CORPORATE STRATEGY. The company plans to establish a global system for mobile communication (GSM)-based wireless network for all of its Latin American subsidiaries. AMX expects a common technological platform to ensure seamless digital roaming across countries, and to permit the development of new applications and services that can be standardized across the region.

 

PRIMARY BUSINESS DYNAMICS. Telcel, AMX's wholly owned Mexican subsidiary (29% of total wireless subscribers at the end of first quarter 2010), serves the second largest wireless market in Latin America. Telcel added 1.1 million subscribers in the first quarter of 2010, ending the quarter with a total of 60.3 million.

 

Wireless number portability was introduced on July 13, 2008. Also, Telcel introduced the 3G iPhone, which could help it gain subscribers and be a slight positive with wireless number portability, but the increased subsidy could weigh on margins. In January 2010, Telcel was alerted that it has been named a "dominant" carrier in Mexico by the Federal Competition Commission (CFC).We believe the company will appeal this ruling, which, if it goes into effect, could affect pricing, quality and information.We do not expect

a significant impact from this ruling.

 

Wholly owned Telecom Americas (22%) is the second largest wireless operator in Brazil. Its wireless licenses cover some of the largest metropolitan markets, such as Sao Paulo. The company's wireless properties in Brazil include ATL, Tess, Telet and Americel, and, since May 2003, BSE. AMX acquired 95% of the shares of BSE from a subsidiary of BellSouth and from holding companies of the Safra family. Telecom Americas gained 1.2 million subscribers in the 2010 first quarter.

 

Comcel, Occel and Celcaribe comprise AMX's operations (14%) in Colombia. Comcel serves the eastern region of the country, Occel the western region, and Celcaribe principally the Caribbean region. Colombia and Panama added 363,000 subscribers in the 2010 first quarter.

 

Each ADS represents 20 ordinary common shares. TracFone Wireless, 98.2% owned (7%), operates in the U.S. as a prepaid wireless reseller. TracFone does not own any wireless facilities or hold any licenses. Instead, it purchases airtime through agreements with about 40 wireless service providers, and resells airtime to customers. The company ended the 2010 first quarter with 15.5 million customers. Notably, TracFone recently introduced a prepaid offering called Straight Talk, which could allow the large net addition gains to continue as it expands its offering to a large number ofWal-Mart stores. AMX's remaining Latin American operations (28%) are based in Argentina, Chile, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay, Puerto Rico, Peru and Uruguay.

 

COMPETITIVE LANDSCAPE.We believe the company faces intense competition in all of its markets, but in Brazil, the largest wireless market in Latin America, we expect to see even greater competition. In Brazil, the company's major competitors are Vivo, a joint venture of Telefonica and Portugal Telecom, Oi, a subsidiary of Tele Norte Leste Participacoes, and TIM Brasil, a subsidiary of Telecom Italia. Oi recently purchased a small wireless provider as well as Brazil Telecom, and we believe it will continue to build out its

wireless operations in Brazil. In addition, we think Telefonica has been getting aggressive in pricing and attracting new subscribers in Mexico.

 

IMPACT OF MAJOR DEVELOPMENTS. In our opinion, AMX will be opportunistic in making new acquisitions to spur future growth. In April 2006, AMX reached an agreement with Verizon to acquire its ownership interests in Verizon Dominica (100%), Telecom de Puerto Rico (52%) and CANTV (28.51%) in Venezuela through a joint venture with Telmex. The acquisitions of Verizon Dominica and Telecom Puerto Rico closedin the fourth quarter of 2006. The planned purchase of CANTV was canceled because Venezuela's government nationalized the company. The two deals that did close in 2006 were valued at $2.06 billion and $939

million, respectively. In January 2010, AMX announced plans for a tender offer for shares of Carso Global Telecom. This deal would provide the company with 59.4% of Telefonos de Mexico (TMX 14, Hold) and 60.7% of Telmex Internacional. AMX would then attempt to acquire the remaining outstanding shares ofTelmex Internacional at an exchange rate of 0.373 of an AMX share or 11.66 pesos per Telmex share.

 

FINANCIAL TRENDS.We believe AMX has sufficient operating cash flow and access to capital to meet its working capital, capital expenditure and debt requirements. Consolidated debt was US$14.5 billion (50% of total capitalization) at March 31, 2010.We expect capital spending of $3.25 billion in 2010.