at Banco Popular Dominicano and the Finance Vice President at Grupo Financiero Popular from 1982 until May 1992. Mr. Vargas was employed by Coopers & Lybrand as an audit manager from 1974 until 1982. He is a certified public accountant and earned his degree in accounting from Universidad Nacional Pedro Henriquez Urena. VIRGILIO CADENA DEL ROSARIO has served as our Vice President Engineering TRICOM Latin American since June 2000. Mr. Cadena was First Vice President of Planning and Operations since from September 1995 until June 2000. Mr. Cadena was the Second Vice President of Planning and Operations between July 1991 and September 1995 and Telecommunications Manager from July 1989 until July 1991. Mr. Cadena graduated with a degree in electromechanical engineering from the Universidad Autonoma de Santo Domingo and studied at the Electrical Engineering Department of the University of Kyoto in Japan. CARLOS RAMON ROMERO has served as our Vice President of our Customer Relationship Management Division since July 2000. He was First Vice President of the Residential and Business Division from July 1996 until July 2000. Immediately prior to his arrival, Mr. Romero served as chief executive of a brokerage company which he started in February 1994. Mr. Romero served as Vice President of the Technical Area of Compania Nacional de Seguros, a subsidiary of GFN, from 1980 until February 1994. Mr. Romero earned a BA in International Services from the Universidad Nacional Pedro Henriquez Urena, where he has since held various academic posts. LORENZO VICENS has served as our First Vice President of the Residential and Business Division since July 2000. Prior to his arrival, Mr. Vicens served as Vice President of Marketing at Banco Popular Dominicano from February 1997 until July 2000. Mr. Vicens has extensive experience as a consultant and coordinator of company restructure procedures, working closely with local government agencies and the United Nations. Mr. Vicens holds a BS in Electro-Mechanic Engineering Technology and an MBA from the Pontificia Universidad Catolica Madre y Maestra and a PHD in Business Administration from the University of South Carolina. VALERIANO VALERIO has served as our First Vice President of Planning and Operations since June 2000 and as Second Vice President of Institutional Relationships between June 1995 and June 2000. Mr. Valerio graduated with a degree in Electrical Engineering from the Universidad Pedro Henriquez Urena and studied at the Nippon Telegraph and Telephone Public Corporation of Tokyo, Japan. RAMON TARRAGO has directed the International Division since its organization as a separate business unit in July 1996 as First Vice President. He was a Second Vice President of the Corporate Center from August 1995 until July 1996. He was a Second Vice President of the International Division from August 1995 until July 1996. He was Director of International Relations from November 1993 until August 1995. From February 1992 until November 1993, he was our Director of Finance. Between May 1991 and February 1992, he was a management associate in the Corporate Banking Unit at the Santo Domingo branch of Citibank. Mr. Tarrago worked for the World Bank's International Finance Corporation in Washington, D.C. from May 1990 to September 1990 and for Bancredito between October 1986 and March 1988. He is the former dean of the MBA program at the Pontificia Universidad Catolica Madre y Maestra and has held an academic post at the Instituto Tecnologico de Santo Domingo. Mr. Tarrago holds both a BA in economics from Universidad Nacional Pedro Henriquez Urena and an MBA with a finance concentration from the Virginia Polytechnic Institute and State University. JUAN FELIPE MENDOZA has been a member of our Board of Directors since June 1997. Mr. Mendoza currently serves as Chief Executive Officer of Bancredito and President of Compania Nacional de Seguros. He was recently elected Vice President of FIDES (Inter-American Federation of Insurance Companies) and its regional commission for Central America and the Caribbean. Mr. Mendoza is a director of Reaseguradora Nuevomundo, Caribbean Hotel -53- Association Insurance Company, Bancredito and GFN Corporation USA. Mr. Mendoza joined GFN in 1977. Prior to joining GFN, Mr. Mendoza was employed in the Internal Audit Department for the Caribbean of the Royal Bank of Canada. Mr. Mendoza graduated from Universidad Nacional Pedro Henriquez Urena and also attended Specialized Insurance Training Programs at Royal Global Insurance of New York and Swiss Insurance Formation Center, Swiss Re, Switzerland. Mr. Mendoza is a certified public accountant. ANIBAL DE CASTRO has been a member of our Board of Directors since May 1998, and has served as President of Editorial AA, a subsidiary of GFN, since May 1994. Mr. De Castro has served on the Board of Directors of Corporacion Dominicana de Electricidad (C.D.E), the country's state-owned electric utility provider from 1979 to 1982, and currently serves on the Board of Directors of several Dominican companies and professional associations including Banco de la Pequena Empresa and Fondo de Financiamiento de la Micro-Empresa. Mr. De Castro graduated from Universidad Autonoma de Santo Domingo with a degree in journalism and holds a B.A. in economics from the University of East Anglia in Great Britain. KEVIN J. WILEY has been a member of our Board of Directors since December 1998. Mr. Wiley has been employed by Motorola Network Management Group as the Director of Regional Cellular Operations for the Latin America Region since October 1998. Prior to joining Motorola in July 1997, Mr. Wiley was the Vice President and General Manager of Aliant Cellular Communications from July 1995 to July 1997. Mr. Wiley has been involved in various positions within the wireless telecommunications industry throughout his entire career. Mr. Wiley graduated from Creighton University with a B.S. in finance and management. JESUS BARONA has been a member of our Board of Directors since December 1998 and served as the Director of Business Operations in Latin America since April 1997. Prior to joining Motorola, Mr. Barona served as the Director of Marketing and Operations for BellSouth Panama from January 1996 to March 1997. From December 1992 to March 1996, Mr. Barona served as the Senior Manager of Marketing Operations for BellSouth International. Mr. Barona holds a degree in marketing from Columbia Business School. CARL O. BARRY has been a member of our Board of Directors since January 2000. He has been employed since 1991 by Motorola, including as Senior Operations Controller since February 1996, Pan American Service & Quality Operation Controller from July 1993 until February 1996 and another Manufacturing Controller from November 1991 until June 1993. Prior to joining Motorola, he was a Price Waterhouse Audit Manager for eight years. Mr. Barry holds a BA in Business Administration from the University of Puerto Rico and is a Certified Public Accountant. PETER ROJAS has been a member of our Board of Directors since January 2000. Mr. Rojas joined Motorola in December 1999 as a Director of Latin American Business Development. He was Vice President of both Sales and Business Development in Latin America for GE Capital Spacenet from April 1996 until December 1998 and Gilat Latin America from December 1998 until November 1999. Mr. Rojas has a Bachelor of Science in Mechanical Engineering Technology from the Virginia Polytechnic Institute and an MBA from Drexel University. FERNANDO ANTONIO RAINIERI has been a member of our Board of Directors since July 1998. Mr. Rainieri served as Advisor to the Central Bank of the Dominican Republic since December 1990 to August 1996, as the Dominican Republic's Secretary of Tourism from August 1986 to August 1990 and Advisor to the World Tourism Organization from 1988 to 1990. From 1979 to 1985, Mr. Rainieri served as General Director of the Fund for the Development of Tourism Infrastructure (INFRATUR). From 1970 to 1975, Mr. Rainieri held positions as Executive Assistant at Gulf & Western Americas Corporation. In addition, Mr. Rainieri is currently on the Board of Directors of several Dominican companies including Fimaca, Servicios Aereos Dominicanos, La Antillana Comercial, Helados Bon and Inversiones Bohechio. Mr. Rainieri holds a bachelors degree in Business Administration and a degree in marketing from Texas A & M University. JOSE MANUEL VILLALVAZO has been a member of our Board of Directors since July 1998. A pioneer in the Mexican cellular industry, Mr. Villalvazo has been an active member of the wireless and satellite communication sectors. In 1990 Mr. Villalvazo co-founded Baja Cellular, the Band A service provider in the northwestern region of Mexico, and in 1993 he founded Leo One Panamericana, a Mexican-based low-earth-orbiting satellite service providing mobile data services throughout Latin America. Since 1989 he has served as the Chairman and CEO of Tecelmex, a holding company with interests in mobile communication. Other positions within the telecommunications industry which Mr. -54- Villalvazo has held have included Vice-Chairman of the Mexican Association of Cellular Telephone Concessionaires (AMCEL) from 1992 to 1995, and Chairman, as well as founder, of the Latin American Cellular Industry Association (ALACEL) from 1994 to 1996. Since 1992 he has served as a Member of the Mexican delegation to the Inter-American Telecommunications Commission (CITEL). Mr. Villalvazo is a certified public accountant and has a MBA from the University of Mexico. EXECUTIVE COMPENSATION The aggregate amount of compensation we paid during the fiscal year ended December 31, 2000 to our directors and executive officers, as a group (16 persons), was $2.1 million. EMPLOYEES. At December 31, 2000, we had 1,740 employees. Of this number, 30 were executives, 165 were managers, and the remaining 1,545 were technicians, salesmen, service and staff employees. The Company believes that this number may increase over the next several years as the Company expands its network and its customer base. None of the Company's employees belong to labor unions. The Company believes that it has good relations with its employees. SHARE OWNERSHIP We refer to Item 7 for information with respect to Manuel Arturo Pellerano Pena, who, to our knowledge, is the only director with 1% or greater percentage of ownership in TRICOM. In connection with our initial public offering, our Board of Directors adopted, and GFN and Motorola approved, our 1998 Long-Term Incentive Plan pursuant to which 750,000 shares of Class A common stock were reserved for issuance. Our Board of Directors, which administers the plan, has granted options to purchase an aggregate of 519,630 shares of Class A common stock to directors, officers and employees. The options granted expire on the tenth anniversary of the date of grant and, commencing on or about May 4, 2001, will become exercisable with respect to 37.5% of the shares of Class A common stock subject to the option. At December 31, 2000, there were 230,370 shares available for grant under the plan. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS The following table sets forth certain information known to us with respect to beneficial ownership of the common stock at February 22, 2001 (unless otherwise indicated) by each person, to our knowledge, who beneficially owns 5% or more of the common stock and all officers and directors as a group. Except as otherwise indicated, the holders listed below have sole voting and investment power with respect to all shares beneficially owned by them. For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares as of a given date which such person or group of persons has the right to acquire within 60 days after such date. Information relating to the percentage beneficially owned is calculated in accordance with SEC rule 13d-3 and includes for each of Oleander Holdings Inc. and Motorola the shares of Class A common stock issuable upon conversion of the Class B stock owned by it. Each share of Class B stock is freely convertible at any time into one share of Class A common stock, subject to adjustment, and may not be transferred except to GFN, Motorola or permitted transferees, as defined. Each share of Class B stock has ten votes and of Class A common stock has one vote. All of the shares owned by GFN and Motorola are Class B stock and represent 100% of the outstanding shares of Class B stock. If all of the Class B shares were converted to Class A common stock, then Oleander Holdings, Inc. would own 39.8% of the Class A common stock and Motorola 26.5% of the Class A common stock. -55-
SHARES PERCENTAGE OF PERCENTAGE OF BENEFICIALLY SHARES BENEFICIALLY CLASS B SHARES SHAREHOLDER OWNED OWNED BENEFICIALLY OWNED --------------------------------------------------------- ------------- ------------------- ------------------ Oleander Holdings, Inc.(1)........................... 11,486,726 39.8 60.0 Motorola, Inc........................................ 7,657,818 26.5 40.0 Orient Star Holdings LLC............................. 1,175,000(2) 12.1 -- Prime 66 Partners, L.P............................... 1,174,000(3) 12.1 -- WaterView Capital Management LLC..................... 1,500,000(4) 15.5 -- Directors and executive officers as a group (16 persons) 11,583,668(5) 39.8 60.0 ------------------------------------------------------------------------------------------------------------------------
(1) Oleander Holdings, Inc., a Panamanian corporation, is a wholly owned subsidiary of GFN. GFN is controlled by Manuel Arturo Pellerano Pena, our Chairman of the Board of Directors and President, and members of his family. (2) Inmobiliaria Carso, S.A. de C.V., as the sole member of Orient Star Holdings LLC, is deemed to beneficially own indirectly the ADSs owned directly by Orient Star Holdings LLC. Carlos Slim Helu, Carlos Slim Domit, Marco Antonio Slim Domit, Patrick Slim Domit, Maria Soumaya Slim Domit, Vanessa Paola Slim and Johanna Monique Slim Domit own all of the outstanding voting securities of Inmobiliaria Carso, S.A. de C.V., and are deemed to beneficially own indirectly the ADSs deemed beneficially owned by Inmobiliaria Carso, S.A. de C.V. and directly owned by Orient Star Holdings LLC. This information is based on a Schedule 13-G dated November 6, 2000 and filed with the Securities and Exchange Commission. (3) P-66 Genpar, L.P., a Texas limited partnership, and P-66, Inc., a Texas corporation, as the two general partners of Prime 66 Partners, L.P., Carmel Land & Cattle Co., a Texas corporation, as the sole general partner of P-66 Genpar, L.P., and the Sid R. Bass Management Trust, a revocable Texas trust and the sole shareholder of P-66, Inc., may be deemed to be the beneficial owners of the shares of Class A common stock. In his capacity as the sole shareholder of Carmel Land & Cattle Co., William P. Hallman, Jr. may be deemed to be the beneficial owner of the shares. As Trustee of the Sid R. Bass Management Trust, Sid R. Bass may also be deemed the beneficial owner of the shares. This information is based on a Schedule 13G/A dated February 13, 2001 and filed with the Securities and Exchange Commission. (4) WaterView Capital Management LLC, a Delaware limited liability company, possesses sole power to vote and direct the disposition of all shares held by WaterView Partners, L.P., a Delaware limited partnership, which owns 958,500 shares, and of D&DF WaterView Partners, L.P., a Delaware limited partnership, which owns 41,500 shares. Georgica Advisors LLC, a Delaware limited liability company, is the holder of, and possesses sole power to vote and direct the disposition of, 500,000 shares. WaterView Capital Management LLC and Georgica Advisors LLC may act together, from time to time, with respect to the shares. Each of the entities discussed above is deemed to beneficially own 1,500,000 shares or 15.5% of the Class A Shares. This information is based on a Schedule 13-D dated November 15, 2000 and filed with the Securities and Exchange Commission. (5) Includes 11,486,720 shares of Class B stock that may be deemed to be beneficially owned by Mr. Pellerano, our Chairman of the Board of Directors and President, in his capacity as a controlling person of GFN. Does not include 313,420 shares of Class A common stock issuable upon exercise of options that are exercisable commencing in 2001 and through 2008. Motorola Inc. has announced its intention to sell its shares of Class B stock. Our By-laws provide that upon transfer of such shares (unless to GFN or one of its affiliates), these shares will convert to Class A common stock. -56- SHAREHOLDERS AGREEMENT Each of the current members of the Board of Directors has been elected under the terms of an amended and restated shareholders agreement, dated as of May 8, 1998, among TRICOM, Motorola, Oleander, Zona and certain nominal shareholders that are affiliates of GFN or TRICOM. The shareholders agreement provides that the Board of Directors will consist, and GFN and Motorola each will vote all of the shares owned by it (or in the case of any transfer of shares to its permitted transferee, as defined in the shareholders agreement, will cause such permitted transferees to vote their shares) in favor, of six directors to be designated by GFN, four directors to be designated by Motorola and two independent directors. The shareholders agreement provides that in order for a person to qualify as an independent director such person must not be: - an officer, employee, principal stockholder, consultant or partner of TRICOM, apart from such directorship, or an officer, employee, principal stockholder, consultant or partner of an entity that was dependent upon TRICOM or any affiliate of TRICOM for more than 5% of its revenues or earnings in its most recent fiscal year; - an officer, director, employee, principal stockholder, consultant or partner of a person that is a competitor of TRICOM or any of its affiliates, any affiliate of such competitor, or any other person that was dependent upon such competitor or affiliate of such competitor for more than 5% of its revenues or earnings in its most recent fiscal year; or - an officer, director, employee, principal stockholder, consultant or partner of Motorola or GFN or an officer, employee, principal stockholder, consultant or partner of an entity that was dependent upon Motorola or any affiliate of Motorola for more than 5% of its revenues or earnings in its most recent fiscal year. Each of Motorola and GFN will be entitled to nominate one independent director so long as it together with its permitted transferees owns at least 25% of the issued and outstanding shares of Class B stock. In calculating the number of shares of Class B stock owned by either GFN or Motorola, there will be included the number of shares of Class B stock owned by any of it permitted transferees. The composition of the Board of Directors is intended to approximate the respective ownership interests of GFN (11,486,720 shares of Class B stock, representing 39.8% of the shares of common stock and 60% of the shares of Class B stock and 57% of the total voting power), Motorola (7,657,818 shares of Class B stock, representing 26.5% of the shares of common stock and 38% of the shares of Class B stock and 38.8% of the total voting power) and the public. The number of directors other than independent directors that GFN or Motorola each may designate will change if its percentage ownership of Class B stock changes as follows: - if GFN and Motorola each owns 50% of the then outstanding shares of Class B stock, each would have the right to designate five directors; - if either GFN or Motorola owns shares of Class B stock - greater than 50% but less than or equal to 60% of the then outstanding shares of Class B stock, it would designate six directors and the other four directors; - greater than 60% but less than or equal to 70% of the then outstanding shares of Class B stock, it would designate seven directors and the other three directors; - greater than 70% but less than or equal to 80% of the then outstanding shares of Class B stock, it would designate eight directors and the other two directors; - greater than 80% but less than or equal to 90% of the then issued and outstanding shares of Class B stock, it would designate nine directors and the other one director; or - greater than 90% of the issued and outstanding Class B stock, it would designate all ten directors. -57- Until such time as either Motorola or GFN owns less than 25% of the outstanding shares of Class B stock, the shareholders agreement requires the affirmative vote of nine directors to approve the following actions: - the acquisition or formation by TRICOM of any entity or the making of any investments in an other entity of business, including, but not limited to, the purchasing of equity or debt interests in or the extension of credit to such entity; - the incurrence of indebtedness, if after giving effect to such incurrence, including the proposed application of the proceeds of such indebtedness to pay existing indebtedness, the ratio of indebtedness to shareholders' equity would be greater than three to one; - approval of annual budgets relating to income, capital expenditure, operating expenses and cash flows (provided that this does not require approval of any projected debt incurrence that otherwise complies with the limits described above or of any other proposed corporate action for which super-majority approval is not specifically required); and - the issuance, or redemption, of Class A common stock or other securities or instruments exercisable for or convertible into Class A common stock. In addition, approval by the independent directors is required for any transaction that has a fair market value exceeding $1.0 million which we enter into with either GFN or Motorola and their respective affiliates. The vote of a majority of the directors present at a duly convened meeting is required for all other board actions (and at such time that Motorola or GFN owns less than 25% of the then outstanding shares of Class B stock for the four actions specified as requiring a greater vote). Under the shareholders agreement, if we propose to register any of our securities under the Securities Act of 1933 (other than a registration in connection with a reorganization on Form F-4 or in connection with any employee stock option, stock purchase or savings plan on Form S-8 or similar registration forms), whether or not for our own account, GFN and Motorola are entitled to include shares of Class A common stock owned by them in any such registration, subject to the right of the managing underwriter of any such offering to exclude, due to market conditions, some or all of such securities. In addition, GFN and Motorola each has the right to require us to prepare and file on three occasions a registration statement covering registrable securities with a market value of at least $5.0 million, subject to customary blackout periods. We are generally required to bear the expenses (except underwriting discounts and commissions and fees and expenses of any special counsel) of all such registrations, whether or not initiated by GFN or Motorola. VOTING AGREEMENTS FOR THE 11 3/8% SENIOR NOTES DUE 2004 In connection with the offering of the 11 3/8% senior notes due 2004, Oleander and Motorola each entered into separate voting agreements, dated August 21, 1997 with The Bank of New York, as trustee under the indenture for the senior notes. The voting agreements provide that each of Oleander and Motorola will grant to the trustee for the 11 3/8% senior notes due 2004 the right to vote all of its shares of common stock upon the occurrence of the following events: - our failure to pay interest on the senior notes when due for a period of 30 days; - our failure to pay the principal of or premium on the senior notes when due, whether at maturity, upon redemption or repurchase or otherwise; - our failure to pay principal of and interest on the senior notes required to be purchased in the event of a change of control; - a payment default under any debt instrument for money borrowed by us or any of our guarantor subsidiary (except any such subsidiary that is not a significant subsidiary); or - our failure or the failure of any significant subsidiary to pay final judgments aggregating in excess of $10.0 million within 60 days after the date for which any period for appeal has expired and during which a stay of enforcement of such judgment shall not be in effect. The trustee's right to vote all of the shares of voting stock, once such right is triggered, will continue (a) during the continuation of the first three events set forth above and for one year after the date we cure such event of default or -58- (b) during the continuation of the fourth event. Either Oleander or Motorola may revoke the proxy granted by it under the voting agreement if: - the Dominican Republic becomes bound by the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958); - if as of the last day of any fiscal quarter we report shareholders' equity of at least $100 million and for each of the four full consecutive fiscal quarters ending on such date our leverage ratio as defined in the senior note indenture is equal to or less than 2.5 to 1.0; - the senior notes are rated Ba2 or better by Moody's Investors Service, Inc. and BB or better by Standard & Poor's Ratings Group, respectively; or - our obligations with respect to the outstanding senior notes are discharged. If we incur any indebtedness that constitutes senior facilities under the senior note indenture and the lender or lenders under such senior facilities are granted a lien by Oleander and Motorola in respect of its voting stock, then the proxy rights granted under the voting agreement will be suspended and the trustee will not have the right to exercise such rights until such time as the senior facilities are repaid in full, provided that: - the trustee is granted a lien or similar interest in respect of the voting stock by Oleander and Motorola for the benefit of the holders, which lien will be subordinated and subject to the prior rights and claims of the senior lenders and TRICOM; and - the holders, the trustee and all senior lenders enter into an escrow agreement and an intercreditor agreement, then the proxy rights granted under the voting agreement. The voting agreements do not prohibit or restrict either Oleander or Motorola from transferring, selling, pledging, or hypothecating any shares of voting stock. Any shares of voting stock transferred to an affiliate of either Oleander or Motorola will remain subject to the voting agreements and any shares of voting stock transferred to a person unaffiliated with either Oleander or Motorola will no longer be subject to the voting agreements. The voting agreements will terminate and be of no further force and effect if (a) any senior lenders holding a security interest in the voting stock foreclose upon such security interest subject to the terms of the intercreditor agreement to be entered into by the senior lenders and the trustee or (b) the proxy is revoked pursuant to the voting agreements. CERTAIN TRANSACTIONS WITH PRINCIPAL SHAREHOLDERS GFN GFN is one of the Dominican Republic's largest privately held companies, with interests in insurance, finance and publishing. GFN provides a number of managerial services to its affiliated companies, including TRICOM, for which the affiliated companies are billed based upon the number of hours that a particular GFN employee spends on providing such services and other factors. GFN employees have provided to us internal auditing, public relations, management information services, legal and personnel management services. For 1998, 1999 and 2000, we paid to GFN $494,125, $167,470 and $234,348, respectively, for such services. GFN also provides us with security services for which we paid $111,460, $77,382 and $227,001 in 1998, 1999 and 2000, respectively. We anticipate that we will continue to receive such services from GFN. We lease premises and equipment from GFN and its affiliates. During 1998, 1999, and 2000, we paid to GFN and its affiliates $44,610, $108,578 and $157,600, respectively, for the use of premises and equipment. During 1999 we bought land from an unaffiliated third-party for $1,826,625 which we later sold to an affiliate of GFN for $2,724,458. We also entered into various capital leases with an affiliate of GFN for $26,244,000 during 1999 and 17,691,845 during 2000. In 2000, we sold our Internet portal to GFN affiliate for approximately $2.3 million. In 1999 we had capital lease obligations of $26.2 million and in 2000 of 17.7 million. We provide life insurance to our employees and have obtained other insurance through Compania Nacional de Seguros, a GFN affiliated insurance company. We paid insurance premiums to affiliates of GFN totaling $1.5 million, $2.0 million and $4.1 million in 1998, 1999 and 2000, respectively. -59- We provide telecommunications services to GFN and its affiliated companies. GFN and its affiliated companies paid us $0.8 million, $2.0 million and $1.9 million for such services in 1998, 1999 and 2000, respectively. GFN affiliated banks have loaned us funds. We had borrowings from GFN affiliated banks, including financing of letters of credit on open accounts, in the aggregate principal amounts of $17.9 million at December 31, 1999 and $31.4 million at December 31, 2000. MOTOROLA We have purchased telecommunications equipment from Motorola, particularly for the development of our mobile cellular system and our wireless local loop for aggregate consideration of approximately $2.3 million, $23.1 million and $20.3 million during 1998, 1999, and 2000, respectively. In July 2000, we also have entered into an infrastructure supply agreement to buy systems and license the iDEN technology from Motorola for use in Central America. We placed an order for an initial system for Panama, for $20 million, concurrently with the execution of the agreement but have not placed any other orders to date. OTHER TRANSACTIONS We have purchased mortgage participation contracts from savings and loan associations in the Dominican Republic that are maintained as compensating balances for mortgage loans made by these associations to several of our officers. At December 31, 1999 and 2000, these mortgage participation contracts totaled $2,710,572 and $3,289,459, respectively. ITEM 8. FINANCIAL INFORMATION See "Item 18. Financial Statements" OTHER FINANCIAL INFORMATION LEGAL PROCEEDINGS In August 1999, a Dominican company, DCS International S.A., and two individual plaintiffs whom in our belief are officers or employees of DCS, sued us before Dominican courts for alleged losses and damages of up to approximately RD$200 million ($12 million) resulting from the imprisonment by Dominican authorities of two of the individuals for 15 days. The plaintiffs alleged that their imprisonment was the result of an investigation by the local district attorney and the police that we instigated following an irregular increase in telephonic traffic at certain telephone numbers. We requested that the court dismiss the action because of lack of jurisdiction. The court granted our motion to dismiss and ruled that the plaintiffs should cover the costs of the proceedings. The plaintiffs have resubmitted the action before the proper court and, after numerous requests and hearings before the Court, the case is now pending decision from the Judge of the Civil and Commercial Court Room of the Third Circumscription of the Court of First Instance of the National District of Santo Domingo. After consulting with legal counsel, we believe that this matter will not have a material adverse effect on our results of operations and financial position. There are no other legal proceedings to which we are a party, other than routine litigation incidental to our business which is not otherwise material to our business or financial condition. ITEM 9. THE OFFER AND LISTING AMERICAN DEPOSITARY SHARES -60- The ADSs are traded on the New York Stock Exchange under the symbol "TDR". Shares of Class A common stock are not traded on any other exchange or automated quotation system. At April 30, 2001, there were 30 record holders in the United States of the ADSs. The following tables provides the high and low prices for the ADSs on the New York Stock Exchange for (1) each quarter since we completed our initial public offering on May 4, 1998 and (2) each of the most recent six months.
NEW YORK STOCK EXCHANGE HIGH LOW ---- --- YEAR ENDED DECEMBER 31, 1998 Second Quarter........................ 12 9/16 8 3/16 Third Quarter......................... 10 13/16 5 7/8 Fourth Quarter........................ 7 1/2 3 7/16 YEAR ENDED DECEMBER 31, 1999 First Quarter......................... 9 6 Second Quarter........................ 11 5/8 6 1/8 Third Quarter......................... 12 7/16 7 9/16 Fourth Quarter........................ 22 5/8 7 5/8 YEAR ENDED DECEMBER 31, 2000 First Quarter......................... 27.88 17.17 Second Quarter........................ 21.19 14.31 Third Quarter......................... 19.25 14.63 Fourth Quarter........................ 16.00 7.10 YEAR ENDING DECEMBER 31, 2001 First Quarter......................... 12.46 7.00 Second Quarter........................ 7.80 6.00 Third Quarter......................... 6.70 5.30 April................................. 7.80 6.15 May................................... 6.90 6.25 June.................................. 7.40 6.00 July.................................. 6.70 5.80 August................................ 6.26 5.50 September............................. 5.89 5.30
-61- ITEM 10 ADDITIONAL INFORMATION MEMORANDUM AND ARTICLES OF ASSOCIATION Board of Directors The business and affairs of the Company is managed by the Board of Directors, which consists of not more than fifteen or less than eight persons. The Directors of the Company are elected annually at the Annual General Meeting of Shareholders. Each Director (whenever elected) holds office until the next Annual General Meeting of Shareholders following his election and until his successor is elected and qualified or until his earlier resignation or removal. Any Director may resign at any time upon written notice to the Board of Directors, to the Chairman of the Board or to the President of the Company. Any Director may be removed with or without cause at any time by an affirmative vote of a majority of the shareholders entitled to vote. If any vacancies occur in the Board of Directors, of if the authorized number of Directors is increased, the Directors then in office may continue to act, and such vacancies may be filled by a majority of the Directors then in office. Any vacancies or newly created directorships also may be filled by an affirmative vote of a majority of the shareholders entitled to vote at a General Meeting of Shareholders called for such purpose. Regular meetings of the Board of Directors may be held at such places within or out of the Dominican Republic and at such times as the Board of Directors may from time to time determine. Special meetings of the Board of Directors may be held at any time or place within or outside of the Dominican Republic whenever called by the Chairman of the Board, by the President of by any two Directors. Any member of the Board of Directors may participate in a meeting of the Board of Directors by means of a telephone conference or similar communications equipment provided that all persons participating in the meeting can hear each other. At all meetings of the Board of Directors, the presence of a majority of the total number of Directors will constitute a quorum for the transaction of business. The vote of at least a majority of the Directors present at any meeting at which a quorum is present is necessary to constitute the act of the Board of Directors unless otherwise provided by applicable law. Purpose Article 2 of our by-laws states that the purpose of the Company is: - to provide, maintain and operate telecommunications systems in the Dominican Republic and elsewhere; - to enter into such agreements as may be required to be interconnected to the switched public telephone network, as well as to any domestic networks rendering inter-urban services, as may be required by said telecommunications systems; and - to construct, maintain, and exploit a private telecommunications system for the transmission of national and international calls and for the transmission or reception of messages and signals of any kind. Capital Stock Our authorized capital stock consists of 55,000,000 shares of Class A common stock and 25,000,000 shares of Class B stock. Both classes of capital stock vote together as a single class on matters except any matter that would adversely affect the rights of either class. These matters would need to be approved by a special meeting of the holders of the class of shares to be affected. The Class A common stock has one vote per share and the Class B stock has ten votes per share. The economic rights of each class of capital stock are identical. -62- Registration and Transfer All shares are evidenced by share certificates in registered form. Dominican law requires that all shares be represented by a certificate, although a single certificate may represent multiple shares of stock. Certificates may be issued in the name of the registered holder, bearer or to-order form. All of our share certificates are issued in the name of. Dominican law also requires that all transfers, encumbrances and liens on nominative shares must he recorded in the share registry and only are enforceable against us and third parties after such registration has taken place. The Bank of New York is the registrar and transfer agent for the Class A common stock, except during shareholders meetings when we will maintain the share registry for the Class A common stock. Shareholders Meetings Shareholders are entitled to vote on all matters at ordinary or special shareholders' meetings. The board of directors will convene an annual shareholders' meeting at least once a year in order for shareholders: - to elect new directors and a vigilance officer; - to acknowledge the vigilance officer's report; and - for management to report upon our financial performance and for the shareholders to decide whether or not to distribute dividends. Ordinary shareholders' meetings may be convened at other times in order to transact other business, including to remove directors. Special shareholders' meetings are convened in order to effect fundamental changes in our structure, including to approve amendments to our by-laws. Under our by-laws, shareholders' meetings may be convened by: - the Chairman of the Board of Directors; - a majority of the members of the board at any time; - at the request of the holders of 30% of the shares entitled to be cast at such meeting; and - at the request of the vigilance officer in urgent circumstances, which are not defined under Dominican law. Shareholders meetings may he convened not less than 30 but not more than 60 calendar days after written notice has been mailed to shareholders. A majority of the shares entitled to be cast constitutes a quorum at all shareholders meetings. Our by-laws provide that holders of two-thirds of the votes entitled to be cast is required to approve: - amendments to the by-laws, including increases or decreases of our authorized share capital; - the issuance of shares of Class B stock in addition to those shares of Class B stock outstanding on the date of the adoption of the by-laws, except in connection with a dividend or other distribution with respect to, or a subdivision, consolidation or reclassification of all outstanding shares of stock; - the declaration and payment of any dividend or distribution with respect to our capital stock; - any increase or decrease in the number of directors; and - our voluntary winding up or liquidation or the filing of a bankruptcy petition. The affirmative vote of the holders of a majority of votes entitled to be cast is required to approve all other actions. Shareholders may vote by proxy, and the depositary will cast proxies as directed by the holders of the ADRs. Limitation of Officers' and Directors' Liability In addition to voting for directors at the annual shareholder's meeting, shareholders are asked to vote upon the performance of management. Our vigilance officer, an officer elected by the shareholders each year, delivers a report on our financial performance and other issues related to management's performance. If the holders of a majority of the votes entitled to be cast approve management's performance, all shareholders are deemed to have released the -63- directors and officers from claims or liability to us or our shareholders arising out of actions taken or any failure to take actions by any of them on our behalf during the prior fiscal year, with certain exceptions. Shareholders will likely fail in any suit brought in a Dominican court with respect to the acts or omissions deemed to have been released. Officers and directors may not be released from any claims or liability for criminal acts, fraud, self-dealing or gross negligence. If the shareholders do not approve management's performance, the vigilance officer's report may form the basis of any suit brought by the shareholders against our officers and directors. Our by-laws provides that we will indemnify any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person, or a person of whom he or she is the legal representative, is or was our director, officer, employee or agent or any of our predecessors, or serves or served any other enterprise as a director, officer, employee or agent at our request or any of our predecessors. We are required to pay any expenses reasonably incurred by a director or officer in defending a civil or criminal action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it ultimately is determined that he or she is not entitled to be indemnified by us under our by-laws or otherwise. We may, by action of our Board of Directors, provide for the payment of such expenses incurred by our employees and agents as it deems appropriate. Liquidation Rights Each shareholder is entitled to a proportionate share of any of our assets available upon dissolution after the payment of debts owed to creditors. Shareholders are deemed to be creditors of our company to the extent of declared and unpaid dividends. Dividends Under Dominican law, only shareholders may authorize the declaration and payment of dividends. Shareholders are entitled to receive dividends in proportion to their respective capital participation, subject to adjustment as provided in the by-laws. Dividends are payable only from after-tax profits, and only after we have set aside at least 5% of our annual profits as a legal reserve (until such reserve equals 10% of paid-in capital). The by-laws provide that shareholders may only approve the declaration and payment of dividends or distributions if the declaration or payment of such dividend or distribution would not violate any obligation, contractual or otherwise, to which we or any of our subsidiaries are a party or by which any of them or their respective properties or operations are bound. Voting Rights The holders of Class A common stock and Class B stock vote together with respect to all matters. Every holder of Class A common stock is entitled to one vote for each share of Class A common stock held and every holder of Class B stock is entitled to ten votes for each share of Class B stock held by the number of shares of Class A common stock into which one share of Class B stock is then convertible. Under our by-laws, Class B stock may not be transferred except to permitted transferees. Permitted transferees include 1. Oleander 2. Motorola 3. any subsidiary or affiliate, as defined, and 4. with respect to Oleander, Manuel Arturo Pellerano Pena and any member of the family of Manuel Arturo Pellerano Pena as of the date of the initial public offering that had an interest (including indirectly through any corporation, trust or entity) in Oleander and - the spouse or surviving spouse and natural and adopted children of any such family member -64- - any trust existing solely for the benefit of family members and any person who would be a permitted transferee of any such family member under clause (A) and any trustee of such trust - upon the death of any such member or any person who would be a permitted transferee of any member, such holder's estate or any executor, administrator or other legal representative of such holder, and - any corporation, partnership or other entity all of the outstanding equity interests of which are owned, or all of the outstanding voting power of which is controlled, directly or indirectly by, or any trust or similar entity the sole beneficiaries of which are, such members and their permitted transferees. If, despite these restrictions on transfer, a shareholder owning shares of Class B stock transferred its shares to a person or entity other than to Oleander, Motorola or a permitted transferee, the shareholder will only become entitled to one vote per share. If, with respect to any shares of Class B stock owned by Oleander and its permitted transferees, the shares of common stock owned by Oleander and its permitted transferees constitute less than 10% of the outstanding common stock, such shares of Class B stock will entitle the holder to one vote per share. If, with respect to any shares of Class B stock owned by Motorola and its permitted transferees. the shares of common stock owned by Motorola and its permitted transferees constitute less than 10% of the outstanding common stock, such shares of Class B stock will entitle the holder to one vote per share. Oleander, Motorola and any permitted transferee may pledge shares of Class B stock without reducing the number of votes to which it is entitled; provided, however, that if such shares of Class B stock are transferred to or registered in the name of the pledgee (unless the pledgee is a permitted transferee), the number of votes to which such shares of Class B stock are entitled will be reduced until Oleander, Motorola or any of their permitted transferees either cures any default that resulted in the transfer or registration or reacquires the shares from the pledgee. Preemptive and Other Rights The holders of Class A common stock and Class B stock are not entitled to preemptive or similar rights. The shares of Class A common stock and Class B stock are not subject to redemption or a sinking fund. Under our by-laws, we are authorized to issue shares of Class B stock only in connection with a dividend or other distribution with respect to, or a subdivision, consolidation or reclassification of, all outstanding shares of Class A common stock. In the event of any subdivision, consolidation, reclassification or other change in the Class A common stock, the Board of Directors, in its discretion, in lieu of issuing additional shares of Class B stock, may adjust the number of shares of Class A common stock into which the Class B stock is convertible and the number of votes to which each share of Class B stock is entitled. Reorganization, Consolidation, Share Exchange or Merger In the event of a reorganization, consolidation, share exchange or merger of the Company, each holder of outstanding shares of stock of the Company shall be entitled to receive for each of his shares the same kind and amount of consideration (whether consisting of cash, property or securities) to be received by each other holder of the same class of stock, if any for each of his shares. EXCHANGE CONTROLS FOREIGN EXCHANGE CONTROLS The foreign exchange system of the Dominican Republic is administered by the Central Bank. In January 1991, the Monetary Board of the Central Bank instituted the current foreign exchange system which permits the purchase of foreign currency from commercial banks located in the Dominican Republic. Prior to January 1991, persons were required to purchase foreign currency directly from the Central Bank. The resolution adopted by the Monetary Board in 1991 retained the Central Bank's administrative authority over the foreign exchange system by -65- requiring registration with and approval by the Central Bank in order to repatriate foreign currency abroad. The Monetary Board further liberalized the foreign exchange system in September 1994, but it retained the requirement that the payment of debt obligations abroad be registered with the Central Bank. This registration generally has been regarded as ministerial in nature, except that short-term advances for exports of goods and services still require prior approval of the Central Bank. Dominican banks are required to submit an application form to the Central Bank for approval of any foreign currency exchange transactions. We cannot assure you that Dominican authorities will not change the Dominican Republic's monetary policies to restrict the exchange of Dominican pesos for U.S. dollars. The Central Bank requires that any person who has registered foreign debt obligations pay a 5% commission on amounts of Dominican pesos exchanged for foreign currency to be remitted abroad. FOREIGN EXCHANGE SYSTEM The current foreign exchange system in the Dominican Republic was instituted in January 1991. Under this system, there are two primary exchange rates: - the rate established by the Central Bank at which the Dominican government buys foreign currency or the official rate; and - the freely floating, private commercial bank rate at which private banks and other authorized currency exchange agents sell foreign currency, or the private market rate. OFFICIAL RATE The official rate is the rate at which companies in certain strategic industries are required to surrender revenues received in foreign currency to the Central Bank for Dominican pesos. The strategic industries subject to this requirement include the telecommunications industry, and, as a result, we are subject to this requirement. Accordingly, every U.S. dollar we receive as revenues must be surrendered to the Central Bank at the official rate unless otherwise authorized by the Central Bank. Other strategic industries subject to this requirement include the coffee, sugar, cocoa, minerals and credit card industries. On April 27, 2001, the official rate was RD$16.66 per U.S. dollar. PRIVATE MARKET RATE The private market rate is the rate at which we purchase the foreign currency we need to pay foreign suppliers or otherwise to meet our obligations abroad. According to current regulations, all purchases of foreign currency from private commercial banks must be reported daily to the Central Bank. This requirement permits the Central Bank to supervise and keep statistics on the private market rate but does not give the Central Bank direct control over the private exchange rate. The Central Bank publishes a weighted average private market rate on a weekly basis. The Central Bank is entitled to receive a 5% commission on all purchases of foreign currency to be remitted abroad. Interest, principal and all other payments in respect of the 11 3/8% senior notes due 2004 are required to be paid to the trustee in U.S. dollars. In addition, most of our equipment and inventory purchases have been made, and are expected to continue to be made, in U.S. dollars. Since September 1999, the Central Bank has allowed us to use revenues received in U.S. dollars to pay interest on the 11 3/8% senior notes due 2004 without first converting them into pesos. On April 27, 2001, the Private Market Rate was RD$16.86 per U.S. dollar. FOREIGN INVESTMENT The Dominican Republic once restricted the repatriation of foreign direct investments in certain sectors of the economy, including the telecommunications sector. In December 1995, the Dominican government enacted Law No. -66- 16-95 on foreign investment, which, among other things, permitted foreigners to make direct investments in the telecommunications sector and to repatriate funds from such investments. The foreign investment law requires that foreigners register their investment with the Central Bank in order to exchange Dominican pesos for foreign currency. The foreign investment law expanded the definition of direct foreign investment to include investments in debt instruments. Prior to the enactment of the foreign investment law, the Dominican government only treated equity investments as direct foreign investments. As a result, the principal of and interest on debt instruments could be repatriated so long as the obligor adhered to the requirements of the Law on the International Transfer of Funds and the regulations and resolutions promulgated under the law. The foreign investment law brings "financial instruments" within its purview, establishing that foreign investments could take the form of those financial instruments that the Monetary Board categorizes as foreign investments. However, the Monetary Board has yet to identify which "financial instruments" could become registered as a foreign investment. We have been advised by our Dominican counsel, Pellerano & Herrera, that "financial instruments" as contemplated by the foreign investment law are Dominican peso-dominated instruments issued to foreign investors in the Dominican Republic. As such, U.S. dollar-denominated instruments, including the 11 3/8% senior notes due 2004, must be registered as foreign debt obligations under the foreign currency transfer law. TAXATION The following discussion summarizes the principal Dominican Republic income tax consequences of an investment in the ADRs, ADSs or shares of Class A common stock by a person who is neither domiciled in nor a resident of the Dominican Republic for tax purposes and who holds such ADRs, ADSs or shares of Class A common stock for investment purposes and not for purposes of a trade or business. In the opinion of the Dominican law firm, Pellerano & Herrera, the discussion sets forth the material Dominican Republic consequences of such an investment. The discussion is not intended as tax advice to any particular investor. Under our 1996 concession agreement with the Dominican government which grants us our right to operate as a telecommunications provider, dividends and interest paid to any of our shareholders, bondholders or other investors are exempt from Dominican income tax. Under Dominican tax law, the term "dividends" refers to any distribution of profits of a company to its shareholders. Thus, under the 1996 concession agreement, any dividend or distribution paid by us with respect to the class A common stock will not be subject to Dominican income tax. Our 1996 concession agreement has not yet been approved by the Dominican Congress, but was duly executed by the Dominican Executive Branch, making the concession itself valid and binding on the Dominican government under our laws. Provisions in our concession agreement providing preferential tax treatment for Tricom and its shareholders still need to be submitted to and approved by the Dominican Congress to be binding under the Dominican Constitution. At the time our concession agreement was executed, it was not submitted to the Dominican Congress for approval for political reasons. Our concession agreement, along with the concession agreements of most of Tricom's competitors in the telecommunications business, was not submitted to the Dominican Congress because the Dominican Congress was greatly divided at that time and the Dominican Executive Branch did not control a majority of the Congress. However, the tax provisions contained in these concession agreements, along with other concession agreements in other areas, have been completely followed and complied with by our Dominican Tax Administration. Until our 1996 concession agreement is approved by the Dominican Congress, cash dividends and other distributions paid by us with respect to ADSs or shares of Class A common stock held by any holder could be subject to a 25C withholding tax, which would be required to be withheld by us and paid to the Dominican tax administration at the time a cash dividend or other distribution is paid. Such tax withheld may not be a creditable foreign tax in determining the U.S. tax liability of such holder. We are not aware of any plans of the Dominican government to submit our 1996 concession agreement for approval to the Dominican Congress. Our 1996 concession agreement does not specifically address whether capital gains taxes will apply to sales of ADSs in the Dominican Republic. However, it states that the transfer or sale of our shares of any type will be exempt from Dominican income tax. Under the principles of territoriality underlying the Dominican constitution, gain from the sale or exchange of ADRs evidencing the ADSs by a foreign holder outside of the Dominican Republic would not be -67- subject to taxation by the Dominican tax authority even if our 1996 concession agreement were not applicable to gains on the transfer or sale of ADSs. Until our 1996 concession agreement is approved by the Dominican Congress, the Dominican government could require payment of capital gains tax on gain recognized on the sale or exchange in the Dominican Republic of shares of Class A common stock (as distinguished from sales or exchanges of ADSs). The capital gains tax was instituted in the Dominican Republic only in 1992 and was later modified by regulations in 1998 as part of major tax reform legislation. Under present law, the capital gains tax rate is identical to the regular income tax rate of the person or entity that earned such gain; there is no preferential rate. Thus, a corporation selling shares of Class A common stock in the Dominican Republic would be required to pay the corporate income tax of 25% on any gain from a sale or exchange of such shares. An individual, whether also would have to pay income tax at the applicable individual rate, as set forth below, on gain from the sale of shares of Class A common stock in the Dominican Republic. The individual income tax rates applicable, in the Dominican Republic since January 1, 2001 are as follows:
IF TAXABLE INCOME IS: THE TAX IS: --------------------- ----------- Not over RD$120,000.00 0 Over RD$120,000.01 but not over RD$200,000.00 15% of taxable income over RD$120,000.01 Over RD$200,000.01 but not over RD$300,000.01 RD$10,278.00 plus 20% of the excess over RD$171,309.01 Over RD$300,000.01 RD$32,000 plus 25% of the excess over RD$300,000.01
The amount of gain on which the capital gains tax is assessed is equal to the sale or transfer price (i.e., amount realized on the sale or transfer) minus the acquisition price, adjusted for inflation. Regulations for the application of the Dominican Tax Code clarify how the tax basis is to be calculated and also provide how the inflation adjustment is to be applied. There is no income tax treaty in force between the Dominican Republic and the United States. There are no Dominican inheritance or succession taxes applicable to the ownership, transfer or disposition of ADSs by a foreign holder not domiciled in the Dominican Republic at the moment of death. It is unclear whether Dominican gift taxes would apply to the transfer or other disposition by gift of shares of Class A common stock by a non-resident foreign holder; however, ADSs or ADRs are not subject to Dominican gift taxes. There are no Dominican stamp, issue, registration or similar taxes or duties payable by holders of ADSs or shares of Class A common stock. ITEM 11. QUANTATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following discussion about market risks to certain financial instruments includes "forward-looking" statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. We are exposed to market risks from adverse changes in interest rates and foreign exchange rates. We do not hold or issue financial instruments for trading purposes. INTEREST RATE RISKS -68- Our interest expense is sensitive to changes in the general level of interest rates in the United States and in the Dominican Republic. At December 31, 2000, we had outstanding $200 million aggregate principal amount of senior notes. The senior notes bear interest at fixed rate of 11 3/8% per annum and mature in the year 2004. The fair value of the senior notes was approximately $186 million at December 31, 2000. The senior notes are U.S. dollar denominated. Our primary exposure to market risk for changes in interest rates relates to our short-term borrowings from Dominican banks. Primary exposure is based on the potential of short-term interest rate variation, not on exposure to changes in fair market value of our long-term debt. At December 31, 2000, we had $198.8 million outstanding of short-term and long-term borrowings, other than our senior notes due 2004 but including trade finance, of which $189.1 million was U.S. dollar denominated, and the remaining $9.7 million was Dominican peso denominated. Of the $189.1 million of U.S. dollar dominated debt, $55.8 million was borrowed from Dominican banks, while the remaining $133.3 million was borrowed from international banks. Of the total $198.8 million outstanding, $137.2 million had fixed interest rates, while the remaining $61.6 million had variable interest rates. During 2000, our short-term and long-term U.S. dollar denominated borrowings bore interest at rates ranging from 9.5% per annum to 12.9% per annum. During 2000, our short-term and long-term Dominican peso denominated borrowings bore interest at rates ranging from 24% per annum to 26% per annum. A 10% increase in the average rate for our variable rate debt would have increased our loss for 2000 by approximately $1.7 million. FOREIGN EXCHANGE RISKS We are subject to currency exchange risks. During 2000, we generated revenues of $84.2 million in U.S. dollars and $140.1 million in Dominican pesos. In addition, at December 31, 2000, we had $189.1 million of U.S. dollar-denominated debt outstanding, excluding the $200.0 million principal amount of the 11 3/8% senior notes due 2004. The impact of changes in foreign exchange rates is determined by measuring the effect of percentage changes in the range of rates during the year for our Dominican peso denominated assets and liabilities. The model reflects the weighted average change in exchange rates as resulting in the same percentage change in foreign exchange gains or losses. Dominican foreign exchange regulations require us and other telecommunications companies to convert all U.S. dollar revenues into Dominican pesos at the official exchange rate, and to purchase US dollars at the private market exchange rate. Although the official exchange rate now fluctuates and is tied to the private market rate, the official exchange rate tends to be lower than the private market rate. During 2000, the average official exchange rate was RD$16.18 per $1.00 while the average private market rate was RD$16.37 per $1.00. Our functional currency is the U.S. dollar and, as a result, we must translate the value of Dominican peso-denominated assets into U.S. dollars when compiling our financial statements. This translation can create foreign exchange gains or losses depending upon fluctuations in the relative value of the Dominican peso against the U.S. dollar. During 2000, we recognized an approximate $303,000 foreign exchange loss. If the Dominican peso had devalued by an additional 10% against the U.S. dollar on average in 2000, then we would have realized an additional foreign exchange loss of approximately $30,300. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not Applicable. -69- PART II ITEM 13. DEFAULTS, DIVIDED ARREARAGES AND DELINQUENCIES None. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Not applicable. ITEM 15. [RESERVED] ITEM 16. [RESERVED] PART III ITEM 17. FINANCIAL STATEMENTS Not Applicable. ITEM 18. FINANCIAL STATEMENTS The following consolidated financial statements are filed as part of this Annual Report on Form 20-F Independent Auditors' Report. Consolidated Balance Sheets as of December 31, 1999 and 2000. Consolidated Statements of Operations for the Years Ended December 31, 1998, 1999 and 2000. Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1998, 1999 and 2000. Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1999 and 2000. Notes to Consolidated Financial Statements. ITEM 19. EXHIBITS Exhibit Number 1.1 Amended and Restated By-laws of the Company with English translation thereof.* 2.1 Indenture, dated August 21, 1997, between The Bank of New York, as trustee, and the Company.** 4.1 iDEN(R) Infrastructure Supply Agreement, dated July 31, 2000, between Motorola, Inc. and Tricon Latinoamerica, S.A.*** -------------------------------------------------------------------------------- * Incorporated by Reference to Exhibit 3 to Amendment No. 1 to the Registration Statement on Form F-1, registration number 333-8574, filed May 1, 1998. ** Incorporated by Reference to Exhibit 4.1 to the Company's Registration Statement on Form F-4, registration number 333-8150, filed December 29, 1997. *** The Company has requested that certain portions of this document be given confidential treatment. The entire document, including the redacted portions, has been filed separately with the Securities and Exchange Commission. -70- (This page has been left blank intentionally.) -71- TRICOM, S.A. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Independent Auditors' Report.................................................................................. F-2 Consolidated Balance Sheets as of December 31, 1999 and 2000.................................................. F-3 Consolidated Statements of Operations for the Years Ended December 31, 1998, 1999 and 2000.................... F-5 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1998, 1999 and 2000........................................................................... F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1999 and 2000............................................................................ F-8 Notes to Consolidated Financial Statements.................................................................... F-11
F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of TRICOM, S.A.: We have audited the accompanying consolidated balance sheets of TRICOM, S.A. and subsidiaries as of December 31, 1999 and 2000 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three year-period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TRICOM, S.A. and subsidiaries as of December 31, 1999 and 2000 and the results of their operations and their cash flows for each of the years in the three year-period ended December 31, 2000, in conformity with generally accepted accounting principles in the United States of America. As explained in note 12 to the consolidated financial statements, effective January 1, 2000, the Company changed its method of accounting for installation and activation revenues. As explained in note 26 to the consolidated financial statements, effective January 1, 1999, the Company changed its method of accounting for organization costs. Santo Domingo, Dominican Republic KPMG February 9, 2001 --------------------------------- Member Firm of KPMG International F-2 TRICOM, S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 2000
1999 2000 ----------------- ------------ ASSETS Current assets: Cash on hand and in banks (note 6) $ 13,459,566 18,199,552 Accounts receivable (notes 5,6, 11 and 20): Customers 22,821,951 21,970,677 Carriers 6,467,016 8,729,886 Related parties 40,412 1,663,396 Officers and employees 415,702 556,577 Current portion of long-term accounts receivable 66,369 - Other 624,846 1,601,119 ----------------- ------------ 30,436,296 34,521,655 Allowance for doubtful accounts (4,307,563) (2,394,903) ----------------- ------------ Accounts receivable, net 26,128,733 32,126,752 Inventories, net: Equipment and accessories 9,429,905 8,889,385 Other 271,350 651,708 ----------------- ------------ 9,701,255 9,541,093 Prepaid expenses (notes 6 and 16) 6,637,067 7,947,531 Deferred income taxes (note 17) 949,190 801,008 ----------------- ------------ Total current assets 56,875,811 68,615,936 ----------------- ------------ Long-term accounts receivable (note 6) 22,619 - Investments (note 7) 2,710,572 3,289,459 Property and equipment, net (notes 4, 6, 10 and 14) 455,045,191 586,223,900 Other assets at cost, net of amortization (notes 8 and 19) 16,824,268 24,310,564 ----------------- ------------ $ 531,478,461 682,439,859 ================= ============
See accompanying notes to the consolidated financial statements. F-3 TRICOM, S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) DECEMBER 31, 1999 AND 2000
1999 2000 ---- ---- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable (notes 6, 9 and 14): Borrowed funds - banks $ 63,602,022 82,131,865 Borrowed funds - related parties 17,895,946 31,410,612 Current portion of long-term debt 315,216 3,213,939 ----------------- ------------ 81,813,184 116,756,416 ----------------- ------------ Current portion of capital leases (notes 6 and 10) 14,242,056 5,308,310 Accounts payable (notes 6 and 12): Carriers 2,987,379 13,835,276 Related parties 10,035,066 2,093,385 Suppliers 12,043,787 21,653,727 Other 329,309 242,582 ----------------- ------------ 25,395,541 37,824,970 Other liabilities (note 12) 3,789,707 19,990,490 Accrued expenses (note 13) 15,293,910 14,035,182 ----------------- ------------ Total current liabilities 140,534,398 193,915,368 ----------------- ------------ Reserve for severance indemnities 31,414 9,727 Deferred income tax (note 17) 631,159 974,867 Capital leases, excluding current portion (notes 6 and 10) 11,640,652 15,520,965 Long-term debt, excluding current portion (note 14) 228,772,011 261,222,759 ----------------- ------------ Total liabilities 381,609,634 471,643,686 ----------------- ------------ Shareholders' equity (notes 15 and 21): Class A common stock at par value RD$10: Authorized 55,000,000 shares; 5,700,000 shares issued at December 31, 1999 and 9,700,000 at December 31, 2000 3,750,000 6,210,025 Class B stock at par value RD$10: Authorized 25,000,000 shares at December 31, 1999 and 2000; 19,144,544 issued at December 31, 1999 and December 31, 2000 12,595,095 12,595,095 Additional paid-in-capital 94,288,852 159,981,808 Retained earnings 41,258,637 34,033,002 Other comprehensive income-foreign currency translation (note 2.2) (2,023,757) (2,023,757) ----------------- ------------ Shareholders equity, net 149,868,827 210,796,173 ----------------- ------------ $ 531,478,461 682,439,859 ================= ============
See accompanying notes to the consolidated financial statements. F-4 TRICOM, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1998, 1998 AND 2000
1998 1999 2000 ---- ---- ---- Operating revenues (note 6): Toll revenues $ 17,644,573 23,118,149 28,666,107 International revenues 50,332,088 60,592,134 84,187,050 Local service 12,941,983 33,858,620 54,770,706 Cellular and PCS 20,363,647 26,473,985 35,796,234 Paging 4,527,579 2,695,531 1,703,963 Sale of equipment 4,114,513 7,689,534 5,263,137 Installation and activation fees 12,936,817 15,501,847 13,748,906 Other 2,640,192 889,141 161,552 ---------------- ------------ ------------ Total operating revenues 125,501,392 170,818,941 224,297,655 Operating costs: Satellite connections and carrier (note 19) 32,308,880 43,687,794 68,607,640 Network depreciation 11,382,446 15,982,827 29,341,705 Expense in lieu of income taxes (note 16) 9,561,710 12,763,565 10,173,983 General and administrative expenses, including depreciation charges of $3,239,714, $4,854,653 and $6,823,574 in 1998, 1999 and 2000, respectively (notes 6, 18, 19 and 22) 39,379,388 51,501,272 70,690,895 Cost of equipment sold 2,249,268 3,988,446 2,911,386 Other 1,142,079 1,432,957 1,550,161 Total operating costs 96,023,771 129,356,861 183,275,770 Operating income 29,477,621 41,462,080 41,021,885 Other income (expenses): Interest expense (note 6) (18,006,286) (22,430,031) (34,037,053) Interest income (note 6) 5,133,348 2,389,329 3,301,031 Foreign currency exchange gain (loss) 104,414 (202,724) (303,078) Gain on sale of land (note 6) - 897,833 - Gain on sale of equipment - - 29,874 Other, net (note 6) 844,801 179,409 (197,118) ---------------- ------------ ------------ Other expenses, net (11,923,723) (19,166,184) (31,206,344) ---------------- ------------ ------------ Earnings before income taxes and cumulative effect of accounting change 17,553,898 22,295,896 9,815,541 Income taxes (note 17) 351,691 (141,660) (588,377) ---------------- ------------ ------------ Earnings before cumulative effect of accounting change 17,905,589 22,154,236 9,227,164 Cumulative effect of change in accounting change: Organization costs (note 26) - (119,711) - Installations and activations revenues (note 12) - - (16,452,799) ---------------- ------------ ------------ Net earnings (loss) $ 17,905,589 22,034,525 (7,225,635) ================ ============ ============ Earnings (loss) per common share - basic and diluted: Earnings before cumulative effect of accounting change 0.78 0.89 0.33 Cumulative effect of change in accounting - - (0.59) ---------------- ------------ ------------ Net earnings (loss) per common share - basic and diluted $ 0.78 0.89 (0.26) ================ ============ ============ Proforma amounts assuming the change in accounting principle for installation and activation fees retroactively: Net earnings $ 11,049,546 17,183,884 9,227,164 ================ ============ ============ Earnings per common share - basic and diluted $ 0.48 0.69 0.33 ================ ============ ============ Basic 22,944,544 24,844,544 27,723,665 Diluted 22,944,569 24,888,709 27,896,666
See accompanying notes to the consolidated financial statements. F-5 TRICOM, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
Retained Earnings ---------------------------- Number of Common Additional Appropriate Shares Issued Common Stock Paid in Legal Un- Class A Class B Class A Class B Capital Reserved appropriated ------- ------- ------- ------- ---------- ----------- ------------ Balance at December 31, 1997 - 19,390,529 $ - 43,357,343 - 600,233 718,290 Issuance of common shares, Net of issuance cost of $6,537,345 (note 15) 5,700,000 - 3,750,000 - 63,812,655 - - Effect of change from no par value to RD$10 par value (note 15) - - - (30,203,197) 30,203,197 - - Retirement of treasury stock as a result of initial public offering - (245,985) - (559,051) - - - Transfer to legal reserve (note 21) - - - - - 571,955 (571,955) Net earnings - - - - - - 17,905,589 --------- ---------- ---------- ----------- ----------- --------- ---------- Balance at December 31, 1998 5,700,000 19,144,544 3,750,000 12,595,095 94,015,852 1,172,188 18,051,924 Stock - based compensation to non-employees (note 22) - - - - 273,000 - - Transfer to legal reserve (note 21) - - - - - 480,819 (480,819) Net earnings - - - - - - 22,034,525 --------- ---------- ---------- ----------- ----------- --------- ---------- Balance at December 31, 1999 5,700,000 19,144,544 3,750,000 12,595,095 94,288,852 1,653,007 39,605,630 Issuance of common shares, Net of issuance cost of $6,852,774 (note 15) 4,000,000 - 2,460,025 - 64,687,201 - - Stock - based compensation to non-employees (note 22) - - - - 1,005,755 - - Net loss - - - - - - (7,225,635) --------- ---------- ---------- ----------- ----------- --------- ---------- Balance at December 31, 2000 9,700,000 19,144,544 $6,210,025 12,595,095 159,981,808 1,653,007 32,379,995 ========= ========== ========== =========== =========== ========= ==========
See accompanying notes to the consolidated financial statements. F-6 TRICOM, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED) YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
Other Comprehensive Income-Foreign Currency Treasury Shareholders' Translation Stock Equity, Net -------------- -------- ------------- Balance at December 31, 1997 (2,023,757) (559,051) 42,093,058 Issuance of common shares, Net of issuance cost of $6,537,345 (note 15) - - 67,562,655 Effect of change from no par value to RD$10 par value (note 15) - - - Retirement of treasury stock as a result of initial public offering - 559,051 - Transfer to legal reserve (note 21) - - - Net earnings - - 17,905,589 ----------- -------- ----------- Balance at December 31, 1998 (2,023,757) - 127,561,302 Stock - based compensation to non-employees (note 22) - - 273,000 Transfer to legal reserve (note 21) - - - Net earnings - - 22,034,525 ----------- -------- ----------- Balance at December 31, 1999 (2,023,757) - 149,868,827 Issuance of common shares, Net of issuance cost of $6,852,774 (note 15) - - 67,147,226 Stock - based compensation to non-employees (note 22) - - 1,005,755 Net loss - - (7,225,635) ----------- -------- ----------- Balance at December 31, 2000 (2,023,757) - 210,796,173 =========== ======== ===========
See accompanying notes to the consolidated financial statements F-7 TRICOM, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
1998 1999 2000 ---- ---- ---- Cash flows provided by operating activities: Net earnings (loss) $17,905,589 22,034,525 (7,225,635) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Allowance for doubtful accounts 1,665,349 5,420,717 3,499,893 Amortization of debt issue cost 1,381,361 1,499,497 1,958,610 Amortization of radio frequency right - 198,333 320,186 Cumulative effect of accounting change in installations and activations revenues - - 16,452,799 Cumulative effect of accounting change in organizations costs - 119,711 - Deferred income tax, net (351,691) 33,660 491,890 Depreciation 14,622,160 20,837,480 36,165,279 Expense for severance indemnities 257,690 328,807 760,740 Foreign exchange gains 31,106 101,835 - Gain on sale of fixed assets, net - - (836,054) Gain on sale of land - (897,833) - Value of consulting services received in exchange for stock warrants - 273,000 1,005,755 Net changes in assets and liabilities: - Accounts payable (4,471,048) 9,005,096 12,429,429 Accounts receivable (3,681,109) (13,407,676) (9,497,912) Accrued expenses 3,857,953 1,563,855 (1,258,728) Inventories (3,053,879) (4,213,002) 160,162 Long-term accounts receivable 866,997 68,937 22,619 Other assets (5,542,150) (3,944,266) (9,765,092) Other liabilities 4,387,282 (3,624,114) (252,016) Prepaid expenses (403,628) (3,532,125) (1,310,464) Reserve for severance indemnities (355,445) (340,279) (782,427) Unearned interest (204,576) - - ----------- ----------- ----------- Total adjustments 9,006,372 9,491,633 49,564,669 ----------- ----------- ----------- Net cash provided by operating activities 26,911,961 31,526,158 42,339,034 =========== =========== ===========
See accompanying notes to the consolidated financial statements F-9 TRICOM, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
1998 1999 2000 ---- ---- ---- Cash flows from investing activities: Acquisition of investments (367,866) (546,185) (578,887) Acquisition of land - (1,826,625) - Acquisition of property and equipment (142,101,012) (119,182,223) (151,221,583) Proceeds from maturity of US Treasury Bonds and irrevocable restricted funds 21,297,912 54,470,478 - Proceeds from sale of fixed assets - - 2,405,494 Proceeds from sale of land - 2,724,458 - -------------- ------------- ------------- Net cash used in investing activities (121,170,966) (64,360,097) (149,394,976) -------------- ------------- ------------- Cash flows from financing activities: Borrowed funds from banks 23,234,625 111,580,042 226,440,816 Borrowed funds from related parties 57,019,761 62,233,725 71,727,978 Re-payment of Carifa Bonds - (32,000,000) - Capital lease payments - (361,292) (22,745,278) Issuance of common stock 67,562,655 - 67,147,226 Payments of long-term debt - - (10,315,216) Principal payments to banks (7,474,114) (69,643,536) (207,910,973) Principal payments to related parties (36,277,664) (69,929,694) (58,213,312) Proceeds from issuance of long term debt - 29,087,227 45,664,687 -------------- ------------- ------------- Net cash provided by financing activities 104,065,263 30,966,472 111,795,928 Effect of exchange rate changes on cash (161,353) (50,377) - -------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents 9,644,905 (1,917,844) 4,739,986 Cash and cash equivalents at beginning of the period 5,732,505 15,377,410 13,459,566 -------------- ------------- ------------- Cash and cash equivalents at end of period $ 15,377,410 13,459,566 18,199,552 ============== ============= ============= Supplementary information: Interest paid (net of capitalization) (17,601,409) (23,373,038) (33,785,503) Capital lease obligation incurred - 26,244,000 17,691,845 ============== ============= =============
See accompanying notes to the consolidated financial statements F-10 TRICOM, S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 2000 1 ORGANIZATION AND NATURE OF BUSINESS The consolidated financial statements of TRICOM, S.A. include operations of the following companies in the communications industry, which are identified as and operate in the Dominican Republic and New York, U.S.A. under the commercial name TRICOM: TRICOM, S.A. (Parent Company) GFN Comunicaciones, S.A. Bay Tel Communication, S.A. Call Tel Corporation TRICOM USA, Inc. and Subsidiaries TRICOM LATINOAMERICA, S.A. and Subsidiaries TRICOM, S.A. ("TRICOM" or the "Company") is a diversified telecommunications company, which provides international and domestic long distance, basic local service, mobile, Internet and broadband services in the Dominican Republic and long distance service through subsidiaries in the United States. The Company's operations in the Dominican Republic are governed by the Telecommunications Law (Law No.153-98) and by a Concession Agreement signed with the Dominican Government and confirmed by the National Congress on April 30, 1990. This agreement is for a 20-year term through June 30, 2010, subject to renewal for an additional 20-year term. Law No. 153-98 establishes a basic framework to regulate the installation, maintenance and operation of telecommunications networks and the provision of telecommunications services and equipment. The law adopted the "Universal Services Principle" by guaranteeing access to telecommunications services at affordable prices in low-income rural and urban areas. The law creates a fund for the development of the telecommunications sectors that is supported by a 2% tax on industry participants' billings of all telecommunication services. The Company was formed by GFN Corporation, Ltd. ("GFN"), one of the Dominican Republic's largest private holding companies, with equity interests in insurance, finance and publishing companies. At December 31, 2000, GFN holds a 39.8% interest in the Company, and Motorola, Inc. holds a 26.5% interest. TRICOM USA, Inc. ("TRICOM USA") was formed on January 15, 1992 under the General Corporation Law of Delaware. In September 1995, the United States Federal Communications Commission ("FCC") authorized TRICOM USA, to operate as a facilities-based carrier in the United States. TRICOM LATINOAMERICA, S.A. is a company organized under the Corporation Law of the Cayman Islands, on May 12 2000. The activities of this company are to control the telecommunication operations in Central America and the Caribbean. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of TRICOM, S.A. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. F-11 The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. Preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses. Actual results could differ from those estimates and assumptions. 2.2 FOREIGN CURRENCIES The functional currency of the Company has been the U. S. dollar since January 1, 1997. Translation adjustments resulting from the conversion of the consolidated financial statements to the reporting currency were accumulated and presented as a separate component of equity in the accompanying consolidated balance sheets for years prior to January 1, 1997. Commencing January 1, 1997 the Company has recognized in the statements of operations gains and losses arising from the translation of foreign currency transactions other than the U.S. dollar. As of December 31, 1999 and 2000, the rates used by the Company to translate Dominican peso denominated accounts at year-end were RD$16.05 and RD$16.69 per one U.S. dollar, respectively. Panamanian Balboas (B/.) are at par with the U.S. dollar. 2.3 CASH AND CASH EQUIVALENTS For the purpose of the statements of cash flows, the Company considers as cash and cash equivalents cash on hand, banks, time deposits and highly liquid debt instruments with original maturities, at the time of purchase of three months or less. 2.4 ALLOWANCE FOR DOUBTFUL ACCOUNTS The allowance for doubtful account receivable is established through a charge to an expense account. 2.5 INVENTORIES Inventories are valued at the lower of average cost or market. 2.6 PROPERTY AND EQUIPMENT Property and equipment are carried at cost. Construction costs and equipment installations in process are maintained as construction projects until they are completed and/or equipment is placed in service. Depreciation is calculated and recorded starting with the first full month that the assets are placed in service. 2.7 DEPRECIATION The depreciation method used by the Company is the straight-line method, that is, the uniform distribution of cost over the estimated useful lives of the corresponding assets. The estimated useful lives of assets are as follows:
YEARS ------ Buildings and improvements 50 Furniture, equipment and transportation equipment 4-10 Equipment for lease 3-6 Operation and communication equipment 15 Cellular phones 3 Computer equipment 6.67
F-12 2.8 OTHER ASSETS Other assets consist principally of deferred debt issue costs and radio frequency rights (see note 8). Deferred debt issue costs are amortized over the debt service period of the related debt. For the years ended December 31, 1998, 1999 and 2000, amortization expense of deferred debt issue amounted to $1,381,361, $1,499,497 and $1,958,610, respectively. The radio frequency rights are amortized on a straight-line basis over the useful lives, which range from 15 to 20 years. For the year ended at December 31, 1999 and 2000, the amortization expense amounted to $198,333 and $320,186, respectively. Deferred commissions on prepaid calling cards are recognized when the deferred revenues are recorded. On sales of calling cards outside of the Dominican Republic, the commission expense is recognized as revenues are recognized based upon minutes used. On sales of calling cards within the Dominican Republic, where collection of sales proceeds has been assessed by the company to be less assured, commission expense is recorded when the collections of outstanding invoices to distributors and/or wholesalers are made. 2.9 SEVERANCE INDEMNITIES According to the Labor Code of the Dominican Republic, employers are required to pay severance indemnities to those workers whose labor contracts are terminated without just cause. Just cause is defined in the Labor Code as including misstatements by an employee in his job application, termination of an employee within three months of his hire for poor performance, dishonesty, threats of violence, willful or negligent destruction of property, unexcused absence or termination of the job for which the employee was hired. The Company maintains a minimal reserve to cover severance indemnities based on its experience in this area. 2.10 REVENUE RECOGNITION TOLL REVENUES Toll revenues are amounts received by the Company from customers in the Dominican Republic for international and domestic long distance calls. These revenues are recognized as the calls are made. INTERNATIONAL SETTLEMENT REVENUES International settlement revenues represent amounts due from telecommunications carriers for call (based on minutes) originated outside the Dominican Republic which terminate into the Company's Dominican network. as per operating agreements between the Company and each such carrier. These revenues are recognized as the minutes are provided. PREPAID CALLING CARD REVENUES The Company recognizes revenue from prepaid calling cards based on card usage. The Company accounts for cash received or credit extended from the sale of the prepaid calling cards as deferred revenues, which are then recognized as the cards are used. This revenue may be part of the toll or international revenues depending on the call destination. LOCAL SERVICE REVENUE Local service revenue consists of wireline rent, local measured service, which represents minutes used by local customers which are billed on established rates or tariffs per actual minutes of call duration, as well as charges for "Custom local access signaling services" or CLASS. CLASS represents value-added services which include which include call forwarding, three-way calling, call waiting and voicemail. It also features vertical services such as incoming-call identification, call trace, call blocking, automatic return of the most F-13 recent incoming call, call redial, and selective forwarding and programming to permit for distinctive ringing for incoming calls requested for local customers which are billed in addition to rent. Local service revenues also includes collect call revenues and revenues from other miscellaneous wireline services. These revenues are recognized as the services are rendered. CELLULAR AND PCS REVENUES Represents fees received for mobile cellular and PCS services, including interconnection charges for incoming calls to the Company's cellular and PCS subscribers (these revenues do not include international and domestic long distance calls generated by cellular or PCS units). Cellular and PCS fees consist of fixed monthly access fees and per-minute usage charges, as well as additional charges for custom or vertical features, which include call waiting, call forwarding, three-way calling and voicemail, and for other miscellaneous cellular and PCS services. These revenues are recognized as the services are rendered. PAGING Paging revenues consist of fixed monthly charges for nationwide service and the use of paging equipment and activation fees. These revenues are recognized as these services are rendered. SALES OF EQUIPMENT These revenues consist of sales and rental fee charges to customers for communication equipment, including private branch exchanges, key telephone systems, residential telephones, cellular handsets and paging units. These revenues are recognized upon sale to the customer. INSTALLATION AND ACTIVATION FEES Revenues from installations consist of amounts charged by the Company to its clients for the installation of local access lines, private interchange, central telephone systems, as well as charges for the activation of cellular phones and PCS. Effective January 1, 2000, the Company adopted Staff Accounting Bulletin (SAB 101), issued by the Securities and Exchange Commission (SEC), which establishes certain criteria regarding revenue from installation and activation. As a consequence of this adoption, these revenues are recognized over the estimated average service life based on the Company's experience (35 months). In previous years, these revenues were recognized when they were generated. Direct incremental cost incurred to provide installations and activations are accounted for as they are incurred. OTHER Other revenues represent revenues that are not generated from the Company's core business activities, including commissions and revenues from the sale of miscellaneous products. These revenues are recognized when earned. 2.11 CAPITALIZATION OF INTEREST Interest is capitalized on qualified projects and included as part of project costs during the period necessary for installation. During the years ended December 31, 1998, 1999 and 2000, interest capitalized as part of construction projects amounted to approximately $10,200,000, $11,900,000 and $11,300,000, respectively. 2.12 FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of the Company's financial instruments classified as current assets or current liabilities approximates their book value due to the relative short maturities of these financial instruments. See note 14 for the estimated fair values of the Company's long - term debt. F-14 2.13 EXPENSE IN LIEU OF INCOME TAX The parent company TRICOM, S.A. pays a tax, which is based on a percentage of the Company's domestic gross revenues (less deductions for access to the local network) plus a percentage of the Company's net international settlement revenues. An accrual is made for any difference between the dates when these items are reported to the tax authorities and when they are reported in the accompanying consolidated statements of operations. 2.14 INCOME TAXES In the case of the subsidiary, TRICOM USA, income taxes are accounted for under the asset and liability method. Deferred tax 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 operating loss and tax credit carry-forwards. Deferred tax 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 assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 2.15 EARNINGS PER COMMON SHARE Basic earnings per share have been computed based on the average number of common shares outstanding. Diluted earnings per share reflects the increase in average common shares outstanding that would result from the assumed exercise of outstanding stock options, calculated using the treasury stock method. 2.16 PENSION PLAN Prior to September 1, 2000, the Company had a contributory defined benefit pension and retirement plan that included all personnel. The cost of the plan had been determined based on actuarial studies and includes amortization of past service costs over the estimated average life of its employees. From September 1, 2000 a pension management company has managed the Company's plan, which was converted to a defined contribution plan. Under this arrangement, both the Company and the employee make fixed contributions to the employees account. The contributions made by the Company are recognized as expense monthly. 2.17 IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows before interest projected to be generated by the asset. If the carrying value of the assets exceeds these cash flows, such assets are considered to be impaired and the impairment to be recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value will be measured as appropriate depending on the intended use of the asset, which may be based upon the projected cash flows, discounted using a market rate of return. Assets to be disposed of are reported at the lower of the carrying amount or fair value fewer costs to sell. 2.18 ADVERTISING COSTS F-15 Advertising costs are expensed as incurred. For the years ended December 31, 1998, 1999 and 2000 these costs amounted to $4,461,123, $5,431,834 and $4,204,391, respectively, and are included as part of general and administrative expenses in the accompanying consolidated statements of operations. 2.19 STOCK OPTION PLAN The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations, including FASB Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation an interpretation of APB Opinion No. 25" issued in March 2000, in accounting for its fixed plan stock options. As such, compensation expense is recorded on the date of grant only if the market price of the underlying stock exceeded the exercise price. SFAS No. 123, "Accounting for Stock-Based Compensation," established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 123. 3 LIQUIDITY As of December 31, 2000, the Company's current liabilities exceed its current assets by $125.3 million. This reflects the Company's short-term borrowings in the Dominican Republic with related companies, and mostly with local banks. Dominican banks lend on a short-term basis, in order to renegotiate interest rates should market conditions change, without necessarily demanding the repayment of credit facilities. Additionally, the Company is involved in negotiations to obtain medium term financing to refinance its short-term debt. It is the Company's belief that the existence of a negative working capital will not affect the continuity of its business due to the nature of its operations. 4 PROPERTY AND EQUIPMENT A detail of property and equipment at December 31, 1999 and 2000 is as follows:
1999 2000 -------- --------- Operations and communications: Land $ 5,288,164 7,118,634 Buildings and improvements 12,730,864 15,861,346 Furniture and equipment 6,868,212 10,324,397 Communications equipment 125,790,885 184,484,503 Transmission equipment 172,738,824 283,120,786 Other equipment 1,668,162 4,098,949 ---------------- ------------- 325,085,111 505,008,615 Less accumulated depreciation 41,774,980 70,891,750 ---------------- ------------- Sub-total, operations and communications 283,310,131 434,116,865 Property and equipment: Buildings 6,372,566 9,037,820 Furniture and office equipment 13,965,777 20,133,420 Transpiration equipment 4,435,443 4,636,530 Leasehold improvements 3,879,221 4,807,139 Data processing equipment 23,037,601 33,590,043 ---------------- ------------- 51,690,608 72,204,952 Less accumulated depreciation 14,289,015 21,157,407 ---------------- ------------- Sub-total, property and equipment 37,401,593 51,047,545 ---------------- ------------- Communication equipment pending installation 31,141,978 16,872,746 Equipment in transit (a) 2,506,092 5,789,586 Construction in process (b) 100,685,397 78,397,158 ---------------- ------------- Property and equipment, net $ 455,045,191 586,223,900 ================ =============
F-16 (a) Equipment in transit represents accumulated costs of equipment imported by TRICOM, for which additional import related costs are still to be incurred. At December 31, 1999 and 2000, this amount includes mainly transmission equipment and accessories. (b) A detail of construction in process at December 31, 1999 and 2000 is as follows:
1999 2000 ---------------- ------------- Operation and communications: Buildings $ 3,816,556 3,104,105 Transmission equipment (i) 87,642,687 48,302,135 Cells 8,502,529 17,075,909 Submarine cable 723,625 - Property and equipment: Other - 9,915,009 ---------------- ------------- $ 100,685,397 78,397,158 ================ =============
(i) At December 31, 1999 and 2000, construction in process of transmission equipment relates to the development of a wireless local loop (WLL) network in the Dominican Republic, as well as cellular and PCS cells, fiber optic and other network improvements. 5 ACCOUNTS RECEIVABLE Changes in the allowance for doubtful accounts were as follows:
1998 1999 2000 ------------- ----------- ----------- Allowance at beginning of year $ 668,827 740,687 4,307,563 Increase for the year, net 1,665,349 5,420,717 3,499,893 Write-off during the year (1,593,489) (1,853,841) (5,412,553) ------------- ----------- ----------- Allowance at end of year $ 740,687 4,307,563 2,394,903 ============= =========== ===========
A detail of account receivable - others at December 1999 and 2000 is as follows:
1999 2000 ------------- --------- Interest receivable $ 235,016 1,248,804 Miscellaneous 389,830 352,315 ------------- --------- Allowance at end of year $ 624,846 1,601,119 ============= ===========
6 TRANSACTIONS WITH RELATED PARTIES During the years ended December 31, 1998, 1999 and 2000, the Company made payments to several related parties for leased premises and equipment, public relations, systems and procedures, legal services and personnel management. F-17 The majority of these charges are for services received by the Company from Grupo Financiero Nacional, S.A., ("Grupo Financiero") a subsidiary of GFN. Grupo Financiero allocates administrative charges based on the time invested by its employees providing administrative support services to each of its subsidiaries. A detail of balances with related companies at December 31, 1999 and 2000 is as follows:
1999 2000 ----------- ---------- Assets: Cash in banks $ 4,194,306 3,677,466 Deposits (a) 7,251,319 13,054,686 Account receivable (b) 40,412 1,663,396 Current portion and long-term accounts receivable 53,820 - Prepaid expenses - insurance 3,548,458 4,472,055 Other assets - deposits 86,580 86,580 Liabilities: Borrowed funds (c) 17,895,946 31,410,612 Accounts payable - letters of credit (d) 985,187 - Accounts payable (e) 10,035,066 2,093,385 Capital leases 25,882,708 20,829,276
(a) As of December 31, 1999 and 2000, includes $2,185,005 in a non-interest bearing time deposit and $5,066,314 and $10,198,900, respectively, in interest bearing deposits, which earn interest at rates between 9% and 11%. Additionally, as of December 31, 2000, includes RD$11,195,335 ($670,781) in certificates of deposit, which earn interest rates of 20% per annum. (b) The Company contracts services from a related party dedicated to managing the collection of past due accounts. This related party also provides these services to other related companies. During the year ended December 31, 2000, the Company recognized collection recoveries from customer accounts previously written off for $3,087,728. This amount is presented, net of increase in the allowance for doubtful accounts in general and administrative expenses in the accompanying consolidated statements of operations. At December 31, 2000, the Company had amounts receivable from the related party of $1,566,447, which was collected in January 2001. (c) Correspond to financing of letters of credit and open accounts at interest rates of 10% to 11% in 1999 and 10% to 11.50% in 2000. At December 31, 2000, the Company has unsecured, short term lines of credit available for approximately $13,100,000. (d) These letters of credit accrue annual interest at rates ranging from 10% to 11.5%, payable at maturity. (e) At of December 31, 1999 this account includes $7,775,892 representing a 7.94% financing facility from Motorola for the acquisition of transmission and communications equipment. A detail of transactions with related parties during the years ended December 31, 1998, 1999 and 2000 is as follows:
1998 1999 2000 ----------- ---------- ---------- Operating revenues - communications services revenue $ 828,316 1,970,646 1,948,321 General and administrating expenses: F-18 Insurance premiums 1,520,171 2,000,473 4,071,713 Leased premises and equipment 44,610 108,578 157,600 Security services 111,460 77,382 227,001 Pension plan contributions 433,998 586,921 738,058 Advertising services 134,830 74,104 250,232 Professional services 494,125 167,470 234,348 Other income (expenses): Interest incurred on loans (880,281) (710,537) (5,713,690) Interest earned 270,352 265,423 1,805,780 Gain on sale of land (a) - 897,833 - Other (b) - - 806,180 Bank charges (45,916) (135,640) (151,600) Equipment purchased (Motorola) 2,258,028 23,097,157 20,279,706
(a) During 1999, the Company bought from an unaffiliated third party a parcel of land that was subsequently sold to a related party. The sale price was $2,724,458 (RD$44,000,000) and the acquisition cost was $1,826,625 (RD$29,500,000). This transaction generated a gain on sale of land of $897,833, which is presented as gain on sale of land in other income (expenses) in the consolidated statements of operations. (b) During the month of July 2000 the Company sold all operational assets related to the operations of the Internet business portal to a related company in the Dominican Republic for $2,315,412 in cash. The gain on the sale of this asset was $806,180, and is included as part of other, net in other income (expenses) in the accompanying consolidated statements of operations. 7 INVESTMENTS At December 31, 1999 and 2000, investments consist of mortgage participation contracts, which have been purchased from savings and loan associations in the Dominican Republic. These contracts earn interest at rates between 9% and 12% per annum. These investments are maintained as compensating balances for mortgage loans made by these saving and loan associations to certain officers and employees of the Company. 8 OTHER ASSETS Other assets at December 31, 1999 and 2000 consisted of the following:
1999 2000 ----------- ---------- Deferred debt issue costs, net (a) $ 8,864,074 7,303,063 Deposits with international carriers (b) 202,850 214,340 Deposits 668,432 1,976,585 Radio frequency rights (c) 4,561,667 10,766,390 Other (d) 2,527,245 4,050,186 ----------- ---------- $16,824,268 24,310,564 ----------- ---------- ----------- ----------
(a) Represent commissions paid to brokers and other expenses incurred at the time of, and directly related to, the issuance of the Senior Notes and bank debt. As of December 31, 1999 and 2000 accumulated amortization amounted to $3,365,089 and $5,323,699, respectively. (b) At December 31, 1999 and 2000 deposits with international carriers represent security deposits made by TRICOM for the installation of international circuits. These deposits will be recovered at the termination of the agreements. These agreements mature each year and are automatically renewed unless otherwise terminated by the parties. F-19 (c) Represent payments made for frequency usage rights to expand the cellular and PCS capacity of the Company in the Dominican Republic, as well as payments made for the acquisition of frequencies in El Salvador and Guatemala for approximately $6,500,000. This amount was paid during 2000 as part of the expansion plans to Central America and the Caribbean. These amounts are being amortized over the life of the licenses, which range from 15 to 20 years. As of December 31, 1999 and 2000, accumulated amortization amounted to $198,333 and $518,519, respectively. (d) At December 31, 1999 and 2000 includes deferred commissions related to prepaid calling cards of $2,276,012 and $3,591,760, respectively. 9 BORROWED FUNDS - BANKS Funds borrowed by the Company consist of:
1999 2000 ----------- ---------- Funds denominated in U.S. dollars (a) $56,000,776 78,656,730 Funds denominated in R.D. pesos (b) 7,601,246 3,475,135 ----------- ---------- $63,602,022 82,131,865 =========== ==========
(a) At December 31, 1999 and 2000, these amounts are due to local and international banks and accrue interest at rates ranging from 9.5% to 12% per annum in 1999 and 9.8% to 12% in 2000. (b) At December 31, 1999, these loans were RD$122,000,000 with maturities ranging from 60 to 90 days, bearing interest at rates ranging from 21% to 30% per annum. At December 31, 2000 these loans were RD$58,000,000 bearing interest at 26% per annum. At December 31, 2000 the Company has undrawn lines of credit available with local and international banks of approximately $32,900,000. 10 CAPITAL LEASES Since December 1999, the Company has entered into various capital lease contracts with a related party. These contracts mature at various dates during the next four years. Assets recorded under these leases consist of:
1999 2000 ----------- ---------- Communications equipment $17,248,429 42,488,488 Communications equipment pending installation 7,548,214 - Transportation 1,176,001 1,176,001 Machinery and equipment 271,356 271,356 ----------- ---------- 26,244,000 43,935,845 Less accumulated depreciation - 2,350,834 ----------- ---------- $26,244,000 41,585,011 =========== ==========
A schedule of the future lease payments under these capital leases is as follows: Year ending December 31, 2001 $ 8,523,816 2002 8,523,816 2003 7,939,101 2004 3,783,337 ----------- Total lease payments 28,770,070 F-20 Less related taxes 3114,639 ----------- Minimum lease payments 25,655,431 Less amount representing interest (12% to 12.875%) 4,826,156 ----------- Present value of net minimum capital lease payments 20,829,275 Less current maturities of capital lease obligations 5,308,310 ----------- Capital lease obligations $15,520,965 ===========
11 TRANSACTIONS WITH CARRIERS Accounts receivable from carriers arise from the interconnection services of inbound calls, while accounts payable result from interconnection services of outbound calls. These charges are based on minutes billed. Amounts paid to carriers constitute one of the main operating costs of the Company. Net amounts receivable and payable for these activities at December 31, 1999 and 2000 were as follow:
1999 2000 --------------------------- -------------------------- RECEIVABLE PAYABLE RECEIVABLE PAYABLE ----------- --------- ---------- ---------- Inbound $12,406,384 - 13,699,020 - Outbound (5,939,368) 1,785,132 (4,969,134) 12,323,898 Payable accounts interconnection operations - CODETEL - 1,202,247 - 1,511,378 ----------- --------- ---------- ---------- $ 6,467,016 2,987,379 8,729,886 13,835,276 =========== ========= ========== ==========
12 OTHER LIABILITIES Other liabilities at December 31, 1999 and 2000 consisted of the following:
1999 2000 ---------- ---------- Customer advances $1,203,764 1,256,345 Deferred revenues: Calling cards 2,130,985 3,622,686 Installations and activations - 14,654,886 OOther 454,958 456,573 ---------- ---------- $3,789,707 19,990,490 ========== ==========
Effective January 1 2000, the Company adopted the Staff Accounting Bulletin (SAB 101) "Revenue Recognition" issued by the Securities and Exchange Commission (SEC). The adoption of SAB 101 resulted in a change in the revenue recognition policy regarding installation and activation revenues. Such change required the Company to recognize net revenues from installation and activation over the average service life based on the experience of the Company (35 months). This change in the revenue recognition method required the Company to recognize a cumulative effect of accounting change in net revenues from installations and activations for $16,452,799, which is presented as a separate item in the accompanying consolidated statements of operations. The adoption of this bulletin did not affect the cash flows of the Company. F-21 13 ACCRUED EXPENSES A summary of accrued expenses at December 31, 1999 and 2000 is as follows:
1999 2000 ----------- ---------- Expenses in lieu of income tax payable $ 3,085,766 627,543 Interest payable 8,783,221 9,854,165 Other 3,424,923 3,553,474 ----------- ---------- $15,293,910 14,035,182 =========== ==========
14 LONG-TERM DEBT Long-term debt is summarized as follows:
1999 2000 ------------ ----------- Senior notes (a) $200,000,000 200,000,000 Bank loans: Four loans with Dominican banks for a total amount of RD$65,600,000 in 1999 and six loans for a total amount of RD$103,586,975 in 2000; with interest ranging from 20% to 24% per annum in 1999 and 24% to 26% per annum in 2000. These loans are due in monthly installments of RD$2,812,682 (approximately US$168,525) including principal and interest, starting January, 2000 through December, 2007; five of these loans are secured by communications equipment with a carrying value of $7,283,201, the remainder is unsecured. 4,087,227 6,206,529 Loan from Export-Import Bank through International Bank of Miami for equipment purchases for a total approved amount of $36,002,530, which includes $2,267,026 of interest paid in advance, which amount is allocated proportionately to individual amounts drawn. Interest is payable semi-annually at a rate of 30-day LIBOR plus 2.25% (annually) until May 15, 2001. The principal amount is payable in 10 semi-annual installments of approximately $2,023,017 each, from June 15, 2002 to December 15, 2006. The latest date to draw against the loan is May 15, 2001. After such date, this loan will bear interest at a rate equal to that of 3 year US Treasuries plus 2%. This loan is guaranteed by TRICOM USA. - 20,230,169 Loan with Banco Popular de Puerto Rico for a total amount of $15,000,000, with monthly interest payments at LIBOR plus 4%. The principal amount will be paid in 3 installments of $3,000,000 in June 2003, $4,000,000 in December 2003 and $8,000,000 in June 2004. This loan is guaranteed by TRICOM USA. - 15,000,000 Loan with General Electric Capital Corporation of Puerto Rico for $8,000,000. This loan bears interest at 30 day LIBOR plus 2.75%. The principal amount is payable in 36 monthly installments of $222,222 starting in January 2001. This loan is collateralized by transmission and communication equipment at a cost of $15,864,000. - 8,000,000 10% unsecured line of credit with Citibank, N. A. for $10,000,000. 10,000,000 - $15,000,000 revolving line of credit with Hamilton Bank, N. A. due in 2002. This loan bears interest at Citibank, N. A. prime rate (9% at December 31, 1999 and 10% at December 31, 2000) plus 0.05%. This line of credit is guaranteed by TRICOM, S.A. an affiliate Banco Nacional de Credito, S.A. 15,000,000 15,000,000 ------------ ----------- Total bank loans 29,087,227 64,436,698 ------------ ----------- Total long-term debt 229,087,227 264,436,698 Less current portion of long-term debt 315,216 3,213,939 ------------ ----------- Long-term debt excluding current portion $228,772,011 261,222,759 ------------ ----------- ------------ -----------
F-22 The aggregate principal amounts due on these long-term debt obligations are as follow: Year ending December 31, 2001 $ 3,213,939 2002 22,410,643 2003 14,602,812 2004 213,181,348 2005 5,418,810 2006 and thereafter 5,609,146
(a) Senior Notes On August 15, 1997, the Company issued $200,000,000 aggregate principal amount of 11 3/8% Senior Notes due in 2004 (the "Senior Notes"). Interest on the Senior Notes is payable in semi-annual installments on March 1st and September 1st of each year. The Senior Notes may be redeemed at any time at the option of the Company, in whole or in part, after September 1, 2001, at a premium declining to par after September 1, 2003, plus accrued and unpaid interest, and additional amounts, if any, through the redemption date. The Senior Notes are senior unsecured obligations of the Company ranking pari passu in right of payment with all other existing and future senior debt, and will rank senior to any future subordinated indebtedness. The indenture for the Senior Notes contains certain covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries, as defined in the indenture, to incur additional indebtedness and issue preferred stock, pay dividends or make other distributions, repurchase equity interests or subordinated indebtedness, engage in sale and leaseback transactions, create certain liens, enter into certain transactions with affiliates, sell assets of the Company or its Restricted Subsidiaries, engage in any business other than the telecommunications business, issue or sell equity interests of the Company's Restricted Subsidiaries or enter into certain mergers and consolidations. The fair value of this long term debt at December 31, 2000 is estimated in the amount of $186,000,000 determined through a combination of management estimates and information obtained from independent third parties, using market data available on the last business day of the year. The Senior Notes are guaranteed fully, unconditionally and jointly and severally by some of the Company's subsidiaries, each of which is wholly owned by the Company. Separate financial statements of each of the guarantor subsidiaries have not been presented herein because management has determined that such separate financial statements would not be material to the holders of the Senior Notes. Summarized condensed consolidated financial information of TRICOM, S.A. (Parent Company), the subsidiaries guarantors on a combined basis ( Comunicaciones, Tricom Latinoamerica, S.A. (previously Bay Tel), Call Tel and TRICOM USA and Subsidiaries) and the subsidiaries not guarantors on a combined basis at December 31, 1999 and 2000 and for the years ended December 31, 1998, 1999 and 2000 is as follows (see note 1): BALANCE SHEET DATA AS OF DECEMBER 31, 1999:
OTHERS CONSOLIDATION AND F-23 TRICOM, S.A. SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL PARENT CO. GUARANTORS NO GUARANTORS ADJUSTMENTS CONSOLIDATED ------------ ------------ ------------- ----------- ------------ Assets Current assets: Cash and cash equivalents $ 12,844,764 614,802 - - 13,459,566 Accounts receivable, net 29,561,365 17,050,832 (20,483,464) 26,128,733 Other current liabilities 16,132,885 1,154,627 - - 17,287,512 ------------ ------------ ------------- ----------- ------------ Total current assets 58,539,014 18,820,261 (20,483,464) 56,875,811 Property and equipment, net 446,964,891 8,080,300 - - 455,045,191 Other non-current assets 23,548,421 1,243,774 - (5,234,736) 19,557,459 ------------ ------------ ------------- ----------- ------------ $529,052,326 28,144,335 - (25,718,200) 531,478,461 ------------ ------------ ------------- ----------- ------------ ------------ ------------ ------------- ----------- ------------ Liabilities and Stockholders' Equity Current liabilities: Notes payable $ 81,813,184 - - - 81,813,184 Current portion of capital leasing 14,242,056 - - - 14,242,056 Accounts payable 41,691,399 4,187,606 - (20,483,464) 25,395,541 Other current liabilities 16,047,376 3,036,241 - - 19,083,617 ------------ ------------ ------------- ----------- ------------ Total current liabilities 153,794,015 7,223,847 - (20,483,464) 140,534,398 Other non-current liabilities 225,389,484 15,685,752 - - 241,075,236 ------------ ------------ ------------- ----------- ------------ Total liabilities 379,183,499 22,909,599 - (20,483,464) 381,609,634 Stockholders' equity: 149,868,827 5,234,736 - (5,234,736) 149,868,827 ------------ ------------ ------------- ----------- ------------ $529,052,326 28,144,335 - (25,718,200) 531,478,461 ------------ ------------ ------------- ----------- ------------ ------------ ------------ ------------- ----------- ------------
BALANCE SHEET DATA AT DECEMBER 31, 2000:
OTHERS CONSOLIDATION AND TRICOM, S.A. SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL PARENT CO. GUARANTORS NO GUARANTORS ADJUSTMENTS CONSOLIDATED ------------ ------------ -------------- ------------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 17,241,951 919,185 38,416 - 18,199,552 Accounts receivable, net 42,620,337 13,590,450 25,870,144 (49,954,179) 32,126,752 Other current assets 17,049,765 1,239,867 - - 18,289,632 ------------ ------------ ------------- ------------------ ------------ Total current assets 76,912,053 15,749,502 25,908,560 (49,954,179) 68,615,936 Property and equipment, net 557,465,684 26,726,431 2,031,785 - 586,223,900 Other non-current assets 58,932,766 2,765,051 6,442,682 (40,540,476) 27,600,023 F-24 ------------ ------------ ------------- ------------------ ------------ $693,310,503 45,240,984 34,383,027 (90,494,655) 682,439,859 ------------ ------------ ------------- ------------------ ------------ ------------ ------------ ------------- ------------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $116,756,416 - - - 116,756,416 Current portion of capital leasing 5,308,310 - - - 5,308,310 Accounts payable 68,895,750 18,692,598 190,801 (49,954,179) 37,824,970 Other current liabilities 29,800,403 4,225,269 - 34,025,672 ------------ ------------ ------------- ------------------ ------------ Total current liabilities 220,760,879 22,917,867 190,801 (49,954,179) 193,915,368 Other non-current liabilities 261,753,451 15,974,867 - - 277,728,318 ------------ ------------ ------------- ------------------ ------------ Total liabilities 482,514,330 38,892,734 190,801 (49,954,179) 471,643,686 Stockholders' equity 210,796,173 6,348,250 34,192,226 (40,540,476) 210,796,173 ------------ ------------ ------------- ------------------ ------------ $693,310,503 45,240,984 34,383,027 (90,494,655) 682,439,859 ------------ ------------ ------------- ------------------ ------------ ------------ ------------ ------------- ------------------ ------------
STATEMENTS OF OPERATIONS DATA FOR THE YEAR ENDED DECEMBER 31, 1998
OTHERS CONSOLIDATION AND TRICOM, S.A. SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL PARENT CO. GUARANTORS NO GUARANTORS ADJUSTMENTS CONSOLIDATED ------------- ------------ ------------- ----------------- ------------ Operating revenues $116,270,423 27,919,654 - (18,688,685) 125,501,392 Operating costs (85,850,736) (28,861,720) - 18,688,685 (96,023,771) ------------- ------------ ------------- ----------------- ------------ Operating income 30,419,687 (942,066) - - 29,477,621 Other income (expenses), net (12,514,098) 21,685 - 568,690 (11,923,723) ------------- ------------ ------------- ----------------- ------------ Earnings before income taxes 17,905,589 (920,381) - 568,690 17,553,898 Income taxes - 351,691 - - 351,691 ------------- ------------ ------------- ----------------- ------------ Net earning (loss) $ 17,905,589 (568,690) - 568,690 17,905,589 ------------- ------------ ------------- ----------------- ------------ ------------- ------------ ------------- ----------------- ------------
STATEMENTS OF OPERATIONS DATA FOR THE YEAR ENDED DECEMBER 31, 1999:
OTHERS CONSOLIDATION AND TRICOM, S.A. SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL PARENT CO. GUARANTORS NO GUARANTORS ADJUSTMENTS CONSOLIDATED -------------- ------------ ------------- ----------------- ------------ Operating revenues $ 155,895,506 36,179,982 - (21,256,547) 170,818,941 Operating costs (115,133,014) (35,480,394) - 21,256,547 (129,356,861) -------------- ------------ ------------- ----------------- ------------ Operating income 40,762,492 699,588 - - 41,462,080 Other expenses, net (18,608,256) (868,817) - 310,889 (19,166,184) -------------- ------------ ------------- ----------------- ------------ Earnings before income taxes and Cumulative effect of accounting Change 22,154,236 (169,229) - 310,889 22,295,896 Income taxes - (141,660) - - (141,660) -------------- ------------ ------------- ----------------- ------------ Earnings(loss) before cumulative effect F-25 of accounting change 22,154,236 (310,889) - 310,889 22,154,236 Cumulative effect of accounting change in Organizations costs (119,711) - - - (119,711) -------------- ------------ ------------- ----------------- ------------ Net earning (loss) $ 22,034,525 (310,889) - 310,889 22,034,525 -------------- ------------ ------------- ----------------- ------------ -------------- ------------ ------------- ----------------- ------------
STATEMENTS OF OPERATIONS DATA FOR THE YEAR ENDED DECEMBER 31, 2000:
TRICOM, OTHER CONSOLIDATION AND S.A. SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL PARENT CO. GUARANTORS NO GUARANTORS ADJUSTMENTS CONSOLIDATED -------------- ------------ ------------- ----------------- ------------ Operating revenues $ 188,897,636 65,697,691 - (30,297,672) 224,297,655 Operating costs (150,954,070) (62,537,158) (82,214) 30,297,672 (183,275,770) -------------- ------------ ------------- ----------------- ------------ Operating income 37,943,566 3,160,533 (82,214) - 41,021,885 Other expenses, net (28,716,402) (1,458,642) 185,241 (1,216,541) (31,206,344) -------------- ------------ ------------- ----------------- ------------ Earnings before income taxes and cumulative effect of accounting Change 9,227,164 1,701,891 103,027 (1,216,541) 9,815,541 Income taxes - (588,377) - - (588,377) -------------- ------------ ------------- ----------------- ------------ Earnings before cumulative effect of accounting change 9,227,164 1,113,514 103,027 (1,216,541) 9,227,164 Cumulative effect of change in accounting for installations and activation revenues (16,452,799) - - - (16,452,799) -------------- ------------ ------------- ----------------- ------------ Net earning (loss) $ (7,225,635) 1,113,514 103,027 (1,216,541) (7,225,635) -------------- ------------ ------------- ----------------- ------------ -------------- ------------ ------------- ----------------- ------------
CASH FLOW DATA FOR THE YEAR ENDED DECEMBER 31, 1998:
OTHERS CONSOLIDATION AND TRICOM, S.A. SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL PARENT CO. GUARANTORS NO GUARANTORS ADJUSTMENTS CONSOLIDATED -------------- ------------ ------------- ----------------- ------------ Net cash provided by operating activities $ 26,828,900 83,061 - - 26,911,961 Net cash used in investing activities (120,928,618) (3,241,348) - 2,999,000 (121,170,966) Net cash provided by financing activities 104,065,263 2,999,000 - (2,999,000) 104,065,263 Effect in exchange rate changes on cash (161,441) 88 - - (161,353) -------------- ------------ ------------- ----------------- ------------ Net increase (decrease) in cash and cash equivalents 9,804,104 (159,199) - - 9,644,905 Cash and cash equivalents at beginning of the year 5,310,138 422,367 - - 5,732,505 -------------- ------------ ------------- ----------------- ------------ Cash and cash equivalents at the end of the year $ 15,114,242 263,168 - - 15,377,410 -------------- ------------ ------------- ----------------- ------------ -------------- ------------ ------------- ----------------- ------------
CASH FLOW DATA FOR THE YEAR ENDED DECEMBER 31, 1999:
OTHERS CONSOLIDATION AND TRICOM, S.A. SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL PARENT CO. GUARANTORS NO GUARANTORS ADJUSTMENTS CONSOLIDATED ------------ ------------ ------------- ----------------- ------------ F-26 Net cash provided by (used in) operating activities $ 38,455,777 (6,929,619) - - 31,526,158 Net cash used in investing activities (62,214,283) (2,145,814) - - (64,360,097) Net cash provided by financing activities 21,539,440 9,427,032 - - 30,966,472 Effect in exchange rate changes on cash (50,412) 35 - - (50,377) ------------ ------------ ------------- ----------------- ------------ Net increase (decrease) in cash and cash equivalents (2,269,478) 351,634 - - (1,917,844) Cash and cash equivalents at beginning of the year 15,114,242 263,168 - - 15,377,410 ------------ ------------ ------------- ----------------- ------------ Cash and cash equivalents at the end of the year $ 12,844,764 614,802 - - 13,459,566 ------------ ------------ ------------- ----------------- ------------ ------------ ------------ ------------- ----------------- ------------
CASH FLOW DATA FOR THE YEAR ENDED DECEMBER 31, 2000:
OTHERS CONSOLIDATION AND TRICOM, S.A. SUBSIDIARIES SUBSIDIARIES ELIMINATION TOTAL PARENT CO. GUARANTORS NO GUARANTORS ADJUSTMENTS CONSOLIDATED ------------- ------------ ------------- ----------------- ------------ Net cash provided by (used in) operating activities $ 54,506,114 20,042,719 (32,209,799) - 42,339,034 Net cash used in investing activities (161,904,855) (19,738,336) (2,031,785) 34,280,000 (149,394,976) Net cash provided by financing activities 111,795,928 - 34,280,000 (34,280,000) 111,795,928 ------------- ------------ ------------- ----------------- ------------ Net increase in cash and cash equivalents 4,397,187 304,383 38,416 - 4,739,986 Cash and cash equivalents at beginning of the year 12,844,764 614,802 - - 13,459,566 ------------- ------------ ------------- ----------------- ------------ Cash and cash equivalents at the end of the year $ 17,241,951 919,185 38,416 - 18,199,552 ------------- ------------ ------------- ----------------- ------------ ------------- ------------ ------------- ----------------- ------------
F-27 15 STOCKHOLDERS' EQUITY The authorized capital stock of the Company consists of 55,000,000 shares of Class A common stock and 25,000,000 shares of Class B common stock. All of the Company's outstanding shares are duly authorized, validly issued and fully paid. Both classes of capital stock vote together as a single class, except on any matter that would adversely affect the rights of either class. The Class A common stock has one vote per share and the Class B has ten votes per share. The economic rights of each class of capital stock are identical. In the second quarter of 1998, the Company sold 5,700,000 Class A common shares in a public offering for US$74.1 million, net of issuance costs of $6,346,545. The proceeds of this issuance were used to expand the Company's local service, cellular and PCS networks and its international switching and circuit capacity. As well as paying short-term debt primarily incurred to fund equipment purchases. All share and per share data set forth in the financial statements reflect the reclassification of the Company's shares of common stock that were outstanding prior to TRICOM's initial 1998 public offering of American Depository Shares into shares of Class B stock and give effect to an approximate 3.3132-for-one stock split at that time. During the second quarter of 2000, the Company sold 4,000,000 Class A common shares in a public offering for US$74.0 million, net of issuance costs of $6,852,774. The proceeds of this issuance were used for capital expenditures associated with increasing the capacity and coverage of local access, mobile and data networks and to expand international facilities to support increased traffic volume and to fund working capital. 16 EXPENSE IN LIEU OF INCOME TAXES In accordance with the terms of the Concession Agreement signed with the Dominican Government, as revised on February 20, 1996 TRICOM, S.A. had an exemption from income tax but had to pay a fixed tax equal to 10% of gross domestic revenues, after deducting charges for access to the local network, plus 10% of net international settlement revenues. This tax will never be less than RD$18,000,000 ($1,078,500) annually. In addition, since July 1998, expense in lieu of income taxes also includes a tax of 2% on international settlement revenues collected. For December 31, 1998, 1999 and 2000, the cost of this additional tax was $315,801, $566,549 and $364,434, respectively, which is included as part of expense in lieu of income taxes in the accompanying consolidated statements of operations. During the year ended December 31, 2000 the Company paid RD$7,500,000 ($449,371) as an advance deposit against the fixed tax 10%. As of December 31, 2000, there is RD$6,120,000 (equivalent to $366,687) included in prepaid expenses in the accompanying consolidated balance sheets. At December 31, 1999 the Company paid as an advance of RD$30,000,000 ($1,869,159), which is included in prepaid expenses in the accompanying consolidated balance sheet. This prepayment was used to offset taxes for the year 2000. F-28 17 INCOME TAX The Company is subject to income taxes in the United States. The components of income taxes follow:
1998 1999 2000 ---- ---- ---- Current tax provision $ - (108,000) (96,487) Deferred tax 351,691 (33,660) (491,890) ---------------- --------- --------- $ 351,691 (141,660) (588,377) ================ ========= ========= The provision for current income taxes is composed of the following: Federal - Alternative minimum tax $ - (71,701) (96,487) State income tax, net of federal benefit - (36,299) - ---------------- --------- --------- $ - (108,000) (96,487) ================ ========= =========
The components of deferred income taxes in the United States follow: Deferred revenues $ 483,011 737,410 211,304 Net operating loss carry forward 209,001 45,856 195,064 Tax credit carry forward - 100,825 132,961 Other 43,361 65,099 261,679 ---------------- --------- --------- 735,373 949,190 801,008 Deferred tax liabilities - property and equipment 383,682 631,159 974,867 ---------------- --------- --------- $ 351,691 318,031 (173,859) ================ ========= =========
The Company has not recorded a valuation allowance for the deferred tax assets because it believes that sufficient book and taxable income will be generated to realize the benefit of these tax assets. At December 31, 2000, the Company had net operating loss carryforwards ("NOLS") aggregating approximately $586,472 expiring in the year 2019. In addition, the Company has alternative minimum tax credit carryforwards aggregating approximately $132,961. Subsidiaries operating in the Republic of Panama and the Cayman Islands are exempt from income taxes as long as they operate outside the Republic of Panama and Cayman Islands. 18 PENSION BENEFITS Beginning September 1, 2000, AFP Siembra, S.A. a related pension management company, has managed the Company's pension plan as individual defined contribution accounts (similar to the United States 401K plan). The plan management company maintains the investments on behalf of the plan participants and reports changes in the value of the individual accounts on a unit investment system. Under this arrangement, the Company contributes 5% of the employee's salary and the employee contributes 4%. Since September 1, 2000, the Company's expense for this plan was approximately $207,000, and is included as part of general and administrative expenses in the accompanying consolidated statements of operations. The pension management company guarantees a minimum return of 1.5% over the mean of the average bid interest rate offered by certificates of deposit from Dominican commercial and multiple services banks reported by the Central Bank of the Dominican Republic, determined monthly, considering the date in which the funds entered the individual account. The pension management company commits to permanently maintain on deposit with banks 90% of the instruments that comprise the total amount of the portfolio of funds being managed. The cost of this service F-29 is RD$50 (approximately $3) per employee per month, which will is deducted monthly from the contributions that the employer (the Company) makes. The pension management company earns performance bonus of 1% annually on the cumulative balance of each account under its management. Prior to September 1, 2000, substantially all of the employees of the Company were included in a defined benefit plan that was established by Grupo Financiero. The benefits were based on the years of service and the employees' compensation during the last years before retirement. This plan was administered by the Plan de Pensiones y Jubilaciones del Grupo Financiero Nacional, S.A. The Company made annual contributions to the Plan based on contribution levels determined by independent actuaries. The Company's pension expense was approximately $433,000, $587,000 and $531,000 in the years ended December 31, 1998, 1999 and 2000, respectively, and is included as part of general and administrative expenses in the accompanying consolidated statements of operations. The following summarizes pension obligation information and estimated plan asset information for the Company individually, which were administered by the Plan de Pensiones as of November 30, 1999 is as follows: CHANGES IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 2,234,367 Change in exchange rate (61,253) --------------- Benefit obligation at beginning of year, as adjusted 2,173,114 Service cost 940,622 Interest cost 186,824 Actuarial gain 271,744 Benefits paid (88,392) Adjustments 72,260 --------------- Benefit obligation at end of year 3,556,172 --------------- CHANGES IN PLAN ASSETS Fair value of plan assets at beginning (a) 2,513,478 Change in exchange rate (68,906) --------------- Fair value of plan assets at beginning of year, adjusted 2,444,572 Actual return in plan assets 419,038 Employer contribution 586,887 Plan participants' contributions 359,072 Benefits paid (88,392) Expenses and other adjustments (65,001) --------------- Fair value of plan assets at end of year (a) 3,656,176 --------------- Funded status of the plan $ 100,004 =============== RATE ASSUMPTIONS Discount rates 6.00% Rate of return on plan assets 14.39% ===============
(a) Corresponds to an estimate of the assets allocable to the Company. This estimate was based on the ratio of total obligations of TRICOM to the total obligation of Grupo Financiero applied to the total plan assets. However, there is no formal segregation of assets applicable to the employees of the Company. 19 COMMITMENTS AND CONTINGENCIES Since 1995, TRICOM has entered into operating leases with related companies. The total expense under these leases in 1998, 1999 and 2000 was $72,582, $108,578, and $157,600 respectively. F-30 TRICOM maintains contracts with foreign entities for the traffic of overseas calls. Such contracts require each entity to obtain the necessary facilities to establish, maintain and operate its respective terminals. The costs of each contract are based upon negotiation rates, which are computed based on the amount of traffic each month. For the years ended December 31, 1998, 1999 and 2000 this cost was $4,273,617, $3,706,683 and $4,916,317, respectively, and is included in the cost of satellite connections in the accompanying consolidated statements of operations. The Company has commitments for the purchase of transmission and communication equipment with Motorola, Inc. for $14,540,747. This equipment will be installed in Panama, in accordance with the Company's expansion plans. On May 8, 1997, the Federal Communications Commission ("FCC") issued an order to implement the provisions of the Telecommunications Act of 1996 relating to the preservation and advancement of universal telephone service (the "Universal Service Fund"). The Universal Service Order requires all telecommunications carriers providing interstate telecommunications services to contribute to universal service by contribution to a fund (the "Universal Service Fund"). Universal Service Fund contributions were assessed based upon intrastate, interstate and international end-user gross telecommunications revenue effective January 1 through December 31. At December 31, 1999 and 2000 the Company contributed $141,141 and $251,386, respectively, to the "Universal Service Fund" on end-user telecommunications revenue of $4,756,792 in 1999 and $3,585,572 in 2000. The contribution paid is included as part of general and administrative expenses in the accompanying statements of operations. OTHER LEASE OBLIGATIONS The Company maintains operating leases for the use of office space, telecommunication centers, commercial offices, warehouse, an automobile, an aircraft and others. The operating leases are renewable at the end of the lease period, which is usually one year. Expenses for these leases in 1998, 1999 and 2000 were approximately $405,000, $476,000 and $1,754,000, and are included in general and administrative expenses in the consolidated statements of operations. The lease payments for the next five years are as follows:
Year Amount ---- ------ 2001 $ 2,598,151 2002 2,651,370 2003 2,740,499 2004 2,864,819 2005 and future 12,374,241 ===============
LEGAL PROCEEDINGS In August 1999, a Dominican company and two individual plaintiffs sued the Company before Dominican courts for alleged losses and damages of up to approximately RD$200,000,000 (approximately $12,000,000) resulting from the imprisonment by Dominican authorities of two of the individuals for 15 days. The plaintiffs alleged that their imprisonment was the result of an investigation by the local district attorney and the police that the Company instigated following an irregular increase in telephonic traffic at a certain telephone number. The case is pending decision from the Judge. After consulting with legal counsel, the Company believes that this matter will not have a material adverse effect on results of operations or financial position. The Company is involved in other lawsuits and legal actions that have resulted from its ordinary business activities, under which claims amount to approximately US$6,800,000 (RD$113,000,000). Management has evaluated these claims and believes that the final outcome of these matters will not have an adverse effect on the results of the operations or the financial position of the Company. F-31 No amounts have been recorded in the accompanying financial statements related to these legal proceedings. SEVERANCE INDEMNITIES Companies based in the Dominican Republic maintain reserves under the provisions of U.S. Statement of Financial Accounting Standards "SFAS" 112 to cover the ultimate payment of severance indemnities. Severance expense amounted to $257,690, $328,807 and $760,740 in the years ended December 31, 1998, 1999 and 2000 and are included as part of general and administrative expenses in the accompanying consolidated statement of operations. 20 BUSINESS AND CREDIT CONCENTRATION In the normal course of business, the Company has accounts receivable from carriers. Although the Company's exposure to credit risk associated with non-payment by these carriers is affected by conditions or occurrences within the industry, most of these receivables are due from large, well-established companies. The Company does not believe that this concentration of credit risk represents a material risk of loss. 21 LEGAL RESERVE Article 58 of the Code of Commerce of the Dominican Republic requires all companies to segregate at least 5% of net earnings as a legal reserve until such reserve reaches 10% of paid- in capital. This reserve is not available for dividend distribution, except in case of dissolution of the corporation. 22 STOCK OPTION PLAN At May 4, 1998, the Company initiated a Long-term Incentive Plan, in which certain employees could be granted options to purchase shares of the Company's common stock. The Plan is administered by the Board of Directors of the Company and has the authority to determine which employees will participate in the Plan. The Plan authorizes grants of options to purchase up to 750,000 shares of authorized but unissued common stock. Stock options are granted with an exercise price equal to the stock's fair market value at the date of grant. All stock options have ten-year terms and vest and become exercisable after three years from the date of grant. At December 31, 1999 and 2000, there were 436,580 and 230,370 additional shares available for grant under the Plan, respectively. The Company applies APB Opinion No. 25 in accounting for its Plan and, accordingly, no compensation cost has been recognized for its stock options in the financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net income would have been reduced to the pro-forma amounts indicated below.
1999 2000 ---- ---- Net earnings (loss) - as reported $ 22,034,525 (7,225,635) Net earnings (loss) - proforma 21,648,100 (7,929,562) =============== =========== Net earnings (loss) per share: As reported - basic and diluted 0.89 (0.26) =============== =========== Pro-forma - basic and diluted 0.87 (0.28) =============== ===========
Weighted Average Exercise Options Price -------- -------- Balance, December 31, 1997 - - Granted 477,664 12.95 -------- ----- F-32 Balance, December 31, 1998 477,664 12.95 Granted (a) 251,420 8.06 Cancelled (a) (415,664) 13.00 -------- ----- Balance, December 31, 1999 313,420 8.96 Granted 207,245 20.45 Surrendered (1,035) 8.06 -------- ----- Balance, December 31, 2000 519,630 13.53 ======== =====
(a) Corresponds to the reduction in the exercise price from $13.00 to $8.06 of options granted in 1998. The number of options was also reduced proportionately. All other conditions were unchanged. Effective July 1, 2000, the FASB issued Financial Interpretation No. 44 (FIN 44) which amended APB 25 and requires "variable" accounting for all stock option repricing retroactive to December 15, 1998. As a result, these options will require variable accounting until they are exercised, cancelled, forfeited or expired. Under variable accounting, compensation expense must be measured by the difference between the exercise price and the market price of the Company's stock at each reporting period amortized over the vesting period. The effect of the application of FIN 44 during 2000 was not significant. Exercise prices of options outstanding as of December 31, 2000 ranged from $6.63 to $23.75. The following table provides certain information with respect to stock options outstanding at December 31, 2000:
Weighted Stock Average Weighted Average options Exercise Remaining Range of exercise prices outstanding Price Contractual Life ------------------------ ----------- -------- ---------------- Under $7.00 4,000 6.63 7.92 $7.00 - $10.00 251,815 8.05 7.48 $10.01 - $13.00 62,435 12.88 7.52 $13.01 - $16.00 72,420 15.51 9.65 $16.01 - $19.00 - - - $19.01 - $22.00 5,000 20.90 9.25 $22.00 - $23.75 123,960 23.75 9.25 ------- ----- ---- 519,630 13.53 8.23 ======= ===== ====
The weighted-average fair value at date of grant for options granted during 1999 and 2000 were $8.06 and $20.45, respectively and was estimated using the Black-Scholes option valuation model with the following weighted-average assumptions.
1999 2000 ---- ---- Expected life in years 7.50 7.50 Interest rate 6.33 5.10 Volatility 73.22 79.94 Expected dividends - - ===== =====
Warrants: In October, 1999 the Company entered into an agreement with a third party to provide investor relations service for a period of two years. The Company granted warrants to purchase 300,000 Class A common shares of the Company at an exercise price of $8.875 per share. At December 31, 1999 and 2000 the Company had 150,000 and 250,000 shares vested for this contract, while the remaining 50,000 share will vested in April 28, 2001. The Company is recognizing an expense for the fair value of these options using the Black-Scholes options pricing model as follow: F-33 The 150,000 shares vested in 1999 were valued at the fair value of the shares at the date of grant and the 100,000 shares vested in the year 2000 were valued at the fair value of the shares at the date they were vested. The Company has 50,000 shares that are not vested at December 31, 2000, that are valued at the fair value at December 31, 2000. For the years ended December 31, 1999 and 2000 the Company recognized an expense of $273,000 and $1,005,755, respectively, which is included as part of general and administrative expense in the accompanying consolidated statements of operations. 23 QUARTERLY FINANCIAL DATA (UNAUDITED) The following tables contain selected unaudited consolidated quarterly financial data for the Company:
1999 ------------------------------------------------------------------- FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER ------------- -------------- ------------- -------------- Total operating revenues $ 34,823,199 40,901,880 44,968,825 50,125,037 Operating costs, including depreciation charges of $4,494,884; $5,141,925; $5,158,482 and $6,042,189 for each quarter, respectively 26,495,328 32,149,080 32,719,085 37,993,368 --------------- -------------- ------------- -------------- Operating income 8,327,871 8,752,800 12,249,740 12,131,669 Other expenses, net (3,745,609) (3,547,369) (6,534,080) (5,339,126) --------------- -------------- ------------- -------------- Earnings before income taxes and cumulative effect of accounting change 4,582,262 5,205,431 5,715,660 6,792,543 Income tax benefit (expense) 56,203 - - (197,863) --------------- -------------- ------------- -------------- Earnings before cumulative effect of accounting change 4,638,465 5,205,431 5,715,660 6,594,680 Cumulative effect of accounting change for organization expenses - - - (119,711) --------------- -------------- ------------- -------------- Net earnings $ 4,638,465 5,205,431 5,715,660 6,474,969 --------------- -------------- ------------- -------------- --------------- -------------- ------------- -------------- Earnings per share $ 0.19 0.21 0.23 0.26 --------------- -------------- ------------- -------------- --------------- -------------- ------------- -------------- Number of common shares used in calculation 24,844,544 24,844,544 24,844,544 24,844,544 --------------- -------------- ------------- -------------- --------------- -------------- ------------- --------------
2000 ------------------------------------------------------------------- FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER ------------- -------------- ------------- -------------- Total operating revenues $ 50,229,735 53,081,404 57,919,395 63,067,121 Operating costs, including depreciation charges of $7,552,734; $8,390,173; $9,168,662 and $11,053,710 for each quarter, respectively 39,401,870 44,406,622 47,125,015 52,342,263 -------------- -------------- ------------- -------------- Operating income 10,827,865 8,674,782 10,794,380 10,724,858 Other expenses, net (8,172,126) (6,818,441) (7,297,368) (8,918,409) -------------- -------------- ------------- -------------- F-34 Earnings before income taxes and cumulative effect of accounting change 2,655,739 1,856,341 3,497,012 1,806,449 Income tax benefit (expense) (130,250) (140,568) (160,210) (157,349) -------------- -------------- ------------- -------------- Earnings before cumulative effect of accounting change 2,525,489 1,715,773 3,336,802 1,649,100 Cumulative effect of accounting change for installation and activation revenues (16,452,799) - - - -------------- -------------- ------------- -------------- Net earnings $ (13,927,310) 1,715,773 3,336,802 1,649,100 -------------- -------------- ------------- -------------- -------------- -------------- ------------- -------------- Earnings per share $ (0.56) 0.06 0.12 0.06 -------------- -------------- ------------- -------------- -------------- -------------- ------------- -------------- Number of common shares used in calculation 24,844,544 28,361,028 28,844,544 28,844,544 -------------- -------------- ------------- -------------- -------------- -------------- ------------- --------------
24 SEGMENT INFORMATION In the fourth quarter of 1998, the Company adopted Financial Accounting Standards Board Statement No. 131, "Disclosures about Segment of an Enterprise and Related Information", which establishes standards for reporting information about a company's operating segments. The Company has divided its operations into four reportable segments: Wireline, Cellular, International, and Others based upon similarities in revenue generation, cost recognition, marketing and management of its businesses. The reporting segments follow the same accounting policies used for the Company's consolidated financial statements as described in the summary of significant accounting policies. Management evaluates a segment's performance based upon profit or loss from operations before income taxes. The segments and a description of their business is as follows: Wireline which includes local access lines. Cellular which includes prepaid and postpaid mobile communication products and services. International which includes long distance carrier services and Other which includes services such as paging, internet, local prepaid calling cards and customers contact services. Following is a tabulation of business segment information for each of the past three years.. GEOGRAPHIC
1998 ---------------------------------------------------------------------- DOMINICAN UNITED STATES REPUBLIC ELIMINATIONS CONSOLIDATED ------------- --------- ------------ ------------ International settlement revenues $ 24,208,283 44,812,490 (18,688,685) 50,332,088 Other 2,857,215 72,312,089 - 75,169,304 -------------- ------------ ------------ ------------- Total operating revenues 27,065,498 117,124,579 (18,688,685) 125,501,392 Operating costs 27,818,364 86,894,092 (18,688,685) 96,023,771 -------------- ------------ ------------ ------------- Operating income (loss) $ (752,866) 30,230,487 - 29,477,621 -------------- ------------ ------------ ------------- -------------- ------------ ------------ ------------- Identifiable assets $ 8,603,748 436,763,531 (552,676) 444,814,603 -------------- ------------ ------------ ------------- -------------- ------------ ------------ -------------
1999 ---------------------------------------------------------------------- UNITED STATES DOMINICAN REPUBLIC ELIMINATIONS CONSOLIDATED ------------- ------------------ ------------ ------------ International settlement revenues $ 35,510,406 46,338,275 (21,256,547) 60,592,134 Other 490,836 109,735,971 - 110,226,807 -------------- ------------------ ------------ ------------ Total operating revenues 36,001,242 156,074,246 (21,256,547) 170,818,941 Operating costs 35,007,605 115,605,803 (21,256,547) 129,356,861 -------------- ------------------ ------------ ------------ F-35 Operating income (loss) $ 993,637 40,468,443 - 41,462,080 -------------- ------------------ ------------ ------------ -------------- ------------------ ------------ ------------ Identifiable assets $ 25,525,617 514,417,693 (8,464,849) 531,478,461 -------------- ------------------ ------------ ------------ -------------- ------------------ ------------ ------------
2000 ------------------------------------------------------------------------- UNITED DOMINICAN STATES REPUBLIC OTHER ELIMINATIONS CONSOLIDATED ------ --------- ----- ------------ ------------ International settlement revenues $ 65,667,150 48,817,572 - (30,297,672) 84,187,050 Other 29,768 140,080,837 - - 140,110,605 ---------- ----------- ---------- ------------ ------------ Total operating revenues 65,696,918 188,898,409 - (30,297,672) 224,297,655 - Operating costs 62,056,005 151,435,223 82,214 (30,297,672) 183,275,770 ---------- ----------- ---------- ------------ ------------ Operating income (loss) $ 3,640,913 37,463,186 (82,214) - 41,021,885 ---------- ----------- ---------- ------------ ------------ ---------- ----------- ---------- ------------ ------------ - Identifiable assets $ 38,107,771 697,291,056 34,383,027 (87,341,995) 682,439,859 ---------- ----------- ---------- ------------ ------------ ---------- ----------- ---------- ------------ ------------
PRODUCTS AND SERVICES
1998 ------------------------------------------------------------------------------------------ ELIMINATION WIRELINE CELLULAR INTERNATIONAL OTHERS(A) (B) CONSOLIDATED -------- -------- ------------- --------- ----------- ------------ Revenue $ 35,658,595 26,604,945 69,020,773 12,905,764 (18,688,685) 125,501,392 --------- ---------- ------------ ---------- ----------- ------------ --------- ---------- ------------ ---------- ----------- ------------ Operational income 8,943,886 9,069,722 10,221,879 1,242,134 - 29,477,621 --------- ---------- ------------ ---------- ----------- ------------ --------- ---------- ------------ ---------- ----------- ------------ Proforma operational income assuming the change in accounting principle for installation and activation retroactively 3,424,771 7,732,794 10,221,879 1,242,134 - 22,621,578 --------- ---------- ------------ ---------- ----------- ------------ --------- ---------- ------------ ---------- ----------- ------------ Identifiable assets 88,372,739 66,747,297 22,510,041 267,184,526 - 444,814,603 --------- ---------- ------------ ---------- ----------- ------------ --------- ---------- ------------ ---------- ----------- ------------ Depreciation - expense 7,924,465 3,222,774 1,509,691 1,965,230 14,622,160 --------- ---------- ------------ ---------- ----------- ------------ --------- ---------- ------------ ---------- ----------- ------------ Capital - expenditures $ 69,663,693 31,777,625 6,980,783 33,678,911 142,101,012 --------- ---------- ------------ ---------- ----------- ------------ --------- ---------- ------------ ---------- ----------- ------------
1999 ------------------------------------------------------------------------------------------ WIRELINE CELLULAR INTERNATIONAL OTHERS(A) ELIMINATION(B) CONSOLIDATED -------- -------- ------------- --------- -------------- ------------ Revenue $ 62,572,264 35,346,554 81,848,681 12,307,989 (21,256,547) 170,818,941 ---------- ---------- ------------- ---------- -------------- ------------ ---------- ---------- ------------- ---------- -------------- ------------ Operational income 21,085,005 9,846,875 10,185,960 344,240 - 41,462,080 ---------- ---------- ------------- ---------- -------------- ------------ ---------- ---------- ------------- ---------- -------------- ------------ Proforma operational income assuming the change for accounting principle in installation and activation retroactively 17,193,219 8,768,309 10,185,960 344,240 - 36,491,728 ---------- ---------- ------------- ---------- -------------- ------------ ---------- ---------- ------------- ---------- -------------- ------------ Identifiable assets 177,806,707 110,876,334 25,590,381 217,205,039 - 531,478,461 ---------- ---------- ------------- ---------- -------------- ------------ ---------- ---------- ------------- ---------- -------------- ------------ Depreciation - expense 11,080,231 5,605,645 2,928,174 1,223,430 20,837,480 ---------- ---------- ------------- ---------- -------------- ------------ ---------- ---------- ------------- ---------- -------------- ------------ Capital - expenditures $ 79,065,923 42,573,958 7,602,493 16,183,849 145,426,223 ---------- ---------- ------------- ---------- -------------- ------------ ---------- ---------- ------------- ---------- -------------- ------------
2000 ------------------------------------------------------------------------------------------ WIRELINE CELLULAR INTERNATIONAL OTHERS(A) ELIMINATION(B) CONSOLIDATED -------- -------- ------------- --------- -------------- ------------ Revenue $ 83,491,208 42,450,018 114,484,722 14,169,379 (30,297,672) 224,297,655 ---------- ---------- ----------- ---------- ------------- ----------- ---------- ---------- ----------- ---------- ------------- ----------- Operational income 22,558,963 12,273,329 2,932,170 3,257,423 - 41,021,885 ---------- ---------- ----------- ---------- ------------- ----------- ---------- ---------- ----------- ---------- ------------- ----------- Identifiable assets 155,520,757 267,580,351 38,341,447 220,997,304 - 682,439,859 ---------- ---------- ----------- ---------- ------------- ----------- ---------- ---------- ----------- ---------- ------------- ----------- Depreciation - expense 24,425,105 7,870,113 1,953,356 1,916,705 36,165,279 ---------- ---------- ----------- ---------- ------------- ----------- ---------- ---------- ----------- ---------- ------------- ----------- F-36 Capital expenditures $ 42,975,001 90,751,943 9,476,159 25,710,325 - 168,913,428 ---------- ---------- ----------- -------- ------------- ----------- ---------- ---------- ----------- -------- ------------- -----------
(a)Other (identifiable assets) include administrative/corporate assets which are not revenue-generating. Also includes construction in process and communication equipment pending installation, which at December 31, had not been placed in service and were not specifically associated with any business segment. Other remaining assets do not meet any quantifiable test for determining reportable segments. (b)Corresponds to elimination of the gross revenues between subsidiaries and the Parent Company in international revenues. 25 NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). As amended, the statement becomes effective for fiscal years beginning after June 15, 2000 and will not be applied retroactively. The statement establishes accounting and reporting standards for derivative instruments and hedging activity. The Company has determined that this statement will not have any effect on its financial position or results of operations. 26 CUMULATIVE EFFECT OF ACCOUNTING CHANGE OF ORGANIZATIONS COSTS During 1999, the Company changed its method of accounting for organization expenses in order to comply with Statement of Position No. 98-5, issued by the American Institute of Certified Public Accountants. The change involved expensing these costs as incurred, rather than capitalizing and subsequently amortizing such costs. The change resulted in the write-off of costs capitalized as of January 1, 1999. The cumulative effect of the change of $119,711 has been expensed and reflected as a separate line in the 1999 consolidated statements of operations. F-37 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing Form 20-F and has duly caused this amendment to the annual report to be signed on its behalf by the undersigned, thereunto duly authorized. TRICOM, S.A. Dated: October 8, 2001 By: /s/ Carl H. Carlson ------------------------------------- Carl H. Carlson, Executive Vice President and Member of the Office of the President S-1
EX-4.1 3 a2060683zex-4_1.txt EXHIBIT 4.1 Exhibit 4.1 iDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN TRICOM LATINOAMERICA, S.A. AND MOTOROLA, INC. This iDEN(R) Infrastructure Supply Agreement ("Agreement" or "Supply Agreement") is between Motorola, Inc., a Delaware corporation, by and through its Network Solutions Sector, Customer Solutions Group with offices at 1301 East Algonquin Road, Schaumburg, Illinois 60196 ("Motorola", which term shall also mean, where the context requires, Motorola subsidiaries or subcontractors involved in providing services or materials for this Agreement) and Tricom Latinoamerica, S. A., a Cayman Islands corporation, with offices at Campbell Corporate Services Limited, The Bank of Nova Scotia Building, P.O. Box 268, George Town, Grand Cayman ("Customer" or "Tricom"). RECITALS: Customer has or will obtain certain rights to use certain electromagnetic radio frequencies licensed by the "Spectrum Regulatory Agency" and employs or intends to employ such frequencies to operate iDEN Systems in the "Area" defined below in Section 1. Customer desires to purchase and Motorola desires to sell, and where required by the Customer, Motorola would install and integrate iDEN Systems, as set forth in this Agreement and in the attached Exhibits, which are incorporated herein by reference. Customer is a wholly owned subsidiary of Tricom S.A., a Dominican Republic company. AGREEMENT: Now therefore, in consideration of the mutual obligations herein contained, the parties agree as follows: 1.0 DEFINITIONS Capitalized terms used in this Agreement and the Exhibits shall have the following meanings: ----------- (R) Registered U.S. Patent & Trademark Office. 1 ACCEPTANCE TEST PLAN The Acceptance Test Plan (ATP) means the tests of a System, or portion thereof, mutually agreed upon by Motorola and the Customer and selected from the Generic Acceptance Test Plan (GATP) provided in Exhibit "C." AFFILIATE A company owned by or under common ownership or effective control by another company. AREA Customer's market(s) in Panama, El Salvador, Guatemala, Nicaragua, Honduras and Costa Rica. CHANGE ORDER Any change agreed to in writing, by Customer and Motorola, that modifies the type or quantity of Equipment, Software or Services set forth in a Purchase Order. COMMERCIAL SERVICE The point at which the System or any portion thereof has one or more Subscribers and is functional and operative, that is, the capability of successful completion of calls between Subscribers or between Subscribers and subscribers of any other telephone system, such as a local telephone system. CONDITIONAL ACCEPTANCE AND FINAL ACCEPTANCE Conditional Acceptance of a System shall occur as follows: With respect to Initial Systems, and in the event Customer purchases installation and integration services, Conditional Acceptance shall occur at the earliest of the point in time of: (1) commencement of Commercial Service of the product purchased, or (2) satisfactory completion of the ATP. Final Acceptance shall occur and be evidenced by a notice signed by Customer when all Punchlist items, over which Motorola has control, have been resolved. With respect to Expansion Product purchased with installation and integration services, Conditional and Final Acceptance shall occur in the same manner as provided in the "Conditional Acceptance and Final Acceptance" definition above with respect to the System. 2 For Expansion Product, Equipment or Software purchased without installation and integration services, the Conditional Acceptance and Final Acceptance provisions in this Section will not apply. CONFIDENTIAL INFORMATION Confidential Information means that information which is marked appropriately as confidential or, if orally disclosed, is identified as confidential at the time of disclosure and confirmed in writing within thirty (30) days of such disclosure, which may be exchanged pursuant to this Agreement and shall include, without implied limitation, formulas, processes, designs, photographs, plans, samples, performance reports, Subscriber lists, pricing information, studies, findings, inventions, ideas, drawings, schematics, sketches, specifications, parts lists, technical data, data bases, Software in any form, flow charts, algorithms (as therein specified), business technical information, business plans, strategic alliances, market analysis, and quotation and price information. Excluded from Confidential Information is information: (i) which the recipient had in its possession without confidential limitation prior to disclosure (for which the recipient shall have the burden of demonstrating by clear and convincing evidence); (ii) which is independently developed by either party: (iii) which is known or becomes known to the general public without breach of this Agreement; or (iv) which is received rightfully and without confidential limitation from a third party. CONSULTANT The term consultant means the third party consultant, or group of consultants, hired from time to time by the Customer to advise the Customer in connection with all aspects of this Agreement, including, without limitation, the selection, revision and supervision of the tests of the ATP. DOCUMENTATION The documentation described in Exhibit "H". EQUIPMENT Goods, hardware, and products (other than Software and Subscriber units) which are supplied by or through Motorola to Customer to be used in conjunction with and as part of an iDEN System. EXPANSION PRODUCT All Equipment, Software, and other products and services purchased from Motorola to add to or expand an existing System. 3 FCA When used herein shall be as defined in Incoterms 2000. Motorola shall deliver to Customer's carrier at a manufacturing site or Motorola facility. FIXED NETWORK EQUIPMENT - FNE "FNE" shall mean Motorola supplied Equipment integral to the iDEN System, such as the switch, radio subsystems, dispatch systems, packet, data and intelligent network components. Equipment which is not integral to the Sites, such as antennas, transmission line and combining equipment, is excluded from FNE, as are Subscriber Units. HARMONY SYSTEM The Harmony System is a wireless communication system that offers the latest in digital communications services including two-way dispatch and wireless telephone interconnect, for about five thousand (5,000) subscribers utilizing eight (8) cell sites. iDEN iDEN is the trademark for Motorola's advanced integrated radio-telephone and dispatch communications system that is described in Exhibit "B". IMPLEMENTATION Implementation consists of the services of installing, integrating, optimizing, management and system engineering as listed in Exhibit "A" and performed as described in Exhibit "D". IMPLEMENTATION SCHEDULE The schedule set forth in Exhibit "D" or other agreement for the Initial System or System expansion. The current Implementation Schedule will be modified upon the change of Exhibit A for Panama. INITIAL PROGRAM LOAD (IPL) The Initial Program Load (IPL) Software is that Software delivered with the Initial System or Expansion Product, and shall be the most current version of iDEN Software that is in general release. INITIAL SYSTEM The minimum required System to operate as a digital mobile network to provide mobile integrated services for a country in the Area utilizing the iDEN technology platform. The 4 Initial System for each country of the Area will consist of at least the number of sites indicated below, as shown in phase I of each of the requests of quotation attached hereto as Exhibit "L" ------------------------------------------ ----------------------------- Country Number of Sites ------------------------------------------ ----------------------------- Costa Rica 20 ------------------------------------------ ----------------------------- El Salvador 13 ------------------------------------------ ----------------------------- Guatemala 22 ------------------------------------------ ----------------------------- Honduras 5 ------------------------------------------ ----------------------------- Nicaragua 10 ------------------------------------------ ----------------------------- For Panama the Initial System will be that described in the budgetary proposal attached hereto as current Exhibit "A1". INITIAL SYSTEM'S FIRM QUOTE The Initial System's Firm Quote is the quote prepared by Motorola for each Initial System based on a firm and final request for quotation of an Initial System for a particular country in the Area prepared by Customer and submitted to Motorola at least 5 weeks prior to the date Customer expects to receive such quote. The Initial System's Firm Quote for each of the countries in the Area will become part of this Agreement in the form of Exhibit "A," as follows: ---------------------------------------- ------------------------------- Country Exhibit "A" ---------------------------------------- ------------------------------- Panama A1 ---------------------------------------- ------------------------------- Costa Rica A2 ---------------------------------------- ------------------------------- El Salvador A3 ---------------------------------------- ------------------------------- Guatemala A4 ---------------------------------------- ------------------------------- Honduras A5 ---------------------------------------- ------------------------------- Nicaragua A6 ---------------------------------------- ------------------------------- 5 For Panama, the quote described in the attached Exhibit "A1" is a budgetary quote that will be changed for the final Panamanian Initial System's Firm Quote. INTERCONNECT CARRIER Any local carrier, long distance carrier, or reseller of local or long distance communicating service that is connected to the System. INTERCONNECT FACILITIES The medium connecting the iDEN Network Interconnect Switch to the public switched telephone network or long distance carrier network of any Interconnect Carrier including termination facilities such as protected termination blocks, end office termination repeaters and channel service units to permit direct connection to the System. MOTOROLA QUOTATION Quotations issued by Motorola for Equipment or Services that are not in the Price Book or require customization or deviate in any respect from standard product or service offering detailed in the Price Book. OPERATION AND MAINTENANCE SERVICE Operation and Maintenance Service shall have the meaning set forth in section 4.19. PRICE BOOK Motorola's iDEN(R) INFRASTRUCTURE PRICE BOOK, which is kept by Motorola on the iDEN web site for use in the United States and worldwide, as appropriate, and updated periodically by Motorola. PUNCHLIST The list, prepared during and after the ATP and finalized no later than 14 days subsequent to the date of Conditional Acceptance, which sets forth those items, if any, identified by Customer in good faith and agreed to by Motorola (which agreement Motorola shall not unreasonably withhold or delay) where the Initial System or System Expansion or Expansion Product fail to comply with the applicable specifications and performance standards set forth in Exhibit "B" and the ATP. PURCHASE ORDER A "Purchase Order" is a form whereby Customer places an order for Equipment, Software, and/or other goods and services upon Motorola for the System on a form 6 provided either by Customer or by Motorola, provided that a Purchase Order in proper form and executed by Customer becomes effective upon acceptance by Motorola. RF Radio Frequency. SITE Each of the physical locations comprising the System, which contains FNE, including the geographic location that houses the iDEN mobile switching office equipment. SMP The Software Maintenance Program defined in Exhibit "E-2". SOFTWARE Software means the object-code computer programs furnished by Motorola to Customer for use solely in conjunction with the FNE under the terms of the Software License attached hereto as Exhibit F. A further definition of Software is contained in Exhibit "F". Any reference herein to Software being "sold" or "purchased" shall in fact be deemed to be a reference to Software being "licensed." SPECTRUM REGULATORY AGENCY "Spectrum Regulatory Agency" shall mean the agency of the Government of each of the countries of the Area responsible for radio communications administration and regulation. SUBSCRIBER A person who uses the System entitling the System operator to revenue, other than those using the System during the Customer Performance Test described in Section 5.9 of Exhibit C. SUBSCRIBER UNIT Any manufactured and assembled, mobile or portable, iDEN telecommunications unit intended for use by any Subscriber. SYSTEM A "System" shall be defined as a specified grouping of Equipment, Software and related services supplied by or through Motorola, which operates as a digital mobile network to 7 provide mobile integrated services for a country in the Area utilizing the iDEN technology platform. TECHNICAL DEFINITIONS The definitions set forth in Exhibit "B" shall have the same meaning herein. 2.0 SCOPE OF AGREEMENT: PROVISION, TERM, PURCHASE ORDERS 2.1.1 [Confidential portions omitted and filed separately with the Securities and Exchange Commission pursuant to an application for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.] 2.1.2 [Confidential portions omitted and filed separately with the Securities and Exchange Commission pursuant to an application for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.] 2.2 Sole Supplier In consideration of the benefits and other consideration granted Customer herein, Motorola will be the sole supplier of FNE, Software and services for Customer's iDEN System(s). At any time, if Motorola is no longer the sole supplier, the parties shall renegotiate all pricing hereunder. 2.3 Term The initial term of this Agreement shall commence on the date of its execution and shall continue until five (5) years after such date. Thereafter, the Agreement may be extended for additional terms of three (3) years upon a party providing written notice to the other party at least ninety (90) days prior to the expiration of the then-current term or any renewal thereof. 2.4 Customer shall order Equipment, Software, Services, and System or Expansion Product on Purchase Order(s), provided, however, that Customer agrees that any such documents incorporates this Agreement by reference and that this Agreement supersedes all terms and conditions of such document. Purchase Orders shall identify quantities of goods and/or services ordered and shall include shipping dates and/or shipping locations. All prices shall be as set forth in the then current Price Book or as specifically provided by Motorola in a referenced Motorola Quotation. Standard Equipment order lead times and installation period shall be as set forth in the Price Book, as modified by Motorola from time to time. If a Purchase Order makes reference to a valid Motorola Quotation, such Motorola Quotation shall become incorporated into such Purchase Order when the latter becomes effective. 2.5 Order Process 8 Purchase Orders for Price Book items may be completed by Customer without the need for input from Motorola. Receipt of Purchase Orders will be acknowledged by Motorola. Non-Price Book items require a Motorola Quotation. Customer shall review all documents of a Motorola Quotation and indicate its acceptance by signing and returning an executed copy to Motorola or shall work with Motorola to achieve mutually acceptable revisions to the proposal, after which both parties shall execute such revised proposal. 2.6 Changes in Purchase Orders (a) Purchase Order Modification. Any modification after such Purchase Order has been accepted by Motorola other than cancellation shall be made only by written mutual agreement accompanied by a revised or replacement Purchase Order executed by Customer, except for the type of changes set forth below ("Purchase Order Adjustments"): (i) Changes to Customer requested ship dates, not to exceed ninety (90) days extension; (ii) Changes to shipping locations to an alternate authorized Customer location. (iii) Changes to the initial Purchase Order for Panama to adjust it to the Panamanian Initial System's Firm Quote. Purchase Order Adjustments may be made by agreement of the parties, provided that such agreement is confirmed via contemporaneous faxed or emailed confirmations exchanged between the parties. (b) Purchase Order Cancellation. Customer may cancel a Purchase Order, without charge up to thirty (30) days after the date of the Purchase Order, provided that shipment has not occurred. In other cases and unless otherwise specified in a Motorola Quotation, cancellation fees shall apply. For the MSO/switch, within the forty five (45) days following the Customer's cancellation notice, Motorola will offer for sale the MSO/switch to other customers. In the event no third party is interested in purchasing the MSO/Switch, a cancellation fee of one hundred percent (100%) of the price of the MSO/Switch shall apply. For EBTS Equipment, within the forty five (45) days following the Customer's cancellation notice, Motorola will offer for sale the EBTS Equipment to other customers. In the event no third party is interested in purchasing the EBTS Equipment, a cancellation fee of ninety percent (90%) of the price of the EBTS Equipment shall apply. 9 2.7 Motorola and Customer shall each appoint a Program Manager for each System. Each such System Program Manager shall have the responsibility to make good faith efforts to resolve problems and disputes prior to initiating the dispute resolution procedures set forth in Section 29.0 Disputes, Dispute Resolution and Arbitration. Other responsibilities are as follows: 2.7.1 The responsibilities of the Motorola Program Manager shall include: a. Serve as the primary Customer contact for the System. b. Serve as the focal point for all Motorola internal plant and field issues. c. Deliveries, subcontracts, installation, System testing and integration, documentation, training and all duties required to coordinate any work of the various Motorola team members required by the Customer. d. Clarify the final definition of all Customer and project requirements. e. Establish a detailed project schedule and oversee accomplishment of project milestones. f. Establish the project team structure and staffing. g. Establish and maintain project reporting and measurement procedures. h. Meet regularly with Customer's Program Manager to review progress and project issues. i. Facilitate within Motorola Customer's order placement and order acceptance procedures. 2.7.2 The responsibilities of the Customer Program Manager shall include: a. Serve as primary Motorola contact for the System. b. Serve as the focal point for all Customer internal and field issues. c. Schedule and oversee accomplishment of project milestones. d. Review and approve accomplishment of project milestones. e. Disseminate project reports and measurement procedures within Customer's organization. f. Approve all modifications to specifications. 10 g. Approve and acquire all Sites, notify the Motorola Program Manager of Site availability, and coordinate Motorola's access to the Sites. h. Meet regularly with the Motorola Program Manager to review progress and project issues. 2.8 Additional Operating Entities Customer intends to deploy iDEN in specific countries of the Area, either directly or through operating companies, subsidiaries or partnerships in which it holds at least 51% interest ("Additional Operating Entity" or "AOE"). Motorola and Customer agree that an Additional Operating Entity may take advantage of the rights, and be responsible for the representations, duties and obligations, of the Customer for a particular country of the Area under this Agreement once an amendment to this Agreement in the form of Exhibit "I", attached hereto, is executed between Motorola, Customer and the Additional Operating Entity. The Panamanian AOE will sign Exhibit "I" by November 15, 2000; other AOEs will sign Exhibit "I" within 90 days from the placement of its country's Initial System Purchase Order. Not complying with this requirement will terminate the Preferred Deployment or Headstart benefit described in Section 2.9. 2.9 Preferred Deployment 2.9.1. "Preferred Deployment" means that, in a specific country in the Area, Motorola guarantees Customer priority production, manufacturing and delivery of the totality of its Initial System Purchase Order related to iDEN Systems before initiation of work for any purchase orders in such specific country in the Area of any other interested party related to iDEN Systems, including Harmony System. 2.9.2 The purpose of Preferred Deployment is to maximize the deployment and operation of the iDEN System by establishing an adequate contractual balance between the parties to assure Customer's development of such System in the most efficient and expeditious manner in order to extend to end users the benefits of the iDEN technology. 2.9.3. "Headstart" means that in a specific country in the Area, and for a certain period of time, Motorola agrees not to put into Commercial Service an iDEN System, other than Customer's, or a Harmony System. 11 2.9.4. The Sale, by Motorola, of iDEN System for private or governmental use is not limited under the Preferred Deployment or under the Headstart term. 2.9.5. The Preferred Deployment and the Headstart for the Area (i) are contingent upon the approval, by August 22, 2000, of the resolution of the Board of Directors of Tricom, S.A. whereby an iDEN project for the Area and funding to initiate such project are confirmed, and (ii) are subject to relevant laws of the countries where the Preferred Deployment or the Headstart is granted. Certified copy of the resolution shall be delivered to Motorola by August 30, 2000. 2.9.6. The Preferred Deployment for Panama starts from the date of the Purchase Order of the Initial System for Panama but is contingent upon (i) the execution of this Agreement, (ii) the execution of Exhibit "I" by the Panamanian AOE, by November 15, 2000, and (iii) the placement, concurrent with this Agreement, of a firm Purchase Order for all the Equipment, Software and Services for the Initial System of Panama as set forth in Exhibit "A1", and the Purchase Order resulting from the Purchase Order Adjustment submitted by Customer to Motorola in the terms indicated in Section 2.6.a.(iii), all, except for (ii), by September 15, 2000. Cancellation of such Purchase Order resulting from the Purchase Order Adjustment, or its reduction to less than 75% of the value of the budgetary quote included herein as Exhibit "A1" will immediately terminate the Preferred Deployment. Further, the Preferred Deployment will terminate upon the earlier of (i) commencement by Customer of Commercial Service in Panama, or (ii) twenty four (24) months from the execution of this Agreement. 2.9.7. The Preferred Deployment for Costa Rica starts from the date of the Purchase Order of the Initial System for Costa Rica but is contingent upon (i) the execution of this Agreement, (ii) the execution of Exhibit "I" by the Costa Rican AOE, within ninety (90) days from the date of the Purchase Order mentioned in (iii) below, and (iii) the placement of a firm Purchase Order for all the Equipment, Software and Services for the Initial System of Costa Rica as set forth in Exhibit "A2", all within the following nine (9) months from the Effective Date. Cancellation of such Purchase Order, or its reduction to less than 75% of its initial value will immediately terminate the Preferred Deployment. Additionally, the Preferred Deployment will terminate upon the earlier of (i) commencement by Customer of Commercial Service in Costa Rica, or (ii) 24 months from the date of the Purchase Order of the Initial System for Costa Rica. Further, the sale of Harmony Systems in Costa Rica to Motorola's affiliates is not subject to this Preferred Deployment. 12 2.9.8. With respect to each of Guatemala, El Salvador, Nicaragua and Honduras, Motorola grants a Headstart until 24 months from the date of the Purchase Order of the Initial System for each country, for any other customer in each of those countries other than Tricom or any corresponding AOE, which Headstart is contingent upon the following conditions being met: (i) the execution of this Agreement, (ii) the execution of Exhibit I by the corresponding AOE, within ninety (90) days from the date of the Purchase Order mentioned in (iii) below, (iii) the placement of a firm Purchase Order for all the Equipment, Software and Services for the Initial System of the corresponding country as set forth in the corresponding Exhibit "A", all within the following nine months from the Effective Date. Cancellation of such Purchase Order, or its reduction to less than 75% of its initial value will immediately release Motorola from the obligation set forth in this Section. 2.9.9. The above benefits are subject to Section 12.2 below. However, the parties understand and agree that, if required, the information related to Preferred Deployment and Headstart will be disclosed to financial institutions and potential Tricom's investors and partners. Customer shall inform any such third party of the confidential nature of the information being disclosed. 3.0 OBLIGATIONS OF CUSTOMER Customer shall: 3.1 Design the RF coverage plan and frequency plan for each country in the Area including but not limited to Site location, frequencies at each Site, RF coverage from each Site, co-channel interference caused from one Site to another Site, co-channel interference from non-Customer sites. 3.2 Procure necessary Spectrum Regulatory Agency radio station licenses together with such other authorizations as may be required to construct and operate the System, including without implied limitation, Site building permits, zoning variances, and any other required approval or authorizations from appropriate government and other authorities, and any required authorizations from any local agencies. 3.3 Make all legal arrangements and pay all expenses, that may be required, to Site owners or to others, to construct and operate each Site in accordance with the provisions of this Agreement. 3.4 Bear the costs of its own legal fees, as well as provisional charges for Site acquisition, Interconnect Facilities, telephone and utility charges and other services and items being supplied by Customer under this Agreement. To the 13 extent possible, provide unrestricted ingress and egress to Sites, as requested by Motorola, and have Sites available for timely installation of System Equipment. 3.5 Negotiate in good faith the Implementation Schedule and adhere to the schedule for performance of the responsibilities set forth therein. 3.6 Negotiate in good faith the Punchlist for the System or System Expansion and Expansion Product prior to the expiration of the fourteen (14) day period following the date of Conditional Acceptance. 3.7 Not unreasonably withhold either Conditional or Final Acceptance or any other approvals required under this Agreement. 3.8 Assume responsibility for diagnosis, analysis, isolation, and remedy of problems in the Interconnect Facilities or at the Interconnect Carrier side of the interface with the System. 3.9 Furnish necessary databases to Motorola in accordance with the Implementation Schedule. 3.10 Make payments according to the schedule set forth in Section 6.0 of this Agreement. 3.11 Assume responsibility for lawful operation of the System. 3.12 Be responsible for the provisional exercise of timely transportation of all Equipment from the FCA shipment point to covered storage areas at the sites. 3.13 Provide and assume all associated costs for warehousing, storage, inventory, and staging of Equipment prior to transport to the installation sites. 3.14 Within 30 days after the execution date of any Motorola Quotation, or at such time as may be agreed by the parties, make available the technical details of any and all Customer-supplied equipment to which the System must be interfaced. Also provide technical liaison personnel on a full-time basis with the knowledge of Customer-supplied equipment. Furnish and install suitable environmental control facilities in each building. Provide telephone company network configuration including dial plan and design. 3.15 Provide any outside cable support bridges required, coaxial, and transmission line access ports into the buildings, inside conduit or cable ducts, any necessary inside floor trenches and cable raceways required for installation. 3.16 Provide insurance coverage for all Equipment from FCA point. 14 3.17 In response to Motorola's reasonable request, provide Motorola with information as reasonably known to the Customer which may be required to enable Motorola to comply with all applicable laws and regulations. 3.18 As required purchase or provide the services set forth in Exhibit "D". Provide all Site development services and engineering drawings as set forth in Exhibit "D", in order to enable Motorola to install and integrate the System in accordance with the agreed upon schedule set forth in the Implementation Schedule. 3.19 Provide capable technical personnel in order to be trained in the operation and maintenance of the System and to interface with Motorola with regard to operational and maintenance issues. 3.20 Perform all other obligations set forth in this Agreement and any other agreement delivered in connection herewith. 3.21 In its discretion, periodically provide forecasts in good faith for Equipment and Services. 3.22 Provide Motorola with reasonable notice of any anticipated delay in Customer's performance hereunder. 4.0 OBLIGATIONS OF MOTOROLA Motorola shall: 4.1 Determine the required material, effort, and services necessary for installation and integration. Negotiate in good faith Implementation Schedules and perform according to such Schedules. 4.2 Negotiate in good faith the Punchlist for the System or System Expansion and Expansion Product prior to the expiration of the fourteen (14) day period following the date of each respective Conditional Acceptance. 4.3 Install the switching Equipment and adjust the System or Expansion Product to the standards set out in Exhibits "B" and "C" and in compliance with Exhibit "D". 4.4 Keep Customer advised of modifications required, as soon as such modifications are determined to be required by Motorola. 4.5 Provide, at a reasonable cost to Customer, a retrofit package for any change in standards subsequently put into effect by the industry, the government, regulatory agencies, as well as those promulgated by Motorola. 15 4.6 Continue to develop operability and reliability improvements to iDEN technology over time and continue to develop and implement new feature functionalities agreed to by the parties throughout the term of the Agreement. 4.7 Make spares and replacement parts available for seven (7) years from the date of this Agreement. Motorola reserves the right to substitute equivalent products. Spare and replacement parts prices shall be at the then current Motorola prices. 4.8 Install and integrate the System or System Expansion and Expansion Product in compliance with all applicable federal, state and local laws and all rules and regulations promulgated pursuant thereto including all Spectrum Regulatory Agency approvals and certifications. 4.9 To accept properly documented Customer's orders, to make timely delivery and to install and integrate the System or System Expansion according to the Schedule set forth in the Implementation Schedule. 4.10 To remedy all Punchlist items, defects and problems during the warranty and maintenance periods. 4.11 In response to Customer's reasonable request, provide Customer with information as reasonably known to Motorola which may be required to enable Customer to comply with all applicable laws and regulations. 4.12 Use skilled personnel, competent to perform assigned tasks and take all actions necessary to avoid the turn-over of the Project Manager and key skilled personnel. 4.13 Perform all other obligations set forth in this Agreement and any other agreement delivered in connection herewith. 4.14 Upon Motorola's determination of any delay, provide Customer with verbal notice, with written confirmation, of any anticipated delay in Motorola's performance hereunder. 4.15 Prior to shipment Motorola will obtain type approval for any Equipment sold herein that requires type approval in the Area. 4.16 For any new product development Motorola shall propose special terms and conditions associated with the purchase of such new product for the parties' approval. 4.17 All equipment sold to Customer hereunder is new and Motorola will provide any documents which may be reasonably requested by Customer evidencing this fact. 16 4.18 At the time or times contemplated herein for the transfer of title to any equipment included in the System, Motorola shall convey to Customer all right in and good title, free and clear of any encumbrances of any type, to such equipment by appropriate title documents. Title to Software shall not be conveyed to Customer at any time. 4.19 Upon Customer's request, provide the operation and maintenance service. Customer agrees to receive and Motorola agrees to perform operation and maintenance services ("Operation and Maintenance Services") consisting of local engineering support to Customer in addition to the selected MSO warranty for a period of sixteen (16) months from Conditional Acceptance for the price set forth in the corresponding Exhibit A. Operation and Maintenance Service shall include, without limitation, (i) aid in troubleshooting switch and EBTS issues, (ii) at least one monthly meeting between Motorola's operation and maintenance personnel and Customer's technical administration, (iii) ongoing evaluation of Customer's personnel and indication of Motorola's view of whether Customer's technical staff have the knowledge and skill level to operate the System(s) after the term of these Operation and Maintenance Services expires, (iv) telephone support to troubleshoot issues for the Panamanian MSO and EBTS sites, (v) Motorola's operation and maintenance personnel availability on MSO site during Customer's normal working hours (the equivalent of 8:00 am to 5:00 pm, USA Eastern Standard time), Monday through Friday, (vi) Motorola's operation and maintenance personnel emergency availability on MSO site after working hours, seven days a week, including holidays. It is understood by the parties that in the event Customer's personnel cannot solve a problem in an EBTS site, Motorola's operation and maintenance personnel will be available seven (7) days a week, including holidays, to accompany Customer's personnel to the EBTS site. Any cost associated with the rendering of this service will be covered by Customer, including without limitation, the transportation to the sites, hotel, meals, etc., and (vii) any other operation and maintenance services mutually agreed upon by the parties. Customer may, at its option, purchase Operation and Maintenance Services on a quarterly basis after the twelve (12) month period specified in the paragraph above expires and Motorola agrees to provide a quote for such additional quarterly services upon Customer's written request. 4.20 Motorola shall provide Customer with written guidance with respect to an organizational chart of the technical organization required to operate the iDEN System, the profile of the personnel required, and a short job description. 17 5.0 SITE CONFIGURATIONS This Agreement, and the prices provided in the Price Book or Motorola Quotation, are predicated on the use of certain Site configurations provided by Customer. Customer is free to alter Site configurations during the course of performance of this Agreement. However, changes in site configurations may result in either increased or decreased costs for RF equipment and/or other related FNE. 6.0 GENERAL PRICING PROVISIONS; EXHIBITS 6.1 The Price Book contains standard lead times (which are updated as market conditions change) and expedite fees which are incorporated by reference herein. Motorola does not warrant that lead times can be moved in. At times Motorola can move in such lead times by paying Motorola's suppliers expedite fees, paying for overtime or other methods. If Motorola is requested to perform in such times Customer shall pay the expedite fees set forth in the Price Book. The lead times set forth in the Price Book will be shown for both cases where the product is forecasted and when it is not forecasted. 6.2 Motorola, from time to time, may set account credit limits for the Customer and notify Customer of such limits. 6.3 Changes in Exhibit "A" Notwithstanding the fact that Customer has made firm orders for Equipment and Service, the parties agree that Customer may without charge or penalty modify, pursuant to a Change Order, the specific Equipment and Services ordered herenunder subject to the below: a. All changes must be made thirteen (13) weeks in advance of the ship date shown in the agreed upon project schedule, as modified hereafter; and b. The total dollar value of Equipment and Services (excluding RF ancillary items) set forth in Exhibit "A" may not be reduced to less than 75% of such dollar amount. Motorola shall notify Customer's bank of any reduction for purposes of Letter of Credit adjustment. c. The decision to delete categories of RF ancillary products must be made within ninety (90) days of the execution of this Agreement. 6.4 The licensing fee for Software is set forth in the Price Book and included in the Software prices set forth in Exhibit "A". Subsequent purchases of Equipment, increases to capacity, SMP renewals or new features may require new license fees, 18 as set forth in the Price Book or as specifically proposed by Motorola. The software IPL pricing offered Customer is valid only for the purchase of Hardware and Software as a package from Motorola. If any Motorola iDEN FNE hardware is purchased directly from a third party source, the IPL fee set forth in the Price Book shall be charged in addition to any applicable fees. 6.5 Customer shall pay for any training ordered by the Customer per the Price Book and other appropriate agreements. A three (3) year training price will be included in the Panamanian Initial System's Firm Quote. 6.6 Subject to the conditions contained in Section 4, any costs required to modify the System in order to comply with local codes or regulations shall be Customer's responsibility. 6.7 For any amount due hereunder which remains unpaid, the Customer shall pay Motorola a service fee at the rate of one percent (1%) of the amount due for each month, or portion thereof, that the amount remains unpaid. 6.8 Customer shall be responsible for the payment of all applicable sales, use, retailer's occupation, excise, property and other assessments in the nature of taxes, however, designated, on the Deliverables and Services provided to Customer pursuant to this Agreement, exclusive, however, of any taxes measured by Seller's net income or based on Seller's franchise. Personal property taxes assessable on the Deliverables shall be the responsibility of Customer. To the extent Motorola is required by law to collect such taxes (state or local), one hundred percent (100%) thereof shall be added to invoices as separately stated charges and paid in full by customer, unless the Customer is exempt from such taxes and furnishes Motorola with a certificate of exemption in a form reasonably acceptable to Motorola. In the event Customer claims exemption from sales, use or other such taxes under this Agreement, Customer agrees to hold Motorola harmless from any and all subsequent assessments levied by a proper taxing authority for such taxes, including interest, penalties and late charges. 6.9 Customer agrees to pay all freight costs from point of shipment and all applicable duties, customs charges, tasa aeroportuaria and other costs associated with nationalization of the equipment on a "prepay and add" basis. 7.0 PAYMENT Customer shall pay to Motorola the price of the Initial System and related services, as set forth in the applicable Exhibit "A" or Purchase Order in U.S. dollars, and according to the following terms and payment schedules: 7.1 General Payment Terms 19 Payment for Equipment and Services to Motorola shall be made in U.S. dollars either by wire/telegraphic transfer or through the medium of a confirmed and irrevocable Letter of Credit, permitting partial and transshipments no later than thirty (30) days after the date of invoice. 7.1.1 Letter of Credit At the placement of the Purchase Order for the corresponding Initial System, Customer shall issue one (1) or two (2) confirmed and irrevocable Letters of Credit made out in favor of Motorola, Inc., 1301 East Algonquin Road Schaumburg, Illinois 60196 USA, and payable at the counters of BankOne Chicago. Drafts are to be drawn upon BankOne Chicago, Chicago, Illinois, USA and full reimbursement instructions must be provided to the U.S. bank by the opening bank at the time the Letter(s) of Credit is(are) opened. In the event one Letter of Credit is opened, such Letter of Credit shall be in the amount of one ninety percent (90%) of the value of the corresponding Initial System as described in appropriate Exhibit "A" or Purchase Order amount, as applicable, and its validity shall be as follows: a) 70% for a period of one (1) year from the date of issuance; and b) 20% for a period of two (2) years from the date of issuance. This Letter of Credit shall be issued at latest seventy two (72) business hours from the placement of the Initial System's Purchase Order. It is understood that Motorola will not accept this Purchase Order until this Letter of Credit is issued. Further, this Letter of Credit shall be drawn down as follows: a) Seventy percent (70%) of the commercial invoice gross value of the Equipment shipped is payable after each shipment, from the portion that is valid for one (1) year; b) Fifteen percent (15%) of commercial invoice gross value is payable after presentation of the Conditional Acceptance Certificate, from the portion that is valid for two (2) years; c) Five percent (5%) of the commercial invoice gross value is payable after presentation of the Final Acceptance Certificate, from the portion that is valid for two (2) years. 20 In the event two (2) Letters of Credit are opened, one Letter of Credit shall be in the amount of seventy percent (70%) of the value of the corresponding Initial System as described in the appropriate Exhibit "A" or Purchase Order amount, as applicable, and shall be valid for a period of one (1) year from the date of issuance, which shall occurred at latest seventy two (72) business hours from the placement of the Initial System's Purchase Order. It is understood that Motorola will not accept this Purchase Order until this Letter of Credit is issued. This Letter of Credit will be drawn down upon shipments are made and for the amount of each shipment. The second Letter of Credit shall be in the amount of twenty percent (20%) of the value of the corresponding Initial System as described in the appropriate Exhibit "A" or Purchase Order amount, as applicable, and shall be valid for a period of two (2) years from the date of issuance, which shall occurred at latest seventy two (72) business hours from the placement of the Initial System's Purchase Order. It is understood that Motorola will not accept this Purchase Order until this Letter of Credit is issued. This Letter of Credit shall be drawn down as follows: a) Fifteen percent (15%) of commercial invoice gross value is payable after presentation of the Conditional Acceptance Certificate. b) Five percent (5%) of the commercial invoice gross value is payable after presentation of the Final Acceptance Certificate. If Motorola is prevented from obtaining Conditional Acceptance by the scheduled date of Conditional Acceptance because Customer has not completed its obligations hereunder (except as provided in Section 18), Motorola shall provide Customer with written notice of the obligations Customer must fulfill and allow Customer a twenty (20) day period to cure any failure to fulfill its obligations (the "Cure Period"). If such failure continues for ten (10) days from the end of the Cure Period, Motorola shall be entitled to receive the final payments, described in a and b above, as if Conditional Acceptance had occurred as scheduled. Banking charges incurred by the opening bank shall be borne by Customer and those incurred by the U.S. bank (BankOne) shall be borne by Motorola. 21 7.1.2 The licensing fee for Software, licensed as set out in Exhibit "F" and provided for use with the System, is set forth in Exhibit "A". 7.1.3 Customs clearance, or related costs pertaining to import of the proposed equipment and software are the responsibility of Customer. No such costs have been included in Motorola's pricing. 7.1.4 Any costs required to modify the System in order to comply with local codes or regulations shall be Customer's responsibility. 7.2 Specific Payment Terms 7.2.1 Advance Payment Customer agrees to remit, a non-refundable advance payment of 10% of the total amount of each Initial System's Purchase Order, on the same date such Purchase Order is placed. The start date for the Implementation Schedule shall be the date of receipt of this payment. Each advance payment shall be made by wire/telegraphic transfer to the following address: Citibank, New York Routing No.: 021000089 Account No.: 38492274 In the event Customer does not proceed with its obligations set forth in 7.1.1, under this Agreement (subject to Section 18) in a timely manner, and such failure continues for thirty (30) days following written notice by Motorola to Customer that Motorola intends to proceed under this Section, Motorola shall promptly document its non-recoverable costs directly incurred in the performance of this Agreement, such as, but not limited to staff hours, travel expenses, equipment re-stocking charges, etc. In the event such non-recoverable costs exceed the amount of the advance payment, Customer will pay Motorola the difference. 7.2.2 Payment of Balance Due Customer shall be invoiced seventy percent (70%) of the Commercial invoice gross value of Equipment on shipment. Fifteen percent (15%) of the commercial invoice gross value of Equipment is due upon Conditional Acceptance and the five percent (5%) balance due upon Final Acceptance. Services and Training balances are invoiced upon completion. 22 7.2.3 Payment for Expansion Product Customer shall be invoiced one hundred percent (100%) of the commercial invoice gross value of Expansion Product on shipment. Customer must pay within thirty (30) days from the invoice date. 8.0 WARRANTY AND SOFTWARE MAINTENANCE PROGRAM 8.1 Motorola-manufactured Hardware Warranty 8.1.1 FNE manufactured by Motorola is warranted to be free from defects in material and workmanship at time of shipment and will be warranted for a period of twelve (12) months from the date of shipment (for Initial Systems, twelve (12) months from Initial System Conditional Acceptance). The Exhibit "A" price of the EBTS Equipment hardware warranty during the warranty period shall be Two Percent (2%) of the net EBTS Equipment price for all shipments that occur during the effective dates of this Agreement. All other warranty charges shall be as per the Price Book. Parts will be repaired at the Motorola repair depot or replaced at no charge for the full warranty period, except as outlined herein. 8.1.2 Customer shall be responsible for the initial level of diagnosis (i.e., for identification and isolation of FNE hardware problems to the board level), for hardware, firmware and software removal and replacement, and for sending the malfunctioning product, packed in a manner to prevent damage, to the designated Motorola repair depot. Customer shall be responsible for associated shipping charges to Motorola's repair depot. When such products or their replacements are being returned to Customer, Motorola shall bear such charges. 8.1.3 Parts and labor at the Motorola repair depot to repair or replace defective FNE will be provided at no charge for the full warranty period except as outlined in 8.1.1 above. 8.1.4 In the event a defect occurs during the warranty period Motorola, at its option, and as Customer's sole remedy, will either repair or replace the product. Any item replaced will be deemed to be on an exchange basis, and any item retained by Motorola through replacement will become the property of Motorola. Repaired or replaced parts shall have a warranty of the greater of the remainder of this warranty period or sixty (60) days. 8.2 This Warranty DOES NOT COVER defects, damage, or malfunctions resulting from: 8.2.1 Use of the products in other than their normal and customary manner. 23 8.2.2 Misuse, accident, neglect, environmental or Site conditions not conforming to the specifications for the product as set out in the current Equipment specifications, or unauthorized access to source or object code or manipulation of Software elements. 8.2.3 Unauthorized alterations or repairs, use of un-approved parts in the products or the combination or interfacing of the products, use of "gray market" parts or components, in each case in a manner not approved by Motorola. "Gray market" components or parts are those components or parts purchased (a) outside the United States or (b) from unauthorized sellers of such components or parts. 8.2.4 An event of Force Majeure. 8.2.5 Installation, integration, or movement of products from their original installation Site that is not in accordance with Motorola hardware configuration and datafill guidelines. 8.2.6 Failure of antennas, lines, or any part of the Interconnect Facilities. 8.2.7 Failure of Customer to maintain or provide maintenance for the System pursuant to Motorola Equipment and Software maintenance agreements, or other maintenance, substantially in accordance with the Documentation and under the supervision of one or more individuals who shall have completed appropriate Motorola training. 8.2.8 Damage which occurs during shipment of the product to Motorola for warranty repair. 8.3 Except as associated with an agreed-to assignment, this express warranty is extended by Motorola, Inc. to Customer only and is valid only in the Area. 8.4 Software Warranty - This warranty shall be applicable to Software associated with the Motorola-Manufactured Equipment purchased in connection with the iDEN System. 8.4.1 WARRANTY. Motorola warrants that each Software Release provided in connection with Motorola-Manufactured Equipment shall conform to the specifications set forth in the relevant Exhibit B-1, as it exists on the warranty commencement date. Motorola does not warrant that: (i) operation of any Software shall be uninterrupted or error free; and (ii) functions contained in the Software shall operate in the combination which may be selected for use by Customer or meet Customer's requirements. 24 8.4.2 TERM. The warranty set forth in Section 8.4.1 above shall commence on the date Software Release is loaded onto the relevant Network Element and shall terminate the earlier of (i) twelve (12) months from such date; or (ii) ninety (90) days from General Availability of the subsequent Software Release for such Network Element. 8.4.3 CUSTOMER OBLIGATIONS. Customer will be responsible for the first level of maintenance, including but not limited to, diagnosis and isolation of reproducible Software malfunctions, provided, however, that such first echelon diagnosis shall be required only to the extent Customer can reasonably be expected to perform given its Documentation and the training available to Customer's personnel. Motorola shall provide Customer with any reasonably requested aid in performing such diagnosis, provided Motorola may charge for such aid if it constitutes first echelon diagnosis that is Customer's responsibility. In the event of Software malfunction, Customer shall notify Motorola promptly, followed by written confirmation of such notice. Motorola will acknowledge receipt of notice of verified Software malfunctions. 8.4.4 MOTOROLA'S OBLIGATIONS. Motorola's sole obligations under this warranty and Customer's sole remedy are as follows: Motorola shall make the required code changes to the Software Release such that it conforms to the relevant specifications and is free from reproducible defects. Such Software code fixes may be provided as a Point Release, Software Update or Patch Tape, or as part of a subsequent Software Release. The inclusion of a Software fix in subsequent Software Release, however, does not entitle Customer to receipt of such Software Release for free. 8.4.5 LIMITATION. THIS WARRANTY APPLIES ONLY TO THE SOFTWARE IN THE FORM PROVIDED BY MOTOROLA. Modifications, attempted modifications or additions to such Software by any party other than Motorola shall void the obligations of Motorola under this warranty. 8.4.6 OWNERSHIP OF SOFTWARE. Failure by Motorola to provide support under this warranty shall not be construed as conveying any rights or ownership in Software. 8.5 Software Maintenance Program (SMP) 8.5.1 Customer commits to purchase SMP on an annual basis for each year of the term of this Agreement for all its iDEN Equipment and Software, and Motorola commits to offer SMP at the prices set forth in the Price Book for the years set forth therein. Customer shall pay SMP fees on a quarterly basis. The annual amount due shall be calculated by taking the total 25 number of subscribers on the Customer System(s) based on the number of units registered on the DAP/HLR at the end of the prior year multiplied by the annual per subscriber rate. The quarterly payment shall be one-quarter of the calculated annual payment. The quoted prices are for the services defined in Exhibit "A". The SMP Agreement shall be evidenced by Customer's Purchase Order indicating which sections of said proposal are agreed to by the parties. Any additional services agreed to by the parties shall also contain applicable pricing for such services. 8.5.2 Once Motorola's Software Warranty expires for a Release, all reproducible software defects or bugs shall be corrected as part of SMP. 8.6 Non-Motorola Manufactured Products Non-Motorola manufactured products, other than batteries, are warranted for a period of twelve (12) months from the date of shipment, except for those non-Motorola manufactured products that have a longer warranty period, in which case the longer warranty period shall be extended to Customer, to the extent provided to Motorola by the manufacturer or supplier of such product. Motorola does not accept any liability for System integration or warranty obligation for such separately purchased hardware or software, and if Motorola is called on any warranty claim or other service request involving such hardware or software, Customer shall pay Motorola's standard service charge for such calls. 8.7 THE WARRANTIES IN THIS AGREEMENT ARE GIVEN IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WHICH ARE SPECIFICALLY EXCLUDED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL MOTOROLA BE LIABLE FOR INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES TO THE FULL EXTENT SUCH MAY BE DISCLAIMED BY LAW. MOTOROLA WARRANTS THAT FOR THE TERM OF THIS AGREEMENT THAT THE INDIVIDUAL FNE PRODUCTS WILL OPERATE TOGETHER AS A SYSTEM WITHIN GENERAL OPERATING LIMITS SPECIFIED IN EXHIBIT "B", SO LONG AS THE AVERAGE SUBSCRIBER USAGE CHARACTERISTICS OF THE INDIVIDUAL FNE PRODUCTS AT BUSY HOUR DO NOT CAUSE THE PEAK CAPACITY LIMITS OF INDIVIDUAL FNE PRODUCTS TO BE EXCEEDED AND ANY EQUIPMENT INSTALLED BY THE CUSTOMER WITHOUT MOTOROLA INTEGRATION AND GATP ASSISTANCE IS INSTALLED IN ACCORDANCE WITH MOTOROLA HARDWARE CONFIGURATION AND DATAFILL GUIDELINES; BATTERIES ARE EXCLUDED BUT CARRY THEIR OWN SEPARATE LIMITED WARRANTY FROM THEIR MANUFACTURER, AS WILL BE 26 DESCRIBED IN EXHIBIT K. MOTOROLA DISCLAIMS LIABILITY FOR RF COVERAGE UNDER THIS WARRANTY. BATTERY SUPPLIER'S WARRANTY WILL BECOME EXHIBIT "K." 9.0 PRODUCT CHANGES OR SUBSTITUTIONS At any time during the performance of this Agreement, Motorola may implement changes in the products set forth in Exhibit "B", modify the drawings and specifications relating thereto, or substitute therefore products of more recent design; provided, however, that any such changes, modifications or substitutions, under normal and proper use: (1) shall not materially or adversely affect physical or functional interchangeability or performance (except where there is written agreement between the parties that the change can be made after Customer knows the effect thereof); (2) shall not detract from the safety of the product; (3) shall be acceptable to the Spectrum Regulatory Agency if required; and (4) Motorola shall notify Customer of any change that is not downward compatible. 10.0 DISCLAIMER OF PATENT LICENSE 10.1 Nothing contained in this Agreement shall be deemed to grant, either directly or by implication, any license under any patents or patent applications of Motorola, except that Customer shall have the normal non-exclusive royalty-free license to use which is implied, or otherwise arises by operation of law, in the sale of a product. 11.0 INTELLECTUAL PROPERTY INDEMNITY 11.1 Motorola shall defend Customer against a claim that Motorola-manufactured products or latest unmodified release of Software supplied hereunder infringe a U.S. patent or copyright, provided that (i) Customer promptly notifies Motorola in writing of the claim, (ii) Motorola has sole control of the defense and all related settlement negotiations, and (iii) Customer gives Motorola information and assistance for the defense of all at Motorola's expense provided, however, that Customer's failure to provide such notice shall not relieve Motorola of liability under this Section 11 except to the extent Motorola was prejudiced thereby. Subject to the conditions and limitations of liability stated in this Agreement, Motorola shall indemnify and hold Customer harmless from all payments which 27 by final judgments in such suits may be assessed against Customer on account of such infringement and shall pay resulting settlements, costs and damages finally awarded against Customer by a court of law. 11.2 Customer agrees that if Equipment or Software become, or in Motorola's opinion are likely to become, the subject of such a claim, Customer will permit Motorola, at its option and expense, either to procure the right for Customer to continue using such Equipment or Software or to replace or modify same so that they become non-infringing without affecting the function and capability, and if neither of the foregoing alternatives is available on terms which are reasonable in Customer's and Motorola's judgment, Customer can return Motorola-manufactured products and/or Software for full credit on the entire unusable portion thereof. 11.3 Motorola has no liability for any claim of patent or copyright infringement to the extent based upon adherence to specifications, designs or instructions furnished by Customer, nor for any claim based upon the combination, operation or use of any Motorola-manufactured products or Software supplied hereunder with products, software or data not supplied by Motorola, nor for any claim to the extent based upon alteration of the products or modification of any software supplied by entities other than Motorola. 12.0 CONFIDENTIALITY 12.1 From time to time during the performance of this Agreement, the parties may deem it necessary to provide each other with Confidential Information. The parties agree: 12.1.1 To maintain the confidentiality of such Confidential Information and not disclose same to any third party, except as authorized by the original disclosing party in writing, or in connection with a public or private debt or equity offering of securities, or as required by law. Such Confidential Information also includes oral and visual Confidential Information. 12.1.2 To restrict disclosure of Confidential Information to employees who have a "need to know". Such Confidential Information shall be handled with the same degree of care which the receiving party applies to its own confidential information but in no event less than reasonable care. 12.1.3 To take precautions necessary and appropriate to guard the confidentiality of Confidential Information, including informing its employees and consultants who handle such Confidential Information that it is confidential and not to be disclosed to others and as to all technical consultants obtain a signed non-disclosure agreement consistent therewith. 28 12.1.4 That Confidential Information is and shall at all times remain the property of the disclosing party. No use of any Confidential Information is permitted except as otherwise provided herein and no grant under any proprietary rights is hereby given or intended, including any license implied or otherwise. 12.1.5 To use such Confidential Information only as required in performance of this Agreement. 12.2 Except as may be required by applicable law, neither party shall disclose to any third party the contents of this Agreement, the Exhibits or any amendments hereto or thereto for a period of two (2) years from the date of execution hereof without the prior written consent of the other except as provided for in Section 12.1.1. 13.0 TRADEMARK AND PUBLICITY Nothing contained in this Agreement shall be construed as conferring any right to use any name, trademark or other designation of either party hereto, including any contraction, abbreviation, or simulation of any of the foregoing, in advertising, publicity or marketing activities. No publicity, advertising, etc. with regard to this Agreement or the System which mentions the other party shall be released without prior written consent of the other party, except as may be required by law. 14.0 SHIPMENT, DELIVERY AND PACKING 14.1 Motorola may ship products at any time during the "Time Frame" (the interval between the shipment/implementation date and the completion date for a particular activity as set forth in the Implementation Schedule) and may invoice Customer upon shipment as provided in Section 6 of this Agreement. No shipment of products during said Time Frame shall be considered early for purposes of invoicing. 14.2 Customer shall select the carrier and notify Motorola in writing or instruct Motorola to use the best available carrier or any carrier as previously used by Customer, unless Customer notifies Motorola not to use such carrier. 14.3 Motorola shall use all reasonable efforts to ship products directly to the Site or Customer designated warehouse. 14.4 In the event that the Site or Customer designated warehouse is not available to receive Equipment because Customer has not met its obligations hereunder to receive the products when shipped, Motorola, at its option, may ship said products to a warehouse in or near the area as designated by Customer, and Customer shall bear the costs of warehousing, reloading, transporting, off-loading and moving the products onto the Site when such Site becomes available. 29 14.5 Shipping documentation shall be developed to the mutual satisfaction of the parties. Shipping terms are FCA manufacturing site or Motorola facility. The manufacturing site may be other than a USA facility. 14.6 Motorola shall have the Equipment securely packed so as to withstand numerous handlings and loading as appropriate for inland, sea and/or air transportation. Motorola shall take reasonable protective measures to protect Equipment from weather and shock, considering the different shapes and special features of the Equipment. 15.0 TITLE, INDEMNITY, INSURANCE 15.1 Good title, free and clear of all liens or other encumbrances to the FNE and other Motorola provided products supplied hereunder and risk of loss for all such products shall pass to Customer upon delivery FCA point of shipment. 15.2 The above notwithstanding, title to Software and underlying intellectual property rights (i.e., patents, copyrights, proprietary and confidential information, and know-how) belonging to Motorola or any other third party shall remain with Motorola or such third party. This Agreement only grants a right to use such Software. 15.3 All Equipment sold to Customer hereunder is new and Motorola will provide any documents which may be reasonably requested by Customer evidencing this fact. 15.4 During the term of this Agreement, the parties shall indemnify and hold harmless each other together with their directors, officers, agents, employees, affiliates and subsidiaries from any and all loss, damage, expense, judgment, lien, suit, cause of action, demand or liability (collectively, "loss") for personal injury (including death) and tangible property damage which may be imposed on or incurred by one party arising directly out of the intentional misconduct or negligent acts or omissions of the other, its agents, subcontractors, or employees during the performance of any work hereunder. The indemnifying party shall, at its sole expense, defend any suit based upon a claim or cause of action within the foregoing indemnity provision and satisfy any judgment that may be rendered against the other resulting therefrom, provided that the indemnifying party shall be given (i) prompt notice of any such claim or suit; and (ii) full opportunity to defend such claim or suit; provided, however, that failure to provide such notice shall not relieve the indemnifying party of liability under this Section except to the extent the indemnifying party was prejudiced thereby. The indemnified party may, at its election, participate in the defense of any suit, and shall cooperate fully in defending any claim or suits. The indemnifying party shall pay all costs, expenses, and reasonable attorney's fees incurred by the indemnified party in connection with any such suit or in enforcing this indemnity provision, provided a valid claim is presented. 30 15.5 Customer and Motorola each shall be named as additional insured under the other's comprehensive general liability policy for claims arising out of work performed hereunder (which includes but is not limited to product and public liability, property and all risk insurance). 16.0 FORCE MAJEURE - EXCUSABLE DELAY 16.1 Neither party shall be liable for delays in delivery or performance, or for failure to manufacture, deliver or perform when caused by any of the following which are beyond the reasonable control of the delayed party: 16.1.1 Acts of God, acts of the public enemy, acts or failures to act by the other party, acts of civil or military authority, governmental priorities and regulatory actions, strikes or other labor disturbances, hurricanes, earthquakes, fires, floods, epidemics, embargoes, war, riots, delays in transportation, and loss or damage to goods in transit, or; 16.1.2 Inability on account of causes beyond the reasonable control of the delayed party or its suppliers to obtain necessary products, components, services, or facilities. 16.2 In the event of any such delay, the date of delivery or performance shall be extended for a period equal to the period of time lost by reason of the delay. If any such delay lasts for more than one hundred eighty (180) days, the parties shall consult with one another for the purpose of agreeing upon the basis on which the delayed party shall resume work at the end of the delay. If no reasonable solution to the delay is available, then either party may, by written notice, cancel that portion of the Agreement which is delayed, and adjust the Agreement price appropriately. 17.0 TERMINATION 17.1 Either party may terminate this Agreement without liability by the giving of notice, in accordance with Section 23, if (i) the other makes a general assignment for the benefit of creditors or goes into compulsory or voluntary liquidation, (ii) if a petition in bankruptcy or under any insolvency law is filed by or against the other and such petition is not dismissed within sixty (60) days after it has been filed, or (iii) the other shall commit any material breach of its obligations hereunder. In the case of any material breach, neither party shall terminate this Agreement unless and until the other shall have failed to cure such breach within thirty (30) 31 days after it shall have been served with a notice, in accordance with Section 23, (i) stating the nature of the breach, (ii) requiring that the breach be cured, and (iii) stating its intention to terminate the Agreement if compliance with the notice is not met. 17.2 The termination of this Agreement shall not affect or prejudice any provisions of this Agreement which are expressly or by implication provided to continue in effect after such termination. 17.3 If this Agreement is terminated, Motorola shall have the right to determine whether any unfilled Purchase Orders, in existence at the time of such termination shall be completed under the terms of this Agreement or canceled. 18.0 LIMITATION OF LIABILITY NEITHER PARTY, WHETHER AS A RESULT OF BREACH OF AGREEMENT, WARRANTY, TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE), PATENT INFRINGEMENT, COPYRIGHT INFRINGEMENT, OR OTHERWISE, SHALL HAVE ANY LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFIT OR REVENUES, LOSS OF USE OF THE PRODUCTS OR ANY ASSOCIATED EQUIPMENT, COST OF CAPITAL, COST OF SUBSTITUTE PRODUCTS, (EXCEPT REPLACEMENT PRODUCTS UNDER SECTIONS 9 AND 11), FACILITIES OR SERVICE, OR DOWNTIME COSTS OR CLAIMS OF THIRD PARTIES TO THE FULL EXTENT SUCH MAY BE DISCLAIMED BY LAW. 19.0 ASSIGNMENT - RESALE OF EQUIPMENT 19.1 Any re-sale of Equipment will require a re-licensing of the Software from Motorola, including potential payment of an IPL license fee by the new owner. 19.2 The Agreement shall accrue to the benefit of and be binding upon the parties hereto and any successor entity into which either party shall have been merged or consolidated or to which either party shall have sold or transferred all or substantially all its assets. Specifically, Motorola may assign this Agreement, provided that Motorola, Inc. shall remain liable for performance hereunder. This Agreement shall not be otherwise assigned by either party without the prior written consent of the other party. In conjunction with any agreed to assignment of this Agreement, Motorola agrees to offer a software license the assignee pursuant to the terms set forth in Exhibit "F". A reasonable new Software License Fee may be required of any successive owner, other than an AOE, of iDEN infrastructure Equipment. 32 19.3 Notwithstanding anything to contrary elsewhere in this Agreement, Customer may pledge, mortgage or otherwise assign all or any portion of this Agreement or any orders hereunder (or any combination thereof) to one or more providers of debt or equity financing (provided any such intended assignee is not a person or entity listed on the United States Department of Commerce Denied Parties List or to a person or entity residing in a country to which export of the iDEN Equipment is prohibited under United States law) upon terms and conditions satisfactory to Customer, provided that (i) Customer will remain liable for all obligations arising out of this Agreement, (ii) the assignee agrees in writing that the terms and conditions of this Agreement shall apply to and be binding upon the assignee to the same extent as Customer, to the extent that the assignee is exercising any right under this Agreement, (iii) in addition to any rights conferred on the assignee, and Customer shall be treated as having placed the order and paid for purchases for purposes of all rights and benefits available to Customer under this Agreement. 19.4 Motorola retains the right to subcontract, in whole or in part, any effort required to fulfill its obligations under this Agreement, provided Motorola shall remain liable for performance hereunder. 19.5 Motorola reserves the right to assign the obligations of rendering the Implementation Services, Training, and the Operation and Maintenance Service to one of its wholly owned subsidiaries. In the event the assignment of the obligations of rendering the Implementation Services, Training, and the Operation and Maintenance Service is made to any other third party, a prior approval from Customer will be required, which will not be unreasonably withheld or delayed. 19.6 Customer understands and agrees that notwithstanding the assignment of the rights and obligations to an AOE, including payment for Equipment and/or Services, Customer remains liable for performance hereunder. Motorola accepts the assignment to an AOE under the terms of Exhibit I, and Motorola remains liable for the obligations under this Agreement. 20.0 GOVERNMENT COMPLIANCE This Agreement is a commercial contract and is governed by the terms and conditions negotiated by the parties contained herein. Customer represents and warrants that: (i) it is not a governmental entity; (ii) it is not owned in whole or in part, directly or indirectly, by any governmental entity;; and (iii) there is no other basis on which any regulations, decrees or laws applicable to sales to a governmental entity could be deemed applicable to this Agreement. The term "governmental entity," as used herein, shall include agencies and instrumentalities of U.S. federal, state and local governments as well as of governments outside of the U.S. 33 In the event the Customer elects to sell Motorola products or services to any U.S. federal, state or local government agency, to any government entity outside the U.S., or to a prime contractor selling to any such government entity, Customer does so solely at its own option and risk, and agrees not to obligate Motorola as a subcontractor or otherwise, to the government entity. Customer remains solely and exclusively responsible for compliance with all statutes and regulations governing sales to the U.S. federal, state, local or foreign government agency. Motorola makes no representations, certifications or warranties whatsoever with respect to the ability of its goods, services or prices to satisfy any such statutes, regulations or clauses. In the event the purchases contemplated under this Agreement are financed using any funds obtained from OPIC or Eximbank, Motorola reserves the right to determine, on a case by case basis, whether representations and other governmental requirements can be provided to Customer or the aforementioned governmental entities. 21.0 GOVERNING LAW The validity, performance, and all matters relating to the effect of this Agreement and any amendment hereto shall be governed by the laws of State of New York without regard to its conflicts of laws provisions. 22.0 ORDER OF PRECEDENCE In the event of an inconsistency in this Agreement, the inconsistency shall be resolved by giving precedence in the following order: 22.1 This Agreement and duly executed amendments thereto, with the latest amendment precedence over earlier amendments; 22.2 The Price Book, as may be amended from time to time by Motorola; 22.3 Purchase Orders and duly executed Change Orders thereto, with the latest Change Order taking precedence over earlier Change Orders; 22.4 Exhibit "F" and all duly executed Amendments to Exhibit "F"; 22.5 All other Exhibits in alphabetical order and all duly executed Amendments or Change Orders to said Exhibits. 23.0 NOTICE 23.1 Notices required to be given by one party to another shall be deemed properly given if reduced to writing and personally delivered or transmitted by recognized express mail to the address below, postage prepaid, or by facsimile with a 34 confirmation of transmission printed by sender's facsimile machine, and shall be effective upon receipt. 23.1.1 Motorola shall send notices as follows: Tricom Latinoamerica, S.A. Campbell Corporate Services Limited The Bank of Nova Scotia Building, P.O. Box 268 George Town, Grand Cayman Cayman Islands Attention: Mr. Marcos J. Troncoso With a copy to: Tricom, S.A. Av. Lope de Vega No. 95 Santo Domingo, Dominican Republic Attention: Mr. Marcos J. Troncoso Fax: (809) 476-670 e-mail: mtroncoso@tricom.com.do And to: Tricom, S.A. Av. Lope de Vega No. 95 Santo Domingo, Dominican Republic Attention: Legal Department Fax: (809) 476-4412 e-mail: mvelazquez@tricom.com.do 23.1.2 Customer shall send notices as follows: Motorola, Inc. Network Solutions Sector Customer Solutions Group Attention: Vice President, LACR Fax #: 954-489-2030 e-mail: c17736@email.mot.com With a copy to: Motorola, Inc. Network Solutions Sector Customer Commercial Relations 35 Attention: Regional Commercial Director Fax #: 847-435-6290 e-mail: lgamboa1@email.mot.com 23.2 Either party may change the addresses for giving notice from time to time by writen instructions to the other of such change of address. 24.0 SURVIVAL OF PROVISIONS The parties agree that the Sections 8.0, 11.0, 12.0, 15.0, 18.0, 21.0, 23.0, 29.0, 32.0 and any other provision where the context of such provision indicates an intent that it shall survive the term of this Agreement, it shall survive. 25.0 WAIVER AND HEADINGS Failure or delay on the part of Motorola or Customer to exercise any right, power, or privilege hereunder shall not operate as a waiver. Section and paragraph headings used in this Agreement are for convenience only and are not to be used to construe the provisions of this Agreement. 26.0 AUTHORITY Each party hereto represents and warrants that: 26.1 It has obtained all necessary approvals, consents and authorizations of third parties and governmental authorities to enter into this Agreement and has obtained or will obtain all necessary approvals, consents and authorizations of third parties and governmental authorities to perform and carry out its obligations hereunder; 26.2 The persons executing this Agreement on its behalf have express authority to do so, and, in so doing, to bind the party thereto; 26.3 The execution, delivery, and performance of this Agreement does not violate any provision of any bylaw, charter, regulation, or any other governing authority of the party; and; 26.4 The execution, delivery, and performance of this Agreement has been duly authorized by all necessary partnership or corporate action and this Agreement is a valid and binding obligation of such party, enforceable in accordance with its terms. 36 27.0 INCORPORATION OF EXHIBITS The Exhibits described in the Exhibit List are specifically incorporated by reference into this Agreement as if fully set forth herein. 28.0 RE-EXPORTATION OF TECHNICAL DATA OR PRODUCTS Customer understands that all equipment, proprietary data, know-how, software, or other data or information obtained by Customer from Motorola is considered to be United States technology and is licensed for export and re-export by the United States Government. Customer therefore agrees that it will not, without the prior written consent of Motorola and the Office of Export Control, United States Department of Commerce, Washington, DC 20230, USA, knowingly export, re-export, or cause to be exported or re-exported, either directly or indirectly, any such equipment, proprietary data, know-how, software, or other data or information, or any direct or indirect product thereof, to any destination prohibited or restricted under United States law. Customer understands that the list of prohibited or restricted destinations may be amended from time to time by the United States Department of Commerce and that all such amendments shall be applicable to this Agreement. 29.0 DISPUTES, DISPUTE RESOLUTION AND ARBITRATION Motorola and Customer will attempt to settle any claim or controversy arising out of this Agreement through consultation and negotiation in good faith and a spirit of mutual cooperation. If those attempts fail, then, except for disputes related to alleged patent, copyright, or trademark infringement, the dispute will be mediated by a mutually acceptable mediator to be chosen by Motorola and Customer within thirty (30) days after written notice by the other demanding mediation. Neither party may unreasonably withhold consent to the selection of a mediator, and Motorola and Customer will share the costs of the mediation equally. Venue for mediation shall be the United States of America. By mutual agreement, however, the parties may postpone mediation until they have each completed some specified but limited discovery about the dispute. The parties may also agree to replace mediation with some other form of alternative dispute resolution (ADR), such as neutral fact-finding or a mini-trial. Any dispute which the parties cannot resolve through negotiation, mediation, or other form of ADR within four (4) months of the date of the initial demand for it may then be submitted to arbitration as described below. The use of any ADR procedures will not be construed under the doctrines of latches, waiver, or estoppel to affect adversely the rights of either party. And nothing in this section will prevent either party from resorting to arbitration if good faith efforts to resolve the dispute under these procedures have been unsuccessful or, in any case of alleged patent, copyright, trademark or any other intellectual property right infringement or alleged confidentiality violation, interim relief 37 from a court is necessary to prevent serious and irreparable injury to one party or to others. Except as otherwise described above, and for disputes pertaining to a party's intellectual property, any dispute arising out of or in connection with this Agreement shall be submitted for arbitration in Miami, Florida, USA to be conducted by the American Arbitration Association in accordance with its substantive and procedural rules. All such proceedings shall be conducted in English and a daily transcript shall be prepared in English. In the event that a dispute arises between Motorola and Customer, three arbitrators shall be selected as follows: one shall be selected by Customer, one by Motorola, and the third by the other two selected arbitrator, which third arbitrator shall concurrently serve as chairman of the arbitration panel; provided, that if either Motorola or Customer does not select an arbitrator, then the arbitrator selected by the other party may select the remaining two arbitrators. All of the arbitrators shall be fluent in the English and Spanish languages. The English language text of this Agreement shall be used in any arbitration proceedings commenced pursuant to this Section. Arbitration awards shall be final and binding on the parties hereto. The costs of arbitration shall be reasonably determined by the arbitration panel. Any award of the arbitrators shall be enforceable by any court having jurisdiction over the party against which the award has been rendered, or wherever assets of the party against which the award has been rendered can be located. 30.0 LANGUAGE The definitive text of this Agreement and its Exhibits shall be in English and all communications between the parties in the course of the present Agreement shall be made in English. 31.0 SEVERABILITY In the event that any one or more of the provisions contained in the Agreement or in any of the Exhibits hereto should be determined to be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired. The parties shall endeavor in good faith to replace any invalid, illegal, or unenforceable provision with a valid provision, the economic effect of which comes as close as possible to that of the invalid, illegal, or unenforceable provision. 32.0 ENTIRE AGREEMENT This Agreement and the Exhibits hereto constitute the entire understanding between the parties concerning the subject matter hereof and supersede all prior discussions, agreements, and representations, whether oral or written, and whether or not executed by Motorola and Customer. 38 No modification, Amendment, Change Order, or other change may be made to this Agreement or any Exhibit unless reduced to writing and executed by authorized representatives of both parties. The terms and conditions of this Agreement shall prevail notwithstanding any variance with the terms and conditions of any order submitted by Customer following execution of this Agreement. In no event shall the preprinted terms and conditions found on any Customer purchase order, acknowledgment, a Change Order, or other form be considered an Amendment, or modification of this Agreement, even if such documents are signed by representatives of both parties. Such preprinted terms and conditions shall be null and void and of no force and effect. 39 33.0 COUNTERPARTS AND FACSIMILE SIGNATURES Facsimile signatures shall be treated as originals and this Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same instrument. 34.0 COMMENCEMENT OF WORK Motorola's obligations to commence work hereunder shall begin upon the date which Customer satisfies the requirements of Section 7.2.1. All time periods for completion of Motorola's obligations shall commence on such date. This Agreement is effective as of the 31 day of July, 2000 ("Effective Date"). MOTOROLA, INC. TRICOM LATINOAMERICA, S.A. /s/ Jose Figueroa /s/ Marcus J. Troncoso ------------------------------------- -------------------------------------- Signature Signature Jose Figueroa Marcus J. Troncoso ------------------------------------- -------------------------------------- Printed/Typed Name Printed/Typed Name Vice President and General Manager Secretary and Director ------------------------------------- -------------------------------------- Title Title 40 EXHIBIT LIST EXHIBIT "A" INITIAL SYSTEM'S FIRM QUOTE FOR EACH COUNTRY IN THE AREA. PLEASE REFER TO INITIAL SYSTEM'S FIRM QUOTE DEFINITION. EXHIBIT "B" TECHNICAL OVERVIEW: NOTES ON THE IDEN SYSTEM [THE CURRENT VERSION IS MAINTAINED ON THE IDEN WEB SITE. A HARD COPY OF VERSION 68P81095E55-D, DATED MAY __, 1999 IS ATTACHED.] EXHIBIT "C" SYSTEM PERFORMANCE CRITERIA AND ACCEPTANCE TEST PLAN EXHIBIT "D" IMPLEMENTATION ENGINEERING, SITE PREPARATION, INSTALLATION AND INTEGRATION EXHIBIT "E-1" SYSTEM HARDWARE MAINTENANCE EXHIBIT "E-2" SOFTWARE SYSTEM MAINTENANCE EXHIBIT "F" SOFTWARE LICENSE EXHIBIT "G" TRAINING EXHIBIT "H" DOCUMENTATION EXHIBIT "I" ADDITIONAL OPERATING ENTITY EXHIBIT "J" EBTS VOLUME PRICING SCHEDULE EXHIBIT "K" SUPPLIER'S BATTERY WARRANTY EXHIBIT "L" Requests for Quotation 42 EXHIBIT "A" TO THE iDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN MOTOROLA AND TRICOM [4 pages. Confidential portion omitted and filed separately with the Securities and Exchange Commission pursuant to an application for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.] EXHIBIT "B" TO THE iDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN MOTOROLA AND TRICOM iDEN GENERIC SYSTEM DESCRIPTION For purposes of uniformity and brevity, references to Agreement or to an Exhibit shall refer to the above-referenced Agreement to which this document is Exhibit "B" and to the other Exhibits to that Agreement. All definitions set forth in the Agreement shall apply hereto. INTRODUCTION/OVERVIEW: The technical overview of the System is organized into three major topic areas: 1. Section 1.0 introduces the general System architecture, features, and capabilities. 2. Section 2.0 provides a more detailed description of the Fixed Network Equipment (FNE) and components. 3. Section 3.0 provides information regarding System quality and reliability. This document is a general system overview. Please refer to the associated Section III, Pricing, for specific features and their associated prices. 1. GENERAL OVERVIEW The following is an overview of the System and an introduction to the System architecture. In this section, the general System architecture and features are described without regard to any specific implementation. FIGURE 1-1 MOTOROLA iDEN PRODUCT OFFERING shows an overview of the Motorola iDEN product offering. 1 1.1 iDEN SYSTEM TECHNOLOGY Motorola's Integrated Dispatch Enhanced Network (iDEN) System is the second generation, fully digital, integrated radio-telephone and dispatch system in the trunked SMR land mobile spectrum and contains the following features: o Dispatch Communications Features - Private Call - Group Call - Automatic Queuing and Callback - Recent User Priority - Accounting Records Collection o Telephone Interconnect Communications Features - Full Duplex - Call Transfer (No Answer Transfer and Busy Transfer) - Call Forwarding (User Defineable Conditions) - Call Restrictions (User Defineable Conditions) - Call Hold - Call Waiting - Three Party Conference Calling - Accounting Records Collection o Increased capacity, up to six times that of analog trunking through digital TDMA transmission and VSELP voice compression technologies. o Handportable Viability 2 [GRAPHIC OMITTED] FIGURE 1-1 MOTOROLA ESMR PRODUCT OFFERING 3 1.1.1 LINK INTEGRITY The System architecture incorporates several features which are designed to maximize the integrity of the communication link. Considerable emphasis is given to the signaling performance. Measurements are made both by the MS unit and the base equipment. The number and types of measured parameters include up-link and down-link signal levels and down-link signal levels of adjacent cells. Also, a unique feature of the use of digital communication is the use of the signal quality coding to estimate the bit error-rate of the channel. This measurement allows for a characterization of the impact of co-channel and adjacent channel interference, even when signal levels are relatively high. 1.1.2 FEATURES 1.1.2.1 MS SERVICES Several categories of tele-services are available, including basic speech (duplex telephone interconnect and half-duplex dispatch), short message service (i.e., paging like service), facsimile, and modem port. Non-transparent transmission is used with the inherent RF channel error correction. Data rates of 1200, 2400 and 4800 bits per second are provided. This error detection/re-transmission scheme provides for much reduced net error rates but with a non-deterministic throughput rate dependent on the radio channel quality. In addition to provisions for voice communication, the System's mobile units provide a data port interface to connect standard data terminal equipment. A data IWF (Interworking Function) located at the MSC (Mobile Switching Center) allows inter-working with the analog-oriented PSTN (Public Switched Telephone Network). The IWF connects data from the mobile through a modem and converts the modem audio into PCM format for connection to a PSTN digital trunk. The call set-up message from the MS includes a bearer capability information element to indicate which type of data call is being set-up. 1.1.3 SECURITY FEATURES Security features of the System protect both users and operators against vulnerability of the over-the-air interface. This protects against the misuse of valuable resources. 4 1.1.4 INCREASED CAPACITY 1.1.4.1 USE OF ADVANCED MODULATION TECHNIQUES AND GEOGRAPHIC REUSE The System provides for increased MS unit capacity. Research in modulation technology for land mobile radio has resulted in a practical digital modulation technique, which, when combined with TDMA and a digital speech coding method, can convey 6 voice/data channels in a single 25 kHz RF channel at 800 MHz (except for time slots reserved for control purposes). Optionally, time slots can be combined in offset pairs to support a higher vocoder rate in interconnect mode. The digital speech subsystem consists of VSELP speech encoding technique coupled with a channel error control method. A modified speech coding modulation subsystem has been incorporated in the System to fit within the FCC Part 90, 25 kHz bandwidth limitation. 1.1.4.2 HANDPORTABLE VIABILITY Several considerations have been given by the System architects to improve the viability of handportables. Most of these relate to reducing the power consumption of the handportable. Among these key provisions are: o Active Power Control o Discontinuous Transmit 1.1.5 SYSTEM DESCRIPTION The System will support: o Network Architecture and Interfaces o Dispatch Services o Security Features o Speech Coding o Channel Coding o Radio Channel Structure o Traffic and Control Channels o Radio Channel Modulation 5 o MS Power Control o Discontinuous Transmit is supported for both interconnect and dispatch MS units. o Discontinuous Receive is supported for interconnect only MS units due to the short response time requirement placed upon dispatch MS units. o Signal Level/Quality Measurement The following discussion highlights and describes some of these differences. 1.1.5.1 FUNCTIONAL NETWORK ARCHITECTURE AND PRINCIPAL INTERFACES The nominal public land mobile network embodied by the System consists of mobile and portable subscribers in communication with an infrastructure consisting of a multiplicity of base station Sites controlled by a MSO (Mobile Switching Office). From the MS unit's point of view, the System can be thought of as an extension of the modern PSTN with standard signaling from the base station systems through the MSO to the PSTN. The System, distinct from the PSTN, is capable of unique network functions owing to the special mobile services offered including: o Basic service provision, telephone interconnect and dispatch o Call handling: - queuing (dispatch only) - off air phone number entry - security related services - DTMF capability o MS authentication o Supplementary services o Interconnect operations support: - location registration - handover o Network management Special call processing functions unique to the System are provided including: 6 o Authentication o Dispatch call processing o Short message service (Message-Mail(TM)) o Traffic channel assignment o MS paging (for call set-up) o Power control o MS timing advance o Discontinuous transmit and receive o Call processing procedures include: - location updating - call origination; MS unit/network - call clearing; MS unit/network o Handover; inter-cell and intra-cell FIGURE 1-2 SYSTEM NETWORK ENTITIES AND INTERFACES shows the System network elements and their interfaces to one another. 7 [GRAPHIC OMITTED] FIGURE 1-2 SYSTEM NETWORK ENTITIES AND INTERFACES 8 1.1.6 SYSTEM NETWORK ENTITIES The System network entities are: MS (MOBILE STATION) The radio equipment and man-machine interface that a subscriber needs to access System services. EBTS (ENHANCED BASE TRANSCEIVER SYSTEM) The set of radio transceivers, controlling equipment, and antennas which are located at the base Sites to provide radio coverage in a specific geographic area. The EBTS serves one or more sectors in a cell and supports multiple RF frequencies if so equipped. BSC (BASE STATION CONTROLLER) The intermediate controlling element between the EBTS and the MSC. The BSC provides control and concentration functions for one or more cells and their associated MSs. MSO (MOBILE SWITCHING OFFICE) The telephone and dispatch switching office for mobile originated or terminated traffic. MSC (MOBILE SWITCHING CENTER) Provides call and signaling control at the MSO Site. The MSC can be integrated with the HLR, or stand-alone. The MSC provides the interface from the iDEN system to the PSTN for calls terminating or originating outside of the iDEN System. HLR (HOME LOCATION REGISTER) The database oriented processing network entity that contains the master database of the subscribers to the System. The HLR can be integrated with the MSC. The AUC (Authentication Center) is integrated with the HLR. VLR (VISITED LOCATION REGISTER) The database oriented processing network entity that temporarily contains information for subscribers roaming in a given location area. The VLR is integrated with the MSC Switch. 9 OMC (OPERATIONS AND MAINTENANCE CENTER) A central network entity that controls and monitors the DAP, EBTS and BSC/XCDR. Other network entities such as the MSC and HLR may be accessed remotely through a terminal emulation connection. DAP (DISPATCH APPLICATIONS PROCESSOR) The processing entity for dispatch call functions. This processor controls the assignment and routing of dispatch call services. MPS (METRO PACKET SWITCH) The packet switching engine for dispatch call functions. The MPS provides voice and control packet switching and distribution between the cell Sites in response to routes set-up by the DAP for the support of dispatch call services. XCDR (SPEECH TRANSCODER) The digital signal processing equipment (component of the BSC) required to perform speech encoding and decoding. The speech transcoder converts the 64 K bit/s PCM in the land network to the compressed vocoder format used on the air interface. IWF (INTERWORKING FUNCTION) AND MODEMS The IWF performs the data rate adaptation between the iDEN System and the PSTN. The IWF provides the mobile subscribers access to a modem pool for data transmission so that communication with a PSTN-based modem is possible. SMS (SHORT MESSAGE SERVICE) The Message Mail(TM) Short Message Service provides the user with the ability to transmit alphanumeric messages visible on the MS units display. DCS (DIGITAL CROSSCONNECT SYSTEM) The DCS may be optionally required depending upon the customers network configuration, for the System network interfaces listed below. The DCS provides filling and grooming functions that allow configurable bandwidth management of backbone transports, thus eliminating stand-alone multiplexers and manual cross-connects. Control of direct DSO/timeslot connectivity must be capable under software control for the interfaces between the: o MSO and RSOs (Remote Switching Office) 10 o RSO to RSO for dispatch voice traffic o RSO and its associated EBTS Sites During the final design stage, Motorola will work with Customer to provide the required information for Customer to determine the configuration, sizing, and quantity of DCS needed to support the System transport interface requirements. Figure 1.2 shows a basic generic DCS configuration. DCS equipment is not supplied unless included in Section III, Pricing. The following sections provide a more detailed description of the key System network elements: 1.1.6.1 MS (MOBILE STATION) The MS includes the radio equipment and man-machine interface that a Subscriber needs to access the services provided by the iDEN system. A dispatcher position is typically configured as a fixed MS and referred to as a DS (Dispatch Station). MSs can be installed in vehicles or be portable or hand held stations. The MS includes provisions for data communication as well as voice. Each MS is identified by a unique mobile IMEI (International Mobile Equipment Identifier) which is permanently stored in the mobile unit. Upon request, the MS sends this number over the signaling channel to the MSC. Security functions are provided through authentication. Refer to sections 1.2.2 and 1.1.6.3 for a description of authentication during Telephone Interconnect call set-up. The authentication process is similar for both telephone interconnect and dispatch operation. The MSC processes the authentication activity for both operations. Hence, a change in an MS's telephone location area automatically triggers the re-authentication process. For Telephone Interconnect: authentication takes place when a MS powers on, initiates a call, or when it travels from one telephone location area to another telephone location area. For Dispatch: authentication takes place when an MS powers on or when it moves from one dispatch location area to another. Just as the IMEI identifies the mobile EQUIPMENT, other numbers are used to identify the MS unit's other characteristics. Different MS unit identities are used in different phases of call setup. The MS unit's telephone number (MS-ISDN) is the number a calling party dials to reach the MS unit. It is used by the land network to route calls toward an appropriate MSC. The MS unit's identity is the International Mobile Subscriber Identity IMSI (International Mobile Subscriber Identity) which is the primary identity of the MS unit within the mobile network and is permanently assigned to it. The System can also assign a Temporary Mobile Station Identity (TMSI) number. This number can be periodically changed by the System and protects the MS unit from being identified by someone attempting to monitor the radio channel. 11 1.1.6.2 MSC (MOBILE SWITCHING CENTER) The MSC provides an interface between the PSTN and mobile network. The MSC is the telephone switching office for mobile originated or terminated traffic. Each MSC provides service to mobiles located within a certain geographic coverage area, and the network can contain more than one MSC. The MSC provides interfaces to the PSTN, and also interfaces to the terrestrial circuits from the transcoders. The MSC controls the call setup and routing procedures in a manner similar to the functions of a land network end office. On the land network side, the MSC performs call signaling functions. Other types of land network interfaces can also be provided as options. Other call control functions include number translations and routing, matrix path control, and allocation of outgoing trunks. The MSC collects call billing data, formats the call records, and sends them magnetic tape and/or an optional billing center. The MSC also collects traffic statistics for performance management purposes. In addition to call control functions typical of a land network switch, the MSC performs other functions unique to the mobile environment. The MSC also supports the security procedures used to control access to the radio channels. These procedures include validating the identity of the mobile station. In addition to the call setup procedures, the MSC also controls the location registration and handover procedures. Location registration (and location update) allows mobiles to report changes in their locations enabling automatic completion of mobile terminated calls. The handover procedure preserves call connections as mobiles move from one radio coverage area to another during an established call. Handovers within and between cells controlled by a single BSC are controlled by that BSC. When handovers are between cells controlled by different BSCs, the primary control is at the MSC. The Motorola MSC uses Northern Telecom's DMS-MSC(TM) Switch for telephone interconnect services. The MSC Switch is based on Northern Telecom's DMS supernode family of switching products. 1.1.6.3 HLR (HOME LOCATION REGISTER) The System requires Location Register (LR) network entities. These entities are the HLRs and VLRs. The LRs are database oriented processing nodes which address the needs of managing MS unit data and keeping track of a mobile station's location as it moves through the network. The HLR is the reference database for MS unit interconnect parameters. Various identification numbers and addresses are stored as well as authentication parameters, services subscribed, special routing information, MS unit status, and associated VLR. 12 The HLR contains the master database of the subscribers to the System. This data is remotely accessed by the MSCs and VLRs in the network. The System may include more than one HLR, in which case each HLR contains a portion of the total MS unit database. The MS unit data may be accessed by either the IMSI or the MS-ISDN. The data can also be referenced by an MSC or a VLR in another iDEN system to allow inter-system roaming. The data stored in the HLR indicates which basic and supplementary interconnect services a given MS unit is allowed to use. This data is changed only when new subscribers are added or deleted, or the specific services they subscribe to are changed. The HLR data also includes temporary information related to supplementary services such as the current call forwarding number. A MS unit's HLR entry also includes the address of its current VLR. This information, in connection with the VLR data explained below, allows completion of calls to roaming subscribers. The HLR function also includes the Authentication Center (AUC). The AUC generates and stores the parameters necessary to authenticate a MS unit's identity. 1.1.6.4 VLR (VISITED LOCATION REGISTER) The VLR contains a copy of most of the data stored at the HLR, but this is a temporary entry which exists only as long as a particular MS unit is known to be operating within the area controlled by the VLR. The VLR data base contains some duplicated HLR data as well as more precise location information and status. Cells in the System are grouped into geographic areas and each is assigned at least one Location Area Identity (LAI). Each VLR controls a certain set of LAIs. When a mobile MS unit roams from one LAI to another, its current location is automatically updated in its VLR entry. If the old and new LAIs are under control of two different VLRs, the entry on the old VLR is deleted and a new entry is created at the new VLR by copying the basic data from the HLR entry. The MS unit's current VLR address, stored at the HLR, is also updated. This provides the information necessary to complete calls to roaming subscribers. The VLR also controls the assignment of Mobile Station Roaming Number (MSRN). The call is then forwarded using the MSRN as the called address. The MSRN causes the call to be routed to the MSC which controls the base stations in the LA (Location Area) where the MS unit is currently located. The VLR also allocates handover numbers for use in inter-MSC handovers. These handovers require the call to be dynamically re-routed from the source MSC to the target MSC. The handover number functions similarly to an MSRN in that it allows the required voice trunk connection to be set up by routing through the existing land network. Signaling for inter-MSC handover requires dedicated CCS/C7(CCITT) or CCS/SS7(ANSI) links between MSCs. 13 The VLR also controls allocation of new TMSI numbers. A MS unit's TMSI may be periodically changed to secure the MS unit's identity. TMSIs are changed whenever an MS does a location update. The database in the VLR can be accessed by TMSI, IMSI, or MSRN. 1.1.6.5 OMC (OPERATIONS AND MAINTENANCE CENTER) The OMC provides a central point from which to control and monitor the DAP, EBTS and BSC/XCDR. The MSC and HLR may be accessible via a terminal emulation window. The OMC is connected to the DAP, EBTS and BSC/XCDR via an X.25 packet network. The OMC provides alarm handling functions to report and log alarms generated by the other network entities. The fault management functions of the OMC allow network devices to be manually or automatically removed from or restored to service. The status of network devices can be checked from the OMC, and tests and diagnostics on various devices can be invoked. The performance management functions include collecting traffic statistics from the iDEN RF network entities (BSC, DAP, EBTS) and archiving them in disk files or displaying them for analysis. The OMC provides System change control for the various versions of the software and configuration databases in the network entities. Software loads can be downloaded from the OMC to other network entities by the OMC. The OMC keeps track of which network entities are running which versions of software. Software upgrades can be coordinated from the OMC. The System configuration data bases of the other network entities can also be downloaded from the OMC. These databases change as the physical configuration of the network expands to accommodate growth. By using either network management procedures to manipulate defined managed objects or by using a remote man-machine interface when objects are not defined, the data bases on other entities can be changed from the OMC. The OMC can also perform consistency checks on data bases in the other entities. 1.1.6.6 BILLING CENTER (PART OF CUSTOMER PROVIDED ADMINISTRATIVE DATA CENTER (ADC)) The billing center is a system that must be provided by Customer which collects the billing data from the iDEN network entities and applies the billing data to subscribers' accounts. Tapes are used to transfer billing records from the MSC, SMS-SC, and the DAP to the Billing Center. 14 1.1.7 INTERFACES USAGE For interfaces between the MSC and the PSTN, the MSC is capable of interfacing to the local Central Office (CO) of the PSTN in MF (Multi Frequency) in-band signaling. The actual interface will depend on the capability of the local CO at the time the System is deployed. Inter-MSC handovers require dedicated CCS/C7(CCITT) circuits between the two MSCs involved. Details on signaling must be provided by the customer. Unique requirements may cause the need for additional equipment and services. 1.1.8 BASE RADIO ARCHITECTURE AND OPERATION Various configurations of base stations are available to adapt to different radio network design requirements. The MSC communicates and passes traffic to the XCDR and BSC which provide the opportunity for remote switching, distributed control, and traffic concentration. The introduction of the BSC is a key architectural feature of the System for providing wide area coverage capability. The interface between the MSC and the BSC is based on CCS/C7 (CCITT) (A-Interface). At the application levels, the System uses a special set of messages, unique to mobile application such as handover control signaling. The principal functions of the BSC include managing the radio channels and transferring signaling information to and from MSs for interconnect traffic. Many types of call handling signaling do not directly affect the BSC because the BSC merely serves as a relay point between a MS and the MSC. The BSC also includes a digital switching matrix. No fixed circuit relationship between the radio channels at the BSC/EBTS and the terrestrial circuits which connect the BSC/EBTS to the MSC exist. While the EBTS selects the radio channel, the terrestrial circuits are selected by the MSC. The switching matrix in the BSC is then used to connect the two together. The switching matrix also allows the BSC to perform most cell interconnect handovers without involving the MSC. 1.1.9 PROPERTIES OF THE RADIO INTERFACE The following provides some key radio related technical characteristics of the System. 1.1.9.1 FREQUENCY BAND The assigned frequencies between 806-821 MHz are for base receive and between 851-866 MHz for base transmit. Carriers are spaced every 25 kHz in 45 MHz channel pairs. Channels offset by 12.5 kHz are supported. 15 1.1.9.2 RADIO CHANNEL ACCESS METHOD The channel transmission used for the System is time division multiplex. This physical channel supports a variety of logical signaling and traffic channels. Three or six traffic channels can be multiplexed onto a single radio carrier. The speech coder is called Vector Sum Excited Linear Prediction (VSELP) coding which incorporates a long term predictor. In addition, there are numerous types of logical control channels tailored to specific purposes. These include broadcast, multiple access, and dedicated channels (both stand alone and or associated with user traffic). Logical control channels are sub-multiplexed with each other and with other traffic channels in a multiple tier frame structure over the radio path. 1.1.9.3 PHYSICAL RADIO CHANNEL The gross radio channel bit rate used in the System is 64 Kbits. The selected modulation is M16QAM. This technique, which is linear, provides for a highly desirable combination of modulation efficiency, sensitivity, acceptable C/I trade-offs, and low adjacent channel interference. For the typical environments experienced, the symbol duration is sufficiently long that no sophisticated equalization techniques are required to eliminate the effects of inter-symbol interference which would otherwise cause significant reception complications. Periodic pilot symbols embedded in every transmitted burst are used so the receiver can synchronize and obtain an estimate of the radio channel impulse response. Differential delays up to 24 microseconds are accommodated. The coding of the speech traffic information for the radio channel is accomplished as follows. Blocks of 30 msec (6:1 iDEN) or 15 msec (3:1 iDEN) speech represented by coded samples are speech coded by the VSELP encoder. Redundancy is added to the most important bits by means of a trellis code. The types of channel coding used for the radio path are optimized for the particular traffic (aside from speech) or control signaling. For error control over the faded radio channel, a combination of block coding (providing error detection and correction) and trellis coding is used. 1.1.10 RADIO SYSTEM ISSUES AND CONTROL FUNCTIONS 1.1.10.1 HANDOVER FOR TELEPHONE INTERCONNECT Handover allows for maintaining the link quality for user connections, minimizing interference, and managing traffic distributions. The mobile assisted technique is accurate and fast. Measurements which feed the handover decision algorithm are made at both ends of the radio link. MS unit measurements are signaled to the base where the determination for handover is ultimately made. EBTS measurements, which are available to the handover algorithm, involve only the uplink communication path. 16 1.1.10.2 POWER CONTROL Transmitter power control is employed for the MS. The key purpose is to control interference, but in the case of handportables, reducing the power serves further to extend the battery life. 1.1.10.3 DTX (DISCONTINUOUS TRANSMIT) The System allows use of DTx of speech using a voice activity detector. 1.1.10.4 DRX (DISCONTINUOUS RECEIVE) Discontinuous receive is a group paging technique whereby the MS is not required to be in a continuously active receive mode to detect pages and control signaling information. This feature is only supported when an MS is configured as an interconnect only unit. 1.1.10.5 LOGICAL CHANNELS AND FUNCTIONAL LAYERING The functional layering of the System is partially based on the seven layer model for open systems interconnection suggested by the ISO. Each layer performs a specific set of functions that are isolated and enhances those performed by the lower layers. This philosophy facilitates a modular approach to implementation. The functions occurring at one layer have only limited interaction with those at another. Layer 1 consists of the physical channel layer and is concerned with transmitting and receiving coded information symbols over the radio link. Layer 1 provides for the basic TDM frame structure. Layer 2 provides for the multiplexing and de-multiplexing of the multiple and diverse types of logical channels that are required (e.g. traffic, signaling, synchronization, control channels, etc.). Finally, Layer 3 provides for the three major management functions - radio resource management (paging, assignments, handover, measurement reports, etc.), the mobility management (authorization, location updating, MS unit attach/detach, periodic registration, identification confidentiality, etc., and call management (control, supplementary services, DTMF, short message data, etc.) 1.1.10.6 TIMING ADJUSTMENT Due to the short duration of the TDMA bursts (15 msec.), a closed loop mechanism for providing timing correction for the MS unit is provided to minimize the guard time needed between bursts. 1.1.10.7 SYNCHRONIZATION Synchronization is a key feature for the System. By design, all frequencies and times are locked to a high stability reference. The time reference is locked to a system-wide standard. The frequency reference is provided with Site standards. MS units lock to a reference transmitted from the base. 17 1.1.11 QUALITY AND MAINTENANCE FEATURES o Board level self diagnostics. o A variety of alarms and indicators throughout the equipment. o The use of self calibrating subsystems, including PA. o Circuit designs that do not require tuning and are immune to drift (e.g., direct digital synthesis for the modulation, etc.). o The use of remotely and software controllable parameters, including transmitter power. 1.2 CALL PROCESSING "INTERCONNECT" 1.2.1 GENERAL The iDEN System allows MSs to travel freely throughout the total service area and originate or receive interconnect calls without regard to their current location. The System tracks each subscriber unit's location and can route calls to it. The subsequent sections will delineate some of the internal (not visible to a user) steps involved in a typical interconnect call. The specific MS services are described in subsequent sections. 1.2.2 MS UNIT TO LAND CALL There are several variations of the call set up process. An example follows: An integrated interconnect/dispatch MS initiates a telephone call by selecting a "phone mode", entering digits and pressing the "send" key. The EBTS receives the request on a control channel and passes it to the controlling BSC which then passes it to the MSC. The MSC marks the unit "busy" and initiates an authentication sequence. The MSC sends a random number to the MS and requests a result to be produced by the MS unit by multiplying the number with its internal authentication key. The result is then compared with the result produced by the HLR using the authentication key assigned to the unit and stored in the MSC. The MSC sends a call request to the PSTN which must return a "call proceeding" indicator. The MSC assigns a terrestrial channel (i.e. trunk), and the BSC cross-connects the terrestrial channel with a newly assigned RF traffic channel (i.e., voice channel). Upon receiving an "alerting" message from the PSTN, the MSC Switch sends (via BSC, EBTS, control channel) an "alerting" message to the initiating MS. Once an answer signal is received from the PSTN, the MSC sends a "connect" message to the MS causing it to switch to the assigned voice channel and enter a conversation state. 18 1.2.3 LAND CALL TO MS UNIT There are several variations of the call set up process. An example follows: A land to MS unit call is essentially inverse to the MS unit to land call process described in the previous section. The principal difference is that the MSC must locate a mobile MS unit which may be traveling through the MSC service area or has roamed away to a service area of another MSC. This is accomplished by the MSC accessing the VLR to determine the MS unit location and if necessary the HLR. The location of the MS unit is only known down to a LA. The MSC, which controls the LA, requests the BSC to distribute "pages" to all the cells that belong to that LA. Upon receiving a "page" response, the call proceeds similarly to the MS unit to Land call. 1.2.4 MS UNIT TO MS UNIT This call is seen by the initiating MS unit as a MS unit to land call and by the target MS unit as a land to MS call. The FNE can route the call through the PSTN and would, in that case, also treat this scenario as two calls. The call may be contained within the MSC. A provision is made in the system such that mobile to mobile calls both inter and intra-iDEN System, are not double-transcoded (i.e. not converted from VSELP to PCM to VSELP). Inter-system calls must be routed via digital links to maintain this feature. 1.2.5 SYSTEM TO SYSTEM HANDOVER The System supports handover between cells, between LAs, and between iDEN systems. For Inter-MSC handovers to occur, additional dedicated trunks and MSC equipment must be purchased to connect the MSCs. The inter-system handover is facilitated in the MSC. When it is determined through RF metrics, that a handover is required and it is determined that this handover is required across MSC boundaries, the current MSC and the destination MSC begins a process of negotiating an inter-MSC call set-up through dedicated trunks that exist between the MSCs. The following scenario is executed to perform inter-MSC handovers: o The current MSC (the MSC that is initially handling the call) establishes a call set-up session with the adjacent MSC by signaling over dedicated trunks between the MSCs. o The destination MSC sets up a terrestrial circuit to the appropriate EBTS which allocates a channel for the MS that requires handover. o Trunks for speech are set-up between the switches. o Once a stable path is set-up on the new MSC, the MS is directed to switch to the new site's frequency, and the call continues uninterrupted. 19 o The terrestrial path to the original EBTS is broken. The call now continues through the original PSTN circuit to the original MSC and through a dedicated trunk to the new MSC. 1.2.6 DISCONNECT Upon receiving a call disconnect message from either a mobile or land subscriber unit, the MSC records the disconnect time in the call record, in addition to the previously recorded answer time, and initiates a disconnect sequence to release the utilized resources (e.g., voice channel, trunks). The call record which contains pertinent information such as called number, call time and duration is saved in a data base to be used for billing purposes. 1.3 CALL PROCESSING "DISPATCH" 1.3.1 GENERAL The System allows a MS to travel freely throughout the total service area and originate or receive dispatch calls without regard to its current location. The System tracks the unit's location. The System allows MSs to make calls directed to a single MS unit radio or calls directed to a group of members. In a multi-cell System a single time slot will be used in any omni-cell or sector-cell for a call whether there are one or several members of the group in that sector-cell. Initially no channel will be used in a cell or sector-cell unless there are members of the group called present. The subsequent sections will delineate some of the internal (not visible to a user) steps involved in a typical dispatch call. 1.3.2 LOCATION AREAS (LA) A LA is defined by the location area ID (LAI). A LAI determines which sector-cells are part of the LA. A sector-cell declares to the monitoring MS units that it is a member of a LA by broadcasting its support of the indicated LAI. A given sector-cell will generally belong to multiple LAs, and, therefore, it will broadcast support of multiple LAIs. A MS registers on a given sector-cell with a LA. The result is that the MS radio may move freely among the sector-cells supporting the LAI with which it registered without the need of a new registration. The Location Area update procedure of a DS is the same as that of a MS. 20 1.3.3 MS TO DS CALLS An MS unit may contact its base (generally a dispatcher) via a private call. To place a private call to the dispatcher, the MS first selects the Private Call radio mode. If the initiating MS unit radio is capable of targeting different MSs, the MS unit then selects the base as the desired target. The MS unit then initiates the call processing by pressing the PTT. The MS unit radio sends the request to the DAP for processing via the control channel. The DAP equipment then validates the requester, the request, and the target. After validation, the DAP locates the target unit and reserves a channel for the initiator and target (queue and callback if required). If the initiator and target happen to be on the same sector-cell, only one channel is reserved. When the necessary resources are available, the call is granted and the initiator's audio would be passed to the DS. After the initiator releases the PTT, the call is held for the call hang time period in anticipation of a response. Within the hang time, a response from the DS or further transmission request from the initiating MS unit is granted using the same resources. The expiration of the call hang time following the last transmission then triggers the call tear down procedure. The call hang timer is reset by each new transmission. 1.3.4 DS TO MS CALLS The procedure for a DS unit to reach another MS unit individually is similar to that set forth in the previous section. However, the DS is able to select from more than one potential target. Therefore, the target selection step is not optional. The process of locating the target MS in this case is the same as that described above in section 1.1.3.3. 1.3.5 MS TO MS CALLS This scenario is a duplication of the previous base to MS unit scenario. 21 1.3.6 GROUP CALLS If authorized, either a DS or MS may place a call to its group. Assuming the MS radio is in its default operating mode of group call, the initiating MS starts the call simply by pressing the PTT. The request will be forwarded to the DAP for processing. The DAP will then send a location request to each mobile/portable MS radio which is a member of the target MS group (including the initiator and the assigned fixed location DS unit). The location requests are targeted to the respective LA. If there happens to be more than one MS unit registered to a given LA, only one location request is sent to that LA. Further, since a sector-cell generally belongs to more than one location area, only one request is sent to each sector-cell. For reliable delivery, a request is repeated on the RF channel several times. Upon reception of the request the targeted MSs would return a location response. The DAP delays the processing of the call for a short period to allow for these location responses. The DAP then allocates channel resources, queuing with Call Back if necessary. When the channel resources for the initiator and at least one target become available, the DAP continues the call processing by granting the channels and setting the audio route from the initiator to those members of the group that have resources. After PTT release, the DAP maintains the channel for the duration of the call hang time. A request within that time by any one of the group members will cause the DAP to adjust the audio routing for the new transmission. The expiration of the call hang timer then triggers the call disconnect procedures. 1.4 INTERCONNECT CALL HANDOVER AND DISPATCH CALL RECONNECT 1.4.1 INTERCONNECT CALL HANDOVER During an interconnect call, there is continuous monitoring of the RF link quality in order to determine the need and possible target Sites for handover. Handover is directed by the MSC or BSC, but with the aid of measurements made by the MS. The MS periodically reports these measurements to the EBTS. Prior to being involved in a call, the MS determines the frequencies being utilized in the adjacent cells. At the initiation of a call the MS will already have quality metrics for those cells. Once a call is established, the MS monitors the channel quality for the assigned cell on the assigned bearer channel. In addition, the MS monitors the quality metrics for the adjacent cells. The assigned and best alternates are reported to the BSC. The EBTS equipment will likewise, and on an ongoing basis, measure the uplink channel quality of the assigned channel as well as the noise and interference levels of potential alternative bearer channels. The BSC or MSC will determine when and to which cell to handover the call. The handover command is sent to the MS, which then switches to the newly assigned bearer channel to complete the handover sequence. MS unit assisted handover does not require the use of scanning receivers at the base station and offers improved performance over systems driven by scanning receivers alone. 22 1.4.2 DISPATCH CALL RECONNECT In lieu of the interconnect type of handover, call reconnection is supported for dispatch traffic. Call reconnection is the dispatch process which allows an MS to be automatically reconnected to an ongoing dispatch call (i.e. group and private) after the MS switches to a new cell (coverage area). The reconnection process is a best effort attempt assuming that the new cell is within the coverage areas associated with a Service Area that is part of the call. 1.5 ADVANCED MODULATION TECHNOLOGY AND FCC COMPLIANCE ISSUES The System design utilizes digital modulation technique which, when combined with TDMA and VSELP speech coding, conveys six (6) channels in a single 25 kHz channel in the 800 MHz Land Mobile Band (LMB). (These channels may be assigned to interconnect calls in pairs). As reflected by FIGURE 1-3 FCC MASK PICTURE, the modulation technique conforms to the digital emission mask specified in the FCC rules, Section 90.209(g). Wide band transmitter spurious emissions also meet the specifications listed in Section 90. Motorola has done extensive simulation to quantify the effects interference caused to a digital iDEN by a co-channel analog SMR. It is Motorola's recommendation that a 55 mile separation is necessary to theoretically achieve a 19 dB advantage to a 100 watt, 200 foot iDEN Site that is co-channel with a 500 watt, 500 foot SMR Site. 23 [GRAPHIC OMITTED] FIGURE 1-3 FCC MASK PICTURE 1.6 ID MANAGEMENT PLAN Each MS is manufactured with a unique IMEI (International Mobile Equipment Identity). The MS software can read the IMEI which can be used to identify the unit uniquely over the RF to the DAP equipment. Motorola will cooperate with other vendors to coordinate the assignment of ranges of serial numbers to selected qualified and licensed vendors. The MS unit will supply this serial number over the air as needed. Other temporary IDs will be assigned subsequently for various purposes by the MSC. To support the authentication process, each MS unit is assigned an authentication key which is stored only in the MS and at the authentication center. The HLR generates a random number that is input to an authentication algorithm along with the authentication key. The algorithm produces a new number called the signed response. To authenticate an MS unit, the random number is sent to the MS. The mobile, if it is a valid one, executes the same authentication algorithm and produces the same signed response that is sent back on the signaling channel. Producing the same signed response from the same random number proves the authenticity of the MS unit. 24 For Telephone Interconnect: authentication takes place when an MS powers on and initiates a call, or when it travels from one telephone location area to another telephone location area. For Dispatch: authentication takes place when an MS powers on or when it moves from one dispatch location area to another. 25 2. FIXED NETWORK EQUIPMENT DESCRIPTION The System as shown in Figure 2-1 MOTOROLA iDEN PRODUCT below shows a high-level functional block diagram of the architecture. Note: Equipment configuration diagrams are provided as examples only. Actual diagrams will be provided in various equipment manuals and other documentation. 26 [GRAPHIC OMITTED] FIGURE 2-1 MOTOROLA ESMR PRODUCT 27 2.1 MSC/HLR PRODUCT OVERVIEW 2.1.1 MSC/VLR The MSC is a member of the Northern Telecom DMS switching family which all share the same basic architecture for both hardware and software. The DMS switching family includes local, trunk and international PSTN exchanges. [GRAPHIC OMITTED] FIGURE 2-2 DMS ARCHITECTURE 2.1.1.1 DMS ARCHITECTURE: o DMS-CORE is the central computing module of the DMS. It uses Motorola semiconductor technology and supports up to 240M bytes of memory to provide a powerful computing module. DMS-Core uses a duplicated architecture with two planes running in synchronous matched, lock step operation to provide extremely high reliability levels. The same computing modules used for DMS-Core are replicated to provide Application Processors and File Processors. o DMS-BUS is a duplicated, high capacity, low delay messaging subsystem (128 MBits/sec for 125,000 messages/second with less than 100 microsecond delay). It provides connectivity between the multiple computing modules, the signaling interfaces, the switching matrices and peripherals via fibre links. 28 o AVAILABLE BILLING SERVER in conjunction with the layered software architecture allows distribution of billing application software to a file processor. o LINK PERIPHERAL PROCESSORS (LPPS) provide a platform for support of up to 400 signaling processors that support protocol intensive network interfaces such as CCS/SS7(ANSI), CCS/C7(CCITT), 'A' interface BSSMAP lower layer protocols, and Ethernet. o The SWITCHING MATRIX within the DMS-MSC is the Enhanced Network (ENET). This is a single stage, fully non-blocking, n x 64 KBit/s switching fabric supporting up to 64k channels per cabinet and up to 128k channels maximum. o DIGITAL TRUNK CONTROLLER (DTCS) are used to interface T1/E1 digital carriers. Twenty T1 digital or 16 E1 carriers may terminate on each DTC (480 DS0/timeslots). The DTC provides the physical termination for the 'A' interfaces, and all voice trunking. 2.1.1.2 MSC FUNCTIONAL ARCHITECTURE iDEN Mobile Services switching Center (MSC) supports three distinct interfaces to the host network or other external systems. These interfaces are: o The 'A' INTERFACE, providing linkage to Base Site Controller's (BSCs) for Mobile Stations' interconnect activity. o The MOBILE APPLICATION PART (MAP) Interface, permitting mobility information to be transferred between network level components (Location Registers and MSCs). o The PSTN INTERFACE, which provides connectivity to the PSTN. Connectivity with System BSCs, MSCs, PSTN and other PLMNs is via T1/E1 interfaces connected to the DTCs. These peripherals support both the telephony traffic and the 'A' Interface signaling channel. The signaling channels are routed through the switching matrix to an 'A' Interface LIU in a LPP. This signaling processor handles all of the 'A' Interface protocol processing and communicates with DMS-Core, for network updates and mobile call processing via the DMS-Bus. Signaling between the MSC and other MSCs, HLRs and the PSTN for network updates and telephony call control are via the CCS/C7 (CCITT) LIUs also located in the LPPs. 2.1.1.3 SOFTWARE STRUCTURE The DMS-100 family software has a highly modular structure with narrow, well-defined interfaces among modules. The module interfaces are designed around basic operating system functions (scheduling tasks or store allocations), the basic call processing functions, the features required and the hardware supported. 29 Basic modules, held in a common library, can be classified into several layers that are used to build up an office. The main layers are the operating system, the call processing utilities, and the call processing options. The call processing options do not provide direct interfaces for other modules to call. They are specifically designed with no references to them, so that they can be independently selected as options for any given office. When loaded, they make themselves known to the rest of the System. The term "agency" is used for these call processing options. Typically an agency deals with a specific set of call processing features and the terminals (lines or trunks) to which they apply. The modular design concept of the DMS-MSC enables hardware components to be extended to meet future requirements. In the event of traffic growth, the processing capability of the MSC can easily be expanded via faster CPU and memory extensions. Extensions can be classified as either core or peripheral interface. Core extensions cover processor, memory and the switching network. 2.1.1.4 VLR (VISITED LOCATION REGISTER) The VLR is implemented completely in software within its corresponding MSC, and is currently not separable. This arrangement of having the VLR co-resident in memory with the MSC permits very quick updates and access to the subscriber data, thereby reducing the overall processing load on the System, improving MSC capacity and minimizing call set-up time. The VLR queries other network components (VLRs and HLRs) for information, when necessary to complete its own processing. These queries include location updates, authentication requests, and other events where the required data is not immediately available. The contents of the VLR closely match those of the HLR, but include additional information specific to the handling of the mobile subscribers, such as TMSI's, handover numbers and feature status. While the VLR has an appearance in the DMS table control system for software upgrade and System recovery purposes, it is not normally manipulated externally; additions and changes to its contents are handled by the System itself. Certain sensitive pieces of information, such as authentication and ciphering data, are not made visible to ensure security of the data. Communication between the VLR and other external network components (HLRs and VLRs) is accomplished through the MAP (Mobile Application Part) protocol. 30 2.1.2 HOME LOCATION REGISTER (HLR) The principle function of the HLR is to provide a central repository for the mobile subscriber information required by the network together with facilities for communications with the other network entities. On smaller Systems the HLR may be initially integrated inside the MSC. All subscribers have the following types of information associated with them: o MS Operational Information Identification, numbering and authentication. o MS Subscription Information Indication of the selected basic and supplementary services available to the subscriber together with any options relating to those services. o MS Service Registration and Activation Information Indication of which services are currently selected by the subscriber together with qualifying parameters. o MS Location Information Indication of the subscribers current location with respect to the network. The HLR maintains this information within its database and provides services through which other network entities may access it. The HLR is connected to the network through CCS/C7(CCITT) links to the VLRs and MSCs. The information is transferred as CCS/C7(CCITT) application layer messages. The information within the HLR is classified as either permanent data or temporary data: permanent data is updated by the service provider through the use of Customer supplied Administrative Data Center (ADC) functions; temporary data is updated in real-time from the network. MS operational information and subscription information is an example of permanent data, whereas location information is an example of temporary data. 2.1.2.1 HLR ARCHITECTURE The DMS-HLR is based on the hardware components of the DMS as shown below. The ADC (Administrative Data Center) is an external component and not part of the platform. 31 [GRAPHIC OMITTED] FIGURE 2-3 DMS-HLR HARDWARE THE BASE is comprised of the DMS-CORE, DMS-BUS, I/O Controller (IOC), the SLM II disk, the Office Alarms Unit (OAU) and a network module. The DMS-CORE provides centralized HLR and CCS/C7(CCITT) maintenance; the DMS-BUS provides the messaging medium between processors (e.g. LIUs and FPs); the IOC provides the MAP terminals to maintain the DMS-HLR node and printers for OM log reporting, and the ADC interface; the SLM II disk provides storage for the DMS-HLR software load and datafill; the OAU provides the audible and visual alarm reporting; the network module connects the OAU to the System. THE CORE holds the HLR application databases, implements the query processing functions for one or more HLR applications, and provides access to HLR data for update and administration purposes. Non-volatile storage of the HLR data is provided via image capture on the SLM II disk. LIUS which implement MTP layers 1, 2 and 3 and the SCCP layer of the CCS/C7(CCITT) protocol. LIUs are also part of the DMS STP product. LPPS which house the LIUs. 32 2.1.2.2 AUC (AUTHENTICATION CENTER) The AUC contains subscriber authentication keys (Ki) and generates security related parameters. During normal operation, the VLR will interrogate the AUC, via the HLR, for authentication and ciphering information. When requested, the AUC generates and sends a set of authentication parameters and ciphering vectors for forwarding back to the VLR. The AUC is implemented as a separate entity in software within the HLR, but it is not deployable separately. 2.1.3 SERVICE DESCRIPTION The following is a description of interfaces and services of the MSC and HLR. 2.1.3.1 "A" INTERFACE MODIFICATIONS Modifications to the GSM A interface are implemented to support the System radio requirements. These include change in message formatting and the inclusion of additional parameters in handover messaging. 2.1.3.2 IDEN AUTHENTICATION ALGORITHM The DMS-HLR contains an AUC, which generates security-related parameters. These are used to ensure that only authorized mobile subscribers have access to the network. An iDEN specific authentication algorithm is implemented in the AUC. The AUC also maintains the confidentiality of the subscriber authentication key Ki. The authentication procedure is always initiated and controlled by the network. 2.1.3.3 THIS SECTION REMOVED INTENTIONALLY. 2.1.3.4 THIS SECTION REMOVED INTENTIONALLY. 2.1.3.5 CALL WAITING Call Waiting permits a mobile subscriber to be notified of an incoming call (as per basic call procedures) while the traffic channel is not available for the incoming call. Subsequently, the subscriber can either accept, reject, or ignore the incoming call. 33 2.1.3.6 CALL FORWARDING (UNCONDITIONAL) Call Forward Unconditional allows the called subscriber to have the network divert all incoming calls addressed to the called mobile subscriber's directory number (DN) to another DN. Once Call Forwarding is activated, all incoming calls are forwarded no matter what the condition of the termination. Unconditional Call Forwarding overrides all other types of Call Forwarding. Registration of Call Forwarding can be accomplished either by the service provider or through the use of a control procedure by the subscriber. 2.1.3.7 NO ANSWER TRANSFER Allows the called mobile subscriber to have the network divert all incoming calls addressed to the called mobile subscriber's DN, but which are not answered, to another DN. The ability of the subscriber to originate calls is not affected. Once Call Forward No Reply is activated, all incoming calls that meet Call Forward No Reply criteria are forwarded. 2.1.3.8 BUSY TRANSFER Allows the called mobile subscriber to have the network divert all incoming calls addressed to the called mobile subscriber's DN, which meet Mobile Subscriber Busy criteria, to another DN. The ability of the subscriber to originate calls is not affected. Once activated, all incoming calls that meet Mobile Subscriber Busy criteria are forwarded. 2.1.3.9 CALL HOLD This allows the mobile subscriber to place an active call on hold or retrieve a currently held call. 2.1.3.10 INCOMING CALLS ONLY This is based on barring all outgoing calls. It gives the subscriber the ability to deny any outgoing call set-up, except emergency calls. 2.1.3.11 CALL BARRING OUTGOING INTERNATIONAL CALLS Barring All Outgoing International Calls (BOIC) provides the subscriber with the ability to deny outgoing call set-up to international numbers. 2.1.3.12 SOURCE DIRECTED ROUTING The ability to translate and route mobile originated calls based on cell of origination. 34 2.1.3.13 THIS SECTION REMOVED INTENTIONALLY. 2.1.3.14 LEAST COST (TIME OF DAY) ROUTING The Time of Day (TOD) Routing feature allows or denies route choices based on time of day. The times can be set according to the rate schedules of the carriers accessible to the user. The changeovers also can be varied based on the day of week and day of year, to account for weekends and holidays. The TOD system allows for changeovers to be specified for up to 16 time ranges. Different results can be defined for any day, or set of days on a weekly basis, or for any specific day of the year. 2.1.3.15 ALTERNATE ROUTING If no idle trunk is available in a selected trunk group, the System advances to the next route choice. If the end of the list is reached and no idle trunk is found, the software controlling the call selects the appropriate treatment code, and translation proceeds to the treatment table. 2.1.3.16 THIS SECTION REMOVED INTENTIONALLY. 2.1.3.17 R2 SIGNALING INTO THE PSTN MFCR2 (Multifrequency Compelled Register) Signaling can be supported, depending on the specific in-country signaling implementation. Details on this signaling must be provided by the Customer in order for a firm switch quote to be provided. 2.1.3.18 VOICE MAIL INTERFACE (R2) This allows the mobile subscribers to redirect an incoming call using call forwarding capabilities to an optional voice mail service via an R2 Interface (trunk). The mobile subscriber can dial the voice mail service directory number to retrieve the subscriber's voice messages. Details on the specific signaling must be provided to Motorola for a firm quote. 2.1.3.19 INTRA-SYSTEM ROAMING (ROAMING WITHIN A SINGLE MSC) The System tracks a unit's location so that calls can be routed to it. Interconnect calls require the current location of an MS. The System utilizes a LA concept. LA consists of a collection of cells. The mobile issues a location update request whenever there is a change in the LAI. The location update request is sent to the VLR that holds the current location of the MS. 35 2.1.3.20 INTER-SYSTEM ROAMING (BETWEEN TWO MSCS ON THE SAME NETWORK) The ability to travel freely throughout the single service area and originate or receive calls without regard to its current location can be extended to allow MS's to travel from one service area to another. The System will use a service area concept and a VLR in addition to the LA. The location request update is sent to the VLR that issues a TMSI for the MS allowing it to originate calls. Then the VLR sends an update to the HLR associated with the MS. Subsequently, the HLR will route all MS terminated calls to the current VLR allowing it to receive calls. 2.1.3.21 OVERDIAL (DTMF) DTMF is an inband, one out of four plus one out of four, signaling system primarily used from the terminal instruments in telecommunications networks. The use of DTMF is only permitted during an active call and is disabled in all other phases. The MS generated DTMF overdial digits, which arrive from the MS as signaling messages, must be regenerated by the MSC so that the MS is capable of accessing the "touch tone" (DTMF) driven services such as banking, voice mail systems and others. External DTMF overdial devices are not supported. 2.1.3.22 TRAFFIC DATA (OPERATIONAL MEASUREMENTS) These measurements/pegs are subject to change with each software release as new features and System enhancements are added to the System. Documentation for OMs is provided in the Northern Telecom Practices (NTPs) in CD ROM. 2.1.3.23 SHORT MESSAGE SERVICE (SMS) SMS (Message-Mail(TM)) is a feature of the System that facilitates delivery of short messages of up to 140 characters to an MS from several sources. These sources, called short message entities, include operator entry of alpha-numeric messages, numeric messages through DTMF-IVR digit collection from PSTN, and voice mail indication from a connected voice mail system. A distinguishing feature of SMS is the storing and forwarding of messages to MSs. If the messages cannot be delivered, the SMS-SC stores the message for delivery when the MS becomes available to the system. To add SMS to the iDEN system requires the addition of a Short Message Service Center (SMS-SC) and additional software to the MSC to interface and interwork with the SMS-SC. These are additional-cost items. 36 2.1.3.24 ROUTING TO PSTN OPERATOR The capability to route various type calls to a trunk terminating to a PSTN operator will be via standard translations. The MSC will not have mobile operator position system capability. 2.1.3.25 AUTO MESSAGE ACCOUNTING The MSC collects a full set of call record information. This information can be archived using a standard 9 track magnetic tape supplied with the MSC. These tapes can then be sent to a separate billing system. The MSC may optionally provide on-line transfer of billing information by using a standard FTAM. This eliminates the need for transferring tapes to the billing center and facilities programmed periodic automatic transfer of billing information. 2.1.3.26 DATA SERVICES System Data Services using Interworking Function (IWF) are available. These support Group 3 fax and asyncronous data. The MSC contains call control and routing functions for data and fax services. The services that are supported are Non-Transparent Async Data and Non-Transparent Fax. The addition of IWF requires the purchase of IWF hardware at additional cost. The MSC software to support IWF functionality must be purchased as part of the IWF Hardware package. 2.1.3.27 NEAR REAL TIME BILLING This near real time data transfer feature allows billing records to be sent to the billing center as soon as the records are formatted and written to disk. This capability enables the billing center to generate billing records shortly after the calls terminate. To incorporate this feature, a billing server must be purchased at additional cost. 2.1.3.28 CLASS-OF-SERVICE (OPTIONAL) DMS-MSC/HLR subscribers are partitioned into various customer groups at provisioning time. The customer group ID given to a subscriber community logically relates and uniquely identifies uniform and group specific services. NCOS in the DMS allows further service differentiation within a customer group. There are a maximum of 256 NCOS per subscriber group that can define originating and terminating restrictions on a subscriber basis. The combination of customer group IDs and NCOS allows the control of services for a class of subscribers. For example, they can be used initially for restricting a group of subscribers from making calls to a particular exchange. To add Class-of-Service to the iDEN System requires purchase of the software feature. 2.1.3.29 LOCAL CALLS ONLY A mobile subscriber that subscribes to Local Calls Only can make calls to those directory numbers in the target area that the network has designated as local. 37 2.1.3.30 INTER-MSC HANDOVER Inter-MSC handover occurs when a subscriber moves into a new MSC area. A terrestrial connection is set up to the new MSC, and the radio resource is switched to the new BSC on the new MSC. 2.1.3.31 THREE PARTY CALLING This service provides MS the ability to have three party call, i.e., simultaneous communication with two additional parties. In order for a user to activate a three-party service, the user must have: (1) one active call; (2) one call on hold, and (3) both calls must have been answered. In this situation, the served mobile subscriber can request the network to begin the three party service. 2.1.3.32 DIGITAL CROSSCONNECT SYSTEM (DCS) The DCS may be used as the BSC Site interface to EBTS. DCS requirements are explained in greater detail in Section 1.1.6 of the Exhibit. 2.1.3.33 ADDING SYSTEM FEATURES For reliability, both the MSC and the HLR have duplicated control component elements that operate synchronously, and duplicated messaging component elements that operate in a load-sharing mode. This duplication offers hardware fault protection, as well as the ability to carry out office extensions and software updates without disrupting service. Batch Change Supplement (BCS) is Northern Telecom's means of enhancing existing features and adding new features to the DMS-MSC and DMS-HLR. The following is an explanation of Northern Telecom's software update procedures that are followed after Customer requests such an update: o Customer is notified of the proposed BCS application schedule. o Each office scheduled for a BCS application is polled approximately 7 weeks prior to the software delivery date. The BCS polling group first contacts Customer to request permission to poll the office, and then dials via remote modem into the MSC/HLR to begin the polling session. Memory usage and current BCS levels are verified on the MSC/HLR. The polling also contains information on the hardware configuration and subscriber database. This information is used by various hardware and software engineering groups who build and deliver the new BCS load. 38 o The polling is used to determine any BCS gating hardware requirements. An example of gating hardware is additional memory requirements, or updated circuit packs. After engineering has evaluated the hardware configuration, any required gating hardware is sent to Site, and is installed in the System for at least 12 days. These 12 days are called the "soak period" during which this new hardware is monitored for stability. Any hardware that becomes defective within the soak period is replaced and must operate a minimum of 72 hours without a fault prior to the BCS application. If there is insufficient time to allow for a 72-hour period, the application will be rescheduled by NTI. This 12-day soak rule decreases the likelihood that the software upgrade will be impacted or unsuccessful due to faulty or unstable hardware in the office. o Pre-production activities are performed immediately prior to building or producing the new BCS load. These activities include: - Verification of the job feature database. Confirm the software packages ordered by Customer are included in the database, and all software interdependencies are met. - Ship documentation to Site (includes Northern Telecom Practices (NTPs) for the particular BCS load). o Production of the software load (load build). Load build is a series of procedures that merge base-level software (general software packages common to all offices) with optionally ordered features into a customized un-datafilled software load. o The software delivery process involves moving the office-specific data from the old BCS load to the new BCS load, prior to applying the new load to Customer's MSC. After the data has been verified, the application process is started. The new BCS load is first added into the inactive side of the CPU. Once the inactive side is loaded, an activity command is used to bring the System on-line with the new software load. By using this method, new software can be added to the System without affecting service. 2.1.4 NORTHERN TELECOM DMS-MSC The Northern Telecom DMS-MSC(TM) is based on the Northern Telecom DMS Family of switching products. 2.1.4.1 DMS-MSC ELECTRICAL/ENVIRONMENTAL CHARACTERISTICS ---------------------------------------------------------------------- Nominal Voltage -48 v DC ---------------------------------------------------------------------- Temperature 10 -30 degrees C ---------------------------------------------------------------------- Humidity 20 -55% relative humidity ---------------------------------------------------------------------- 39 2.1.4.2 HLR (HOME LOCATION REGISTER) The HLR is based on a fault tolerant hardware platform. HLR ELECTRICAL/ENVIRONMENTAL CHARACTERISTICS --------------------------------------------------------------------- Nominal Voltage -48 v DC --------------------------------------------------------------------- Temperature 10 - 30 degrees C --------------------------------------------------------------------- Humidity 20 - 55% relative humidity --------------------------------------------------------------------- 2.2 XCDR (VOICE TRANSCODER) The XCDR module is generally located at the MSC Site. Its function is to provide the transcoding between MS VSELP compressed audio and the 64 kB Pulse Code Modulation (PCM) utilized in the MSC and PSTN. The MSC provides the interface to the PSTN, therefore, VSELP compressed speech arriving from the BSC/EBTS needs to be converted to the Mu-law (T1)/A-law (E1) PCM format by the XCDR. Due to the delays inherent in packetized low rate speech, the MSC must provide the required degree of echo cancellation/suppression and noise masking to ensure audio quality. Communication links between the MS and the BSC/EBTS employ DTx which improves radio channel utilization and conserves the battery life of the handportable MS. The XCDR supports the DTx algorithm used by the MS, including noise masking of the silence intervals to ensure a more natural sounding speech. Voice packets may arrive at the XCDR with a variable delay. This occurs due to the BSC/EBTS internal packet processing. This delay is removed to provide an uninterrupted stream of PCM speech to the MSC. The BSC may be remotely located or co-located with the XCDR. Depending on traffic density, and if co-located, the BSC and the XCDR card cages may be housed in the same cabinet to form an integral BSC/CP/XCDR system or in separate cabinets to optimize trunking efficiency. 2.3 DAP (DISPATCH APPLICATIONS PROCESSOR) The DAP is a fault tolerant node responsible for the overall coordination and control of the dispatch communication services and support of the network operations related to MS units. The DAP has been optimized to support the rapid response time required for dispatch services. Up to four DAPs may be combined as one system for increased subscriber capacity. These services include typical dispatch calls with support for inter-Site calls when any target MS unit(s) is outside the coverage area of the call-initiating Site. The dispatch-type features included are: PRIVATE CALL (INDIVIDUAL DISPATCH CALL) -- An MS user can engage in a conversation with another MS user. 40 TALK-GROUP CALL (FLEET DISPATCH CALL) -- An MS can engage in a conversation with a predefined group of MS users. SELECTED TALK-GROUP CALL (GROUP DISPATCH CALL) -- A dispatcher can communicate with a predefined group of MS users or dynamically select a subset of members based upon their current location (e.g. selected service area, selected local area, or wide area). In addition to the above basic features, the DAP will support the following: OVER-THE-AIR-PROGRAMMING -- All of the parameters necessary for defining a MS unit's essential operating parameters will be provided via an over-the-air protocol. PTT-ID -- The controller will optionally forward individual MS IDs to a properly equipped MS. CALL ALERT -- A MS user can send an alert message containing his ID to another MS registered on the System requesting him to call back. AFFILIATION -- A MS user can change its default groups and System to be used from a predefined list of choices. In order to support all the dispatch/MS unit network management services, the DAP must manage/request global-shareable System resources and track the state and location of dispatch units. The network management services include the resources managed locally by the DAP, the resources managed by the ACG and the MSCs themselves. This includes knowing if the unit is registered, where it is registered and providing it with the correct default groups. The following System features will provide the System with this information: AUTO-REGISTRATION -- A MS will indicate that it is coming into a new LA so it can continue operating at that area. The unit will be provided with the parameters necessary for operating in this LA. AUTO-DE-REGISTRATION -- A MS will indicate that it is leaving the current LA because of either powering-off or by roaming into another LA. Since the location data is needed for the telephone interconnect services and stored in the HLR/VLR data base, the DAP implements its own mobility tracking and uses a private data base (D-HLR) maintained by the DAP to track the locations needed for the dispatch services. The D-HLR keeps track of all the records necessary for the dispatch communication services. The database will include a MS unit access record for each unit to identify which features the unit is permitted to use. The database will also be used to indicate in which call a MS unit is currently 41 involved so the DAP can correctly process conflicts that arise. In addition, records will be needed for dispatch talk-groups to determine which MSs make-up each of these groups. The DAP also collects air time usage information and performance statistics. This information is stored on a disk and provided to other systems as necessary (e.g., a billing computer). 2.4 MPS (METRO-PACKET-SWITCH) The MPS is a high-speed digital T1/E1 nodal processor for the System. This provides virtual circuit connectivity between various end node EBTS for dispatch traffic, and associated control information. A MPS may be expanded to form even wider area dispatching services. The MPS will communicate with end nodes, EBTS and the DAP, via a star configuration network. The MPS is the central switching node and is connected to each end node via one or more statically allocated DSO/timeslots. The MPS and end nodes will coordinate the exchange of information via industry standard based protocols. These protocols will provide for the multiplexing of both control and packetized voice over the shared DS0/timeslots. The MPS is configured to provide sophisticated network routing, resiliency, redundancy and cost effectiveness. When possible, it will provide fast network re-routing on circuit failure to maintain voice and control sessions. Faults will be indicated by local and network alarms. The MPS will have continuous diagnostics and can be configured to provide full hardware redundancy for all components. 2.5 OMC (OPERATIONS MAINTENANCE CENTER) 2.5.1 GENERAL The OMC is a centralized facility that supports the day to day management of the System and provides a database for long term network engineering and planning tools. The OMC manages the DAP, EBTS and BSC-CP/BSC-XCDR. The DMS-MSC and HLR will be remotely accessible through terminal emulation windows on the OMC. The DAP, EBTS and BSC-CP/BSC-XCDR have network management agents that support a hierarchical network management philosophy. The OMC supports the following network management applications functions: o Event/Alarm Management o Fault Management o Performance Management 42 o Configuration Management o Security Management The Event/Alarm Management functions provide utilities to report and log alarms for the attention of the maintenance personnel at the OMC. The Fault Management functions of the OMC allow network devices to be manually or automatically removed from or restored to service. The status of the network devices can be checked from the OMC, and tests and diagnostics on various devices can be invoked. Diagnostic control can be invoked, for example, on the BSC, EBTS and other fixed network entities. The performance management functions include collecting traffic statistics from the various network entities and archiving them to disk for display or analysis. The OMC provides System change control for the software versions and configuration databases in the network entities. Software loads can be downloaded from the OMC to other network entities. The OMC keeps track of which network entities are running which versions of software. Software upgrades are coordinated from the OMC. The System configuration databases of the other network entities can also be downloaded. These databases change as the physical configuration of the network expands to accommodate growth. By using either OSI procedures to manipulate defined managed objects or by using a remote man-machine interface when objects are not defined, the data bases on other entities can be changed from the OMC. The OMC can also perform consistency checks on data bases in the other entities. The OMC network management application is built to run on the UNIX operating system which provides maximum flexibility in adapting new applications by providing an industry standard operating environment. The OMC security management function provides a secure environment for operating the network. It contains a password and authorization database which limit the functions each maintenance person can perform. An OMC MMI (Man-Machine Interface) is supplied for interacting with the Network Manager providing a user-friendly interface. The OMC has the ability to operate autonomously so that normally the Network Manager need only supervise the reported events and reactions of the network. The MMI control is provided through "X" terminals and provides facilities to enter commands and to display command responses and alarms. Multiple "X" terminals can be connected to the MMI to allow access through several locations. With this interface all equipment repair and replacement, all maintenance, recent change, troubleshooting and diagnostics, and System administration can be executed through a single focal point. 43 2.5.2. OMC (OPERATIONS MAINTENANCE CENTER) OMC ELECTRICAL/ENVIRONMENTAL CHARACTERISTICS ---------------------------------------------------------------------- Voltage Range 100 - 120V AC (uses an inverter for battery backup) ---------------------------------------------------------------------- Temperature 10 -38 degrees C ---------------------------------------------------------------------- Humidity 10 - 85% relative humidity ---------------------------------------------------------------------- Note: Other supply voltage options are available. OMC/MMI ELECTRICAL/ENVIRONMENTAL CHARACTERISTICS --------------------------------------------------------------------- Voltage Range 90 - 132V AC --------------------------------------------------------------------- Temperature 5 - 40 degrees C --------------------------------------------------------------------- Humidity 10 - 80% relative humidity --------------------------------------------------------------------- Note: Other supply voltage options are available. 44 2.6 THIS SECTION INTENTIONALLY BLANK. (FOR FUTURE USE) 2.7 BSC/CP/XCDR ARCHITECTURE [GRAPHIC OMITTED] FIGURE 2-4 BSC-CP BLOCK DIAGRAM 2.7.1 GENERAL DESCRIPTION The Motorola BSC-CP equipment provides the control and interface between the MSC and the EBTS. It is also a way of remoting some of this capability away from the MSC. The BSC can function as a remote concentration point to minimize recurring line costs. In addition, the BSC architecture provides a platform for the Speech Transcoder (XCDR). These functions are normally associated with the MSC. This flexibility is achieved by defining a set of common boards which are used throughout. A block diagram of the BSC-CP is shown in FIGURE 2-4 BSC-CP BLOCK DIAGRAM. A block diagram of the BSC-XCDR is shown in FIGURE 2-6 BSC-XCDR BLOCK DIAGRAM. This section describes the architecture and the modules used in these subsystems. 45 [GRAPHIC OMITTED] FIGURE 2-5 BSC CABINET CONFIGURATION Two card cages are mounted in a 24 inch rack as depicted in FIGURE 2-5 BSC CABINET CONFIGURATION. Each card cage is powered by three load sharing DC power supplies operating from -48 VDC. Modules are interconnected using the microprocessor bus, the TDM bus and the Local Area Network. Control and communication functions are performed by the GPROC. System interfaces are based on the T1/E1 standard with extensive use of HDLC based data communications. A parallel TDM bus is used for voice and data traffic. The bus is fully redundant. It is controlled through the KSW which performs 64, 32 and 16 kbps time slot interchange functions. 46 Local Area Network is based on IEEE 802.5 standard (Token Ring). It is used for communications between the GPROCs. It is also extendible between the card cages using the fiber-optic interface. The LAN is fully redundant. The MCAP bus is used by the GPROCs to control the extender boards. This bus is not extendible beyond the boundaries of a single digital board shelf. [GRAPHIC OMITTED] FIGURE 2-6 BSC-XCDR BLOCK DIAGRAM 2.7.2 BSC/CP/XCDR TECHNICAL SPECIFICATIONS Cabinet ratings shown in the chart below are common to the CP/XCDR components. 47 ----------------------------------------------------------------------- CABINET RATINGS ----------------------------------------------------------------------- Size (inches) ----------------------------------------------------------------------- width 28 ----------------------------------------------------------------------- depth 16 ----------------------------------------------------------------------- height 83 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Weight (loaded) ----------------------------------------------------------------------- kg 242 ----------------------------------------------------------------------- lbs 535 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Power ----------------------------------------------------------------------- watts 3,100 ----------------------------------------------------------------------- BTU/hr 11,000 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Temperature(degree)C 0 to +50 ----------------------------------------------------------------------- Supply Voltage ----------------------------------------------------------------------- -48 VDC -40 to-75 volts ----------------------------------------------------------------------- Supply Maximum Current ----------------------------------------------------------------------- -48 VDC 30 amps DC ----------------------------------------------------------------------- 2.8 ENHANCED BASE TRANSCEIVER SYSTEM 2.8.1 GENERAL DESCRIPTION The EBTS diagrammed in FIGURE 2-7 ENHANCED BASE TRANSCEIVER SYSTEM, provides radio communication link between the land network and the MS units. The base radios actually perform the communications with the MS units, sending both the control information and the compressed speech over a multiplexed radio channel. Each base radio handles one 25 kHz, in the 800 MHz Land-Mobile Band channel with 6 time slots. Therefore up to 6 conversations per frequency can take place at the same time. Some of the time slots are assigned for control data. These slots are also used for channel requests by the MS units and for paging the units from the network. 48 [GRAPHIC OMITTED] FIGURE 2-7 ENHANCED BASE TRANSCEIVER SYSTEM Most of the control messages are originated at the ACG portion of the ISC which is the Site's "resource manager". The ACG keeps track of the available frequencies and the slots and assigns these resources to the MS units as necessary. The ISC communicates with the network over the T1/E1 lines. Compressed voice is sent out to be connected to the PSTN or for "one to many" duplication in the dispatch call. The ISC also communicates with operations and management computer and the subscriber authorization computers at the MSC. Two ISC units are needed to provide a fall back capability. A Local Area Network links the EBTS modules. Time synchronization and a common frequency standard are also provided within the ISC. The RF distribution system depends on the particular Site capability and is described in other sections of this document. 49 This System provides a considerably more private grade of voice and data operation than currently available from the FM cellular systems and most FM trunking systems. This occurs because no commercially available monitor receivers for this type of modulation currently exist, and the difficulty with regard to building one represents a significant barrier. Some of the key difficulties include: handover tracking, VSELP decoding, authentication and linear demodulation. These features of the System effectively block most eavesdroppers. For these reasons many System operators may not require any additional security. [GRAPHIC OMITTED] FIGURE 2-8 STATION MECHANICS As reflected in FIGURE 2-8 STATION MECHANICS, EBTS functional modules are constructed as card cages which are 15 inches deep and mount in EIA standard 19 inch width rails. The BR is a 5U (Rack Unit =1.75") high card cage. The card cage contains the RF Power Amplifier, the receivers, the BRC, the power converter and the exciter. 2.8.2 BASE RADIO (BR) 2.8.2.1 BASE RADIO CONTROLLER (BRC) This microprocessor based module shown in FIGURE 2-9 BASE RADIO BLOCK DIAGRAM, controls basic station functions including transmitter keying, operating frequency programming, data routing and fault management. The BRC connects three receivers (3 branch diversity) and one transmitter via the dedicated high speed digital links. This module contains two DSPs for performing advanced linear modulation and demodulation. 50 [GRAPHIC OMITTED] FIGURE 2-9 BASE RADIO BLOCK DIAGRAM The BRC supports a local area network connection used to exchange radio channel data and base radio control messages with the ISC. Radio channel data includes compressed voice packets and user data such as telephone dialing commands. It also contains the control stream, which is used to perform such functions as handovers, System registration and unit paging. The BRC performs the real-time control of the three receivers and one transmitter. At the physical layer the BRC demodulates the digitized IF signals from the receivers into a bit stream by locking onto and tracking the received signals within the time slots. Three way diversity is used to combat the channel disturbances at this very high data rate. On the transmit side, the radio channel data and the pilot symbols are combined, and the output waveform is synthesized. At the data link layer, the BRC performs partitioning of the time slots used for multiplexing of 6 traffic channels onto one frequency resource. The BRC also performs error detection and correction using optimized procedures to handle voice and data. The outbound channels are always active even if no users are assigned to these channels. The BRC generates the idle pattern for these channels. The BRC supports network management functions. The BRC is capable of self-testing and conducting the diagnostic checks of transmitter, receiver and power converter modules. It also configures these modules on command or on power up. The BRC monitors the alarm conditions and routes the alarm messages to the ISC and the local serial port. A command set that supports access to the alarm information, run-time statistics and on-demand testing is used. The BRC software, except for the "boot" code, can be remotely updated. The BRC utilizes an external Site synchronization signal supplied by the time frequency reference. This signal is used to align the time division slots on different frequencies. 51 2.8.2.2 INTEGRATED SITE CONTROLLER (ISC) The ISC is the Site controller and the communications gateway between an EBTS Site and the System's central network. The ACG is a functional portion of the ISC. The ACG relieves the BSC, DAP and MSC from the lower level Site control functions. It provides the isolation between the central network and the RF System implementation. Because most of the Site control functions are performed by the ACG, the number of messages to the MSC is decreased. This approach also results in the shortest call setup time and decreased link capacity requirements. The ISC controls the RF base radios via a LAN. The ISC communicates with higher levels of the network via a T1/E1 link. It communicates with the BSC/MSC for interconnect calls and the DAP for dispatch calls. For example, a "page" received from the controlling BSC is sent to the correct base radio, and an acknowledgment is returned to the originator BSC. In conjunction with the MS, the EBTS measures handover parameters. The EBTS/ACG handles intra Site handovers between sectors. For telephone interconnect handovers involving multiple Sites, the handover metrics are passed on to the upper layers of the network (BSC and/or MSC) from several Sites for evaluation and the handover decision. Additionally, the ACG contains a "network management agent" process controlled by the operations and management computer at the MSO. This process is responsible for performing all the local network management functions such as configuration management (e.g. code download), fault management (alarm processing and re-configuration support), performance management (e.g. statistics gathering) and communication with its "agent" processes resident in the base radios and the MS units. The ISC supports data-communications over a single T1/E1. The ISC card cage houses the TFR, EAS, and CSU. Two ISC units are required for standby operation. Communication exists between the master and standby ISC to determine the current ISC master. The ISC supports up to 10 RF channels (60 RF servers) at an Omni EBTS Site and 12 RF channels (72 RF servers) at a Sector EBTS Site. The ISC interfaces (on its T1/E1 side) to 64 kbps DSO/timeslots where 24/30 DS0s form one T1/E1. The quantity of DSO/timeslots required in the single T1/E1, from an EBTS Site, will depend on the number of RF servers, the total traffic loading and the traffic mix (Interconnect and Dispatch) at the EBTS Site. The ISC requires a full T1/E1 (not a fractional T1/E1) unless a Customer provided DCS (grooming the T1/E1) is located at the EBTS Site. 52 The EBTS/ISC passes the following traffic via the T1/E1 to the iDEN central network: Network Management (Status/Control and Configuration), Telephone Interconnect Service and Dispatch Service. Compressed voice for Interconnect is sent in a 16 kbps sub-rated format. "Clear T1/E1" capability is needed to support the sub-rates which is accomplished via B8ZS/HDB3. Time Frequency Reference (TFR), an ultra high stability ovenized Site reference, is incorporated in the ISC. Each base transceiver is connected to the reference signal from the Site standard. 2.8.2.3 RECEIVER The receiver converts the low level RF signal into the digitized IF data which is sent to the BRC for post processing via the dedicated high speed serial link. The receiver includes a synthesizer for operation on any of the 800 MHz band channels with 25 kHz spacing. The receiver is capable of linear operation over a wide dynamic range necessary to support the advanced linear modulation. Adjacent channel selectivity is provided by the combination of crystal and digital filters. 2.8.2.4 TRANSMITTER The transmitter converts the digitized output waveform, received from the base radio controller via the dedicated high speed serial link, into a high power RF signal. The transmitter includes a 800 MHz band linear power amplifier. The linear 350 Watts PEP power amplifier provides 60 dB IMR and is rated for 70 Watts average continuous duty. The high level of linearity is achieved with a double conversion feedback design using a number of custom integrated circuits. The transmit frequency is controlled through the on-board synthesizer. The BRC is used to perform thermal derating, transmitter initialization, power control loop leveling and synthesizer loading. This module includes fans for thermal management. 2.8.2.5 POWER CONVERTER The power converter provides DC voltage necessary for base radio operation. It operates from the nominal input voltage. Fans are included in this module for cooling the power supply devices. 2.8.3 THIS SECTION REMOVED INTENTIONALLY. 53 2.8.4 LAN (LOCAL AREA NETWORK) The LAN provides a method of routing both data and compressed voice on the same communication link. The LAN operates at 10 Mbps to carry traffic between the base radios and the ACG. The functionality of the LAN repeater has been integrated into the LAN interfaces of the base radios and the ISC. This further improves System reliability. All base radio and ISC LAN interfaces are equipped with circuitry that will provide continued LAN functionality should a problem occur on either the base radio or the ISC. Thus, no single failure in the base radio of the ISC will bring down the LAN. 2.8.5 SITE SYNCHRONIZATION The BRs at a Site must transmit their information in synchronization with other BRs at that Site as well as with BRs at other Sites. Some of the reasons are to prevent interference and to permit optimal handoff. To meet this requirement, a Global Positioning Satellite Receiver (GPSR) system, included in above TFR, is used to supply a Site timing reference. The ISC contains the GPSR to provide absolute time sync. This information is distributed to all the BRs at a Site to provide knowledge of when timeslots start. Synchronization of base radios is necessary to ensure that MS units do not lose time reference as they change operating frequency. Synchronization is achieved via a GPSR at each Site. Since the time sync is generated from one source, MS units are synchronized to the System's time reference. To protect against a single point of failure, a standby GPSR is supplied with each standby ISC. 2.8.6 STANDBY CAPABILITY Three way antenna diversity is provided for each BR's receiver. The failure of any antenna results in potentially degraded coverage and capacity performance, but not a complete failure of the Site. The specific degradation of Site capacity will depend on the Site's transmitter combining scheme. The Site equipment operates from the -48 VDC source, so that a backup battery may be used to provide service during a power outage. 54 2.8.7 BASE RADIO TECHNICAL SPECIFICATION
GENERAL Frequency Generation Synthesized Frequency Stability 3400 PPB or better per year with external reference Frequency Spacing 25 kHz T/R Separation (with Duplexer) 45 MHz RF Input Impedance 50 ohms Nominal Input Voltage -48 v DC Average Power Consumption (Max. @ 70W output) 625 Watts Size, Weight 8.5"H x 19" W x 15" D, 90 lbs Temperature Range (except batteries) 0(degree)C to +40(degree)C TRANSMITTER Frequency Range 851-866 MHz Frequency Switching Time 100 msec Power Output 70W average, 350W Peak Envelope Power Operating Bandwidth 15 MHz Spurious and Harmonic Emissions -80 dBc Adjacent Channel Power Per Part 90 FCC Mask RF Emissions Per FCC Requirements
55
RECEIVER Frequency Range 806-821 MHz Channel Spacing 25 kHz Adjacent Channel IF Filter Attenuation 100 dB Preselector Bandwidth 15 MHz Sensitivity (8% BER, Static M-QAM) Typically -115 dBm Radio 3rd Order Intercept Point +13 dBm RF Filter Spur Selectivity 106 dB RF Emissions Per FCC Requirements
2.9 NETWORK SYSTEM DESIGN 2.9.1 GENERAL The System network design, its capacity and routing will determine which of any additional subsystems may be desired or required. For example, in some cases, remote BSCs might optimize T1/E1 efficiency as the System grows. Also, the placement of the MSO Site, the dedicated T1/E1 routing to EBTS Sites and the associated T1/E1 route distances may require additional remote DAPSs and MPSs due to circuit delay. 2.9.1 CIRCUIT DELAY A System design guideline has been established that recommends that delays from an EBTS cell Site to the MPS be kept to less than 5 ms and the delay from the MPS to the DAP be kept to less than 2.5 ms. This limits the range from an EBTS to an MPS to about 600 (1000 KM) circuit miles if there are no other significant delays in the inter-exchange carrier's network (other than the link propagation delays themselves). Telephone interconnect, short message service and circuit-switched data can tolerate longer delays because of their less critical and less frequent set-up times and audio delay adjustment capability, and thus do not require the above stated dispatch system design criteria. However, extremely long delays (such as satellite hops or terrestrial links that have delays beyond 20 ms. should be avoided as this will add to the telephone audio delay. 56 2.9.2 EBTS TO MSO LINKS 2.9.2.1 TI Motorola requires that the T1 span (1.544 mbps) linking Motorola provided equipment meet the following specifications: o Extended super frame o Clear channel signaling o Binary 8 zero substitution (B8ZS) (64 kbps DSO/timeslot) o North American T1 NOTE: The MSC to PSTN trunk interface will support 56 kbps super frame protocol in addition to above. 2.9.2.2 E1 Motorola requires that the E1 span (2.048 Mbps) linking Motorola provided equipment met the following specifications. o Clear channel signaling o HDB3 (64 kbps time slot) o 75? Coaxial or 120? 4-wire termination. 57 3. QUALITY AND RELIABILITY 3.1 SYSTEM AVAILABILITY System availability is calculated based upon the individual contributions of each part of the System. In the design of the System, Motorola has made use of fault tolerant computer architectures at all locations where a device failure would result in the loss of a significant part of the System. Also, Motorola has battery backup capability at all MSO Sites and its EBTS Sites to prevent loss of coverage and/or capacity given a failure of the AC mains. 3.2 FAULT TOLERANCE Following is a list of fault tolerant capabilities of the System. It is important to keep in mind that although this discussion treats a board as a single point failure, typically this is not accurate. Many of the boards contain identical functional blocks such as T1/E1 interfaces or voice transcoding circuits. In such instances, a board may be capable of functioning with some but not all of its capability. In other instances, performance of a board may degrade without an apparent failure. Critical circuitry is monitored as practical, and equipment alarms are generated so that a board may be replaced before an interruption of service occurs. 3.2.1 EBTS A complete failure of a single EBTS may be partially offset by the adjacent EBTS. Three way antenna diversity is provided for each Base Radio's receiver. The failure of any antenna may result in degraded coverage and capacity performance, but not a complete failure of the Site. The specific degradation of Site capacity will depend on the Site's transmitter combining scheme. Two ISC units can be used at every EBTS Site. If one fails the other takes over control of the Site. After a short interruption, service is restored automatically. All Sites use one T1/E1 to bring service from the telephone company CO. A protected fault tolerant T1/E1 connection between the COs can be requested from the serving telephone company. 3.2.2 BSC/CP/XCDR Within the BSC, the GPROCs are designated as Base Site Control Processor or Link Control Processor. The Base Site Control Processor is a centralized control point. In the XCDR the GPROCs perform the operations and maintenance processing. The MSI boards provide E1/T1 link connectivity. These may be assigned to two destinations. A high capacity connection which uses more capacity than one T1/E1 will be degraded if a MSI board fails. 58 The transcoders boards are normally provided to support 0.1% blocking rate. If one of the boards fails, blocking probability may increase. 3.2.3 MSC/HLR/DAP The MSC, HLR, and DAP are provided on fault tolerant platforms. The fault tolerant platforms incorporate redundant pairs of processor boards that mirror the execution of the stored program. Should a processor fail, the redundant processor of the pair takes over and continues to operate. The failed board can be replaced on-line without service interruption. 59 DEFINITION OF ACRONYMS -A - B - C- "A" Interface Switch MSC Switch ACG Access Controller Gateway ADC Administrative Data Center AUC Authentication Center BCS Batch Change Supplement BHCA Busy Hour Call Attempts BR Base Radio BRC Base Radio Controller BSC Base Site Controller BTC Bus Terminator Card CCS/C7(CCITT) CCITT Signaling System 7 CLKX Clock Extender CO Central Office CP Call Processor (Part of BSC) CPU Central Processing Unit CSU Channel Service Unit -D- DAP Dispatch Application Processor DCS Digital Crossconnect System DMS-MSC (Refer to MSC) DN Directory Number DRX Discontinuous Receive DS Dispatch Station DS0 Single Time Slot of E1 or T1 circuit DSP Digital Signal Processor DTC Digital Trunk Controller DTC Digital Trunk Cage DTMF Dual Tone Multi-frequency DTX Discontinuous Transmit -E - F- E1 A 2.048 Megabit per second communications channel EBTS Enhanced Base Transceiver System EIA Electronic Industries Association ENET Enhanced Network (MSC Switching Network) ERP Effective Radiated Power ESN Equipment Serial Number FCC Federal Communications Commission FNE Fixed Network Equipment FTAM File Transfer Access Method -G - H- GCLK Generic Clock GPROC Generic Processor Card GSM Global System for Mobile Communications HDLC High Level Data Link Control HLR Home Location Register 60 -I - J -K- iDEN Integrated Dispatch Enhanced Network IMEI International Mobile Equipment Identifier IMSI International Mobile Subscriber Identifier IOC Input/Output Controller ISC Integrated Site Controller ISO International Standards Organization IWF Interworking Function KSW Kiloport Switch KSWX Kiloport Switch Extender -L - M - N - O- LA Location Area LAI Location Area Identity LAN Local Area Network LANX Local Area Network Extender LIU Link Interface Unit LPP Link Peripheral Processor LR Location Register M16QAM Motorola's RF Modulation for iDEN MAP Maintenance Administration Port (MSC Control Terminal) MAP Mobile Application Part (Protocol) MCAP Motorola Cellular Processor - Advanced MMI Man-Machine-Interface MPC MultiPersonal Computer MPS Metro-Packet-Switch MS Mobile Station MS-ISDN Mobile Station International Subscriber Directory Number MSC Mobile Switching Center MSI Multiple Serial Interface MSO Mobile Switching Office MSRN Mobile Station Roaming Number OAU Office Alarm Unit OCOS Originating Class of Service OM Operational Measurement OMC Operations and Maintenance Center -P - Q - R - S- PCM Pulse Code Modulation PLMN Public Land Mobile Radio Network PSTN Public Switched Telephone Network PTT Push To Talk RAM Random Access Memory RBDS Remote BSS Diagnostic Subsystem RF Radio Frequency RSO Remote Switching Office SIX Serial Interface Extender SMR Specialized Mobile Radio SMS Short Message Service (Message-Mail(TM)) SMS-SC Short Message Service Service Center SS7 Signaling System 7 61 STP Signal Transfer Point 62 T - U - V - W - X - Y- Z T1 A 1.544 Megabit-per-second communications channel. TDM/TDMA Time Division Multiplexed/Time Division Multiple Access TMSI Temporary Mobile Station Identifier USDC United States Digital Cellular VLR Visited Location Register VSELP Vector Sum Excited Linear Prediction XCDR Speech Transcoder 63 EXHIBIT "C" TO iDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN MOTOROLA AND TRICOM LATINOAMERICA, S.A. ACCEPTANCE TEST PLAN For purposes of uniformity and brevity, references to Agreement or to an Exhibit shall refer to that Purchase Agreement to which this document is Exhibit "C" and to the other Exhibits to that Agreement. All definitions set forth in the Agreement shall apply hereto, unless otherwise specified herein. 1.0 PURPOSE The purpose of this Exhibit "C" Acceptance Test Plan is to set forth the Acceptance Testing procedures and to demonstrate to Customer that Motorola has delivered the Hardware, Software, and features as described in and pursuant to the Agreement and its Exhibits. 2.0 ACCEPTANCE TESTING PROCEDURES 2.1 The parties agree that the acceptance testing shall be done for all new Systems and a modified ATP shall be performed for all System Expansions and shall be included in all relevant Purchase Orders. The ATP tests shall be chosen from the GATP, as set forth below, that the parties have agreed to and identified when Customer purchases ATP Services. This ATP is generic in nature and tests operational features. Should a certain feature or option not be purchased then it is agreed that portion of the ATP shall be deleted and will not be performed. Motorola shall supply new sections to cover new products or features Motorola develops. The GATP will be amended to reflect desired practices for testing Systems in Commercial Service. The parties acknowledge that different approaches are required for Systems in Commercial Service and those acceptable for Systems not in Commercial Service. Motorola and the Customer agree and acknowledge that System performance may be affected by local regulatory constrains on System's operation. Since such situation will be beyond Motorola's control, it shall not impact or affect in any way the attainment of Conditional Acceptance or Final Acceptance. Furthermore, any condition derived from such situation shall not become an item on the Punchlist. Motorola and the Customer shall agree upon the ATP. It is understood that in the event Customer uses services of the Consultant for the ATP, Consultant's opinions will be subject to the decisions made by Motorola and Customer. 2.2 Should Customer request additional testing above and beyond the ATP, the parties shall not be required to consider these tests before Conditional Acceptance. Motorola shall prepare and present to Customer a quotation detailing the time and material charges that such additional testing may require. However, if Customer requests additional acceptance tests for the sole purpose of 1 isolating any defects that affect the operation of the System, such tests will be conducted at no additional cost to the Customer 3 SYSTEM AND SYSTEM EXPANSION ACCEPTANCE Acceptance of all Systems and System Expansions shall be governed by the requirements set forth below: 3.1 Motorola shall conduct acceptance test procedures in accordance with Section 5.0, ATP -- Conditional Acceptance, and Section 6.0, ATP -- Final Acceptance, below. The test procedures shall be contained in the Acceptance Test Plan (ATP) for each System or System Expansion. 3.2 The ATP shall be based on the Generic Acceptance Test Plan (GATP) maintained by Motorola and may also include other additional tests mutually agreed to. The GATP shall be modified as needed to incorporate acceptance test procedures for newly developed Equipment and Software as part of the Software general release process and shall reflect the then current acceptance test procedures available. Any modifications to the GATP shall be made by Motorola to reflect Equipment or Software or to correct errors or omissions in the GATP. A copy of the current GATP is attached for reference. 3.3 The scope of the ATP required to achieve Conditional Acceptance - and Final Acceptance for each specific System or System Expansion shall be identified and mutually agreed to. The specific System or System Expansion ATP shall contain only those GATP test procedures required to test the Equipment, Software, and the associated features ordered and shall be developed by Motorola based upon portions of the GATP applicable to the mutually agreed upon scope for ATP Conditional Acceptance and Final Acceptance. The schedule for performance of such specific ATP shall be included in the Implementation Schedule for the specific System or System Expansion. 3.4 Motorola shall supply to Customer, no later than sixty (60) days prior to the scheduled commencement of ATP Conditional Acceptance and Final Acceptance, as applicable, the particular required test procedures to achieve the specific System or System Expansion ATP Conditional Acceptance and Final Acceptance. Customer shall have thirty (30) days following receipt of said test procedures to review and comment on the content of the test procedures. 3.5 Only those features and items of Equipment and Software supplied by Motorola in accordance with the definitions of System and System Expansion contained herein, and installed by Motorola, or installed by Customer in accordance with Motorola-authored or Motorola-approved published installation and engineering standards, shall be included in and tested under the ATP for a System or System Expansion. 3.6 Individual Site tests and the switch test shall be performed in accordance with the ATP as soon as the individual Sites and switch are completed. The System test in accordance with the ATP shall be performed as soon as the switch and Site tests are completed. These tests shall take place even when all the Sites are not operational if all such unavailable Sites are due to Customer failure to perform its applicable obligations in accordance with the Implementation Schedule ("Customer Unavailable Sites"). If there remain Customer Unavailable Sites due to Motorola's failure to perform its applicable obligations in accordance with the Implementation Schedule, such tests shall be delayed until the affected Sites become operational. 3.7 The areas served by Customer Unavailable Sites shall not be included in the System Test. When the Customer Unavailable Sites are completed, the Site Test shall be completed for any Customer Unavailable Sites. The existence of Customer Unavailable Sites shall not delay - Conditional 2 Acceptance or Final Acceptance as long as the other items necessary for Conditional Acceptance or Final Acceptance are complete. 3.8 Customer may order additional testing above and beyond the specific acceptance test procedures defined in Sections 5.0 and 6.0, below, for a System or System Expansion. In accordance with Section 2.0 above, the additional test procedures to be performed and the price thereof shall be identified and mutually agreed to prior to acceptance of an order. The completion of these additional test procedures shall be outside the scope of the System or System Expansion ATP and shall not be apart of, nor a precedent to, Conditional Acceptance or Final Acceptance of a System or System Expansion. 3.9 The acceptance test procedures as defined in Sections 5.0 and 6.0 shall not include, and shall be separate and distinct from, any Software testing developed and executed in conjunction with, and required to achieve, general release of Software under the Software Maintenance Program (SMP) of the Agreement. 3.10 The conduct of Conditional Acceptance testing procedures shall preclude Customer from initiating an expansion to a System or System Expansion prior to the relevant Scheduled Completion Date, unless the parties agree in writing that such expansion does not result in material delay and/or expense to Motorola in conducting and/or completing Conditional Acceptance testing procedures in accordance with the relevant Scheduled Completion Date. 4 RESPONSIBILITIES 4.1 Initial System acceptance testing involves both the testing of the FNE itself and the exercising of interfaces to Systems external to the FNE. For this reason, testing of all external equipment must be completed prior to recommencement of FNE acceptance testing to assure its proper functioning. The Customer is responsible to ensure the proper functioning of equipment not supplied by Motorola. Initial System acceptance testing shall be a joint responsibility between Motorola and Customer. 4.2 During Motorola's performance of the ATP, Customer shall: (i) place the System or subsystem in the appropriate condition (i.e. System lockdown) necessary to permit such testing to be conducted at all reasonable times in accordance with a schedule to be mutually agreed to by the parties; (ii) make the Equipment, data, and facilities required for completion of Conditional Acceptance testing available to Motorola in accordance with such approved schedule; and (iii) provide free access, ingress and egress to Customer facilities as reasonably required to perform Conditional Acceptance in accordance with such approved schedule. 4.3 A qualified member of the Motorola staff, as designated by Motorola, will serve as acceptance test coordinator. The test coordinator will be responsible for observing and documenting test results. Customer will provide an acceptance test monitor who will assist in conducting the test procedure and observe and verify the tests. 4.4 Motorola shall provide Customer a schedule of the ATP procedures and notify Customer of the time and place at which such tests are to be conducted. Customer shall have the right to observe the conduct of the tests and the results thereof. Customer shall use reasonable efforts to accommodate Motorola's ATP schedule. 4.5 Customer is responsible for coordinating, with Motorola's assistance, the activities of any common carrier or other public or private agency, firm, etc., whose participation may be required in successfully executing the test plan. 3 5 TEST PROCEDURES FOR ATP -- CONDITIONAL ACCEPTANCE 5.1 The ATP Conditional Acceptance is comprised of four (4) test sections, as appropriate, to verify performance and functionality of a System or subsystem. The defined test methodologies, target performance goals, timing, reference documents and applicability to a new System or System Expansion are described below. The test sections include: o Customer Unique Information Testing o Site Operational Readiness o Interconnect Voice Circuit Testing o Administrative Function Test 5.2 Customer Unique Information Testing The Customer Unique Information Testing shall evaluate the implementation of System unique database elements developed by Motorola utilizing specific information provided by Customer. The test shall ensure that new System elements are properly provisioned prior to loading of end users on a new network. The System unique database may consist of the following database elements, but Motorola shall specify the database requirements based upon the final System configuration. a) MSC Dialplan. Verify the MSC translations by generating incoming and outgoing calls on each NPA-NXX for each call type to include supplementary services. b) Dispatch and Interconnect Voice Server Testing. The voice server tests shall include the confirmation of functional call processing on all Site time slots provisioned for I6 dispatch and of functional call processing on all Site time slots provisioned for I6 and I3 interconnect call applications. 5.3 Site Operational Readiness Site Operational Readiness will consist of the evaluation of Site Hardware installations against established Motorola standards. It will follow installation of each Site when power is available to each Site and all radio equipment is installed and hooked up. It will ensure that all Motorola-supplied Equipment is present, properly installed, and connected with other Site equipment. 5.4 Interconnect Voice Circuit Testing Interconnect Voice Circuit Testing shall confirm the connectivity and operations of all voice circuits between the MSC and the BSC Equipment. 5.5 Administrative Function test Administrative Function Tests will confirm the operation of primary and common administrative functions available on the Operations Maintenance Center (OMC). These functions include, but are not limited to, Site build and load, parameter changes, System statistics gathering, alarm functionality, and making back-ups on the System. 5.6 Pass/Fail Criteria Pass/Fail criteria of individual ATP-Conditional Acceptance tests will be included within the detailed test procedures delivered by Motorola to Customer as defined in Section 7.0 below. 4 Pass/fail criteria identified in the ATP -- Conditional Acceptance test procedures will be based on the applicable component specifications. 5.7 Special Consideration for System Expansions The ATP for a System Expansion may contain a subset of the acceptance tests for a System and will be dependent upon the Equipment and Software purchased in the System Expansion. 5.8 Conditional Acceptance In the event that commercial service has not yet commenced, Conditional Acceptance for a System or System Expansion shall occur when Motorola has completed and passed, to mutual agreement, the applicable ATP tests. Conditional Acceptance shall not be delayed because of minor (level 4 or below) test failures. Such defects may be placed on the punchlist for later resolution. In the event of major test failures caused by level 6 or above defects, completion of the ATP will be delayed until each such defect is corrected and the item retested. Defects caused by systemic Software issues that are not service affecting are covered under the Software Maintenance Program (SMP). 5.9 Customer Performance Test Period a) Upon completion of the ATP, a Punchlist shall be mutually developed within 14 days. In addition, a Performance Test Period, shall commence immediately following successful completion of the ATP -- Conditional Acceptance Test Procedures, to allow Customer to operate the System to determine if additional failures are found as a result of Motorola products failure to operate as specified. b) Prior to completion of the Performance Test, Customer may load the System or System Expansion for a period not to exceed thirty (30) days (unless otherwise mutually agreed to) with up to 100 employees and up to 250 non-paying subscribers, or as otherwise mutually agreed to, in accordance with the terms of the Commercial Service definition in Section 1.0 of the Agreement, provided this activity does not interfere with commissioning or System testing. Such loading for Customer testing purposes shall not trigger Commercial Service. c) Testing conducted during the Performance Test Period shall be witnessed by Motorola, and the results, including failures, must be reproducible and documented by Customer to be included in the Punchlist in the terms of Section b) below. This testing shall be limited to testing of the System infrastructure functionality tested in the ATP. The testing shall specifically exclude testing of System RF coverage and voice quality. d) To be included in the ATP Punchlist, test failures found during the Performance Test Period must be Level 6 or above and, upon mutual agreement, placed on the Punchlist within the 14-day Performance Test Period. Any defects found after the Punchlist is finalized shall be resolved in accordance with the warranties provided under the Agreement. 5.10 Customer Certification of Conditional Acceptance Upon agreement on the contents of the Punchlist, Customer shall endorse the Motorola provided letter of acceptance signifying occurrence of ATP -- Conditional Acceptance. 5 6 ATP -- FINAL ACCEPTANCE AND CUSTOMER CERTIFICATION When substantially all Punchlist Items (including all Level 6 and above defects) are resolved, ATP -- Final Acceptance shall be granted. Such approval shall not be unreasonably withheld. Final Acceptance shall be evidenced by a letter of acceptance provided by Motorola and signed by Customer. 7 ACCEPTANCE GUIDELINES 7.1 In the event that, due to a problem outside Motorola's control, a particular test or group of tests cannot be completed within the time scheduled, one of these procedures will be implemented: a) The affected test or portion of a test may be interrupted and rescheduled for completion or retesting at some future time. b) The affected test or portion of a test may be continued to completion and the Acceptance Test schedule amended as required to accommodate the remaining tests and the exceptions that failed the original testing. c) If the problem results from Customer action or inaction or due to non-performance of a Customer responsibility, the affected test will be rescheduled and any additional costs will be borne by Customer. Motorola will confer with Customer and decide, on a case by case basis, which of these procedures is appropriate and notify Customer. 7.2 In the event of Customer-caused delays (i.e. not force majeure or Motorola-caused) in the implementation of a System or System Expansion, Conditional Acceptance shall be deemed granted 60 days after the ATP -- Conditional Acceptance date set forth in the Project Implementation Schedule and all payments associated with Conditional Acceptance shall be due and payable as of this date. Final Acceptance for such System or System Expansion shall be deemed granted 90 days after the Conditional Acceptance date set forth in the Project Implementation Schedule and all payments associated with Final Acceptance shall be due and payable as of this date. In either case, 45 days before the automatic granting date is expected, Motorola shall provide written notice to the Customer that the provisions of this Section will apply. Notwithstanding the foregoing, Motorola may provide the aforementioned written notice 30 days before the automatic granting date is expected. In such case, if Customer takes action to cure the cause of the delay but requires more than 30 days, Customer shall be allowed an additional 15 days before Conditional or Final Acceptance, as the case may be, becomes automatic. 8 REPORTING RESULTS AND RETESTING 8.1 Test Sequencing At the completion of each test, a pass/fail determination will be made based on the performance of FNE Equipment supplied by Motorola and subject to Acceptance Testing under the Agreement. In the event of test failure, other tests not effected by the failed test will not be delayed and can continue while remedies are prepared for the failed test. Failed test procedures will be scheduled for retesting as appropriate. 8.2 Regression Testing 6 After a test failure has been remedied it will be scheduled for retest. Previous tests that have passed and that logically could be affected by the remedy for the failed test will be repeated. Previously passed tests that are logically unaffected by the remedy for the failed test do not require retesting. Motorola and Customer will determine whether a test is or is not logically affected by any remedy. 8.3 Test Failure Severity Levels The following table defines the Test Severity Levels to be used in recording Test Results:
TABLE 1 ------------ -------------------------------------------------------------------------------------------------------- LEVEL DESCRIPTION ------------ -------------------------------------------------------------------------------------------------------- SERVICE AFFECTING. Call processing or traffic handling is severely affected in some manner by the 10 failure. ------------ -------------------------------------------------------------------------------------------------------- PERFORMANCE AFFECTING. Some adverse impact on System performance affecting the quality of service on 6 call processing or traffic handling. ------------ -------------------------------------------------------------------------------------------------------- MINOR PROBLEM. The failure does not impact call processing, traffic handling, or System performance, 4 but pass/fail criteria of the test procedure have not been satisfied. ------------ -------------------------------------------------------------------------------------------------------- DOCUMENTATION. Proper System operation has been observed, but System documentation referenced in the 3 test procedure is ambiguous, misleading, or incorrect. ------------ -------------------------------------------------------------------------------------------------------- PROCEDURAL. Proper System operation has been observed, but the test procedure is ambiguous, 1 misleading, or incorrect. ------------ -------------------------------------------------------------------------------------------------------- EXTERNAL. Test failure was caused by equipment not supplied by Motorola or Equipment supplied by 0 Motorola but not subject to Acceptance Testing under the current Agreement or R/F interference generated by sources outside the System not under control of Motorola. ------------ -------------------------------------------------------------------------------------------------------- CHANGE REQUEST. Customer has requested a change to test procedures or System characteristics which is 0 beyond the scope of the current Agreement. ------------ --------------------------------------------------------------------------------------------------------
8.4 Record of Test Results During the entire Acceptance Test period, the Motorola Coordinator will maintain a record of test results on the standard data sheets, which will be made available for review by Customer's Acceptance Test Monitor. In the event of test failure, the severity of the failure will be determined and recorded. A description of the extent of the failure will also be recorded, along with requirements for retesting to demonstrate that the failure has been cleared. 8.5 Acceptance Report 8.5.1 Upon completion of each ATP test, Motorola shall submit to Customer for approval all test reports setting forth full and accurate test results obtained. Customer's approval of such test reports shall not be unreasonably withheld or delayed. The test reports shall also summarize the results of testing conducted. Each test report shall contain the necessary analysis and collected data to support conclusions, and copies of the original test data sheets shall be provided to the Customer. 8.5.2 The completed data sheet will contain all of the test results. Therefore, it will form the basis for Acceptance of the System. Information on any Acceptance Test procedures still pending will be included. 8.6 Acceptance Neither endorsement of the Acceptance Test results nor the issuance of a Letter of Acceptance will be delayed because of minor (level 4 or below) defects of Equipment or Software. Motorola will 7 expeditiously correct such reproducible defects, if any, within 90 days after Conditional Acceptance. 8 EXHIBIT "D" TO iDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN MOTOROLA AND TRICOM IMPLEMENTATION ENGINEERING, SITE PREPARATION, INSTALLATION AND INTEGRATION For purposes of uniformity and brevity, references to Agreement or to an Exhibit shall refer to the above-referenced Agreement to which this document is Exhibit "D" and to the other Exhibits to that Agreement. All definitions set forth in the Agreement shall apply hereto. 1.0 SCOPE OF WORK 1.1 Customer shall provide all Site acquisition and Site development efforts. Customer shall be responsible for architectural engineering drawings. Motorola shall be responsible for installation and integration of Fixed Network Equipment (FNE). 1.2 Customer shall pay the prices for Expansion Engineering, Installation, and Integration as set forth in the iDEN Infrastructure Price Book at the then current rate. 1.3 All drawings, specifications and other documentation furnished by Motorola will be in English. Drawings created by Motorola specifically for this Agreement will utilize metric measurements. Standard drawings, specification sheets and other documentation will be furnished using the measurements as published by the provider. Motorola will attempt to obtain metric measurements if available from the provider. 1.4 All drawings, specifications and other documentation furnished by Customer, including notations made by Customer on Motorola furnished drawings shall be in English. 2.0 COMMENCEMENT OF WORK 2.1 System Implementation Engineering shall commence upon the execution of the purchase order and formulation of the preliminary System definition as specified by Customer and Motorola. 2.2 Site acquisition shall commence in accordance with the dates contained in the Implementation Schedule of the specific Purchase Agreement. 2.3 Installation and integration by Motorola shall commence in accordance with the Purchase Agreement Implementation Schedule. 3.0 SITE ACQUISITION 3.1 All Site acquisitions must be complete within the time frame defined in the Purchase Agreement Implementation Schedule to assure inclusion in the acceptance testing and Conditional Acceptance of the System or System Expansion. Site acquisition by Customer is that process from Site selection through lease or purchase negotiation. Building permits and other entitlements, inclusive of zoning deviations, are a part of Site acquisition. Once the Site is ready for construction and/or alteration, this responsibility is fulfilled. 1 3.2 ***NOTE*** Avoid zones which are prone to or consist of: flammable material storage buildings, frequent grass and brush fires, hazardous materials, hazardous processes, flood planes, landfills, radon gas, excessive vibration, or areas which may be prone to railroad or vehicular mishaps. 4.0 iDEN SYSTEM IMPLEMENTATION ENGINEERING After Sites have been released to Motorola by Customer, iDEN Implementation Engineering shall be performed. This shall include a Site appraisal and installation analysis. The iDEN Implementation Engineering shall be performed as follows: 4.1 Customer will select all Sites. Following Site selection, Motorola will conduct a Site appraisal and installation analysis which shall be used to determine the required tasks, material and effort necessary for installation and integration. 4.2 Upon completion of the Site appraisal and installation analysis Motorola will provide Customer with a list of all tasks which need to be accomplished prior to the System's equipment installation and integration. 4.3 Additionally, Motorola shall prepare Site-specific FNE and Motorola-supplied ancillary equipment lists. Pre-construction documentation developed therefrom shall include: 4.3.1 Site layouts. 4.3.2 Wiring diagrams. 4.3.3 Rack layout diagrams for equipment to be installed during the initial construction cycle. 4.3.4 Wiring lists. 4.3.5 Block and level diagrams. 4.3.6 Overall iDEN System diagram and an iDEN System block and level diagram. 4.4 Customer is responsible for the public switched telephone network ("PSTN") configuration, including the Dial Plan and design. 5.0 SITE PREPARATION 5.1 Standards Customer shall provide all Site Development Services. Customer shall furnish all labor and material necessary to prepare and complete each Site in compliance with all applicable codes, inclusive of the Architectural Engineering Drawings and Motorola applicable standards, and in accordance with the project's Implementation Schedule. All Site acquisition must be completed in accordance with the Implementation Schedule to assure inclusion in acceptance testing and Conditional Acceptance of the System or System Expansion. 5.2 Scope of Work Existing Site Below are the standard requirements which should be met in order for the Sites to be considered acceptable to Motorola under normal business conditions. Deviations to these criteria must be reviewed and approved by Motorola on a case-by-case basis. 2 5.2.1 Existing Building Site Requirements 5.2.1.1 Structure must safely support the floor load of current and future system equipment requirements, which is subject to change. 5.2.1.2 Walls, ceilings, and enclosures must accommodate approved equipment layouts. 5.2.1.3 Area should be a minimum of 200 square feet usable space with ceilings that will accommodate approved equipment layouts (Minimum Ceiling Height 8'6" - Maximum 12'0"). The building must provide adequate access for construction, installation, and material movement. Should space be unavailable which meets the provisions of this Section, Motorola System Engineering must be notified prior to equipment manufacture. 5.2.1.4 A 5 ohm resistance measured between the building and earth ground in accordance with the Motorola grounding specification document R-56 must be available within 20 feet of the equipment to meet Motorola engineering specifications. 5.2.1.5 Power shall be within 20 feet of the equipment room and provide either 120/240V AC, single phase, or 208V, three phase at 200 amps to allow for future expansion of equipment. 5.2.1.6 Motorola suggests that antennas be mounted within 150 feet of the equipment thus allowing the use of 7/8 inch coaxial cable. In those cases where longer feed lines are necessary, coaxial cable size must be adjusted accordingly by the change process. 5.2.1.7 Must meet or exceed all local building codes. 5.2.1.8 Compliance with site specific safety codes as contained in the local regulations and codes. 5.2.1.9 Doors, lock sets, and/or security devices (Customer provided) must be in place and functioning. 5.2.1.10 Provisions must be made to allow installation of all cables in a non-plenum space. 5.2.2 Existing Building Architectural Engineering Requirements. (This section is a list of the items that are typically required from the Architectural Engineering provider. This is Customer's responsibility.) 5.2.2.1 Site Plan 5.2.2.1.1 Entire property and leased area fully dimensioned. 5.2.2.1.2 Existing structural drawings. 5.2.2.1.3 Existing street, driveways, utilities, easements drawings. 5.2.2.1.4 Dimensions from proposed structures to property lines, other structures. 5.2.2.1.5 Elevations with dimensions of existing towers and antennas. 3 5.2.2.1.6 Ownership identification documents. 5.2.2.1.7 Legal descriptions. 5.2.2.1.8 Flood plane documents where required. 5.2.2.1.9 Special city code documentation where required. 5.2.2.1.10 Floor loading-structure specifications. 5.2.2.2 Mechanical Plans 5.2.2.2.1 For existing structures. 5.2.2.2.2 Floor plans, mechanical equipment, duct work, piping. 5.2.2.2.3 Specifications. 5.2.2.2.4 Local requirements and restrictions. 5.2.2.3 Electrical Plans 5.2.2.3.1 Floor plans, single line and panel schedule. 5.2.2.3.2 Specifications. 5.2.2.3.3 Local requirements. 5.2.2.3.4 Ground systems including details and specifications. 5.2.2.4 Tower Drawings (by the party performing tower installation) 5.2.2.4.1 Details (foundations included). 5.2.2.4.2 Structural analysis. 5.2.2.5 Shelter Drawings (by the provider of the shelter). 5.2.2.5.1 Details with elevations, placement and dimensions by architectural engineering provider. 5.2.2.5.2 Approved as necessary by appropriate governmental authorities and stamped by shelter provider. 5.2.3 Site preparation tasks to be performed by Customer shall include: 5.2.3.1 Install air conditioning system and/or forced air ventilation system. 5.2.3.2 Install wall feed through port for transmission lines. 5.2.3.3 Provide three-phase AC distribution system, including lighting and convenience outlets. 5.2.3.4 Ground system tied to building ground. 5.2.3.5 Construction and installation of electrical shield (if required). 5.2.3.6 Installation of cable ladder. 4 5.2.3.7 Installation of seismic bracing. 5.2.3.8 Mount and test antennas and transmission lines and any tower-mounted amplifiers that may be required. 5.2.3.9 Installation and testing of telephone services. 5.2.3.10 Site clean up and trash removal. 5.2.3.11 Project Management and field supervision exclusive of FNE equipment. 5.3 Scope of Work Vacant Property Site (Scope may vary based on Site specific requirements) 5.3.1 Vacant Property Shelter Site Requirements: 5.3.1.1 Site is assumed to be a vacant plot of cleared land that has sufficient area and with ingress and egress which will allow the installation of the required building and antenna structure. 5.3.1.2 The site is assumed to have normal soil. Normal soil is defined as a cohesive soil with an allowable net vertical bearing capacity of 4,000 pounds per square foot, and an allowable net horizontal pressure of 400 pounds per square foot per linear foot of depth to a maximum of 4,000 pounds per square foot. Rock, non-cohesive soils, or saturated or submerged soils are not to be considered normal soil. In addition, the soil shall be suitable for mechanical backhoe excavation and no forming requirements for pouring sub-surface concrete should be considered. 5.3.2 Vacant Property Architectural and Engineering Drawing Requirements to be provided by Customer. (In all cases the information furnished for each Site is based on the specific Site selected and the local conditions, ordinances, codes, etc.) 5.3.2.1 Site Plan 5.3.2.1.1 Topographic and drainage information and calculations. 5.3.2.1.2 Existing structural drawings. 5.3.2.1.3 Existing street, driveways, utilities, easements. 5.3.2.1.4 Dimensions from proposed structures to property lines, other structures. 5.3.2.1.5 Setbacks. 5.3.2.1.6 Ownership documentation. 5.3.2.1.7 Legal descriptions. 5.3.2.1.8 Flood plane information. 5.3.2.1.9 Local seismic codes. 5.3.2.1.10 Fire Protection. 5 5.3.2.2 Foundation Plans 5.3.2.2.1 Details, plans and elevations for tower and shelters. 5.3.2.2.2 Soils recommendations. 5.3.2.3 Tower Drawings 5.3.2.3.1 Details (foundation included by tower provider). 5.3.2.3.2 Structural steel license (where required). 5.3.2.3.3 Wooden tower approved as necessary by appropriate governmental authorities. 5.3.2.4 Shelter Drawings 5.3.2.4.1 Details (foundations included) with elevations, placement and dimensions. 5.3.2.4.2 Approved as necessary by appropriate governmental authorities and stamped by shelter provider. 5.3.2.5 Landscaping Plans 5.3.2.5.1 If required, detail size, species, number location, irrigation with details, and material lists. 5.3.3 Vacant property site preparation tasks provided by Customer shall include where appropriate: 5.3.3.1 Soil boring and analysis. 5.3.3.2 Certified drawings for tower, building and foundations. 5.3.3.3 Appropriate layouts and drawings. 5.3.3.4 Identification of existing or required utilities. 5.3.3.5 Construction of building and tower foundation based on soil analysis. 5.3.3.6 Assembly of building on Site (where required). 5.3.3.7 Erection of tower, installation and test of antennas, and transmission line. 5.3.3.8 Building electrical wiring connections. 5.3.3.9 Connection and testing of HVAC. 5.3.3.10 Installation and testing of telephone services. 5.3.3.11 Building and tower grounding system per Motorola Systems Engineering specifications. 5.3.3.12 Construction and installation of electrical shielding (if required). 5.3.3.13 Construction of access road or driveway as required. 5.3.3.14 Site fencing as desired by Customer. 6 5.3.3.15 Final site grading (where required). 5.3.3.16 Landscaping (where required). 5.3.3.17 Site clean up and trash removal. 5.3.3.18 Program management and field supervision. 5.3.4 Existing building Site requirements in Section 5.2.1 also apply to buildings constructed on vacant Sites. 5.4 Scope of Work - Switch Site 5.4.1 Switch Site Requirements: 5.4.1.1 Existing building Site requirements in Section 5.2.1 also apply to the Switch Site, unless modified in this section. 5.4.1.2 Site is assumed to be an existing building of suitable size to house the Switch equipment and power supplies, inclusive of space for offices and storage. 5.4.1.3 Area should accommodate approved equipment layouts, house support personnel and provide storage for repair equipment. Cable tray height of between 8'6" to 9'6" is required, with adequate access for construction, installation, and material movement. 5.4.1.4 Power shall be within reasonable distance of the equipment room and provide AC, three phase, at sufficient amperage to support the MSO equipment configuration. 5.4.2 Switch Site Architectural Engineering Requirements: 5.4.2.1 Reference 5.2.2. 5.4.3 When appropriate Customer will provide: 5.4.3.1 Structural analysis and certification for existing buildings. 5.4.3.2 Certified drawings of building layout modifications and the appropriate building subsystems. 5.4.3.3 Air conditioning system as required to support the equipment configuration and personnel. 5.4.3.4 Adequate electrical service to support electrical distribution system, including lighting and convenience outlets, DC power plant, and inverters to support the MSO. 5.4.3.5 A stand-by generator, as required, and transfer equipment. 5.4.3.6 Building ground system compliant with Motorola grounding standards specified in R-56. 5.4.3.7 Ground loop tied to building ground. 5.4.3.8 Adequate space for 48 V battery system sized to provide eight (8) hours of system operation without recharge. 7 5.4.3.9 Cable ladder system. 5.4.3.10 Fire suppression, external alarms, and security systems. 5.4.3.11 Site clean up and trash removal. 5.4.3.12 Program management and field supervision. 6.0 INSTALLATION AND INTEGRATION 6.1 Standards All Site Preparation must be completed in accordance with the project's Implementation Schedule to assure inclusion in acceptance testing and Conditional Acceptance of the System or System Expansion. Customer shall furnish all labor and materials necessary to prepare and complete each Site in compliance with all applicable codes and in accordance with the Implementation Schedule. Customer will advise Motorola upon completion of MSO Site preparation. Motorola will commence installation and integration only after this notification of "READY for FNE" is made. The equipment will be installed and integrated by Motorola in accordance with the following standards: 6.1.1 All work shall be performed by skilled Motorola personnel and qualified subcontractors approved by Motorola. 6.1.2 Motorola parts or parts of equal quality will be used. 6.1.3 The work will be performed in accordance with the instructions and techniques as described in the manuals supplied by the equipment vendor. 6.1.4 All grounding shall be in conformance with Motorola systems engineering requirements. 6.2 Unless otherwise agreed by the parties, Motorola shall install and integrate the System or System Expansion as specified in the Agreement when the Site is listed "Ready for FNE." A Site is "FNE Ready" at the point in time when the installation team can deliver, install, integrate, and test all of the FNE and associated ancillary equipment in a continuous, uninterrupted manner. "Ready for FNE" is further defined as, but is not limited to, the following conditions being met: 6.2.1 Lease agreement commenced. 6.2.2 All construction work has been completed. This includes but is not limited to the completion of interior finishes (including all paint and floor covering), electrical work (including all lighting, convenience outlets, grounding and bonding), cable ladder (installed and grounded), and HVAC systems fully operational. 6.2.3 Final inspection granted. 6.2.4 Power activated. 6.2.5 Access and security issues resolved (24 hour access and theft security provided). 6.2.6 Construction punchlist complete. 6.2.7 Telephone company circuits, and any associated modems, installed and tested. 8 6.2.8 Antennas, transmission lines, poly phasers, grounding, and bonding installed and tested on prepared support structures, per specifications. 6.3 FNE Installation and Integration 6.3.1 Install and interconnect the battery/charger equipment to Customer-provided commercial power source. 6.3.2. Unpack and position cabinets and racks and fasten to the floor, if required. Include earthquake bracing as applicable. 6.3.3 Interconnect and lace or tie-wrap all cables and wiring on the Motorola-supplied equipment. 6.3.4 Connect equipment to Customer-provided commercial power cables. 6.3.5 Program all iDEN FNE Software with iDEN System data. 6.3.6 Load the System Software. 6.3.8 Perform any other tests or adjustments required by Motorola to verify that the iDEN System or System Expansion is operating according to the agreed specifications. 6.3.9 Verify and test proper operation of alarm system. 6.3.10 Place all refuse in Customer provided trash receptacles. 6.4 Upon completion of the above procedures, Motorola will inform Customer that the System is ready for formal acceptance testing as set forth in Exhibit "C." 7.0 CUSTOMER RESPONSIBILITIES 7.1 Customer is responsible to negotiate all leases and/or purchases of all Sites. 7.2 Customer is responsible for obtaining any required operating authority to install or operate the System, including, without implied limitation, radio licenses, governmental authorizations and approvals, local zoning approvals, environmental impact studies and waivers, and building permits. 7.3 Information, documentation, facilities and services under Customer's control or those documents not furnished by Motorola shall be furnished by Customer in a timely manner to facilitate the orderly progress of the work in accordance with the project's Implementation Schedule. Included, without implied limitation, shall be: access and right of entry to all Sites; regulatory filing information; floor plans; and any supporting documents which may affect Site engineering, installation analysis, acquisition, permitting and construction. 7.4 Customer will be responsible for warehousing, reloading, transporting, off-loading and moving the equipment onto the permanent Site. Customer will bear the responsibility for safekeeping and warehousing of the equipment in environmental conditions as set out in the specifications. Motorola agrees, with the exception of certain drop ship type equipment (antennas, lines, combiners, etc.), not to ship equipment prior to the scheduled dates without Customer's prior approval. Motorola agrees to make a reasonable effort to batch the equipment. 9 7.5 To the fullest extent possible, Customer shall negotiate 24 hour per day Site availability during installation and the maintenance period. Site access includes providing Motorola with keys, pass codes, security clearances, escort, etc., necessary to gain entrance to and exit from the work area. Should a specific Site not be made available 24 hours per day, response will commence at the beginning of the access time frame. Response time ends at the access route to remote high Sites. 7.6 Customer is at all times responsible for the costs of commercial AC power usage, building air conditioning and facility access issues. 7.7 Customer is responsible for telephone service, inclusive of cables and wiring, which shall be run to the immediate area of the Motorola-supplied equipment, i.e., to the same room or within twenty (20) cable feet of the termination point of the equipment, whichever is closer. 7.8 In the event that Customer fails to meet any of its responsibilities and such failure results in any delays to the agreed upon Implementation Schedule, Customer and Motorola shall negotiate in good faith a revised Implementation Schedule and additional costs, if necessary, reflecting the effect of those delays. 8.0 RIGHT TO SUBCONTRACT Motorola and Customer shall have the right to subcontract the Site installation work in whole or in part. 9.0 SUPERVISION Motorola shall provide Program Management to supervise the installation and integration of the iDEN System or System Expansion. Customer shall appoint a System Manager who shall have authority to make changes that may be required during the installation. 10.0 OUT OF SCOPE WORK Out of scope work requested by Customer to be performed by Motorola and not specified in this Exhibit "D" required to complete installation or integration shall be authorized in writing via a formal change order by Customer prior to the commencement of such work as set forth in the Changes section in the Agreement. 11.0 SYSTEM ACCEPTANCE Within seven (7) days after Motorola has advised Customer that any increment or all of the System or System Expansion is complete, Customer shall furnish representatives to witness acceptance testing as set forth in the Acceptance Test Plan (ATP) and Exhibit "C." In the event Customer does not furnish representatives within the time frame above, Motorola may proceed with the acceptance tests and send Customer a written report of the acceptance test results, which results shall be as valid as if Customer representatives had personally witnessed the ATP. 12.0 FREQUENCY MANAGEMENT RECORDS Provision and maintenance of records required by appropriate frequency management authorities are the sole responsibility of Customer. 13.0 BUILDING SPECIFICATIONS No Site buildings are to be provided by Motorola. However, all System Site buildings are to be in accordance with applicable Motorola specifications. 10 EXHIBIT "E1" TO iDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN MOTOROLA, INC. AND TRICOM SYSTEM HARDWARE MAINTENANCE For purposes of uniformity and brevity, references to Agreement or to an Exhibit shall refer to the above-referenced Agreement to which this document is Exhibit "E1" and to the other Exhibits to that Agreement. All definitions set forth in the Agreement shall apply hereto. This Exhibit sets forth Motorola's technical maintenance obligations (collectively, the "System Hardware Maintenance") with respect to FNE Equipment during the warranty periods stated in Section 8 of the Agreement and any maintenance options purchased by Customer. Motorola shall provide its " System Hardware Maintenance Plan," as set forth in Schedules A and B below during the initial warranty period for each item of FNE Equipment purchased under the Agreement. The maintenance services in Schedule B are included in the FNE item's warranty purchase price and shall be provided for a period of fifteen (15) months after the date of Conditional Acceptance. An optional maintenance service, referred to as "Optional Local Engineering Support Services," is also offered by Motorola as set forth in Schedule C below. The maintenance option, when selected by Customer, must be procured in accordance with pricing in the iDEN Infrastructure Price Book. SERVICE PLAN The following is a description of the scope of work to be provided by Motorola under Motorola's System Hardware Maintenance Plan (see Schedules A and B) and Optional Local Engineering Support Services (see Schedule C). 1. SCOPE 1.1 Motorola shall maintain each FNE product covered by a maintenance plan according to the terms and conditions set forth herein and for the prices referenced above and in Section 8 of the Agreement. 1.2 The System Hardware Maintenance Plan shall be provided during the FNE Equipment warranty period as defined in Section 8 of the Agreement. The individual segments of the plan may be extended thereafter at Motorola's then current rates. The plan shall consist of the following: 1.2.1 Schedule A: Telephone Technical Support 1.2.2 Schedule B: Depot Repair Maintenance. 1.3 The optional maintenance services listed below will be provided when separately purchased in accordance with the iDEN Infrastructure Price Book: 1.3.1 Schedule C: Optional Local Engineering Support Services. 1 2. CUSTOMER RESPONSIBILITIES Customer shall: 2.1 Appoint a System Manager for each system and supply Motorola with the name, address and telephone number of the System Manager who shall be responsible for coordination with Motorola personnel and who shall, at the option of the Customer System Manager, make available a Customer Representative during Motorola performance of Services. 2.2 Control site environmental conditions including but not limited to temperature, humidity, voltage, VSWR, etc. according to FNE specifications. 2.3 Provide reasonable facilities including, but not limited to, secure storage space, a designated work space with adequate temperature control and light, and use of all FNE and communications facilities, including access to a telephone line. 2.4 Supervise and perform all normal day-to-day System operational activities. 2.5 Perform System restarts or other maintenance activity as directed by Motorola service manuals prior to initiating a service call for any System problem unless previously instructed otherwise by a Motorola representative. 2.7 Furnish, maintain and repair equipment, products, and services supplied by: 2.7.1 The local telephone company (which include but are not limited to local exchange interface), 2.7.2 Vendors other than Motorola, and 2.7.3 Vendors of mobile and/or other portable subscriber units. 2.9 Procure its desired test equipment for its own use. 2.10 Procure and stock Field Replaceable Units ("FRUs"). 3. SCHEDULE A: TELEPHONE TECHNICAL SUPPORT With Respect to FNE equipment, Motorola shall provide Customer a telephone number for access to unlimited twenty-four (24) hour seven (7) days a week telephone technical support from a Motorola supplied central support function in Schaumburg, Illinois. 4. SCHEDULE B: DEPOT REPAIR SERVICE Motorola shall provide depot repair of Field Replaceable Units (FRUs) at a Motorola repair facility or a repair facility authorized by Motorola in accordance with Section 8.1 of the Agreement and the terms set forth below: 4.1 Customer shall determine and identify all FRUs indicated to be defective and ship, prepaid by Customer, said defective equipment to the designated Motorola repair facility. Customer must provide a summary of the nature of the defect. Customer must also choose a reasonable method of shipment so that FRU is received on a timely basis. Failure to adhere to these steps may result in repair delays. 4.2 Motorola will repair and test all defective FRUs and will return said FRUs to Customer at a location designated by Customer within a reasonable time after receipt at the Motorola authorized repair location. Motorola shall pay for shipping to Customer's location. 2 5. SCHEDULE C: OPTIONAL LOCAL ENGINEERING SUPPORT SERVICES The following Service option is offered by Motorola to Customer concurrently with the maintenance service contained in Schedules A and B during the warranty period and may be extended on an annual basis. 5.1 Local Engineering Support Motorola shall provide local engineering support to Customer in accordance with the selected MSO warranty in the iDEN Infrastructure Price Book for each new switch purchased. Said engineering support shall aid in troubleshooting switch issues, provide telephone support to troubleshoot issues for remote BSC and EBTS sites, and be available during Customer's normal working hours (the equivalent of 8:00 am to 5:00 pm), Monday through Friday. 6. SERVICE LIMITATIONS AND EXCLUSIONS The following applies to any of the Maintenance Plans contained in this Exhibit. 6.1 Service does not include installation for System hardware expansions requested by Customer. 6.2 Service does not include: normal system operating responsibilities; the provision of operating supplies or replacement of consumable supplies; electrical work external to the Switch; or any other functions not required per this Exhibit "E". 6.3 Service does not include maintenance or repair of towers, antennas, transmission lines, telephone lines, microwave equipment, building's HVAC, or back-up generators unless such products are provided by Motorola. 6.4 Movement of equipment and reinstallation by anyone not authorized by Motorola may void any obligation or warranty by Motorola. Such authorization by Motorola will not be unreasonably withheld. 6.5 Customer shall not modify, remove, or obliterate the bar code, serial number, or other identifying mark(s) on the products. Any Product so altered and in need of repair shall be repaired at the sole discretion of Motorola. 6.6 Motorola shall have no obligation to repair or replace items when such repair or replacement is caused by the following: 6.6.1 An event of Force Majeure. However, Motorola agrees, upon Customer's request, to participate with Customer and make an assessment with respect to any damage as a result of such event and to provide a quotation with respect to the repair and/or replacement of the items damaged. 6.6.2 Acts of vandalism. 6.6.3 Attempts by other than personnel authorized by Motorola to repair, maintain, install or modify the equipment, or if the product is used in other than its normal and customary manner; 6.6.4 Customer's failure to maintain prescribed environmental conditions or external electrical tolerances. 6.6.5 Damage which occurs during shipment from Customer to Motorola. 3 6.6.6 Replacement or malfunction of consumable items such as printing ribbons. 6.6.7 Failure of any part of the Interconnected Carrier equipment. 4 EXHIBIT "E2" TO iDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN MOTOROLA, INC. AND TRICOM SOFTWARE SYSTEM MAINTENANCE For purposes of uniformity and brevity, references to Agreement or to an Exhibit shall refer to the above-referenced Agreement to which this document is Exhibit "E2" and to the other Exhibits to that Agreement. All definitions set forth in the Agreement shall apply hereto. This Exhibit sets forth Motorola's technical maintenance obligations (collectively, the "Software System Maintenance") with respect to Software during the warranty periods stated in Section 9 of the Agreement. Upon the expiration of the initial warranty period Customer shall purchase the Software Maintenance Program pursuant to Section 8.5 of the Agreement. Motorola shall provide its "Software System Maintenance Plan," as set forth in Schedules A and B during the initial warranty period for Software purchased under the Agreement. The services in Schedules A and B are provided under the terms of the annual Software Maintenance Program (SMP). SERVICE PLAN The following is a description of the scope of work to be provided by Motorola under Motorola's Software System Maintenance. 1. SCOPE 1.1 Motorola shall maintain each Software product covered by a maintenance plan according to the terms and conditions set forth herein and for the prices referenced above and in Section 8 of the Agreement. 1.2 The Software Maintenance Plan shall be provided during warranty period as defined in Section 8 of the Agreement. The individual segments of the plan may be extended thereafter at Motorola's then current rates. The plan shall consist of the following: 1.2.1 Schedule A: Telephone Technical Support 1.2.2 Schedule B: Software Maintenance. 2. CUSTOMER RESPONSIBILITIES Customer shall: 2.1 Appoint a System Manager for each System and supply Motorola with the name, address and telephone number of the System Manager who shall be responsible for coordination with Motorola personnel and who shall, at the option of the Customer System Manager, make available a Customer Representative during Motorola performance of Services. 1 2.2 Control site environmental conditions including but not limited to temperature, humidity, voltage, VSWR, etc. according to Motorola specifications. 2.3 Provide reasonable facilities including, but not limited to, secure storage space, a designated work space with adequate temperature control and light, and use of communications facilities, including access to a telephone line. 2.4 Supervise and perform all normal day-to-day System operational activities. 2.5 Perform System restarts or other maintenance activity as directed by Motorola Software manuals prior to initiating a service call for any System problem unless previously instructed otherwise by a Motorola representative. 2.6 Assist Motorola in Motorola's diagnosis of reproducible Software malfunctions and cooperate with Motorola remote and local personnel as they provide technical supervision and support to Customer's maintenance technicians. 2.7 Furnish, maintain and repair equipment, products, and services supplied by: 2.7.1 The local telephone company (which include but are not limited to local exchange interface), 2.7.2 Vendors other than Motorola, and 2.7.3 Vendors of mobile and/or other portable subscriber units. 2.8 Supervise, manage and control its use of the licensed Software including but not limited to: 2.8.1 Assuring proper machine configuration, program installation, audit controls and operating methods; 2.8.2 Implementing adequate backup plans, based on alternate procedures to diagnose, patch and repair Software defects in the event of a Software malfunction; and 2.8.3 Implementing sufficient procedures and checkpoints to satisfy Customer's requirements for security and accuracy of input and output as well as restart and recovery in the event of malfunction. Such procedures and checkpoints will be provided to and followed by Motorola. 2.9 Procure its desired test equipment for its own use. 3. SCHEDULE A: TELEPHONE TECHNICAL SUPPORT Motorola shall provide Customer a telephone number for access to unlimited twenty-four (24) hour seven (7) days a week telephone technical software support from a Motorola supplied central support function in Schaumburg, Illinois. 2 5. SCHEDULE B: SOFTWARE MAINTENANCE PROGRAM ("SMP") Pursuant to Section 9.4 of the Agreement, the subsections below set forth SMP general terms, the proposal set forth in Exhibit "A" further defines the SMP services and pricing for 2000, and Motorola periodically shall make proposals governing SMP services and pricing for the remaining portions of the term of the Agreement. The license for Software provided during the SMP shall be provided in accordance with Exhibit "F" to the Agreement. 5.1 Definitions CERTIFICATION - The approval by Motorola that Customer's current Software is in acceptable condition for coverage under the Software Maintenance Program. FEATURE - A new Software functionality or substantial performance improvement that is made available to Customer for the then current Software release. FIRMWARE - Software in object code form that is implanted in hardware such as, by example and not limitation: ROM (Read Only Memory); PROM (Programmable Read Only Memory); or EPROM (Erasable Programmable Read Only Memory). MAJOR RELEASE - The issue of Software and any superseding issue thereof which adds to, improves, or enhances existing Software Features and capabilities involving more extensive changes to the underlying source code or the user interface than Is the case in a Point Release. A Major Release may also correct defects in earlier releases. NEW FEATURE RELEASE - A Major Release which contains one or more new Features. POINT RELEASE - A superseding issue of the Software which adds to, improves, or enhances existing Features and capabilities of the Major Release of Software with which it is associated. A Point Release may also correct defects in earlier releases. REHOSTING - The integration of SP Software into Customer's current release of Software. SOFTWARE PATCH - Software that corrects or removes a reproducible anomaly or "bug" in an existing Major Release. SOFTWARE UPDATES - Those Software "fixes" and "patches" issued by Motorola which correct a reproducible service-affecting defect in a Major Release of the Software, whether or not such defect applies to Software furnished to Customer under this Agreement. Software Updates do not include Point Releases or Major Releases, and do not represent an upgrade to or enhancement of existing Software performance levels. SPECIAL PRODUCT SOFTWARE (SP) - Features developed for Customer which contain Customer unique features and/or functionality. 5.2 All Major Releases and Software Updates (not Optional Features) made available by Motorola to any other iDEN customer shall be made available to Customer free of charge (except for SMP charges). 5.3 Optional Features and SP Software may be included in SMP at additional cost which shall be added to the base SMP rate and included as part of the annual audit set forth in Section 5.14. 5.4 Travel and associated expenses for on-site visits by Motorola personnel are not covered by this SMP unless, in Motorola's judgment, such travel is required to perform the warranty work or is 3 provided for under the "iDEN System Software Loading Support Services"section of the Clearnet 1999 SMP Proposal set forth in Exhibit "O". 5.5 Customer may purchase Motorola FNE additions required to accommodate new features and/or functionality at an additional charge to Customer as set forth in the iDEN Infrastructure Price Book. Motorola shall notify Customer of any additional hardware requirements as soon as they are aware that such additional hardware is necessary. Motorola's failure to notify Customer of material changes in hardware, when known prior to Customer order for such features or functions, will result in cancellation of the original order and allowance for the Customer to reconsider its wish to proceed. 5.6 After completion of an SMP coverage period, if Customer declines to purchase and extend the SMP for a future term or if Customer terminates a subsequent SMP and thereby allows SMP coverage to lapse for a System, Motorola must certify (as described in Section 5.7 herein) the System before Motorola will make the SMP available to Customer for such System for another term. 5.7 Certification for SMP consists of the following: (1) Motorola will audit Customer's System at Customer's expense; (2) Motorola will identify the FNE and/or IPL that must be purchased by Customer, if any, in order to bring Customer's System to the current release level (this includes back payment of all lapsed SMP); (3) Customer must acquire such FNE and/or IPL; and (4) once Customer has purchased the necessary items, Motorola will certify Customer's System and make SMP available to Customer at the then current Motorola price. 5.8 While Customer is enrolled in the SMP, Motorola shall provide all labor necessary to correct any service-affecting Software defects for the full warranty period and for any period the Software is covered by the SMP, without charge to Customer, and in accordance with the warranty provisions contained in Exhibit "F". 5.9 During the period SMP is purchased by Customer, Motorola shall provide the services defined in Schedule A (Telephone Technical Support) under SMP. 5.10 Customer shall be responsible for the first level of maintenance, including but not limited to diagnosis and isolation of reproducible Software malfunctions. In the event of any such Software malfunction, Customer shall notify Motorola immediately, followed by written confirmation of such notice. Motorola will acknowledge receipt of verified reproducible Software malfunctions and will promptly provide such service as is necessary to correct service-affecting defects in accordance with the published Motorola specifications. Customer shall be responsible for the installation of new Releases, Updates and associated Firmware. 5.11 SMP applies only to the Software as supplied or modified by Motorola. Modifications, attempted modifications, or additions to the Software by Customer or by any party other than Motorola is a breach of the Software License contained in Exhibit "F" to the Purchase Agreement and will void all obligations of Motorola under the SMP. 5.12 Motorola shall have no obligation to support any Software other than the current Release and the immediately preceding Major Release. 5.13 The SMP supplied to Customer during the warranty period shall be automatically renewed on a yearly basis. If Customer desires not to renew SMP, Customer must notify Motorola a minimum of ninety (90) days prior to the end of the warranty period or any subsequent renewal period. 5.14 Customer shall agree to yearly audits by Motorola of Systems configurations and capacities in order to calculate the new SMP price. The new SMP price for the following year shall be calculated at the end of each calendar year and shall be based on the Products in Commercial Service at that time. If Customers' initial SMP coverage expires prior to December 31, the renewal 4 period shall expire on December 31, and Customer shall be charged for the pro rata amount of the SMP fee to cover the period from expiration to December 31 of that year. The next renewal period shall begin on January 1 of the next year. 6. SCHEDULE C: OPTIONAL LOCAL ENGINEERING SUPPORT SERVICES The following Service option is offered by Motorola to Customer concurrently with the maintenance service contained in Schedules A through C during the warranty period and may be extended on an annual basis. 6.1 Local Engineering Support Motorola shall provide local engineering support to Customer in accordance with the selected MSO warranty in the iDEN Infrastructure Price Book for each new switch purchased. Said engineering support shall aid in troubleshooting switch issues, provide telephone support to troubleshoot issues for remote BSC and EBTS sites, and be available during Customer's normal working hours (the equivalent of 8:00 am to 5:00 pm), Monday through Friday. 7. SERVICE LIMITATIONS AND EXCLUSIONS The following applies to any of the Maintenance Service Plans contained in this Exhibit. 7.1 Service does not include installation for System hardware expansions requested by Customer. 7.2 Service does not include: normal system operating responsibilities; the provision of operating supplies or replacement of consumable supplies; electrical work external to the Switch; or any other functions not required per this Exhibit "E". 7.3 Service does not include maintenance or repair of towers, antennas, transmission lines, telephone lines, microwave equipment, building's HVAC, or back-up generators unless such products are provided by Motorola. 7.4 Movement of equipment and reinstallation by anyone not authorized by Motorola may void any obligation or warranty by Motorola. Such authorization by Motorola will not be unreasonably withheld. 7.5 Customer shall not modify, remove, or obliterate the bar code, serial number, or other identifying mark(s) on the products. Any Product so altered and in need of repair shall be repaired at the sole discretion of Motorola. 7.6 Motorola shall have no obligation to repair or replace items when such repair or replacement is caused by the following: 7.6.1 An event of Force Majeure. However, Motorola agrees, upon Customer's request, to participate with Customer and make an assessment with respect to any damage as a result of such event and to provide a quotation with respect to the repair and/or replacement of the items damaged. 7.6.2 Acts of vandalism. 7.6.3 Attempts by other than personnel authorized by Motorola to repair, maintain, install or modify the equipment, or if the product is used in other than its normal and customary manner; 7.6.4 Customer's failure to maintain prescribed environmental conditions or external electrical tolerances. 5 7.6.5 Damage which occurs during shipment from Customer to Motorola. 7.6.6 Replacement or malfunction of consumable items such as printing ribbons. 7.6.7 Failure of any part of the Interconnected Carrier equipment. 6 EXHIBIT "F" TO THE PURCHASE AND SALE AGREEMENT BETWEEN MOTOROLA, INC. AND TRICOM SOFTWARE LICENSE For purposes of uniformity and brevity, references to Agreement or to an Exhibit shall refer to the Purchase and Sale Agreement to which this document is Exhibit F and to the other Exhibits to that Agreement, except as otherwise stated herein. All definitions set forth in the Agreement shall apply hereto except as otherwise expressly defined herein. 1. DEFINITIONS FEATURES - Features include Optional Features and Standard Features. INITIAL PROGRAM LOAD (IPL) - The Initial Program Load contains the Operating System Software (O/SS) and the Standard Features of the current Software Release. INITIAL LICENSE FEE (ILF) - The Initial License Fee is the License Fee for using the O/SS, and all Standard Features included in the IPL. This fee does not cover the use of any Optional Features. This fee also does not cover the use of Software on expansion equipment associated with Network Elements, unless such expansion equipment is installed when Customer pays the Initial License Fee. LICENSE FEE - License Fee means the fee paid by Customer pursuant to Section 6.1.4 of the Agreement for the right to use Software in accordance with the terms of this Exhibit. NETWORK ELEMENTS - Network Elements refer to the network infrastructure components, including those component associates with Internet Protocol (IP) network architecture. Network Elements include, but are not limited to, the Fixed Network Equipment (FNE), and any expansions or sub-components thereof. Network Elements may be either manufactured or supplied by Motorola or by third parties. NETWORK FEATURES - Network Features allow specialized communication between any Network Elements. OPERATING SYSTEM SOFTWARE (O/SS) - The O/SS brings the hardware platform to a state of readiness that allows Standard and Optional Features to run. OPERATIONAL FEATURES - Operational Features improve the overall non-call performance of the network. Non-call performance includes increased call quality, increased availability and decreased cost of ownership. Examples of Operational Features include Billing Features, CAMP Terminal Expansions, Interference Cancellation, and Multiple Alarm Expansions. OPTIONAL FEATURES - Optional Features provide incremental functionality beyond the Standard Release and require the purchase of individual feature licenses. Optional Feature categories include Subscriber Features, Network Features and Operational Features. 1 SOFTWARE - Software is any computer program, including the O/SS, the Features and any other computer program, whole or partial copies of a computer program, adaptations, derivative works, modifications, translations, updates or enhancements of all or part of a computer program, documentation associated with a computer program, and the techniques and ideas embodied and expressed in a computer program (including but not limited to the structure, sequence and organization of a computer program.) A computer program comprising Software under this Agreement is in any medium (including but not limited to all types of permanent or semi-permanent memory or storage devices, in hard-wired logic instructions, or in any electronic medium) and in any form (for example, human or machine-readable form), and a computer program is furnished directly or indirectly by Motorola to Customer, or, to the extent permitted under this Agreement, is a Customer's copy, adaptation, derivative work, modification, translation, update or enhancement of a computer program furnished directly or indirectly by Motorola to Customer. The computer programs comprising Software may be used solely in conjunction with the System Configuration. Notwithstanding the foregoing, the term Software shall not include third party computer programs provided under separate license agreements such as shirk-wrap license agreements, or third party computer programs not licensable under the terms of this Agreement, such as third party computer programs provided under the free software foundation's general public license. Any reference herein to Software being "sold" or "purchased" shall in fact be deemed to be a reference to Software being "licensed." SOFTWARE RELEASE - A Software Release is a new version of Software that contains new Standard Features, O/SS upgrades, and those Optional Features that have been licensed separately and individually by Customer. STANDARD FEATURES - Standard Features are included in the current Software Release at no additional charge. Included in the Standard Features is the Call Processing functionality that allows the Network Elements to operate as a wireless communications system. SUBSCRIBER FEATURES - Subscriber Features are those that can either be offered on a per-subscriber or per-traffic channel basis and/or which are apparent as features to the subscriber. Examples of Subscriber Features include Caller Preview Service, Message Waiting Notification and Authentication. SYSTEM CONFIGURATION - System Configuration means the combination of Software and Network Elements installed in the System for which the most recent License Fees due under the terms of this Agreement have been paid by Customer. (For the purposes of this definition, a Network Element does not include that expansion equipment associated with such Network Elements if such expansion equipment has not yet been installed.) 2. LICENSE GRANT 2.1 Concurrent with execution of the Agreement and subject to the payment of applicable License Fees hereunder, Motorola grants to Customer a personal, perpetual, revocable, limited, non-exclusive and non-transferable license under applicable copyrights and trade secret rights to use Software in connection with the System Configuration. The term "use" means to load, execute, store or display the Software, for the purpose of operating or maintaining the System Configuration. The term "maintain" means performing diagnostic and testing functions consistent with Customer's obligation to provide first echelon diagnosis under the Software warranty set forth in the Agreement. 2.2 The following License Fees for the use of Software on the initial System Configuration are set forth in Exhibit A of the Agreement: (i) ILF; and (ii) License Fees for specified Optional Features. 2.3 Changes to System Configuration and/or additional use of existing Software (by Network Elements or subscribers) may require payment of additional License Fees. Examples of changes to System Configuration and/or additional Software uses include, but are not limited to, the following: (i) use of additional Optional Features; (ii) increased capacity of Optional Features; (iii) increased call processing capacity; 2 (vi) expansion of Network Elements (e.g. increase in the number of trunk shelves); (vii) addition of Network Elements. 3. [LEFT BLANK ON PURPOSE] 4. LIMITATIONS ON USE OF SOFTWARE 4.1 The Software is Confidential Information of Motorola or its licensors. Customer agrees to keep confidential, in accordance with the terms of the Agreement, and not use, provide or otherwise make available in any form any Software or its contents, or any portion thereof, to any third party. 4.2 Customer shall not translate, modify, merge, adapt, de-compile, disassemble, or reverse engineer the Software or any portion thereof. 4.3 Customer shall notify Motorola in the event that it has purchased Network Elements from a third party. Motorola shall have the right to audit Customer's System Configuration at any time for the purpose of calculating any additional License Fees which may be due pursuant to Section 3.3. Notwithstanding any Software warranty or other performance requirements included in the Agreement, Motorola shall have no responsibility for the operation of Software on components that have not been originally packaged together by Motorola. 4.4 Subsequent transfers or sale of Network Elements by Customer may require the transferee or purchaser to obtain a Software license from Motorola, as well as payment of applicable license fees, prior to the use of Software by the transferee or purchaser. Customer shall notify Motorola upon such transfer or sale in order to permit Motorola to grant a Software license to the transferee or purchaser, if appropriate. 5. RIGHT TO COPY, PROTECTION AND SECURITY 5.1 Software provided hereunder may be copied (for back-up purposes only) in whole or in part, in machine-readable form for Customer's internal use only, provided, however, that no more than two (2) printed copies and two (2) machine-readable copies will be in existence at any one time without the prior written consent of Motorola, other than copies resident in the System Configuration. 5.2 With reference to any copyright notice of Motorola associated with Software, Customer agrees to include the same on all copies it makes in whole or in part. Motorola's copyright notice may appear in any of several forms, including machine-readable form. Use of a copyright notice on the Software does not imply that such has been published or otherwise made generally available to the public. 5.4 SOFTWARE AND ANY COPY OF SOFTWARE IS THE SOLE AND EXCLUSIVE PROPERTY OF MOTOROLA OR ITS LICENSORS AND NO TITLE OR OWNERSHIP RIGHTS TO THE SOFTWARE OR ANY OF ITS PARTS IS TRANSFERRED TO CUSTOMER. 5.5 Customer acknowledges that it is the responsibility of Customer to take all reasonable measures to safeguard Software and to prevent its unauthorized use or duplication. In the event that Customer discovers the unauthorized use or duplication of Software, Customer shall notify Motorola in writing and provide reasonable assistance in securing such unauthorized Software. 6. REMEDIES Customer acknowledges that violation of the terms of this Exhibit or the Agreement shall cause Motorola irreparable harm for which monetary damages may be inadequate, and Customer agrees that Motorola may seek temporary or permanent injunctive relief without the need to prove actual harm in order to protect Motorola's interests. 3 7. TERMINATION 7.1 Any license granted hereunder may be terminated by Customer upon one (1) month's prior written notice. 7.2 Motorola may revoke any license granted hereunder if Customer is in default of any of the terms and conditions of the Agreement or Exhibits, and such revocation shall be effective if Customer fails to correct such default within ten (10) days after written notice thereof by Motorola. 7.3 Within one (1) month after termination or revocation of any license, Customer shall furnish to Motorola a document certifying, through its best efforts and to the best of its knowledge, the original and all copies in whole or in part of all Software, in any form, including any copy in an updated work, have been returned to Motorola or destroyed. 8. LICENSEE RIGHTS 8.1 Nothing contained herein shall be deemed to grant, either directly or by implication, estoppel, or otherwise, any license under any patents or patent applications of Motorola or Motorola's licensors, except where a license may arise by operation of law, and only to the extent that such license is necessary to operate the System. 8.2 During the term of the license granted pursuant to Section 2 herein and for a period of one year after expiration or termination, Motorola, its licensor(s), or their representatives may, upon prior notice to Customer: (i) inspect the files, computer processors, equipment, facilities and premises of Customer during normal working hours to verify Customer's compliance with this Agreement; and (ii) while conducting the inspection, copy or retain any item that Customer may possess in violation of the license or the Agreement. 8.3 Customer acknowledges that the provisions of this Exhibit are intended to inure to the benefit of Motorola and its licensors. Customer acknowledges that Motorola or its licensors have the right to enforce these provisions against Customer, whether in Motorola's or its licensor's name. 8.4 Third party computer programs not licensable under the terms of this Agreement, such as third party computer programs provided under the Free Software Foundation's General Public License, are only licensed to the extent allowed by the original licensor. Pursuant to Customer's request, with respect to computer programs provided under the Free Software Foundation's General Public License ("Freeware Programs") (i) such freeware programs shall be identified by Motorola using commercially reasonable best efforts and to the best of Motorola's knowledge and (ii) for a period of three years after receipt of such freeware programs, a free copy of the source code of the freeware programs in machine-readable form shall be provided by Motorola (although distribution fees may be applicable). 9. ENTIRE UNDERSTANDING Notwithstanding anything to the contrary in other agreements, purchase orders or order acknowledgments, the Agreement and this Exhibit F set forth the entire understanding and obligations regarding use of Software, implied or expressed. 4 EXHIBIT "G" TO iDEN(R) INFRASTRUCTURE EQUIPMENT PURCHASE AGREEMENT BETWEEN MOTOROLA AND TRICOM TRAINING For purposes of uniformity and brevity, references to Agreement or to an Exhibit shall refer to the above-referenced Agreement to which this document is Exhibit "G" and to the other Exhibits to that Agreement. All definitions set forth in this Agreement shall apply hereto. Payment of the fee set forth in the then current iDEN Training Catalog shall evidence incorporation of this Exhibit "G" into the Agreement. Technical Training is intended for System Operators, Maintenance personnel, Supervisor and Management personnel responsible for operation of an iDEN System who possess the necessary prerequisite knowledge, including but not necessarily limited to knowledge of telephony, digital communications and networking, logic circuitry, Pulse Code Modulation theory, and RF Technology. 1.0 GENERAL 1.1 The series of sub-component courses presented in the iDEN Training Catalog are primarily intended for delivery at the iDEN Technical Training Center in Schaumburg, IL, using dedicated training equipment and training facilities. Some level 1 courses can be delivered at the Customer premises. 1.2 The training pricing shown in the iDEN Training Catalog includes all instructional services and student course materials for use by Customer's students. No license is granted for further reproduction or distribution of these Motorola developed training materials provided during the class sessions. 1.3 All training will be conducted in English and all course material will be in English, unless otherwise agreed by both parties 1.4 For classes conducted at Motorola facilities in Schaumburg, IL, any and all other expenses incurred by Customer's student attendees, including but not limited to travel, meals, lodging and personal entertainment, are the responsibility of Customer or the attendee. 1.5 For instructional services, consulting, or classes conducted at a Customer-supplied facility, or for any location other than Motorola facilities in Schaumburg, IL, Customer shall be responsible for the payment of all incidental expenses resulting from the training session. This would include but not be limited to facilities costs such as meeting room costs or equipment rental, plus Customer or attendee food, travel, and lodging expenses. Instructor expenses (food, travel and lodging) will be passed through to the Customer at cost. 1.6 The courses utilized in support of the iDEN System will, in most cases, be divided between periods of lecture and periods of practical "Hands-On" training. Courses conducted at Customer location will utilize customer-supplied product, terminals, test equipment and related paraphernalia for the practical "Hands-On" sessions. Motorola reserves the right to subcontract training to authorized Motorola training departments outside of the Network Solutions Sector (NSS), and/or subcontractors of Motorola. 1 2.0 TECHNICAL TRAINING PLAN DESCRIPTION 2.1 One of the many initiatives of iDEN technical training is to provide training that will help Customer participants perform their jobs more efficiently. To do this, Motorola's technical training representatives interviewed managers, and more importantly, the technicians and engineers who actually do the work to find out what the Customer's needs are to maintain the iDEN infrastructure. 2.2 The Technical Training Curriculum is divided into 3 levels. A. Level 1 is for someone new to the MSO environment B. Level 2 is designed to train individuals how to maintain and troubleshoot the infrastructure. C. Level 3 will teach the technicians and engineers advanced concepts and troubleshooting techniques. All equipment maintenance courses will be structured to provide servicing information consistent with the service plan established by Motorola. No component level servicing information is included in this training plan for any Fixed or Subscriber equipment within this System. 3.0 SCHEDULING OF TRAINING The training curriculum available in the iDEN Training Catalog will be accompanied by the schedule for all of the classes held in the Motorola Training facility in Schaumburg, IL. Training that can be delivered at the Customer location will be scheduled depending on instructor availability and the acceptance of the proposed quote. These field classes may be subject to change based on resource, equipment, and System availability. To ensure a wider range of available training dates, scheduling requests should be made at least 120 days in advance of the start of the requested delivery date. At the time of Customer's request for scheduling, Motorola will confirm the request and will inform Customer of changes that may have occurred in course length, delivery location, content or source that would materially affect the training session. 4.0 DELIVERABLES FOR TECHNICAL TRAINING AND TECHNICAL TRAINING-RELATED PRODUCTS The Curriculum list in the iDEN Training Catalog shows the course titles for each of the expected classes in each of the three training levels. The lists of training courses are subject to revision, based on changes in Customer's System hardware and software. In addition, training course title, content, source and desired location is subject to change. Course Descriptions for each of these training courses are shown in the attached iDEN Training Catalog. 5.0 TECHNICAL TRAINING PREREQUISITES Each of the courses or course levels shown in the catalog has one or more prerequisites. In general, if a course is to be taken without completing the suggested prerequisites for that particular course, the prerequisite waiver form located in the catalog must be completed and attached to the registration form. The filling out of this waiver form indicates that the specified individual has the equivalent experience, and/or knowledge base, to assimilate the course content without completing the suggested prerequisites. It also indicates that the individual is registering without having taken the prerequisites but is part of the target audience. 6.0 COURSE DESCRIPTIONS The course descriptions set forth in Motorola's Training Catalog shall be considered a representative sample of the courses available to Customer. All material in the catalog is subject to change. 2 EXHIBIT "H" TO IDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN MOTOROLA AND TRICOM DOCUMENTATION For purposes of uniformity and brevity, references to Agreement or to an Exhibit shall refer to the above-referenced Agreement to which this document is Exhibit "H" and to the other Exhibits to that Agreement. All definitions set forth in the Agreement shall apply hereto. Following is a brief description of the iDEN System manuals. All manuals will be in English. 1.0 GLOSSARY OF TERMS AND SYSTEM DESCRIPTION Consists of a definition of SWITCH acronyms and telephony terms along with a description of the various System parts (i.e., SWITCH, Base Site) and how they tie together. 2.0 SWITCH TECHNICAL DESCRIPTION This document includes the SWITCH Theory of Operation, hardware (block diagrams) description, and software (data flow diagrams) description. 3.0 SWITCH OPERATOR'S MANUAL Description of how to operate the Switch, including loading procedures, commands, operational modes, and alarm descriptions. 4.0 SWITCH FIELD MAINTENANCE This manual helps a technician identify and replace boards and modules which are non-functional. The manual is basically divided into two sections: troubleshooting and board replacement. Troubleshooting is an alphabetical listing of error messages followed by a suggested procedure. If the procedure involves replacing a defective board, the crafts person will be routed to a specific cage and slot number in the board replacement section. 5.0 BASE SITE CONTROLLER This manual consists of Base Site Controller information. Configuration information, theory of operation, operating procedures, and maintenance information are described. 6.0 BASE STATION EQUIPMENT This Base Station manual includes configuration information, block diagrams of product hardware, theory of operation, and routine maintenance. Motorola will provide the above-mentioned volumes as part of the Agreement. Quantities include one copy of each of the manuals described in paragraphs 1 through 6, and two copies of all other manuals. Additional copy pricing will be quoted separately. Motorola reserves the right to change Documentation without notifying Customer beforehand. Motorola periodically will supply relevant changes to standard Documentation to Customer. Motorola Documentation is copyrighted by Motorola, Inc. No reproduction rights for these Motorola developed manuals will be granted. EXHIBIT "I" TO iDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN MOTOROLA AND TRICOM LATINOAMERICA, S.A. ADDITIONAL OPERATING ENTITIES For purposes of uniformity and brevity, references to Agreement or to an Exhibit shall refer to that Purchase Agreement to which this document is Exhibit "I" and to the other Exhibits to that Agreement. All definitions set forth in the Agreement shall apply hereto, unless otherwise specified herein. 1.0 PURPOSE The purpose of this Exhibit "I" is to set forth the wording of the document to be executed, from time to time, by the Motorola, Customer and the corresponding Additional Operating Entity, whereby Customer assigns to the corresponding Additional Operating Entity certain rights, and obligations of the Customer for a particular country of the Area. 2.0 THE AGREEMENT This agreement (the "AOE Agreement") between (i) Motorola, Inc., a Delaware corporation, by and through its Network Solutions Sector, Customer Solutions Group with offices at 1301 East Algonquin Road, Schaumburg, Illinois 60196 ("Motorola", which term shall also mean, where the context requires, Motorola subsidiaries or subcontractors involved in providing services or materials for this Agreement), (ii) Tricom Latinoamerica, S. A., a Cayman Islands corporation, with offices at Campbell Corporate Services Limited, The Bank of Nova Scotia Building, P.O. Box 268, George Town, Grand Cayman ("Customer" or "Tricom"), and (iii) [AOE's name], a [AOE's country of incorporation] company, with offices at [AOE's domicile] ("AOE"). RECITALS: Motorola and Customer entered into the iDEN(R) Infrastructure Supply Agreement ("Agreement" or "Supply Agreement") on ___ July, 2000, which purpose is for Customer to purchase and for Motorola to sell, and where required by the Customer, for Motorola to install and integrate iDEN Systems, as set forth in the Agreement and in the Exhibits thereto. Customer desires to develop an iDEN(R) System in the Area, which will be developed either directly or through the AOE in each of the countries in the Area, as provided in Section 2.8 of the Agreement. AOE has obtained certain rights to use certain electromagnetic radio frequencies licensed by the Spectrum Regulatory Agency and employs or intends to employ such frequencies to operate iDEN Systems in [the country] (the "Country"). AGREEMENT: Now therefore, in consideration of the mutual obligations herein contained, the parties agree as follows: 1.0 DEFINITIONS All definitions set forth in the Agreement shall apply hereto, unless otherwise specified herein. 2.0 THE ASSIGNMENT By virtue of this AOE Agreement, Customer assigns to include the AOE and the AOE accepts the assignment of Customer's rights and obligations derived from the Agreement with respect to the Country. Customer understands and agrees that notwithstanding the assignment of such rights and obligations to AOE, including payment for Equipment and/or Services, Customer remains liable for performance of those obligations under the Agreement. AOE understands and agrees that the terms and conditions of the Agreement will govern its relationship with Motorola and that the AOE agrees to all the terms and conditions of the Agreement applicable to Customer. Motorola agrees to the assignment of the Agreement by Customer to AOE, and Motorola remains liable for the performance of its obligations under the Agreement. Page 1 3.0 COUNTRY'S INITIAL SYSTEM The Country's Initial System is the minimum required System to operate as a digital mobile network to provide mobile integrated services in the Country utilizing the iDEN technology platform. This Country's Initial System is described in Exhibit "A_" of the Agreement, attached hereto as Annex "A" and corresponds to what has been defined in the Agreement as the Initial System's Firm Quote for the Country. 4.0 REPRESENTATIONS AND WARRANTIES A. Customer and AOE represent and warrant to Motorola that: 4.1 AOE is a company, subsidiary or partnership in which Customer holds at least 51% interest; 4.2. AOE has obtained certain rights to use certain electromagnetic radio frequencies licensed by the Spectrum Regulatory Agency which allows it to operate iDEN Systems in the Country; 4.3. AOE has obtained all necessary approvals, consents and authorizations of third parties and governmental authorities to enter into this AOE Agreement and has obtained all necessary approvals, consents and authorizations of third parties and governmental authorities to perform and carry out its obligations hereunder, if any are required; 4.4. The persons executing this Agreement on its behalf have express authority to do so, and, in so doing, to bind the party thereto; 4.5. The execution, delivery, and performance of this AOE Agreement does not violate any provision of any bylaw, charter, regulation, or any other governing authority of the party, and; 4.6 The execution, delivery, and performance of this AOE Agreement has been duly authorized by all necessary partnership or corporate action and this AOE Agreement is a valid and binding obligation of Customer and AOE, as the case may be, and enforceable in accordance with its terms. B. Motorola represents and warrants to Customer and AOE that: 4.7. Motorola shall extend [Preferred Deployment or Headstart, as the case may be] treatment to this AOE in accordance with the terms of the Agreement. 4.8. Motorola shall extend all warranties for Motorola and Non-Motorola manufactured products and services to this AOE in accordance with the terms of the Agreement. 4.9. Motorola shall extend to this AOE all applicable terms of the Agreement in accordance with the terms of said Agreement. 5.0 RATIFICATION OF AGREEMENT Except as specifically stated in this AOE Agreement, the Agreement is in all other respects ratified, confirmed and continues in full force and effect. In witness whereof, the parties have caused this AOE Agreement to be effective on __________, 200_. MOTOROLA, INC. TRICOM LATINOAMERICA, S.A. By: By: ------------------------------ ---------------------------- (Signature) (Signature) Name: Name: ------------------------------ ---------------------------- (Print-Block Letters) (Print-Block Letters) Title: Regional Director - LAC Title: ------------------------------ ---------------------------- (Print-Block Letters) (Print-Block Letters) [AOE'S NAME] By: -------------------------------- (Signature) Name: ------------------------------ (Print-Block Letters) Title: ----------------------------- (Print-Block Letters) Page 2 EXHIBIT "J" TO THE iDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN MOTOROLA AND TRICOM LATINOAMERICA, S.A. [2 pages. Confidential portion omitted and filed separately with the Securities and Exchange Commission purusant to an application for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.] EXHIBIT "L" TO iDEN(R) INFRASTRUCTURE SUPPLY AGREEMENT BETWEEN MOTOROLA AND TRICOM LATINOAMERICA, S.A. REQUEST FOR QUOTATION (RFQ) QUESTIONNAIRE INT'L iDEN INFRASTRUCTURE NEW SYSTEM ................................................................................ PLEASE NOTE THAT THE FOLLOWING IS REQUIRED BEFORE QUOTATION WORK WILL BEGIN: 1. A SIGNED NON DISCLOSURE AGREEMENT (NDA) 2. AN EXPORT CONTROL SCREENING FORM (TABLE OF DENIAL ORDERS) 3. GOVERNMENT SCREENING FORM 4. Q-GATE 17 (SALES STRATEGY MAY BE WAIVED) THE ABOVE MUST BE FILLED OUT, SIGNED, AND FAXED TO MOTOROLA NSS-iDEN BID AND QUOTE (847-576-5801). THESE FORMS ARE A REQUIREMENT PER MOTOROLA STANDARD OPERATING PROCEDURES. ................................................................................ Customer Name: TRICOM, S. A. ------------- Customer Address: AVENIDA LOPE DE VEGA #95 ---------------------------- APARTADO POSTAL 30373 --------------------- SANTO DOMINGO, REPUBLICA DOMINICANA ----------------------------------- Proposal Number: _______________________________________ Submitted by: __ Approved by: _ Requested Due Date for Quotation? ___ Anticipated Date of Contract Award? __________ (MSO/EBTS Forecast will be submitted based upon anticipated contract award date.) Page 1 of 10 PLEASE CHECK WHICH TYPE OF QUOTATION IS REQUIRED. (See definitions below). Budgetary or Firm Proposal XXXX --------- --------------- A BUDGETARY QUOTE WILL NOT be reviewed by the Configuration Engineering Team. This quote will be based upon generic equipment models and other recently engineered equipment lists. In addition, the budgetary quote will be comprised of an Exhibit A ONLY unless other documentation is required. Please check other documentation required for the Budgetary Quote: Generic Executive Summary xx ------------ Generic Implementation Schedule xx ---------- Generic Statement of Work xx ------------ Generic Responsibility Matrix xx ------------ Standard iDEN Purchase Agreement with Exhibits xx ----------- ASSUMING COMPLETE INFORMATION IS RECEIVED PER THIS RFQ, THE NORMAL TURNAROUND TIME TO COMPLETE A BUDGETARY QUOTE IS APPROXIMATELY 1-2 WEEKS. PLEASE NOTE NORMAL TURNAROUND TIME IS DEPENDENT UPON OUTSTANDING WORKLOAD AND RESOURCE AVAILABILITY. A FIRM PROPOSAL will be reviewed by the Configuration Engineering Team. Customized engineering will be prepared per the configuration requirements as defined on this RFQ. The standard proposal format includes a generic executive summary, generic implementation schedule and the standard iDEN Purchase Agreements with Exhibits. ASSUMING COMPLETE INFORMATION IS RECEIVED, THE NORMAL TURNAROUND TIME TO COMPLETE A FIRM PROPOSAL IS APPROXIMATELY 4 WEEKS. PLEASE NOTE NORMAL TURNAROUND TIME IS DEPENDENT UPON OUTSTANDING WORKLOAD AND RESOURCE AVAILABILITY. NOTE: COMPLETE INFORMATION INCLUDES AN ENGLISH VERSION OF THE PSTN SIGNALING SPECIFICATION. Hard Copy of the Proposal or Budgetary Required? YES (yes/no) If No, ------------ Exhibit A will be sent via E-mail. Proposal/Budgetary Hard Copies to be sent to: Name: Virgilio Cadena Title: Vicepresidente de Operaciones Tricom Address: Avenida Lope de Vega #95 Santo Domingo, Republica Dominicana Phone: (809) 476-4042 Page 2 of 10 Total number of Proposal/Budgetary Copies Required for Customer: 3 -------------- Two (2) copies will be given to Sales Team. Are additional copies required? YES ------- If Yes, how many additional copies? ______. To whom and to what address are they to be sent? Luis Quijano and Valerie Bennett ( Project PM ) ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- In order to construct an accurate and timely quotation for an iDEN system, several pieces of information are necessary. This information includes details about the area to be covered and the subscribers to be served. DISCLAIMER The quotation constructed through this information is intended for preliminary use. Estimates of site coverage will be made using theoretical models that make assumptions such as, but not limited to, flat earth and uniform density buildings. These estimates do not replace the need for detailed RF planning. Customers are encouraged to retain a RF planning consultant to perform RF design. Traffic models are provided for information only. Actual traffic loading may vary based on factors such as, but not limited to, base site locations and customer marketing. Upon completion of this input document, Motorola will produce a budgetary pricing estimate. Final pricing will require additional information from customer and additional analysis by Motorola. Page 3 of 10 DESCRIBE YOUR iDEN SYSTEM REQUEST Describe the New iDEN System you are requesting: MSO Design Capacity - subscribers ------------------ Phase 1 Phase 2 Phase 3 RF Design Capacity 9,382 14,073 20,265 ----- ------ ------ (CUMULATIVE) Briefly describe the system you are requesting with this RFQ. Include information like system features (Multiservice Only, SMS, Packet Data, IWF,VMS). TRICOM'S iDEN SYSTEM WILL BE IMPLEMENTED IN COSTA RICA . INTERCONNECT INTERLEAVE WILL BE 3:1 AND THE SUBSCRIBERS DISTRIBUTION WILL BE 30% DISPATCH AND 70% MULTISERVICE. THERE WILL BE 59 EBTS'S SITES WITH 287 BR'S., DIVIDED IN THREE (3) PHASES. THE COSTA RICA EBTS'S INFRASTRUCTURE WILL BE LINKED UP TO THE PANAMA HOST MSO, FOR YEAR 1; YEAR 2 AND YEAR 3 WILL BE DETERMINED BASE ON TRAFFIC GROWTH IN THE REGION. PLEASE TO SPECIFY, IF REQUIRED, ANY EXPANSION IN THESE MSO FOR ADDITIONAL OF COSTA RICA INFRASTRUCTURE. THE PROPOSAL MUST BE ITEMIZED PRICING FOR EQUIPMENT AND SERVICES (INSTALLATION, ENGINEERING, O&M FOR YEAR BASIS, ETC). TRAINING FOR YEAR 1 TO YEAR 3 PLUS RECOMMENDED TEST EQUIPMENTS AND SPARES FOR E-BTS (2). Explain briefly any special considerations to be taken into account by Configuration Engineering and Proposal Management. (For Example: Do not quote power system to be provided by the customer. Design MSO for capacity of phase 3.) detailed in section 1.2. --------------------------- State which system features should be quoted as options (e.g. VMS). PACKET DATA ( THE DEFAULT EQUIPMENT FOR PD IS THE 64K MDG ) . An external HLR for the MSC should be quoted as an option. One EBTS engineer should also be quoted on a quarterly Page 4 of 10 1. SITE INFORMATION 1.1 MSO LOCATION: Please provide the expected MSO location below: Expected MSO Name: N/A City Name; Guatemala 1.2 EBTS SITE INFORMATION Please provide the types of EBTS configuration and their total number of sites that are planned to be deployed in the table below. Double click Table below and then modify. AVAILABLE CONFIGURATIONS (SEE PRICEBOOK SECTION 4): o Omni 1 through 18 (Cavity sites 1 through 20) o 3SECTOR - __Through o SRRC Omni - through 16 o SRRC 3Sector - 3 through 22 o Indoor SRSC Omni 1 through 3 (Omni 1 through 4 on 40w sites) o Outdoor SRSC Omni 1 through 3 --------- AVAILABLE OPTIONS: o LR - Left or Right Side Panel o FR - Front and Rear Door o TB - Top and Base Cover o TTAI - Tower Top Amp Interface o TTA - Tower Top Amp o UP - Utility Pedestal and parts (Outdoor SRSC only) Page 5 of 10
EBTS Configuration Table -------------------------------------------------------------------------------------------------------------------------- # OF 70w/ HYB/ 75/120 OPTIONS SITES SITE TYPE # OF BRS FREQ. 40w CAV E1/T1 Ohms -------------------------------------------------------------------------------------------------------------------------- SAMPLE 3 SRRC SECTOR 3-2-2 21 800MHZ 70 HYB E1 120 TTAI, TTA -------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- PHASE 1 5 OMNI 3 15 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- PHASE 1 2 OMNI 4 8 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- PHASE 1 2 OMNI 6 12 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- PHASE 1 8 OMNI 7 56 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- PHASE 1 3 SECTOR -3-3-4 30 800MHZ 70 HYB E1 120 NO ------------------------------------------------------------------------------------------------------- Total Ph 1 20 121 -------------------------------------------------------------------------------------------------------------------------- PHASE 2 STAND ALONE BR'S 41 -------------------------------------------------------------------------------------------------------------------------- PHASE 2 39 OMNI 2 78 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- Total Ph 2 39 119 -------------------------------------------------------------------------------------------------------------------------- PHASE 3 STAND ALONE BR'S 47 -------------------------------------------------------------------------------------------------------------------------- Total Ph 3 0 47 --------------------------------------------------------------------------------------------------------------------------
Page 6 of 10 2. CALL PROFILE: 2.1 PLANNED CALL PROFILE: DISPATCH AND INTERCONNECT Please provide the following call model information. Double click Table below and then modify BLUE BOLD only. If call profile is different by phases, please copy the table below and generate call profile separately.
----------------------------------------------------------------------------------------------------------- UNIT TYPE Int. Disp. Multi. Units Total --------------------- Number Only Units Only Units Int. Disp. of --------------------------------------------------------------------------------------- Subscriber Interleave 3:1 6:1 3:1 6:1 Units --------------------------------------------------------------------------------------- by Calls/hr 0.18 1.80 0.60 1.80 Phase Hold Time 120 20.0 84 20 Illum. Cells 1 2 1 2 Erlangs/Unit 0.0060 0.0120 0.0140 0.0120 ---------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 1 0 2,815 6,567 9,382 ----------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 2 0 4,222 9,851 14,073 ----------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 3 0 6,080 14,186 20,265 -----------------------------------------------------------------------------------------------------------
Int. = Interconnect, Disp. = Dispatch, Multi. = Multiservice 2.2 PLANNED CALL PROFILE: VMS, SMS, IWF AND MDG Please provide the following expected number of subscribers below. Double click Table below and then modify BLUE BOLD only.
--------------------------------------------------------------------------------------------------------- Default Value Phase 1 Phase 2 Phase 3 --------------------------------------------------------------------------------------------------------- VMS Users 100 % of Int. Units 10000 USERS 15000 USERS 0 USERS --------------------------------------------------------------------------------------------------------- SMS Users 5 % of Int. Units 2000 USERS 4000 USERS 0 USERS --------------------------------------------------------------------------------------------------------- IWF Users 5 % of Int. Units 2000 USERS 4000 USERS 0 USERS --------------------------------------------------------------------------------------------------------- Packet Data Users 5 % of Disp. Units 1000 USERS 2000 USERS 0 USERS ---------------------------------------------------------------------------------------------------------
Int. Units = (3:1 Int. Only Units) + (3:1 Int. in Multiservice Units) Disp. Units = (6:1 Disp. Only Units) + (6:1 Disp. In Multiservice Units) 3 PLANNED MSO PARAMETERS 3.1 MSC PARAMETERS o Equipment Type Approval Required (Yes, No, Default = Yes)................................(YES ) o Type of PSTN Signaling (R1, R2, ISUP, TUP, etc., Default = R2)...........................(R2 AND C7 ) o Number of PSTN Pools (1,2,3, etc., Default = 3)..........................................(3 ) o Type of Span Lines (T1, 120(OMEGA) E1, 75(OMEGA) E1, etc., Default = 120 (OMEGA) E1).....(120(OMEGA) E1 ) o External HLR Required (Yes, No, Default = No)............................................(NO ) Page 7 of 10 3.2 VMS PARAMETERS o Average Voice Message per day per subscriber (Default = 2)...............................(2 ) o Average Message Length per Message (Default = 30 Sec)....................................(30 SEC ) o Average Voice Mail Greeting Length (Default = 20 Sec)....................................(25SEC ) o Average Retention (Read) Time per Message (Default = 12 Hr)..............................(24HR o Busy Hour Call Rate (Default = 10 %).....................................................(10% ) o GOS (Default = 5 %)......................................................................(5% ) 3.3 SMS PARAMETERS o Short Message per day per subscriber (Default = 0.6).....................................(.6 ) o Busy Hour per Day (6, 7, 8, 9, 10, etc. Default = 8) ....................................(8 ) o VMS Penetration (50, 60, 70, 80, etc. Default = 70 %)....................................(70% ) o SMS Penetration (20, 30, 40, 50, etc. Default = 30 %)....................................(30% ) Note: Sum of VMS and SMS Penetration Rates must be 100 %. 3.4 IWF PARAMETERS o Circuit Data Busy Hour Call Rate (0.1, 02, 0.3, etc. Default = 0.1)......................(0.1 ) o Average Holding Time (100, 150, etc. Default = 180 Sec)..................................(180 SEC ) o GOS (1, 2, etc. Default = 5 %)...........................................................(5% ) 3.5 PACKET DATA o Number of subscribers (15K, 64K, etc Default =15K)....................................(64 K) 4 EXPECTED MSO ROOM REQUIREMENTS 4.1 MSO ROOM: CUSTOMER'S RESPONSIBILITY o Ceiling Height from Floor (2.5, 3.0, etc. Default = 3.5 m)...............................(3.5 M ) o Cable Tray or Floor Tile.................................................................(MOTOROLA ) o HVAC.....................................................................................(MOTOROLA ) 4.2 AC POWER: CUSTOMER'S RESPONSIBILITY o Inputs to Rectifiers Chose one: o Voltage (380/415 VAC, 50/60 Hz).......................................................( ) o Voltage (208/240 VAC, 50/60 Hz).......................................................(208/240 VAC,60HZ ) o Voltage (480 VAC, 50/60 Hz)...........................................................( ) o Voltage (specify VAC, 50/60 Hz).......................................................(60 HZ ) o Inputs to Monitors: o Voltage (120VAC, 240VAC, 440VAC, etc. Default = 240 VAC)..............................(120 VAC ) o Phases (Single, Three, etc. Default = Single Phase)...................................(SINGLE PHASE ) o Frequencies (50, 60, etc. Default = 50 Hz)............................................(60 HZ ) Page 8 of 10 4.3 DC POWER: o DC Power Plant (- 48 VDC System) and Rectifiers: o Supplied by (Motorola, Customer, etc. Default = Motorola).............................(MOTOROLA ) o N+1 Redundant Rectifier? (Yes, No, Default = Yes).....................................(YES ) o Battery Backup Hour (2,4, 6, 8, etc. Default = 2 Hr)..................................(8 HRS. o DC to AC Inverters (Yes, No, Default = Yes)..............................................(YES ) o DC Generator, if required................................................................(CUSTOMER SUPPLIED) 5 EBTS INFORMATION 5.1 FREQUENCY AVAILABLE o Frequency Range Chose one: o Base RX (806 - 821 MHz, 896-901 MHz)..................................................(806 - 821 MHZ ) o Base TX (851-866 MHz, 935-940 MHz)....................................................(851 - 866 MHZ ) 5.2 EBTS EQUIPMENT o EBTS Power (Standard, None, Specific)....................................................(STANDARD ) o EBTS Antenna (Standard, None, Specific)..................................................(CUSTOMER SUPPLIED) o EBTS Spares (Standard, None, Specific)...................................................(STANDARD ) 6 STANDARD EBTS SITE REQUIREMENTS 6.1 SPAN LINES FROM EBTSS TO MSO: CUSTOMER'S RESPONSIBILITY o Type of Span Lines (T1, 120(OMEGA) E1, 75(OMEGA) E1, etc., Default = 120 (OMEGA) E1).....(120(OMEGA) E1 ) 7 TEST EQUIPMENT 7.1 MSO TEST EQUIPMENT o How many sets of MSO Test Equipment? (0,1 , 2, etc. Default = 1).........................(1 ) 7.2 EBTS TEST EQUIPMENT o How many sets of EBTS Test Equipment? (0, 1, 2, etc. Default = 1)........................(2 )
Page 9 of 10 8 Additional Information Please provide any additional comments concerning the system requirements or the quotation format below: The grade of service GOS that should be used is 2% blocking for interconnect and 5% for dispatch. 9 ATTACHMENTS: 9.1 PSTN SIGNALING SPECIFICATION - MANDATORY IF INTERCONNECT IS REQUESTED This specification is mandatory if the system is to be designed for both Interconnect and Dispatch. Disregard if your entire system is for Dispatch Only. In order to process a quotation for an MSC, Nortel will require an English version of the local PSTN Signaling document/specifications. Upon receipt of this document the quote can be officially started. English version should include references to international standards. For example: ISUP (ITU-T Blue Book). 9.2 SYSTEM BLOCK DIAGRAM - PREFERRED ATTACH 9.3 NON DISCLOSURE AGREEMENT (NDA) - HARD COPY REQUIRED WITH CUSTOMER SIGNATURE. FAX TO 847-576-5801. ATTACH 9.4 EXPORT CONTROL SCREENING ATTACH 9.5 GOVERNMENT SCREENING FORM ATTACH 9.6 Q-GATE 17 ATTACH 9.7 SALES STRATEGY FORM (IF APPLICABLE) ATTACH Page 10 of 10 REQUEST FOR QUOTATION (RFQ) QUESTIONNAIRE INT'L iDEN INFRASTRUCTURE NEW SYSTEM ................................................................................ PLEASE NOTE THAT THE FOLLOWING IS REQUIRED BEFORE QUOTATION WORK WILL BEGIN: 1. A SIGNED NON DISCLOSURE AGREEMENT (NDA) 2. AN EXPORT CONTROL SCREENING FORM (TABLE OF DENIAL ORDERS) 3. GOVERNMENT SCREENING FORM 4. Q-GATE 17 (SALES STRATEGY MAY BE WAIVED) THE ABOVE MUST BE FILLED OUT, SIGNED, AND FAXED TO MOTOROLA NSS-IDEN BID AND QUOTE (847-576-5801). THESE FORMS ARE A REQUIREMENT PER MOTOROLA STANDARD OPERATING PROCEDURES. ................................................................................ Customer Name: TRICOM, S. A. ------------- Customer Address: AVENIDA LOPE DE VEGA #95 ---------------------------- APARTADO POSTAL 30373 --------------------- SANTO DOMINGO, REPUBLICA DOMINICANA ----------------------------------- Proposal Number: _______________________________________ Submitted by: __ Approved by: _ Requested Due Date for Quotation? ___ Anticipated Date of Contract Award? __________ (MSO/EBTS Forecast will be submitted based upon anticipated contract award date.) Page 1 of 10 PLEASE CHECK WHICH TYPE OF QUOTATION IS REQUIRED. (See definitions below). Budgetary or Firm Proposal XXXX --------- --------------- A BUDGETARY QUOTE WILL NOT be reviewed by the Configuration Engineering Team. This quote will be based upon generic equipment models and other recently engineered equipment lists. In addition, the budgetary quote will be comprised of an Exhibit A ONLY unless other documentation is required. Please check other documentation required for the Budgetary Quote: Generic Executive Summary xx ------------ Generic Implementation Schedule xx ---------- Generic Statement of Work xx ------------ Generic Responsibility Matrix xx ------------ Standard iDEN Purchase Agreement with Exhibits xx ----------- ASSUMING COMPLETE INFORMATION IS RECEIVED PER THIS RFQ, THE NORMAL TURNAROUND TIME TO COMPLETE A BUDGETARY QUOTE IS APPROXIMATELY 1-2 WEEKS. PLEASE NOTE NORMAL TURNAROUND TIME IS DEPENDENT UPON OUTSTANDING WORKLOAD AND RESOURCE AVAILABILITY. A FIRM PROPOSAL will be reviewed by the Configuration Engineering Team. Customized engineering will be prepared per the configuration requirements as defined on this RFQ. The standard proposal format includes a generic executive summary, generic implementation schedule and the standard iDEN Purchase Agreements with Exhibits. ASSUMING COMPLETE INFORMATION IS RECEIVED, THE NORMAL TURNAROUND TIME TO COMPLETE A FIRM PROPOSAL IS APPROXIMATELY 4 WEEKS. PLEASE NOTE NORMAL TURNAROUND TIME IS DEPENDENT UPON OUTSTANDING WORKLOAD AND RESOURCE AVAILABILITY. NOTE: COMPLETE INFORMATION INCLUDES AN ENGLISH VERSION OF THE PSTN SIGNALING SPECIFICATION. Hard Copy of the Proposal or Budgetary Required? YES (yes/no) If No, ------------ Exhibit A will be sent via E-mail. Proposal/Budgetary Hard Copies to be sent to: Name: Virgilio Cadena Title: Vicepresidente de Operaciones Tricom Address: Avenida Lope de Vega #95 Santo Domingo, Republica Dominicana Phone: (809) 476-4042 Page 2 of 10 Total number of Proposal/Budgetary Copies Required for Customer: 3 -------------- Two (2) copies will be given to Sales Team. Are additional copies required? YES ------- If Yes, how many additional copies? ______. To whom and to what address are they to be sent? Luis Quijano and Valerie Bennett ( Project PM ) ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- In order to construct an accurate and timely quotation for an iDEN system, several pieces of information are necessary. This information includes details about the area to be covered and the subscribers to be served. DISCLAIMER The quotation constructed through this information is intended for preliminary use. Estimates of site coverage will be made using theoretical models that make assumptions such as, but not limited to, flat earth and uniform density buildings. These estimates do not replace the need for detailed RF planning. Customers are encouraged to retain a RF planning consultant to perform RF design. Traffic models are provided for information only. Actual traffic loading may vary based on factors such as, but not limited to, base site locations and customer marketing. Upon completion of this input document, Motorola will produce a budgetary pricing estimate. Final pricing will require additional information from customer and additional analysis by Motorola. Page 3 of 10 DESCRIBE YOUR iDEN SYSTEM REQUEST Describe the New iDEN System you are requesting: MSO Design Capacity - subscribers --------------- Phase 1 Phase 2 Phase 3 RF Design Capacity 10,136 15,204 21,894 ------ ------ ------ (CUMULATIVE) Briefly describe the system you are requesting with this RFQ. Include information like system features (Multiservice Only, SMS, Packet Data, IWF,VMS). TRICOM'S iDEN SYSTEM WILL BE IMPLEMENTED IN EL SALVADOR . INTERCONNECT INTERLEAVE WILL BE 3:1 AND THE SUBSCRIBERS DISTRIBUTION WILL BE 30% DISPATCH AND 70% MULTISERVICE. THERE WILL BE 38 EBTS'S SITES WITH 249 BR'S., DIVIDED IN THREE (3) PHASES. THE EL SALVADOR EBTS'S INFRASTRUCTURE WILL BE LINKED UP TO THE PANAMA HOST MSO, FOR YEAR 1; YEAR 2 AND YEAR 3 WILL BE DETERMINED BASE ON TRAFFIC GROWTH IN THE REGION. PLEASE TO SPECIFY, IF REQUIRED, ANY EXPANSION IN THESE MSO FOR ADDITIONAL OF GUATEMALA INFRASTRUCTURE. THE PROPOSAL MUST BE ITEMIZED PRICING FOR EQUIPMENT AND SERVICES (INSTALLATION, ENGINEERING, O&M FOR YEAR BASIS, ETC). TRAINING FOR YEAR 1 TO YEAR 3 PLUS RECOMMENDED TEST EQUIPMENTS AND SPARES FOR E-BTS (2). Explain briefly any special considerations to be taken into account by Configuration Engineering and Proposal Management. (For Example: Do not quote power system to be provided by the customer. Design MSO for capacity of phase 3.) detailed in section 1.2. --------------------------- State which system features should be quoted as options (e.g. VMS). PACKET DATA ( THE DEFAULT EQUIPMENT FOR PD IS THE 64K MDG ) . An external HLR for the MSC should be quoted as an option. One EBTS engineer should also be quoted on a quarterly Page 4 of 10 1. SITE INFORMATION 1.1 MSO LOCATION: Please provide the expected MSO location below: Expected MSO Name: N/A City Name; Guatemala 1.2 EBTS SITE INFORMATION Please provide the types of EBTS configuration and their total number of sites that are planned to be deployed in the table below. Double click Table below and then modify. AVAILABLE CONFIGURATIONS (SEE PRICEBOOK SECTION 4): o Omni 1 through 18 (Cavity sites 1 through 20) o 3SECTOR - __Through o SRRC Omni - through 16 o SRRC 3Sector - 3 through 22 o Indoor SRSC Omni 1 through 3 (Omni 1 through 4 on 40w sites) o Outdoor SRSC Omni 1 through 3 --------- AVAILABLE OPTIONS: o LR - Left or Right Side Panel o FR - Front and Rear Door o TB - Top and Base Cover o TTAI - Tower Top Amp Interface o TTA - Tower Top Amp o UP - Utility Pedestal and parts (Outdoor SRSC only) Page 5 of 10
EBTS Configuration Table --------------------------------------------------------------------------------------------------------------------------- # OF 70W/ HYB/ 75/120 OPTIONS SITES SITE TYPE # OF BRS FREQ. 40W CAV E1/T1 OHMS --------------------------------------------------------------------------------------------------------------------------- SAMPLE 3 SRRC Sector 3-2-2 21 800Mhz 70 Hyb E1 120 TTAI, TTA --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- PHASE 1 5 SECTOR 5-5-7* 85 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 1 1 SECTOR 5-5-3 13 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 1 1 SECTOR 3-3-3 9 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- 1 OMNI 5 5 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- 5 OMNI 4 20 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- Total Ph 1 13 132 --------------------------------------------------------------------------------------------------------------------------- * JUST 1 EBTS SITE WITH TTA --------------------------------------------------------------------------------------------------------------------------- PHASE 2 STAND ALONE BR'S 26 --------------------------------------------------------------------------------------------------------------------------- PHASE 2 5 OMNI 2 10 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- PHASE 2 9 OMNI 3 27 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- PHASE 2 1 OMNI 4 4 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- Total Ph 2 15 67 --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- PHASE 3 STAND ALONE BR'S 50 --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- Total Ph 3 0 50 ---------------------------------------------------------------------------------------------------------------------------
Page 6 of 10 2. CALL PROFILE: 2.1 PLANNED CALL PROFILE: DISPATCH AND INTERCONNECT Please provide the following call model information. Double click Table below and then modify BLUE BOLD only. If call profile is different by phases, please copy the table below and generate call profile separately.
----------------------------------------------------------------------------------------------------------- UNIT TYPE Int. Disp. Multi. Units Total ---------------- Number Only Units Only Units Int. Disp. of ------------------------------------------------------------------------------------ Subscriber Interleave 3:1 6:1 3:1 6:1 Units ------------------------------------------------------------------------------------ by Calls/hr 0.18 1.80 0.60 1.80 Phase Hold Time 120 20.0 84 20 Illum. Cells 1 2 1 2 Erlangs/Unit 0.0060 0.0120 0.0140 0.0120 ----------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 1 0 3,041 7,095 10,136 ----------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 2 0 4,561 10,643 15,204 ----------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 3 0 6,568 15,326 21,894 -----------------------------------------------------------------------------------------------------------
Int. = Interconnect, Disp. = Dispatch, Multi. = Multiservice 2.2 PLANNED CALL PROFILE: VMS, SMS, IWF AND MDG Please provide the following expected number of subscribers below. Double click Table below and then modify BLUE BOLD only.
------------------------------------------------------------------------------------------------------------ Default Value Phase 1 Phase 2 Phase 3 ------------------------------------------------------------------------------------------------------------ VMS Users 100 % of Int. Units 10000 USERS 25000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------ SMS Users 5 % of Int. Units 2000 USERS 4000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------ IWF Users 5 % of Int. Units 2000 USERS 4000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------ Packet Data Users 5 % of Disp. Units 1000 USERS 2000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------
Int. Units = (3:1 Int. Only Units) + (3:1 Int. in Multiservice Units) Disp. Units = (6:1 Disp. Only Units) + (6:1 Disp. In Multiservice Units) 3 PLANNED MSO PARAMETERS 3.1 MSC PARAMETERS o Equipment Type Approval Required (Yes, No, Default = Yes)................................(YES ) o Type of PSTN Signaling (R1, R2, ISUP, TUP, etc., Default = R2)...........................(R2 AND C7 ) o Number of PSTN Pools (1,2,3, etc., Default = 3)..........................................(3 ) o Type of Span Lines (T1, 120(OMEGA) E1, 75(OMEGA) E1, etc., Default = 120(OMEGA) E1)......(120(OMEGA) E1 ) o External HLR Required (Yes, No, Default = No)............................................(NO ) Page 7 of 10 3.2 VMS PARAMETERS o Average Voice Message per day per subscriber (Default = 2)...............................(2 ) o Average Message Length per Message (Default = 30 Sec)....................................(30 SEC ) o Average Voice Mail Greeting Length (Default = 20 Sec)....................................(25SEC ) o Average Retention (Read) Time per Message (Default = 12 Hr)..............................(24HR o Busy Hour Call Rate (Default = 10 %).....................................................(10% ) o GOS (Default = 5 %)......................................................................(5% ) 3.3 SMS PARAMETERS o Short Message per day per subscriber (Default = 0.6).....................................(.6 ) o Busy Hour per Day (6, 7, 8, 9, 10, etc. Default = 8) ....................................(8 ) o VMS Penetration (50, 60, 70, 80, etc. Default = 70 %)....................................(70% ) o SMS Penetration (20, 30, 40, 50, etc. Default = 30 %)....................................(30% ) Note: Sum of VMS and SMS Penetration Rates must be 100 %. 3.4 IWF PARAMETERS o Circuit Data Busy Hour Call Rate (0.1, 02, 0.3, etc. Default = 0.1)......................(0.1 ) o Average Holding Time (100, 150, etc. Default = 180 Sec)..................................(180 SEC ) o GOS (1, 2, etc. Default = 5 %)...........................................................(5% ) 3.5 PACKET DATA o Number of subscribers (15K, 64K, etc Default =15K)....................................(64 K) 4 EXPECTED MSO ROOM REQUIREMENTS 4.1 MSO ROOM: CUSTOMER'S RESPONSIBILITY o Ceiling Height from Floor (2.5, 3.0, etc. Default = 3.5 m)...............................(3.5 M ) o Cable Tray or Floor Tile.................................................................(MOTOROLA ) o HVAC.....................................................................................(MOTOROLA ) 4.2 AC POWER: CUSTOMER'S RESPONSIBILITY o Inputs to Rectifiers Chose one: o Voltage (380/415 VAC, 50/60 Hz).......................................................( ) o Voltage (208/240 VAC, 50/60 Hz).......................................................(208/240 VAC,60HZ ) o Voltage (480 VAC, 50/60 Hz)...........................................................( ) o Voltage (specify VAC, 50/60 Hz).......................................................(60 HZ ) o Inputs to Monitors: o Voltage (120VAC, 240VAC, 440VAC, etc. Default = 240 VAC)..............................(120 VAC ) o Phases (Single, Three, etc. Default = Single Phase)...................................(SINGLE PHASE ) o Frequencies (50, 60, etc. Default = 50 Hz)............................................(60 HZ ) Page 8 of 10 4.3 DC POWER: o DC Power Plant (- 48 VDC System) and Rectifiers: o Supplied by (Motorola, Customer, etc. Default = Motorola).............................(MOTOROLA ) o N+1 Redundant Rectifier? (Yes, No, Default = Yes).....................................(YES ) o Battery Backup Hour (2,4, 6, 8, etc. Default = 2 Hr)..................................(8 HRS. o DC to AC Inverters (Yes, No, Default = Yes)..............................................(YES ) o DC Generator, if required................................................................(CUSTOMER SUPPLIED) 5 EBTS INFORMATION 5.1 FREQUENCY AVAILABLE o Frequency Range Chose one: o Base RX (806 - 821 MHZ, 896-901 MHZ)..................................................(806 - 821 MHZ ) o Base TX (851-866 MHZ, 935-940 MHZ)....................................................(851 - 866 MHZ ) 5.2 EBTS EQUIPMENT o EBTS Power (Standard, None, Specific)....................................................(STANDARD ) o EBTS Antenna (Standard, None, Specific)..................................................(CUSTOMER SUPPLIED) o EBTS Spares (Standard, None, Specific)...................................................(STANDARD ) 6 STANDARD EBTS SITE REQUIREMENTS 6.1 SPAN LINES FROM EBTSS TO MSO: CUSTOMER'S RESPONSIBILITY o Type of Span Lines (T1, 120(OMEGA) E1, 75(OMEGA) E1, etc., Default = 120(OMEGA) E1)......(120(OMEGA) E1 ) 7 TEST EQUIPMENT 7.1 MSO TEST EQUIPMENT o How many sets of MSO Test Equipment? (0,1 , 2, etc. Default = 1).........................(1 ) 7.2 EBTS TEST EQUIPMENT o How many sets of EBTS Test Equipment? (0, 1, 2, etc. Default = 1)........................(2 )
Page 9 of 10 8 ADDITIONAL INFORMATION Please provide any additional comments concerning the system requirements or the quotation format below: THE GRADE OF SERVICE GOS THAT SHOULD BE USED IS 2% BLOCKING FOR INTERCONNECT AND 5% FOR DISPATCH. 9 ATTACHMENTS: 9.1 PSTN SIGNALING SPECIFICATION - MANDATORY IF INTERCONNECT IS REQUESTED This specification is mandatory if the system is to be designed for both Interconnect and Dispatch. Disregard if your entire system is for Dispatch Only. In order to process a quotation for an MSC, Nortel will require an English version of the local PSTN Signaling document/specifications. Upon receipt of this document the quote can be officially started. English version should include references to international standards. For example: ISUP (ITU-T Blue Book). 9.2 SYSTEM BLOCK DIAGRAM - PREFERRED ATTACH 9.3 NON DISCLOSURE AGREEMENT (NDA) - HARD COPY REQUIRED WITH CUSTOMER SIGNATURE. FAX TO 847-576-5801. ATTACH 9.4 EXPORT CONTROL SCREENING ATTACH 9.5 GOVERNMENT SCREENING FORM ATTACH 9.6 Q-GATE 17 ATTACH 9.7 SALES STRATEGY FORM (IF APPLICABLE) ATTACH Page 10 of 10 REQUEST FOR QUOTATION (RFQ) QUESTIONNAIRE INT'L iDEN INFRASTRUCTURE NEW SYSTEM ................................................................................ PLEASE NOTE THAT THE FOLLOWING IS REQUIRED BEFORE QUOTATION WORK WILL BEGIN: 1. A SIGNED NON DISCLOSURE AGREEMENT (NDA) 2. AN EXPORT CONTROL SCREENING FORM (TABLE OF DENIAL ORDERS) 3. GOVERNMENT SCREENING FORM 4. Q-GATE 17 (SALES STRATEGY MAY BE WAIVED) THE ABOVE MUST BE FILLED OUT, SIGNED, AND FAXED TO MOTOROLA NSS-IDEN BID AND QUOTE (847-576-5801). THESE FORMS ARE A REQUIREMENT PER MOTOROLA STANDARD OPERATING PROCEDURES. ................................................................................ Customer Name: TRICOM, S. A. ------------- Customer Address: AVENIDA LOPE DE VEGA #95 ---------------------------- APARTADO POSTAL 30373 --------------------- SANTO DOMINGO, REPUBLICA DOMINICANA ----------------------------------- Proposal Number: _______________________________________ Submitted by: __ Approved by: _ Requested Due Date for Quotation? ___ Anticipated Date of Contract Award? __________ (MSO/EBTS Forecast will be submitted based upon anticipated contract award date.) Page 1 of 10 PLEASE CHECK WHICH TYPE OF QUOTATION IS REQUIRED. (See definitions below). Budgetary or Firm Proposal XXXX --------- --------------- A BUDGETARY QUOTE WILL NOT be reviewed by the Configuration Engineering Team. This quote will be based upon generic equipment models and other recently engineered equipment lists. In addition, the budgetary quote will be comprised of an Exhibit A ONLY unless other documentation is required. Please check other documentation required for the Budgetary Quote: Generic Executive Summary xx ------------ Generic Implementation Schedule xx ---------- Generic Statement of Work xx ------------ Generic Responsibility Matrix xx ------------ Standard iDEN Purchase Agreement with Exhibits xx ----------- ASSUMING COMPLETE INFORMATION IS RECEIVED PER THIS RFQ, THE NORMAL TURNAROUND TIME TO COMPLETE A BUDGETARY QUOTE IS APPROXIMATELY 1-2 WEEKS. PLEASE NOTE NORMAL TURNAROUND TIME IS DEPENDENT UPON OUTSTANDING WORKLOAD AND RESOURCE AVAILABILITY. A FIRM PROPOSAL will be reviewed by the Configuration Engineering Team. Customized engineering will be prepared per the configuration requirements as defined on this RFQ. The standard proposal format includes a generic executive summary, generic implementation schedule and the standard iDEN Purchase Agreements with Exhibits. ASSUMING COMPLETE INFORMATION IS RECEIVED, THE NORMAL TURNAROUND TIME TO COMPLETE A FIRM PROPOSAL IS APPROXIMATELY 4 WEEKS. PLEASE NOTE NORMAL TURNAROUND TIME IS DEPENDENT UPON OUTSTANDING WORKLOAD AND RESOURCE AVAILABILITY. NOTE: COMPLETE INFORMATION INCLUDES AN ENGLISH VERSION OF THE PSTN SIGNALING SPECIFICATION. Hard Copy of the Proposal or Budgetary Required? YES (yes/no) If No, ------------ Exhibit A will be sent via E-mail. Proposal/Budgetary Hard Copies to be sent to: Name: Virgilio Cadena Title: Vicepresidente de Operaciones Tricom Address: Avenida Lope de Vega #95 Santo Domingo, Republica Dominicana Phone: (809) 476-4042 Page 2 of 10 Total number of Proposal/Budgetary Copies Required for Customer: 3 -------------- Two (2) copies will be given to Sales Team. Are additional copies required? YES ------- If Yes, how many additional copies? ______. To whom and to what address are they to be sent? Luis Quijano and Valerie Bennett ( Project PM ) ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- In order to construct an accurate and timely quotation for an iDEN system, several pieces of information are necessary. This information includes details about the area to be covered and the subscribers to be served. DISCLAIMER The quotation constructed through this information is intended for preliminary use. Estimates of site coverage will be made using theoretical models that make assumptions such as, but not limited to, flat earth and uniform density buildings. These estimates do not replace the need for detailed RF planning. Customers are encouraged to retain a RF planning consultant to perform RF design. Traffic models are provided for information only. Actual traffic loading may vary based on factors such as, but not limited to, base site locations and customer marketing. Upon completion of this input document, Motorola will produce a budgetary pricing estimate. Final pricing will require additional information from customer and additional analysis by Motorola. Page 3 of 10 DESCRIBE YOUR iDEN SYSTEM REQUEST Describe the New iDEN System you are requesting: MSO Design Capacity - subscribers ------------------ Phase 1 Phase 2 Phase 3 RF Design Capacity 16,855 25,283 36,408 ------ ------ ------ (CUMULATIVE) Briefly describe the system you are requesting with this RFQ. Include information like system features (Multiservice Only, SMS, Packet Data, IWF,VMS). TRICOM'S iDEN SYSTEM WILL BE IMPLEMENTED IN GUATEMALA CITY, GUATEMALA . INTERCONNECT INTERLEAVE WILL BE 3:1 AND THE SUBSCRIBERS DISTRIBUTION WILL BE 30% DISPATCH AND 70% MULTISERVICE. THERE WILL BE 38 EBTS'S SITES WITH 398 BR'S., DIVIDED IN THREE (3) PHASES. THE GUATEMALA EBTS'S INFRASTRUCTURE WILL BE LINKED UP TO THE PANAMA HOST MSO, FOR YEAR 1; YEAR 2 AND YEAR 3 WILL BE DETERMINED BASE ON TRAFFIC GROWTH IN THE REGION. PLEASE TO SPECIFY, IF REQUIRED, ANY EXPANSION IN THESE MSO FOR ADDITIONAL OF GUATEMALA INFRASTRUCTURE. THE PROPOSAL MUST BE ITEMIZED PRICING FOR EQUIPMENT AND SERVICES (INSTALLATION, ENGINEERING, O&M FOR YEAR BASIS, ETC). TRAINING FOR YEAR 1 TO YEAR 3 PLUS RECOMMENDED TEST EQUIPMENTS AND SPARES FOR E-BTS (2). Explain briefly any special considerations to be taken into account by Configuration Engineering and Proposal Management. (For Example: Do not quote power system to be provided by the customer. Design MSO for capacity of phase 3.) detailed in section 1.2. --------------------------- State which system features should be quoted as options (e.g. VMS). PACKET DATA ( THE DEFAULT EQUIPMENT FOR PD IS THE 64K MDG ) . An external HLR for the MSC should be quoted as an option. One EBTS engineer should also be quoted on a quarterly Page 4 of 10 1. SITE INFORMATION 1.1 MSO LOCATION: Please provide the expected MSO location below: Expected MSO Name: N/A City Name; Guatemala 1.2 EBTS SITE INFORMATION Please provide the types of EBTS configuration and their total number of sites that are planned to be deployed in the table below. Double click Table below and then modify. AVAILABLE CONFIGURATIONS (SEE PRICEBOOK SECTION 4): o Omni 1 through 18 (Cavity sites 1 through 20) o 3SECTOR - __Through o SRRC Omni - through 16 o SRRC 3Sector - 3 through 22 o Indoor SRSC Omni 1 through 3 (Omni 1 through 4 on 40w sites) o Outdoor SRSC Omni 1 through 3 ---------- AVAILABLE OPTIONS: o LR - Left or Right Side Panel o FR - Front and Rear Door o TB - Top and Base Cover o TTAI - Tower Top Amp Interface o TTA - Tower Top Amp o UP - Utility Pedestal and parts (Outdoor SRSC only) Page 5 of 10
EBTS Configuration Table --------------------------------------------------------------------------------------------------------------------------- # of 70w/ Hyb/ 75/120 Options Sites Site Type # of BRs Freq. 40w Cav E1/T1 Ohms --------------------------------------------------------------------------------------------------------------------------- SAMPLE 3 SRRC Sector 3-2-2 21 800Mhz 70 Hyb E1 120 TTAI, TTA --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- PHASE 1 11 SECTOR 5-5-5 165 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- PHASE 1 3 QUASI OMNI 2 6 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- PHASE 1 2 QUASI OMNI 3* 6 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 1 2 QUASI OMNI 4* 8 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 1 2 QUASI OMNI 5* 10 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 1 1 QUASI OMNI 11 11 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 1 1 QUASI OMNI 14 14 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- Total Ph 1 22 220 --------------------------------------------------------------------------------------------------------------------------- * JUST 1 SITE WITH TTA --------------------------------------------------------------------------------------------------------------------------- PHASE 2 STAND ALONE BR'S 36 --------------------------------------------------------------------------------------------------------------------------- PHASE 2 3 OMNI 2* 6 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 2 1 OMNI 3 3 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 2 3 OMNI 4 12 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 2 2 OMNI 6** 12 800MHZ 72 HYB E3 122 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 2 1 OMNI 8 8 800MHZ 73 HYB E4 123 NO --------------------------------------------------------------------------------------------------------------------------- PHASE 2 1 OMNI 5 5 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- Total Ph 2 11 82 --------------------------------------------------------------------------------------------------------------------------- *JUST 2 SITES WITH TTA **JUST 1 SITE WITH TTA --------------------------------------------------------------------------------------------------------------------------- PHASE 3 STAND ALONE BR'S 73 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- PHASE 3 4 OMNI 2* 8 800MHZ 70 HYB E1 120 YES --------------------------------------------------------------------------------------------------------------------------- PHASE 3 1 OMNI 15 15 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- Total Ph 3 5 96 --------------------------------------------------------------------------------------------------------------------------- *JUST 2 SITE WITH TTA
Page 6 of 10 2. CALL PROFILE: 2.1 PLANNED CALL PROFILE: DISPATCH AND INTERCONNECT Please provide the following call model information. Double click Table below and then modify BLUE BOLD only. If call profile is different by phases, please copy the table below and generate call profile separately.
---------------------------------------------------------------------------------------------------------- UNIT TYPE Int. Disp. Multi. Units Total ---------------------- Number Only Units Only Units Int. Disp. of --------------------------------------------------------------------------------------- Subscriber Interleave 3:1 6:1 3:1 6:1 Units --------------------------------------------------------------------------------------- by Calls/hr 0.18 1.80 0.60 1.80 Phase Hold Time 120 20.0 84 20 Illum. Cells 1 2 1 2 Erlangs/Unit 0.0060 0.0120 0.0140 0.0120 ---------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 1 0 5,057 11,799 16,855 ---------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 2 0 7,585 17,698 25,283 ---------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 3 0 10,922 25,485 36,408 ----------------------------------------------------------------------------------------------------------
Int. = Interconnect, Disp. = Dispatch, Multi. = Multiservice 2.2 PLANNED CALL PROFILE: VMS, SMS, IWF AND MDG Please provide the following expected number of subscribers below. Double click Table below and then modify Blue Bold only.
------------------------------------------------------------------------------------------------------------ Default Value Phase 1 Phase 2 Phase 3 ------------------------------------------------------------------------------------------------------------ VMS Users 100 % of Int. Units 10000 USERS 25000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------ SMS Users 5 % of Int. Units 2000 USERS 4000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------ IWF Users 5 % of Int. Units 2000 USERS 4000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------ Packet Data Users 5 % of Disp. Units 1000 USERS 2000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------
Int. Units = (3:1 Int. Only Units) + (3:1 Int. in Multiservice Units) Disp. Units = (6:1 Disp. Only Units) + (6:1 Disp. In Multiservice Units) 3 PLANNED MSO PARAMETERS 3.1 MSC PARAMETERS o Equipment Type Approval Required (Yes, No, Default = Yes)................................(YES ) o Type of PSTN Signaling (R1, R2, ISUP, TUP, etc., Default = R2)...........................(R2 AND C7 ) o Number of PSTN Pools (1,2,3, etc., Default = 3)..........................................(3 ) o Type of Span Lines (T1, 120(OMEGA) E1, 75(OMEGA) E1, etc., Default = 120(OMEGA) E1)......(120(OMEGA) E1 ) o External HLR Required (Yes, No, Default = No)............................................(NO ) Page 7 of 10 3.2 VMS PARAMETERS o Average Voice Message per day per subscriber (Default = 2)...............................(2 ) o Average Message Length per Message (Default = 30 Sec)....................................(30 SEC ) o Average Voice Mail Greeting Length (Default = 20 Sec)....................................(25SEC ) o Average Retention (Read) Time per Message (Default = 12 Hr)..............................(24HR o Busy Hour Call Rate (Default = 10 %).....................................................(10% ) o GOS (Default = 5 %)......................................................................(5% ) 3.3 SMS PARAMETERS o Short Message per day per subscriber (Default = 0.6).....................................(.6 ) o Busy Hour per Day (6, 7, 8, 9, 10, etc. Default = 8) ....................................(8 ) o VMS Penetration (50, 60, 70, 80, etc. Default = 70 %)....................................(70% ) o SMS Penetration (20, 30, 40, 50, etc. Default = 30 %)....................................(30% ) Note: Sum of VMS and SMS Penetration Rates must be 100 %. 3.4 IWF PARAMETERS o Circuit Data Busy Hour Call Rate (0.1, 02, 0.3, etc. Default = 0.1)......................(0.1 ) o Average Holding Time (100, 150, etc. Default = 180 Sec)..................................(180 SEC ) o GOS (1, 2, etc. Default = 5 %)...........................................................(5% ) 3.5 PACKET DATA o Number of subscribers (15K, 64K, etc Default =15K)....................................(64 K) 4 EXPECTED MSO ROOM REQUIREMENTS 4.1 MSO ROOM: CUSTOMER'S RESPONSIBILITY o Ceiling Height from Floor (2.5, 3.0, etc. Default = 3.5 m)...............................(3.5 M ) o Cable Tray or Floor Tile.................................................................(MOTOROLA ) o HVAC.....................................................................................(MOTOROLA ) 4.2 AC POWER: CUSTOMER'S RESPONSIBILITY o Inputs to Rectifiers Chose one: o Voltage (380/415 VAC, 50/60 Hz).......................................................( ) o Voltage (208/240 VAC, 50/60 Hz).......................................................(208/240 VAC,60HZ ) o Voltage (480 VAC, 50/60 Hz)...........................................................( ) o Voltage (specify VAC, 50/60 Hz).......................................................(60 HZ ) o Inputs to Monitors: o Voltage (120VAC, 240VAC, 440VAC, etc. Default = 240 VAC)..............................(120 VAC ) o Phases (Single, Three, etc. Default = Single Phase)...................................(SINGLE PHASE ) o Frequencies (50, 60, etc. Default = 50 Hz)............................................(60 HZ ) Page 8 of 10 4.3 DC POWER: o DC Power Plant (- 48 VDC System) and Rectifiers: o Supplied by (Motorola, Customer, etc. Default = Motorola).............................(MOTOROLA ) o N+1 Redundant Rectifier? (Yes, No, Default = Yes).....................................(YES ) o Battery Backup Hour (2,4, 6, 8, etc. Default = 2 Hr)..................................(8 HRS. o DC to AC Inverters (Yes, No, Default = Yes)..............................................(YES ) o DC Generator, if required................................................................(CUSTOMER SUPPLIED) 5 EBTS INFORMATION 5.1 FREQUENCY AVAILABLE o Frequency Range Chose one: o Base RX (806 - 821 MHz, 896-901 MHz)..................................................(806 - 821 MHZ ) o Base TX (851-866 MHz, 935-940 MHz)....................................................(851 - 866 MHZ ) 5.2 EBTS EQUIPMENT o EBTS Power (Standard, None, Specific)....................................................(STANDARD ) o EBTS Antenna (Standard, None, Specific)..................................................(CUSTOMER SUPPLIED) o EBTS Spares (Standard, None, Specific)...................................................(STANDARD ) 6 STANDARD EBTS SITE REQUIREMENTS 6.1 SPAN LINES FROM EBTSS TO MSO: CUSTOMER'S RESPONSIBILITY o Type of Span Lines (T1, 120(OMEGA) E1, 75(OMEGA) E1, etc., Default = 120(OMEGA) E1)......(120(OMEGA) E1 ) 7 TEST EQUIPMENT 7.1 MSO TEST EQUIPMENT o How many sets of MSO Test Equipment? (0,1 , 2, etc. Default = 1).........................(1 ) 7.2 EBTS Test Equipment o How many sets of EBTS Test Equipment? (0, 1, 2, etc. Default = 1)........................(2 )
Page 9 of 10 8 ADDITIONAL INFORMATION Please provide any additional comments concerning the system requirements or the quotation format below: THE GRADE OF SERVICE GOS THAT SHOULD BE USED IS 2% BLOCKING FOR INTERCONNECT AND 5% FOR DISPATCH. 9 ATTACHMENTS: 9.1 PSTN SIGNALING SPECIFICATION - MANDATORY IF INTERCONNECT IS REQUESTED This specification is mandatory if the system is to be designed for both Interconnect and Dispatch. Disregard if your entire system is for Dispatch Only. In order to process a quotation for an MSC, Nortel will require an English version of the local PSTN Signaling document/specifications. Upon receipt of this document the quote can be officially started. English version should include references to international standards. For example: ISUP (ITU-T Blue Book). 9.2 SYSTEM BLOCK DIAGRAM - PREFERRED ATTACH 9.3 NON DISCLOSURE AGREEMENT (NDA) - HARD COPY REQUIRED WITH CUSTOMER SIGNATURE. FAX TO 847-576-5801. ATTACH 9.4 EXPORT CONTROL SCREENING ATTACH 9.5 GOVERNMENT SCREENING FORM ATTACH 9.6 Q-GATE 17 ATTACH 9.7 SALES STRATEGY FORM (IF APPLICABLE) ATTACH Page 10 of 10 REQUEST FOR QUOTATION (RFQ) QUESTIONNAIRE INT'L iDEN INFRASTRUCTURE NEW SYSTEM ................................................................................ PLEASE NOTE THAT THE FOLLOWING IS REQUIRED BEFORE QUOTATION WORK WILL BEGIN: 1. A SIGNED NON DISCLOSURE AGREEMENT (NDA) 2. AN EXPORT CONTROL SCREENING FORM (TABLE OF DENIAL ORDERS) 3. GOVERNMENT SCREENING FORM 4. Q-GATE 17 (SALES STRATEGY MAY BE WAIVED) THE ABOVE MUST BE FILLED OUT, SIGNED, AND FAXED TO MOTOROLA NSS-iDEN BID AND QUOTE (847-576-5801). THESE FORMS ARE A REQUIREMENT PER MOTOROLA STANDARD OPERATING PROCEDURES. ................................................................................ Customer Name: TRICOM, S. A. ------------- Customer Address: AVENIDA LOPE DE VEGA #95 ---------------------------- APARTADO POSTAL 30373 --------------------- SANTO DOMINGO, REPUBLICA DOMINICANA ----------------------------------- Proposal Number: _______________________________________ Submitted by: __ Approved by: _ Requested Due Date for Quotation? ___ Anticipated Date of Contract Award? __________ (MSO/EBTS Forecast will be submitted based upon anticipated contract award date.) Page 1 of 10 PLEASE CHECK WHICH TYPE OF QUOTATION IS REQUIRED. (See definitions below). Budgetary or Firm Proposal XXXX --------- --------------- A BUDGETARY QUOTE WILL NOT be reviewed by the Configuration Engineering Team. This quote will be based upon generic equipment models and other recently engineered equipment lists. In addition, the budgetary quote will be comprised of an Exhibit A ONLY unless other documentation is required. Please check other documentation required for the Budgetary Quote: Generic Executive Summary xx ------------ Generic Implementation Schedule xx ---------- Generic Statement of Work xx ------------ Generic Responsibility Matrix xx ------------ Standard iDEN Purchase Agreement with Exhibits xx ----------- ASSUMING COMPLETE INFORMATION IS RECEIVED PER THIS RFQ, THE NORMAL TURNAROUND TIME TO COMPLETE A BUDGETARY QUOTE IS APPROXIMATELY 1-2 WEEKS. PLEASE NOTE NORMAL TURNAROUND TIME IS DEPENDENT UPON OUTSTANDING WORKLOAD AND RESOURCE AVAILABILITY. A FIRM PROPOSAL will be reviewed by the Configuration Engineering Team. Customized engineering will be prepared per the configuration requirements as defined on this RFQ. The standard proposal format includes a generic executive summary, generic implementation schedule and the standard iDEN Purchase Agreements with Exhibits. ASSUMING COMPLETE INFORMATION IS RECEIVED, THE NORMAL TURNAROUND TIME TO COMPLETE A FIRM PROPOSAL IS APPROXIMATELY 4 WEEKS. PLEASE NOTE NORMAL TURNAROUND TIME IS DEPENDENT UPON OUTSTANDING WORKLOAD AND RESOURCE AVAILABILITY. NOTE: COMPLETE INFORMATION INCLUDES AN ENGLISH VERSION OF THE PSTN SIGNALING SPECIFICATION. Hard Copy of the Proposal or Budgetary Required? YES (yes/no) If No, ------------ Exhibit A will be sent via E-mail. Proposal/Budgetary Hard Copies to be sent to: Name: Virgilio Cadena Title: Vicepresidente de Operaciones Tricom Address: Avenida Lope de Vega #95 Santo Domingo, Republica Dominicana Phone: (809) 476-4042 Page 2 of 10 Total number of Proposal/Budgetary Copies Required for Customer: 3 -------------- Two (2) copies will be given to Sales Team. Are additional copies required? YES ------- If Yes, how many additional copies? ______. To whom and to what address are they to be sent? Luis Quijano and Valerie Bennett ( Project PM ) ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- In order to construct an accurate and timely quotation for an iDEN system, several pieces of information are necessary. This information includes details about the area to be covered and the subscribers to be served. DISCLAIMER The quotation constructed through this information is intended for preliminary use. Estimates of site coverage will be made using theoretical models that make assumptions such as, but not limited to, flat earth and uniform density buildings. These estimates do not replace the need for detailed RF planning. Customers are encouraged to retain a RF planning consultant to perform RF design. Traffic models are provided for information only. Actual traffic loading may vary based on factors such as, but not limited to, base site locations and customer marketing. Upon completion of this input document, Motorola will produce a budgetary pricing estimate. Final pricing will require additional information from customer and additional analysis by Motorola. Page 3 of 10 DESCRIBE YOUR iDEN SYSTEM REQUEST Describe the New iDEN System you are requesting: MSO Design Capacity - subscribers ------------------ Phase 1 Phase 2 Phase 3 RF Design Capacity 3,772 5,658 8,148 ----- ----- ----- (CUMULATIVE) Briefly describe the system you are requesting with this RFQ. Include information like system features (Multiservice Only, SMS, Packet Data, IWF,VMS). TRICOM'S iDEN SYSTEM WILL BE IMPLEMENTED IN HONDURAS . INTERCONNECT INTERLEAVE WILL BE 3:1 AND THE SUBSCRIBERS DISTRIBUTION WILL BE 30% DISPATCH AND 70% MULTISERVICE. THERE WILL BE 24 EBTS'S SITES WITH 108 BR'S., DIVIDED IN THREE (3) PHASES. THE HONDURAS EBTS'S INFRASTRUCTURE WILL BE LINKED UP TO THE PANAMA HOST MSO, FOR YEAR 1; YEAR 2 AND YEAR 3 WILL BE DETERMINED BASE ON TRAFFIC GROWTH IN THE REGION. PLEASE TO SPECIFY, IF REQUIRED, ANY EXPANSION IN THESE MSO FOR ADDITIONAL OF HONDURAS INFRASTRUCTURE. THE PROPOSAL MUST BE ITEMIZED PRICING FOR EQUIPMENT AND SERVICES (INSTALLATION, ENGINEERING, O&M FOR YEAR BASIS, ETC). TRAINING FOR YEAR 1 TO YEAR 3 PLUS RECOMMENDED TEST EQUIPMENTS AND SPARES FOR E-BTS (2). Explain briefly any special considerations to be taken into account by Configuration Engineering and Proposal Management. (For Example: Do not quote power system to be provided by the customer. Design MSO for capacity of phase 3.) detailed in section 1.2. --------------------------- State which system features should be quoted as options (e.g. VMS). PACKET DATA ( THE DEFAULT EQUIPMENT FOR PD IS THE 64K MDG ) . An external HLR for the MSC should be quoted as an option. One EBTS engineer should also be quoted on a quarterly Page 4 of 10 1. SITE INFORMATION 1.1 MSO LOCATION: Please provide the expected MSO location below: Expected MSO Name: N/A City Name; Guatemala 1.2 EBTS SITE INFORMATION Please provide the types of EBTS configuration and their total number of sites that are planned to be deployed in the table below. Double click Table below and then modify. AVAILABLE CONFIGURATIONS (SEE PRICEBOOK SECTION 4): o Omni 1 through 18 (Cavity sites 1 through 20) o 3SECTOR - __Through o SRRC Omni - through 16 o SRRC 3Sector - 3 through 22 o Indoor SRSC Omni 1 through 3 (Omni 1 through 4 on 40w sites) o Outdoor SRSC Omni 1 through 3 AVAILABLE OPTIONS: o LR - Left or Right Side Panel o FR - Front and Rear Door o TB - Top and Base Cover o TTAI - Tower Top Amp Interface o TTA - Tower Top Amp o UP - Utility Pedestal and parts (Outdoor SRSC only) Page 5 of 10
EBTS Configuration Table -------------------------------------------------------------------------------------------------------------------------- # OF 70W/ HYB/ 75/120 OPTIONS SITES SITE TYPE # OF BRS FREQ. 40W CAV E1/T1 OHMS -------------------------------------------------------------------------------------------------------------------------- Sample 3 SRRC Sector 3-2-2 21 800Mhz 70 Hyb E1 120 TTAI, TTA -------------------------------------------------------------------------------------------------------------------------- PHASE 1 1 OMNI 16 16 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- PHASE 1 1 OMNI 10 10 800MHZ 70 HYB E1 120 -------------------------------------------------------------------------------------------------------------------------- PHASE 1 1 OMNI 4 4 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- PHASE 1 1 OMNI 3 3 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- PHASE 1 1 OMNI 7 7 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- Total Ph 1 5 40 -------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- PHASE 2 STAND ALONE BR'S 9 -------------------------------------------------------------------------------------------------------------------------- PHASE 2 18 OMNI 2 36 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- PHASE 2 1 OMNI 6 6 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------------------------- Total Ph 2 19 51 -------------------------------------------------------------------------------------------------------------------------- PHASE 3 STAND ALONE BR'S 17 -------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- Total Ph 3 0 17 --------------------------------------------------------------------------------------------------------------------------
Page 6 of 10 2. CALL PROFILE: 2.1 PLANNED CALL PROFILE: DISPATCH AND INTERCONNECT Please provide the following call model information. Double click Table below and then modify BLUE BOLD only. If call profile is different by phases, please copy the table below and generate call profile separately.
---------------------------------------------------------------------------------------------------------- UNIT TYPE Int. Disp. Multi. Units Total ------------------ Number Only Units Only Units Int. Disp. of --------------------------------------------------------------------------------------- Subscriber Interleave 3:1 6:1 3:1 6:1 Units --------------------------------------------------------------------------------------- by Calls/hr 0.18 1.80 0.60 1.80 Phase Hold Time 120 20.0 84 20 Illum. Cells 1 2 1 2 Erlangs/Unit 0.0060 0.0120 0.0140 0.0120 ---------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 1 0 1,132 2,640 3,772 ---------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 2 0 1,697 3,961 5,658 ---------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 3 0 2,444 5,704 8,148 ----------------------------------------------------------------------------------------------------------
Int. = Interconnect, Disp. = Dispatch, Multi. = Multiservice 2.2 PLANNED CALL PROFILE: VMS, SMS, IWF AND MDG Please provide the following expected number of subscribers below. Double click Table below and then modify BLUE BOLD only.
------------------------------------------------------------------------------------------------------------ Default Value Phase 1 Phase 2 Phase 3 ------------------------------------------------------------------------------------------------------------ VMS Users 100 % of Int. Units 5000 Users 10000 Users 0 Users ------------------------------------------------------------------------------------------------------------ SMS Users 5 % of Int. Units 2000 Users 4000 Users 0 Users ------------------------------------------------------------------------------------------------------------ IWF Users 5 % of Int. Units 2000 Users 4000 Users 0 Users ------------------------------------------------------------------------------------------------------------ Packet Data Users 5 % of Disp. Units 1000 Users 2000 Users 0 Users ------------------------------------------------------------------------------------------------------------
Int. Units = (3:1 Int. Only Units) + (3:1 Int. in Multiservice Units) Disp. Units = (6:1 Disp. Only Units) + (6:1 Disp. In Multiservice Units) 3 PLANNED MSO PARAMETERS 3.1 MSC PARAMETERS o Equipment Type Approval Required (Yes, No, Default = Yes)................................(YES ) o Type of PSTN Signaling (R1, R2, ISUP, TUP, etc., Default = R2)...........................(R2 AND C7 ) o Number of PSTN Pools (1,2,3, etc., Default = 3)..........................................(3 ) o Type of Span Lines (T1, 120(OMEGA) E1, 75(OMEGA) E1, etc., Default = 120(OMEGA) E1)......(120(OMEGA) E1 ) o External HLR Required (Yes, No, Default = No)............................................(NO ) Page 7 of 10 3.2 VMS PARAMETERS o Average Voice Message per day per subscriber (Default = 2)...............................(2 ) o Average Message Length per Message (Default = 30 Sec)....................................(30 SEC ) o Average Voice Mail Greeting Length (Default = 20 Sec)....................................(25SEC ) o Average Retention (Read) Time per Message (Default = 12 Hr)..............................(24HR o Busy Hour Call Rate (Default = 10 %).....................................................(10% ) o GOS (Default = 5 %)......................................................................(5% ) 3.3 SMS PARAMETERS o Short Message per day per subscriber (Default = 0.6).....................................(.6 ) o Busy Hour per Day (6, 7, 8, 9, 10, etc. Default = 8) ....................................(8 ) o VMS Penetration (50, 60, 70, 80, etc. Default = 70 %)....................................(70% ) o SMS Penetration (20, 30, 40, 50, etc. Default = 30 %)....................................(30% ) Note: Sum of VMS and SMS Penetration Rates must be 100 %. 3.4 IWF PARAMETERS o Circuit Data Busy Hour Call Rate (0.1, 02, 0.3, etc. Default = 0.1)......................(0.1 ) o Average Holding Time (100, 150, etc. Default = 180 Sec)..................................(180 SEC ) o GOS (1, 2, etc. Default = 5 %)...........................................................(5% ) 3.5 PACKET DATA o Number of subscribers (15K, 64K, etc Default =15K)....................................(64 K) 4 EXPECTED MSO ROOM REQUIREMENTS 4.1 MSO ROOM: CUSTOMER'S RESPONSIBILITY o Ceiling Height from Floor (2.5, 3.0, etc. Default = 3.5 m)...............................(3.5 M ) o Cable Tray or Floor Tile.................................................................(MOTOROLA ) o HVAC.....................................................................................(MOTOROLA ) 4.2 AC POWER: CUSTOMER'S RESPONSIBILITY o Inputs to Rectifiers Chose one: o Voltage (380/415 VAC, 50/60 Hz).......................................................( ) o Voltage (208/240 VAC, 50/60 Hz).......................................................(208/240 VAC,60HZ ) o Voltage (480 VAC, 50/60 Hz)...........................................................( ) o Voltage (specify VAC, 50/60 Hz).......................................................(60 HZ ) o Inputs to Monitors: o Voltage (120VAC, 240VAC, 440VAC, etc. Default = 240 VAC)..............................(120 VAC ) o Phases (Single, Three, etc. Default = Single Phase)...................................(SINGLE PHASE ) o Frequencies (50, 60, etc. Default = 50 Hz)............................................(60 HZ ) Page 8 of 10 4.3 DC POWER: o DC Power Plant (- 48 VDC System) and Rectifiers: o Supplied by (Motorola, Customer, etc. Default = Motorola).............................(MOTOROLA ) o N+1 Redundant Rectifier? (Yes, No, Default = Yes).....................................(YES ) o Battery Backup Hour (2,4, 6, 8, etc. Default = 2 Hr)..................................(8 HRS. o DC to AC Inverters (Yes, No, Default = Yes)..............................................(YES ) o DC Generator, if required................................................................(CUSTOMER SUPPLIED) 5 EBTS INFORMATION 5.1 FREQUENCY AVAILABLE o Frequency Range Chose one: o Base RX (806 - 821 MHz, 896-901 MHz)..................................................(806 - 821 MHZ ) o Base TX (851-866 MHz, 935-940 MHz)....................................................(851 - 866 MHZ ) 5.2 EBTS EQUIPMENT o EBTS Power (Standard, None, Specific)....................................................(STANDARD ) o EBTS Antenna (Standard, None, Specific)..................................................(CUSTOMER SUPPLIED) o EBTS Spares (Standard, None, Specific)...................................................(STANDARD ) 6 STANDARD EBTS SITE REQUIREMENTS 6.1 SPAN LINES FROM EBTSS TO MSO: CUSTOMER'S RESPONSIBILITY o Type of Span Lines (T1, 120(OMEGA) E1, 75(OMEGA) E1, etc., Default = 120(OMEGA) E1)......(120(OMEGA) E1 ) 7 TEST EQUIPMENT 7.1 MSO TEST EQUIPMENT o How many sets of MSO Test Equipment? (0,1 , 2, etc. Default = 1).........................(1 ) 7.2 EBTS Test Equipment o How many sets of EBTS Test Equipment? (0, 1, 2, etc. Default = 1)........................(2 )
Page 9 of 10 8 ADDITIONAL INFORMATION Please provide any additional comments concerning the system requirements or the quotation format below: THE GRADE OF SERVICE GOS THAT SHOULD BE USED IS 2% BLOCKING FOR INTERCONNECT AND 5% FOR DISPATCH. 9 ATTACHMENTS: 9.1 PSTN SIGNALING SPECIFICATION - MANDATORY IF INTERCONNECT IS REQUESTED This specification is mandatory if the system is to be designed for both Interconnect and Dispatch. Disregard if your entire system is for Dispatch Only. In order to process a quotation for an MSC, Nortel will require an English version of the local PSTN Signaling document/specifications. Upon receipt of this document the quote can be officially started. English version should include references to international standards. For example: ISUP (ITU-T Blue Book). 9.2 SYSTEM BLOCK DIAGRAM - PREFERRED ATTACH 9.3 NON DISCLOSURE AGREEMENT (NDA) - HARD COPY REQUIRED WITH CUSTOMER SIGNATURE. FAX TO 847-576-5801. ATTACH 9.4 EXPORT CONTROL SCREENING ATTACH 9.5 GOVERNMENT SCREENING FORM ATTACH 9.6 Q-GATE 17 ATTACH 9.7 SALES STRATEGY FORM (IF APPLICABLE) ATTACH Page 10 of 10 REQUEST FOR QUOTATION (RFQ) QUESTIONNAIRE INT'L iDEN INFRASTRUCTURE NEW SYSTEM ................................................................................ PLEASE NOTE THAT THE FOLLOWING IS REQUIRED BEFORE QUOTATION WORK WILL BEGIN: 1. A SIGNED NON DISCLOSURE AGREEMENT (NDA) 2. AN EXPORT CONTROL SCREENING FORM (TABLE OF DENIAL ORDERS) 3. GOVERNMENT SCREENING FORM 4. Q-GATE 17 (SALES STRATEGY MAY BE WAIVED) THE ABOVE MUST BE FILLED OUT, SIGNED, AND FAXED TO MOTOROLA NSS-IDEN BID AND QUOTE (847-576-5801). THESE FORMS ARE A REQUIREMENT PER MOTOROLA STANDARD OPERATING PROCEDURES. ................................................................................ Customer Name: TRICOM, S. A. ------------- Customer Address: AVENIDA LOPE DE VEGA #95 ---------------------------- APARTADO POSTAL 30373 --------------------- SANTO DOMINGO, REPUBLICA DOMINICANA ----------------------------------- Proposal Number: _______________________________________ Submitted by: __ Approved by: _ Requested Due Date for Quotation? ___ Anticipated Date of Contract Award? __________ (MSO/EBTS Forecast will be submitted based upon anticipated contract award date.) Page 1 of 10 PLEASE CHECK WHICH TYPE OF QUOTATION IS REQUIRED. (See definitions below). Budgetary or Firm Proposal XXXX --------- --------------- A BUDGETARY QUOTE WILL NOT be reviewed by the Configuration Engineering Team. This quote will be based upon generic equipment models and other recently engineered equipment lists. In addition, the budgetary quote will be comprised of an Exhibit A ONLY unless other documentation is required. Please check other documentation required for the Budgetary Quote: Generic Executive Summary xx ------------ Generic Implementation Schedule xx ---------- Generic Statement of Work xx ------------ Generic Responsibility Matrix xx ------------ Standard iDEN Purchase Agreement with Exhibits xx ----------- ASSUMING COMPLETE INFORMATION IS RECEIVED PER THIS RFQ, THE NORMAL TURNAROUND TIME TO COMPLETE A BUDGETARY QUOTE IS APPROXIMATELY 1-2 WEEKS. PLEASE NOTE NORMAL TURNAROUND TIME IS DEPENDENT UPON OUTSTANDING WORKLOAD AND RESOURCE AVAILABILITY. A FIRM PROPOSAL will be reviewed by the Configuration Engineering Team. Customized engineering will be prepared per the configuration requirements as defined on this RFQ. The standard proposal format includes a generic executive summary, generic implementation schedule and the standard iDEN Purchase Agreements with Exhibits. ASSUMING COMPLETE INFORMATION IS RECEIVED, THE NORMAL TURNAROUND TIME TO COMPLETE A FIRM PROPOSAL IS APPROXIMATELY 4 WEEKS. PLEASE NOTE NORMAL TURNAROUND TIME IS DEPENDENT UPON OUTSTANDING WORKLOAD AND RESOURCE AVAILABILITY. NOTE: COMPLETE INFORMATION INCLUDES AN ENGLISH VERSION OF THE PSTN SIGNALING SPECIFICATION. Hard Copy of the Proposal or Budgetary Required? YES (yes/no) If No, ------------ Exhibit A will be sent via E-mail. Proposal/Budgetary Hard Copies to be sent to: Name: Virgilio Cadena Title: Vicepresidente de Operaciones Tricom Address: Avenida Lope de Vega #95 Santo Domingo, Republica Dominicana Phone: (809) 476-4042 Page 2 of 10 Total number of Proposal/Budgetary Copies Required for Customer: 3 -------------- Two (2) copies will be given to Sales Team. Are additional copies required? YES ------- If Yes, how many additional copies? ______. To whom and to what address are they to be sent? Luis Quijano and Valerie Bennett ( Project PM ) ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- In order to construct an accurate and timely quotation for an iDEN system, several pieces of information are necessary. This information includes details about the area to be covered and the subscribers to be served. DISCLAIMER The quotation constructed through this information is intended for preliminary use. Estimates of site coverage will be made using theoretical models that make assumptions such as, but not limited to, flat earth and uniform density buildings. These estimates do not replace the need for detailed RF planning. Customers are encouraged to retain a RF planning consultant to perform RF design. Traffic models are provided for information only. Actual traffic loading may vary based on factors such as, but not limited to, base site locations and customer marketing. Upon completion of this input document, Motorola will produce a budgetary pricing estimate. Final pricing will require additional information from customer and additional analysis by Motorola. Page 3 of 10 DESCRIBE YOUR iDEN SYSTEM REQUEST Describe the New iDEN System you are requesting: MSO Design Capacity - subscribers ------------------ Phase 1 Phase 2 Phase 3 RF Design Capacity 1,572 2,331 3,310 ----- ----- ----- (CUMULATIVE) Briefly describe the system you are requesting with this RFQ. Include information like system features (Multiservice Only, SMS, Packet Data, IWF,VMS). TRICOM'S iDEN SYSTEM WILL BE IMPLEMENTED AT NICARAGUA . INTERCONNECT INTERLEAVE WILL BE 3:1 AND THE SUBSCRIBERS DISTRIBUTION WILL BE 30% DISPATCH AND 70% MULTISERVICE. THERE WILL BE 10 EBTS'S SITES WITH 46 BR'S., DIVIDED IN THREE (3) PHASES. THE NICARAGUA EBTS'S INFRASTRUCTURE WILL BE LINKED UP TO THE PANAMA HOST MSO, FOR YEAR 1; YEAR 2 AND YEAR 3 WILL BE DETERMINED BASE ON TRAFFIC GROWTH IN THE REGION. PLEASE TO SPECIFY, IF REQUIRED, ANY EXPANSION IN THESE MSO FOR ADDITIONAL OF NICARAGUA INFRASTRUCTURE. THE PROPOSAL MUST BE ITEMIZED PRICING FOR EQUIPMENT AND SERVICES (INSTALLATION, ENGINEERING, O&M FOR YEAR BASIS, ETC). TRAINING FOR YEAR 1 TO YEAR 3 PLUS RECOMMENDED TEST EQUIPMENTS AND SPARES FOR E-BTS (2). Explain briefly any special considerations to be taken into account by Configuration Engineering and Proposal Management. (For Example: Do not quote power system to be provided by the customer. Design MSO for capacity of phase 3.) detailed in section 1.2. --------------------------- State which system features should be quoted as options (e.g. VMS). PACKET DATA ( THE DEFAULT EQUIPMENT FOR PD IS THE 64K MDG ) . An external HLR for the MSC should be quoted as an option. One EBTS engineer should also be quoted on a quarterly Page 4 of 10 1. SITE INFORMATION 1.1 MSO LOCATION: Please provide the expected MSO location below: Expected MSO Name: N/A City Name; Guatemala 1.2 EBTS SITE INFORMATION Please provide the types of EBTS configuration and their total number of sites that are planned to be deployed in the table below. Double click Table below and then modify. AVAILABLE CONFIGURATIONS (SEE PRICEBOOK SECTION 4): o Omni 1 through 18 (Cavity sites 1 through 20) o 3SECTOR - __Through o SRRC Omni - through 16 o SRRC 3Sector - 3 through 22 o Indoor SRSC Omni 1 through 3 (Omni 1 through 4 on 40w sites) o Outdoor SRSC Omni 1 through 3 --------- AVAILABLE OPTIONS: o LR - Left or Right Side Panel o FR - Front and Rear Door o TB - Top and Base Cover o TTAI - Tower Top Amp Interface o TTA - Tower Top Amp o UP - Utility Pedestal and parts (Outdoor SRSC only) Page 5 of 10
EBTS Configuration Table --------------------------------------------------------------------------------------------------------------------------- # of 70w/ Hyb/ 75/120 Options Sites Site Type # of BRs Freq. 40w Cav E1/T1 Ohms --------------------------------------------------------------------------------------------------------------------------- SAMPLE 3 SRRC Sector 3-2-2 21 800Mhz 70 Hyb E1 120 TTAI, TTA --------------------------------------------------------------------------------------------------------------------------- 1 OMNI 5 5 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- 2 OMNI 4 8 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- 4 OMNI 3 12 800MHZ 70 HYB E1 120 NO --------------------------------------------------------------------------------------------------------------------------- 3 OMNI 2 6 800MHZ 70 HYB E1 120 NO -------------------------------------------------------------------------------------------------------- Total Ph 1 10 31 --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- PHASE 2 STAND ALONE BR's 8 -------------------------------------------------------------------------------------------------------- Total Ph 2 0 8 --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- PHASE 3 STAND ALONE BR's 7 -------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- Total Ph 3 0 7 ---------------------------------------------------------------------------------------------------------------------------
Page 6 of 10 2. CALL PROFILE: 2.1 PLANNED CALL PROFILE: DISPATCH AND INTERCONNECT Please provide the following call model information. Double click Table below and then modify BLUE BOLD only. If call profile is different by phases, please copy the table below and generate call profile separately.
---------------------------------------------------------------------------------------------------------- UNIT TYPE Int. Disp. Multi. Units Total Only Units Only Units Int. Disp. Number --------------------------------------------------------------------------------------- of Interleave 3:1 6:1 3:1 6:1 Subscriber --------------------------------------------------------------------------------------- Units Calls/hr 0.18 1.80 0.60 1.80 by Hold Time 120 20.0 84 20 Phase Illum. Cells 1 2 1 2 Erlangs/Unit 0.0060 0.0120 0.0140 0.0120 ---------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 1 0 472 1,100 1,572 ---------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 2 0 699 1,632 2,331 ---------------------------------------------------------------------------------------------------------- Numer of Subcriber Units: Phase 3 0 993 2,317 3,310 ----------------------------------------------------------------------------------------------------------
Int. = Interconnect, Disp. = Dispatch, Multi. = Multiservice 2.2 PLANNED CALL PROFILE: VMS, SMS, IWF AND MDG Please provide the following expected number of subscribers below. Double click Table below and then modify BLUE BOLD only.
------------------------------------------------------------------------------------------------------------ Default Value Phase 1 Phase 2 Phase 3 ------------------------------------------------------------------------------------------------------------ VMS Users 100 % of Int. Units 10000 USERS 25000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------ SMS Users 5 % of Int. Units 2000 USERS 4000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------ IWF Users 5 % of Int. Units 2000 USERS 4000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------ Packet Data Users 5 % of Disp. Units 1000 USERS 2000 USERS 0 USERS ------------------------------------------------------------------------------------------------------------
Int. Units = (3:1 Int. Only Units) + (3:1 Int. in Multiservice Units) Disp. Units = (6:1 Disp. Only Units) + (6:1 Disp. In Multiservice Units) 3 PLANNED MSO PARAMETERS 3.1 MSC Parameters o Equipment Type Approval Required (Yes, No, Default = Yes)................................(YES ) o Type of PSTN Signaling (R1, R2, ISUP, TUP, etc., Default = R2)...........................(R2 AND C7 ) o Number of PSTN Pools (1,2,3, etc., Default = 3)..........................................(3 ) o Type of Span Lines (T1, 120(OMEGA) E1, 75(OMEGA) E1, etc., Default = 120(OMEGA) E1)......(120(OMEGA) E1 ) o External HLR Required (Yes, No, Default = No)............................................(NO ) Page 7 of 10 3.2 VMS Parameters o Average Voice Message per day per subscriber (Default = 2)...............................(2 ) o Average Message Length per Message (Default = 30 Sec)....................................(30 SEC ) o Average Voice Mail Greeting Length (Default = 20 Sec)....................................(25SEC ) o Average Retention (Read) Time per Message (Default = 12 Hr)..............................(24HR o Busy Hour Call Rate (Default = 10 %).....................................................(10% ) o GOS (Default = 5 %)......................................................................(5% ) 3.3 SMS Parameters o Short Message per day per subscriber (Default = 0.6).....................................(.6 ) o Busy Hour per Day (6, 7, 8, 9, 10, etc. Default = 8) ....................................(8 ) o VMS Penetration (50, 60, 70, 80, etc. Default = 70 %)....................................(70% ) o SMS Penetration (20, 30, 40, 50, etc. Default = 30 %)....................................(30% ) Note: Sum of VMS and SMS Penetration Rates must be 100 %. 3.4 IWF Parameters o Circuit Data Busy Hour Call Rate (0.1, 02, 0.3, etc. Default = 0.1)......................(0.1 ) o Average Holding Time (100, 150, etc. Default = 180 Sec)..................................(180 SEC ) o GOS (1, 2, etc. Default = 5 %)...........................................................(5% ) 3.5 Packet Data o Number of subscribers (15K, 64K, etc Default =15K)....................................(64 K) 4 Expected MSO Room Requirements 4.1 MSO Room: Customer's Responsibility o Ceiling Height from Floor (2.5, 3.0, etc. Default = 3.5 m)...............................(3.5 M ) o Cable Tray or Floor Tile.................................................................(MOTOROLA ) o HVAC.....................................................................................(MOTOROLA ) 4.2 AC Power: Customer's Responsibility o Inputs to Rectifiers Chose one: o Voltage (380/415 VAC, 50/60 Hz).......................................................( ) o Voltage (208/240 VAC, 50/60 Hz).......................................................(208/240 VAC,60HZ ) o Voltage (480 VAC, 50/60 Hz)...........................................................( ) o Voltage (specify VAC, 50/60 Hz).......................................................(60 HZ ) o Inputs to Monitors: o Voltage (120VAC, 240VAC, 440VAC, etc. Default = 240 VAC)..............................(120 VAC ) o Phases (Single, Three, etc. Default = Single Phase)...................................(SINGLE PHASE ) o Frequencies (50, 60, etc. Default = 50 Hz)............................................(60 HZ ) Page 8 of 10 4.3 DC Power: o DC Power Plant (- 48 VDC System) and Rectifiers: o Supplied by (Motorola, Customer, etc. Default = Motorola).............................(MOTOROLA ) o N+1 Redundant Rectifier? (Yes, No, Default = Yes).....................................(YES ) o Battery Backup Hour (2,4, 6, 8, etc. Default = 2 Hr)..................................(8 HRS. o DC to AC Inverters (Yes, No, Default = Yes)..............................................(YES ) o DC Generator, if required................................................................(CUSTOMER SUPPLIED) 5 EBTS Information 5.1 Frequency Available o Frequency Range Chose one: o Base RX (806 - 821 MHz, 896-901 MHz)..................................................(806 - 821 MHZ ) o Base TX (851-866 MHz, 935-940 MHz)....................................................(851 - 866 MHZ ) 5.2 EBTS Equipment o EBTS Power (Standard, None, Specific)....................................................(STANDARD ) o EBTS Antenna (Standard, None, Specific)..................................................(CUSTOMER SUPPLIED) o EBTS Spares (Standard, None, Specific)...................................................(STANDARD ) 6 Standard EBTS Site Requirements 6.1 Span Lines from EBTSs to MSO: Customer's Responsibility o Type of Span Lines (T1, 120(OMEGA) E1, 75(OMEGA) E1, etc., Default = 120(OMEGA) E1)......(120(OMEGA) E1 ) 7 Test Equipment 7.1 MSO Test Equipment o How many sets of MSO Test Equipment? (0,1 , 2, etc. Default = 1).........................(1 ) 7.2 EBTS Test Equipment o How many sets of EBTS Test Equipment? (0, 1, 2, etc. Default = 1)........................(2 )
Page 9 of 10 8 ADDITIONAL INFORMATION Please provide any additional comments concerning the system requirements or the quotation format below: THE GRADE OF SERVICE GOS THAT SHOULD BE USED IS 2% BLOCKING FOR INTERCONNECT AND 5% FOR DISPATCH. 9 ATTACHMENTS: 9.1 PSTN SIGNALING SPECIFICATION - MANDATORY IF INTERCONNECT IS REQUESTED This specification is mandatory if the system is to be designed for both Interconnect and Dispatch. Disregard if your entire system is for Dispatch Only. In order to process a quotation for an MSC, Nortel will require an English version of the local PSTN Signaling document/specifications. Upon receipt of this document the quote can be officially started. English version should include references to international standards. For example: ISUP (ITU-T Blue Book). 9.2 SYSTEM BLOCK DIAGRAM - PREFERRED ATTACH 9.3 NON DISCLOSURE AGREEMENT (NDA) - HARD COPY REQUIRED WITH CUSTOMER SIGNATURE. FAX TO 847-576-5801. ATTACH 9.4 EXPORT CONTROL SCREENING ATTACH 9.5 GOVERNMENT SCREENING FORM ATTACH 9.6 Q-GATE 17 ATTACH 9.7 SALES STRATEGY FORM (IF APPLICABLE) ATTACH Page 10 of 10