Maxcom Telecomunicaciones Third Quarter 2005 Results

Maxcom Telecomunicaciones Third Quarter 2005 Results

- Revenues increased 31% over 3Q04 and 9% over 2Q05 - EBITDA grew 65% over 3Q04 and 12% over 2Q05 - Lines in service increased 29% over 3Q04 and 6% over 2Q05 - Voice customers grew 31% over 3Q04 and 5% over 2Q05

MEXICO CITY, Oct. 28 /PRNewswire-FirstCall/ -- LINES:

The number of lines in service at the end of 3Q05 increased 29% to 199,476 lines, from 154,968 lines at the end of 3Q04, and 6% when compared to 188,283 lines in service at the end of 2Q05.

During 3Q05, 19,670 new voice lines were installed, 34% higher than the 14,655 lines installed during 3Q04. When compared to 2Q05, the number of installations increased 13% from 17,457 lines.

During 3Q05, the monthly churn rate for voice lines was 1.7%, lower than the 2.0% monthly average churn during 3Q04. When compared to 2Q05, churn rate increased from 1.6%. Voluntary churn in 3Q05 resulted in the disconnection of 2,498 lines, a rate of 0.5%, the same that the one registered in 2Q05 with 2,422 disconnected lines. Involuntary churn resulted in the disconnection of 6,643 lines, a rate of 1.2%, and higher than the 5,156 disconnected lines in 2Q05 (1.0%).

vs. vs.
LINES 3Q04 2Q05 3Q05 3Q04 2Q05
Business Lines 27,421 31,612 34,047 24% 8%
Residential Lines 116,227 142,425 149,092 28% 5%
Public Telephony Lines - 2,334 3,761 N/A 61%
Total Voice Lines 143,648 176,371 186,900 30% 6%
Wholesale 11,320 11,912 12,576 11% 6%
Lines in Service (1) 154,968 188,283 199,476 29% 6%

Data Equivalent Lines (2) 16,639 20,948 23,555 42% 12%

(1) Does not include Data Equivalent Lines
(2) Data Conversion @ 64Kbps

CUSTOMERS:

Total voice customers grew 31% to 145,460 at the end of 3Q05, from 111,444 at the end of 3Q04, and 5% when compared to 138,828 customers at the end of 2Q05.

The change in the number of voice customers by category was the following: (i) business customers increased by 13% from 3Q04 and 3% from 2Q05; and, (ii) residential customers increased by 31% from 3Q04 and 5% from 2Q05.

vs. vs.
VOICE CUSTOMERS 3Q04 2Q05 3Q05 3Q04 2Q05
Business 3,846 4,227 4,342 13% 3%
Residential 107,598 134,601 141,118 31% 5%
Total Voice Customers 111,444 138,828 145,460 31% 5%

Data Customers 6,026 7,079 6,415 6% -9%

REVENUES:

Revenues for 3Q05 increased 31% to Ps$301.6 million, from Ps$230.4 million reported in 3Q04. Voice revenues for 3Q05 increased 31% to Ps$244.7 million, from Ps$187.2 million during 3Q04, driven by a 30% increase in voice lines. Data revenues for 3Q05 were Ps$12.9 million and contributed with 4% of total revenues. Data revenues in 3Q04 were Ps$11.8 million. Wholesale revenues for 3Q05 were Ps$44.0 million, a 40% increase from Ps$31.4 million in 3Q04.

Revenues for 3Q05 increased 9% to Ps$301.6 million, from Ps$277.7 million in 2Q05. Voice revenues for 3Q05 increased 9% from Ps$223.4 million during 2Q05. Data revenues in 3Q05 decreased 2% from Ps$13.1 million during 2Q05. During 3Q05, revenues from Wholesale customers increased 7% from Ps$41.1 million in 2Q05.

COST OF NETWORK OPERATION:

Cost of Network Operation in 3Q05 was Ps$99.6 million, a 21% increase when compared to Ps$82.5 million in 3Q04. Over the same period, outbound traffic increased 3%, showing an increase on a cost per minute basis basically as a result of the lease of capacity on a CATV network in the city of Queretaro, where we started providing a "triple play" service comprised of Cable TV, internet and telephone service; combined with a shift of the outbound traffic pattern from local to long distance and calls to cellular phones. Local traffic was 96% of total traffic in 3Q04 and 92% in 3Q05. The Ps$17.1 million increase in Cost of Network Operation was generated by: (i) Ps$14.2 million, or 25%, increase in network operating services, mainly driven by Ps$8.5 million higher calling party pays interconnection charges, a Ps$3.1 million higher long distance interconnection; and, Ps$3.5 million lease of capacity on a CATV network, which were partially offset by Ps$0.9 million lower AsistelMax, lease of ports and other services cost; (ii) Ps$3.3 million higher technical expenses, basically as a result of Ps$2.3 higher general office expenses and fees to external advisors; Ps$1.0 higher lease of equipment; Ps$0.9 higher leases of sites and poles, partially offset by Ps$0.9 million lower maintenance expenses; and, (iii) Ps$0.4 million, or 12%, decrease in installation expenses and cost of disconnected lines.

Cost of Network Operation increased 7% quarter-over-quarter when compared to Ps$92.8 million in 2Q05. The Ps$6.8 million increase in Cost of Network Operation was generated by: (i) Ps$6.5 million, or 10% increase in Network operating services, mainly driven by Ps$2.7 million higher long distance reselling cost, Ps$2.2 million lease of a cable TV network, Ps$1.8 million higher calling party pays charges; and, Ps$0.2 lower AsistelMax and other services cost; (ii) Ps$1.3 million increase in Technical expenses, partially offset by a Ps$1.0 million decrease of installation expenses and cost of disconnected lines. On a traffic-related cost basis, the cost per minute improved as outbound traffic increased 17%.

Gross margin at 67% in 3Q05 showed an improvement from 64% reported in 3Q04 and remained at 67% reported in 2Q05.

SG&A:

SG&A expenses were Ps$123.1 million in 3Q05, a 23% increase from Ps$100.1 million in 3Q04. The increase was mainly driven by: (i) higher salaries, wages and benefits of Ps$23.5 million as a result of increased headcount; (ii) higher sales commissions of Ps$6.7 million; (iii) higher general and insurance expenses of Ps$1.6 million. Higher expenses were partially offset by (i) lower bad debt reserve of Ps$3.4 million (ii) lower fees paid to external advisors of Ps$2.0 million, (iii) Ps$1.9 lower advertising and promotion expenses; (iv) lower offices and warehouse leases of Ps$0.5 million; and, (v) Ps$0.9 million lower maintenance expenses.

SG&A expenses in 3Q05 increased 7% from Ps$114.5 million in 2Q05. The Ps$8.6 million increase was generated by: (i) higher salaries, wages and benefits of Ps$15.2 million, (ii) Ps$0.9 million higher bad debt reserve, (iii) Ps$0.2 million higher advertising expenses; and, (iv) Ps$0.1 million higher insurance expenses. Higher expenses were partially offset by (i) Ps$3.4 million lower sales commissions, (ii) Ps$2.9 million lower general expenses, (iii) Ps$1.3 million lower maintenance expenses; and, (iv) Ps$0.2 million lower leases expenses.

EBITDA:

EBITDA for 3Q05 increased 65% to Ps$78.8 million, from Ps$47.9 million reported in 3Q04. When compared to 2Q05, EBITDA grew 12% from Ps$70.4 million.

EBITDA margin of 26% improved from 21% of 3Q04, and from 25% in 2Q05.

CAPITAL EXPENDITURES:

Capital expenditures for 3Q05 were Ps$128.0 million, 17% higher that the Ps$109.2 million reported in 3Q04, and a 76% increase when compared to Ps$72.8 million in 2Q05.

CASH POSITION:

Maxcom's cash position at the end of 3Q05 was Ps$68.0 million in Cash and Cash Equivalents, including Ps$9.8 million of restricted cash in connection with a banking financing obtained in 4Q04, compared to Ps$43.0 million at the end of 3Q04. Cash and Cash Equivalents at the end of 2Q05 were Ps$45.4 million, including Ps$9.8 million of restricted cash.

COMMERCIAL PAPER PROGRAM:

On July 14, we entered into a short-term commercial paper program in Mexico, issuing 1,500,000 notes with a face value of Ps$100.00 for a total amount of Ps$150.0 million. Notes will be payable on June 15, 2006 and bear interests at a rate equal to the Inter-banking Equilibrium Interest Rate (TIIE) plus 2.75 points and applicable taxes. Coupons are payable monthly starting August 11, 2005.

SPIN-OFF:

On August 30, 2005, Maxcom's shareholders approved a spin-off ("escision") of the Company under Mexican law, pursuant to which a new company was created and Maxcom transferred to the new company part of its assets, liabilities and equity, as follows: Ps$8.3 million in assets; Ps$8.2 million in liabilities and Ps$0.1 million in equity.

In connection with the spin off, starting August 31, 2005, Maxcom executed a series of arms' length related parties transactions to acquire more than 99% of the spun off company. These transactions had no impact on Maxcom's cash balance.

Maxcom Telecomunicaciones, S.A. de C.V., headquartered in Mexico City, Mexico, is a facilities-based telecommunications provider using a "smart-build" approach to deliver last-mile connectivity to micro, small and medium-sized businesses and residential customers in the Mexican territory. Maxcom launched commercial operations in May 1999 and is currently offering Local, Long Distance and Internet & Data services in greater metropolitan Mexico City, Puebla and Queretaro. The information contained in this press release is the exclusive responsibility of Maxcom Telecomunicaciones, S.A. de C.V. and has not been reviewed by the National Banking and Securities Commission of Mexico (CNBV). The registration of the securities described in this press release before the Special Section of the National Registry of Securities (Registro Nacional de Valores) held by the CNBV does not imply a certification of the investment quality of the securities or of Maxcom's solvency. The securities described in this press release have not been registered before the Securities Section of the National Registry of Securities held by the CNBV and therefore can not be publicly offered or traded in Mexico. The trading of these securities by a Mexican investor will be made under such investor's own responsibility.

This document may include forward-looking statements that involve risks and uncertainties that are detailed from time to time in the U.S. Securities and Exchange Commission filings of the Company. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," and similar expressions may identify such forward-looking statements. The Company wants to caution readers that any forward-looking statements in this document or made by the company's management involves risks and uncertainties that may change based on various important factors not under the Company's control. These forward- looking statements represent the Company's judgment as of the date of this document. The company disclaims, however, any intent or obligation to update these forward-looking statements.

(Financial Statements to follow)

MAXCOM TELECOMUNICACIONES, S.A. DE C.V.

CONSOLIDATED BALANCE SHEET

(Thousands of Mexican pesos "Ps" with purchasing power as of September 30,
2005 and thousands of US Dollars "$")

September 30, 2004
Pesos US Dollars
ASSETS
CURRENT ASSETS:
Cash and cash equivalents Ps 42,984 $3,962
Restricted Cash - -
42,984 3,962
Accounts receivable:
Customers, net of allowance 146,973 13,547
Other sundry debtors 23,145 2,133
170,118 15,680

Inventory 16,519 1,523
Prepaid expenses 63,686 5,870
Total current assets 293,307 27,035

Restricted Cash Long Term - -

Frequency rights, Net 97,538 8,990
Telephone network systems & Equipment, Net 1,672,299 154,137
Preoperating expenses, Net 164,828 15,192
Intangible Assets, Net 369,097 34,020
Other assets 23,168 2,135

Total assets Ps 2,620,237 $241,509

LIABILITIES
CURRENT LIABILITIES:
Interest Payable Ps 9,879 $911
Accrued expenses and other accounts payable 201,866 18,606
Bank Financing 74,794 6,894
Commercial paper - -
Customers deposits 2,017 186
Payroll and other taxes payable 50,995 4,700
Total current liabilities 339,551 31,297

LONG-TERM LIABILITIES:
Senior notes, net 2,111,232 194,593
Bank Financing - -
Notes payable 13,359 1,231
Hedging Valuation - -
Total liabilities Ps 2,464,142 $227,121

SHAREHOLDERS' EQUITY
Capital stock 1,872,641 172,602
Additional paid-in capital 1,568 145
Accumulated deficit (1,598,348) (147,320)
Net loss for the period (119,766) (11,039)
Other Comprehensive Income - -
Minority interest - -
Total shareholders' equity (deficit) Ps 156,095 $14,388
Ps 2,620,237 $241,509

June 30, 2005
Pesos US Dollars
ASSETS
CURRENT ASSETS:
Cash and cash equivalents Ps 35,603 $3,282
Restricted Cash 9,787 902
45,390 4,184
Accounts receivable:
Customers, net of allowance 148,806 13,715
Other sundry debtors 23,392 2,156
172,198 15,871

Inventory 13,115 1,209
Prepaid expenses 60,586 5,584
Total current assets 291,289 26,848

Restricted Cash Long Term 16,963 1,563

Frequency rights, Net 92,211 8,499
Telephone network systems & Equipment, Net 1,781,962 164,243
Preoperating expenses, Net 138,069 12,726
Intangible Assets, Net 345,237 31,821
Other assets 19,032 1,754

Total assets Ps 2,684,763 $247,454

LIABILITIES
CURRENT LIABILITIES:
Interest Payable Ps 9,590 $884
Accrued expenses and other accounts payable 229,349 21,139
Bank Financing 189,582 17,474
Commercial paper - -
Customers deposits 2,542 234
Payroll and other taxes payable 45,350 4,180
Total current liabilities 476,413 43,911

LONG-TERM LIABILITIES:
Senior notes, net 575,359 53,031
Bank Financing 41,948 3,866
Notes payable 37,848 3,488
Hedging Valuation - -
Total liabilities Ps 1,131,568 $104,296

SHAREHOLDERS' EQUITY
Capital stock 2,458,443 226,595
Additional paid-in capital 880,272 81,135
Accumulated deficit (1,729,385) (159,398)
Net loss for the period (56,135) (5,174)
Other Comprehensive Income - -
Minority interest - -
Total shareholders' equity (deficit) Ps 1,553,195 $143,158
Ps 2,684,763 $247,454

September 30, 2005
Pesos US Dollars
ASSETS
CURRENT ASSETS:
Cash and cash equivalents Ps 58,217 $5,366
Restricted Cash 9,791 902
68,008 6,268
Accounts receivable:
Customers, net of allowance 166,489 15,345
Other sundry debtors 26,468 2,439
192,957 17,784

Inventory 15,313 1,411
Prepaid expenses 72,553 6,687
Total current assets 348,831 32,150

Restricted Cash Long Term 20,645 1,903

Frequency rights, Net 90,436 8,335
Telephone network systems & Equipment, Net 1,849,537 170,478
Preoperating expenses, Net 129,148 11,904
Intangible Assets, Net 325,355 29,988
Other assets 14,944 1,377

Total assets Ps 2,778,896 $256,135

LIABILITIES
CURRENT LIABILITIES:
Interest Payable Ps 21,647 $1,995
Accrued expenses and other accounts payable 264,655 24,394
Bank Financing 137,944 12,714
Commercial paper 150,000 13,826
Customers deposits 2,718 251
Payroll and other taxes payable 146,612 13,513
Total current liabilities 723,576 66,693

LONG-TERM LIABILITIES:
Senior notes, net 571,993 52,721
Bank Financing 15,152 1,397
Notes payable 49,407 4,554
Hedging Valuation 8,588 792
Total liabilities Ps 1,368,716 $126,157

SHAREHOLDERS' EQUITY
Capital stock 2,697,951 248,671
Additional paid-in capital 1,629 151
Accumulated deficit (1,090,289) (100,492)
Net loss for the period (196,969) (18,155)
Other Comprehensive Income (2,182) (201)
Minority interest 40 4
Total shareholders' equity (deficit) Ps 1,410,180 $129,978

Ps 2,778,896 $256,135

NOTES TO FINANCIAL STATEMENTS:
Financial statements are reported in period-end pesos as of September 30,
2005 to adjust for the inter-period effect of inflation.
For readers' convenience, all Peso amounts were converted to U.S. dollars
at the exchange rate of Ps$10.8495 per US$1.00.

MAXCOM TELECOMUNICACIONES, S.A. DE C.V.

CONSOLIDATED STATEMENT OF OPERATIONS

YEAR 2005 AND 2004 QUARTERLY PERIODS

(Thousands of Mexican pesos "Ps" with purchasing power as of
September 30, 2005 and thousands of US Dollars "$")

July 1 to
September 30, 2004
Pesos US Dollars %

Voice 187,170 17,251 81%
Data 11,839 1,091 5%
Wholesale 31,421 2,896 14%
TOTAL REVENUES Ps 230,430 $21,238 100%

Network operating services 57,805 5,328 25%
Technical expenses 21,257 1,959 9%
Installation expenses 3,443 317 1%
Cost of Network Operation 82,505 7,604 36%

GROSS PROFIT 147,925 13,634 64%

SG&A 100,064 9,223 43%

EBITDA 47,861 4,411 21%

Depreciation and amortization 75,348 6,945

Operating Loss (27,487) (2,534)

Comprehensive (Income) Cost of Financing:

*Interest expense 5,102 470
**Interest income 4,844 447
Exchange (income) loss, net (2,170) (201)
Gain on net monetary position (39,773) (3,666)
(31,997) (2,950)

Other (income) expense (172) (16)

INCOME (LOSS) BEFORE TAXES 4,682 432

Provisions for:
Asset Tax 8,999 829
Income Tax & Profit Sharing (210) (19)
Total Provisions 8,789 810

NET INCOME (LOSS) Ps (4,107) $(378)

April 1 to
June 30, 2005
Pesos US Dollars %

Voice 223,442 20,595 80%
Data 13,108 1,208 5%
Wholesale 41,137 3,792 15%
TOTAL REVENUES Ps 277,687 $25,595 100%

Network operating services 65,499 6,037 24%
Technical expenses 23,229 2,141 8%
Installation expenses 4,080 376 1%
Cost of Network Operation 92,808 8,554 33%

GROSS PROFIT 184,879 17,041 67%

SG&A 114,518 10,555 42%

EBITDA 70,361 6,486 25%

Depreciation and amortization 89,798 8,277

Operating Loss (19,437) (1,791)

Comprehensive (Income) Cost of Financing:

*Interest expense 14,895 1,373
**Interest income 2,825 260
Exchange (income) loss, net (26,851) (2,475)
Gain on net monetary position 28 3
(9,103) (839)

Other (income) expense (1,136) (105)

INCOME (LOSS) BEFORE TAXES (9,198) (847)

Provisions for:
Asset Tax 3,175 293
Income Tax & Profit Sharing 150 14
Total Provisions 3,325 307

NET INCOME (LOSS) Ps (12,523) $(1,154)

July 1 to
September 30, 2005
Pesos US Dollars %

Voice 244,667 22,551 81%
Data 12,875 1,187 4%
Wholesale 44,041 4,059 15%
TOTAL REVENUES Ps 301,583 $27,797 100%

Network operating services 72,010 6,637 24%
Technical expenses 24,548 2,263 8%
Installation expenses 3,045 281 1%
Cost of Network Operation 99,603 9,181 33%

GROSS PROFIT 201,980 18,616 67%

SG&A 123,177 11,353 41%

EBITDA 78,803 7,263 26%

Depreciation and amortization 91,031 8,390

Operating Loss (12,228) (1,127)

Comprehensive (Income) Cost of Financing:

*Interest expense 24,545 2,262
**Interest income 5,966 550
Exchange (income) loss, net 6,987 645
Gain on net monetary position (5,323) (491)
32,175 2,966

Other (income) expense (439) (40)

INCOME (LOSS) BEFORE TAXES (43,964) (4,053)

Provisions for:
Asset Tax 3,162 291
Income Tax & Profit Sharing 93,708 8,637
Total Provisions 96,870 8,928

NET INCOME (LOSS) Ps (140,834) $(12,981)

NOTES TO FINANCIAL STATEMENTS:
* Interest related to Senior Notes and Vendor Financing
** Interest Income net of bank commissions

Financial statements are reported in period-end pesos as of September 30,
2005 to adjust for the inter-period effect of inflation.
For readers' convenience, all Peso amounts were converted to U.S. dollars
at the exchange rate of Ps$10.8495 per US$1.00.

Source: Maxcom Telecomunicaciones, S.A. de C.V.

CONTACT: Mexico City - Jose-Antonio Solbes of Maxcom Telecomunicaciones,
+52-55-5147-1125, investor.relations@maxcom.com; or New York City - Lucia
Domville for Maxcom Telecomunicaciones, +1-917-375-1984, ldomville@nyc.rr.com

Web site: http://www.maxcom.com/

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