MAPPING THE REAL TRAFFIC TO THE COSITU SERVICES DEFINITIONS

Volume in internation internation national in national -> international

urban national out
minutes al out al iN single international -> National
GSMNETToGSMNET 90,000,000 90,000,000
GSMNETToHondurasViaTelcor 512,850 512,850
GSMNETToint 313,482 313,482
GSMNETTointViaTelcor 346,573 346,573
GSMNETToRagatelViaTelcor 442,853 442,853
GSMNETToTelcor 25,681,700 25,681,700
HondurasToGSMNETViaTelcor 293,755 293,755
intToGSMNET 935,081 935,081
IntToGSMNETViaTelcor 15,442 15,442
IntToRagateViaTelcor 800,246
IntToTelcorViaGSMNET 57,147 57,147
RagatelToGSMNETViaTelcor 318,782 318,782
TelcorToGSMNET 49,372,010 49,372,010
TelcorToIntViaGSMNET 1,412,547 1,412,547

90,000,000 313,482 935,081 26,983,976 49,999,989 1,412,547 57,147

Traffics
 MAPPING SETTLEMENTS

international national national national -> international

Settlements and international
urban settlement settlement settlement international ->National
Interconnection settlement iN
out out in single settlement settlement
GSMNETToGSMNET 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
GSMNETToHondurasViaTelcor 4.83 0.00 0.00 0.00 4.83 0.00 0.00 0.00 EXO
GSMNETToint 3.56 0.00 3.56 0.00 0.00 0.00 0.00 0.00 EXO
GSMNETTointViaTelcor 6.28 0.00 0.00 0.00 6.28 0.00 0.00 0.00 EXO
GSMNETToRagatelViaTelcor 1.63 0.00 0.00 0.00 1.63 0.00 0.00 0.00 EXO
GSMNETToTelcor 1.07 0.00 0.00 0.00 1.07 0.00 0.00 0.00 EXO
HondurasToGSMNETViaTelcor 1.06 0.00 0.00 0.00 0.00 1.06 0.00 0.00
intToGSMNET 3.05 0.00 0.00 3.05 0.00 0.00 0.00 0.00
IntToGSMNETViaTelcor 1.06 0.00 0.00 0.00 0.00 1.06 0.00 0.00
IntToRagateViaTelcor 4.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
IntToTelcorViaGSMNET 5.61 0.00 0.00 0.00 0.00 0.00 0.00 5.61 EXO included
RagatelToGSMNETViaTelcor 1.06 0.00 0.00 0.00 0.00 1.06 0.00 0.00
TelcorToGSMNET 1.06 0.00 0.00 0.00 0.00 1.06 0.00 0.00
TelcorToIntViaGSMNET 8.17 0.00 0.00 0.00 0.00 0.00 8.17 0.00 EXO included

Setlements for COSITU Services 0.00 3.56 3.05 1.22 1.06 8.17 5.61

4.61 4.54 Endogenous

VAT 12%
0.0521554443

Repartition of traffic Prepaid - postpaid 30% 30% 70% 70%

Retail Prices PR E PAI D E D PO ST PAI D Traffic Average price Average price Average price Exogenous Endogenous
Repartition of customers 80% 80% 20% 20% without VAT without VAT without VAT
PEAK DISCOUNT PEAK DISCOUNT PEAK DISCOUNT
Services 75% 25% 75% 25%
Installation 265 265 265 265 265
Monthly Subscription Fee nil nil 50 50 10
with VAT without VAT
GSMNETToGSMNET 0.67 0.54 0.49 0.33 90,000,000 0.52 0.38 0.49 0 0.49
GSMNETToTelecor 1.90 1.60 1.40 1.20 25,681,700 1.49 1.27 1.43 1.07 0.36
GSMNETToRagtel 2.40 2.10 2.00 1.80 442,853 2.04 1.82 1.99 1.63 0.36
GSMNETToCostaRica&Honduras 5.80 5.77 5.50 4.30 512,850 5.40 4.56 5.19 4.83 0.36
GSMNETToOtherCountries 8.00 6.40 7.00 5.60 660,055 7.04 5.63 6.69 4.99 1.70

usd->nio sdr->usd
GsmNet Accounting Rates (sdr) 2.6828 5.14 2.94 15.70 1999 12.1 1.2973
%of traffic 27.14 19.809802 14.452 20.84 2003 15.04 1.3855
terminate in fixed network 0.4 50%
terminate in mobile network 0.3 50% average exchang 1SDR= 20.323861 NIO 1US$= 14.746 nio

GsmNet settlement out 0.175 150000 80%

GsmNet settlement in 0.15 120000

Actual tariffs and rates

 Purchase and
External Taxes and Financial Exogenous
variation of Transportations Staff cost Other costs Depreciation Provision
services levies charges costs
inventories
Selling & distribution 21,304,900 21,304,900
Administrative expenses 25,104,500 10,856,000 14,248,500
Depreciation 15,605,500 15,605,500
Financial charges 1,764,100 1,764,100
Operating rentals 10,856,000 10,856,000
Interconnect costs 10,177,500 10,177,500 10,177,500
Bad debts provisions 6,649,300 6,649,300
International payments 7,192,100 7,192,100 7,192,100

21,304,900 10,856,000 28,225,600 0 14,248,500 0 1,764,100 15,605,500 6,649,300 17,369,600

TOTAL CHARGES 98,653,900
TOTAL ENDOGENOUS CHARGES 81,284,300

Assets Equity and liabalities

Non curent assets Capital and reserves
fixed 110,731,200 share cap. 58,508,300
Staff Cost 14,248,500 others 12,755,800 reserve 47,870,500
Interest income 135,700
Net foreign exchange (losses/gain) -814,200 Current Current liabalities
Interest payable -542,800 inventories 5,699,400 trade payab 58,622,400
Other financing costs. -407,100 trade receivab 129,050,700 borrowings 95,000,000 Details of borrowings
cash&bank 1,764,100 5 years 19,000,000
10 years 79,000,000
Non current assets details
Network Land & Motor Total tangible Intangible
Infrastructure Building vehicles &
Equipments
Cost valuation (NIOs)
Balance sheet
7/1/2002 112,766,700 10,991,700 12,213,000 135,971,400 25,511,600 Million NIO
Additions 27,275,700 542,800 1,221,300 29,039,800 0 Net turnover 140,585,200
6/30/2003 140,042,400 11,534,500 13,434,300 165,011,200 25,511,600 Cost & Sales -96,889,800
Depreciation Gross profit 43,695,400
7/1/2002 21,712,000 6,785,000 10,177,500 38,674,500 12755800 Other income 2,578,300
Charge for year 12,891,500 949,900 1,764,100 15,605,500 2,551,160 Operating print 46,273,700
6/30/2003 34,603,500 7,734,900 11,941,600 54,280,000 12,755,800 Net finance costs -1,628,400
Profit before taxa 44,645,300
6/30/2003 105,438,900 3,799,600 1,492,700 110,731,200 12,755,800 Taxation charge -9,091,900
Net profit 35,553,400

The network functions include: Depreciation time

Transmission
-National 0% 0 10
These figures were calculated by a -International 7.03% 7,784,403 10
"Pricing team" regrouping
accountants and engineers. They Switching
analysed the depreciation file and -National 26.60% 29,454,499 15
allocated each piece of equipment to -International 6.53% 7,230,747 12
the relevant network function.
Access Network 53.19% 58,897,925 15
Others 6.65% 7,363,625

Costs, assets and liabilities

 Indirect and common costs

computer system 15,319,173 relations with national operators 40,710

depreciation 8 years relations with international operators 94,990
computer centre staff cost 2% of the total staff costs payments to Intelsat for circuits rental 407,100
annual cost of the computer centre 2,199,867 international transit fees paid 162,840
international accounting costs 135,700
products design costs 407,100
percentage of computer time dedicated to billing 30% of the total retail outlets 1,764,100
other billing expenses 968,440 cost of advertisement 135,700
billing costs 1,628,400
cost of customer care 832,959
relations with operators 135700 R&D costs 135,700
national 30% other support costs 12,484,400
international 70%

customer care system costs cost of capital

percentage of computer time dedicated to customer care 15%
other customer care costs 218009 Net financial debt 93,235,900
customer care staff cost % total staff cost 2% Equity 106,378,800
corporation tax 20.36%
Average duration of loans 9.03
expected return on equity in us$ 15.00% us$
Average interest rate 11.25% NiO

Indirect costs & cost of capita

Test 1
NIO GSMNET Based
Endogenous Exogenous Retail
Urban 0.50 0.00 0.50 Urban 0.50
internat out 1.77 4.99 6.75 International Outgoing 3.28
to honduras 0.40 4.83 5.23 International Incoming 4.64
to costa rica 0.40 4.83 5.23 National Incoming Single 0.53
to TelCor Managua 0.40 1.07 1.47 National Outgoing 0.40
to TelCor Masaya 0.40 1.07 1.47 International to National 4.38
to ragtel 0.40 1.63 2.03 National to International 4.38

internat in 4.64 4.64

nat IN Single 0.53 0.53
nat to int 4.38 4.38
nat out 0.40 0.40
int to nat 4.38 4.38

Test 2
a Services offered by GSMNET to Telcor TELCOR oriented Based To H&C To Internat to ragtel
nat IN Single 0.5252 0 0.53
nat to int 4.3791 3.56 7.94 Urban 0.54 0.99
Interurban 2.65 1.75
b International Outgoing 4.63 3.06 1.05 2.5
International Incoming 4.70 3.18
c Retail prices to Telcor customers: Subregional Outgoing 3.61 2.39
A 1 minute call to a GSMNET subscriber 4.13 NIO Subregional Incoming 3.64 2.46
A 1 minute call to international 11.54 NIO International to International 6.04 4.08
International to Subregional 4.97 3.36
d The actual situation is already favourable to GSMNET with an average monthly rental fee of 10 NIO. Subregional to Subregional 3.91 2.64
But figures displayed are weighted averages and do not reflect the rates that should apply to the two National Incoming Single 1.23 0.83
customer segments of GSMNET: prepaids and post paid. National Incoming Double 2.44 1.65
80% of GSMNET customers do not pay any monthly rental fee, which results in endogenous tarifs higher than listed above: National Outgoing 1.70 1.13 0.6
NIO National to National 1.03 0.69
Endogenous Exogenous Retail International to National 3.78 2.56
Urban 0.65 0.00 0.65 National to International 3.78 2.56
internat in 4.64 0.00 4.64
internat out 2.22 4.99 7.20 gsmNet_all_prepaid
to honduras 0.52 4.83 5.35 Urban 0.65
to costa rica 0.52 4.83 5.35 International Outgoing 4.23
to TelCor Managua 0.52 1.07 1.59 International Incoming 4.64
to TelCor Masaya 0.52 1.07 1.59 National Incoming Single 0.53
to ragtel 0.52 1.63 2.15 National Outgoing 0.52
National to National 0.00
nat IN Single 0.53 0.53 International to National 4.38
nat to int 4.38 4.38 National to International 4.38
nat out 0.52 0.52
int to nat 4.38 4.38
These tariffs are now very close to those of Telcor but the monthly rental fee will make the difference in favor of GsmNet where possible

e Competion on retail international outgoing unfair because of the regulatory arbitrage: on that service, GSMNET is not contributing
to the costs of USO decided by the government.
Effect of USO on that service: 1.57 NIO

f How to make it fair?

1 the 1.57 should be added to GSMNET retail price on international outgoing
but, as USO is managed as a tax, the resulting income should be entirely
reversed to the body managing the USO fund ("Pay or Play": GsmNet pays)
2 many regulatory body give priority to tariffs rebalancing in order to avoid such situations
but this may take a long time indeveloping countries where the level of access deficit
is high
3

TEST 3 (try it yourself)

TEST 4
inbound settlement rate in TEST 2 conditions: Try
inbound settlement rate in TEST 3 conditions: Try

TESTS