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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
[_] 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, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-14538
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Compania Anonima Nacional Telefonos de Venezuela (CANTV)
(Exact name of Registrant as specified in its charter)
National Telephone Company of Venezuela (CANTV)
(Translation of Registrant's name into English)
Bolivarian Republic of Venezuela
(Jurisdiction of incorporation or organization)
Edificio CANTV, Primer Piso, Avenida
Libertador, Caracas, Venezuela
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which registered
American Depositary Shares, The New York Stock Exchange
each representing 7 Class D
shares of common stock, par
value Bs. 36.90182224915 each
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
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(Title of class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
None
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(Title of Class)
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.
Class A Shares . . . . . . . 400,000,000
Class B Shares . . . . . . . 51,900,000
Class C Shares . . . . . . . 130,184,578
Class D Shares . . . . . . . 416,685,522
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 requirement for the past 90 days. [X] Yes [_] No
Indicate by check mark which financial statement item the registrant has
elected to follow. [_] Item 17 [X]Item 18
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [_] Yes [_] No
Not applicable
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
INTRODUCTION......................................................................................... 2
FORWARD-LOOKING INFORMATION.......................................................................... 3
EXCHANGE RATES....................................................................................... 4
PART I............................................................................................... 5
Item 1. Description of Business.................................................................... 5
Item 2. Description of Property.................................................................... 42
Item 3. Legal Proceedings.......................................................................... 42
Item 4. Control of Registrant...................................................................... 43
Item 5. Nature of Trading Market................................................................... 45
Item 6. Exchange Controls and Other Limitations Affecting Security Holders......................... 45
Item 7. Taxation................................................................................... 46
Item 8. Selected Financial Data.................................................................... 51
Item 9. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 53
Item 9A. Quantitative and Qualitative Disclosures About Market Risk................................. 80
Item 10. Directors and Officers of Registrant....................................................... 83
Item 11. Compensation of Directors and Officers..................................................... 88
Item 12. Options to Purchase Securities from Registrant or Subsidiaries............................. 88
Item 13. Interest of Management in Certain Transactions............................................. 88
PART II.............................................................................................. 89
Item 14. Description of Securities to be Registered................................................. 89
PART III............................................................................................. 90
Item 15. Defaults upon Senior Securities............................................................ 90
Item 16. Changes in Securities and Changes in Security for Registered Securities and Use of Proceeds 90
PART IV.............................................................................................. 91
Item 17. Financial Statements....................................................................... 92
Item 18. Financial Statements....................................................................... 92
Item 19. Financial Statements and Exhibits.......................................................... 92
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INTRODUCTION
As used herein, unless the content otherwise requires, the "Company" means
Compania Anonima Nacional Telefonos de Venezuela (CANTV) and its consolidated
subsidiaries and "CANTV" means Compania Anonima Nacional Telefonos de Venezuela
(CANTV). Unless otherwise specified, all references in this Form 20-F to "U.S.
dollars," "dollars," "$" or "US$" are to United States dollars and references to
"bolivars" or "Bs." are to Venezuelan bolivares, the legal tender currency of
the Bolivarian Republic of Venezuela ("Venezuela"). References to access "lines
in service" are to lines in billing.
The Company prepares its financial statements in constant bolivars and in
conformity with generally accepted accounting principles in Venezuela
("Venezuelan GAAP"). Venezuelan GAAP differs in certain important respects from
generally accepted accounting principles in the United States ("U.S. GAAP"). See
Note 26 to the audited consolidated financial statements of the Company as of
December 31, 1998 and 1999 and for the years ended December 31, 1997, 1998, and
1999 (the "Audited Financial Statements") contained elsewhere in this Form 20-F
for a description of the principal differences between Venezuelan GAAP and U.S.
GAAP as they relate to the Company and a reconciliation to U.S. GAAP of net
income reported under Venezuelan GAAP for the years ended December 31, 1997,
1998, and 1999 and of total stockholders' equity as of December 31, 1998 and
1999.
Pursuant to Venezuelan GAAP, financial data regarding the Company have been
adjusted to reflect the effects of inflation using the Indice de Precios al
Consumidor del Area Metropolitana de Caracas (Index of Consumer Prices of the
Caracas Metropolitan Area) (the "Consumer Price Index") published by the Banco
Central de Venezuela (the "Central Bank of Venezuela"). See Note 4(b) to the
Audited Financial Statements. Unless otherwise specified, financial data
regarding CANTV is presented herein in constant bolivars as of December 31,
1999. Although the restatement of nominal bolivar amounts into constant bolivar
amounts lessens the distorting effect that an inflationary environment has on
comparisons of financial statements over time, such restatement does not wholly
eliminate those distortions, and evaluation of period to period trends may be
difficult. References herein to amounts in "nominal" bolivars or "historical"
bolivars are to bolivars that have not been adjusted for inflation.
For the convenience of the reader, this Form 20-F contains translations of
certain constant bolivar amounts into dollars at the average daily exchange rate
(the "Daily Exchange Rate") announced by the Central Bank of Venezuela on
December 31, 1999, which was Bs. 649.25 = US$1.00. The noon buying rate of
bolivars reported by the Federal Reserve Bank of New York on March 31, 2000 was
Bs. 670.00 = US$1.00. No representation is made that the bolivar or U.S. dollar
amounts shown in this Form 20-F could have been or could be converted into U.S.
dollars or bolivars, as the case may be, at such rate or at any other rate. The
translation of amounts expressed in nominal or constant bolivars as of a
specified date by the then prevailing exchange rate may result in presentation
of dollar amounts that differ from the dollar amounts that would have been
obtained by translating nominal or constant bolivars as of another specified
date.
Operational data regarding the Company contained in this Form 20-F is
presented as of December 31, 1999 unless otherwise stated, as this is the most
recent date for which the Company has prepared such data.
Neither the Government of Venezuela (the "Government") nor private
independent sources publish definitive data regarding telecommunications markets
in Venezuela. However, certain Government entities have published statistics on
wireless service competitors which the Company has used in computing the market
share data relating to such competitors. Additional data, including population
data, were obtained from third-party sources. To the extent estimates are
contained in this Form 20-F, the management of the Company believes that such
estimates, which are based on internal data, are reliable but they have not been
confirmed by independent sources.
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FORWARD-LOOKING INFORMATION
Certain statements contained in this Form 20-F contain "forward-looking"
information (as defined in the U.S. Private Securities Litigation Reform Act of
1995) that involves risks and uncertainties. Actual future results and trends
may differ materially depending on a variety of factors discussed elsewhere in
this Form 20-F, including, among others, the Company's success in implementing
its investment program, the nature and extent of future competition, changes in
the Venezuelan economy that could affect demand for telephone service and the
ability of the Company to make collections, inflation, regulatory conditions,
exchange controls and conditions in currency markets, labor relations and
Venezuelan political and legal developments.
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EXCHANGE RATES
The following table sets forth certain information concerning bolivar/U.S.
dollar exchange rates for the five years ended December 31, 1999, based on the
applicable Daily Exchange Rates announced by the Central Bank of Venezuela:
<TABLE>
<CAPTION>
End of
Year Ended December 31, High (1) Low (1) Average (2) Year (3)
- ----------------------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C>
1995 290.00 170.00 180.00 290.00
1996 500.00 290.00 426.50 476.75
1997 504.75 475.25 490.67 504.75
1998 582.50 511.25 550.69 565.00
1999 649.25 565.50 609.60 649.25
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</TABLE>
(1) The highest and lowest of the Daily Exchange Rates on the last day of each
month in the relevant year.
(2) The average of the Daily Exchange Rate on the last date of each month in the
relevant year.
(3) The Daily Exchange Rate on the last day of each relevant year.
On March 31, 2000, the Daily Exchange Rate was Bs. 670.00 = US$1.00
(equivalent to Bs. 1.00 = US$0.0015).
There are currently no restrictions under Venezuelan law on export or
import of capital including foreign exchange controls, restrictions on payment
or remittance of dividends.
From 1989 until June 1994, the bolivar was permitted to trade freely with
respect to the U.S. dollar. On June 27, 1994 the Government imposed controls on
foreign exchange transactions and fixed the official exchange rate. The rate
was originally fixed at Bs. 170.00 per U.S. dollar and was adjusted to Bs.
290.00 per U.S. dollar in December 1995. On April 22, 1996 the Government
lifted all exchange controls and allowed the price of the bolivar to float
freely. Since July 1996, the Central Bank of Venezuela has intervened to
maintain the exchange rate between 7.5% above and 7.5% below a reference rate.
The reference rate was originally set at Bs. 470.00 per U.S. dollar and is
adjusted from time to time to account for projected inflation. On January 14,
1998, the reference rate was reset to Bs. 508.50 per U.S. dollar and the Central
Bank of Venezuela announced that it would adjust the reference rate by 1.16% to
1.28% monthly. Under this policy, the reference rate was Bs. 686.54 per U.S.
dollar at December 31, 1999 and Bs. 714.00 per U.S. dollar at March 31, 2000.
For a discussion of the effect, and potential effect, of fluctuations in
bolivar/U.S. dollar exchange rates on the Company, its results of operations and
financial condition and on the market price, liquidity of, and return on
investment in the American Depositary Shares (the "ADSs") and the Class D
Shares, see "Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Item 6. Exchange Controls and Other
Limitations Affecting Security Holders."
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PART I
Item 1. Description of Business
Introduction
The Company is a full service telecommunications provider offering
switched, fixed, local and domestic and international long distance telephone
service throughout Venezuela on an exclusive basis until November 27, 2000,
except in limited circumstances. The Company also offers wireless services,
public telephones, telecommunications centers, private networks, rural telephone
services, packet-switched data transmission, Internet access, directory
information services and other value-added services. The Company owns all of
the Venezuelan public exchanges and the nationwide network of public telephone
lines and public national and international long distance telephone transmission
facilities.
The Company had gross revenues and net income of Bs. 1,715.5 billion
(US$2.6 billion) and Bs. 89.2 billion (US$137 million), respectively, for the
year ended December 31, 1999. At December 31, 1999, the Company had
approximately 2.6 million access lines in service and approximately 1.2 million
wireless subscribers.
In December 1991, VenWorld Telecom, C.A. ("VenWorld"), a company organized
under the laws of Venezuela by a private consortium of companies and currently
57.8%-owned by a subsidiary of GTE Corporation ("GTE"), acquired operating
control and 40% of the equity share capital of CANTV from the Government through
Fondo de Inversiones de Venezuela (the "Venezuelan Investment Fund") for a
purchase price of approximately US$1.885 billion. Since VenWorld obtained
operating control of the Company, the Company has substantially increased the
number of access lines in service, modernized its network, increased employee
productivity, consolidated operations, strengthened management controls and
improved network planning and design. In late 1996, the Government sold
348,100,000 Class D Shares representing 34.8% of the equity share capital of
CANTV in an international equity offering (the "Initial Public Offering").
The Company is subject to comprehensive regulation and supervision by the
Ministry of Infrastructure (previously known as the Ministry of Transportation
and Communications) (the "Ministry") and the Comision Nacional de
Telecomunicaciones ("CONATEL"). See "-- Regulatory Framework -- Regulation and
the Concession -- General."
Prior to privatization, the quality of services provided by the Company and
its operating results were negatively affected by severe congestion in the
domestic telephone network, which was largely attributable to outdated
equipment, poor network design, poor equipment maintenance and inadequate
management systems and controls. Pursuant to an expansion and modernization
program, the Company has increased its access lines in service and wireless
subscribers from approximately 2.4 million and 169,758 at December 31, 1995 to
approximately 2.6 million and 1.2 million at December 31, 1999, respectively.
The percentage of digital access lines installed in the Company's network has
increased from 55.0% at December 31, 1995 to 68.5% at December 31, 1999. All of
the Company's international and domestic long distance switches are digital. In
addition, the Company has put into service most of the segments of a high
capacity broadband fiber optic network, which is expected to be completed in
2000, and has completed the installation of asynchronous transfer mode ("ATM")
Frame Relay platforms. Based on nominal bolivars converted to U.S. dollars at
average exchange rates during the relevant period, the Company made capital
expenditures of approximately US$333 million, US$312 million, US$593 million,
US$706 million and US$546 million in 1995, 1996, 1997, 1998 and 1999,
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respectively. The Company presently plans capital expenditures of approximately
US$550 million in 2000. Even though capital expenditures are expected to drop
to lower levels in the 2001 to 2004 planning period, expenditures will continue
to be directed towards network expansion, digitalization and modernization. The
Company continues increasing its emphasis on wireless, data transmission and e-
business areas.
Since privatization, the Company has implemented a number of programs
designed to lead to greater productivity and improved customer service. As a
result of productivity improvements, the Company has also been able to reduce
the number of its employees and at the same time grow its business. Access
lines in service per CANTV employee have increased from 124 at December 31, 1995
to 218 at December 31, 1999. As part of its customer service enhancements, the
Company has automated its customer service system, introduced detailed billing
and a computerized payment system, increased the number of bilingual
international and domestic operators, consolidated operator centers, modernized
and increased the number of customer service centers, improved the quality of
its trouble reporting system, increased the number of maintenance facilities and
implemented an automated disconnect and reconnect system. In addition, the
Company has redesigned its employee training programs, emphasizing quality and
efficient service in order to promote a customer-oriented service culture. The
Company continuously seeks to enhance customer service through the introduction
of innovative, value added services.
The consortium of companies that, directly or through subsidiaries,
originally formed VenWorld includes, in addition to GTE: T.I. Telefonica
Internacional de Espana, S.A. ("Telefonica Internacional"); C.A. La Electricidad
de Caracas, S.A.C.A. ("Electricidad de Caracas"), Venezuela's largest private
sector power generating and distribution company; Consorcio Inversionista
Mercantil (CIMA) C.A., S.A.C.A., as trustee for 239 trusts established as a
result of the liquidation of Inversiones Cimatel, C.A.; and AT&T International,
Inc. ("AT&T") (together with their successors, collectively referred to as the
"Participants in the Consortium"). The Participants in the Consortium
contribute broad operating experience and expertise to the operation of the
Company and provide the Company with access to technology, research and product
development and procurement. In addition, certain of the Participants in the
Consortium have entered into service agreements with the Company to provide
technical, consulting and other assistance. See "Item 13. Interest of
Management in Certain Transactions." VenWorld, as the holder of the Company's
Class A Shares, has the right until January 1, 2001 to elect the President of
the Company and four principal directors, which collectively comprise a majority
of the Board of Directors of CANTV. See "Item 10. Directors and Officers of
Registrant."
Company Strategy
The Company's mission is to provide communications solutions that exceed
customer expectations and to meet evolving global technological standards in
telecommunications. To achieve this end, the Company focuses its strategy
towards obtaining profitable growth in its telecommunications business through
increased market focus and by continuing to selectively expand its network,
broaden service offerings, increase network utilization, increase market
penetration, reduce costs and improve overall productivity. Key elements of the
Company's strategy include:
Improve Profitability Through Effective Customer Focus and an Integrated
Service Offering. The Company has made substantial progress on its expansion
and modernization program and continues to focus on key customer groups. The
Company uses improvements in customer service and technological infrastructure
to market its services more effectively and to prepare the Company for
competition at the end of November 2000. The Company is aggressively moving
towards an integrated marketing focus by capitalizing on the operational
synergies between CANTV and its subsidiaries to
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identify and meet customer needs. The Company is integrating its information
technology systems to provide the information and tools necessary to better
target customers and improve overall customer service and satisfaction. The
Company has created units to focus on specifically targeted customer groups. The
units and customer groups are described below:
Large Corporate Customers. This unit is responsible for offering
specialized integrated telecommunications solutions to large companies and is
focused on capturing the growing demand for data services. The integrated
telecommunications solutions range from voice and data transport to network
administration. The Company believes it can use advanced technologies such as
virtual private networks ("VPN") to provide higher quality service while
increasing efficiency. The Company is upgrading its technological infrastructure
to support the provision of these enhanced services.
Commercial Customers. This unit serves the needs of mid- and small-size
private companies. The unit develops and markets new services to these
customers, focusing on enhanced services, including data. In order to
accomplish this goal, the Company continues to make investments designed to
improve the quality of its network, including: (i) the planned completion during
the year 2000 of a high capacity broadband fiber optic network linking
Venezuela's major urban centers; (ii) the goal of reaching 80% digitalization of
the Company's lines installed during 2000; and (iii) the development of wireless
technology to expand basic service where cost effective. The Company plans to
complement these investments through increased promotion of its basic and value-
added services and the introduction of new technologies such as advanced
intelligent networks.
Government Entities. This unit serves the Central Government, as well as
the state and municipal governments, and tailors its service offerings to the
Government's diverse telecommunications needs. These include voice, data
transmission, video and value-added services. By offering innovative services,
the Company encourages the modernization of the telecommunications
infrastructure used by the Government. The Company is also actively involved in
several social projects such as the virtual library, citizen watch and
telemedicine.
Consumer Market. This unit serves residential customers by seeking to
increase services while decreasing the costs of providing these services. Its
objective is to offer products and services under new technical platforms that
promote usage and customer loyalty through improvements in customer care. As
part of this objective, during the year 2000 CANTV expects to introduce a fixed
wireline prepaid service to make CANTV's services more accessible to lower
income consumers.
Public Telecommunications Services. This unit's objective is to optimize
existing public telecommunication facilities through the strategic installation
and relocation of public telephones. During the year 2000, the Company expects
to develop approximately 100 additional Community Telecommunications Centers in
low income areas of Venezuela. Community Telecommunications Centers have been
well received by communities throughout the country and are managed by third
parties. Community Telecommunications Centers reduce the Company's cost of
providing service and decrease maintenance costs.
Interconnection. This unit serves interconnection customers and
proactively markets CANTV's interconnection services. Its strategy is to (i)
become the preferred "carrier's carrier" using the Company's current and future
infrastructure; (ii) offer timely solutions to customer requirements at
competitive prices; (iii) develop long term strategic alliances; and (iv)
maximize the efficiency of the Company's interconnection facilities while
minimizing costs. To these ends, the Company has entered into interconnection
agreements with several competing telecommunications service providers. The
Company is developing specific packages that encourage other telecommunications
service providers to
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use the Company's network. In addition, the Company continues to introduce new
services to increase domestic and international traffic to strengthen its
position in both the national and international data transport markets.
Continue Expanding Wireless Services. The Company, through its wholly-
owned subsidiary Telecomunicaciones Movilnet, C.A. ("Movilnet"), plans to
continue expanding its wireless communications business. The Company is also
seeking to increase the revenues and margins of its wireless business by (i)
supporting the profitable growth of its prepaid services customer base while
sustaining its position in the postpaid market; (ii) continuing the introduction
of attractive products into the Venezuelan market; (iii) continuing the
development of the wireless data market; (iv) expanding its geographic coverage
and concentrating in key markets; (v) continuing improvement of Movilnet's
market position through increased product segmentation; (vi) providing packages
of services that maximize the utilization of Movilnet's technological, marketing
and personnel infrastructure; and (vii) centralizing marketing efforts and
client service functions to better focus on customer care, build loyalty and
improve customer satisfaction. In order to support this strategy and to expand
capacity during 1999, the Company continued converting Movilnet's network to a
time division multiple access ("TDMA") digital platform based on major markets'
capacity requirements. The Company has also coordinated its marketing efforts
with Movilnet to better serve the Company's large corporate customers and make
efficient use of marketing resources.
Grow Data Transmission and Value-Added Services. The Company provides
various telecommunications related services, including data transmission and an
array of value-added services such as voice mail, call waiting, call forwarding,
call blocking, speed dialing, toll free and pay 800 services, Venezuela Direct
service (which allows customers to reach a Venezuelan operator from outside
Venezuela), other country direct long distance calling services, video
conferencing, "web page" hosting, enhanced fax service, audio text, 900 service
in the greater Caracas metropolitan area, and other intelligent network and data
capabilities, which increase network utilization. The Company plans to offer
additional value-added services in the future and seeks to capture the largest
share of this market by (i) leveraging its existing infrastructure and its
relationships with the Participants in the Consortium and (ii) seeking to be the
first to offer new services in Venezuela.
Consolidate Our Position as the Preferred Internet Service Provider in
Venezuela. The Company seeks to remain the recognized market leader in the
provision of Internet services. The Company's strategy to retain the largest
share of this high-growth market includes the development of an advanced
services platform and integrated service network. The Company actively targets
the development of Internet services in the corporate market by emphasizing
long-term partnerships and delivering reliable and secure services aimed at
ensuring the promises of the e-economy. The Company also continues to deliver
and market its Internet services to mid- and small-sized companies and to the
broader consumer market.
Achieve "World Class" Efficiency Standards. The Company has made
substantial progress in reducing costs and increasing productivity, reducing
CANTV's labor force by approximately 38.6% and increasing the number of access
lines in service per CANTV employee by 75.8%, from 124 to 218 between December
31, 1995 and December 31, 1999. Other efficiencies achieved include improvement
of internal controls, consolidation of operator centers and centralization of
the Company's ordering and procurement processes. The Company is seeking to
enhance the quality of its workforce through training programs, improved hiring
practices and analysis of employee capabilities in connection with workforce
reductions. Additionally, the Company has implemented a voluntary retirement
program to encourage workforce reductions. The Company believes that these
measures, in combination with the ongoing improvement of its network
infrastructure, should continue to make possible substantial additional
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improvements in efficiency and productivity, which should result in improvements
to its operating margins.
Lead the Implementation of a Fair and Balanced Regulatory Framework. The
Company seeks to promote the establishment of a regulatory framework that will
ensure that the Company is adequately compensated for providing access to its
network both during and after the period of exclusivity under the Concession (as
defined below) to provide switched, fixed, local and domestic and international
long distance service throughout Venezuela. The Company has reached
interconnection agreements with a number of competitive service providers and
seeks to become Venezuela's preferred carrier by leveraging on its extensive
country-wide fiber optic "backbone."
Globalization. The Company continues to take advantage of its relationship
with GTE in order to benefit from its strengths in processes, systems and
resources to strengthen the Company's competitive position for the anticipated
competition in Venezuela at the end of November 2000. See "-- Competition."
The Company expects that it may further benefit from GTE's planned merger with
Bell Atlantic Corp.
Domestic Telephone Services
Domestic telephone services include local and domestic long distance and
public telephone services. These services accounted for 56.4% of the Company's
total operating revenues during 1999.
Local and Domestic Long Distance Services
Pursuant to the Concession (as defined below), CANTV is the exclusive
provider of switched, fixed, local and domestic long distance telephone services
throughout Venezuela until November 27, 2000, except in limited circumstances.
As of December 31, 1999, CANTV's domestic telephone network included
approximately 3.5 million installed lines and 2.6 million access lines in
service extending throughout the whole of Venezuela.
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The following table provides information relating to the development and
improvement of the Company's domestic telephone system over the most recent five
years:
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Lines installed 2,956,788 3,208,977 3,403,521 3,550,706 3,546,538
Percentage of lines
installed
in digital exchanges 55.0% 59.4% 62.3% 66.1% 68.5%
Access lines in service (1):
Non-residential 709,995 705,694 736,759 681,761 634,969
Residential 1,619,789 1,732,756 1,895,838 1,859,073 1,870,859
Public telephones (2) 57,266 56,409 70,012 75,097 80,033
--------------- --------------- --------------- --------------- ---------------
Total 2,387,050 2,494,859 2,702,609 2,615,931 2,585,861
=============== =============== =============== =============== ===============
Access lines in service per
100 inhabitants 11.0 11.1 11.8 11.2 10.8
Customer satisfaction (3)
Public telephones 85.8% 80.4% 70.1% 69.6% 72.3%
Residential 84.4% 87.7% 89.8% 91.5% 88.2%
Non-residential 80.7% 90.2% 88.2% 88.5% 83.2%
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</TABLE>
(1) References to "access lines in service" are to lines in billing.
(2) In 1996, CANTV performed an inventory of public telephones and determined
that the number of public telephone lines in service was 8,591 less than
the number indicated in its records. No adjustment has been made to the
number of public telephone lines in service data at December 31, 1995.
(3) Percentage of customers satisfied with CANTV's service as measured by
customer opinion surveys conducted by third parties. The lower customer
satisfaction results obtained from the 1999 customer survey compared to the
1998 survey are primarily attributable to differences in survey design and
methodology. The survey design and methodology is currently under review
with CONATEL as part of the Government's review of service quality mandate.
See "-- Regulatory Framework -- Regulation and the Concession -- Network
Expansion, Modernization and Quality Improvement Requirements."
From December 31, 1995 to 1998, the number of lines in service increased at
a compound annual growth rate of 3.1% and penetration increased from 11.0 lines
to 11.2 lines per 100 inhabitants. In 1999, the number of access lines in
service decreased 1.1% and penetration decreased to 10.8, reflecting the
permanent disconnection of approximately 453,900 lines, excluding public
telephones. Permanent disconnections have resulted principally from management's
continued aggressive focus on collections. The Company is reassigning these
disconnected lines to new customers following upfront credit history checks.
See "-- Billing."
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Following privatization, the Company began a modernization program to
replace analog switches in high traffic areas with new digital switches and to
replace obsolete switches in low traffic areas with more modern analog switches
displaced by the digitalization program. This switch modernization program has
increased the percentage of digital access lines installed in the network from
55.0% at December 31, 1995 to 68.5% at December 31, 1999. Digital systems
improve the quality and efficiency of the network, accommodate higher traffic
levels, require less maintenance and enable the Company to offer a broad range
of voice and data applications simultaneously on the same network. As part of
an agreement reached by CONATEL and CANTV, CANTV has agreed that 80% of its
lines installed will be digitalized by December 31, 2000. See "-- Regulatory
Framework -- Regulation and the Concession."
In order to expand its ability to provide advanced services generally and
to meet the existing and future needs of certain of its large corporate
customers, the Company is further upgrading the network's technological
infrastructure. The Company implemented ATM Frame Relay platforms in the second
half of 1997. Additionally, in 1997 and 1998 the Company installed an advanced
"SS7" intelligent network platform. These technologies will enhance the
Company's ability to provide high speed data transmission services to its
customers, as well as enhanced services including caller ID, automatic calling
card validation, automatic redial and call forwarding. During 1999, the Company
began installing Digital Loop Carriers ("DLCs"). The DLCs are devices that
allow a better utilization of the copper network. The device allows line
concentration and voice transmission services in remote locations as well as
data transmission services in high concentration areas such as shopping
(commercial) areas. The Company plans to upgrade approximately 20,000 lines
during the year 2000.
In the fourth quarter of 1998, CANTV launched Extended Local Area Service
("EAS") in certain parts of Venezuela. EAS migrates certain domestic long
distance traffic to local area service, permitting CANTV to effectively achieve
additional rate rebalancing while providing the opportunity to shift revenues to
the local service category, which is less vulnerable to competition and
elasticity. EAS gives customers a better tariff package for specific calling
patterns. See "-- Rates" and "-- Regulatory Framework -- Regulation and the
Concession -- Rate Regime."
In order to provide high-speed services, the Company has adopted fiber
optics as the medium of transportation for the transmission of voice, data, and
video. During 1999, the Company completed the installation of an interurban
high capacity broadband fiber optic network to interconnect the northern part of
Venezuela. This area encompasses the vast majority of Venezuela's population.
A total of 3,264 kilometers of fiber optic transmission lines was installed.
The network, currently consisting of four rings, is being extended to cover
other geographical areas. A fifth ring, which is already 61% complete, will
cover the telecommunications needs of the southeastern territory. Two
additional rings are planned for the southwestern territory. When completed,
the fiber optic network will consist of strategically deployed rings connecting
all major cities and most large corporate customers. The Company believes that
the full fiber optic network will be put into service by the end of 2000 and
that it will connect approximately 80% of Venezuela's population. The Company
plans to use the fiber optic network as its "backbone" while maintaining its
digital microwave network for redundancy.
The Company continuously seeks to enhance customer service and product
offerings. The Company has undertaken a project to install Asymmetrical Digital
Subscriber Lines ("ADSLs"). Tests have been successfully completed. A total of
1,500 ADSL lines are available for commercialization in eight central offices in
Caracas. The first service to be provided with this platform is high-speed
Internet access, which is provided by CANTV Servicios. Additionally, the
Company incorporated 70 central offices and 100% of its digital central offices
into its "4Tel System" during 1999. The objective of this system is to improve
repair time by identifying the particular faulty network element, thereby
reducing
11
<PAGE>
dispatch and repair times. By the end of year 2000, the Company plans to
complete the "National Numbering Plan." This project will adapt the Company's
current national numbering system for both basic telephony and wireless to world
class standards.
The Company's revenues from local and domestic long distance telephone
services consist of installation and subscription charges for new lines, monthly
line rental charges and usage charges. At December 31, 1999, non-residential
customers represented 24.6% of access lines in service and accounted for 46.8%
of 1999 local and domestic long distance revenues. Revenues from usage
constitute 56.0% of the Company's local and domestic long distance revenues in
1999.
The Company's local and domestic long distance traffic for the years 1995
to 1999 is presented in the table below:
Domestic Service Usage
- --------------------------------------------------------------------------
Total Local and Domestic
Long Distance Minutes of Use Minutes of Use per
Year (millions) Average Access Line (1)
- ---- --------------------------- -----------------------
1995 14,313 6,149
1996 13,312 5,454
1997 13,565 5,220
1998 15,674 5,894
1999 15,804 6,076
- ------------------------------------
(1) Prior to June 1995, the Company did not distinguish between local and
domestic long distance minutes of use. As a result, minutes of use data for
1995 in the table above represent estimates based on converting the number
of impulses recorded in such period to minutes of use based on calling
patterns in 1995 and 1996.
Total minutes of use of the Company's domestic services constantly
increased during the period 1996 through 1999 mainly due to a net increase in
lines installed. Minutes of use per average line in service steadily decreased
from 1995 to 1997 due to the expansion of service to lower-traffic customers and
to weakness in the Venezuelan economy. Minutes of use per average line in
service increased in 1998 and 1999 due primarily to lower domestic long distance
rates in real terms.
Public Telephones
The Company owns and operates public telephones distributed nationwide. At
December 31, 1999, the Company had 80,033 public telephones, of which
approximately 89% could be operated with a prepaid debit card. As part of its
strategy to improve customer service and operating results, the Company has
relocated less productive public telephones to high-traffic areas. The Company
is planning to have approximately 85,000 public phones in service by the end of
year 2000 as required pursuant to its agreements with CONATEL.
Community Telecommunications Centers
Community Telecommunications Centers are located in remote or urban areas
to serve persons with limited economic resources. During 1996 the Company began
a program to open Community Telecommunications Centers throughout Venezuela.
Community Telecommunications Centers are operated by third parties and provide
telephone, fax and messaging services to persons who would otherwise have no
access to such services. Telephone lines installed at Community
Telecommunications
12
<PAGE>
Centers provide a substantially higher call volume than public telephones at
substantially lower maintenance costs. The Company believes that these centers
provide an important service and they have been well received by communities
throughout the country. At December 31, 1999, the Company had 1,226 such centers
in service and plans to have approximately 1,326 such centers in service by the
end of the year 2000.
Telecommunications Centers
Telecommunications Centers are offices where an array of telecommunications
services are offered, including local, domestic long distance and international
long distance, fax, Internet access and sale of prepaid cards. The Company
plans to offer other services such as voice mail access, sale of
telecommunication equipment and parcel service in the near future. These
centers are operated by third parties with support from the Company. As of
December 31, 1999, 28 Telecommunications Centers were in service.
Rural Service
On December 15, 1997, the Company signed a joint venture with Direct-to-
Phone International Incorporated, a subsidiary of STM Wireless Incorporated, to
develop rural telephone services via satellite. The Company began these
operations in early 1998. In September 1999, Direct-to-Phone International
Incorporated was acquired by SkyOnline Incorporated. At December 31, 1999, the
Company had 1,336 satellite-based lines serving rural areas with satellite
technology and plans to continue expanding its satellite-based network due to
the cost advantages of serving remote areas with satellite technology.
The Company also provides radio-based telecommunication services to remote
rural areas, which are linked to the main public switched network via base
station transreceivers and radio terminals. As of December 31, 1999, the
Company had 504 systems of this type with 420 channels per system providing
access to 494 rural areas. The Company has identified additional rural areas in
which it expects to provide basic, public telephone, and data transmission
services in the future using both radio- and satellite-based technology.
Interconnection Agreements
The Concession and the Telecommunications Regulations require CANTV to
provide interconnection to other telecommunications operators in order to
complete calls (the "Interconnection Regulations"). In addition to these
interconnections, CANTV also permits private telephone line interconnections
pursuant to specific contract arrangements. The Company has entered into
several interconnection agreements pursuant to the Interconnection Regulations.
The main objective of these regulations is to establish general conventions and
technical, administrative and economic norms to regulate the interconnection of
telecommunications networks. Under the Interconnection Regulations, companies
must work together to develop interconnection agreements. The Government may
only intervene in case where a formal agreement is not reached. See "--
Regulatory Framework." CANTV provides interconnection services through which
wireless and rural operators establish points of interconnection between their
networks and CANTV's networks. See "-- Competition" and "-- Regulatory
Framework -- Regulation and the Concession -- Competitive Framework." As part
of its overall strategy, the Company intends to pursue interconnection
agreements with competing telecommunications service providers, to develop
specific packages that encourage other providers to use the Company's network
and to enhance its domestic and international connectivity. The Company also
pursues long-term strategic alliances.
13
<PAGE>
International Long Distance Services
Pursuant to the Concession, CANTV is the exclusive provider of switched,
fixed international telephone services in Venezuela until November 27, 2000.
The Company's international services include voice, video and data communication
services that represented 9.4% of the Company's operating revenues in 1999. The
largest of these services is international voice service.
The Company provides international services through submarine cables and
satellite and microwave links. Satellite capacity is provided via Intelsat, the
global satellite consortium with 122 member countries, of which CANTV is a
signatory with a 1.4% equity ownership interest. Traffic is primarily handled
by two satellite antenna earth stations. The Company also operates four
additional satellite antenna earth stations, which are used for international
point-to-point data transmission, video conferencing, and Very Small Aperture
Terminals ("VSAT") service. The Company owns 16.2% of the Americas I and 4.4%
of the Columbus II fiber optic submarine cable systems. The Americas I cable
system connects South America to the United States. The Columbus II cable
system connects the United States, Mexico and the Caribbean to Western Europe.
As of 1999, the Company owns 4.3% of the Pan American system and 6.9% of the
Americas II system. The Pan American cable system connects Venezuela to Chile
through the western coast of South America. The Americas II cable system will
connect South America and the Caribbean to the United States. CANTV also owns
0.5% of the Columbus III system. The Columbus III cable system will connect the
United States to Europe. The Americas II and Columbus III systems are expected
to be completed by the end of 2000. The Company is currently evaluating its
possible participation in the Americas III cable system which will also connect
South America, Central America and the Caribbean to the United States. In
addition, the Company has minor participations in four other submarine cable
systems, Taino Caribe, Rioja, TPC-4 and TAT-12/13.
At December 31, 1999 the Company had 7,834 international long distance
circuits in service, including 1,050 leased circuits which are not operated by
CANTV. Of the Company's international circuits in service, 73.7% were provided
through submarine cable, 17.0% were provided via satellite and 9.3% were
provided through microwave links. The Company has two international digital
switches that are both located in Caracas.
Revenues from international telephone services are primarily derived from
(i) charges to subscribers in Venezuela for outgoing calls (a portion of which
the Company must pay to other international operators for calls which are
carried on their networks once outside of Venezuela) and (ii) access charges
paid by other international telecommunications operators for incoming calls
originating outside of Venezuela and carried through the Company's network once
in Venezuela.
14
<PAGE>
The Company's international traffic, which is measured in call minutes in
both the outgoing and incoming directions, is shown in the table below for the
years 1995 through 1999:
<TABLE>
<CAPTION>
International Service Usage
- ---------------------------------------------------------------------------------------------------------------
Outgoing Traffic
Outgoing Traffic per Average Incoming Traffic Ratio of
(millions of Access Line (millions of Incoming to
Year minutes) Outgoing % Growth (minutes) minutes) Outgoing Traffic
----------- --------------- ----------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
1995 128.5 (9.1) 55.2 189.5 1.47
1996 140.3 9.2 57.5 221.7 1.58
1997 152.6 8.8 58.7 279.1 1.82
1998 165.6 8.5 62.3 302.2 1.83
1999 162.6 (1.8) 62.5 311.9 1.91
</TABLE>
Total outgoing traffic declined by 9.1% during 1995, due to adverse
economic conditions in Venezuela, and then increased by 9.2% in 1996, 8.8% in
1997 and 8.5% in 1998, due in part to the Company's pricing strategy of reducing
real rates. In 1999, outgoing traffic decreased 1.8% due to Venezuela's
recession. Incoming traffic exceeded outgoing traffic each year as a result of
competitive pricing by international carriers.
The Concession signed in 1991 provided for rate rebalancing to allow the
Company to eliminate the subsidy provided by its long distance services to its
basic rent for residential customers and thereby has gradually permitted the
Company to offer more competitive pricing for its international long distance
services as the Company approaches the opening of the markets to competition in
November 2000. The Agreement reached by CONATEL and CANTV in January 2000 sets
the rate for outgoing international long distance calls at a weighted average
rate of US$0.7437 per minute. See "-- Rates" and "-- Regulatory Framework --
Regulation and the Concession -- Rate Regime."
In 1999, 47 direct routes to 37 countries accounted for approximately 97%
of the Company's international traffic. Transit centers in the United States,
Italy, Canada, France, Curacao and Spain, which provide for indirect routing of
international calls to 189 countries, accounted for the remaining 3% of traffic.
The Company's largest international traffic route is between Venezuela and North
America (the United States, Mexico and Canada), which accounted for
approximately 63.6% of its 1999 international traffic.
15
<PAGE>
The following table sets forth the number of minutes of international long
distance calls in each specified category, and as a percentage of total
international long distance call minutes, for 1995 through 1999:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1995 1996 1997 1998 1999
-------------- ----------- ----------- ----------- ----------
(millions of minutes)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outgoing international
long distance minutes:
North America 59.7 18.8% 69.6 19.2% 81.2 18.8% 88.1 18.8% 78.8 16.6%
South America 29.8 9.4% 31.2 8.6% 30.1 7.0% 29.7 6.4% 36.7 7.7%
Europe 25.4 8.0% 25.0 6.9% 26.4 6.1% 34.6 7.4% 34.8 7.3%
Others 13.6 4.3% 14.5 4.1% 14.9 3.5% 13.2 2.8% 12.3 2.7%
----- ---- ----- ---- ----- ---- ----- ---- ----- ----
Total 128.5 40.5% 140.3 38.8% 152.6 35.4% 165.6 35.4% 162.6 34.3%
===== ==== ===== ==== ===== ==== ===== ==== ===== ====
Incoming international
long distance minutes:
North America 122.9 38.6% 155.8 43.1% 197.9 45.8% 225.8 48.3% 222.9 47.0%
South America 23.9 7.5% 22.9 6.3% 29.4 6.8% 30.1 6.4% 34.0 7.2%
Europe 26.6 8.4% 28.0 7.7% 36.5 8.5% 32.0 6.8% 40.8 8.6%
Others 16.1 5.0% 15.0 4.1% 15.3 3.5% 14.3 3.1% 14.2 2.9%
----- ---- ----- ---- ----- ---- ----- ---- ----- ----
Total 189.5 59.5% 221.7 61.2% 279.1 64.6% 302.2 64.6% 311.9 65.7%
===== ==== ===== ==== ===== ==== ===== ==== ===== ====
</TABLE>
Wireless Services
As of December 31, 1999, the Company, through its wholly-owned subsidiary,
Movilnet, provided wireless communications services in areas that covered
approximately 70.3% of Venezuela's population. Movilnet provides these services
pursuant to a cellular concession (the "Cellular Concession") which has an
initial term of 20 years. The Cellular Concession may be extended, subject to
certain conditions, for an additional 20 years. The Company purchased the B-
band Cellular Concession from the Government in May 1992 for the then bolivar
equivalent of approximately US$82 million. Pursuant to the Cellular Concession,
Movilnet is required to pay 10% of its gross revenues to CONATEL.
The following chart provides information regarding the growth of Movilnet's
subscriber base and traffic from 1995 to 1999:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------ ----------- -------------- ------------- -------------
Number of Subscribers:
<S> <C> <C> <C> <C> <C>
Postpaid 169,758 208,656 279,011 371,347 314,933
Prepaid -- 4,999 95,864 267,760 866,340
------------ ----------- -------------- ------------- -------------
Total 169,758 213,655 374,875 639,107 1,181,273
============ =========== ============== ============= =============
Traffic (in thousands of minutes) (1) 225,001 433,667 563,901 945,811 1,324,220
Penetration (2) 0.8% 1.0% 1.6% 2.8% 4.9%
- ----------------------------------------
</TABLE>
(1) Billed minutes excluding night, weekend, and free minutes.
(2) Customers as a percentage of total population.
Wireless services are the Company's fastest growing business. As of
December 31, 1999, Movilnet served 1,181,273 customers, which represented an
estimated market share of approximately 38%. The number of customers served by
Movilnet has increased by a compound annual growth rate of
16
<PAGE>
62.4% from December 31, 1995 through December 31, 1999. Although Movilnet has
experienced rapid growth of its customer base, the Company believes that there
exists unsatisfied demand for wireless services in Venezuela. The Company
markets its wireless services through a network of agents and the Company's
commercial offices.
Wireless services postpaid customers are charged an activation fee, a basic
monthly service fee, special fees and usage fees on a per-minute basis. Prepaid
customers are charged mainly for usage fees on a per-minute basis. Movilnet
operates on a "calling party pays" system under which customers are charged only
for calls they originate with the exception of roaming charges to customers
receiving calls from other than a Movilnet client outside his home area.
Movilnet also receives revenues from incoming calls to both postpaid and prepaid
customers primarily from its interconnection agreement with CANTV.
Subscribers are offered a number of value-added services, including voice
mail, call forwarding, call waiting, caller ID, message waiting indicator,
conferencing, detailed billing, automated customer service, national and
international roaming, and Mobile Data Solutions using Cellular Digital Package
Data ("CDPD") technology. During 1999 Movilnet launched a number of new
services and products which include wireless data transmission ("Movidata"),
value-added services such as "Moviltext" which is a general information center
and a variety of prepaid cards specific to varied customer needs in the various
segments of its market.
The Company continues to invest in its wireless business to increase
network coverage, efficiency, capacity and service quality. Movilnet is
developing CDPD applications that support its positioning for migration into
more advanced data services. Movilnet has installed TDMA digital technology,
including switches and cell sites, in Caracas and is installing TDMA digital
technology in the rest of its service areas, with plans to further expand its
digital network during 2000. Movilnet currently provides wireless services
utilizing Ericsson switching equipment and radio base stations ("RBS"). This
equipment allows for a relatively easy conversion to a digital network. The
Company believes that digital technology will be attractive to its existing and
potential customers because it allows for higher quality service as well as
advanced value-added features. At December 31, 1999, Movilnet's digitalization
level was approximately 60.7% of its voice paths capacity, including
approximately 77.1% of its RBS and 7 of its 9 mobile switching centers. In
addition, approximately 97% of its customer base handsets are digitalized as of
December 31, 1999.
Other Telecommunications-Related Services
The Company provides various telecommunications-related services that
extend beyond basic telephone service and wireless services, including data
transmission, directory information services and value-added services including
Internet access. In addition, the Company currently provides free of charge to
its customers, time information, trouble/repair reporting, directory assistance
and other operator and emergency services.
Data Transmission
The Company's data transmission services are provided through high-capacity
private links, which at December 31, 1999 consisted of approximately 39,000,
circuits serving approximately 2,000 private line customers. As part of its
strategy with respect to large corporate customers, the Company is implementing
VPN technology and intends to encourage its private line customers to use VPN
services. VPN technology should enable the Company to provide higher quality
dedicated services while improving efficiency by increasing utilization of the
network. There are other data transmission service providers in the market.
The Company had an estimated market share of approximately 74% as of
17
<PAGE>
December 31, 1999 compared to a similar market share at December 31, 1998. In
February 2000, CANTV introduced Asymmetrical Digital Subscriber Line technology
(ADSL). This technology allows simultaneous voice and data traffic on the same
line.
Value-Added Services
The Company offers an array of value-added services, including voice mail,
call waiting, call forwarding, call blocking, speed dialing, toll free and pay
800 services, Venezuela Direct service (which allows customers to reach a
Venezuelan operator from outside Venezuela), other country direct long distance
calling services, video conferencing, "web page" hosting, enhanced fax service,
audio text, 900 service in the greater Caracas metropolitan area, inside wire
maintenance service, data transmission services, computer network management,
professional services including outsourcing of telecommunications networks and
other intelligent network and data capabilities, all of which lead to higher
usage of the Company's network. During 1999, the Company launched "CANTV
Mundo," an international prepaid card that allows customers to place long
distance international calls to and from Venezuela and any other country. The
Company aims to capture the largest share of the market for value-added services
by utilizing its existing telecommunications resources and leveraging its
relationships with the Participants in the Consortium.
Internet Access
The Company provides Internet access service through its wholly-owned
subsidiary, CANTV Servicios. CANTV Servicios provides nationwide one-number
dial-up Internet access as well as international Internet roaming capabilities.
CANTV Servicios is among the two largest Internet service providers in
Venezuela, serving approximately 86,600 subscribers at December 31, 1999, with
an estimated market share of approximately 39%. In addition to Internet access,
subscribers may choose from an array of products such as web hosting, web
creation, Intranet development and fax over Internet protocol ("FoIP").
Through various initiatives, CANTV Servicios is rapidly becoming one of the
most sophisticated Internet service providers in the region. In the first
quarter of 1999, CANTV Servicios signed an agreement with Microsoft MCIS
Technologies for the provision of advanced services to accelerate CANTV
Servicios' response capacity and to allow for faster product implementation.
During 1999, CANTV Servicios expanded its international broadband capacity from
24 Mbps (megabits per second) to 67 Mbps. Access to this capacity is provided
through Frame Relay and dedicated lines. This advanced technology facilitates
multimedia applications. It will also result in increased data transmission via
incoming and outgoing traffic. The availability of satellite capacity is
maintained for redundancy.
The Company also plans to launch a prepaid card for Internet access and to
strongly support e-commerce and e-media strategies. During 1999, the Company
also launched "plaza.cantv.net," its virtual portal, which provides access to e-
commerce. CANTV Servicios and Movilnet are joining efforts to aggressively
develop the IP/wireless market. During 1999, the Internet operation was
certified by GTE Internetworking after verification of some 300 key measurement
and performance criteria. This certification acknowledges that CANTV Servicios
operates a secure and reliable IP service platform, which is important in
gaining customer confidence and promoting electronic commerce in the future.
CANTV Servicios provides its services pursuant to a value-added concession
(the "Value-Added Concession"). See "-- Regulatory Framework -- Additional
Concessions." The Value-Added Concession has a term of 10 years from October 5,
1995, and is renewable for another 10-year term. The Value-
18
<PAGE>
Added Concession is one of 68 concessions granted by CONATEL to providers of
value-added services, including Internet-related services.
Directory Information Services
The Company provides telephone directory information services through its
80%-owned subsidiary Compania Anonima Venezolana de Guias ("Caveguias") (the
remaining 20% is owned by an affiliate of a major newspaper publisher in
Venezuela). Caveguias publishes telephone directories ("White Pages") and
business directories ("Yellow Pages"). It also operates an Internet portal that
provides on-line access to the Company's directories as well as access to
information of public interest including special events, art exhibitions, job
search services, restaurant locations and tourist information. This portal is
among the ten top Venezuelan portals. Caveguias derives revenues from sales of
advertising space in its printed directories and from sales of information from
its database and electronic dissemination of information. Advertisers in the
Company's printed telephone directories are charged an annual fee, which varies
depending on the size of the advertisement placed and the circulation of the
edition of the directory in which such advertisement is published. Caveguias
currently competes with all other major media suppliers in the sale of
advertising.
Business Segments
Segment information for the Company's two main business segments, wireline
and wireless services, is set forth in Note 27(e) to the Audited Financial
Statements.
19
<PAGE>
Rates
The following table sets forth information regarding the average rates
charged by the Company (expressed in constant bolivars at December 31, 1999) for
local and domestic long distance service, international long distance service,
public telephone service and wireless services for the years ended December 31,
1997, 1998 and 1999. Despite the requirements under the Concession allowing for
quarterly adjustments to rates, CANTV's rates were last permitted to be
increased in accordance with the terms of the Concession effective April 30,
1999. Movilnet's rates were last adjusted effective November 15, 1999.
Following negotiations with the Government, an agreement was reached between
CANTV and CONATEL (the "Agreement") in January 2000 relating to new rate
structures for regulated services for the year 2000. The Agreement also
provides for rebalancing levels as well as service level commitments in 2000.
Under the Agreement CANTV was permitted to implement new rates effective March
23, 2000 and will be allowed to further adjust rates effective June 16, 2000.
No agreement or methodology for determining rates has been established beyond
2000. See "-- Regulatory Framework -- Regulation and the Concession -- Rate
Regime."
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1997 1998 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
Installation:
Residential 49,593 44,193 43,977
Non-Residential 56,664 50,648 48,676
Subscription:
Residential 81,627 70,899 65, 909
Non-Residential 285,633 228,969 213,785
Monthly rent charge:
Residential (1) 4,728 5,719 6,275
Non-Residential 16,840 15,620 15,059
Local usage (per minute):
Residential (1) 17 17 18
Non-Residential 24 23 25
Domestic long distance (per minute) (2):
Residential 172 111 111
Non-Residential 221 139 136
International long distance (per minute) (3): 1,540 1,065 870
Public telephone service:
Local call (4) 30 16 18
Domestic long distance (2) 182 121 118
Wireless telephone service
Postpaid (5):
Activation fee 45,806 9,090 699
Basic monthly service fee 28,512 23,297 25,118
Usage:
Peak hour (per minute) 247 219 211
Off-peak hour (per minute) 162 147 155
Prepaid (6):
Peak hour (per minute) N.A. N.A. 270
Off-peak hour (per minute) N.A. N.A. 160
</TABLE>
_____________________
(1) Weighted average of three plans offered by the Company. Represents charges
for usage in excess of free minutes.
(2) Weighted average per minute rates.
20
<PAGE>
(3) Weighted average per minute rates. International long distance rates do not
vary between residential and non-residential customers.
(4) Represents charge for a three-minute call as of December 31, 1997. In April
1998, CANTV changed its tariff structure to bill all public telephone calls
at a flat per minute charge. The rates as of December 31, 1998 and 1999,
represent the per minute charge.
(5) Weighted average of thirteen postpaid tariff plans offered by Movilnet.
(6) Weighted average of two prepaid tariff plans offered by Movilnet.
The Company's revenues from local and domestic long distance telephone
service consist of installation and subscription charges for new lines, monthly
line rental charges, usage charges and equipment sales. All domestic traffic is
measured and billed based on duration and, in the case of domestic long distance
calls, the time of day the call was made and, until recently, its destination.
The number of impulses counted during each call measures the duration of local
calls. A local call impulse is generated every 60 seconds. Rates for each
category of local and domestic long distance revenues differ for residential and
non-residential customers. During the year ended December 31, 1999, CANTV
offered three residential plans. As of December 31, 1999, the Basic Plan had
the lowest monthly rate, included 60 free local minutes per month and charged
relatively higher rates for additional local call minutes. The Intermediate
Plan had a higher monthly rate, included 100 free local minutes per month and
lower rates for additional local call minutes. The Premium Plan had the highest
monthly rate, included 150 free local minutes per month and the lowest rates for
additional local call minutes.
The Agreement recently finalized by CANTV and CONATEL increases the number
of permitted plan offerings from three to seven and reduces the number of free
minutes to 40, 65 and 90 minutes from the 60, 100 and 150 minutes established in
the old basic, intermediate and premium plans. The four additional plans
include a special plan for Internet users and a wireline prepaid plan. The
Agreement provides for a single domestic long distance weighted average rate of
approximately US$0.1875 per minute. The Agreement advances the rebalancing
process by reducing the international long distance rates by a weighted average
of 35%. The Agreement allows for a 23% increase in public telephone rates.
CANTV introduced the four new plans permitted by the Agreement and implemented
the changes required by the Agreement effective March 23, 2000. Additional
tariff adjustments are permitted effective June 16, 2000. These price
adjustments will help to reduce subsidies to local services consistent with the
price rebalancing contemplated in the Company's Concession, while bringing
prices more in line with general industry benchmarks. The rebalancing is not
expected to have a material effect on total Company revenues based on current
usage patterns.
In the fourth quarter of 1998, CANTV launched Extended Local Area Service
("EAS") in certain parts of Venezuela. EAS migrates certain domestic long
distance traffic to local area service, permitting CANTV to effectively achieve
additional rate rebalancing while providing the opportunity to shift revenues to
the local service category, which is less vulnerable to competition and
elasticity. The Company's fourth quarter 1998 tariff increase included an
additional 11% nominal rate increase, 4.6% in real terms, in local usage rates
to compensate for the introduction of EAS. See "-- Regulatory Framework --
Regulation and the Concession -- Rate Regime."
Revenues from international telephone services are primarily derived from
receipts from (i) charges to subscribers in Venezuela for outgoing calls (a
portion of which the Company must pay to other international operators for calls
which are carried on their networks once outside of Venezuela) and (ii) access
charges paid by other international telecommunications operators for incoming
calls originating outside of Venezuela and carried through the Company's network
once in Venezuela. The Company charges its customers for outgoing international
long distance calls based on the destination country, duration and time of day
of the call and whether the call is direct-dial or operator assisted (station-
to-station or person-to-person). International long distance rates do not vary
between residential
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and non-residential customers. Payments to and receipts from international
operators for incoming and outgoing calls are made and received pursuant to
bilateral agreements between the Company and foreign telecommunications
administrations or private carriers under the auspices of the International
Telecommunications Union. The agreements govern the rates of payment by the
Company to the foreign carriers for the use of their facilities in connecting
international calls billed in Venezuela, and by the foreign carriers to the
Company for the use of its facilities in connecting international calls billed
abroad. The currency and rates of payment under such agreements are negotiated
with each foreign carrier. Such settlement agreements generally require that
outgoing traffic be routed among foreign carriers in the same proportion as
those operators that carry incoming traffic to Venezuela. The practice among
carriers is for payments due in respect of the use of overseas networks to be
recorded, collected and forwarded by the carrier in the country in which the
call is billed. Settlements among carriers are normally made monthly
approximately six months in arrears on a net basis. In each of the past several
years, the Company received settlement payments from foreign carriers in excess
of payments made to such carriers. See "-- Regulatory Framework -- Regulation
and Concession -- Rate Regime."
Users of public telephones in Venezuela pay for calls based on the duration
and destination of the call. Through the first quarter of 1998, local calls
from public telephones were charged to the user based upon a fixed rate for the
first three minutes and a slightly higher rate for each minute thereafter. In
April 1998, CANTV changed its tariff structure to bill all public telephone
calls at a flat per minute charge. Domestic and international long distance
calls from public telephones are charged based upon the time of day, the
duration of the call and the long distance impulse frequency tables at the non-
residential rate. Public telephones, which are available to make international
long distance calls, are located in strategic places such as tourist and high
traffic areas.
Wireless postpaid subscribers are charged an activation fee, a basic
monthly service fee, special service fees and usage fees on a per-minute basis,
in excess of a monthly free allowance, depending on whether the call is made
during "peak" hours or "off-peak" hours. Movilnet offers its postpaid customers
13 service plans, which vary in terms of price and services. Prepaid customers
are charged for per-minute usage only based on the number of minutes purchased
on prepaid cards. The Company currently sells prepaid cards in Bs. 12,000 and
Bs. 20,000 denominations. Usage charges are based on a "calling party pays"
principle under which Movilnet's customers are charged only for calls, which
they originate. Roaming charges are applied to customers receiving calls from
persons who are not Movilnet customers whose calls originate outside the
receiving party's home area. Movilnet charges CANTV an access fee for calls
terminating on Movilnet's wireless network and CANTV charges Movilnet an access
fee for cellular calls terminating on CANTV's network. This access fee
structure also applies to competing cellular service providers.
Billing
Since privatization, the Company has substantially improved its billing and
collection systems by, among other things, providing detailed bills, issuing
bills on a more timely basis, offering credit card/debit card and bank draft
payment options and significantly expanding the number of payment booths.
Bolivar denominated bills are sent to subscribers monthly. Large corporate
clients may choose to receive their invoices in digital CD-ROM format.
During 1998, the Company identified and aggressively addressed an
uncollectible accounts receivable problem arising primarily from a deterioration
in the Venezuelan macroeconomic environment and weaknesses in the Company's
collection and credit policies. In response, the Company took decisive actions
and developed and launched an aggressive collection program that included a
tightening of its credit policies and strict procedures requiring temporary and
permanent disconnection of
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customer lines for nonpayment. The Company also implemented a stronger system of
controls and reorganized the collection function by assigning responsibility for
collections to the business unit leaders and incorporating collection
performance standards into their compensation packages. CANTV also made
personnel changes and provided intensive training to all collections personnel.
To further avoid collection problems in the future, procedures have also been
put in place to minimize the risk of providing service to customers with poor
credit history. During 1999, the Company continued to implement process
improvements as well as its strict collection policies resulting in improved
collections.
The Company's new collections policies include a call to customers just
prior to and again shortly after the payment due date. Customer lines are
temporarily disconnected when a bill becomes 15 days overdue and, if the bill is
not settled after 60 days, the line is permanently removed. During 1999, CANTV
made approximately over 3.0 million temporary disconnections and permanently
removed approximately 453,900 customer lines due to nonpayment. CANTV charges a
reconnection fee to the temporarily disconnected customers. Revenues from the
reconnection charge was Bs. 15.0 billion for residential customers and Bs. 5.0
billion for non-residential customers for the year ended December 31, 1999. The
Company also charges 12% per annum on overdue amounts from non-Government
customers. The permanently removed lines are being aggressively reassigned to
new customers on the basis of credit history checks.
At December 31, 1999, the average number of days that CANTV receivables
remained outstanding was approximately 60 days for all customers except
Government entities, compared to 65 days at December 31, 1998. During 1999, the
Company changed the methodology used to calculate the average number of days
that receivables remained outstanding to the "Average Billing Method" from the
"Countback Method." The new methodology consists of dividing the receivables
outstanding by the average billing for the last four months. The result is then
multiplied by thirty. The "Countback Method" calculates the average number of
days that receivables remained outstanding by subtracting the monthly billing
from the receivable balance. The Company's provision for uncollectibles
represents 5.9% and 13.2% of total operating revenues at December 31, 1999 and
1998, respectively.
The average number of days that receivables remained outstanding for
Government entities was approximately 427 days at December 31, 1999 compared to
344 days at December 31, 1998. Accounts receivable from Government entities
increased 20.5% during the year to Bs. 121.2 billion at December 31, 1999 from
Bs. 100.6 billion at December 31, 1998. The Company believes that these
increases primarily result from budget cuts applied to Government entities.
CANTV has strengthened and restructured its Government collections group, and is
coordinating efforts with appropriate Government entities in order to facilitate
the collection of current and future Government receivables. On November 3,
1999, the Venezuelan Congress passed a law authorizing the issuance of financial
instruments for the purpose of paying certain outstanding obligations including
those related to the utilization of telephone services. The amount of bonds
permitted to be issued for payment of debts owed CANTV under such legislation
totaled Bs. 63.2 billion. The Government has stated, but not committed, that it
plans to issue such bonds by July 30, 2000. The Company still faces uncertainty
regarding the timing of collections from Government entities.
Competition
Under the Concession, the Company is to be the exclusive provider of
switched, fixed, local, domestic and international telephone services in
Venezuela until November 27, 2000 except in certain circumstances. Beginning on
November 27, 2000, however, the Concession permits direct competition for these
services. In addition, the Concession permits the Ministry to grant concessions
for basic
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telephone services to third parties prior to November 27, 2000 in certain
circumstances. See "-- Regulatory Framework -- Regulation and the Concession --
Competitive Framework." Since December 1996, the Ministry has exercised its
authority under this provision to grant concessions to three companies to
provide multi-services, except domestic and international long distance
services. The Government has also announced plans to auction a second basic
telephone license. The Company is unable to determine the intended timing of
such an auction or the timing of the commencement of operations by a second
provider of basic telephone services. See "-- Regulatory Framework --Regulation
and the Concession -- Competitive Framework."
Several entities are competing with the Company in particular areas of its
business. The Company faces competition from companies providing data
transmission services to large corporate customers and companies providing
leased private line networks. The Company also faces competition in wireless
services from Telcel, which is majority-owned by BellSouth Corporation. Telcel
began its operations one year earlier than Movilnet. The Company estimates that
Telcel's market share was approximately 58% at December 31, 1997, 60% at
December 31, 1998 and 62% at December 31, 1999.
In December 1996, Infonet Redes de Informacion C.A. ("Infonet") was granted
a rural concession to provide multi-services, except national and international
long distance services, in eight western states of Venezuela. In January 1998,
two additional companies were granted multi-services concessions. Corporacion
Digitel C.A. ("Digitel") was granted a concession to provide services in seven
central states and Consorcio Elca, C.A. ("Elca") was granted a concession to
provide services in six eastern states. Infonet and Digitel are providing
digital fixed wireless and cellular services in rural areas and have also
expanded their services into larger population areas where they compete directly
with services provided by Movilnet and indirectly with services provided by
CANTV. The Company also faces competition in certain value-added services.
The Company, like most Latin American telephone companies, competes in
international telephone services with a number of alternative services including
calling cards, the rerouting of calls by other international operators, leased
private line networks for large telecommunications providers and "call-back"
services (despite call-back services being illegal in Venezuela). As in many
other countries, the cost of local telephone service in Venezuela has
historically been subsidized by revenues from international services, thereby
causing the price of international services to remain significantly above their
cost. As a result, alternative international service providers are currently
able to offer significant price advantages to the Company's tariffs for certain
routes. The Company believes that these tariff advantages should be reduced as
the Company rebalances its tariffs. The Agreement recently signed between
CONATEL and CANTV provides for a significant rebalancing between long distance
tariffs and local tariffs. See "-- Regulatory Framework -- Regulation and the
Concession -- Rate Regime."
During 1999, CONATEL announced plans to auction an additional cellular or
local multipoint distribution service ("LDMS") concession. CONATEL has
indicated that it estimates that this concession will be granted during 2000.
However, the Company is unable to predict when the auction for this concession
will take place.
Beginning November 27, 2000, the Company's fixed local and domestic and
international long distance services will be open to competition. The new
Government administration in Venezuela has also announced its willingness to
negotiate an early opening of the telecommunications industry subject to
previous agreement with the Company, specifically in Vargas State which was
affected by the December 1999 floods. However, the regulatory framework
necessary to regulate services once competition is allowed to commence is still
in progress.
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Competition in services provided by the Company may arise from a variety of
new entrants, including telecommunications services providers from other
countries. Such competitors will be able to provide telecommunications services
either through newly installed facilities and networks or through facilities and
networks of existing providers. Currently the Venezuelan Telecommunications
market is composed of one integrated service provider, namely CANTV; wireless
service providers, such as Movilnet, Telcel and Digitel; wireless fixed service
providers, such as Digitel, Infonet and Elca; data transmission service
providers, such as ImpSat, Compsat, Bantel, NetUno, Viptel, BellCanada
International and Texcom; Internet service providers ("ISP", such as CANTV
Servicios, T-Net, Etheron, AOL, UOL and Eldish; paging operators, such as
Skytel, Telemensajes Metropolitanos, Radio Contacto and TeleKontacto; trunking
service providers, such as Americatel, Radio Movil Digital and Conmovil; and
Cable TV operators, such as SuperCable, Cabletel and Intercable, including
Direct TV via satellite transmissions. As November 2000 approaches, these
existing telecommunications service providers may have established customer
relationships, as well as other capabilities and resources to expand their
current service offerings. The Government may decide to extend the concession
of any of these companies to include other telecommunications services. The
Company believes that its competitors will target large clients, top tier
commercial customers and high-income residential customers.
The scope of increased competition and the identity of any new entrants,
and any corresponding adverse effect on the Company's results, will depend on a
variety of factors. Among such factors are the business strategies and
financial and technical capabilities of potential competitors, prevailing market
conditions at the time competition is permitted and applicable Venezuelan
regulations, as well as the effectiveness of the Company's efforts to prepare
for increased competition. Increased competition will further change the
environment in which the Company operates. Competition will require the
increased development of a competitive culture, including greater customer care,
differentiated services, continuous introduction of innovative technologies,
competitive cost positioning and operational efficiencies. The Company
believes, however, that its existing network, market share, quality and range of
services position it to operate effectively in a competitive environment.
Year 2000
The Company successfully completed transition from 1999 to 2000. See "Item
9. Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000 Conversion."
Corporate Image
The Company promotes its image through advertisements based on nationwide
campaigns via television, radio and print media. During 1999, these campaigns
were designed to communicate the improvements made by the Company during these
eight years of private administration. During 1999, the Company ran mass media
campaigns directed towards its segmented market to stimulate demand for its
services and products. Customer satisfaction surveys conducted by independent
third parties indicated that approximately 88.2% and 83.2% of the public was
satisfied with CANTV's residential and non-residential service, respectively, as
of December 31, 1999 compared to 84.4% and 80.7%, respectively, at December 31,
1995.
Employees
The Company is one of the largest private employers in Venezuela. At
December 31, 1999, the Company had 14,769 employees, down from 20,523 at
December 31, 1995. The number of non-CANTV employees of the Company increased
slightly in 1999 compared to 1998 due to new employees hired to support the
rapid growth of the Company's wireless and Internet businesses. However, the
total number
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of employees dropped 6% in 1999 compared to 1998. In 1999, the average length of
service was 9.9 years. CANTV had 218 access lines in service per employee at
December 31, 1999 compared to 124 at December 31, 1995. The Company plans to
continue to seek to reduce its total number of employees and believes that this
goal will be accomplished through natural attrition, special voluntary
retirement programs offering financial incentives and the elimination of certain
positions due to technological efficiencies.
At December 31, 1999, approximately 40.8% of CANTV's employees were members
of one of the 28 unions which deal directly with the Company or through
Federacion de Trabajadores de Telecomunicaciones de Venezuela ("FETRATEL"),
compared to approximately 99.9% at privatization. Since privatization, the
Company has experienced work stoppages from time to time of various durations
and levels of participation. These work stoppages have not had a material
effect on the Company's results of operations. The most recent stoppage
occurred in connection with contract negotiations when approximately 1,500 of
CANTV's workers undertook a 23-day strike in March 1997. In April 1997, the
Government suspended the strike and convened an arbitration panel to establish a
new collective bargaining agreement. This agreement expired on June 18, 1999.
On September 3, 1999, the Company signed a new bargaining agreement valid
through June 17, 2001. This agreement contains various innovative provisions
including variable compensation based on the operational performance of the
Company. The agreement also established a 20% base salary increase retroactive
to June 18, 1999, a Bs. 30,000 increase to all union workers on June 18, 2000,
and merit increases in June 2000 and 2001. Annual profit sharing increased from
110 days to 120 days, and the vacation bonus increased from 45 days to 48 days.
Moreover, the agreement modified the obligatory years of service for
postretirement benefits to 23 years for employees covered after June 1997. The
possibility to select between a lump-sum benefit payment instead of the benefits
derived from the retirement program was also established by this agreement.
The new, collective bargaining agreement ensures job security to those
employees who have worked for the Company at least 30 months and were hired
between the period June 18, 1997 and September 3, 1999. New workers enjoy job
security after 120 months of service. Positions may be terminated for just
cause. Venezuelan law requires that employers pay a severance package to those
employees terminated for just cause. Effective June 19, 1997, the Venezuelan
Congress enacted a partial amendment to the labor law regarding employee
severance benefits. Under the new system the retroactive payment was eliminated
and double severance payments applicable to those workers who are dismissed
without just cause were limited. See Note 4(j) to the Audited Financial
Statements.
CANTV has three pension plans: a normal, a deferred and a special plan.
The normal pension plan is available to workers meeting certain age and/or
service criteria. The deferred pension plan is applicable to those workers that
the Company retains beyond the time of normal retirement. The special pension
plan is available to certain workers who have completed at least 20 years of
service (14 years for people employed as of June 23, 1995) and who CANTV
dismisses without just cause. The Company also provides various other benefits
to its employees.
The Caldera administration passed the Ley del Subsistema de Pensiones, a
partial reform of the Social Security System regarding pensions (the "Pension
Reform"). This law will become effective on January 1, 2001 per Decree 426
published on October 26, 1999. The Pension Reform is intended to provide income
following retirement and in the case of disability, as well as provide survivor
benefits and funeral assistance. The Pension Reform establishes a contributory
pension plan for all employees based on approximately 12% of each employee's
salary. When the Pension Reform becomes effective, the Company will be required
to contribute 75% of this salary amount for each employee, with each employee
contributing the remaining 25%. These pension contributions will be required to
be deposited
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in private pension funds established under the Pension Reform. The Pension
Reform may be amended by the new administration before its effective date.
In connection with the privatization of CANTV in 1991, the Government,
through the Venezuelan Investment Fund, transferred 110 million of the Company's
Class C shares, representing 11% of the equity share capital of CANTV, to
certain employee trusts ("Employee Trusts"). Eligible employees and retirees
were offered the right to purchase up to 100 million Class C Shares from the
Employee Trusts pursuant to a stock purchase program by paying nominal Bs.
286.0488 per Class C Share in full in cash or through a non-interest bearing
installment payment plan through salary deductions over a period of up to 12
years. The Company does not finance or administer the acquisition of shares by
employees. Any balance due at the end of such period not paid by salary
deductions or pension payment deductions is forgiven, provided that all previous
installment payments have been made. The proceeds from the sale of such Class C
Shares, after deduction of any fees, dividends or distributions, are paid to the
Venezuelan Investment Fund.
Based upon the number of Class D Shares that were sold in the Initial
Public Offering, the Venezuelan Investment Fund announced its intention to offer
New Class C Shares, representing 9% of the equity share capital of CANTV, for
subscription by employees and retirees of CANTV at the bolivar equivalent of one
seventh of the price per ADS in the Initial Public Offering. In August 1998,
eligible employees and retirees were offered the right to purchase up to 90
million New Class C Shares from the Employee Trusts pursuant to a stock purchase
program ("Stock Purchase Program") established by the Venezuelan Investment
Fund. In accordance with the Stock Purchase Program, 25% of the 90 million New
Class C Shares were reserved for retirees of CANTV and 75% of the shares were
reserved for active employees of the Company based on employee base salary and
length of employment at August 1996, with no employee eligible for more than
15,000 New Class C Shares. Under the Stock Purchase Program, eligible employees
were offered a non-interest bearing installment payment plan to purchase the New
Class C Shares through salary deductions over a period up to 12 years, with the
purchase price to be paid in full at the end of this period. Those employees
still paying for Class C Shares under the 1991 installment plan are granted a
grace period under the Stock Purchase Plan until all prior Class C Shares have
been paid in full. At that time, salary deductions for the New Class C Shares
purchased will begin, provided that an established percentage of the Class C
Shares have not been sold by the employee or retiree. If the Class C Shares are
sold, an accelerated payment plan will apply. In accordance with the Stock
Purchase Plan, dividends paid by CANTV prior to payment in full for the New
Class C Shares are distributed with 50% paid to the Class C shareholder and 50%
applied to the shareholder's unpaid balance of the New Class C Shares.
As part of a share repurchase program initially authorized by the Company
on November 16, 1999, Class C shareholders may from time to time be offered the
opportunity to sell shares purchased by them from the Government. See "Item 4.
Control of Registrant."
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REGULATORY FRAMEWORK
Regulation and the Concession
General
The Company's business and the rates it charges for telephone services are
governed by the Ley de Telecomunicaciones de Venezuela (the "Telecommunications
Law") and the Regulaciones de Telecomunicaciones de Venezuela (the
"Telecommunications Regulations"), the Concession, the Cellular Concession, the
Value-Added Concession and, most recently, by the Agreement reached between
CANTV and CONATEL in January 2000 and later signed on February 21. The
Telecommunications Law and the Telecommunications Regulations provide the
general legal framework for the regulation of telecommunications services in
Venezuela. The Ministry of Infrastructure (previously known as the Ministry of
Transportation and Communications) (the "Ministry") is the Government entity
principally responsible for overseeing telecommunications services in Venezuela
and has delegated supervision and control of the telecommunications sector to
Comision Nacional de Telecomunicaciones ("CONATEL"), an independent regulatory
body under its jurisdiction. CONATEL was created by presidential decree in
September 1991 (the "CONATEL Decree"). The CONATEL Decree provides that CONATEL
has the authority to plan, manage, regulate and supervise telecommunications
services in Venezuela. The CONATEL Decree further provides that CONATEL shall
promote telecommunications investment and technological innovation in Venezuela.
CONATEL has the authority to review and approve CANTV's tariffs, expansion
and modernization plans, to inspect CANTV's equipment and properties, as well as
its accounting and other records and to impose sanctions, including forfeiture
of the Concession, for violations of the Telecommunications Law, the
Telecommunications Regulations and the Concession. Under the Concession, CANTV
is required to provide CONATEL with information necessary for monitoring CANTV.
Among other things, CANTV is required to report annually to CONATEL on the
status of various services under the Concession, including CANTV's compliance
with network expansion, modernization and quality improvement requirements.
Under the Telecommunications Law and the Telecommunications Regulations, a
provider of public telecommunications services such as the Company must operate
under concessions granted by the Government, which acts through the Ministry.
The Concession, granted to CANTV in October 1991, and amended in November 1991,
has an initial term of 35 years and, subject to the approval of the Ministry and
the satisfactory performance by CANTV of its obligations under the Concession,
may be extended for an additional 20 years. The Concession provides that CANTV
is to be the exclusive provider of switched, fixed local, national and
international telephone services, existing or to exist in accordance with
technological advances in telephony throughout Venezuela until November 27,
2000, except in limited circumstances. See "-- Competitive Framework."
CONATEL has informally announced that it expects the National Assembly to
approve a new Telecommunications Law (the "New Telecommunications Law") during
the second quarter of 2000. The primary objectives of the New
Telecommunications Law are to establish a new competitive regulatory framework,
foster efficiency and fair competition among telecommunications service
providers, develop and modernize the telecommunications systems, and at the same
time obtain and establish universal service objectives. The New
Telecommunications Law in the form currently being considered would, if adopted,
respect all previously conferred rights and duties, including obligations under
interconnection agreements among operators, and provide for the deregulation of
tariffs and an equitable fiscal regime.
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The New Telecommunications Law, in the form currently being considered,
would also establish an independent and technically competent administrative
agency to regulate the telecommunications sector. The New Telecommunications
Law would consider telecommunications to be an economic activity that affects
the public interest. Under the New Telecommunications Law, telecommunication
services would be offered on a competitive basis and would include a requirement
for universal and public service obligations to be shared by telecommunications
service providers. The New Telecommunications Law would also adopt a new tax
regime applicable to all telecommunication service providers on the basis of
annual earnings. The new taxes, which would replace the current annual tax and
concession fee of 5.5% for wireline and 10.0% for wireless services, would be as
follows: a 2.5% activity tax, a 0.5% tax to cover CONATEL's activities, a
maximum 0.5% tax for spectrum allocation, a 1% tax to create a Universal Service
Fund, a 0.5% tax for the Telecommunications Training and Development Fund and
charges for administrative procedures. In addition to the taxes previously
described, cellular providers would be subject to a supplemental tax starting at
4.5% of annual earnings in the year 2000 and decreasing by 1% per annum up to
2005 after which time the supplemental tax would be eliminated.
The New Telecommunications Law, in the form currently being considered,
includes provisions which would provide for mandatory interconnections with
charges based on costs to stimulate the commencement of effective competition,
eliminate cross subsidies and to promote self-regulation of the sector. It also
contemplates rights of way guarantees, number portability and operator pre-
subscription. The New Telecommunications Law provides for the creation of a
universal service fund and a research and training fund. According to
statements made by CONATEL, new operators providing basic services would not be
required to pay a concession fee in order to compete with CANTV starting
November 27, 2000 when the monopoly of the basic telephone service, national
long distance and international long distance ends.
In January 2000, CANTV entered into an agreement with CONATEL in respect of
the rate structures and service levels through 2000 (the "Agreement"). The
Agreement supersedes the Concession with respect to subject matter specifically
referred to therein and the Concession continues to control as to subject matter
not specifically covered by the Agreement. In the event of a conflict between
the Agreement and the Concession, the Agreement controls. See "-- The 2000
Agreement." The framework for regulating the telecommunications industry in
Venezuela following the opening of basic services to competition in November
2000 has not been established and no framework has been agreed upon or proposed
for the setting of new rates. CANTV is unable to predict the timing and nature
of rate charges that may be allowed in the future.
The Agreement was arrived at following the delays in tariff approvals in
1999 and the commencement of a preliminary proceeding in contemplation of a
legal action by CANTV against the Government for breach of the Concession. The
Agreement concludes a mandated eighth year review required under the Concession
and resolves the differences outstanding between CANTV and CONATEL relating to
the definition of goals and measures of service mandates and methodologies. In
effect, the Agreement retains for the Company the most significant rights
provided for under the Concession. The Agreement includes: (i) a significant
rebalancing between long distance tariffs and local tariffs, and between non-
residential and residential tariffs; (ii) a definitive ruling on tariffs and
adjustments based on an agreed projected devaluation of the bolivar against the
U.S. dollar during 2000; (iii) quality and service mandates including the
elimination of the service expansion mandate and the introduction of a new 80%
digitalization mandate; (iv) the introduction of new tariff plans including a
fixed prepaid plan and optional plans which CANTV may introduce without
CONATEL's prior approval and which, in the case of certain optional plans, CANTV
may offer with higher basic rent and free minutes up to a US$80 maximum; (v)
delinking of the tariff approval process to compliance with quality and service
mandates; and (vi)
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CANTV's agreement to refrain from taking any action, judicial or administrative,
as a result of the failure by the Government to approve tariffs during 1999,
provided that the Government meets the terms and obligations pursuant to the
Agreement.
Network Expansion, Modernization and Quality Improvement Requirements
The Concession has required the Company to carry out a plan of network
expansion and modernization based on the construction of a specified minimum
number of new digital lines, the modernization of analog lines and installation
of public telephones, each year until the year 2000. In accordance with the
Concession, the Company has filed with CONATEL certain network expansion and
modernization plans: annual plans, a plan through 2000 and a fifteen-year plan.
Each annual plan has been subject to CONATEL's approval. The Company's plans
have incorporated its expansion and modernization proposals for national,
regional and city network build-outs. The plans have been on a principle of
uniform growth for all regions in the country. Compliance with the approved
plans and mandates has been required by the Concession. See "-- Assignment,
Extension and Termination of the Concession."
The economic forecasts developed and relied upon in 1991 on which the nine
year Concession mandates were originally based assumed, among other things,
substantial growth of Venezuela's gross domestic product. Since 1992, the
Venezuelan economy began to experience a downturn, which has continued
throughout subsequent years. As a result of this constant downturn in the
economy, the Company experienced a decrease in the rate of demand for telephone
lines and, in certain of its service areas, had more available facilities than
demand from persons able to afford telephone service. Pursuant to a proposal
submitted by the Company, on September 9, 1996, the Ministry adopted a
resolution to reduce the Company's expansion mandates for 1996 through 2000.
Under the Agreement reached in January 2000, quality and service mandates
have been substantially modified, including the elimination of the mandatory
access line expansion requirements and an agreement by the Company to ensure
that 80% of its lines are digitalized by December 31, 2000. The Agreement
establishes that the fulfillment by the Company of its quality and service
mandates is not a condition to the Company's right to obtain tariff adjustments.
The quality and service mandates under the Agreement require the Company to
achieve a network efficiency equal to 96.5% for local service, 95.5% for
domestic long distance service and 96.5% for international long distance
service. The access mandate under the Agreement requires that the average
installation period be not greater than 67 days and that pending orders over 30
days must represent less than 82% of pending orders. Under the Agreement,
operator response is required to be no more than 5 seconds for repair requests,
8 seconds for domestic long distance service, 20 seconds for information
requests and 20 seconds for international long distance service. Billing
performance under the Agreement is required to be 99.5% accurate and 95% of
billings must be completed within less than 45 days for domestic long distance
and international long distance outgoing calls. Also, no billing of
international long distance service is allowed after 110 days other than when
other international carriers are used.
Under the Agreement, CANTV and CONATEL have agreed to develop measures and
corresponding quality and service level mandates for certain services where
specific mandates are not currently provided in the Agreement. The Agreement
contemplates that these matters were to be agreed upon during the first quarter
of 2000. Some of the measures to be developed include: (i) customer
satisfaction, (ii) time to complete a call, (iii) access to service in areas
where CANTV does not currently provide services, (iv) repair requirements, (v)
billing effectiveness and (vi) operator service. To develop the customer
satisfaction measure, the Agreement contemplates that both CANTV and CONATEL
will
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designate an expert to jointly develop a customer satisfaction survey from
which a customer satisfaction mandate would be developed. The time to complete
a call refers to the time that passes between the moment that the last digit is
dialed and the answer tone is received. The Agreement contemplates that CANTV
and CONATEL would perform measurements during the first quarter of 2000, and
using these actual results, agree on the establishment of a new annual
measurement including an allowed monthly deviation. The Agreement also
contemplates that service access in areas where CANTV does not currently provide
services will be measured based on the percentage of pending service orders in
those areas as of December 31, 1999. In the event that CANTV is unable to
provide service to these areas, other operators will be allowed to offer their
services as long as they use comparable technology to CANTV's. The Agreement
contemplates that both CANTV and CONATEL would also perform several operators
service measurements during the first quarter of the year and develop a new
annual measurement including an allowed monthly deviation. CONATEL retained
inspection rights during the first quarter of 2000 to survey and adjust, as
needed, these quality measures. The studies contemplated by the Agreement have
commenced and are still in progress as of the end of the first quarter of 2000.
31
<PAGE>
The following table sets forth CANTV's actual expansion, modernization and
quality improvement results through 1999:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
(Actual) (Actual) (Actual) (Actual) (Actual)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expansion and modernization:
New digital lines for expansion 99,072 247,226 171,844 148,285 --
Modernization of lines 55,260 30,530 41,000 82,000 87,620
Total lines for expansion and
modernization 154,332 277,756 212,844 230,285 87,620
Total public telephones (1) 57,266 56,409 70,012 75,097 80,033
Total lines installed (2) 2,956,788 3,208,977 3,403,521 3,551,706 3,546,538
Quality improvement:
Dial tone delay (3) 98.9% 99.1% 99.0% 99.2% 99.3%
Call completion (4)
Local 58.8% 62.9% 64.3% 67.3% 68.7%
Domestic long distance 46.3% 51.6% 52.5% 55.6% 57.5%
International long distance 52.1% 48.6% 49.9% 60.7% 60.3%
Operator assistance (seconds):
Domestic long distance 4.2 3.9 4.1 3.5 2.1
Directory assistance (5) 4.6 4.9 4.0 N.A. 3.9
International long distance 4.5 4.4 3.3 3.6 2.4
Repair answer (6) 3.9 4.6 3.8 4.5 3.4
Trouble reports and repair time:
Trouble reports per 100 lines (7) 3.6 3.7 3.5 3.0 2.5
Repaired in 24 hours 42.0% 53.0% 60.5% 68.8% 70.7%
Repaired in 48 hours 60.0% 80.0% 83.9% 89.9% 89.6%
Repaired in 72 hours 74.0% 90.0% 92.7% 93.1% 91.7%
Installation interval
(within-days) (8) N.A. N.A N.A. N.A. N.A.
Billing:
Accuracy (with error) 0.9% 0.9% 0.8% 0.5% 1.0%
Time from providing service
to bill (days) (9) 31 19 21 22 19
Customer satisfaction
(percent satisfied) (10):
Public telephones 85.8% 80.4% 70.1% 69.6% 72.3%
Residential 84.4% 87.7% 89.8% 91.5% 88.2%
Non-residential 80.7% 90.2% 88.2% 88.5% 83.2%
</TABLE>
_____________________________
(1) In 1996, CANTV performed an inventory of public telephones and determined
that the number of public telephone lines in service was 8,591 less than
the number indicated in its records at that time. No adjustment has been
made to the number of public phone data prior to 1996.
(2) Does not reflect decreases or increases resulting from the relocation or
retirement of analog lines.
(3) Percentage of initiated calls that received dial tone within 3 seconds
during the busiest hour of the day.
(4) Percentage of completed calls, which were appropriately dialed and
connected.
(5) Statistics for 1998 are not available due to problems experienced in
connection with the upgrade and testing of the Company's new directory
assistance platform in Caracas and Barquisimeto. The Company has formally
notified CONATEL of the problems encountered and inability to measure
compliance with the mandate.
(6) Average time in seconds for repair operators to answer customer calls
reporting problems with their telephones.
(7) Monthly reported failures divided by number of lines in service at month-
end, multiplied by 100. In 1999, the Company installed a mechanized repair
tracking system, which improved its ability to identify trouble reports
and repair times.
(8) Percentage of service requests completed. The standard for measurement
was never agreed with CONATEL and accordingly no statistics are available.
(9) Days from the moment when the call is made to the billing day, per 100
bills.
(10) As measured by customer opinion surveys conducted by third parties.
32
<PAGE>
The Company did not meet certain Concession mandates relating to call
completion rates in 1998 and 1999 due to the Concession's definition of an
uncompleted call. Under the Concession, a call was not completed if a line was
busy or a person did not answer. Under the Agreement all calls are considered
completed unless there is a technical failure. In 1998, the Company failed to
meet the Concession's customer satisfaction requirement for users of public
telephones. The Company is developing with CONATEL an objective measure of
customer satisfaction for users of public telephones such as the percentage of
public telephones in service. Since 1995, the Company has failed to meet the
Concession's requirement that new lines be installed within a specified number
of days from request. The Company also failed to meet certain repair time
requirements under the Concession in 1994 through 1997. In 1998 and 1999 the
Company met all repair time requirements. In addition, in 1994 the Company
failed to satisfy the billing statement improvement mandate of the Concession,
as well as certain provisions dealing with treatment of third party equipment
providers. As a result of a 1996 inventory of public telephones, the Company
determined that the number of public telephone lines in service was 8,591 less
than the number in its records at June 30, 1996. Due to this shortfall, the
Company only had 52,031 public telephone lines installed at December 31, 1996,
representing just over 80% of the Concession's requirement of 65,000.
The failure by the Company to meet the Concession's mandates may result in
sanctions, including the possible imposition of fines of up to a maximum amount
of 1% of CANTV's billings and, if the failure exceeds 20% of the relevant
requirement, revocation of the Concession. The Agreement establishes that if
CONATEL detects noncompliance with the established quality and service mandates,
it must notify CANTV which in turn must present a corrective plan within fifteen
days after receiving formal notification and correct the noncompliance within
the following quarter unless otherwise justified to CONATEL. Failure to comply
with the corrective plan may lead to a penalty equivalent to 50% of the basic
rent charged affected customers in the most recent month and must be credited
directly to the customers' accounts within the next two months. The penalty
will be calculated for each parameter or measurement per line per month that has
not been complied with. CONATEL will also verify compliance with annual goals.
See "-- Assignment, Extension and Termination of the Concession."
Rate Regime
Prior to January 2000, when CANTV entered into the Agreement with CONATEL,
CANTV's rates were regulated under the Concession. The Concession had provided
for a "price-cap" mechanism to set and adjust rates on a quarterly basis
throughout each calendar year. The price-cap mechanism was designed to vary
quarterly based on the Wholesale Price Index. Although in principle tariffs
were to be adjusted to reflect inflation in the preceding quarter, tariffs were,
in practice, generally calculated based upon rates of inflation during the
second preceding quarter. The delay was due to the time period required to
calculate the inflation rate during a specific quarter. Accordingly, in many
instances tariffs were implemented based on inflation levels relating to periods
ending as much as six months preceding their implementation date.
The increase in CANTV's tariffs did not, in all cases, fully offset the
effects of inflation used in preparing the Company's financial statements since
the rate of inflation used in preparing the Company's financial statements is
based on the more commonly accepted Consumer Price Index which, at times,
significantly exceeded the rate of inflation as measured by the Wholesale Price
Index. Further, the price-cap mechanism was not always implemented as described
in the Concession. CONATEL sometimes delayed the approval of rate increases, or
did not approve the full tariff increases allowed by the Concession's price-cap
mechanism. In other cases the Company decided not to implement the full
increase authorized for competitive or other reasons. In 1998, all four tariff
increases were approved
33
<PAGE>
with minimal delay. In the first three quarters of 1998, CANTV did not increase
domestic long-distance rates by the full amount permitted based on competitive
pricing strategies. In 1999, CANTV received authorization for a rate increase
effective January 1, 1999 and in March 1999, CONATEL approved a tariff increase,
which became effective on April 30, 1999. At the request of CONATEL, CANTV
agreed not to implement the rate increase permitted pursuant to this
authorization for basic residential rent. Most recently, CANTV was unable to
obtain approval to increase its tariffs as stipulated in the Concession
following CANTV's rate increase effective April 30, 1999.
The following table sets forth the increases in the Consumer Price Index,
the Wholesale Price Index and the Company's tariffs based upon this price-cap
mechanism from 1995 through 1999:
<TABLE>
<CAPTION>
% Increase
--------------------------------------------------------------
CANTV's
Consumer Wholesale Weighted
Year Price Index Price Index Average Tariffs
- --------- ----------------- ----------------- --------------------
<S> <C> <C> <C>
1995 56.6 43.6 61.6
1996 103.2 105.8 89.0
1997 37.6 17.3 25.5
1998 29.9 23.3 12.3
1999 20.0 13.6 8.1
</TABLE>
In addition to the price-cap mechanism, the Concession contemplated the
implementation of a rate rebalancing program designed to allow CANTV to
eliminate the subsidy provided by its long distance services to basic rent
charges for residential customers. The program was intended to permit CANTV to
offer competitive pricing for its international and domestic long distance
services by the end of the year 2000. The Concession contemplated the
implementation of certain specific rate rebalancing steps each quarter
commencing in the first quarter of 1994.
Due to the economic conditions existing in Venezuela since 1994, as well as
other factors, rate rebalancing did not take place as contemplated by the
Concession. On September 9, 1996, CANTV entered into the Rebalancing Agreement
with the Ministry, which was intended to achieve the level of rate rebalancing
originally contemplated by the Concession. Under this Rebalancing Agreement,
effective January 1, 1997, CANTV was allowed to accelerate rate rebalancing.
Prices for domestic and international long-distance services were allowed to be
reduced through the year 2000 and prices for local services were allowed to be
increased. Due to further delays in tariff approvals, CANTV did not achieve the
full rebalancing goals permitted under the Rebalancing Agreement. The Agreement
reached in January 2000 allows CANTV to achieve further rebalancing of its
tariffs in 2000 consistent with the general rebalancing objectives of the
Concession. See "-- The 2000 Agreement." The tariffs as stipulated in the
Agreement and detailed below substantially reduce subsidies to local services,
while bringing domestic and international long distance tariffs more in line
with general industry benchmarks. See "--The 2000 Agreement."
In 1998, CANTV negotiated the implementation of its EAS program with
CONATEL and in the fourth quarter of 1998, the Company successfully launched EAS
in certain parts of Venezuela. EAS migrates certain domestic long distance
traffic to local area service, permitting CANTV to effectively achieve
additional rate rebalancing while providing the opportunity to shift revenue to
the local service category that is less vulnerable to competition and
elasticity. The Company's fourth quarter 1998 tariff increase included as
additional 11% nominal rate increase, 4.6% in real terms, to compensate for the
introduction of EAS.
34
<PAGE>
In January 2000, CONATEL and the Company entered into the Agreement,
allowing CANTV to increase rates in 2000. The first tariff increase became
effective March 23, 2000 and the second tariff increase is expected to become
effective on June 16, 2000. See "--The 2000 Agreement."
The 2000 Agreement
Under the Agreement entered into by CANTV and CONATEL in January 2000 and
signed on February 21, CANTV was permitted to make an initial adjustment to its
tariffs effective March 23, 2000 and is permitted to make a second adjustment
effective June 16, 2000. The Agreement provides that the tariff levels
permitted under the Agreement will be effective until November 27, 2000. Prior
to that date, CANTV and CONATEL must reach an agreement regarding the rates,
which will be applicable after November 27, 2000. If no agreement has been
reached by November 27, 2000, the rates provided for in the Agreement will apply
until year-end.
35
<PAGE>
The following table sets forth information regarding the Company's rates
for each component of residential and non-residential local service, domestic
and international long distance calls, and public telephone service effective
from April 30, 1999 through March 22, 2000, effective from March 23, 2000
through June 15, 2000 and as projected effective from June 16, 2000 under the
Agreement. The projected tariffs assume that no extraordinary adjustments are
required under the Agreement based on deviations in the U.S. dollar/bolivar
exchange rate from the projected rates set forth in the Agreement.
<TABLE>
<CAPTION>
Previous Tariffs Current Tariffs Projected Tariffs
Effective from Effective from Effective from June 16,
April 30, 1999 March 23, 2000 through 2000 (1)
through March 22, 2000 June 15,
(1) 2000 (1)
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Residential Service
Installation
Primary line 41,448.21 43,746.46 46,294.73 (2)
Secondary line 11,629.18 12,861.37 13,610.55 (2)
Subscription
With equipment 63,392.55 67,982.66 71,942.68 (2)
Without equipment 42,107.55 44,442.36 47,031.15 (2)
Monthly Rent
Primary line
Plans A, B and C 5,783.92 6,432.55 6,806.42 (2)
Plan D N.A. 13,404.20 13,404.20 (3)
Plan E N.A. 18,095.67 18,095.67 (3)
Plan F N.A. 40,212.60 42,555.00 (2)
Secondary line 326.33 360.91 360.91 (2)
Local usage (per minute) (4)
Plans A, B, and C (5) 17.17 22.23 23.53 (2)
Plan D N.A. 18.77 18.77 (3)
Plan E N.A. 17.09 17.09 (3)
Plan F N.A. 6.70 7.09 (2)
Wireline Prepaid N.A. 60.32 63.83 (2)
Non-residential Services
- ------------------------
Installation
Primary line 45,330.30 47,373.32 50,132.84 (2)
Secondary line 14,336.57 15,855.63 16,779.22 (2)
Subscription
With equipment 201,020.00 110,990.51 117,455.75 (2)
Without equipment 179,735.00 87,450.21 92,544.22 (2)
Monthly rent
Primary line 14,027.53 14,074.41 14,894.25 (2)
Secondary line 1,574.87 1,741.74 1,843.20 (2)
Local usage (per minute) (6) 23.00 25.07 26.53 (2)
Domestic Long Distance (7)
- --------------------------
Residential and non-residential 117.91 118.99 118.99 (2)
International Long Distance (7) 781.37 523.85 523.85 (2)
- -------------------------------
Public Telephone Service (7)
- ----------------------------
Local Call 17.08 20.91 22.13 (2)
Domestic Long Distance 109.06 118.98 118.98 (2)
Premium N.A. 42.22 44.68 (2)
</TABLE>
- ----------------------------------------
(1) In nominal bolivars.
(2) These tariffs are subject to extraordinary adjustment under the Agreement
based on deviations in the U.S. dollar/bolivar exchange rate from the
agreed projected rates set forth in the Agreement. The tariffs shown
assume no such adjustment.
(3) CANTV is permitted to modify plans D and E and create new plans subject to
a maximum monthly rent of US$80.
(4) Figures represent usage in excess of free minutes.
(5) Weighted average of the plans A, B and C offered by CANTV.
(6) Non-residential customers do not receive free impulses.
(7) Charge per minute.
36
<PAGE>
The following table sets forth information concerning the Company's rates for
wireless services since November 15, 1999:
Tariff effective from
November 15, 1999
-----------------------
Wireless Telephone Service
- --------------------------
Postpaid (1)
Activation fee --
Basic monthly service fee 26,945
Usage
Peak hour (per minute) 202
Off-peak hour (per minute) 169
Prepaid (2)
Peak hour (per minute) 335
Off-peak hour (per minute) 110
- ---------------------------------
(1) Weighted average of 13 plans offered by Movilnet effective November 15,
1999.
(2) Weighted average of 2 plans offered by Movilnet effective November 15,
1999.
The Agreement was entered into by CANTV and CONATEL following CONATEL's
denial of the tariff increase permitted under the Concession following CANTV's
last tariff increase under the Concession effective April 30, 1999. Newly
appointed representatives of CONATEL had expressed their disagreement with the
Concession's price-cap mechanism and informally took the position that since
CANTV failed to satisfy certain of the Concession's service mandates, it should
not be entitled to rate increases. In essence, CONATEL linked rate increases
permitted under the Concession to the fulfillment of the Concession service
mandates. The Company believes that such a link was not contemplated in the
Concession. As a result, on July 12, 1999, CANTV took the first step in
instituting a breach of contract action and damage claim by starting a
preliminary administrative procedure before the Attorney General of the
Republic. CANTV temporarily suspended the procedure in September 1999 when
CANTV and CONATEL signed a letter of understanding that named two independent
international telecommunications experts to evaluate and recommend appropriate
tariff and quality standards and methodologies for Venezuela after comparison
with similar information for twelve other countries. As set forth in the letter
of understanding, the experts would present their recommendations to CANTV and
CONATEL who would then jointly reach an agreement. Following receipt of the
recommendation of experts, which were nonbinding, both entities entered into the
Agreement, which provides for revised tariffs. The Agreement also provides for
new service quality mandates and establishes that compliance with these mandates
is not a precondition to the approval of tariff increases. See "-- Network
Expansion, Modernization and Quality Improvement Requirements."
The Agreement introduces seven residential service plans in substitution
for the basic, intermediate and premium plans previously in effect. Customers
will be switched automatically from their existing calling plans to the new
plans under the Agreement. Additionally, customers will be able to switch twice
without cost among calling plans within one year. The new plans, on average,
increase the tariffs of the plans they are replacing by 11% and also call for a
reduction of free minutes. Free minutes are reduced to 40, 65 and 90 minutes
compared to 60, 100 and 150 minutes included in the old plans. The Agreement
introduces a prepaid plan for clients with lower purchasing power. The prepaid
plan provides attractive tariffs established at a minimum of Bs. 10,000 for two
months and Bs. 60.32 charge per minute on local usage. A new premium public
telephony plan will be available in hotels and higher income level areas.
37
<PAGE>
The new tariffs also include a special plan for Internet users with basic rent
at Bs. 40,220, per month, 2,500 free minutes, and a charge per minute on local
usage, which decreases as volume increases.
Tariffs on Plans D and E may be modified by CANTV without the authorization
or approval of CONATEL up to a maximum monthly basic rent of US$80. The only
requirement is to publish changes during three consecutive days in two national
papers at least a month before their effective application. CANTV may also
offer additional plans, but in no instance may the basic rent exceed US$80.
The Agreement advances the rebalancing process, between long distance
tariffs and local tariffs, by reducing outgoing international long distance
weighted average rates by approximately 35%. Under the terms of the Agreement,
outgoing international long distance rates are decreased in some cases by 68%,
depending on the country. Domestic long distance rates are combined into one
nationwide plan with a weighted average of US$0.1875 per minute.
The Agreement provides for an extraordinary adjustment mechanism for
certain of CANTV's tariffs in the event that actual exchange rates, as defined
on the Agreement, deviate materially from the agreed projected exchange rates
set forth in the Agreement. Under the Agreement, the variance between projected
exchange rates and actual exchange rates is measured at the end of each month.
If the variance in exchange rates is less than 2.5%, the agreed tariffs will be
maintained. If the variance in exchange rates is greater than 2.5% but less
than 7.5%, the Agreement allows CANTV to adjust its tariffs to partially account
for this variance subject to a maximum cumulative adjustment in certain cases of
5%. In the event that actual exchange rates deviate in excess of 7.5% from the
projected rates contemplated in the Agreement, CANTV and CONATEL have agreed to
review the Agreement in order to reach a new agreement as to the applicable
level of tariffs. The Agreement sets forth agreed projected exchange rates
measured at the end of each month. The agreed projected exchange rate at
November 30, 2000 is Bs. 729.00 per US$1.00. CONATEL must authorize and approve
all extraordinary adjustments. If the bolivar were to devalue significantly at
rates greater than the ones contemplated in the Agreement, the inability of the
Company to raise its tariffs could result in an adverse effect on the Company's
financial condition and results of operations.
The Agreement allows CANTV to provide discounts on its domestic long
distance and international long distance rates subject to certain limitations.
The framework for regulating the telecommunications industry in Venezuela
following the opening of basic services to competition in November 2000 has not
been established and no framework has been agreed upon or proposed for the
setting of new rates. CANTV is unable to predict the timing and nature of rate
changes that may be allowed in the future.
Competitive Framework
The Telecommunications Regulations and the Concession contain various
provisions designed to introduce competition in the provision of
telecommunications services. The Concession provides that CANTV has the right
to provide switched, fixed telephone services in accordance with technological
advances in basic telephony, local, national and international, on an exclusive
basis until November 27, 2000, except in limited circumstances. The Ministry
may grant concessions for basic telephone services to third parties before
November 27, 2000 to (i) serve population centers with 5,000 or fewer
inhabitants if CANTV is not providing telephone services in such areas and does
not contemplate doing so and (ii) serve population centers with more than 5,000
inhabitants if CANTV has not installed an automatic switching center within a
specified period or the Ministry determines that CANTV has materially failed
38
<PAGE>
to meet the Concession's network expansion, modernization or service quality
terms for two consecutive years, and believes that such action would markedly
improve the existing situation.
Since December 1996, the Ministry has exercised its authority under this
provision to grant multi-services concessions to three companies, except for
domestic and international long distance services. These concessions were
awarded to Infonet in eight western states of Venezuela, to Digitel in seven
central states and to Elca in six eastern states. These concessions limit the
winning concessionaires' ability to provide basic telephone services to rural
areas where CANTV does not operate. However, these concessions allow the
concessionaires to provide wireless services in the geographic areas established
in their respective concessions. A number of difficult interpretive issues
arise under these concessions over the scope of basic telephone services that
are allowed and the areas where competition is permitted. Infonet and Digitel
have started operations and have installed Global System for Mobile
Communications ("GSM") digital fixed wireless and cellular services in rural
areas. Both have also expanded their services into larger population areas
where they compete directly with services provided by Movilnet and indirectly
with services provided by CANTV. Elca is in the process of starting operations.
The Concession also contemplates that the Government will permit competition by
the granting of other concessions in non-basic telecommunications services,
including packet-switched data transmission, public telephones, telex services,
rural services, private telecommunications networks and value-added services.
CANTV is required to permit the direct or indirect interconnection with the
basic telephone network of certain telecommunications services networks
authorized by the Ministry except for private telephone line interconnections,
which require the approval of CONATEL. The Concession and the
Telecommunications Regulations allow the Company to receive a reasonable profit
margin and a subsidy for local telephone service in its interconnection charges.
The subsidy is expected to disappear with the entrance of competition.
CONATEL has informally announced that it expects the National Assembly to
approve a new Telecommunications Law (the "New Telecommunications Law") during
the second quarter of 2000. Among the primary objectives of the New
Telecommunications Law are to provide an up-to-date regulatory framework for the
newly open telecommunications sector and offer customers the benefits of a
competitive environment. The current draft of the New Telecommunications Law
would, if adopted, respect all previously conferred rights and duties, including
obligations under interconnection agreements among operators, and provide for
the deregulation of tariffs and an equitable fiscal regime. The New
Telecommunications Law, in the form currently being considered, would also
establish a technically competent administrative agency to regulate the
telecommunications sector. The New Telecommunications Law would consider
telecommunications to be an economic activity that affects the public interest.
Under the New Telecommunications Law, telecommunication services would be
offered on a competitive basis and would include a requirement for universal and
public service obligations to be shared by telecommunications service providers.
The New Telecommunications Law would also adopt a new tax regime applicable
to all telecommunication service providers on the basis of annual earnings.
These taxes would replaced the current annual tax and concession fee of 5.5% for
wireline and 10.0% for wireless services. See "-- Concession Fee."
The current draft of the New Telecommunications Law would, if adopted,
include provisions that would provide for mandatory interconnections using cost-
based charges to stimulate the commencement of effective competition, eliminate
cross subsidies and promote self-regulation of the sector. It also contemplates
rights of way guarantees, number portability and operator pre-subscription. The
New
39
<PAGE>
Telecommunications Law provides for the creation of a universal fund, a public
service fund and a research and training fund. According to statements made by
CONATEL, new operators providing basic services would not be required to pay a
concession fee in order to compete with CANTV starting November 27, 2000 when
the monopoly of the basic telephone service, national long distance and
international long distance ends.
CONATEL has informally indicated that it currently plans to divide the
currently regulated services among basic or local service providers, domestic
long distance providers and international long distance providers, allowing
several providers to operate in all three-service areas. CONATEL expects that
in November 2000, competition in the telecommunications sector will, at least,
be comprised of CANTV, Telcel and certain cable companies.
CONATEL has, on several occasions, announced plans to auction an additional
cellular or local multipoint distribution service ("LDMS") concession. The
Company is unable to predict the timing when such a concession will be granted.
Concession Fee
The Concession requires that CANTV pay the Government and CONATEL,
respectively, an annual tax and an annual concession fee equal to 5% and 0.5%,
respectively, of the billings for all basic switched telephone services and
other telephone services provided by CANTV. In December 1998, the Company
reached an agreement with CONATEL over payments due from the Company for the
years 1991 through 1996. The Company then paid all outstanding amounts owed to
CONATEL in full.
The proposed law provides for taxes calculated on the basis of annual
earnings to be paid to the Government as follows: a 2.5% activity tax, a 0.5%
tax to cover CONATEL's activities, a 0.5% tax for spectrum allocation, 1% to
create the Universal Service Fund and 0.5% to create the telecommunications
Training and Development Fund. These taxes would replace the current annual tax
and concession fee of 5.5% for wireline and 10.0% for wireless services. In
addition to the taxes previously described, cellular providers would be subject
to a supplemental tax starting at 4.5% of annual earnings in the year 2000 and
decreasing 1% per annum up to 2005 when the supplemental tax will be eliminated.
These proposed taxes would, if adopted, be effective on January 1, 2001.
Assignment, Extension and Termination of the Concession
The Concession provides that, without the prior authorization of CONATEL,
CANTV may not transfer or assign, in whole or in part, the concession granted
thereby or the obligation to fulfill such concession. It further provides that
the control of CANTV may not be assigned or transferred without the approval of
the Ministry. In case of war, rebellion or other circumstances constituting a
serious threat to national defense and security, the Government may replace
CANTV as the holder of the Concession and take possession of the assets,
equipment, facilities and accounting records of CANTV. In such an event, the
Government is required to restore all assets, equipment, facilities and records
at the end of the period during which such circumstances occurred and provide
CANTV compensation for those damages imputable to the Government for which CANTV
could demonstrate as having resulted directly from such action.
The Concession may be revoked and terminated before its scheduled
expiration date in the event of a material breach of the Concession by CANTV, as
determined by CONATEL, including (i) the assignment or transfer of the
Concession, in whole or in part, without the prior authorization of the
Ministry, (ii) the engagement by CANTV in practices obstructing or restricting
free competition in those
40
<PAGE>
areas open to competition, (iii) the complete or partial interruption of
services provided by CANTV, except in the case of a local or national
catastrophe or with the Ministry's authorization, (iv) the failure to pay the
concession fee or annual taxes specified in the Concession, (v) the liquidation
or bankruptcy of CANTV, (vi) the failure to renew or the lapse of the surety
bond delivered by CANTV under the Concession and (vii) the failure to meet, on
an annual basis, 80% of any of the modernization and expansion goals specified
in the Concession, without the prior authorization of the Ministry. The
Concession provides that if termination occurs pursuant to any of the above
circumstances, CANTV will be required to indemnify the Government in an amount
equivalent to 5% of CANTV's revenues for the most recent fiscal year for which
audited financial statements are available upon notification by the Government.
Upon any termination of the Concession, all of CANTV's real estate,
equipment, structures and facilities assets allocated to the rendering of
services under the Concession would be forfeited to the Government in exchange
for a payment equal to the book value of such assets without depreciation or
amortization as recorded on the books used by CANTV for income tax purposes.
The gross and depreciated values of CANTV's assets at December 31, 1999 on such
basis, was approximately Bs. 711.9 billion and Bs. 526.7 billion, respectively.
In addition to revocation, CONATEL has the power to impose sanctions on
CANTV for certain violations of the Concession. Sanctions may include public
censure or a fine of up to a maximum amount of 1% of CANTV's billings for the
most recent fiscal year for which audited financial statements are available.
Violations that may lead to sanctions, in addition to those mentioned above for
termination, include (i) failure to give customers equal treatment, (ii)
assignment or transfer of goods and equipment used in telecommunications
services without prior authorization of the Ministry, (iii) failure to prevent
unauthorized installations of equipment that result in damage to the
telecommunications network, (iv) installation of faulty, obsolete or
unauthorized telecommunications equipment, (v) performance of unauthorized
telecommunications services, (vi) charges to customers in excess of the approved
tariffs, (vii) obstruction of inspections ordered by CONATEL, (viii) violation
of the labor law or the applicable union contract and (ix) failure to present or
comply with a proper numbering plan.
Surety Bond
The Company has delivered, as required by the Concession, a surety bond to
the Government to guarantee the performance of its obligations under the
Concession. The bond must be renewed every two years during the term of the
Concession, including any extensions thereof.
Other
The Concession also requires that CANTV implement a public telephony
program in population centers having 5,000 or fewer inhabitants without
telephone service, including providing for the annual installation of at least
one public telephone in each of at least twenty such population centers. The
Telecommunications Regulations require that the Company annually publish printed
telephone directories that include all non-private customer listings, that the
directories are made available annually to all telephone service customers and
that a classified directory is provided.
Additional Concessions
The Cellular Concession was granted to Movilnet in May 1992 and has an
initial term of 20 years. Subject to certain conditions, the Cellular
Concession is renewable for another 20-year term. The Cellular Concession gives
Movilnet the right to interconnect with CANTV's basic network and requires
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the payment to CONATEL of an annual concession fee equal to 10% of billings. The
Cellular Concession requires that Movilnet expand and digitalize the cellular
network, improve the quality and productivity of cellular services when
technically, materially and economically feasible as well as provide certain
rural, public and emergency services. Compliance with the requirements of the
Cellular Concession is monitored by CONATEL. Movilnet expects to exceed demand
and quality of service requirements mandated by the Cellular Concession and all
non-market-based Cellular Concession obligations such as rural service,
emergency service and public phone service.
Movilnet may set the tariffs it charges its customers for wireless services
within minimum and maximum limits set by CONATEL. Within such limits, the
Company may create different tariff plans, including incentives and promotional
programs. In December 1998, new rate limits were established by CONATEL,
pursuant to a request by the wireless operators.
Pursuant to regulations relating to the operation of cellular telephony,
CANTV and Movilnet must operate separately. Each company must maintain
independent personnel, management, accounting and marketing departments, among
other requirements.
The majority of the Company's value-added services are provided directly by
the Company's wholly-owned subsidiary, CANTV Servicios. Incorporated in 1994,
CANTV Servicios is a full Internet Service Provider. Under a concession to
provide value-added services, CANTV Servicios also offers fax and voice-mail
with alert messages to pagers and cellular telephones, enhanced fax, computer
network management and professional services including outsourcing of
telecommunications networks. The Value-Added Concession was recently expanded
to include Virtual Private Networks, access to Extranets and Internets,
electronic banking, video conferencing and fax over Internet Protocol ("FoIP").
In accordance with the Concession, services provided pursuant to the
Cellular and Value-Added Concessions may not be subsidized by CANTV.
Item 2. Description of Property
The Company's property consists principally of network facilities, land and
structures required to provide telecommunications services. As of December 31,
1999 the Company's fixed assets were comprised of network facilities (81.7%),
buildings and facilities (9.6%), other support assets (7.7%) and construction
work in process (1.0%).
Prior to the privatization, certain municipalities granted land to the
Company in order to facilitate the provision of telephone services in their
respective communities. In many cases, no formal documentation was prepared for
the transfer of title to the Company of such land. Since privatization, defects
with respect to a substantial number of titles have been favorably resolved. In
other cases, the Company is in discussions with the municipalities to resolve
these title issues. The Company expects that these negotiations will be
favorably resolved. At the present time, there are no legal proceedings
involving such properties.
Item 3. Legal Proceedings
The Company is involved in numerous administrative and judicial
proceedings. The majority of these proceedings have been filed by former
employees requesting additional severance benefits. Based on the opinion of its
external legal counsel handling these proceedings, management considers that a
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substantial number of these actions will be resolved in the Company's favor.
Nevertheless, management believes that the Company has recorded adequate
reserves as of December 31, 1999 for all such matters. There are no legal
pending proceedings, other than ordinary routine litigation incidental to the
Company's business, which are material to the Company.
During 1998, the Company was advised of a legal claim filed by Manufacturas
Plasticas Telefonicas, C.A. ("Maplatex"), for breach of contract by CANTV in
connection with a telephone equipment supply contract claiming damages totaling
Bs. 26.6 billion. In June 1999, the judicial proceeding was closed. The
parties agreed to settle their dispute pursuant to a settlement agreement under
which CANTV agreed to pay Maplatex Bs. 1.9 billion (expressed in billions of
constant bolivars at June 30, 1999). See Note 19(c) to the Audited Financial
Statements.
Item 4. Control of Registrant
Until December 1991, CANTV operated under the control of the Government which
owned 100% of the equity share capital. In December 1991, the Government,
through the Venezuelan Investment Fund, sold 40% of the equity share capital of
CANTV to VenWorld for approximately US$1.885 billion, and provided for the
transfer of 11% of the equity share capital of CANTV to the Employee Trusts. In
late 1996, the Government sold additional 348,100,000 shares in an Initial
Public Offering. The following table sets forth certain information concerning
ownership of the equity capital shares outstanding of CANTV as of December 31,
1999:
<TABLE>
<CAPTION>
At December 31, 1999
-----------------------------------------------
Number of
Shares Ownership
Class (in thousands) Percentage
--------------- -------------------- --------------------
<S> <C> <C> <C>
VenWorld A 400,000 40.05%
Venezuelan Investment Fund (1) B 51,900 5.20%
Company employees and retirees (1)(2) C 130,185 13.03%
GTE (3)(4) D 32,946 3.30%
Others (4) D 383,739 38.42%
</TABLE>
______________________________
(1) In August 1998, the Venezuelan Investment Fund transferred 90 million Class
B Shares (representing 9% of the equity share capital of CANTV) to the
Employee Trusts as New Class C Shares for subscription by employees and
retirees of CANTV, as provided for at the time of the Initial Public
Offering.
(2) Class C Shares held directly or through the Employee Trusts.
(3) GTE, acting through its indirect wholly-owned subsidiary, GTE Venezuelan
Telephone Incorporated, purchased 7,823,200 ADSs, for an aggregate purchase
price of approximately US$190 million, in the Initial Public Offering and
in transactions consummated following the completion of the Initial Public
Offering. In December 1998, GTE exchanged 3,116,653 ADSs for 7,728,307
shares in VenWorld held by Banco Mercantil, C.A., S.A.C.A., (Banco
Universal) Fiduciary. At December 31, 1999, GTE owns ADSs representing an
aggregate of 32,945,829 Class D Shares, and owns 57.8% of the equity share
capital of, and controls, VenWorld.
(4) Includes Class D Shares held by Citibank, N.A. as depositary for American
Depositary Receipts of CANTV, each of which represents seven Class D
Shares.
VenWorld is a company organized under the laws of Venezuela and established
by a private consortium of companies, through wholly-owned subsidiaries, led by
GTE (57.8%), and including Telefonica Venezuelan Holding B.V. (16.0%),
Inversiones Inextel, C.A. (originally, Electricidad de
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Caracas) (16.0%), Banco Mercantil, C.A., S.A.C.A., (Banco Universal) Fiduciary
(originally, Consorcio Inversionista Mercantil (CIMA), C.A. S.A.C.A.) (5.2%),
and AT&T Venezuela Holding Ltd. (5.0%).
The Employee Trusts were established to facilitate the sale of Class C
Shares pursuant to a stock purchase program established for certain employees
and retirees of the Company.
In August 1998, eligible employees and retirees were offered the right to
purchase up to 90 million New Class C Shares from the Employee Trusts pursuant
to a stock purchase program ("Stock Purchase Program") established by the
Venezuelan Investment Fund. In accordance with the Stock Purchase Program, 25%
of the 90 million New Class C Shares were reserved for retirees of CANTV and 75%
of the shares were reserved for active employees of the Company based on
employee base salary and length of employment at August 1996, with no employee
eligible for more than 15,000 New Class C Shares. Under the Stock Purchase
Program, eligible employees were offered a non-interest bearing installment
payment plan to purchase the New Class C Shares through salary deductions over a
period up to 12 years, with the purchase price to be paid in full at the end of
this period. Those employees still paying for Class C Shares under the 1991
installment plan are granted a grace period under the Stock Purchase Plan until
all prior Class C Shares have been paid in full. At that time, salary
deductions for the New Class C Shares purchased will begin, provided that an
established percentage of the Class C shares have not been sold by the employee
or retiree. If the Class C Shares are sold, an accelerated payment plan will
apply. In accordance with the Stock Purchase Plan, dividends paid by CANTV
prior to payment in full for the New Class C Shares are distributed with 50%
paid to the Class C shareholder and 50% applied to the shareholder's unpaid
balance of the New Class C Shares.
On November 16, 1999 an extraordinary shareholders' assembly authorized a
share repurchase program for up to 50,000,000 of CANTV's outstanding Class D
Shares. On March 31, 2000 an extraordinary shareholders' assembly authorized a
new share repurchase program for the period April 1, 2000 to September 30, 2000.
The outstanding shares repurchased pursuant to these programs will be canceled.
The Company intends to spend approximately Bs. 97,387 (US$150 million) on these
programs subject to market conditions. The Capital Markets Law limits each
repurchase program to six months and requires publication of a maximum
repurchase price per share and a maximum volume of shares. In order to comply
with these local regulations, the 1999 repurchase program specified a maximum
repurchase price of Bs. 3,696 per share or up to US$40 per ADS and a maximum
volume of up to 5% of the outstanding shares. The 2000 repurchase program
specifies a maximum purchase price of Bs. 4,871 per share or up to US$50 per ADS
and a maximum volume of up to 5% of the outstanding shares (when combined with
shares repurchased under the 1999 repurchase program). As part of the share
repurchase program originally authorized by the Company in 1999, Class C
shareholders were permitted to offer for sale to the Company a portion of the
shares purchased either at the time of privatization (11%) or at the Initial
Public Offering (9%) during the period from February 25, 2000, through March 14,
2000. During this time period, shareholders offered over 28 million Class C
Shares to the Company. The number of Class C Shares that will be repurchased
and the time frame to finalize the transaction, will be established by a
technical committee appointed by the Board of Directors on January 28, 2000.
See Note 15 to the Audited Financial Statements.
As of December 31, 1999, CANTV had acquired 1,229,900 of the outstanding
shares at a weighted average price of Bs. 2,177 per share, equivalent US$23.50
per ADS, based on exchange rates at December 31, 1999. Through March 31, 2000,
the Company had acquired an aggregate of 19,635,000 of the outstanding shares
at a weighted average price of Bs. 2,826 per share, equivalent to US$29.53,
based on exchange rates at March 31, 2000.
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Item 5. Nature of Trading Market
Following the Initial Public Offering of the Company's Class D Shares on
November 22, 1996, the Company's Class D stock began trading on the Caracas
Stock Exchange, the smaller Maracaibo Stock Exchange, and Electronic Stock
Exchange in Venezuela. Following the Initial Public Offering, American
Depositary Shares ("ADSs"), each representing 7 Class D Shares, began trading on
the New York Stock Exchange. Citibank N.A. is acting as depositary in
connection with the ADSs.
The table below sets forth, for the periods indicated, the reported high
and low sale prices for the Class D Shares on the Caracas Stock Exchange:
<TABLE>
<CAPTION>
Caracas Stock Exchange
- ---------------------------------------------------------------------------------------------------------------------
High Low Average
(Bs.) (Bs.) Trading Volume
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
1998
1st quarter 3,185.00 2,300.00 260,912
2nd quarter 3,130.00 1,900.00 106,491
3rd quarter 2,200.00 880.00 74,502
4th quarter 1,900.00 1,141.00 68,642
1999
1st quarter 1,600.00 1,200.00 85,913
2nd quarter 2,640.00 1,400.00 202,325
3rd quarter 2,505.00 1,700.00 128,568
4th quarter 2,501.00 1,935.00 103,066
2000
1st quarter 2,213.00 3,620.00 176,815
</TABLE>
The table sets forth, for the periods indicated, the reported high and low
sale prices for the ADSs on the New York Stock Exchange:
<TABLE>
<CAPTION>
New York Stock Exchange
- ---------------------------------------------------------------------------------------------------------------------
High Low Average
(Bs.) (Bs.) Trading Volume
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
1998
1st quarter 42-15/16 31-3/4 459,990
2nd quarter 42 23-3/4 450,786
3rd quarter 27-3/4 10-1/8 584,023
4th quarter 21 13-3/8 435,357
1999
1st quarter 18-1/5 14-3/4 211,431
2nd quarter 31 17 311,789
3rd quarter 28 19-15/16 197,453
4th quarter 27-3/16 21-3/4 225,023
2000
1st quarter 39 24-3/16 298,324
</TABLE>
As of December 31, 1999 the Company estimates that the number of beneficial
holders of its Class D Shares (or of ADSs representing its Class D Shares) in
the United States was approximately 17,525, representing approximately 89.7% of
total Class D Shares outstanding.
Item 6. Exchange Controls and Other Limitations Affecting Security Holders
There are currently no restrictions under Venezuelan law on export or
import of capital including foreign exchange controls, restrictions on payments
or remittance of dividends. However, due to
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Venezuela's macroeconomic condition, the Government has imposed exchange
controls on foreign exchange transactions and fixed the exchange rate during
certain periods.
On June 27, 1994, the Government established certain foreign currency
exchange controls and soon thereafter fixed the official bolivar/U.S. dollar
exchange rate. The rate was originally fixed at Bs. 170.00 per U.S. dollar and
was adjusted to Bs. 290.00 per U.S. dollar in December 1995. These controls,
together with economic conditions in Venezuela, forced the Company to seek to
restructure its debt obligations in 1995. Such controls also limited the
ability of foreign investors to repatriate capital and of Venezuelan companies
to remit dividends in shares of Venezuelan companies represented by American
Depositary Shares, American Depositary Receipts, Global Depositary Shares or
Global Depositary Receipts. These controls were removed on April 22, 1996.
Since July 1996, the Central Bank of Venezuela has intervened to maintain the
exchange rate between 7.5% above and 7.5% below the reference rate. The
reference rate was originally set at Bs. 470.00 per U.S. dollar and is adjusted
from time to time to account for projected inflation. On January 14, 1998, the
reference rate was reset to Bs. 508.50 per U.S. dollar and the Central Bank of
Venezuela announced that it would adjust the reference rate by 1.16% to 1.28%
monthly. Under this policy, the reference rate was Bs. 686.54 per U.S. dollar
at December 31, 1999 and Bs. 714.00 per U.S. dollar at March 31, 2000.
Item 7. Taxation
Venezuelan Tax Considerations
The following summarizes the principal Venezuelan tax consequences under
present law of the purchase, ownership and disposition of ADSs and Class D
Shares and receipt of dividends thereon by persons (including corporations) who
are non-residents of Venezuela. This summary is based on current Venezuelan tax
law and is for general information only.
As used herein, the term "non-resident of Venezuela" generally refers to a
natural person who is not physically present in Venezuela for more than 180 days
during the calendar year and a legal entity that neither is organized under
Venezuelan law nor maintains a registered branch in Venezuela. If a legal
entity has an office in Venezuela, that office may be subject to taxation in
Venezuela. In general, as more fully discussed below, capital gains and
dividends paid to the Depository with respect to Class D Shares underlying the
ADSs will be treated as foreign source income not subject to taxation in
Venezuela. Capital gains and dividends with respect to Class D Shares held by
persons other than the Depository who are non-residents in Venezuela will be
subject to taxation in Venezuela as Venezuelan source income.
Taxation of Dividends
Dividends paid by CANTV with respect to Class D Shares will not be subject
to Venezuelan Income tax or withholding tax with respect to dividends arising
out of earnings and profits for periods prior to December 31, 2000. Any
dividends arising out of either accumulated or current earnings and profits for
periods closing after January 1, 2001 paid to the Depositary with respect to
Class D Shares underlying the ADSs (whether in cash or stock) will be treated as
foreign source income on return (rendimiento) of the ADSs not subject to
Venezuelan taxation or income tax withholding. Any dividends arising out of
either accumulated or current earnings and profits for periods closing after
January 1, 2001 and paid in cash with respect to Class D Shares held by a person
other than by the Depositary will be subject to a withholding tax at the rate of
34% at the time of payment of the dividend to the shareholder except as may be
provided in an applicable tax treaty. Subject to any applicable tax treaty, any
such
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<PAGE>
dividends arising out of either accumulated earnings and profits or current
earnings and profits for periods closing after January 1, 2001 and paid in stock
with respect to Class D Shares held by a person other than by the Depositary
will be subject to withholding at the rate of 34%, at the time that such stock
is disposed of by the shareholder. Generally speaking except as otherwise
provided in an applicable income tax treaty, the term "dividend" for holders of
Class D Shares other than the Depositary means any distribution of property made
by a corporate entity to its shareholders or partners attributable to the amount
by which accumulated earnings and profits exceeds net taxable income of such
corporate entity for financial and tax periods of corporate entities closing
after January 1, 2001. Under the conventions for the avoidance of double
taxation with respect to taxes on income and capital executed by Venezuela with
other countries, the term "dividend" usually means any distribution of property
made by a corporation to its shareholders out of either accumulated earnings and
profits or current earnings and profits.
Disposition of ADSs
Gains from the sale or other disposition of ADSs and exchanges of ADSs for
Class D Shares generally will not be subject to Venezuelan income tax or
withholding regardless of the location where such transactions occur. As
described more fully below, however, a disposition of Class D Shares effected
through a Venezuelan stock exchange (which would include a disposition by a
broker on behalf of an ADS holder) generally will be subject to a 1% withholding
tax on the gross amount realized from the sale.
Disposition of Class D Shares
Generally speaking, except as otherwise provided by an applicable tax
treaty, gains from the sale or other disposition (other than through a
Venezuelan stock exchange) of Class D Shares (or rights to subscribe for Class D
Shares) will be subject to Venezuelan income tax at a maximum rate of 34% of
gross proceeds or at the rates set forth under the relevant tax treaty. Upon
sale or other disposition (other than through a Venezuelan stock exchange) the
buyer will be required to withhold taxes at rates of up to 5% of the gross
proceeds or at the rate set forth in the relevant convention for the avoidance
of double taxation with respect to taxes on income and capital. Holders of
Class D Shares will be required to file a Venezuelan income tax return, and such
holders may claim a refund for amounts withheld in excess of income tax due with
respect to such gains. Sales of Class D Shares effected through a Venezuelan
stock exchange will only be subject to withholding tax at a flat rate of 1% on
the seller's gross amount realized from the sale. Holders of Class D Shares are
not required to file a Venezuelan tax return with respect to such sales.
The amount of gain from the sale or other disposition of Class D Shares (or
rights to subscribe for Class D Shares) other than through a Venezuelan stock
exchange, is the excess of the amount realized by the holder over the holder's
tax basis in such Class D Shares (or rights to subscribe for Class D Shares)
sold or otherwise disposed of. In general, a holder's tax basis in a Class D
Share will be the holder's cost of acquisition, and a holder's basis in a share
received upon exercise of a right to subscribe for a Class D Share is the sum of
the exercise price paid and the tax basis in such right. If a Class D Share was
received as a stock dividend after January 1, 2000, the tax basis for such share
would be zero.
Dividend Indebtedness Vouchers
The distribution by CANTV of dividend indebtedness vouchers and the payment
by CANTV of the principal amount of such vouchers are not subject to Venezuelan
income tax or withholding until after December 31, 2000. The distribution by
CANTV of dividend indebtedness vouchers with respect to
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<PAGE>
dividends accrued after December 31, 2001 paid to the Depositary will not be
subject to income tax in Venezuela because such income will be treated as income
from foreign sources with respect to ADSs. However, the distribution by CANTV of
dividend indebtedness vouchers with respect to dividends accrued after December
31, 2001 paid to persons other than the Depositary that hold Class D Shares will
be subject to withholding of income tax at the rate of 34% at the time the
vouchers are issued. Such taxes are calculated on the excess of accounting
profits over the net taxable income as indicated above.
Generally, interest paid by CANTV on the vouchers paid to the Depositary
are not subject to taxation in Venezuela or to income tax withholding because
such income will be treated as foreign source income with respect to ADSs.
However, interest paid by CANTV on the vouchers to a person other than the
Depositary that hold Class D Shares is subject to Venezuelan income tax at the
ordinary tax rates and generally is subject to withholding at a net rate of
32.3% for non-residents. Gains from the sale or other disposition of a voucher
made by the Depositary is not subject to taxation in Venezuela because such
income will be treated as from a foreign source with respect to ADSs. However,
gains from the sale or other disposition of a voucher by a person other than the
Depositary that holds Class D Shares calculated as the excess of the proceeds of
the sale over the principal amount of the voucher, will be subject to Venezuelan
income tax at a maximum rate of 34% but will not be subject to withholding. The
tax treatment of interest income and gains from the disposition of a voucher by
a non-resident other than Depositary with respect to ADSs in Venezuela may vary
if the recipient of the interest or the seller of the voucher is a resident of a
country which has entered into a tax treaty with Venezuela.
Non-residents other than the Depositary with respect to the ADSs receiving
interest or realizing gain from the sale or other disposition of vouchers
generally are required to comply with the ordinary annual income tax filing
requirements for residents doing business in Venezuela.
Inheritance and Gift Tax
The acquisition of ADSs through inheritance or gift by a resident or a non-
resident of Venezuela from a non-resident of Venezuela is not subject to
Venezuelan inheritance and gift taxes. The acquisition of ADSs through
inheritance or gift from a resident of Venezuela is subject to Venezuelan
inheritance and gift taxes. Venezuelan inheritance and gift tax rates are
graduated and vary according to the family relationship of the recipient to the
decedent or the donor; closer relatives are subject to lower rates.
The acquisition of Class D Shares (or rights to acquire Class D Shares)
through inheritance or gift is subject to Venezuelan inheritance and gift tax,
regardless of the residence of the decedent or donor. The rate of Venezuelan
inheritance or gift tax imposed on a transfer generally depends on the value of
the devise or gift and on the relationship of the recipient to the decedent or
donor. The beneficiary of an inheritance is responsible for the payment of the
inheritance tax. The donor and the donee are jointly and severally responsible
for the payment of the gift tax.
Other Taxes
There are no Venezuelan stamp, issue, registration or similar taxes or
duties payable by holders of ADSs or Class D Shares (or rights to subscribe for
Class D Shares). Other than the taxes discussed above, no other Venezuelan
transfer taxes are applicable to the transfer of ADSs or Class D Shares (or
rights to subscribe for Class D Shares), including deposits and withdrawals of
Class D Shares to or from the ADR facility.
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<PAGE>
United States Federal Income Taxation
The following is a summary of the principal United States federal income
tax consequences under present law of an investment in the ADSs or the Class D
Shares. This summary applies only to investors that hold the ADSs or Class D
Shares as capital assets and that have the U.S. dollar as their functional
currency. It is not intended as tax advice to any particular investor, certain
of which (such as banks, insurance companies, dealers, traders who elect to mark
to market, tax-exempt entities, persons holding an ADS or Class D Share as part
of a straddle, hedging, conversion or constructive sale transaction and holders
of 10% or more of the voting shares of CANTV) may be subject to special tax
treatment. The Company believes, based upon the advice of counsel, and the
discussion therefore assumes that it is not and will not become a passive
foreign investment company for United States federal income tax purposes.
As used here, the term "U.S. holder" means a beneficial owner of ADSs or
Class D Shares that is (i) a United States citizen or resident, (ii) a domestic
corporation or partnership, (iii) a trust subject to the control of a U.S.
person and the primary supervision of a U.S. court or (iv) an estate the income
of which is subject to United States federal income taxation regardless of its
source. The term "non-U.S. holder" refers to any other holder of ADSs or Class
D Shares. Holders of ADSs (or ADRs evidencing ADSs) generally will be treated
as the owners of the Class D Shares represented by those ADSs (or ADRs
evidencing ADSs).
U.S.-Venezuela Income Tax Treaty
The United States and Venezuela have concluded an income tax treaty, which
entered into force on December 30, 1999. U.S. holders who are eligible for the
benefits of this income tax treaty generally will be subject to withholding tax
on dividends at a maximum rate of 15 percent (or a lower rate in the case of
certain persons that own more than 10% of the Company's voting stock) and
generally will not be subject to Venezuelan income or withholding tax on gains
from the disposition of Class D Shares or ADSs. However, the determination as
to whether a U.S. person is eligible for the benefits of the income tax treaty
is very complex. In particular, a U.S. person that owns Class D Shares that is
not subject to income tax in the United States (such as a partnership or other
pass-through entity) or that has, or is deemed to have a permanent establishment
in Venezuela also may not be eligible for the benefits of the treaty in respect
of taxes on income from, or proceeds from the sale or ADSs and Class D Shares.
U.S. holders are urged to consult their own tax advisors about the possible
application to them of the income tax treaty.
Dividends and Other Distributions
Dividends paid with respect to the ADSs or Class D Shares generally will be
included in the gross income of a U.S. holder as ordinary income (to the extent
paid out of current or accumulated earnings and profits, as determined under
U.S. federal income tax principles) when the dividends are received by the
Depositary. The dividends generally will be foreign source income. The
dividends will not be eligible for the dividends-received deduction allowed to
corporations. Dividends paid in bolivars will be included in income as a U.S.
dollar amount based on the exchange rate in effect on the date of receipt
(which, in the case of ADSs, will be the date of receipt by the Depositary). A
U.S. holder will have a basis in the bolivars received equal to their U.S.
dollar value on the date of receipt. Any gain or loss recognized on a
subsequent sale or conversion of the bolivars for a different amount generally
will be United States source ordinary income or loss.
Distributions to U.S. holders of additional Class D Shares or rights to
subscribe for Class D Shares generally should not be subject to federal income
tax. However, such distributions could be taxable depending on the nature of a
particular distribution. A U.S. holder's tax basis in the Class D
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<PAGE>
Shares or rights that are not subject to U.S. federal income tax when received
generally is determined by allocating the holder's basis in its ADSs between the
ADSs and the Class D Shares or rights on the basis of the relative fair market
values of each, except that in the case of rights whose fair market value is
less than 15% of the fair market value of the Class D Shares with respect to
which the rights are distributed, the basis of the rights is zero unless the
shareholder elects to make such an allocation.
A non-U.S. holder generally will not be subject to United States federal
income tax on dividends paid by CANTV with respect to the ADSs or Class D Shares
unless such income is effectively connected with the conduct by the non-U.S.
holder of a trade or business within the United States.
Capital Gains
U.S. holders will recognize capital gain or loss upon the sale or other
disposition of ADSs or Class D Shares (or rights to subscribe for Class D
Shares) held by the U.S. holder or the Depositary in an amount equal to the
difference between such U.S. holder's basis in the ADSs, Class D Shares or
rights, as the case may be, and the amount realized on such sale or other
disposition. Gain and loss recognized by a U.S. holder generally will be
treated as United States source income. Consequently, in the case of a
disposition of Class D Shares or ADSs that in either case is subject to
Venezuelan tax, the U.S. holder may not be able to use the foreign tax credit
for Venezuelan tax imposed on the gain unless it can apply the credit against
U.S. tax due on other income from foreign sources in the appropriate foreign tax
credit category, or, alternatively, it may take a deduction for such Venezuelan
tax.
U.S. holders will not recognize gain or loss on deposits or withdrawals of
Class D Shares in exchange for ADSs or on the exercise of subscription rights.
If subscription rights expire unexercised, a U.S. holder that has allocated
basis to such rights received as a dividend will not recognize a loss but must
reallocate such basis to the remaining ADSs or Class D Shares held.
A non-U.S. holder of ADSs or Class D Shares will not be subject to United
States federal income tax on gain from the sale or other disposition of ADSs or
Class D Shares unless (i) such gain is effectively connected with the conduct of
a trade or business within the United States or (ii) the non-U.S. holder is an
individual who is present in the United States for at least 183 days during the
taxable year of the disposition and certain other conditions are met.
Dividend Indebtedness Vouchers
Depending upon their terms when issued, dividend indebtedness vouchers
issued by CANTV should be treated as debt instruments for United States federal
income tax purposes. A U.S. holder likely will be required to include in gross
income as a dividend the fair market value of a dividend indebtedness voucher
distributed with respect to the Class D Shares when the voucher is received
(which, in the case of ADSs, will be the date of receipt by the Depositary).
The amount included and the holder's initial tax basis in the voucher will be
the U.S. dollar market value of the voucher on the date of receipt.
The voucher may be treated as issued with original issue discount ("OID")
in an amount equal to the difference between the total bolivar payments to be
received on the voucher and the bolivar market value of the voucher when
received. A U.S. holder will be required to include such OID in gross income on
a constant yield to maturity basis during the period from the receipt of the
voucher to the stated maturity date of the voucher, even though no cash
distributions will be received during that period. A U.S. holder's basis in the
voucher will be increased by undistributed OID included in income. A U.S.
holder may recognize foreign currency gain or loss upon the retirement of the
voucher or the sale or other disposition of the voucher and on any subsequent
sale or conversion of the bolivars received.
50
<PAGE>
Such gain or loss generally will be United States source ordinary income or
loss. Gain or loss on the sale or other disposition of the voucher in excess of
foreign currency gain or loss generally will be capital gain or loss.
U.S. holders should consult their tax advisors concerning the United States
federal income tax consequences of the receipt, ownership and disposition of
dividend indebtedness vouchers.
Information Reporting and Backup Withholding
Dividends in respect of the ADSs or Class D Shares paid to non-corporate
U.S. holders and the proceeds from the sale, exchange, or redemption of the ADSs
or Class D Shares paid to noncorporate U.S. holders may be reported to the
United States Internal Revenue Service. A 31% backup withholding tax also may
apply to amounts paid to such holders unless they provide an accurate taxpayer
identification number or otherwise establish a basis for exemption. Payments of
dividends and the proceeds from the sale or other disposition of ADSs or Class D
Shares made outside the United States to non-U.S. holders generally are not
subject to information reporting and backup withholding, provided that, in the
case of proceeds from a sale or disposition, the broker through which such
payments are received fulfills certain requirements. In addition, for payments
made after December 31, 2000, non-U.S. holders may be required to provide
certification of foreign status. The amount of any backup withholding from a
payment to a holder will be allowed as a credit against the holder's United
States federal income tax liability.
Item 8. Selected Financial Data
The following information should be read in conjunction with and is
qualified in its entirety by reference to the Audited Financial Statements of
the Company, including the Notes thereto, included elsewhere in this Form 20-F.
The Company's Audited Financial Statements are prepared in accordance with
Venezuelan GAAP, which differ in certain important respects from U.S. GAAP, and
have been presented in constant bolivars as of December 31, 1999. See
"Introduction" and Note 4(b) to the Audited Financial Statements for a
discussion of the methodology used to prepare the constant bolivar financial
statements. Note 26 to the Audited Financial Statements provides a description
of the principal differences between Venezuelan GAAP and U.S. GAAP and a
reconciliation to U.S. GAAP of net income for the years ended December 31, 1997,
1998 and 1999 and total stockholders' equity at December 31, 1998 and 1999.
51
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
1995 (1) 1996 (1) 1997 (1) 1998(1) 1999 (1) 1999 (2)
----------------------------------------------------------------------------
(in millions, except per share and per ADS data)
Income Statement Data:
Venezuelan GAAP:
- ---------------
Revenues
<S> <C> <C> <C> <C> <C> <C>
Local and domestic long distance usage 694,343 660,548 679,446 572,917 541,743 835
Basic rent 214,237 252,151 324,280 341,232 319,728 492
Public telephones 96,144 80,261 111,495 108,675 105,508 163
----------------------------------------------------------------------------
Local and domestic long distance 1,004,724 992,960 1,115,221 1,022,824 966,979 1,490
International long distance 311,067 266,774 241,551 179,888 133,146 205
Net settlements 35,524 48,853 51,870 42,046 28,016 43
----------------------------------------------------------------------------
International long distance 346,591 315,627 293,421 221,934 161,162 248
Other wireline-related services 4,764 66,575 109,203 125,375 143,212 221
----------------------------------------------------------------------------
Total wireline services 1,356,079 1,375,162 1,517,845 1,370,133 1,271,353 1,959
Wireless services 143,779 165,495 215,286 305,159 405,514 624
Other telecommunications-related services 19,589 15,186 19,462 32,472 38,663 59
----------------------------------------------------------------------------
Total operating revenues 1,519,447 1,555,843 1,752,593 1,707,764 1,715,530 2,642
Operating income 247,964 317,899 464,987 198,573 141,542 218
Other (expense) income, net (155,662) 160,664 70,309 (25,532) (38,685) (60)
Income before income taxes 92,302 478,563 535,296 173,041 102,857 158
Income tax 23,323 32,572 120,747 1,170 13,653 21
Net income 68,979 445,991 414,549 171,871 89,204 137
Net income per share 68.98 445.99 414.55 171.87 89.21 0.14
Net income per ADS 482.86 3,121.93 2,901.85 1,203.09 624.50 0.96
Cash dividends declared per share (3) -- -- 26.66 174.79 62.41 0.10
Cash dividends declared per ADS (3) -- -- 186.62 1,223.53 436.87 0.70
Extraordinary cash dividends declared per share (3) -- -- -- -- 100.00 0.15
Extraordinary cash dividends declared per ADS (3) -- -- -- -- 700.00 1.05
Average shares outstanding (000s) 1,000,000 1,000,000 1,000,000 1,000,000 999,898 999,898
US GAAP:
- -------
Total operating revenues 1,519,447 1,555,843 1,752,593 1,707,764 1,715,530 2,642
Operating income 318,188 339,693 257,440 186,839 141,542 218
Net income 1,133 243,683 186,846 191,535 167,446 258
Net income per share 1.14 246.13 188.54 193.15 168,76 0.26
Net income per ADS 7.98 1,722.91 1,319.78 1,352.05 1,181.32 1.82
Cash dividends declared per share (3) -- -- 26.66 174.79 62.41 0.10
Cash dividends declared per ADS (3) -- -- 186.62 1,223.53 436,87 0.70
Extraordinary cash dividends declared per share (3) -- -- -- -- 100.00 0.15
Extraordinary cash dividends declared per ADS (3) -- -- -- -- 700.00 1.05
Average shares outstanding (000s) 990,072 990,072 991,018 991,633 992,229 992,229
_____________________________________
</TABLE>
(1) Bolivar amounts are in constant bolivars as of December 31, 1999.
(2) Bolivar amounts have been translated into U.S. dollars, solely for the
convenience of the reader, at the rate of Bs. 649.25 = US$1.00, the Daily
Exchange Rate on December 31, 1999. See "Exchange Rates."
52
<PAGE>
(3) Ordinary cash dividends declared per share and per ADS at the dividend
declaration date were Bs. 13.24 and Bs. 92.68, respectively, in 1997, Bs.
124.10 and Bs. 868.70, respectively, in 1998 and Bs. 55.33 and Bs. 387.31,
respectively, in 1999. Extraordinary cash dividends declared per share and
per ADS at the dividend declaration date were Bs. 100.00 and Bs. 700.00,
respectively, in 1999. Ordinary cash dividends paid by the Company per
share and per ADS converted into U.S. dollars at the exchange rate as of
the dividend payment date were US$ .03 and US$ 0.19, respectively, in 1997.
The Company paid the dividends declared in 1998 in two equal payments. The
first payment represented US$ 0.12 per share and US$ 0.81 per ADS and the
second payment represented US$ 0.11 per share and US$ 0.75 per ADS at the
exchange rate as of their respective payment dates. In 1999, the Company
declared and paid an ordinary dividend and an extraordinary dividend. The
ordinary dividend represented US$ 0.09 per share and US$ 0.63 per ADS at
the exchange rate of its respective payment date. The extraordinary
dividend represented US$ 0.15 per share and US$ 1.05 per ADS at the
exchange rate as of its respective payment dates. On March 31, 2000, the
Company declared an ordinary cash dividend of Bs. 60.00 per share, or Bs.
420.00 per ADS payable on April 28, 2000.
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------------------------
1995 (1) 1996 (1) 1997 (1) 1998 (1) 1999 (1) 1999 (2)
--------------------------------------------------------------------------------
(in millions)
Balance Sheet Data:
Venezuelan GAAP:
- ---------------
<S> <C> <C> <C> <C> <C> <C>
Working (deficit) capital (132,234) 122,442 223,912 270,644 362,492 558
Property, plant and equipment, 3,390,321 3,279,521 3,335,314 3,325,081 3,116,672 4,800
net
Total assets 4,479,296 4,270,960 4,484,234 4,445,458 4,335,300 6,677
Total indebtedness 1,126,797 685,597 452,474 442,984 395,117 608
Total stockholders' equity 2,508,914 2,961,061 3,349,921 3,349,547 3,121,871 4,808
US GAAP:
- -------
Property, plant and equipment, 3,424,361 3,320,356 3,381,277 3,377,006 3,177,530 4,894
net
Total assets 4,477,242 4,214,559 4,407,675 4,465,790 4,364,565 6,722
Total stockholders' equity 2,664,717 3,077,543 3,238,709 3,263,712 3,157,831 4,864
</TABLE>
- -------------------------------------
(1) Bolivar amounts are in constant bolivars as of December 31, 1999.
(3) Bolivar amounts have been translated into U.S. dollars, solely for the
convenience of the reader, at the rate of Bs. 649.25 = US$1.00, the Daily
Exchange Rate on December 31, 1999. See "Exchange Rates."
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1995 1996 1997 1998 1999
--------------------------------------------------------------------
Inflation and Devaluation Data:
<S> <C> <C> <C> <C> <C>
Increase in Consumer Price Index 56.6% 103.2% 37.6% 29.9% 20.0%
Increase in Wholesale Price 43.6% 105.8% 17.3% 23.3% 13.6%
Index
Rate of bolivar devaluation 70.6% 64.4% 5.9% 11.9% 14.9%
</TABLE>
Item 9. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction
Basis of Financial Data
The information in this section should be read in conjunction with the
Audited Financial Statements of the Company and Notes thereto included elsewhere
in this Form 20-F.
The Company prepares its financial statements in bolivars in conformity
with Venezuelan GAAP, which differ in certain important respects from U.S. GAAP.
Note 26 to the Audited Financial
53
<PAGE>
Statements provides a description of the principal differences between
Venezuelan GAAP and U.S. GAAP as they relate to the Company and a reconciliation
to U.S. GAAP of net income for the years ended December 31, 1997, 1998 and 1999
and total stockholders' equity at December 31, 1998 and 1999.
In accordance with Venezuelan GAAP, the Company's consolidated
financial statements are presented on a constant bolivar basis. Accordingly,
except where otherwise indicated, the consolidated financial data have been
presented in constant bolivars as of December 31, 1999 to reflect inflation in
Venezuela using the Consumer Price Index ("CPI"). References to variations in
average real rates over periods within this section are based on adjustments
made in accordance with movements in the Consumer Price Index. Until 1999
tariffs were adjusted by the Government, in accordance with movements in the
Wholesale Price Index ("WPI") which, at times, has been substantially below the
CPI. Beginning on March 23, 2000, tariffs are being adjusted based on projected
exchange devaluations of the bolivar against the U.S. dollar. See "-- Regulatory
Environment." Although the restatement of nominal bolivar amounts into constant
bolivars lessens the distorting effect that an inflationary environment has on
comparisons of financial statements over time, such restatement does not wholly
eliminate these distortions, and evaluation of period to period trends may be
difficult. See "Introduction" and Note 4(b) to the Audited Financial Statements.
Significant Developments in Venezuela's Economy
Substantially all of the Company's business is conducted in Venezuela.
During 1999, Venezuela's economy suffered its worst recession in recent history
despite the increase in the international oil prices. This financial crisis was
due to several factors, but was particularly aggravated by the political
uncertainties generated by the implementation of a new constitution and lack of
an economic environment conducive to business development. The Company's
financial condition and results of operations are significantly impacted by
changes in Venezuela's gross domestic product, the rate of inflation and the
value of the bolivar compared to the U.S. dollar and other foreign currencies.
The petroleum industry is the principal source of Government revenues and
foreign exchange receipts. As a result, fluctuations in the international
petroleum market strongly influence the Venezuelan economy. In 1999,
international oil prices had an important rebound as compared to 1998. On the
other hand, the political uncertainties have negatively affected Venezuela's
economy. Venezuela's gross domestic product grew by 5.1% in 1997, and contracted
by 0.7% in 1998 and 7.2% in 1999. The non-oil gross domestic product grew by
3.3% in 1997, and contracted by 0.8% in 1998 and 4.9% in 1999. During 1999,
these negative factors have discouraged private investment, resulting in a
further investment contraction of 13.7% for that period.
Inflation in Venezuela as measured by the Consumer Price Index was
37.6% during 1997, 29.9% during 1998 and 20.0% during 1999. Inflation as
measured by the Wholesale Price Index was 17.3%, 23.3% and 13.6% during these
same years, respectively.
Devaluation of the bolivar against the U.S. dollar was 5.9%, 11.9% and
14.9% for the years ended December 31, 1997, 1998 and 1999, respectively. The
devaluation of the bolivar against the U.S. dollar and other foreign currencies
resulted in net exchange losses of Bs. 14.8 billion, Bs. 47.2 billion and Bs.
29.7 billion for the years ended December 31, 1997, 1998 and 1999, respectively.
The net exchange losses for 1999 include net losses of Bs. 14.8 billion incurred
on CANTV's Japanese yen-denominated debt. Net exchange losses are included in
the financing benefit (cost), net caption in the consolidated statements of
operations in Note 16 to the Audited Financial Statements included elsewhere in
this Form 20-F, and represent the additional bolivars the Company requires to
settle its U.S. dollar and other foreign currency denominated net liabilities.
These U.S. dollar and other foreign currency denominated net liabilities are set
forth in Note 7 to the Audited Financial Statements. If the value of the
54
<PAGE>
bolivar relative to the U.S. dollar and other foreign currencies were to
continue to decline as it did during the period from 1997 to 1999, the Company's
results of operations and stockholders' equity could be adversely impacted by
additional exchange losses. See "Item 6. Exchange Controls and Other Limitations
Affecting Security Holders" and "Item 9A. Quantitative and Qualitative
Disclosures About Market Risk."
Significant Developments in the Company's Business
The information in this section should be read in connection with "Item 1.
Description of Business."
In general, the Company has increased employee productivity, realigned
operations by key customer groups and improved network planning and design. The
Company has also made substantial progress on its network expansion and
modernization program. The number of access lines in service constantly
increased up to December 31, 1997. However, due to the implementation of
stricter collection policies, the Company permanently disconnected an aggregate
of approximately 940,000 lines during 1998 and 1999. The lines, which have been
permanently removed, are being aggressively reassigned to new customers on the
basis of credit checks. Access lines in service totaled 2.6 million at December
31, 1999.
The number of cellular subscribers increased, from approximately
374,875 at December 31, 1997 to approximately 1,181,000 at December 31, 1999.
The number of Internet subscribers and users also grew, from approximately 6,478
and 16,000, respectively, at December 31, 1997 to approximately 86,671 and
167,048, respectively, at December 31, 1999.
To achieve profitable growth and continue to reduce costs and improve
productivity, the Company has implemented strict procurement and cost
containment programs. In 1999, the Company continued refining its customer focus
units emphasizing quality and efficient service in order to promote a
customer-oriented service culture. The Company uses improvements in customer
service and technological infrastructure to market its services more effectively
and increase revenues and profitability. These improvements focus on efficiently
meeting customer needs while optimizing productivity, and are expected to
prepare the Company for the competitive environment that will follow the
termination of the Company's exclusivity period under the Concession in November
2000.
The Company's strategy is to increase market penetration and continue
to broaden its product portfolio by offering an array of fixed, wireless data
transmission, Internet and value-added services. The Company seeks to capture
the largest share of high growth markets by providing packages of services that
maximize and leverage its existing infrastructure, by continuing to expand
capacity and modernize its wireline, wireless and Internet networks, and by
seeking to improve in its service offerings through innovative value-added
services.
Despite achievements obtained by the Company in recent years, growth of
the Company's wireline operations were negatively impacted by an uncollectible
accounts receivable problem arising primarily from the deterioration in the
Venezuelan macroeconomic environment and weaknesses in the Company's collection
and credit policies. In response, the Company took decisive actions and
developed and launched an aggressive collection program that included a
tightening of its credit policies and strict procedures requiring temporary and
permanent disconnection of customer lines for nonpayment. During 1998, CANTV
made over 2.7 million temporary disconnections and permanently removed
approximately 480,000 customer lines due to nonpayment. During 1999, CANTV made
approximately over 3.0 million temporary disconnections and permanently removed
approximately 458,800 customer
55
<PAGE>
lines for nonpayment. Approximately 90% of customers temporarily disconnected in
1998 paid the overdue amounts and were reconnected for service. Permanently
removed lines are being aggressively reassigned to new customers following
upfront credit history checks. To address the problem, the Company also
implemented a stronger system of controls and reorganized the collection
function by assigning responsibility for collections to the business unit
leaders and incorporating collection performance standards into their
compensation packages. CANTV also made personnel changes and provided intensive
training to all collections personnel. During 1999, the Company's uncollectible
provision was Bs. 101.1 billion compared to Bs. 224.6 billion in 1998. The
Company's provision for uncollectibles represents 5.9% and 13.2% of total
operating revenues at December 31, 1999 and 1998, respectively.
Regulatory Environment
The information in this section should be read in conjunction with
"Item 1. Description of Business--Regulatory Framework."
In January 2000, CANTV entered into an agreement with CONATEL with
respect to the rate structures and previously regulated services under the
Concession including rate rebalancing and service level mandates (the
"Agreement"). The Agreement supersedes the Concession with respect to subject
matter specifically referred to therein and the Concession continues to control
as to subject matter not specifically covered by the Agreement. The Agreement is
in effect until December 31, 2000 except as to rates where CANTV and CONATEL may
agree to change the agreed upon rate structure that will be applicable after
November 27, 2000 pursuant to the terms of the Agreement. See "Item 1.
Description of Business -- Regulatory Framework-- Regulation and the Concession
- -- The 2000 Agreement."
The Agreement was arrived at following the delays in tariff approvals
in 1999 and the commencement of a preliminary proceeding in contemplation of a
legal action by CANTV against the Government for breach of the Concession. In
effect, the Agreement retains for the Company the most significant rights
provided for under the Concession. The Agreement includes: (i) a significant
rebalancing between long distance tariffs and local tariffs, and between
non-residential and residential tariffs; (ii) a definitive ruling on tariffs and
adjustments based on an agreed projected devaluation of the bolivar against the
U.S. dollar during 2000; (iii) quality and service mandates including the
elimination of the service expansion mandate and the introduction of a new 80%
digitalization mandate; (iv) the introduction of new tariff plans including a
fixed prepaid plan and optional plans which CANTV may introduce without
CONATEL's prior approval and which, in the case of certain optional plans, CANTV
may offer with higher basic rent and free minutes up to a US$80 maximum; (v)
delinking of the tariff approval process to compliance with quality and service
mandates; and (vi) CANTV's agreement to refrain from taking any action, judicial
or administrative, as a result of the failure by the Government to approve
tariffs during 1999, provided, the Government meets the terms and obligations
pursuant to the Agreement.
Prior to entering into the Agreement with CONATEL relating to rates for
2000, CANTV's rates were regulated under the Concession. The Concession had
provided for a "price-cap" mechanism to set and adjust rates on a quarterly
basis throughout each calendar year. The price-cap mechanism was designed to
vary quarterly based on the Wholesale Price Index. Although in principle tariffs
were to be adjusted to reflect inflation in the preceding quarter, tariffs were,
in practice, generally calculated based upon rates of inflation during the
preceding second quarter. The delay was due to the time period required to
calculate the inflation rate during a specific quarter. Accordingly, in many
instances tariffs were implemented based on inflation levels relating to periods
ending as much as six months preceding their implementation date.
56
<PAGE>
The increase in CANTV's tariffs did not, in all cases, fully offset the
effects of inflation used in preparing the Company's financial statements since
the rate of inflation used in preparing the Company's financial statements is
based on the more commonly accepted Consumer Price Index which, at times,
significantly exceeded the rate of inflation as measured by the Wholesale Price
Index. Further, the price-cap mechanism was not always implemented as described
in the Concession. CONATEL sometimes delayed the approval of rate increases or
did not allow the full tariff increases allowed by the Concession's price-cap
mechanism. In other cases, the Company decided not to implement the full
increase authorized for competitive or other reasons. In 1998, all four tariff
increases were approved with minimal delay. In the first three quarters of 1998,
CANTV did not increase domestic long-distance rates by the full amount permitted
based on competitive pricing strategies. In 1999, CANTV received authorization
for a rate increase effective January 1, 1999 and in March 1999, CONATEL
approved a tariff increase, which became effective on April 30, 1999. At the
request of CONATEL, CANTV agreed not to implement the rate increase permitted
pursuant to this authorization for basic residential rent. Most recently, CANTV
was unable to obtain approval to increase its tariffs as stipulated in the
Concession following CANTV's rate increase effective April 30, 1999. In January
2000, CONATEL and the Company entered into the Agreement which allows CANTV to
increase rates in 2000. The first tariff increase became effective March 23,
2000 and the second tariff increase is expected to become effective on June 16,
2000. The Agreement is more fully described under "Item 1. Description of
Business -- Regulation and the Concession -- The 2000 Agreement."
Under the Agreement entered into by CANTV and CONATEL in January 2000,
CANTV increased local, domestic long distance and international long distance
tariffs effective March 23, 2000 and will be permitted an additional increase in
tariffs effective June 16, 2000. The tariffs provided for under the Agreement
will be effective until November 27, 2000. Prior to November 27, 2000, CANTV and
CONATEL must reach an agreement regarding the rates which will be applicable
after November 27, 2000. If no agreement has been reached by November 27, 2000,
the rates provided for in the Agreement will apply until year-end. See "Item 1.
Description of Business -- Regulation and the Concession -- The 2000 Agreement"
for additional information regarding the Company's rates for each component of
residential and non-residential local service, domestic long distance service
and international long distance service.
The Agreement advances the rebalancing process, between long distance
tariffs and local tariffs, by reducing outgoing international long distance
weighted average rates by approximately 35%. Under the terms of the Agreement,
outgoing international long distance rates will be decreased in some cases by
68%, depending on the country. Domestic long distance rates will be combined
into one nationwide plan with a weighted average rate of US$0.1875 per minute.
The Agreement provides for an extraordinary adjustment mechanism for
certain of CANTV's tariffs in the event that actual exchange rates, as defined
on the Agreement, deviate materially from the agreed projected exchange rates
set forth in the Agreement. Under the Agreement, the variance between projected
exchange rates and actual exchange rates is measured at the end of each month.
If the variance in exchange rates is less than 2.5%, the agreed tariffs will be
maintained. If such variance in exchange rates is greater than 2.5% but less
than 7.5%, the Agreement allows CANTV to adjust its tariffs to partially account
for this variance subject to a maximum cumulative adjustment in certain cases of
5%. In the event that actual exchange rates deviate in excess of 7.5% from the
projected rates contemplated in the Agreement, CANTV and CONATEL have agreed to
review the Agreement in order to reach a new agreement as to the applicable
level of tariffs. The Agreement sets forth agreed projected exchange rates
measured at the end of each month. The agreed projected exchange rate at
November 30, 2000 is Bs. 729.00 per US$1.00. CONATEL is required to authorize
and approve all extraordinary adjustments. If
57
<PAGE>
the bolivar were to devalue significantly at rates greater than the ones
contemplated in the Agreement, the inability of the Company to raise its tariffs
could result in an adverse effect on the Company's financial condition and
results of operations.
The Agreement allows CANTV to provide discounts on its domestic long
distance and international long distance rates subject to certain limiations.
CONATEL has informally announced that it expects the National Assembly to
approve a new Telecommunications Law (the "New Telecommunications Law") during
the second quarter of 2000. The primary objectives of the New Telecommunications
Law are to establish a new and competitive regulatory framework, foster
efficiency and fair competition among telecommunications service providers,
develop and modernize the telecommunications systems, and at the same time
obtain and establish universal service objectives. See "Item 1. Description of
Business -- Regulatory Framework -- Regulation and the Concession -- General."
The framework for regulating the telecommunications industry in
Venezuela following the opening of basic services to competition in November
2000 has not been established and no framework has been agreed upon or proposed
for the setting of new rates. CANTV is unable to predict the timing and nature
of rate changes that may be allowed in the future.
Summary of Operations
The Company provides substantially all of its services in Venezuela and
substantially all of its operating revenues are derived from Venezuelan
domiciled customers and from settlements with international carriers for calls
completed in Venezuela. The Company's operating revenues are derived from
domestic telephone services, including public telephones and rural telephone
services, and from international telephone services, wireless services,
directory information services, Internet access, data transmission, and other
value-added services.
Local and domestic long distance services generate the largest portion
of the Company's operating revenues, representing 63.7%, 60.0% and 56.4% of the
Company's total operating revenues for the years ended December 31, 1997, 1998
and 1999, respectively. Revenues from local and domestic long distance services
depend on the number of access lines in service, utilization of the network as
measured by minutes of use, the rates charged by the Company to its customers
and the number and availability of public telephones. Revenue from public
telephones is generated primarily by the sale of prepaid telephone cards.
International long distance services generated 16.8%, 13.0% and 9.4% of
the Company's total operating revenues for the years ended December 31, 1997,
1998 and 1999, respectively. International long distance revenues are generated
by outbound traffic billed to the consumer market at local regulated rates and
the settlement with international carriers for traffic from Venezuela to foreign
countries at rates, which are subject to the approval of the local regulator and
the respective foreign agency. Revenues are generally collected by the
originating carrier and shared with the terminating carrier through
international agreements. Revenues from international long distance services
depend on the volume of traffic, the rates charged by the Company to its
customers and the settlement rates agreed with each foreign carrier. In recent
years, certain international operators, including operators in the United
States, have reduced settlement rates. In 1997, the United States Federal
Communications Commission adopted a "report and order" that has significantly
reduced international long distance telephone rates by setting new, lower
benchmarks in international settlement rates. This order took effect on January
1,
58
<PAGE>
1998. The current accounting rate between the United States and Venezuela is
US$0.54, a decrease from US$0.64 at year-end 1999.
59
<PAGE>
The following table sets forth the Company's negotiated accounting
rates with U.S. international carriers for the period 1999 through early 2001:
Rate
Period in US$
------------------------------- -----------
January to June 1999 0.74
July to December 1999 0.64
January to June 2000 0.54
July to December 2000 0.46
January 2001 0.38
Due to the current imbalance between the Company's outgoing and
incoming international call volumes, the reduction in settlement rates paid to
the Company has had, and will continue to have, a negative effect on the
Company's revenues from international long distance services. See "Item 1.
Description of Business -- International Long Distance Services."
Revenues from other wireline-related services consist of
interconnection facilities charges, data transmission services, including
Virtual Private Network ("VPN"), Very Small Aperture Terminals ("VSAT") and
Frame Relay, late payment charges, reconnect fees and miscellaneous charges.
Revenues from wireless services comprised 12.3%, 17.9% and 23.6% of the
Company's total operating revenues for the years ended December 31, 1997, 1998
and 1999, respectively. Revenues from wireless services consist primarily of
charges paid to the Company for calls terminating on its network
(interconnection revenue), monthly service fees, usage charges, revenues from
equipment sales, and activation fees. Revenues from wireless services depend on
the number of cellular subscribers, utilization of the network as measured by
minutes of use and rates charged by the Company to its customers. Usage charges
are based on a "calling party pays" principle under which the Company's wireless
customers are charged only for calls they originate. The Company charges a usage
fee to non-wireless customers accessing the Company's wireless network.
Revenues from other telecommunications-related services primarily
include Internet-related services and directory information services.
Internet-related services include Internet access via dial-up or dedicated
channels and network administration outsourcing. The Company earns directory
information services revenues from sales of advertising space in its printed
white and yellow page directories, sales of information from its database, and
electronic dissemination of information. Revenue is recognized based on the
point-of-publication method.
The Company's operating expenses consist of provision for
uncollectibles, operations, maintenance and repairs, administrative expenses,
depreciation and amortization, and concession and other taxes.
The provision for uncollectibles is an estimate that reflects the
anticipated loss generated by uncollectible accounts receivable. The provision
for uncollectibles comprised 3.5%, 13.2% and 5.9% of the Company's total
operating revenues for the years ended December 31, 1997, 1998, 1999,
respectively. During 1998, the Company increased its provision for
uncollectibles as a result of the Company's aggressive actions to identify and
correct deficiencies in its credit and collection processes.
The Company's operations, maintenance, repairs and administrative
expenses for the year ended December 31, 1999 are comprised of salaries (17.0%),
labor benefits (35.2%), contractors (18.8%), materials (15.6%) and other
expenses (13.4%). Such expenses depend on the number of employees,
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<PAGE>
changes in wages and benefits negotiated in collective bargaining agreements,
pension plan premises, employee productivity and procurement efficiencies
together with other factors. As a result of productivity improvements, the
Company has been able to reduce the number of its employees, from 15,017 at
December 31, 1997 to 14,769 at December 31, 1999, while simultaneously growing
its business.
During 1999, CANTV decreased its workforce by approximately 1,300
employees as a result of a work force reduction program, granting employees an
incentive to voluntarily retire prior to their anticipated retirement date and
the elimination of certain positions due to technological, operational and
administrative efficiencies. The Company's wireless and Internet services
businesses increased their combined work force by approximately 318 employees to
support their rapid growth. During 2000, the Company expects to reduce the total
of number of employees at CANTV and to increase the total number of wireless and
Internet service employees based on anticipated continued strong growth in both
of these businesses. The Company entered into a new labor agreement on September
3, 1999, valid until June 17, 2001 with FETRATEL. See "Item 1. Description of
Business -- Employees."
Depreciation and amortization expense recognizes utilization of the
Company's telecommunications network and other long-lived assets. Depreciation
expense is dependent on the value of telecommunications plant and equipment and
other assets as well as the periods used to depreciate and amortize such assets.
The Company believes the periods used to depreciate and amortize its long-lived
assets are generally of a shorter duration than those generally used by other
telecommunications entities.
Concession and other taxes consist primarily of amounts due to the
Government under the various concession agreements. The amount of concession and
other taxes is generally assessed based on a percentage of billings. See
"Description of Business -- Regulatory Framework."
Other income (expense), net consists of net foreign exchange losses,
gains or losses from net monetary position, interest income and interest
expense. Foreign exchange losses represent the impact of devaluation of the
bolivar on the Company's net holdings of net monetary liabilities denominated in
U.S. dollars and other foreign currencies. The gain (loss) from net monetary
position represents the gain or loss resulting from a monetary denominated net
liability or net asset position during an inflationary period.
The income tax provision is determined in accordance with Venezuelan
income tax regulations. Under these regulations, the Company is subject to tax
on its net taxable income calculated on a historical cost basis with an
adjustment for inflation with respect to the Company's non-monetary assets and
liabilities, net of stockholders' equity. Venezuelan income tax currently is
calculated at a maximum rate of 34% of taxable income. The Venezuelan
legislation provides an investment tax credit of 20% on the amount of new
investments through December 31, 1999 in fixed assets that have not been used
previously in the country. Unused investment tax credits can be carried forward
up to three economic periods from the year when it arose. While the Venezuelan
tax code does not expressly classify telecommunications activities as
industrial, management, based on advice of the Company's internal and external
counsel, believes that the Company qualifies for the investment tax credit
("ITC"). The Venezuelan Income Tax Law authorizes the carryforward of
non-compensated losses up to three years subsequent to the period in which they
were incurred. The business asset tax results from applying a 1% rate to the net
average amount of non-monetary assets adjusted for inflation and monetary assets
devalued for inflation. The amount payable is the higher amount of the business
asset tax and the income tax for the period. In case of tax losses, such tax can
be carried forward up to three subsequent years from the period in which such
tax originated. On October 22, 1999, the Government published a Partial
61
<PAGE>
Reform to the Income Tax Law. The Amendment to the Income Tax Law includes
provisions to tax worldwide income earned by individuals or companies residing
or domiciled in Venezuela. Taxes paid abroad may be credited. Dividends will be
subject to tax up to a maximum rate of 34%. Tax losses resulting from inflation
adjustments may be carried forward up to one year. Companies may take a tax
credit equal to 10% of salary payments to new hires. The ITC rate falls to 10%.
This regulation will be effective January 1, 2000. See "-- Amendment to the
Income Tax Law." A convention for the avoidance of double taxation (the "Tax
Treaty") between the United States and Venezuela became effective on January 1,
2000.
In the normal course of business and as limited by applicable debt
agreements, the Company enters into transactions with certain of its
stockholders and their respective affiliates. Transactions with related parties
are subject to conditions similar to transactions with independent third
parties. See Note 18 to the Audited Financial Statements and "Item 13. Interest
of Management in Certain Transactions."
62
<PAGE>
Key Data for the Years Ended December 31, 1997, 1998 and 1999
The following table sets forth key data of the Company for the years
ended December 31, 1997, 1998 and 1999, and presents each amount as a percentage
change from the prior year:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
% %
increase increase
(decrease) (decrease)
from prior from prior
1997 1998 year 1999 year
------------ ---------- ------------ -----------------------
Lines:
<S> <C> <C> <C> <C> <C>
Lines installed 3,403,521 3,550,706 4.3 3,546,538 (0.1)
Percent digital 62% 66% N.A. 69% N.A.
Access lines in service:
- ------------------------
Residential 1,895,838 1,859,073 (1.9) 1,870,859 0.6
Commercial 736,759 681,761 (7.5) 634,969 (6.9)
Public telephones 70,012 75,097 7.3 80,033 6.6
---------- --------- ----------
2,702,609 2,615,931 (3.2) 2,585,861 (1.1)
Utilization ratio 82% 76% N.A. 75% N.A.
Access lines per 100 inhabitants 11.8 11.2 (5.1) 10.8 (3.6)
Access lines per CANTV employee 203 199 (1.9) 218 9.5
Call Volume (1):
Local:
- ------
Residential 6,410 7,282 13.6 7,702 5.8
Commercial 4,815 5,724 18.9 5,936 3.7
----- ----- -----
11,225 13,006 15.9 13,638 4.9
Domestic long distance:
- ----------------------
Residential 962 1,135 18.0 881 (22.4)
Commercial 1,378 1,533 11.3 1,285 (16.2)
----- ----- -----
2,340 2,668 14.0 2,166 (18.8)
International:
- -------------
Incoming minutes 279 302 8.2 312 3.3
Outgoing minutes 153 165 7.8 163 (1.2)
Net settlement minutes 126 137 8.7 149 8.8
Incoming/outgoing ratio 1.82 1.83 N.A. 1.91 N.A.
Outgoing minutes charged to customers 160 171 6.9 160 (6.4)
Total Employees:
CANTV 13,325 13,151 (1.3) 11,851 (9.9)
Other 1,692 2,600 53.7 2,918 12.2
------ ------ -----
15,017 15,751 4.9 14,769 (6.2)
Wireless Services:
Wireless subscribers:
- ---------------------
Postpaid 279,011 371,347 33.1 314,933 (15.2)
Prepaid 95,864 267,760 179.3 866,340 223.6
------ ------- ---------
374,875 639,107 70.5 1,181,273 84.8
Percent digital:
Handset 38% 72% 89.5 97% 34.7
Voice path 27% 45% 66.7 61% 35.6
Average wireless subscribers 294,265 506,991 72.3 910,190 79.5
Minutes of use (1) 564 945 67.6 1,325 40.2
% Penetration (2) 1.6% 2.8% N.A. 4.9% N.A.
Average Monthly Revenue per User (ARPU) (3) 67 64 (4.5) 53 (17.2)
Financial Statistics:
Average interest rates 8.61% 8.87% 3.0 8.26% (6.9)
Average outstanding borrowings 279,071 343,244 23.0 378,858 10.4
Net monetary liability (asset) position (in
constant bolivars) 139,454 180,089 29.1 (10,461) (105.8)
Net foreign currency liability position
(millions of US$) 567 547 (3.5) 136 (75.1)
Economic Statistics:
Increase in consumer price index 38% 30% (21.1) 20% (33.3)
Increase in wholesale price index 17% 22% 29.4 14% (36.4)
Exchange rate at the end of year 504.75 565.00 11.9 649.25 14.9
</TABLE>
--------------------------------------------------
(1) Represents billed minutes of use, excluding free minutes included in
certain of the Company's tariff plans, in millions of minutes.
63
<PAGE>
(2) Customers per total population.
(3) In U.S. dollars.
64
<PAGE>
Results of Operations for the Years Ended December 31, 1997, 1998 and 1999
The following table sets forth the results of operations of the Company
for the years ended December 31, 1997, 1998 and 1999, expressed in millions of
constant bolivars as of December 31, 1999, and presents each amount as a
percentage of total operating revenues, and as a percentage change from the
prior year:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------------------
1997 1998 1999
--------------------- -------------------------------- --------------------------------
% %
% of % of increase % of increase
total total (decrease) total (decrease)
operating operating from prior operating from prior
Bs. revenues Bs. revenues year Bs. revenues year
--------------------- -------------------------------- --------------------------------
Operating revenues:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Local usage 215,229 12.3 234,908 13.8 9.1 267,570 15.6 13.9
Domestic long distance usage 464,217 26.5 338,009 19.8 (27.2) 274,173 16.0 (18.9)
Basic rent (1) 324,280 18.5 341,232 20.0 5.2 319,728 18.6 (6.3)
Public telephones 111,495 6.4 108,675 6.4 (2.5) 105,508 6.2 (2.9)
------- ---- ------- ---- ------- ----
Local and domestic long distance 1,115,221 63.7 1,022,824 60.0 (8.3) 966,979 56.4 (5.5)
International long distance 241,551 13.8 179,888 10.5 (25.5) 133,146 7.8 (26.0)
Net settlements 51,870 3.0 42,046 2.5 (18.9) 28,016 1.6 (33.4)
------- ---- ------- ---- ------- ----
International long distance 293,421 16.8 221,934 13.0 (24.4) 161,162 9.4 (27.4)
Other wireline-related services (2) 109,203 6.1 125,375 7.2 14.8 143,212 8.3 14.2
------- ---- ------- ---- ------- ----
Total wireline services 1,517,845 86.6 1,370,133 80.2 (9.7) 1,271,353 74.1 (7.2)
Wireless services 215,286 12.3 305,159 17.9 41.7 405,514 23.6 32.8
Other telecommunications-related
services (3) 19,462 1.1 32,472 1.9 66.8 38,663 2.3 19.1
------- ---- ------- ---- ------- ----
Total operating revenues 1,752,593 100.0 1,707,764 100.0 (2.6) 1,715,530 100.0 0.5
Operating expenses:
Provision for uncollectibles 61,871 3.5 224,629 13.2 263.1 101,103 5.9 (55.0)
Operations, maintenance,
repairs and administrative 603,316 34.4 628,449 36.8 4.2 757,993 44.1 20.6
Depreciation and amortization 498,857 28.5 528,818 31.0 6.0 587,700 34.3 11.1
Concession and other taxes 123,562 7.1 127,295 7.4 3.0 123,592 7.2 (2.9)
Nonrecurring charge -- N.A. -- N.A. N.A. 3,600 0.2 N.A.
------- ---- ------- ---- ------- ----
Total operating expenses 1,287,606 73.5 1,509,191 88.4 17.2 1,573,988 91.7 4.3
--------- ---- ------- ---- --------- ----
Operating income 464,987 26.5 198,573 11.6 (57.3) 141,542 8.3 (28.7)
Other income (expense), net:
Exchange losses, net (14,821) (0.8) (47,229) (2.7) 218.7 (29,737) (1.7) (37.0)
Gain (loss) from net monetary 125,781 7.2 40,123 2.3 (68.1) (5,841) (0.3) (114.6)
position
Interest income 18,828 1.1 29,227 1.7 55.2 27,549 1.6 (5.7)
Interest expense (60,932) (3.5) (58,357) (3.4) (4.2) (45,624) (2.7) (21.8)
Gain from indexation of tax units -- N.A. 7,442 0.4 N.A. 11,089 0.6 49.0
--------- ---- ------- ---- --------- ----
Financing benefit (cost), net 68,856 4.0 (28,794) (1.7) (141.8) (42,564) (2.5) 47.8
Other income, net 1,453 0.1 3,262 0.3 124.5 3,879 0.2 18.9
--------- ---- ------- ---- --------- ----
Total other income (expense), net 70,309 4.1 (25,532) (1.4) (136.3) (38,685) (2.3) 51.5
--------- ---- ------- ---- --------- ----
Income before income taxes 535,296 30.6 173,041 10.2 (67.7) 102,857 6.0 (40.6)
Income tax provision 120,747 6.9 1,170 0.1 (99.0) 13,653 0.8 1,066.9
--------- ---- ------- ---- --------- ----
Net income 414,549 23.7 171,871 10.1 (58.5) 89,204 5.2 (48.1)
========= ==== ======= ==== ========= ====
</TABLE>
-------------------------------
(1) Includes installation and subscription charges.
(2) Includes special services and interconnection facilities charges.
(3) Includes value-added services, primarily Internet access, and directory
publishing fees.
65
<PAGE>
Years Ended December 31, 1998 and 1999
Operating Revenues
Consolidated net operating revenues increased by Bs. 7.7 billion (0.5%)
in 1999 to Bs. 1,715.5 billion compared with Bs. 1,707.8 billion reported in
1998. This increase was due to growth in wireless communications services, local
usage and data transmission and Internet revenues, which partially offset
revenue declines resulting from tariff approval delays during the third and
fourth quarter of 1999, lower access lines in service, and lower international
prices. The delay in tariff approvals negatively impacted revenues by
approximately Bs. 38.5 billion in 1999.
Operating Volumes
The total number of access lines in service decreased by 30,070 (1.1%)
to 2,585,861 at December 31, 1999, from 2,615,931 at December 31, 1998. The
decline reflects the permanent disconnection of lines resulting from CANTV's
emphasis on customer treatment and collections. In 1999, CANTV permanently
disconnected approximately 453,900 residential and commercial lines, excluding
public telephones. During 1999, residential access lines increased less than 1%
and commercial access lines decreased 6.9%. The number of public telephones in
service increased by 6.6% during this same period.
Local minutes of use carried by the Company's local switched network
increased by 632 million (4.9%) to 13,638 million minutes for the year ended
December 31, 1999, from 13,006 million minutes for the year ended December 31,
1998. Residential minutes of use increased by 420 million (5.8%) to 7,702
million from 7,282 million minutes for the years ended December 31, 1999 and
1998, respectively. Commercial minutes of use increased by 212 million (3.7%) to
5,936 million from 5,724 million minutes, for years ended December 31, 1999 and
1998, respectively. Part of this volume growth was attributable to the
implementation of EAS during the fourth quarter of 1998. Approximately 397
million minutes of use were shifted from domestic long distance to local usage
during the year. Other factors contributing to this volume growth were tariff
approval delays and the implementation of a system in September 1999 that
minimizes traffic loss by allowing temporary disconnected customers the ability
to receive incoming calls. Internet usage and enhanced services, such as
personal secretary or voicemail services also contributed to the volume growth.
Domestic long distance minutes decreased by 502 million (18.8%) to
2,166 million during 1999 from 2,668 million during 1998. Residential minutes of
use decreased by 254 million (22.4%) to 881 million from 1,135 million for the
years ended December 31, 1999 and 1998, respectively. Commercial minutes of use
decreased by 248 million (16.2%) to 1,285 million from 1,533 million for the
years ended December 31, 1999 and 1998, respectively. This decline is primarily
attributable to the implementation of EAS. Approximately 397 million minutes
shifted from domestic long distance to local usage in the year ended December
31, 1999.
International minutes billed locally to customers in Venezuela
decreased by 11 million (6.4%) to 160 million for 1999 as compared to 171
million for 1998. This decrease occurred in both consumer markets, the
commercial sector declined by 8.1% while residential minutes decreased by 4.7%.
The weakness in the Venezuelan economy has contributed to the decline in the
calling volume. In 1999, net settlement minutes with international carriers
increased by 12 million (8.8%) to 149 million from 137 million in 1998. The
incoming minutes of use to outgoing minutes of use ratio, for the year ended
December 31, 1999, increased to 1.91 as compared to 1.83 for 1998.
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<PAGE>
Local Usage
Local usage revenues increased by Bs. 32.7 billion (13.9%) to Bs. 267.6
billion in 1999 compared to Bs. 234.9 billion in 1998. This increase primarily
is attributable to a 4.9% increase in residential and commercial local calling
volumes combined with a real rate increase of 5.4%. In addition, during the
fourth quarter of 1998, CANTV began implementing Extended Local Area Service
("EAS") in certain parts of Venezuela, which further contributed to the local
usage volume increase.
Domestic Long Distance Usage
Revenues from domestic long distance usage decreased by Bs. 63.8
billion (18.9%) to Bs. 274.2 billion in 1999 from Bs. 338.0 billion in 1998.
This decline is due to volume and real rate decreases of 18.8% and 1.0%,
respectively. Approximately 80% of the decline in volume are attributable to the
implementation of EAS during the fourth quarter of 1998. In nominal terms, rates
increased 22.4% year over year.
Basic Rent
Basic rent revenues include the basic monthly flat fee, installation
charges, and subscriber right charges. These revenues decreased by Bs. 21.5
billion (6.3%) to Bs. 319.7 billion in 1999 compared to Bs. 341.2 billion in
1998. The decrease was primarily generated by a reduction of Bs. 14.9 billion
(25.2%) in the installation and subscriber right charges to Bs. 44.2 billion in
1999 from Bs. 59.1 billion in 1998. Installation and subscriber right fees
decreased by 9.83% in real terms during 1999. The monthly flat fee decreased by
Bs. 6.6 billion (2.3%) in 1999 to Bs. 275.5 billion compared to Bs. 282.1
billion in 1998. This decrease is attributable to a 2.4% decrease of the number
of access lines partially offset by a 1.6% rate increase.
Public Telephones
Despite the increase in the total number of public telephone units in
service and gross card sales of 6.6% and 9%, respectively, net revenues from
public telephones decreased by Bs. 3.2 billion (2.9%) to Bs. 105.5 billion in
1999 compared to Bs. 108.7 billion in 1998 due to increased access fees paid to
cellular service providers. Increased calling volumes drove this increase in
access fees between CANTV's public telephone and cellular telephones, which grew
by 58% in 1999.
International Long Distance
Total international long distance revenues decreased by Bs. 60.7
billion (27.4%) to Bs. 161.2 billion compared to Bs. 221.9 billion recorded in
1998. Revenues from customer charges billed locally decreased by Bs. 46.8
billion (26.0%) to Bs. 133.1 billion in 1999 from Bs. 179.9 billion recorded in
1998. This decline is attributable to lower rates combined with a volume
decrease of 6.4%. Tariffs decreased by 18.3% and 1.4% in real and nominal terms,
respectively.
Settlement revenue with international carriers decreased by Bs. 14.0
billion (33.4%) in 1999 to Bs. 28.0 billion compared to Bs. 42.0 billion
recorded in 1998. This variance was the result of a real rate decrease of 43.2%
slightly offset by a volume increase of 8.8%. Both years contain revenue
adjustments relating to actual traffic settlements, as well as the
contra-revenue associated with payments to foreign service-provider companies in
accordance with contractual revenue-sharing agreements. The ratio of
67
<PAGE>
incoming minutes of use to outgoing minutes of use, for the year ended December
31, 1999 increased 1.91 times compared to 1.83 times for 1998.
The Company's largest international traffic route is between Venezuela
and North America (the United States, Mexico and Canada), which represented
63.6% and 67.1% of the minutes recorded at December 31, 1999 and 1998,
respectively.
Other Wireline-Related Services
Other wireline services revenues, which include revenues from data
transmission services, interconnection facilities charges and other
miscellaneous revenues, increased by Bs. 17.8 billion (14.2%) to Bs. 143.2
billion in 1999 compared to Bs. 125.4 billion in 1998. Revenues from data
transmission services, including Frame Relay, VPN and VSAT services increased by
Bs. 27.6 billion (42.3%) in 1999 to Bs. 92.9 billion compared to Bs. 65.3
billion in 1998. This increase is due to a 19.9% volume growth combined with a
weighted average real rate increase of 34.9%. Interconnection facilities charges
decreased by Bs. 5.2 billion (26.2%) due primarily to a reduction of access fees
received from cellular services providers in connection with a decrease of
interconnection lines. Other miscellaneous charges, which include late payment
charges, reconnect fees and miscellaneous charges revenues, decreased by Bs. 3.2
billion (8.3%) to Bs. 34.9 billion compared to Bs. 38.1 billion in 1998. In
September 1998, CANTV made a decision not to charge late payment fees to
permanently disconnected customers due to the low probability of collecting
these charges. Telex service revenues decreased by Bs. 1.4 billion (65.7%) to
Bs. 0.8 billion in 1999 from Bs. 2.2 billion in 1998.
Wireless Services
Wireless services revenues increased by Bs. 100.4 billion (32.9%) to
Bs. 405.5 billion compared to Bs. 305.1 billion recorded in 1998, reflecting
continued strong growth in the prepaid customer base.
Growth of 84.8% in the wireless customer base was primarily driven by
the success of prepaid services during 1999. In 1999, prepaid subscribers
increased by 223.6%, reaching a total of 866,340 customers at December 31,1999,
compared to 267,760 prepaid customers at December 31, 1998. Postpaid customers
decreased by 15.2% to 314,933 at December 31, 1999 compared to 371,347 at
December 31, 1998.
As a result of the expansion of the customer base, overall penetration,
defined as the number of customers as a percentage of the total population,
improved from 2.8% at December 31, 1998 to 4.9% at December 31, 1999. The growth
in the prepaid customer segment primarily reflects the higher demand for
affordable wireless communications as well as effective promotional campaigns
which contributed to a 40.2% increase in 1999 total minutes of use over 1998.
Also contributing to the revenue growth were real rate increases in the basic
monthly fee and pack hour usage of 7.8% and 9%, respectively, during 1999. The
introduction of the prepaid service has generated a reduction in the average
revenue per user ("ARPU") to US$53 at December 31, 1999 compared to US$64 at
December 31, 1998. Minutes of use per customer decreased by 21.9% in 1999, to
121 minutes per month from 155 minutes in 1998.
Other Telecommunications-Related Services
Revenues from other telecommunications related services, including
Internet services and directory publications, increased by Bs. 6.2 billion
(19.1%) to Bs. 38.7 billion in 1999 from Bs. 32.5 billion in 1998. Internet
revenues increased by Bs. 6.8 billion (91.5%) to Bs. 14.2 billion in 1999 due to
a 78.2% increase in the subscriber base which reached 86,671 at year-end 1999.
68
<PAGE>
Operating Expenses
Total operating expenses increased by Bs. 64.8 billion (4.3%) to Bs.
1,574.0 billion in 1999 compared to Bs. 1,509.2 in 1998. This modest increase
was principally the result of a significantly higher operating expenditures and
depreciation and amortization offset by lower provision for uncollectibles.
Operations, maintenance, repairs and administrative expenses increased
by 20.6% in 1999 to Bs. 758.0 billion compared to Bs. 628.4 billion in 1998. The
increase is attributable to the increased wireless and Internet operating
expenses necessary to support the rapid growth in the customer base and service
offerings of these high growth businesses. Expenses include higher marketing
expenses for new advertising campaigns, expanded sales promotions and increased
customer service costs. CANTV separation costs of approximately Bs. 49 billion
and real salary adjustments granted to union employees, through the collective
bargaining agreement signed in July 1999, also contributed to the increase.
These increases in expenses were partially offset by reduced wireline
contractors and network maintenance expenses.
Depreciation and amortization expense increased by Bs. 58.9 billion
(11.1%) to Bs. 587.7 billion in 1999 from Bs. 528.8 billion in 1998. The
increase was due primarily to Company's ongoing program to expand and digitalize
the wireless network as well as the modernization of the wireline network.
The provision for uncollectibles decreased by Bs. 123.5 billion (55.0%)
to Bs. 101.1 billion in 1999 from Bs. 224.6 billion in 1998. The decrease in
uncollectible expenses reflects improvements in CANTV's collections as
management continues to focus on the application of strong credit policies and
improved working capital management. As a result, approximately 458,800 access
lines were permanently disconnected during 1999.
Concession and other taxes decreased by Bs. 3.7 billion (2.9%) to Bs.
123.6 billion in 1999 compared to Bs. 127.3 billion in 1998, mainly due to lower
revenues.
During December 1999, massive floods impacted Venezuela. Based on the
most current information available and the limited access to the impacted areas,
a one-time charge of Bs. 3.6 billion was recorded to cover possible losses.
Despite the magnitude of the floods endured, the Company does not believe this
natural disaster will have a material impact on its financial results.
Other Income (Expense), Net
Total other income (expense) net totaled Bs. 38.7 billion net expense
for 1999 compared to Bs. 25.5 billion net expenses for 1998. This increase is
primarily due to an increase in the loss from monetary position partially offset
by lower net exchange losses.
Non-cash inflation loss totaled Bs. 5.8 billion at December 31, 1999.
During 1998, the non-cash inflation gain totaled Bs. 40.1 billion. This variance
represents a Bs. 45.9 billion loss primarily due to the change in the Company's
monetary position, which changed from an average net liability position in 1998
to a net asset position for most of 1999 due to the Company's strong liquid
position. This non-cash inflation loss was partially mitigated by 1999's
generally lower inflation of 20.0% compared to 29.9% experienced in 1998.
69
<PAGE>
Exchange loss, net decreased by Bs. 17.5 billion to Bs. 29.7 at
December 31, 1999 compared to Bs. 47.2 billion at December 31, 1998. The lower
loss results from CANTV's reduction of its net debt position, which was
partially offset by an increase in the devaluation rate to 14.9% as compared to
11.9% in 1998. The Company's average net monetary liability position decreased
by US$216 million in 1999 from US$557 million in 1998.
Interest income decreased by Bs. 1.7 billion (5.7%) to Bs. 27.5 billion
for 1999 from Bs. 29.2 billion for 1998, due to slightly lower interest rates
earned by the Company during 1999.
Interest expense decreased by Bs. 12.7 billion (21.8%) to Bs. 45.6
billion in 1999 compared to Bs. 58.3 billion in 1998. This decrease is primarily
generated by a reduction of the Company's debt of Bs. 47 billion in 1999 and
lower interest rates on the Company's debt obligations during 1999 of 8.26%
compared to 8.87% in 1998.
During 1999, gain from the indexation of tax units increased by Bs. 3.6
billion to Bs. 11.0 billion from Bs. 7.4 billion in 1998 reflecting the
inflation gain on the Company's tax credits based on a Government change in the
tax unit value to Bs. 9,600 from Bs. 7,400 at year-end 1998.
Income Taxes
The Company's income tax provision increased by Bs. 12.5 billion to Bs.
13.7 billion at December 31, 1999 compared to Bs. 1.2 billion at December 31,
1998. The increase reflects the 1999 reduction of investment tax credits
resulting from lower capital expenditures, which more than offset the reduction
in taxable income.
Years Ended December 31, 1997 and 1998
Operating Revenues
Consolidated net operating revenues decreased by Bs. 44.8 billion (2.6
%) in 1998 to Bs. 1,707.8 billion compared with Bs. 1,752.6 billion reported in
1997. Growth in the wireless business, as well as strong volume increases in
local, domestic and international long distance traffic was offset by long
distance price reductions. In addition, operating revenues were impacted by the
lag between the Wholesale and Consumer Price Indices on approved tariffs as well
as differences between the inflation rates used as a basis for tariff increases
and the prevailing inflation rates at the time the tariff increases were
approved and implemented. See "-- Regulatory Environment."
Operating Volumes
The total number of access lines in service decreased by 86,678 (3.2%)
during 1998, to 2,615,931 at December 31, 1998, from 2,702,609 at December 31,
1997. The decline reflects the permanent disconnection of lines related to
customers with uncollectible balances. Residential and commercial access lines
decreased by 1.9% and 7.5%, respectively, since December 31, 1997, while the
number of public telephones in service increased 7.3% during this same period,
as a result of the Company's aggressive efforts to improve public telephone
availability.
Local minutes of use carried by the Company's local switched network
increased by 1,781 million (15.9%) to 13,006 million minutes for the year ended
December 31, 1998, from 11,225 million minutes for the year ended December 31,
1997. Residential minutes of use increased 13.6% to 7,282 million minutes from
6,410 million minutes during 1997. Commercial minutes of use increased 18.9%,
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to 5,724 million minutes from 4,815 million minutes for 1997. In the fourth
quarter, CANTV began implementing Extended Local Area Service (EAS) in certain
parts of Venezuela, which effectively shifts revenues to services that are less
vulnerable to competition and elasticity. Consumers as well as the Government
positively received the implementation of EAS.
Domestic long distance minutes increased by 14.0%, to 2,668 million
minutes during 1998 from 2,340 million minutes during 1997. This increase is
primarily due to price reductions in real terms. Residential minutes of use
increased by 18.0% to 1,135 million minutes from 962 million minutes during the
year ended December 31, 1997. Commercial minutes of use increased by 11.3%, to
1,533 million minutes during 1998 from 1,378 million minutes during 1997.
International minutes billed locally to customers in Venezuela
increased by 11 million (6.9%) to 171 million for 1998 as compared to 160
million for 1997. For competitive purposes, the Company has chosen, through
tariff rebalancing, to keep international rate increases below the rate of
inflation. The Company's strategy is to continue to reduce its international
rates in real and nominal terms, thus minimizing any revenue dependency on the
highly competitive international market. In 1998, net settlement minutes with
international carriers increased by 11 million (8.7%) to 137 million from 126
million in 1997.
Local Usage
Local usage revenues increased by Bs. 19.7 billion (9.1 %) to Bs. 234.9
billion in 1998 compared to Bs. 215.2 billion in 1997. This increase is
attributable to a 15.9% increase in residential and commercial local calling
volumes partially offset by a real rate per minute decrease of less than one
percent. In addition, in the fourth quarter of 1998, CANTV began implementing
EAS in certain parts of Venezuela, which also contributed to the increase in
local usage revenues.
Domestic Long Distance Usage
Revenues from domestic long distance usage decreased by Bs. 126.2
billion (27.2%) to Bs. 338 billion in 1998 from Bs. 464.2 billion in 1997.
Domestic long distance minutes of use increased by 328 million (14.0%) during
1998. This increase in domestic long distance minutes of use was accompanied by
competitive rate decreases of 36.6% and 13.0% in real and nominal terms,
respectively. Starting with the fourth quarter of 1998, CANTV began increasing
domestic long distance prices by the full amount permitted in its Concession
contract. This resulted in a 4.1% increase in the weighted average real rate
compared to the third quarter of 1998.
Basic Rent
Basic rent revenues include the basic monthly flat fee, installation
charges, and subscriber right charges. These revenues increased by Bs. 16.9
billion (5.2%) to Bs. 341.2 billion in 1998 compared to Bs. 324.3 billion in
1997. The increase is primarily due to a real rate increase of 3.2% in the basic
monthly flat fee. In addition, nonrecurring charges such as installation and
subscriber right charges and reconnect fees increased by Bs. 4.2 billion (7.6%)
as compared to 1997.
Public Telephones
Despite a 7.3% increase since December 31, 1997 in the number of public
telephone units in service, and an increase in revenue from prepaid card sales
during the year, revenues from public telephones decreased by Bs. 2.8 billion
(2.5%) to Bs. 108.7 billion in 1998 from Bs. 111.5 billion
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recorded in 1997. This decline is attributable to the increased access fees paid
to cellular service providers for the increased level of traffic from public
telephones to cellular telephones.
International Long Distance
Total international long distance revenues decreased by Bs. 71.5
billion (24.4%) to Bs. 221.9 billion compared to Bs. 293.4 billion recorded in
1997. Revenues from customer charges billed locally decreased by Bs. 61.7
billion (25.5%) to Bs. 179.9 billion compared to Bs. 241.6 billion in 1997.
Volume increases of 6.9% over 1997 were more than offset by tariff decreases of
30.9% and 6.0% in real and nominal terms, respectively. The overall decline in
international outgoing revenue is expected to continue over the long term as the
Company continues to lower its prices in real terms.
Settlement revenue with international carriers decreased by Bs. 9.9
billion (18.9%) in 1998, to Bs. 42.0 billion compared to Bs. 51.9 billion
recorded in 1997. This decrease was primarily generated by a decrease of 25.5%
in real rates, offset in part by an increase of 8.7% in net settled minutes.
Both years contain revenue adjustments relating to actual traffic settlements,
as well as the contra-revenue associated with payments to foreign
service-provider companies in accordance with contractual revenue-sharing
agreements.
The Company's largest international traffic route is between Venezuela
and North America (the United States, Mexico and Canada), which represented
64.6% and 67.1% of the minutes recorded at December 31, 1997 and 1998,
respectively.
Other Wireline-Related Services
Other wireline services revenues increased by Bs. 16.2 billion (14.8%)
to Bs. 125.4 billion in 1998 compared to Bs. 109.2 billion in 1997.
Interconnection revenues increased by 5.0% in 1998 to Bs. 19.8 billion. Special
services revenues, including private circuits, VPN services, VSAT and Frame
Relay, increased by Bs. 4.8 billion (8.0%) to Bs. 65.2 billion in 1998 compared
to Bs. 60.4 billion in 1997. Other revenues, which include late payment charges
and miscellaneous charges, increased by 38.7% to Bs. 38.1 billion as compared to
Bs. 27.5 billion in 1997.
Wireless Services
Wireless services revenues increased by Bs. 89.8 billion (41.6%) to Bs.
305.1 billion compared to Bs. 215.3 billion recorded in 1997, reflecting strong
growth in the cellular customer base and the success of 1998 promotional
campaigns.
Growth of 70.5% in the wireless customer base is driven, in part, by
the success of prepaid cellular services introduced during 1997. During 1998,
prepaid subscribers almost tripled, reaching a total of 267,760 customers at
December 31, 1998, compared to 95,864 prepaid customers at December 31, 1997,
while postpaid customers increased 33.1% to 371,347 at year-end 1998.
Due to the expansion of the customer base, overall penetration, defined
as the number of customers as a percentage of the total population, improved
from 1.6% at December 31, 1997 to 2.8% at December 31, 1998. The growth in both
the postpaid and prepaid customers also contributed to a 67.6% increase in total
minutes of use to 945 million minutes during 1998 from 564 million minutes in
1997. Minutes of use per customer, excluding prepaid customers, increased by
7.2% to 179 minutes from 167 minutes in 1997, while prepaid minutes of use per
customer decreased by 8.1% to 113 minutes from 123 minutes. Volume growth was
partially offset by real rate decreases in the basic monthly fee and peak hour
usage rates of 18.3% and 11.7%, respectively, during 1998.
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Other Telecommunications-Related Services
Revenues from other telecommunications-services, including Internet
services and directory publications, increased by Bs. 13.0 billion (66.8%) to
Bs. 32.5 billion in 1998 from Bs. 19.5 billion in 1997. Directory publishing
revenues increased by Bs. 5.7 billion (30.8%) to Bs. 24.1 billion compared to
Bs. 18.4 billion in 1997, as a result of increased advertising sales in
telephone directories. Internet subscribers increased to 58,000 at year-end
1998, reflecting strong growth over 1997. 1998 Internet access revenues totaled
Bs. 7.4 billion.
Operating Expenses
Total operating expenses increased Bs. 221.6 billion (17.2%) to Bs.
1,509.2 billion in 1998 from Bs. 1,287.6 billion in 1997. The variance was
largely attributable to the Bs. 162.7 billion increase in the provision for
uncollectibles. The increase in uncollectible expenses reflects the
deterioration in the quality of the collection processes, in prior periods, and
the worsening Venezuelan macroeconomic outlook.
Operations, maintenance, repairs, and administrative expenses increased
4.2% in 1998, totaling Bs. 628.4 billion compared to Bs. 603.3 billion in 1997.
The increase was primarily attributable to operating expenditures necessary to
support the Company's robust wireless revenue growth, including higher marketing
expenses for new advertising campaigns, expanded sales promotions and increased
to customer service costs. The increase also includes contractor expenses
incurred to upgrade the Company's information technology systems, including
projects related to the year 2000 conversion. These increases were partially
offset by a decrease in labor-related expenses due to lower pension expense as a
result of changes in actuarial assumptions during 1998 and lower costs
associated with the Company's work force reduction program. In 1998, the Company
reviewed and updated its actuarial assumptions for employee turnover and the
rate of inflation to reflect actual experience. These changes reduced pension
expense by Bs. 30.4 billion.
Depreciation and amortization expense increased Bs. 29.9 billion (6.0%)
to Bs. 528.8 billion in 1998 from Bs. 498.9 billion in 1997. The increase was
due primarily to higher levels of plant in service resulting from continued
expansion and modernization of the wireline and wireless network.
Concession and other taxes increased by Bs. 3.7 billion (3.0%) to Bs.
127.3 billion in 1998 from Bs. 123.6 billion in 1997, due primarily to higher
value-added taxes generated by increased purchases of goods and services.
Other Income (Expense), Net
Total other income (expense) net totaled Bs. 25.5 billion net expense
for 1998 compared to other income, net of Bs. 70.3 billion for 1997. This
variance is primarily the result of greater net exchange losses coupled with a
lower non-cash inflation gain.
Net exchange losses increased by Bs. 32.4 billion to Bs. 47.2 billion
for 1998 from Bs. 14.8 billion for 1997. The increase in 1998 is due to higher
bolivar devaluation against the U.S. dollar during the year as well as exchange
losses incurred on the Company's Japanese yen-denominated debt generated by the
appreciation of the yen against the U.S. dollar.
The Company's non-cash inflation gain decreased by Bs. 85.7 billion
(68.1%) to Bs. 40.1 billion
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for 1998 from Bs. 125.8 billion for 1997. This decrease is attributable to lower
annual inflation in 1998 as measured by the Consumer Price Index of 29.9% versus
37.6% in 1997, as well as a reduction in the Company's average net monetary
liability position.
Interest income increased by Bs. 10.4 billion (55.2%), to Bs. 29.2
billion for 1998 from Bs. 18.8 billion for 1997, due to higher average short-
term investments offset, in part, by slightly lower interest rates earned by the
Company during 1998.
Slightly lower interest rates on the Company's debt obligations during
1998 of 8.87% compared to 8.93% in 1997, contributed to a Bs. 2.5 billion (4.2%)
decrease in interest expense to Bs. 58.4 billion for the year ended December 31,
1998 from Bs. 60.9 billion for 1997.
During 1998, the Company recognized a Bs. 7.4 billion gain on the
indexation of tax units, representing the inflation gain on the Company's tax
credits based on a Government change in the tax unit value.
Income Taxes
The Company's income tax provision primarily reflects lower taxable
income, the retroactive tax benefit related to a favorable court ruling allowing
investment tax credits to be indexed for inflation and the reversal of an
existing provision recorded in 1997.
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Financial Condition, Liquidity and Capital Resources
The following table summarizes cash flow data for the Company for the
years ended December 31, 1997, 1998, and 1999:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1997 (1) 1998 (1) 1999 (1) 1999 (2)
-------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Cash and temporary investments
Beginning of the year 102,864 146,068 136,964 211
------- ---------- ------- ---
Operating activities:
- ---------------------
Net income 414,549 171,871 89,204 137
------- -------- ------ ---
Adjustments to reconcile net income
to net cash provided by
operating activities 449,768 760,553 724,381 1,116
Changes in current assets and liabilities (101,756) (281,624) (9,283) (14)
Changes in non-current assets and
Liabilities (61,021) (4,851) (10,386) (16)
------- -------- ------- ---
Net cash provided by operating activities 701,540 645,949 793,916 1,223
------- ---------- ------- -----
Investing activities:
- ---------------------
Capital expenditures, net of disposals (533,146) (490,011) (350,792) (540)
-------- ---------- -------- ----
Net cash used in investing activities (533,146) (490,011) (350,792) (540)
-------- ---------- -------- ----
Financing activities:
- ---------------------
Proceeds from borrowings 209,015 198,410 -- --
Payments of debt (281,188) (153,577) (34,832) (54)
Dividend payments (26,655) (174,794) (162,406) (250)
Share repurchase -- -- (2,680) (4)
-------- ---------- -------- ----
Net cash used in financing activities (98,828) (129,961) (199,918) (308)
------- ---------- -------- ----
Increase in cash and temporary
investments before loss in purchasing
power of cash and temporary investments 69,566 25,977 243,206 375
Loss in purchasing power of cash and
temporary investments (26,362) (35,081) (57,086) (88)
------- ---------- ------- ---
Increase (decrease) in cash and temporary
investments 43,204 (9,104) 186,120 287
------- ---------- ------- ---
Cash and temporary investments
end of the year 146,068 136,964 323,084 498
======= ========== ======= ===
</TABLE>
- --------------------
(1) Bolivar amounts are in constant bolivars as of December 31, 1999.
(2) Bolivar amounts have been translated into U.S. dollars, solely for the
convenience of the reader, at the rate of Bs. 649.25 = US$1.00, the Daily
Exchange Rate on December 31, 1999. See "Exchange Rates."
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<PAGE>
Years Ended December 31, 1998 and 1999
Free cash flow (net cash provided by operating activities minus capital
expenditures) increased by Bs. 287.2 billion to Bs. 443.1 billion as compared to
the same period a year ago. This increase was primarily due to improved working
capital management combined with lower capital expenditures.
Net cash provided by operating activities increased Bs. 148.0 billion
(22.9%) to Bs. 793.9 billion for the year ended December 31, 1999 from Bs. 645.9
billion for the year ended December 31, 1998, primarily due by an improvement of
the provision for uncollectibles accounts, a decrease of the inventory levels
and to lower operating expenses.
Capital expenditures decreased by Bs. 139.2 (28.4%) to Bs. 350.8
billion in 1999 compared to Bs. 490.0 billion in 1998. During 1999, the Company
reduced its investment program. Capital expenditures made during the period were
for the continued modernization of its wireline network and the expansion of
both its wireless and Internet platforms. The Company funded these expenditures
with internally generated funds. See "Item 1. Description of Business --
"Domestic Telephone Services -- International Long Distance Services -- Wireless
Services -- Other Telecommunications-Related Services."
The net cash used in financing activities increased by Bs. 69.9 billion
(53.8%) to Bs. 199.9 billion in 1999 compared to Bs. 130.0 billion in 1998. Net
cash used in financing activities was mainly allocated as follows, Bs. 34.8
billion in debt payments, Bs. 162.4 billion in dividend payments, and Bs. 2.7
billion in the share repurchase program at December 31, 1999. Debt service and
dividend payments were covered with internally generated funds.
Years Ended December 31, 1997 and 1998
Net cash provided by operating activities decreased by Bs. 55.6 billion
(7.9%) to Bs. 645.9 billion for the year ended December 31, 1998 from Bs. 701.5
billion for the year ended December 31, 1997, primarily due to higher payments
to suppliers for purchases of goods and services.
Capital expenditures totaled Bs. 490 billion in 1998. The majority of
the investments in 1998 were made to expand the Company's wireline network to
connect with the Pan American fiber optic submarine cable system and to complete
segments of the Company's high capacity broadband fiber optic network as well as
to continue with the modernization and digitalization of central offices. See
"Description of Business -- International Long Distance Services." Additional
investments were made during the year to improve and expand the wireless and
data networks to facilitate the rapid growth of these services. A substantial
portion of the funds necessary for expansion of the wireless network were from
proceeds of the agreement with the International Finance Corporation ("IFC") as
discussed below. During 1998, CANTV's capital expenditures were funded with cash
generated by operating activities.
The Company used net cash of Bs. 130.0 billion for financing activities
during the year ended December 31, 1998, representing Bs. 153.6 billion in debt
payments and Bs. 174.8 billion in dividends, offset in part by Bs. 198.4 billion
in proceeds from additional borrowings. In March 1998, the Company paid US$150
million of debt outstanding under an agreement with the IFC with the proceeds
from the sale of variable interest rate notes. During 1998, Movilnet received
US$95 million in proceeds from an agreement with the IFC, which were used for
expansion and modernization of the wireless network. See Note 11 to the Audited
Financial Statements.
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<PAGE>
Liquidity and Capital Resources
As of December 31, 1999, the Company's current assets totaled Bs. 907.0
billion, an increase of Bs. 113.3 billion (14.3%) compared to Bs. 793.7 billion
at December 31, 1998. The Company's current liabilities totaled Bs. 544.5
billion at December 31, 1999, an increase of Bs. 21.5 billion (4.1%) compared to
Bs. 523.0 billion at December 31, 1998. As a result, the Company's working
capital ratio increased slightly to 1.7% at December 31, 1999, from 1.5% at
December 31, 1998.
Accounts receivable from Government entities increased by Bs. 20.6
billion (20.5%) during the year, to Bs. 121.2 billion at December 31, 1999 from
Bs. 100.6 billion at December 31, 1998. CANTV has strengthened and restructured
its Government collections group, and is coordinating efforts with appropriate
Government entities in order to facilitate the collection of current and future
Government receivables. The amounts that Government pays for telecommunication
services are limited by its annual budgets. On November 3, 1999, the Venezuelan
Congress passed a law authorizing the issuance of financial instruments for the
purpose of paying certain outstanding obligations including those related to the
utilization of telephone services. The amount of bonds permitted to be issued
for payment of debts owed CANTV under such legislation totaled Bs. 63.2 billion.
The Government has stated that it plans to issue such financial instruments by
July 30, 2000; however, the terms and tenure have not been defined by the
Government. The Company still faces uncertainty regarding the timing of
collections from Government entities. See Note 8 to the Audited Financial
Statements.
During 1999, the Company reduced its total debt obligations by Bs. 47.9
billion (10.8%). As of December 31, 1999, the Company's outstanding indebtedness
totaled Bs. 395.1 billion, with Bs. 53.5 billion classified as short-term, as
compared to total debt of Bs. 443.0 billion with Bs. 37.2 billion classified as
short-term at December 31, 1998. The Company continues to maintain a strong
capital structure as evidenced by a 12.7% debt-to-equity position at December
31, 1999. The Company believes that its capital structure positions it to handle
the impacts of Venezuela's difficult macroeconomic outlook.
During 1999, the Company continued generating strong cash flows due to
strong working capital management combined with lower capital expenditures.
While there is no assurance that current liquidity levels can be maintained in
the future, operating cash inflows are expected to continue to be strong based
on the Company's growth strategies and continued demand for telecommunications
services in Venezuela.
The Company has met its liquidity requirements in recent years with
cash flows from operations and proceeds from borrowings. The Company mainly uses
the borrowings for the purchase of equipment through supplier financing
arrangements. During 1999, the Company did not acquire new borrowings, partially
due to the reduction of the investment plans. The Company also has access to
credit lines with various Venezuelan banks to meet its short-term financing
requirements if necessary. Future use of cash for financing activities will
depend on capital structure requirements as well as capital market conditions.
The Company has significant capital expenditures and net liabilities
denominated in U.S. dollars and other foreign currencies and expects this to
continue in the future. The expansion and modernization of the Company's
telecommunications network and the introduction of new services since
privatization have required significant capital expenditures, which have totaled
over US$4.3 billion from January 1, 1992 to December 31, 1999, based on nominal
bolivars converted to U.S. dollars on the basis of average exchange rates during
each year in the relevant period. These capital expenditures and improvements
have been financed through operating cash flows and debt in U.S. dollars and
Japanese yen. At December 31, 1999, the Company had net U.S. dollar and other
foreign currency-denominated liabilities
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<PAGE>
totaling US$136 million. Reductions in the value of the bolivar against the U.S.
dollar and other foreign currencies have severely affected the business and
results of operations of the Company in the past and may continue to do so in
the future. Although the Company continually reviews opportunities to minimize
its exposure to devaluation, the Company currently does not engage in hedging
activities, as there is no substantial organized market for financial
instruments and derivatives in Venezuela. If the value of the bolivar relative
to the U.S. dollar and other foreign currencies were to continue to decline as
it did during the period from 1997 to 1999, the Company's results of operations
and stockholders' equity could be adversely impacted by additional exchange
losses. See "Item 6. Exchange Controls and Other Limitations Affecting Security
Holders" and "Item 9A. Quantitative and Qualitative Disclosures About Market
Risk." The Company currently has a foreign currency debt reduction plan in order
to reduce an adverse impact due to a strong devaluation.
The Company's capital expenditures for 2000 are estimated to be US$550
million, with approximately US$388 million dedicated to the wireline business,
US$146 million to the wireless business and US$16 million to Internet and
others. The capital expenditure program for 2000 maintains similar expenditures
compared to 1999. The Company is prepared to reduce this further if economic
conditions warrant. Capital expenditures are expected to drop to lower levels in
the 2001 to 2004 planning periods. Based on its current working capital surplus,
the Company believes that it will generate adequate internal resources to fund
anticipated capital expenditures.
The Venezuelan Commercial Code, Capital Markets Law and some
regulations issued by the Comision Nacional de Valores ("CNV") regulate the
Company's ability to pay dividends. In addition, some of the Company's debt
agreements provide for certain restrictions, which limit the ability of the
Company to pay cash dividends. See Note 15 to the Audited Financial Statements.
The Commercial Code establishes that dividends shall be paid solely out of
"liquid and collected earnings," and the Capital Markets Law mandates that the
Company distribute every year among its shareholders not less than 50% of its
net annual income, assessed on a non-consolidated basis and without reflecting
its share in the net income of its subsidiaries. Likewise, the Capital Markets
Law provides that at least 25% of such 50% shall be paid to the shareholders in
cash dividends. However, should the Company have accumulated losses, any income
shall initially be applied to offset such accumulated losses. Until 1996, net
income for this purpose was computed as the lesser of (i) net income according
to historical figures or (ii) net income according to inflation adjusted
figures. However, in May 1997, the CNV modified its regulations and provided
that inflation adjusted net income would be the sole basis for the calculation
of dividend payments. The requirement of the Capital Markets Law is subject to
the provisions of the Commercial Code, that is, dividends shall always be paid
out of "liquid and collected earnings."
In October 1998, a new Capital Markets Law was passed. One of the
principal changes is that dividends must be declared in shareholders' assembly
during which the shareholders determine the amount, form, and frequency of the
dividend payment, and that dividend policies must be stated in the company's
by-laws. The CNV cannot exempt a company with publicly traded securities from
paying the minimum dividends required by the Capital Markets Law. See Note 22 to
the Audited Financial Statements for a discussion of additional changes under
the new law.
Net income for dividend purposes for the year ended December 31, 1999
was Bs. 78.5 billion, calculated on an unconsolidated basis after eliminating
the equity participation in subsidiaries.
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<PAGE>
Year 2000 Conversion
The year 2000 issue concerns the potential inability of information
systems to properly recognize and process date-sensitive information beyond
January 1, 2000, and has significant implications. The Company has had an active
Year 2000 Program in place since 1997. Although the Company maintains a
significant portion of its own systems and infrastructure, it also depends on
certain material external supplier products that the Company must verify are
year 2000 compliant as a condition of their use. The Company's program is
modeled after GTE's year 2000 program, and GTE is providing the methodology and
technical support in connection with this project.
The Company experienced no significant effects arising from the
transition into the year 2000, and its customers had no problems resulting from
the transition into year 2000. The Company completed its year 2000 renovation,
conducted system testing and returned to production the essential systems that
support its businesses in advance of December 31, 1999. With the successful
transition into the year 2000, the Company has eliminated the risk generated by
the rollover to January 1, 2000.
During 2000, the Company will continue its plan to manage any potential
time-date interruptions including, potential gradual system degradation after
January 1, 2000 possible accumulation of processing errors or degraded
performances.
The Company's Year 2000 program totaled approximately US$56 million.
The resources for year 2000 program have come from funds generated from
operations.
Legal Contingencies
The Company is involved in numerous administrative and judicial
proceedings. The majority of these legal proceedings have been filed by former
employees requesting additional severance benefits. Based on the opinion of its
external legal counsel handling these proceedings, management considers that a
substantial number of these actions will be resolved in the Company's favor.
Nevertheless, management believes that the Company has recorded adequate
reserves as of December 31, 1999 for all such matters. There are no legal
pending proceedings, other than ordinary routine litigation incidental to the
Company's business, which are material to the Company.
During 1998, the Company was advised of a legal claim filed by
Manufacturas Plasticas Telefonicas, C.A. ("Maplatex"), asserting breach of
contract by CANTV in connection with a telephone equipment supply contract and
claiming damages totaling Bs. 26.6 billion. In June 1999, the judicial
proceeding was closed. The parties agreed to settle their dispute pursuant to a
settlement agreement under which CANTV agreed to pay Maplatex Bs. 1.9 billion
(expressed in billion of constant bolivars at June 30, 1999). See "Item 3. Legal
Proceedings" and Note 19(c) to the Audited Financial Statements.
Recently Issued Accounting Pronouncements
As a result of a change to Venezuelan accounting standards, effective
in 1999, the Company recognized postretirement benefits other than pensions
systematically over employee's service periods in the amount of Bs. 155.8
billion at December 31, 1999. See Note 14 to the Audited Financial Statements.
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes a new model for
accounting and reporting standards for derivatives and
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<PAGE>
hedging activities. The Company currently does not engage in hedging activities
as there is no substantial market for financial instruments and derivatives in
Venezuela and, therefore, is not required to adopt SFAS 133. See Note 27(f) to
the Audited Financial Statements.
Amendment to the Income Tax Law
On October 22, 1999 the National Government published in the
Extraordinary Official Gazette N(degree) 5390, The Partial Reform of the Income
Tax Law (the "Amended Law"). The most significant changes effective from periods
beginning after the publication of the Law are as follows: implementation of the
price transfer regime for imports and exports of goods and services between
related companies. Losses from adjustment for inflation will be carried forward
up to one period. Tax adjustments for inflation will not be applicable to
taxpayers in the preoperating stage. Investment tax credits in fixed assets for
industrial companies will be 10% of the amount of new investments and will be
applied for the five years from the effective date of the Amended Law. A new
credit of 10% is provided on the Venezuelan personnel hired from the effective
date of the Amended Law until December 31, 2000.
Additionally, the Amendment to the Income Tax includes some regulations
which will be effective from January 1, 2001, as follows: a new taxation on
worldwide income applicable to income obtained by individuals or companies
residing or domiciled in Venezuela and for non-resident individuals or companies
that have fixed basis or permanent establishment in Venezuela. See "Item 7.
Taxation." It allows a credit for income taxes paid abroad. A proportional tax
on dividends is introduced equivalent to 34%. See Note 23 to the Audited
Financial Statements.
Cautionary Statement Regarding Forward-Looking Statements
In this Management Discussion and Analysis, the Company has made
forward-looking statements. These statements are based on the Company's
estimates and assumptions and are subject to certain risks and uncertainties.
These forward-looking statements include information concerning possible or
assumed future results of operations of the Company. For each of these
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the U.S. Private Securities Litigation
Reform Act of 1995. The future results of the Company could be affected by
subsequent events and could differ materially from those expressed in the
forward-looking statements depending on a variety of factors discussed in this
Management Discussion and Analysis and elsewhere in this Form 20-F, including
factors set forth under the caption "Forward-Looking Information." If future
events and actual performance differ from the Company's assumptions, the actual
results could vary significantly from the performance projected in the
forward-looking statements.
Item 9A. Quantitative and Qualitative Disclosures About Market Risk
The carrying amounts of cash and short-term investments, trade
receivables and payables, and short-term and long-term debt approximate their
fair values. The fair value was determined by quoted market prices.
The Company is exposed to market risk, including changes in interest
rates and foreign currency exchange rates. The Company does not use derivative
financial instruments in its investment portfolio. The Company places its
investments with high quality European, U.S. and/or Latin American issuers and,
by policy, limits the amount of credit exposure to any one issuer. The Company
is averse to principal loss and ensures the safety and preservation of its
invested funds by limiting default risk, market risk and reinvestment by
investing with European, U.S. and/or Latin American issuers that are guaranteed
by wholly-owned foreign companies with high credit quality securities.
80
<PAGE>
The Company mitigates default risk by investing in highly liquid U.S.
dollar short-term investments, primarily certificates of deposit and commercial
paper, which have maturities of three months or less. The Company does not
expect any material loss with respect to its investment portfolio.
The majority of the Company's indebtedness is denominated in foreign
currencies, primarily in U.S. dollars and Japanese yen, which exposes the
Company to market risk associated with changes in exchange and interest rates.
The Company's policy is to manage interest rate risk through the use of a
combination of fixed and variable rate debt. Presently the Company has not
signed any hedge contract against foreign currency exposures, but keeps cash
reserves in U.S. dollars and Japanese yen as a natural hedge to meet financing
obligations.
81
<PAGE>
The table below presents principal amounts by year of maturity and the
related weighted average interest rates for the Company's investment portfolio
and debt obligations at December 31, 1999 (in million of bolivars, translated at
the Daily Exchange Rate on December 31, 1999):
<TABLE>
<CAPTION>
Weighted
Average
Interest Year of Maturity
Rate 2000 2001 2002 2003 2004 Thereafter Total
---------- ---------- -------- ---------- --------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment portfolio:
- --------------------
U.S. dollars
Certificates of deposit 5.75% 94,658 -- -- -- -- -- 94,658
Overnight deposits 3.52% 1,012 -- -- -- -- -- 1,012
Commercial paper 6.50% 161,820 -- -- -- -- -- 161,820
Japanese yen
Certificates of deposit 0.15% 29,568 -- -- -- -- -- 29,568
Bolivars
Certificates of deposit 16.69% 23,188 -- -- -- -- -- 23,188
Overnight deposits 4.07% 6,312 -- -- -- -- -- 6,312
Long-term Government bonds 16.85% 6,518 -- -- -- -- -- 6,518
---------- -------- ---------- --------- -------- ------------ ----------
Total 323,076 -- -- -- -- -- 323,076
========== ======== ========== ========= ======== ============ ==========
Debt Obligations:
- ----------------
U.S. dollars
Fixed rate
----------
Guaranteed notes 9.06% -- -- 64,925 -- 64,778 -- 129,703
Bank loans 6.77% 1,529 889 1,279 640 -- -- 4,337
Notes payable to suppliers 7.45% 2,950 1,180 960 -- -- -- 5,090
Variable rate
-------------
Notes 7.50% 19,477 22,724 29,216 17,855 -- -- 89,272
IFC loans 7.75% 9,333 9,333 9,333 9,333 9,333 31,245 77,910
Bank loans 6.16% 5,827 4,242 2,378 -- -- -- 12,447
Japanese yen
Fixed rate
----------
Bank loans 5.80% 6,852 6,852 6,852 6,852 6,852 30,836 65,096
Bolivars
Variable rate
-------------
Bank loans 27.27% 7,553 1,956 515 708 530 -- 11,262
---------- -------- ---------- --------- -------- ------------ ----------
Total 53,521 47,176 115,458 35,388 81,493 62,081 395,117
========== ======== ========== ========= ======== ============ ==========
</TABLE>
82
<PAGE>
Item 10. Directors and Officers of Registrant
Directors
CANTV is managed by its Board of Directors which, in accordance with
its by-laws, consists of the President of CANTV and eight principal directors,
each of whom will have an alternate to act in the absence of such director. The
members of the Board of Directors are elected in annual shareholder meetings.
Until January 1, 2001, the President and four principal directors, who comprise
a majority of the Board of Directors, are to be elected by VenWorld, as the
holder of the Class A Shares and two principal directors are to be elected by
the Government as the holder of the Class B Shares. Holders of Class C Shares
will have the right, voting as a separate class, to elect two directors provided
such shares represent at least 8% of CANTV's share capital and the right to
elect at least one director, provided such shares represent at least 3% of the
equity share capital of CANTV. After January 1, 2001, the Government will have
the right to elect one principal director subject to the Government continuing
to own at least one Class B Share. Holders of Class D Shares have the right,
voting together with all other holders of the equity capital of CANTV, to elect
any director not elected by any other Classes of CANTV's equity shares voting as
separate classes. Accordingly, after January 1, 2001, holders of all shares
voting as single class will be entitled to elect (a) the President and the four
principal directors which holders of Class A Shares are currently entitled to
elect; (b) one of the two principal directors which the Government as holder of
Class B Shares is currently entitled to elect; and (c) up to two additional
principal directors if Class C Shares represent less than 8% or 3% of the equity
capital of CANTV as described above and an additional one principal director of
the Government ceases to own any Class B Shares. The Government has indicated
its intention to retain at least one Class B Share.
The entire Board of Directors, and their alternates, is elected
annually, and each serves until a successor is elected and takes office.
Directors may be removed and replaced in the same manner they were designated
prior to the end of their term by the same class or classes of stockholders who
designated them as directors. Until a vacancy is filled, the respective
alternate fills temporary and permanent absences of principal directors. CANTV's
by-laws require that the Board of Directors meet at least once every three
months. A quorum at any meeting of the Board of Directors is five members.
CANTV's current directors are:
<TABLE>
<CAPTION>
Name Position Held Since
- ----------------------------------------- --------------------------- ---------------------------
<S> <C> <C>
Nominated by VenWorld:
Gustavo Roosen President June 1995
Kathleen Hishinuma Alternate Director March 2000
Fares F. Salloum Director March 1998
Al Giammarino Alternate Director March 1999
Vicente Llatas Director March 2000
Luis Esteban Palacios Alternate Director December 1991
Francisco Aguerrevere Director March 1998 (1)
Luis Jose Diaz Zuloaga Alternate Director March 1999
Rafael Hernandez Garcia Director March 1999
Jose Manuel Santero Munoz Alternate Director March 1999
</TABLE>
83
<PAGE>
<TABLE>
<S> <C> <C>
Nominated by the Government:
Adil J. Coury Director January 1996
Alberto Maman Alternate Director August 1998
Raul Arreaza Coliza Director March 1994
Haydee Deutsch Martinez Alternate Director March 1994
Nominated by CANTV Employees
and Retirees:
Ubaldo Suniaga Director March 2000
Pedro Gonzalez Alternate Director March 2000
Alcides Guzman Director March 1999
Abdul Chaaban Alternate Director March 2000
- ----------------------
</TABLE>
(1) Served from December 1991 to March 1995 as Director, from March 1995 to
March 1996 as Alternate Director, from March 1996 to March 1997 again as
Director and from March 1997 to March 1998 again as Alternate Director.
The Board of Directors has an Audit Committee (consisting of Messrs.
Masin, Salloum, Aguerrevere, Hernandez, Arreaza, Maman, Roosen and Guzman) and a
Shareholders' Relations Committee (consisting of Messrs. Palacios, Zuloaga,
Coury, Deutsch, Guzman, Gonzalez, Marquez and Suniaga). The Finance Committee
was eliminated during 1998.
Executive Officers
Until January 1, 2001, the President of CANTV is selected by VenWorld,
as the holder of the Class A Shares. After January 1, 2001, holders of all
shares voting as a single class will be entitled to elect the President. All
other executive officers of CANTV are appointed by the Board of Directors and
hold office at the discretion of the Board.
84
<PAGE>
The Company's current executive officers are:
<TABLE>
<CAPTION>
Current Position
Name Position Held Since
- -------------------------------- ---------------------------------------- ----------------------------------
<S> <C> <C>
Gustavo Roosen President, Chairman and June 1995
Chief Executive Officer, CANTV
Vicente Llatas Executive Vice President and May 1998
Chief Operating Officer
Alvaro Benavides General Manager, April 1993
Communications and External
Relations
Alberto Briceno General Manager, Planning September 1998
Luis E. Bottaro Lupi General Manager, June 1996
General Counsel
Regulo Carpio General Manager September 1999
Information Systems
Kathleen de lzaguirre General Manager, March 1998
Network
Luis de Leon General Manager, July 1994
Shared Services
Miguel Genova General Manager, January 1998
Regulatory Affairs
Pedro Gonzalez General Manager, June 1998
Human Resources
David N. Schoenberger General Manager, June 1997
Chief Financial Officer
Miguel Benatuil President, CANTV Servicios April 1997
Guillermo Olaizola President, Movilnet January 1996
</TABLE>
Set forth below is biographical information concerning the Company's
executive officers:
Gustavo Roosen, President, Chairman and Chief Executive Officer, CANTV.
Mr. Roosen has been the President, Chairman and Chief Executive Officer since
June 1995. He was President of Petroleos de Venezuela S.A. from 1992 to March
1994. He has served as President of the Junta Interventora del Banco Latino (the
Government-created committee charged with reorganizing Banco Latino) since March
1994, Special Commissioner for the Reform of the National Financial System since
April 1994 and has served and continues to serve on the boards of directors of
many Venezuelan companies, including Envases Venezolanos, S.A.. Mr. Roosen also
served as General Coordinator of the Food Division of Organizacion Polar, an
industrial holding company incorporated in Venezuela, from 1978 to 1989,
President of the Caracas Chamber of Commerce from 1986 to 1988 and Vice
President of the Banking Association from 1981 and 1983. Mr. Roosen was Minister
of Education of the Republic of Venezuela from 1989 to 1992. He received a law
degree from the Universidad Catolica Andres Bello in
85
<PAGE>
1966 and a Master in Comparative Jurisprudence degree in Comparative Law from
New York University School of Law in 1968.
Vicente Llatas, Executive Vice President and Chief Operating Officer.
Mr. Llatas has been the Executive Vice President and Chief Operating Officer
since May 1998. Mr. Llatas holds an Electrical Engineering degree from
Universidad Central de Venezuela and a Master's Degree from Union College, New
York. His professional experience encompasses 33 years in the Petroleum Industry
of Venezuela. Mr. Llatas joined Creole Petroleum Corporation in 1964, holding
various managerial positions throughout Venezuela. In 1977, he was named Manager
of Lagoven's eastern division and in 1980, he became Assistant Production
Manager. In 1984, Mr. Llatas was appointed International Marketing Manager and
in 1986 was named member of the Board of Directors of Lagoven. He became Vice
President of Bitumenes Orinoco, S.A. (BITOR), a subsidiary of Petroleos de
Venezuela, S.A., in 1988. He was appointed Trading and Supply Coordinator of
Petroleos de Venezuela S.A., in 1990. In 1994, he was appointed Vice President
of Lagoven, until September 1997, and served as President of Lagoven prior to
accepting his current position at CANTV.
Alvaro Benavides, General Manager, Communications and External
Relations. Mr. Benavides has served as General Manager, Communications and
External Relations, since April 1993. Prior to joining CANTV, he served at Banco
de Venezuela as Executive Vice President of Marketing and Communications. He
also served as managing editor of El Nacional, a leading Venezuelan daily paper.
He received a Bachelor of Arts degree in Communications from UCV in 1972 and a
Master's degree in Mass Communications from the University of Leicester, England
in 1981.
Alberto Briceno, General Manager, Planning. Mr. Briceno has been
General Manager Planning since September 1998. He received a Bachelor of Science
degree in Engineering from UCV in November 1969 and a Master's degree from
Stanford University, California. His professional career encompasses 27 years of
experience in the Venezuelan oil industry. Mr. Briceno joined Creole Petroleum
Corporation in 1970. In August 1985, he was appointed Manager of Lagoven's
International Sales, and in 1988 he was named Manager of Strategic Planning at
Petroleos de Venezuela S.A.. From 1992 to 1994, he served as Deputy Vice
President at Citgo Petroleum Corporation in Tulsa, Oklahoma. In 1994, he was
appointed Member of the Board of Director for Corpoven and was named Executive
President for PDV-Gas in 1997.
Luis E. Bottaro Lupi, General Manager, General Counsel. Mr. Bottaro has
served as General Manager, General Counsel since June 1996. Prior to joining the
Company, he served as General Counsel for Lagoven S.A., a subsidiary of
Petroleos de Venezuela S.A. from 1991 to 1996. From 1987 to 1991, he served as
General Counsel for Maraven S.A., a subsidiary of Petroleos de Venezuela S.A.
From 1970 to 1987, Mr. Bottaro served as staff attorney for Shell de Venezuela,
N.V., and Maraven S.A. He received a law degree from Universidad de Los Andes in
Venezuela in 1969 and a Master in Comparative Jurisprudence from New York
University in 1987.
Regulo Carpio, General Manager, Information Systems. Mr. Carpio has
served as General Manager, Information Systems since September 1999. Prior to
such time, Mr. Carpio served as Manager, CANTV 2000 Project since January 1998.
From 1985 to 1989 he served as Consultant for Krygier, Morales y Asociados
(Arthur Andersen) and from 1989 to 1994 also served as Systems Manager at
Industrias Savoy (Polar Company). He received a Bachelor of Science in Computing
Engineering from the Universidad Simon Bolivar in Venezuela in 1985, and a
Master's degree in Systems Engineering at the same university in 1990. He
attended the Advanced Management Program at Instituto de Estudios Superiores de
Administracion (IESA) in 1994.
86
<PAGE>
Kathleen de Izaguirre, General Manager, Network. Ms. Izaguirre has
served as General Manager, Network, since March 1998. Prior to such time, Ms.
Izaguirre served as Executive Vice President, Planning and Technology and
Corporate Realignment, since June 1997 and as Executive Vice President, Planning
and Technology, since July 1996. She has also occupied various managerial
positions at CANTV and Venezolana de Cementos C.A.. She received a Bachelor of
Science degree in Electrical Engineering from Universidad Metropolitana in
Venezuela in 1975.
Luis de Leon, General Manager, Shared Services. Mr. de Leon has served
as General Manager, Shared Services, since July 1994. Prior to that time, he
served at Cerveceria Polar C.A., a brewery and beer distribution company
incorporated in Venezuela, as Director of Human Resources from 1992 to 1994,
Director of Operations, from 1986 to 1992 and occupied various managing
positions from 1979 to 1985. Mr. De Leon also worked in various managing
positions at Electricidad de Caracas from 1966 to 1979. He received a B.A. in
Industrial Engineering from Universidad Catolica Andres Bello in Venezuela in
1966.
Miguel Genova, General Manager, Regulatory Affairs. Mr. Genova has
served as General Manager, Regulatory Affairs, since January 1998. Prior to that
time, he served as consultant for the Vice Presidency Planning and Technology of
CANTV, Presidency of Movilnet, and CANTV Servicios, Vice Presidency Assistant to
the President of CANTV, Instituto de Estudios Superiores de Administracion IESA,
Petroleos de Venezuela S.A., Hidroven, Fondo de Inversiones de Venezuela,
CONICIT and others. He also occupied the Presidency of CONATEL from 1992 to 1993
and managerial positions at Ministry of Infrastructure (previously, known as
Ministry of Transportation and Communication) from 1990 to 1991. During this
period, he managed processes such as the privatization of CANTV, the creation of
CONATEL and the deregulation of the telecommunications industry. He received a
B.S. in Electrical Engineering from UCV in 1970 and a Master's degree in
Development and Planning from UCV in 1978.
Pedro Gonzalez, General Manager, Human Resources. Mr. Gonzalez has
served as General Manager, Human Resources, since June 1998. Prior to that time,
he served as Vice President of Human Resources for Movilnet since December 1995.
From 1992 to 1995, he served as the Vice President of Human Resources for United
Distillers of Venezuela, and from 1978 to 1992 as Human Resources Manager for
Warner Lambert in both Venezuela and Argentina. Mr. Gonzalez also served as
Human Resources Manager for Banco Mercantil y Agricola from 1976 to 1978. He
received a B.A. in Philosophy from Universidad Catolica Andres Bello in
Venezuela in 1972 and a B.A in Industrial Relations in 1975.
David N. Schoenberger, General Manager, Chief Financial Officer. Mr.
Schoenberger was appointed General Manager, Chief Financial Officer in June 1997
having served as Controller since 1996. Prior to that he occupied various
executive positions at the Company since 1992, including as Director of Billing
and Revenue Accounting from June 1995 to 1996, and Vice President,
Finance/Controller of Caveguias from 1992 to 1995. Before joining the Company,
Mr. Schoenberger served in various capacities at GTE since 1983. He received a
B.A. from Tulane University in 1976 and an M.B.A. from Loyola University in
1979.
Miguel Benatuil, President, CANTV Servicios. Mr. Benatuil was appointed
President of CANTV Servicios in April 1997. Since 1983 to 1997 he founded and
managed Infotrol a high-tech enterprise serving the telecommunication and
security markets. Prior to such time, he founded and managed AETI, a Venezuelan
supplier company of data communication systems for industrial applications from
1978 to 1983. He received a Bachelor of Science degree in Electronic Engineering
from Universidad Simon Bolivar in Venezuela in 1975.
87
<PAGE>
Guillermo Olaizola, President, Movilnet. Mr. Olaizola has served as
President of Movilnet since January 1996. Prior to that, he founded and served
as President of the following companies: Logramsa S.A., GlobalNet C.A., OpenLink
C.A. and TRUEnet C.A., which are engaged in telecommunications related
businesses and Fonomet C.A., which is engaged in the design and manufacture of
metal parts for the electronics industry. He has also served on the Board of
Directors of CAFADAE, AFETEL, CANAEMTE, FUNDAVAC and FARMATODO. He received an
Electrical Engineering degree from the Universidad Simon Bolivar in Venezuela in
1976, and has attended management courses at Instituto de Estudios Superiores de
Administracion IESA and Duke University.
Item 11. Compensation of Directors and Officers
For the year ended December 31, 1999, the aggregate amount of
compensation paid by the Company to all principal directors, alternate directors
and executive officers was Bs. 1,880.7 million (US$3.1 million), and the
aggregate amount accrued by the Company to provide pension, retirement or
similar benefits for principal directors, alternate directors and executive
officers, pursuant to existing plans, was Bs. 1,003.5 million (US$1.7 million).
Item 12. Options to Purchase Securities from Registrant or Subsidiaries
Not applicable.
Item 13. Interest of Management in Certain Transactions
In the ordinary course of its business, the Company engages in a
variety of transactions with members of VenWorld and their respective
affiliates. Inventories, supplies, plant and equipment of Bs. 20.7 billion, Bs.
29.9 billion and Bs. 23.7 billion for the years ended December 31, 1997, 1998
and 1999, respectively, were purchased from affiliates of VenWorld's
stockholders. These same affiliates provided technical and administrative
services to the Company at a total cost of Bs. 14.3 billion, Bs. 6.6 billion,
and Bs. 19.9 billion for the years ended December 31, 1997, 1998 and 1999,
respectively. Net operating revenues of Bs. 26.0 billion, Bs. 13.7 billion and
Bs. 10.2 billion, were recognized for the years ended December 31, 1997, 1998
and 1999, respectively, with respect to the settlement of international
telephone traffic with affiliates. The Company has recorded net payables to GTE
and AT&T affiliates for all such transactions of Bs. 13.5 billion and Bs. 2.3
billion, respectively, at December 31, 1998 and Bs. 7.5 billion and Bs. 1.0
billion, respectively at December 31, 1999.
88
<PAGE>
PART II
Item 14. Description of Securities to be Registered
Not applicable.
89
<PAGE>
PART III
Item 15. Defaults upon Senior Securities
Due to adverse economic factors in Venezuela, including recession, high
inflation, devaluation and the imposition of exchange controls in June 1994, the
Company was unable to make payments on US$525 million of its outstanding bank
debt and US$21 million of its obligations with certain vendors. On August 25,
1995, the Company and a Bank Advisory Committee entered into a refinancing
agreement (the "Refinancing Agreement"), relating to such US$525 million of its
outstanding debt and certain of the Company's vendors entered into similar
agreements extending the payment terms for existing obligations. The revised
terms included no forgiveness of principal or interest. The Company prepaid all
amounts outstanding under the Refinancing Agreement during 1996 and 1997.
Item 16. Changes in Securities and Changes in Security for Registered
Securities and Use of Proceeds
Not applicable.
90
<PAGE>
PART IV
Item 17. Financial Statements
Not applicable.
Item 18. Financial Statements
Please refer to Item 19.
Item 19. Financial Statements and Exhibits
(a) Financial Statements
<TABLE>
<S> <C>
Page
----
Index........................................................................................ F-1
Report of Independent Public Accountants..................................................... F-2
Consolidated Statements of Operations for the Years Ended December 31, 1997, 1998 and 1999... F-3
Consolidated Balance Sheets as of December 31, 1998 and 1999................................. F-4
Consolidated Statements of Changes in Stockholders' Equity for the Year
Ended December 31, 1997, 1998 and 1999..................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1998 and 1999... F-6
Notes to the Audited Consolidated Financial Statements for the Years
Ended December 31, 1997, 1998 and 1999..................................................... F-7
(b) Exhibits
Exhibit Index ...................................................................................91
</TABLE>
Exhibit 10: Agreement dated February 21, 2000 between The Bolivarian
----------
Republic of Venezuela, acting through its Ministry of Infrastructure, and
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
All supplementary schedules relating to the Registrant are omitted because
they are not required or because the required information, where material,
is contained in the Audited Financial Statements or Notes thereto.
91
<PAGE>
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
on Form 20-F and has duly caused this annual report to be signed on its behalf
by the undersigned, thereunto duly authorized.
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA
(CANTV)
(Registrant)
By: /S/ David N. Schoenberger
---------------------------------------------------
(Signature)
Name: David N. Schoenberger
Title: General Manager, Chief Financial Officer
April 7, 2000
92
<PAGE>
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV) AND SUBSIDIARIES
INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1999, and
for the years ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................. F-2
Consolidated Statements of Operations for the Years
Ended December 31, 1997, 1998 and 1999.............................. F-3
Consolidated Balance Sheets as of December 31, 1998 and 1999............. F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 1997, 1998 and 1999.............................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999................................................. F-6
Notes to the Consolidated Financial Statements for the Years
Ended December 31, 1997, 1998 and 1999.............................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Compania Anonima Nacional
Telefonos de Venezuela (CANTV):
We have audited the accompanying consolidated balance sheets of Compania Anonima
Nacional Telefonos de Venezuela (a telecommunications corporation established in
Venezuela) ("CANTV" or the "Company") and subsidiaries as of December 31, 1998
and 1999, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999 expressed in Venezuelan bolivars. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 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 CANTV and
subsidiaries as of December 31, 1998 and 1999 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles in
Venezuela.
Also, in our opinion, the amounts in the accompanying financial statements
translated into U.S. dollars have been computed on the basis set forth in Note
3.
Accounting practices used by the Company in preparing the accompanying financial
statements conform with generally accepted accounting principles in Venezuela,
but do not conform with accounting principles generally accepted in the United
States. A description of these differences and a reconciliation of consolidated
net income and stockholders' equity to United States generally accepted
accounting principles are set forth in Notes 26 and 27.
/S/ ARTHUR ANDERSEN LLP
New York, New York
January 26, 2000
F-2
<PAGE>
(Translation of financial statements originally issued in Spanish)
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV) AND SUBSIDIARIES
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
----------------------------------------------------
(Adjusted for inflation and expressed in millions of constant bolivars
as of December 31, 1999, and millions of U.S. dollars,
except per share and per ADS amounts)
<TABLE>
<CAPTION>
1997 1998 1999 1999
Bs. Bs. Bs. U.S.$
------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Local and domestic long distance usage 679,446 572,917 541,743 835
Basic rent 324,280 341,232 319,728 492
Public telephones 111,495 108,675 105,508 163
------------- -------------- ----------- ---------
Local and domestic long distance 1,115,221 1,022,824 966,979 1,490
International long distance 241,551 179,888 133,146 205
Net settlements 51,870 42,046 28,016 43
------------- -------------- ----------- ---------
International long distance 293,421 221,934 161,162 248
Other wireline-related services 109,203 125,375 143,212 221
------------- -------------- ----------- ---------
Total wireline services 1,517,845 1,370,133 1,271,353 1,959
Wireless services 215,286 305,159 405,514 624
Other telecommunications-related services 19,462 32,472 38,663 59
------------- -------------- ----------- ---------
Total operating revenues 1,752,593 1,707,764 1,715,530 2,642
------------- -------------- ----------- ---------
OPERATING EXPENSES:
Operations, maintenance, repairs and administrative 665,187 853,078 859,096 1,323
Depreciation and amortization 498,857 528,818 587,700 905
Concession and other taxes 123,562 127,295 123,592 190
Nonrecurring charge - - 3,600 6
------------- -------------- ----------- ---------
Total operating expenses 1,287,606 1,509,191 1,573,988 2,424
------------- -------------- ----------- ---------
Operating income 464,987 198,573 141,542 218
------------- -------------- ----------- ---------
OTHER INCOME (EXPENSE), NET:
Financing benefit (cost), net 68,856 (28,794) (42,564) (66)
Other income, net 1,453 3,262 3,879 6
------------- -------------- ----------- ---------
Total other income (expense), net 70,309 (25,532) (38,685) (60)
------------- -------------- ----------- ---------
Income before income tax 535,296 173,041 102,857 158
INCOME TAX 120,747 1,170 13,653 21
------------- -------------- ----------- ---------
Net income 414,549 171,871 89,204 137
============= ============== =========== =========
EARNINGS PER SHARE 415 172 89 0.14
============= ============== =========== =========
EARNINGS PER ADS (BASED ON 7 SHARES PER ADS) 2,902 1,203 625 0.96
============= ============== =========== =========
Average shares outstanding (in millions) 1,000 1,000 999 999
============= ============== =========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
(Translation of financial statements originally issued in Spanish)
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV) AND SUBSIDIARIES
-------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1999
------------------------------------------------------------
(Adjusted for inflation and expressed in millions of constant bolivars
as of December 31, 1999, and millions of U.S. dollars)
<TABLE>
<CAPTION>
1998 1999 1999
Bs. Bs. U.S.$
---------- ---------- --------
<S> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and temporary investments 136,964 323,084 498
Accounts receivable, net of allowance for doubtful accounts of
Bs. 45,473 and Bs. 77,817 450,514 406,911 627
Accounts receivable from Venezuelan Government entities 100,601 121,204 187
Inventories and supplies, net 83,160 43,400 67
Other current assets 22,442 12,397 18
----------- ---------- ---------
Total current assets 793,681 906,996 1,397
Property, plant and equipment, net 3,325,081 3,116,672 4,800
Cellular concession, net 89,395 86,720 134
Other assets 237,301 224,912 346
----------- ---------- ---------
Total assets 4,445,458 4,335,300 6,677
=========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Short-term debt 37,162 53,521 82
Accounts payable 246,279 275,045 424
Employee severance benefits, net 6,412 8,851 14
Accrued employee benefits 25,264 33,677 52
Other 207,920 173,410 267
----------- ---------- ---------
Total current liabilities 523,037 544,504 839
LONG-TERM LIABILITIES:
Long-term debt 405,822 341,596 526
Pension and postretirement benefit obligations 167,052 327,329 504
----------- ---------- ---------
Total liabilities 1,095,911 1,213,429 1,869
STOCKHOLDERS' EQUITY 3,349,547 3,121,871 4,808
----------- ---------- ---------
Total liabilities and stockholders' equity 4,445,458 4,335,300 6,677
=========== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
(Translation of financial statements originally issued in Spanish)
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV) AND SUBSIDIARIES
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
----------------------------------------------------
(Adjusted for inflation and expressed in millions of constant bolivars as of
December 31, 1999)
<TABLE>
<CAPTION>
Capital Stock
--------------------------------
Additional Cumulative Total
Historical Inflation Paid-in Retained Legal Translation Stockholders'
Cost Adjustment Total Capital Earnings Reserve Adjustment Equity
---------- ---------- --------- ---------- --------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1996 36,902 1,248,198 1,285,100 15,981 1,509,290 128,511 22,180 2,961,062
Net income - - - - 414,549 - - 414,549
Dividends declared - - - - (26,655) - - (26,655)
Change in cumulative translation
Adjustment - - - - - - 966 966
---------- ---------- --------- ---------- --------- ------- ----------- -------------
Balance as of December 31, 1997 36,902 1,248,198 1,285,100 15,981 1,897,184 128,511 23,146 3,349,922
Net income - - - - 171,871 - - 171,871
Dividends declared - - - - (174,794) - - (174,794)
Change in cumulative translation
Adjustment - - - - - - 2,548 2,548
---------- ---------- --------- ---------- --------- ------- ----------- -------------
Balance as of December 31, 1998 36,902 1,248,198 1,285,100 15,981 1,894,261 128,511 25,694 3,349,547
Accumulated postretirement
benefits obligation - - - - (153,947) - - (153,947)
Net income - - - - 89,204 - - 89,204
Dividends declared - - - - (62,406) - - (62,406)
Extraordinary dividends declared - - - - (100,000) - - (100,000)
Repurchased shares (45) (1,509) (1,554) - (1,126) - - (2,680)
Change in cumulative translation
Adjustment - - - - - - 2,153 2,153
---------- ---------- --------- ---------- --------- ------- ----------- -------------
Balance as of December 31, 1999 36,857 1,246,689 1,283,546 15,981 1,665,986 128,511 27,847 3,121,871
========== ========== ========= ========== ========= ======= =========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
(Translation of financial statements originally issued in Spanish)
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV) AND SUBSIDIARIES
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
----------------------------------------------------
(Adjusted for inflation and expressed in millions of constant
bolivars as of December 31, 1999, and millions of U.S. dollars)
<TABLE>
<CAPTION>
1997 1998 1999 1999
Bs. Bs. Bs. U.S.$
------------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income 414,549 171,871 89,204 137
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss from net monetary position (125,781) (40,123) 5,841 9
Exchange loss, net 14,821 47,229 29,737 46
Depreciation and amortization 498,857 528,818 587,700 905
Provision for doubtful accounts 61,871 224,629 101,103 156
Changes in current assets and liabilities:
Accounts receivable (266,207) (309,465) (135,454) (209)
Accounts receivable from Venezuelan Government
entities (68,951) (13,839) (40,466) (62)
Inventories and supplies, net (14,808) (33,148) 37,917 58
Other current assets (2,679) 805 8,316 13
Accounts payable 182,685 39,388 104,952 162
Employee severance benefits, net (4,398) 11,187 19,234 30
Other current liabilities 72,602 23,448 (3,782) (6)
------------- ----------- ---------- ---------
762,561 650,800 804,302 1,239
Changes in non-current assets and liabilities:
Other assets (51,759) (34,737) (16,167) (25)
Employee severance benefits, net (18,453) - - -
Pension and postretirement benefits obligations 9,191 29,886 5,781 9
------------- ----------- ---------- ---------
Net cash provided by operating activities 701,540 645,949 793,916 1,223
------------- ----------- ---------- ---------
INVESTING ACTIVITIES:
Capital expenditures, net of disposals (533,146) (490,011) (350,792) (540)
------------- ----------- ---------- ---------
Net cash used in investing activities (533,146) (490,011) (350,792) (540)
------------- ----------- ---------- ---------
FINANCING ACTIVITIES:
Proceeds from borrowings 209,015 198,410 - -
Payments of debt (281,188) (153,577) (34,832) (54)
Dividend payments (26,655) (174,794) (162,406) (250)
Share repurchase - - (2,680) (4)
------------- ----------- ---------- ---------
Net cash used in financing activities (98,828) (129,961) (199,918) (308)
------------- ----------- ---------- ---------
Increase in cash and temporary investments before
loss in purchasing power of cash and temporary
investments 69,566 25,977 243,206 375
LOSS IN PURCHASING POWER OF CASH AND TEMPORARY INVESTMENTS (26,362) (35,081) (57,086) (88)
------------- ----------- ---------- ---------
Increase (decrease) in cash and temporary
investments 43,204 (9,104) 186,120 287
CASH AND TEMPORARY INVESTMENTS:
Beginning of year 102,864 146,068 136,964 211
------------- ----------- ---------- ---------
End of year 146,068 136,964 323,084 498
============= =========== ========== =========
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest 44,786 37,490 33,681 52
============= =========== ========== =========
Taxes 138,824 86,028 84,211 130
============= =========== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
(Translation of financial statements originally issued in Spanish)
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV)
--------------------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
(Amounts are adjusted for inflation and expressed in millions of constant
bolivars as of December 31, 1999, unless otherwise indicated)
1. EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH:
----------------------------------------------
The consolidated financial statements were originally issued in Spanish and
translated into English.
2. COMPANY BACKGROUND AND CONCESSION AGREEMENT:
-------------------------------------------
Compania Anonima Nacional Telefonos de Venezuela (CANTV or the Company) is the
primary provider of telecommunications services in Venezuela. The Company
provides substantially all of its services within Venezuela and substantially
all of its operating income is derived from Venezuelan domiciled customers and
from settlements with foreign carriers for calls completed in Venezuela. CANTV
is the proprietor of the only basic telecommunications network with nationwide
coverage. Through this network, CANTV provides local, national and international
telecommunications services. In addition, the Company provides private network,
data, public telephone, rural and telex services. Through its subsidiaries, the
Company provides other telecommunications-related services including wireless
communications, internet access and telephone directories.
The Company operates under a Concession Agreement (the Concession) with the
Government of Venezuela (the Government) for the purpose of modernizing and
expanding the local telecommunications network, improving the supply, quality
and use of telecommunications services, introducing progressive rate rebalancing
and establishing a framework for the introduction of competition. The Concession
was approved by the Venezuelan Congress in 1991.
Significant terms of the Concession are as follows:
- --------------------------------------------------
a. The Concession provides that, except in limited circumstances, the Company
is to be the exclusive provider of local, national and international fixed
switched telephone services until November 2000, and grants the Company the
right to provide related services.
b. The Concession is for 35 years ending in 2026 and is extendible for an
additional period of 20 years subject to the approval by the Ministry of
Infrastructure previously the Ministry of Transportation and Communications
(the Ministry), and satisfactory performance by the Company of its
obligation under the Concession.
c. The Company is required to pay annually to the Government a total of 5.5%
of services billed which is reflected as concession and other taxes in the
accompanying consolidated statements of operations.
F-7
<PAGE>
d. The Concession requires the Company to expand, modernize and improve the
quality of its telephone network as well as to meet prescribed service
quality targets. The Concession mandates include national and regional
expansion and modernization targets as well as annual and cumulative
targets (See Note 19 - Commitments and contingencies).
e. The Concession specifies various penalties, which may be imposed on the
Company for negligent or intentional violation of Concession provisions,
including a fine of up to 1% of services billed, and/or revocation and
termination of the Concession. Penalties assessed against the Company
through December 31, 1999 have not been material.
f. The Concession allows for periodic increases in telephone rates as more
fully described in Note 5 - Regulation.
3. CONVENIENCE TRANSLATION OF BOLIVARS INTO U.S. DOLLAR AMOUNTS:
------------------------------------------------------------
Unless otherwise noted, all financial information in these financial statements
has been stated in constant bolivars based upon the bolivar's purchasing power
as of December 31, 1999. Bolivar amounts have been translated into U.S. dollar
amounts, solely for the convenience of the reader, at a rate of Bs. 649.25 to
U.S.$1, the exchange rate reported by the Central Bank of Venezuela as of
December 31, 1999. The translation of amounts expressed in constant bolivars as
of a specified date by the then prevailing exchange rate may result in the
presentation of dollar amounts that differ from the dollar amounts that would
have been obtained by translating constant bolivars as of another specified
date, particularly in periods of high inflation with no corresponding
devaluation, such as has occurred in Venezuela.
Such translation should not be construed as a representation that the bolivar
amounts have been, could have been, or could in the future be converted into
U.S. dollars at this or any other rate of exchange.
4. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES:
---------------------------------------------------------
a. Basis of presentation
---------------------
The consolidated financial statements have been prepared in accordance with
Venezuelan generally accepted accounting principles (Venezuelan GAAP).
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
b. Adjustment for inflation
------------------------
The Company's consolidated financial statements are presented on a constant
bolivar basis as of December 31, 1999, in accordance with the Venezuelan
Statement of Accounting Principles Number 10 "Standards for the Preparation of
Financial Statements Adjusted for Inflation" (DPC 10) and its amendments issued
by the Venezuelan Federation of Public Accountants.
F-8
<PAGE>
The amounts in the consolidated financial statements have been adjusted to
reflect the bolivar's purchasing power at December 31, 1999, based on the
Consumer Price Index (CPI) for the metropolitan area of Caracas as published by
the Central Bank of Venezuela. The indices used in connection with the
preparation of the inflation adjusted financial statements are as follows (1984
base):
1997 1998 1999
----------- ----------- -----------
End of year 11,702.70 15,202.50 18,247.30
Average for year 10,048.61 13,644.35 16,860.30
Each caption in the accompanying consolidated financial statements has been
presented on the basis of the CPI at December 31, 1999, as follows:
i. Monetary assets and liabilities (cash and temporary investments,
receivable, other assets and most liabilities) as of December 31, 1999 have
not been adjusted for the effect of inflation since they already represent
their inflation adjusted value at that date. The balances as of December
31, 1998 have been reexpressed based upon the relative change in the CPI
between that date and the CPI at December 31, 1999.
ii. Non-monetary assets (principally inventories and supplies, property, plant
and equipment, the cellular concession and certain other assets) and
stockholders' equity have been updated based upon the relative change in
the CPI between the time the assets and equity were acquired or contributed
and the CPI at December 31, 1999.
iii. Non-monetary liability, pension and other postretirement benefit
obligations and its related expense are recorded based on actuarial
calculations (See Note 14 - Retirement benefits).
iv. Monetary revenues and expenses have been updated based upon the change in
the CPI from the month in which the transaction was recorded and the CPI at
December 31, 1999.
v. Non-monetary expenses (primarily depreciation and amortization) are based
upon the values of the corresponding assets (primarily property, plant and
equipment) in the accompanying consolidated balance sheets (See (ii)
above).
vi. The inflation gain (loss) attributable to the Company's net monetary asset
or liability position has been set forth as gain (loss) from net monetary
position as part of the Financing benefit (cost), net caption in the
accompanying consolidated statements of operations (See Note 16 - Financing
benefit (cost), net).
c. Consolidation principles
------------------------
The consolidated financial statements include CANTV and all of its majority-
owned subsidiaries. All significant intercompany balances and transactions among
the companies have been eliminated.
d. Cash and temporary investments
------------------------------
Cash and temporary investments include short-term, highly liquid investments,
which have original maturities of three months or less. The loss in the
purchasing power of cash and temporary investments due to inflation is reflected
as a separate caption in the statements of cash flows.
F-9
<PAGE>
e. Inventories and supplies, net
-----------------------------
Inventories and supplies are presented at cost, net of reserves. Certain
inventories and supplies whose original cost per unit does not exceed the
equivalent in bolivars of U.S.$ 500 are expensed when purchased.
f. Depreciation and amortization
-----------------------------
Depreciation is calculated using the straight-line method based on the estimated
useful lives of the assets. The costs of the cellular concession (See Note 6 -
Cellular concession) and other intangible assets (See Note 10 - Other assets)
are amortized on a straight-line basis over the expected periods benefited, not
to exceed 40 years. Amortization expense was Bs. 45,568, Bs. 28,575 and Bs.
35,590 for the years ended December 31, 1997, 1998 and 1999, respectively.
Accumulated amortization was Bs. 155,441 and Bs. 191,031 at December 31, 1998
and 1999, respectively.
g. Computer software
-----------------
The costs of certain purchased computer software and systems for internal use
are capitalized and classified as intangible assets. Until December 31, 1998,
such costs were amortized over their expected useful lives of 6 to 7 years. In
January 1999, the Company reviewed and updated its policy to amortize computer
software to 3 to 5 years. This change did not have a material impact on the
financial statements of the Company. During the periods ended December 31, 1997,
1998 and 1999, the Company capitalized Bs. 35,614, Bs. 33,967 and Bs. 45,682,
respectively. Internal-use software is defined as software which is acquired,
internally developed, or modified solely to meet the internal needs of the
Company; and for which, during the software's development or modification, no
substantive plan exists or is being developed by the Company to market the
software externally. Regular maintenance and modifications to existing software
are expensed when incurred.
h. Revenue recognition
-------------------
Revenues for wireline and wireless services are recognized in the period in
which the services are provided. Unbilled revenues of Bs. 128,495 and Bs.
107,756 are included in accounts receivable as of December 31, 1998 and 1999,
respectively. Revenues from settlement of traffic with international
telecommunications carriers are recognized on a net basis and are based on
estimates of traffic volume and rates. Advertising revenues and related
telephone directory printing costs are recognized upon publication of the
directories.
i. Income tax
----------
The income tax expense is calculated based upon taxable income. Venezuelan tax
legislation does not permit consolidation of results of subsidiaries for tax
purposes. Investment tax credits for plant and equipment reduce the income tax
during the year in which such assets are placed in service. Investment tax
credits as well as net operating losses are permitted to be carried forward for
three years. Venezuelan tax regulations also provide for a corporate asset
alternative minimum tax based on inflation adjusted net assets. (See Note 17 -
Income Tax).
F-10
<PAGE>
j. Employee severance benefits and other benefits
----------------------------------------------
Employee severance benefits are calculated and recorded in accordance with the
Venezuelan labor law and the Company's current collective bargaining agreement.
Under the current labor law, employees earn a severance indemnity equal to 5
days' salary per month, up to a total of 60 days' per year of service. Labor
indemnities are earned once an employee has completed three months of continuous
service. Beginning with the second year of service, the employees earn an
additional 2 days' salary for each year of service (or fraction of a year
greater than six months), cumulative up to a maximum of 30 days' salary.
Severance benefits must be funded and deposited monthly in either an individual
trust or a severance fund, or accrued in an employer's accounting records, as
specified in writing by each employee.
In the case of unjustified or involuntary termination, employees have the right
to an additional indemnification payment of one-month salary per year of service
up to a maximum of 150 days' current salary. In the case of an involuntary
termination, an additional severance benefit of up to a maximum of 90 days'
current salary based on length of employment must be paid.
Additionally, the Venezuelan labor law requires a mandatory annual profit
sharing distribution to all employees. CANTV made distributions equal to 120
days' salary for the year ended December 31, 1997, 1998 and 1999 totaling Bs.
33,417, Bs. 37,210 and Bs. 37,981, respectively.
k. Pension plan and other postretirement benefits
----------------------------------------------
The noncontributory pension plan benefits are accrued based on actuarial
estimates. The real discount rate and real rate of compensation increase used to
develop the projected benefit obligation are 7% and 2%, respectively (See Note
14 - Retirement benefits).
Until 1998, postretirement benefits relating to health care expenses were
recorded as operating expenses on a pay-as-you-go basis. In 1999, the Company
recorded postretirement health care costs based on actuarial estimates as
required by International Accounting Standard 19 (IAS 19). The accumulated
postretirement benefits obligation, as of December 31, 1998, was recognized on
an immediate basis affecting retained earnings. This adoption did not have a
material impact on 1999 results.
l. Foreign currency denominated transactions
-----------------------------------------
Foreign currency denominated transactions are recorded at the bolivar exchange
rate as of the transaction date. The outstanding balances of foreign currency
denominated assets and liabilities are translated into bolivars using the
exchange rate at the balance sheet date, which was Bs. 565.00 and Bs. 649.25 per
U.S. dollar as of December 31, 1998 and 1999, respectively (See Note 7 -
Balances in foreign currency). Any exchange gain or loss from the translation of
these balances and transactions is reflected as exchange loss, net in the
Financing benefit (cost), net caption in the accompanying consolidated
statements of operations (See Note 16 - Financing benefit (cost), net).
F-11
<PAGE>
m. Legal reserve
-------------
The Company and each of its subsidiaries are required under the Venezuelan
Commercial Code and their corporate by-laws to transfer at least 5% of each
year's net income to a legal reserve until such reserve equals 10% of capital
stock. As of December 31, 1998 and 1999, the Company's legal reserve had reached
10% of capital stock.
n. Earnings per share
------------------
Earnings per share are based on 1,000,000,000 common shares outstanding during
the years ended December 31, 1997 and 1998 and 998,770,100 common shares
outstanding during the year ended December 31, 1999.
5. REGULATION:
----------
The Telecommunications Law and telecommunications regulations provide the
general legal framework for the regulation of telecommunications services in
Venezuela. Under the Telecommunications Law, suppliers of public
telecommunications services, such as the Company, must operate under concessions
or permissions granted by the Government, which acts through the Ministry.
The Company's business and the tariffs it charges for basic telephony services
are regulated by the Concession, the Telecommunications Law and
telecommunications regulations, and are subject to approval by the Ministry. The
Comision Nacional de Telecomunicaciones (CONATEL) is a regulatory body under the
direction of the Ministry, and has the authority to supervise telecommunications
services in Venezuela and recommend the granting of concessions, licenses and
administrative authorizations. CONATEL also promotes investments in
telecommunications and technological innovation in Venezuela.
The Concession provides for tariff regulation through a "price-cap" and a "rate
rebalancing" mechanism that promotes operating efficiency and allows for
progressive tariff adjustments. The price-cap varies directly with the Wholesale
Price Index (WPI) published by the Central Bank of Venezuela, permitting the
Company, with the approval of the Ministry, to raise tariffs each quarter to
keep pace with wholesale inflation. Generally a three to six month delay exists
between the date the WPI is published for a particular quarter and its actual
effect on new tariffs.
CANTV's third and fourth quarter 1999 tariff increases were not approved by
CONATEL. According to statements given to the press by CONATEL, the Company is
in noncompliance, and therefore, in violation of the Concession with regards to
service quality targets. These statements did not have legal bases.
On July 12, 1999, CANTV filed a legal document with the Ministry to initiate a
preliminary administrative proceeding, a step prior to filing a lawsuit, and
sought the participation of the Ministry and the Attorney General of the
Republic (the Attorney) in order to solve the tariff increase issue. This
procedure allowed the Government to resolve the situation before a formal
judicial proceeding took place.
F-12
<PAGE>
Presently, CANTV has chosen not to introduce the case to the courts because on
October 27, 1999 CANTV and CONATEL signed a preliminary letter of understanding
that sought a global agreement to review the eighth year as established in the
Concession. The review began with the naming of two independent international
telecommunications experts whose objective was to evaluate and recommend
appropriate tariff and quality standards and methodologies for Venezuela after
comparison with similar information in ten other countries. On November 15,
1999, the experts presented their recommendations in a common report to CANTV
and CONATEL.
During the first days of January 2000, CANTV and CONATEL reached a final
agreement with regards to service level commitments and rate structures. This
agreement will be valid until the end of 2000. The agreement includes changes in
the following areas:
a. New tariff structure for the year 2000.
b. Update of the concession mandates.
c. New service offerings.
d. Resolution of legal matters included in the Concession.
As of the date of this financial statement, the agreement is awaiting the
signature of the Minister of Infrastructure and the President of CANTV.
6. CELLULAR CONCESSION:
-------------------
On May 19, 1992, the Company purchased one of two cellular concessions from the
Government for Bs. 108,656 (Bs. 5,388 on an historical cost basis) and
established Telecomunicaciones Movilnet, C.A. (Movilnet). The amount paid for
the cellular concession is being amortized over 40 years.
The cellular concession has an initial term of 20 years and may be extended
under certain circumstances for an additional 20 years. The cellular concession
requires the payment of an annual concession fee of 10% of services billed. The
cellular concession requires that Movilnet expand the cellular network, improve
the quality of cellular services when technically feasible, and provide certain
rural, public and emergency services. Management believes Movilnet is in
compliance with these requirements as of December 31, 1999.
F-13
<PAGE>
7. BALANCES IN FOREIGN CURRENCY:
----------------------------
As of December 31, 1998 and 1999, the Company has assets and liabilities
denominated in U.S. dollars and Japanese yen as follows (in millions of U.S.
dollars):
1998 1999
-------- --------
Cash and temporary investments 180 509
Accounts receivable, net 37 26
Other assets and advances to suppliers 43 35
Accounts payable (171) (128)
Short-term and long-term debt (636) (578)
-------- --------
Net liability position in foreign currency (547) (136)
======== ========
8. ACCOUNTS RECEIVABLE FROM VENEZUELAN GOVERNMENT ENTITIES:
-------------------------------------------------------
The Company's largest customer is the Venezuelan public sector, including the
Government, its agencies and enterprises, and the Venezuelan states and
municipalities (collectively, Government entities). Government entities
generated approximately 10%, 9% and 9% of the Company's revenues during the
years ended December 31, 1997, 1998 and 1999, respectively.
The following table sets forth the aging of the accounts receivable from
Government entities as of December 31, 1998 and 1999:
Year of Service 1998 1999
- --------------- -------- --------
1999 - 60,806
1998 59,544 31,392
1997 and prior 41,057 29,006
-------- --------
100,601 121,204
======== ========
The changes in accounts receivable from Government entities during the years
ended December 31, 1998 and 1999 are as follows:
1998 1999
-------- --------
Balance at beginning of year 114,552 100,601
Billings 128,412 146,717
Collections (114,574) (106,251)
Loss from exposure to inflation (27,789) (19,863)
-------- --------
Balance at end of year 100,601 121,204
======== ========
The amounts that Government entities can pay for telecommunications services are
established in annual budgets, which are not based upon actual usage during such
year. As a result of these budgeting processes and for other reasons, a number
of Government entities have not paid the Company in full for telecommunications
services received. In addition, as a result of inflation and devaluation, the
value of these balances has decreased.
F-14
<PAGE>
Although the Company has, in the case of certain Government entities, reduced
the number of lines available, there can be no assurance that Government
entities will not continue to use telecommunications services in excess of the
amounts that can be paid, that the Company will not continue to experience
significant delays in collecting receivable from Government entities or that
inflation and devaluation will not continue to decrease the value of these
receivable to the Company. Failure by Government entities to pay the amounts
owed to the Company or the amounts to be billed in the future has had, and will
continue to have, an adverse effect on the profitability of the Company.
Management believes all amounts from Government entities will be collected
either in cash and/or through Government bonds.
On November 3, 1999, Congress passed a law authorizing the issuance of bonds to
refinance external and internal debts, as well as other past-due obligations.
The amount of bonds set aside for payment of debts owed CANTV under such
legislation totaled Bs. 63,218. It is unknown when the Government will issue the
bonds.
9. PROPERTY, PLANT AND EQUIPMENT, NET:
----------------------------------
Property, plant and equipment, net as of December 31, 1998 and December 31, 1999
is as follows:
1998 1999
---------- ----------
Plant 7,108,285 7,407,512
Buildings and facilities 853,984 871,398
Furniture and equipment 446,973 597,659
Vehicles 71,197 69,632
Land 48,391 33,912
---------- ----------
8,528,830 8,980,113
Less: accumulated depreciation (5,404,770) (5,952,002)
---------- ----------
3,124,060 3,028,111
Construction work in progress 201,021 88,561
---------- ----------
3,325,081 3,116,672
========== ==========
The average useful lives for the different classes of property, plant and
equipment are as follows:
Average useful
lives (in years)
----------------
Plant 3 to 33
Buildings and facilities 5 to 25
Furniture and equipment 3 to 7
Vehicles 3
F-15
<PAGE>
Property, plant and equipment includes capitalized direct labor and allocated
overhead costs, as well as materials used in connection with construction work
in progress. Capitalized direct labor and allocated overhead costs totaled Bs.
123,588, Bs. 75,074 and Bs. 69,231 for the years ended December 31, 1997, 1998
and 1999, respectively. Maintenance and repair costs are expensed when incurred
while major improvements and renovations are capitalized.
10. OTHER ASSETS:
------------
Other assets as of December 31, 1998 and 1999 are as follows:
1998 1999
-------- --------
Software and other intangible assets 156,706 151,616
Prepaid taxes 19,483 15,708
Investment in INTELSAT 26,048 22,510
Class C stock and other 35,064 35,078
-------- --------
237,301 224,912
======== ========
Software and other intangible assets include the cost of computer software and
systems for internal use (See Note 4(g) - Summary of significant accounting
principles and policies - Computer software) and the cost of usage rights of
satellites and submarine cables which are amortized over periods ranging from 7
to 16 years based upon the terms of contracts granting usage rights.
Prepaid taxes include taxes assessed on the inflation adjusted value of fixed
assets. In 1991, the Venezuelan Income Tax Law was revised to incorporate new
provisions. Under this new law, companies were required to pay an initial tax
equal to 3% of the inflation adjusted value of fixed assets. This initial tax
was paid prior to 1996 and has been deferred and is being amortized over the
estimated useful lives of the related assets.
The investment in INTELSAT represents the Company's participation in the
International Satellite Telecommunications Organization. The Company accounts
for this investment using the equity method. The functional currency of INTELSAT
is the U.S. dollar.
In 1993, the Company purchased 1% of its capital stock, for Bs. 43,819. The
stock is being distributed to employees as part of an incentive plan. All the
employees of the Company are eligible. The Company charges the related cost to
expense in the year employees earns the award and the stock is issued to
employees the following year. At December 31, 1999, 8,723,339 shares are
available for distribution to employees under this plan.
F-16
<PAGE>
11. LONG-TERM DEBT:
--------------
Long-term debt at December 31, 1998 and 1999 is comprised of the following:
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
Notes in U.S. dollars at interest rates of 9.25% and 8.88% at
December 31, 1998 and 1999, maturing in 2004 and 2002,
respectively 135,428 129,703
Notes in U.S. dollars at interest rates of six-month LIBOR
plus a margin between 1.35% and 1.75%, (averaging 7.50%),
maturing through 2003 101,724 89,272
Bank loans in Japanese yen at fixed interest rates (averaging
5.97% at December 31, 1998 and 5.88% at December 31, 1999),
and in U.S. dollars at interest rates of six-month LIBOR
plus a margin between 0.25% and 2.00%, maturing through 2009 82,578 73,426
IFC loans in U.S. dollars at variable interest rates:
a) At six-month LIBOR plus a margin of 1.75%, (averaging 6.79%),
maturing through 2005 40,689 38,955
b) At six-month LIBOR plus a margin of 2.00%, (averaging 7.04%),
maturing through 2007 23,736 22,724
c) At six-month LIBOR plus a margin between 3.00% and 6.00% (averaging
11.71% at December 31, 1998 and 11.06% at December 31, 1999),
maturing through 2005 16,954 16,231
Supplier loans in U.S. dollars at interest rates of six-month LIBOR
plus a margin of 0.25% to 0.50% (averaging 6.13% at December 31,
1998 and 6.35% at December 31, 1999), maturing through 2002 12,761 8,454
Notes payable to suppliers in U.S. dollars at variable interest
rates (averaging 7.54% at December 31, 1998 and 7.45% at
December 31, 1999), maturing through 2002 9,778 5,090
Bank loan in U.S. dollars at three-month LIBOR (averaging 6.22%),
maturing through 1999 7,196 -
Bank loan in bolivars bearing interest at the average lending rate
of the four major banks in Venezuela (51.74% at December 31,
1998 and 30.95% at December 31, 1999), maturing through 2003 5,758 6,303
Bank loans in bolivars at various interest rates (averaging 56.69%
at December 31, 1998 and 10.47% at December 31, 1999), maturing
through 2001 681 209
------------ ------------
437,283 390,367
Less: Current maturities (31,461) (48,771)
------------ ------------
405,822 341,596
============ ============
</TABLE>
F-17
<PAGE>
On June 7, 1996, the Company entered into an agreement with the International
Finance Corporation (IFC Facility). Pursuant to the IFC Facility, the Company
obtained loan commitments aggregating up to U.S.$ 261 million, of which U.S.$
175 million was disbursed. Of the amount disbursed, U.S. $75 million was used in
the Company's modernization and expansion program as mandated by the Concession
and for certain other capital expenditures. The remaining U.S.$ 100 million
represents the conversion of certain debt outstanding under a Bank Refinancing
Agreement into longer term debt. In March 1998, the Company paid U.S.$ 150
million of the debt outstanding under the IFC Facility with the proceeds from
the sale of variable interest rate notes issued by CANTV Finance Ltd., a wholly-
owned subsidiary of the Company, which are unconditionally and irrevocably
guaranteed as to payment of principal and interest by CANTV. The principal on
the remaining loan is payable as a single payment of U.S.$ 25 million in 2005.
The interest rate on this loan is based on LIBOR plus a margin and an additional
amount of up to 3% based on the Company's annual net income equivalent in U.S.
dollars.
Pursuant to the IFC Facility, the Company may pay dividends only if it is
current with respect to its semi-annual payments. In addition, the Company is
required to meet certain financial ratios, including a long-term debt-to-equity
ratio, a current ratio and a fixed charge coverage ratio, each as defined by the
agreement. The Company has complied with these covenants as of December 31,
1999.
In 1997, Movilnet signed an agreement with the IFC for two loans totaling U.S.$
95 million, which were disbursed during 1998. The proceeds of these loans were
used for expansion and modernization of the cellular network.
Estimated payments of long-term debt are: Bs. 48,771 in 2000, Bs. 47,176 in
2001, Bs. 115,458 in 2002, Bs. 35,388 in 2003, and Bs. 143,574 thereafter,
translated into bolivars at the exchange rate at December 31, 1999.
12. SHORT-TERM DEBT:
---------------
Short-term debt as of December 31, 1998 and 1999 is as follows:
1998 1999
-------- --------
Bank loans in bolivars at various interest rates
(averaging 41.32% at December 31, 1998 and
20.22% at December 31, 1999) 5,701 4,750
Current maturities of long-term debt 31,461 48,771
-------- --------
37,162 53,521
======== ========
F-18
<PAGE>
13. OTHER CURRENT LIABILITIES:
--------------------------
Other current liabilities at December 31, 1998 and 1999 are comprised of the
following:
1998 1999
------- -------
Income, value added and other taxes 10,801 11,445
Accrued liabilities 29,975 15,997
Legal claims 9,816 9,092
Concession tax 91,387 86,900
Deferred income 26,697 22,351
Technical and administrative services
due to affiliates of VenWorld stockholders 11,006 6,808
Interest payable 12,980 10,060
Others 15,258 10,757
------- -------
207,920 173,410
======= =======
14. RETIREMENT BENEFITS:
--------------------
Pension Plan
- ------------
The Company sponsors a noncontributory pension plan for its employees. The
benefits to be paid under the plan are based on years of service rendered and
the employee's final salary. At December 31, 1999, the Company has funded Bs.
63,558 in a trust for this purpose.
The components of pension expense for the years ended December 31 are as
follows:
1997 1998 1999
------ ------ ------
Benefits earned during the year 17,913 12,201 14,456
Interest cost on projected
benefit obligation 26,271 18,598 21,981
Other, net 13,081 5,531 6,924
------ ------ ------
57,265 36,330 43,361
====== ====== ======
The accrued pension obligation at December 31 is as follows:
1998 1999
------- -------
Accumulated benefit obligation 283,183 349,598
======= =======
Projected benefit obligation 318,645 388,415
Funded amount (34,308) (73,236)
Unrecognized transition obligation (7,574) (6,490)
Unrecognized net losses (185,845) (206,082)
Unrecognized prior service cost 84,520 76,235
-------- --------
Pension obligations (including current
portion of Bs. 8,388 and Bs. 7,087,
respectively) 175,438 178,842
======== ========
F-19
<PAGE>
Assumptions used to develop the projected benefit obligation are as follows:
Discount rate 7%
Expected return on assets 5%
Rate of compensation increase 2%
These assumptions represent estimates of real interest rates and compensation
increases rather than nominal rates. The unrecognized transition obligation is
being amortized over 20 years.
In 1998, the Company reviewed and updated its actuarial assumptions for employee
turnover and the rate of inflation to reflect actual experience. These changes
reduced pension expense by Bs. 30,402.
Postretirement Benefits Other than Pensions
- -------------------------------------------
In 1999, the Company recorded postretirement benefit obligations based on
actuarial estimates. Benefit payments are based on the average medical claims
per retiree for 1998.
The components of postretirement benefit expense for the year ended December 31,
1999 are as follows:
Benefits earned during the year 2,793
Interest on accumulated postretirement benefit obligations 10,365
------
13,158
======
The accrued postretirement benefit obligation at December 31, 1999 is as
follows:
Accumulated postretirement benefit obligation attributable to:
Active employees 47,785
Retirees 134,319
-------
Total accumulated
postretirement benefit obligation 182,104
Unrecognized net losses (26,314)
-------
Accrued postretirement benefit
(including current portion of Bs. 216) 155,790
=======
Assumptions used to develop the accumulated postretirement benefit obligation
are as follows:
Discount rate 7%
Medical cost trend rate 2%
These assumptions represent estimates of real interest rates and medical cost
trend rate increases rather than nominal rates. The unrecognized transition
obligation is being amortized over 11 years.
F-20
<PAGE>
Defined Contribution Plan
- -------------------------
The Company has a defined contribution plan (Special Economic Protection Plan
for Eligible Retirees) to supplement the current pension benefits of retirees as
of August 15, 1995. Contributions are allocated to retirees based upon their
age, pension income and other existing benefits. At December 31, 1999, the
Company had funded Bs. 9,679 for this Plan. The Company is not required to
increase the funding of this Plan.
15. STOCKHOLDERS' EQUITY:
---------------------
Dividends
- ---------
The Venezuelan Commercial Code, Capital Markets Law and some regulations issued
by the Comision Nacional de Valores (CNV), regulate the ability of the Company
to pay dividends. In addition, some of the Company's debt agreements provide for
certain restrictions, which limit the ability of the Company to pay cash
dividends (See Note 11 - Long-term debt). The Commercial Code establishes that
dividends shall be paid solely out of "liquid and collected earnings," and the
Capital Markets Law mandates that the Company distribute every year among its
shareholders not less than 50% of its net annual income, assessed on a
non-consolidated basis and without reflecting its share in the net income of its
subsidiaries. Likewise, the Capital Markets Law provides that at least 25% of
such 50% shall be paid to the shareholders in cash dividends. However, should
the Company have accumulated losses, any net income shall initially be applied
to offset such accumulated losses. Until 1996, net income for this purpose was
computed as the lesser of (i) net income according to historical figures or (ii)
net income according to inflation adjusted figures. However, in May 1997, the
CNV modified its regulations and provided that inflation adjusted net income
would be the sole basis for the calculation of dividend payments. The
requirements of the Capital Markets Law are subject to the provisions of the
Commercial Code, that is, dividends shall always be paid out of "liquid and
collected earnings."
In October 1998, a new Capital Markets Law was passed. One of the principal
changes is that dividends must be declared in a shareholders' assembly during
which the shareholders determine the amount, form and frequency of the dividend
payment and that dividend policies must be stated in the company's by-laws. The
CNV cannot exempt a company with publicly traded securities from paying the
minimum dividends required by the Capital Markets Law. (See Note 22 - Capital
Markets Law).
On March 30, 1999, the Company shareholders approved the incorporation of the
Capital Markets Law into the Company's by-laws.
Net income for dividend purposes for the year ended December 31, 1999, is Bs.
78,500, calculated on an unconsolidated basis and after eliminating the equity
participation in its subsidiaries.
On November 16, 1999 an extraordinary shareholders' assembly declared an
extraordinary cash dividend of Bs. 100 per share. On December 3, 1999, this
dividend was paid.
F-21
<PAGE>
Capital Stock
- -------------
The Company's capital stock outstanding of 998,770,100 shares has a par value of
Bs. 36.9018 per share. These shares are separated into four classes, as follows:
Number of
Participation shares (in
Stockholder Class % thousands)
- --------------------------------------- ----- ------------- -----------
VenWorld Telecom C.A. (VenWorld) A 40.05 400,000
Fondo de Inversiones de Venezuela (FIV) B 5.20 51,900
Employee Trusts and Employees C 13.03 130,185
Public Shareholders D 41.72 416,685
------------- -----------
100.00 998,770
============= ===========
VenWorld is a private consortium of companies led by GTE Corporation (GTE), and
originally included T.I. Telefonica Internacional de Espana, S.A.; C.A. La
Electricidad de Caracas, S.A.C.A.; Consorcio Inversionista Mercantil (CIMA),
C.A. S.A.C.A.; and AT&T International, Inc. (AT&T) (Participants in the
Consortium).
During 2000, VenWorld may transfer or encumber the Class A Shares if it
continues to own directly, and free from all encumbrances, at least 20% of the
capital stock of the Company. After January 1, 2001, any Class A Shares
transferred to any person other than VenWorld or its wholly-owned subsidiaries
and affiliates controlled by any of the partners of the Participants in the
Consortium, will be automatically converted into an equal number of Class D
Shares. VenWorld has the right to elect the CANTV President and four members of
the Board of Directors of the Company until January 1, 2001.
Class B Shares may only be owned by Venezuelan Government entities. The transfer
of Class B Shares to any non-public sector individual or entity will cause the
shares to be automatically converted to Class D Shares, except if the shares are
transferred to a CANTV employee or retiree, in which case the shares will be
converted to Class C Shares. Class B stockholders have the right to elect two
members of the Board of Directors of the Company until January 1, 2001.
Thereafter, they may elect only one member. A majority of holders of Class A and
B Shares is required to approve a number of corporate actions, including certain
amendments to the by-laws.
Class C Shares may be owned only by employees, retirees, former employees and
heirs and spouses of employees or retirees of CANTV and its subsidiaries. Any
Class C Shares transferred to any other individual or entity will be
automatically converted to Class D Shares. Holders of Class C Shares have the
right, voting as a separate class, to elect two members of the Board of
Directors provided such Class C Shares represent at least 8% of the equity share
capital of CANTV and the right to elect one member provided such shares
represent at least 3% of the equity share capital of CANTV.
Class D Shares are comprised of the conversion of Class B and C Shares as
described above or from capital increases. There are no restrictions on the
ownership or transfer of Class D Shares. Holders of Class D Shares will have the
right to elect, in conjunction with the other stockholders, any members of the
Board of Directors, at the time the Class A, B and C stockholders lose the right
to designate them according to CANTV's by-laws.
F-22
<PAGE>
In November 1996, the Government sold 348.1 million shares representing 34.8% of
CANTV's equity in a global public equity offering. The Company's Class D Shares
are traded on the Caracas Stock Exchange, Maracaibo Stock Exchange, and
Electronic Stock Exchange in Venezuela. They are also traded on the New York
Stock Exchange in the form of American Depository Shares (ADS), each
representing 7 Class D Shares.
Repurchase program
- ------------------
On November 16, 1999 an extraordinary shareholders' assembly authorized a share
repurchase program for up to 50,000,000 of CANTV's outstanding shares. This
program was started in November 1999, and will end in May 2000. At the end of
this program the total of the outstanding shares repurchased will be canceled.
The Company intends to spend approximately Bs. 97,387 (U.S.$ 150 million) on
this program subject to market conditions. The Capital Markets Law limits each
repurchase program to six months and requires publication of a maximum
repurchase price per share and a maximum volume of shares. In order to comply
with these local regulations, the repurchase program specifies a maximum
repurchase price of Bs. 3,696 per share or up to U.S.$ 40 per ADS and a maximum
volume of up to 5% of the outstanding shares.
As of December 31, 1999, CANTV had acquired 1,229,900 of the outstanding shares
at a weighted average price of Bs. 2,177 per share, equivalent U.S.$ 23.50 per
ADS.
On December 31, 1999, the closing market price was Bs. 2,300 per share and U.S.$
24.62 per ADS.
16. FINANCING BENEFIT (COST), NET:
------------------------------
Financing benefit (cost), net for the years ended December 31, 1997, 1998 and
1999 is as follows:
1997 1998 1999
------- ------- -------
Interest income 18,828 29,227 27,549
Interest expense (60,932) 58,357) (45,624)
Exchange loss, net (14,821) (47,229) (29,737)
Gain (loss) from net monetary position 125,781 40,123 (5,841)
Gain from indexation of tax units - 7,442 11,089
------- ------- -------
68,856 (28,794) (42,564)
======= ======= =======
The net exchange loss reflects the loss resulting from adjusting the Company's
net liabilities denominated in foreign currencies (principally U.S. dollars and
Japanese yen) into bolivars at the exchange rates as of December 31, 1998 and
1999 (See Note 7 - Balances in foreign currency). The Central Bank of Venezuela
has the explicit policy to intervene to maintain the exchange rate within 7.5%
(above or below) of the reference rate, which has been set by the Central Bank
of Venezuela and is adjusted to account for projected inflation on a monthly
basis. The devaluation of the bolivar against the U.S. dollar was 6%, 12% and
15% for the years ended December 31, 1997, 1998 and 1999, respectively.
F-23
<PAGE>
The gain (loss) from net monetary position reflects the gain or loss from
holding net monetary asset or liabilities in a period of inflation, which was
38%, 30% and 20% for the years ended December 31, 1997, 1998 and 1999,
respectively.
17. INCOME TAX:
-----------
The components of the income tax for the years ended December 31, 1997, 1998 and
1999 are as follows:
1997 1998 1999
------- ----- ------
Current 122,772 1,170 13,653
Corporate asset minimum tax (2,025) - -
------- ----- ------
120,747 1,170 13,653
======= ===== ======
In accordance with Venezuelan tax regulations, the Company is taxed on its net
income on an historical cost basis plus a tax inflation adjustment on the
Company's non-monetary assets and liabilities, net of stockholders' equity. This
tax inflation adjustment differs from the book inflation adjustment, which is
non-taxable.
The Income Tax Law also authorizes a tax credit for new investments in property,
plant and equipment. Any portion of the credit that is not used may be carried
forward to the subsequent three years. As of December 31, 1999, CANTV does not
have any carryforward tax credits. However, its Movilnet subsidiary has Bs.
10,263 and Bs. 25,835 from 1998 and 1999 of new investment tax credits that can
be carried forward until 2001 and 2002, respectively.
A reconciliation of the statutory income tax provision to the effective tax
provision for the years ended December 31, 1997, 1998 and 1999 is as follows:
1997 1998 1999
------- ------- -------
Income before income taxes 535,296 173,041 102,857
Statutory income tax rate 34% 34% 34%
------- ------- -------
Tax expense at statutory income tax rate 182,000 58,834 34,971
Non-taxable book inflation adjustment 59,533 99,530 126,044
Utilization of investment tax credits (91,366) (68,876) (45,650)
Tax inflation adjustment (45,811) (72,165) (92,936)
Corporate asset minimum tax (2,025) - -
Other 18,416 (16,153) (8,776)
------- ------- -------
Income tax 120,747 1,170 13,653
======= ======= =======
The caption "Other" for 1998 and 1999 includes an existing tax provision
recorded in 1997 and 1998.
F-24
<PAGE>
18. TRANSACTIONS WITH RELATED PARTIES:
----------------------------------
Transactions with related parties are subject to conditions similar to
transactions with independent third parties. In the normal course of business
and as limited by applicable debt agreements, the Company enters into
transactions with certain of its stockholders and their respective affiliates.
In addition, the Government has significant influence over the Company's
tariffs, regulation, labor contracts and other matters. The Government is also a
major customer of the Company (See Note 8 - Accounts receivable from Venezuelan
Government entities).
Inventories, supplies and plant and equipment of Bs. 20,729, Bs. 29,917 and Bs.
23,669 for the years ended December 31, 1997, 1998 and 1999, respectively, were
purchased from affiliates of VenWorld's stockholders. These same affiliates
provided technical and administrative services to the Company at a total cost of
Bs. 14,287, Bs. 6,647 and Bs. 19,945 for the years ended December 31, 1997, 1998
and 1999, respectively. Net operating revenues of Bs. 26,040, Bs. 13,696 and Bs.
10,165 were recognized for the years ended December 31, 1997, 1998 and 1999,
respectively, with respect to the settlement of international telephone traffic
with affiliates. At December 31, 1998, the Company has recorded payable to GTE
and AT&T affiliates for all such transactions of Bs. 13,549 and Bs. 2,336,
respectively, and at December 31, 1999, Bs. 7,534 and Bs. 1,015, respectively.
19. COMMITMENTS AND CONTINGENCIES:
------------------------------
The Company has the following commitments and contingencies:
a. Capital expenditures
--------------------
CANTV's capital expenditures for 2000 are currently estimated at Bs. 357,088
(U.S.$ 550 million). The funding for these capital expenditures is expected to
be generated by internal cash flows.
b. Operating leases
----------------
The Company leases buildings and equipment under operating leases for periods of
one year or less. Lease agreements generally include automatic extension clauses
for equal terms, unless written termination notification is provided.
c. Litigation
----------
The Company is involved in numerous administrative and judicial proceedings.
Based on the opinion of its external legal counsel handling these proceedings,
management considers that the majority of these actions will be resolved in the
Company's favor. Nevertheless, management believes that the Company has recorded
adequate reserves as of December 31, 1999 for all such matters.
F-25
<PAGE>
During 1998, the Company was advised of a legal claim filed by Manufacturas
Plasticas Telefonicas, C.A. (Maplatex), asserting noncompliance by CANTV with a
telephone equipment supply contract and damages totaling Bs. 26,641. On June 30,
1999, the judicial proceeding was closed. CANTV and Maplatex signed an
"Agreement." The settlement was for Bs. 1,930 (expressed in constant bolivars as
of June 30, 1999).
In August 1999, CANTV paid the net settlement amount to the court and not
directly to Maplatex, as Maplatex is involved in bankruptcy proceeding.
d. Concession mandates
-------------------
The Concession requires the Company to carry out a plan of network expansion and
modernization based on the construction of a specified minimum number of new
digital lines, the modernization of analog lines and the installation of public
telephones for each year until the year 2000. In addition, the Company is
required to meet certain quality and service targets.
In September 1996, the Ministry reduced the Company's expansion mandates for
1996 through 2000, and entered into an agreement with the Company which provided
for review of the mandates in the first quarter of 1998. Depending on the
results, the mandates were to be increased or decreased in order to reflect the
economic conditions. The mandates were reviewed based on economic estimates
available in the first quarter of 1998. Access demand was slightly lower than
1996, estimate. Therefore, it was not necessary to modify the mandates and the
Company will review them in case of macroeconomics changes. On December 16,
1998, the Company presented to CONATEL a proposal to reduce the projected access
demand due to the changes of the macroeconomics conditions.
Clause 22 of the Concession, calls for the review and possible update of the
concession mandates during the eighth year of the Concession. During the second
half of 1999, CANTV and CONATEL held several meetings to address issues such as
the regulatory climate and the existing mandates in order to ready the
telecommunications market for open competition in Venezuela. On October 27,
1999, CANTV and CONATEL signed a preliminary letter of understanding to initiate
this review.
Based on the recommendations presented by the international experts on November
15, 1999, CANTV and CONATEL should jointly formalize a final agreement which
includes the update of such concession mandates. (See Note 5 - Regulation).
e. Competition
-----------
Pursuant to the Concession, the Company is currently the sole provider of
switched, fixed local, domestic, and international long distance services
throughout Venezuela, except in population centers with 5,000 or fewer habitants
if CANTV is not providing basic telephone services in such areas and does not
contemplate doing so within two years. In addition, the Ministry may grant
concessions for basic telephone services to serve population centers with more
than 5,000 habitants if CANTV has not installed an automatic switching center
within a specified plan or the Ministry determines that CANTV has materially
failed to meet for two consecutive years the terms of the Concession with
respect to network expansion and modernization or service quality and the
Ministry determines that such action would markedly improve the existing
situation.
F-26
<PAGE>
In December 1996, the Ministry exercised its authority under this provision to
grant a rural concession to Infonet Redes de Informacion C.A. (Infonet) to
provide multi-services, except national and international long distance
services, in eight western states of Venezuela. Additionally, multi-service
concessions were granted in January 1998 to Corporacion Digitel, C.A. (Digitel)
and Consorcio ELCA, C.A. (ELCA) for the central western and eastern regions of
Venezuela, respectively. Both Infonet and Digitel have started operations.
20. MARKET RISK:
------------
The carrying amounts of cash and short-term investments, trade receivable and
payable, and short-term and long-term debt approximate their fair values. The
fair value was determined by quoted market prices.
The Company is exposed to market risk, including changes in interest rates and
foreign currency exchange rates. The Company does not use derivative financial
instruments in its investment portfolio. The Company places its investments with
the highest quality European and United States of American (U.S.) issuers and,
by policy, limits the amount of credit exposure to any one issuer. The Company
is averse to principal loss and ensures the safety and preservation of its
invested funds by limiting default risk, market risk, and reinvestment by
investing with U.S. issuers that are guaranteed by wholly-owned foreign
companies with the safest and highest credit quality securities.
The Company mitigates default risk by investing in highly liquid U.S. dollar
short-term investments, primarily certificates of deposit and investment grades
commercial paper, which have maturities of three months or less. The Company
does not expect any material loss with respect to its investment portfolio.
The majority of the Company's indebtedness is denominated in foreign currencies,
primarily in U.S. dollars and Japanese yen, which exposes the Company to market
risk associated with changes in exchange and interest rates. The Company's
policy is to manage interest rate risk through the use of a combination of fixed
and variable rate debt. Presently the Company does not hedge against foreign
currency exposures, but keeps cash reserves in U.S. dollars to meet financing
obligations.
21. WORK FORCE REDUCTION PROGRAM:
-----------------------------
The Company has implemented a work force reduction program, granting employees
an incentive to voluntarily retire prior to their anticipated retirement date,
in order to improve the efficiency of the operation and administration of the
Company. This expense amounted to Bs. 41,284, Bs. 7,862 and Bs. 48,502 for the
years ended December 31, 1997, 1998 and 1999, respectively, and is included in
operating expenses in the accompanying consolidated statements of operations.
22. CAPITAL MARKETS LAW:
--------------------
On October 24, 1998, the Government published the reformed Capital Markets Law.
The most significant changes under the new law are as follows:
F-27
<PAGE>
a. Requires publicly-traded companies to immediately notify the public, the CNV
and the respective stock exchanges of any event or information that could
influence the quotation of their publicly-traded instruments. As an
exception, if the company believes that immediate public disclosure of any
such event or information could have a harmful effect on the company or its
shareholders, the company may disclose the information to the CNV only with
a comprehensive request that it remains confidential. The CNV will decide
whether to honor the Company's request.
b. Establishes conditions and restrictions regarding the acquisition of
treasury stock, shares issued by a parent company or other instruments that
grant rights to the acquiring company or its parent company.
c. Expands the protection of minority shareholders.
d. Grants the CNV the authority to regulate, restrict and penalize the use of
privileged information.
e. State that dividends must be declared in a shareholders' assembly during
which the shareholders determine the amount, form and frequency of the
dividend payment, and that dividend policies must be stated in the Company's
by-laws. The CNV cannot exempt a company with publicly-traded securities
from paying the minimum dividends required by the Capital Markets Law.
The new Capital Markets Law states that companies under the CNV's oversight will
have six months from the enactment date of the new law to adopt the new
provisions.
23. AMENDMENT TO THE INCOME TAX LAW:
--------------------------------
On October 22, 1999, the Government published the Partial Amendment to the
Income Tax Law. The most significant changes effective from periods beginning
after the publication of the Law, are as follows:
a. Implementation of a price transfer regime for imports and exports of goods
and services between related companies.
b. Losses from adjustment for inflation will be carried forward up to one
period. The tax adjustment for inflation will not be applicable to taxpayers
during preoperating stage.
c. Investment tax credits in fixed assets for industrial companies will be 10%
on the amount of new investments and will be applied for five years from the
effective date of the Amended Law.
d. A new credit of 10% is provided on Venezuelan personnel hired from the
effective date of the Amended Law through December 31, 2000.
F-28
<PAGE>
Additionally, the Amendment to the Income Tax Law includes some regulations
which will be effective January 1, 2001, as follows:
a. A new regime which taxes worldwide income applied to income obtained abroad
by individuals or companies residing or domiciled in Venezuela. It allows to
credit income taxes paid abroad.
b. A proportional tax on dividends will be introduced based on the excess
between book and tax net income. This excess will be taxed at 34% and that
amount proportionally applied to the dividends to be paid.
24. NATURAL CATASTROPHE:
--------------------
On December 15, 1999, heavy rains devastated the northern coastal areas of
Venezuela which caused serious flooding.
The areas most affected were the states of Vargas, Miranda, Falcon and parts of
Caracas. The flooding caused serious damage to homes and businesses, leaving
them without basic services such as water, power and phone services. In
addition, the roadway infrastructure in those areas was considerably impaired
and CANTV has encountered limitations in making on-site visits to determine the
full extent of damage to its facilities, and thus, the total financial impact.
However, CANTV was able to detect that in the state of Vargas, some of its
central offices and most of the public telephones received considerable damage.
Based on this limited knowledge, the Company has made a financial assessment
only on those central offices and public telephone plant and has calculated the
damage to be approximately Bs. 3,600. This amount is reflected in the Company's
financial statements for the period ended December 31, 1999 as a nonrecurring
charge.
25. CONSOLIDATED FINANCIAL STATEMENT RECLASSIFICATIONS:
---------------------------------------------------
Certain amounts from the 1997 and 1998 consolidated financial statements have
been reclassified for comparison purposes.
F-29
<PAGE>
26. SUMMARY OF DIFFERENCES BETWEEN U.S. GAAP AND VENEZUELAN GAAP:
-------------------------------------------------------------
The Company's consolidated financial statements are prepared in accordance with
Venezuelan GAAP. In many respects, Venezuelan and U.S. GAAP are similar;
however, there are some significant differences that affect how certain
transactions are reported.
On specific matters not addressed by Venezuelan accounting pronouncements,
International Accounting Standards (IAS) apply, if not, Mexican accounting
principles apply. Where there is neither a Venezuelan, IAS nor Mexican statement
that is applicable, U.S. GAAP applies.
The primary differences between U.S. GAAP and Venezuelan GAAP that apply to the
Company are as follows:
a. Restatement for inflation
-------------------------
Venezuela has experienced significant inflation in recent years and follows
general price level accounting as prescribed in DPC 10 (See Note 4(b) - Summary
of significant accounting principles and policies).
In most circumstances U.S. GAAP does not allow for the restatement of financial
statements for general price level changes. For U.S. GAAP purposes, account
balances and transactions are stated in the units of currency of the period when
the transactions originated. This accounting model is commonly known as the
historical cost basis of accounting. However, because the economy of Venezuela
has experienced periods of significant inflation in the recent past, the use of
financial statements restated for general price level changes is consistent with
the requirements of the SEC rules and with the methodology described in
Statement of Financial Accounting Standards (SFAS) No. 89, "Financial Reporting
and Changing Prices" (SFAS 89). The U.S. GAAP reconciliations presented herein
do not, therefore, exclude the effect of the general price level accounting as
prescribed in DPC 10.
b. Accounting for taxation
-----------------------
Venezuelan GAAP is consistent with the accounting principles set forth in the
now superseded U.S. Accounting Principles Board Opinion No. 11, "Accounting for
Income Taxes" (APB 11). Venezuelan GAAP requires that deferred taxes be provided
at the tax rates prevailing at the time of the provision. In addition, the
provision for deferred taxes is not adjusted to take into account subsequent
changes to the statutory rates of taxation.
In 1992, the Financial Accounting Standards Board (FASB) in the United States
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109). This standard requires that deferred tax assets and
liabilities be established for the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities. Under SFAS 109, the effect on deferred taxes
of a change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are provided for deferred tax assets when
realization is not assured.
F-30
<PAGE>
Additional disclosures required by SFAS 109 are presented in Note 27 (c) -
Additional financial statements disclosures required by U.S. GAAP.
c. Accounting for postretirement benefits other than pensions
----------------------------------------------------------
Until 1998, postretirement medical benefits were recorded as operating expenses
when claims were filed and the Company did not fund its obligation related to
this plan. U.S. GAAP requires the expected costs of these benefits to be
recognized systematically over employees' service periods. In 1999, the Company
adopted International Accounting Standard 19 (IAS 19) and will recognize
postretirement benefits other than pension systematically over employee's
service period (See Note 4 (k) - Summary of significant accounting principles
and policies). As permitted under IAS 19 the accumulated postretirement benefits
obligation, as of December 31, 1998, was recognized as an adjustment to
beginning retained earnings, therefore, this item will no longer be a difference
between U.S. and Venezuelan GAAP.
d. Employee severance benefits
---------------------------
In accordance with Venezuelan GAAP, employee severance benefits are reflected as
the absolute amount earned in accordance with the Venezuelan labor law. (See
Note 4 (j) - Summary of significant accounting principles and policies). U.S.
GAAP permits but does not require these types of liabilities to be accrued based
on actuarial estimates, in accordance with SFAS 87, "Employers' Accounting for
Pensions." For U.S. GAAP purposes, the Company has chosen to reflect the
liability based on actuarial assumptions at its discounted value. In addition,
in accordance with SFAS 89 "Financial Reporting and Changing Prices," under U.S.
GAAP this item is treated as a nonmonetary liability while under Venezuelan GAAP
it was considered a monetary liability until 1997.
In June 1997, the Venezuelan Congress enacted an amendment to the labor law
regarding severance benefits (See Note 4 (j) - Summary of significant accounting
principles and policies). As a result of the amendment to the labor law, these
employee severance benefits are treated as a defined contribution plan and
discounting is no longer applicable. Also, under SFAS 89, employee severance
benefits became a monetary item for U.S. GAAP purposes due to its defined
contribution plan nature.
The U.S. GAAP net income reconciliation for 1997 shows the impact of reversing
the amount discounted for employee severance benefits through December 1996.
e. Capitalized interest
--------------------
In accordance with Venezuelan GAAP, in its inflation adjusted financial
statements, the Company does not capitalize interest costs incurred in
connection with the construction of major capital projects. Under U.S. GAAP, the
amount of interest incurred in connection with the construction of these
projects is reflected in inflation adjusted financial statements. The amount
capitalized is calculated by applying the composite weighted average interest
rates of outstanding borrowings to construction work in process balances during
each applicable period. Capitalized interest is included in property, plant and
equipment and depreciated over the lives of the related assets.
F-31
<PAGE>
f. Treasury stock
--------------
As discussed in Note 10 - Other assets, 1% of the shares, or 10,000,000 shares,
issued at privatization were purchased by the Company from the Government to be
distributed to employees in the form of awards. The Company's cost of these
shares is recorded in Other assets. U.S. GAAP for publicly traded entities
reflects these shares as treasury stock.
g. Earnings per share
------------------
In 1997, the FASB adopted SFAS 128, "Earnings per Share." This statement
establishes standards for computing and presenting earnings per share (EPS) as
it applies to entities with publicly held common stock. It replaces the
presentation of primary and fully diluted EPS with a presentation of basic and
diluted EPS. It requires dual presentation of basic and diluted EPS for all
entities with complex capital structure.
h. Reconciliation of Venezuelan GAAP to U.S. GAAP
----------------------------------------------
The approximate effects on net income and net stockholders' equity of restating
CANTV's audited consolidated financial statements for 1997, 1998, and 1999 in
accordance with U.S. GAAP is set forth below (in millions of bolivars, except
per share data):
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net income under Venezuelan GAAP 414,549 171,871 89,204
U.S. GAAP adjustments for:
Reversal of discounting of employee benefits (190,527) - -
Capitalized interest 5,128 5,962 8,933
Provision for postretirement benefits (17,020) (11,734) -
Deferred income taxes:
Provision (49,305) 5,755 63,702
Gain from net monetary position 24,021 19,681 5,607
----------- ----------- ------------
(25,284) 25,436 69,309
----------- ----------- ------------
Approximate net income under U.S. GAAP 186,846 191,535 167,446
=========== =========== ============
Approximate net income per share under U.S. GAAP 188.54 193.15 168.76
=========== =========== ============
Approximate net income per ADS (based on 7 shares per ADS) 1,319.78 1,352.05 1,181.32
=========== =========== ============
Average number of shares outstanding under
U.S. GAAP (in thousands) 991,018 991,633 992,229
=========== =========== ============
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
Total stockholders' equity under Venezuelan GAAP 3,349,547 3,121,871
U.S. GAAP adjustments for:
Capitalized interest 51,925 60,858
Provision for postretirement benefits (43,553) -
Treasury stock (31,593) (31,593)
Deferred income taxes:
Provision (108,676) (44,974)
Gain from net monetary position 46,062 51,669
----------- ------------
(62,614) 6,695
----------- ------------
Total stockholders' equity under U.S. GAAP 3,263,712 3,157,831
=========== ============
</TABLE>
F-32
<PAGE>
The following represents a reconciliation of equity at December 31, 1998 to
December 31, 1999 based on amounts determined in accordance with U.S. GAAP:
Stockholders' equity under U.S. GAAP at December 31, 1998 3,263,712
Accumulated postretirement benefits obligation (153,947)
Reversal of provision for postretirement benefit 43,553
Approximate net income under U.S. GAAP 167,446
Dividends declared and paid (62,406)
Extraordinary dividends declared and paid (100,000)
Repurchased shares (2,680)
Change in cumulative translation adjustment 2,153
-----------
Stockholders' equity under U.S. GAAP at December 31, 1999 3,157,831
===========
The above reconciliations include all material differences between Venezuelan
GAAP and U.S. GAAP.
27. ADDITIONAL FINANCIAL STATEMENT DISCLOSURES REQUIRED BY U.S. GAAP:
----------------------------------------------------------------
a. Postretirement benefits other than pensions
-------------------------------------------
The Company sponsors a postretirement health care benefit plan for retired
telephone company employees. As mentioned in Note 26 (c) - Summary of
differences between U.S. GAAP and Venezuelan GAAP, until 1998, the Company did
not fund its obligation related to this plan. The Company's U.S. GAAP net income
for the years ended December 31, 1997 and 1998 and stockholders' equity as of
December 31, 1998 reflect the application of SFAS 106 on a delayed recognition
basis effective January 1, 1995, as permitted by this statement.
The postretirement benefit cost for 1997 and 1998 is as follows:
1997 1998
-------- --------
Benefits earned during the year 5,738 2,892
Interest on accumulated postretirement benefit obligations 11,761 10,248
Amortization of transition obligation 8,693 7,674
-------- --------
26,192 20,814
Expense recorded by Company (9,172) (9,080)
-------- --------
Additional expense under U.S. GAAP 17,020 11,734
======== ========
The accrued postretirement benefit obligation at December 31 is as follows:
Accumulated postretirement benefit obligation attributable to:
1998
--------
Retirees 111,710
Fully eligible active plan participants 42,236
--------
Total accumulated postretirement benefit obligation 153,946
Unrecognized transition obligation (49,605)
Unrecognized losses (60,788)
--------
Accrued postretirement benefit 43,553
========
F-33
<PAGE>
b. Disclosures about pensions and other postretirement benefits:
-------------------------------------------------------------
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" which revises employer disclosure
requirements for pension and other retiree benefits but does not change the
measurement or recognition of pension or other postretirement benefit plan.
The following tables provide a reconciliation of the changes in the plans
benefit obligations and fair value of plan assets for the years ending December
31, 1998 and 1999, and a statement of funded status as of December 1998 and
1999:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------------------- -------------------------
1998 1999 1998 1999
---------- ------------ --------- ----------
<S> <C> <C> <C> <C>
Reconciliation of benefit obligation:
Benefit obligation at January 1 498,101 318,645 172,735 153,946
Service cost 12,201 14,456 2,893 2,793
Interest cost 18,598 21,981 10,248 10,365
Plan amendments (92,806) - - -
Benefits payments (6,042) (8,948) (9,938) (11,314)
Actuarial (gain) losses (111,407) 42,281 (21,991) 26,314
---------- ----------- --------- ----------
Benefit obligation at December 31 318,645 388,415 153,947 182,104
========== =========== ========= ==========
</TABLE>
In 1998, the Company reviewed and updated its actuarial assumptions for employee
turnover and the rate of inflation to reflect actual experience.
Reconciliation of fair value of plan assets:
<TABLE>
<S> <C> <C> <C> <C>
Fair value of plan assets at January 1 38,982 34,308 - -
Contributions - 38,820 - -
Benefit payments - (7,808)
Actual return on plan assets (4,674) 7,916 - -
---------- ----------- --------- ----------
Fair value of plan assets at December 31 34,308 73,236 - -
========== =========== ========= ==========
<CAPTION>
Funded status:
Funded status at December 31 284,337 315,179 153,946 182,104
Unrecognized transition obligation (7,574) (6,490) (49,605) -
Unrecognized prior service cost 84,520 76,235 - -
Unrecognized net loss (185,845) (206,082) (60,788) (26,314)
---------- ----------- --------- ----------
Net amount recognized 175,438 178,842 43,553 155,790
========== =========== ========= ==========
</TABLE>
F-34
<PAGE>
For benefits other than pensions a one-percentage-point change in the assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1% Point Increase 1% Point Decrease
---------------------- ----------------------
1998 1999 1998 1999
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Effect on total of service and interest cost components 1,899 1,369 (1,565) (1,173)
Effect on postretirement benefit obligation as of
December 31 15,228 21,157 (13,064) (17,802)
</TABLE>
The following table provides the components of net periodic benefit cost for the
plans for the years ending December 31, 1998 and 1999:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------- -------------------------
1998 1999 1998 1999
---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Components of net periodic benefit cost:
Service cost 12,201 14,456 2,892 2,793
Interest cost 18,598 21,981 10,248 10,365
Amortization of:
Transition obligation 1,084 1,084 3,101 -
Prior service cost (8,232) (8,286) - -
Net loss 12,679 14,126 4,573 -
---------- ----------- ------------ ----------
Net periodic benefit cost 36,330 43,361 20,814 13,158
========== =========== ============ ==========
</TABLE>
The assumptions used in the measurement of the Company's benefit obligation are
shown in the following table:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
-------------------- -----------------------
1998 1999 1998 1999
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Weighted-average assumptions as of December 31:
Discount rate 7% 7% 7% 7%
Expected return on assets - 5% - -
Rate of compensation increase 2% 2% 2% 2%
</TABLE>
These assumptions represent estimates of real rates of interest, compensation
increases and health care cost trend rate increases rather than nominal rates.
c. Income and other taxes
----------------------
The provision (benefit) for income taxes for the years ended December 31, in
accordance with SFAS 109 is as follows:
1997 1998 1999
----------- ------------ ----------
Current 122,772 1,170 13,653
Deferred 49,305 (5,755) (63,702)
----------- ------------ ----------
172,077 (4,585) (50,049)
=========== ============ ==========
F-35
<PAGE>
The components of deferred income tax liabilities (assets) for the years ended
December 31 are as follows:
<TABLE>
<CAPTION>
1998 1999
------------- -------------
<S> <C> <C>
Current deferred income taxes:
Allowance for doubtful accounts (14,806) (24,225)
Concession tax (29,615) (29,546)
Amounts payable to shareholders (3,742) (2,315)
Accounts not deductible until paid (20,801) (6,246)
Investment tax credits (16,586) (36,098)
Other (not individually significant) 1,860 (4,451)
------------- -------------
Total (83,690) (102,881)
Non current deferred income taxes:
Capitalized labor, interest and related overhead 221,721 209,961
Pension expense (59,635) (60,806)
Postretirement benefit expense (15,782) (52,969)
------------- -------------
Total 146,304 96,186
------------- -------------
Total deferred income taxes 62,614 (6,695)
============= =============
</TABLE>
Total income taxes are different than the amount which would be computed by
applying the statutory income tax rate to income before income taxes. The major
reasons for this difference are as follows:
<TABLE>
<CAPTION>
1997 % 1998 % 1999 %
---------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes 332,797 186,950 117,397
Statutory income tax rate 34% 34% 34%
---------- ----------- -----------
Tax provision (benefit) at statutory
income tax rate 113,151 34.0 63,563 34.0 39,915 34.0
Non taxable book inflation
Adjustment 119,479 35.9 92,155 49.3 121,100 103.2
Utilization of investment tax
Credits (65,023) (19.5) (68,860) (36.8) (45,650) (38.8)
Tax inflation adjustment (45,800) (13.8) (72,148) (38.6) (92,936) (79.2)
Reversal of discounting of
employee severance benefits 15,180 4.6 - - - -
Deferred tax provision (benefit) 49,305 14.8 (5,755) (3.0) (63,702) (54.3)
Other (14,215) (4.3) (13,540) (7.2) (8,776) (7.5)
---------- --------- ----------- --------- ----------- ---------
172,066 51.7 (4,585) (2.3) (50,049) (42.6)
========== ========= =========== ========= =========== =========
</TABLE>
d. Comprehensive income
--------------------
The FASB enacted SFAS 130, "Reporting Comprehensive Income" for financial
statements issued after December 15, 1997. SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. Included in comprehensive income is the translation
adjustment from the investment in Intelsat, which effect is considered
immaterial for CANTV's financial statements.
F-36
<PAGE>
e. Segment reporting
-----------------
The Company manages its operations in two main business segments: wireline and
wireless services. The Company's reportable segments are strategic business
units that offer different products and services in the telecommunications and
related services industry. They are managed separately because each business
requires different technology and marketing strategies. The wireline services
segment provides domestic telephone services, international long distance
services and other telecommunications-related services. The wireless services
segment provides nationwide cellular mobile telephone services.
The accounting policies of the segments are the same as those described in the
Note 4(h) - Summary of significant accounting principles and policies.
Intersegment sales are accounted for as if the sales were to third parties at
current market prices. The Company evaluates performance based on profit or loss
from operations before income taxes not including nonrecurring gains and losses
and foreign exchange gains and losses.
As is described in Note 8 - Accounts receivable from Venezuelan Government
entities, the Government is a major customer of the wireline services segment.
Segment results for the years ended December 31, 1997, 1998 and 1999 were as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Wireline services:
Revenues
Local and domestic long distance usage 686,594 584,927 555,608
Basic rent 324,280 341,232 319,728
Public telephones 111,495 108,675 103,924
------------- ------------- -------------
Local and domestic long distance 1,122,369 1,034,834 979,260
International long distance 241,551 179,888 133,228
Net settlements 51,870 42,046 28,016
------------- ------------- -------------
International long distance 293,421 221,934 161,244
Other wireline-related services 149,010 178,965 224,288
------------- ------------- -------------
Total revenues 1,564,800 1,435,733 1,364,792
============= ============= =============
Intersegment revenues (46,955) (65,600) (93,439)
Operating income 442,682 143,334 113,321
============= ============= =============
Depreciation and amortization 450,819 472,559 507,226
============= ============= =============
Capital expenditures 415,853 310,028 188,476
============= ============= =============
Total assets 8,031,069 8,158,504 8,344,299
============= ============= =============
</TABLE>
F-37
<PAGE>
<TABLE>
<CAPTION>
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Wireless services:
Revenues
Access 73,029 88,008 102,989
Usage 86,927 140,692 189,971
Equipment sales 19,092 25,452 42,193
------------- ------------- -------------
Total revenues 179,048 254,152 335,153
============= ============= =============
Intersegment revenues 36,238 51,007 70,361
Operating income 25,137 59,760 38,786
============= ============= =============
Depreciation and amortization 46,306 54,543 76,193
============= ============= =============
Capital expenditures 111,961 179,707 149,508
============= ============= =============
Total assets 375,469 553,732 691,183
============= ============= =============
</TABLE>
The reconciliations of segment revenues, operating income and assets are as
follows:
Reconciliation of reportable segment revenues:
<TABLE>
<CAPTION>
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Reportable segments 1,743,848 1,689,885 1,699,945
Other telecommunications-related services 19,462 32,472 38,663
Elimination of intersegment revenues (10,717) (14,593) (23,078)
------------- ------------- -------------
Total operating revenues 1,752,593 1,707,764 1,715,530
============= ============= ==============
<CAPTION>
Reconciliation of reportable segment operating income:
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Reportable segments 467,819 203,094 152,107
Other telecommunications-related services (4,155) (5,593) (9,906)
Elimination of intersegment operating income 1,323 1,072 (659)
------------- ------------- -------------
Total operating income 464,987 198,573 141,542
============= ============= =============
<CAPTION>
Reconciliation of reportable segment assets:
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Reportable segments 8,406,538 8,712,236 9,035,482
Other telecommunications-related services 12,447 17,615 33,192
------------- ------------- -------------
Total assets 8,418,985 8,729,851 9,068,674
============= ============= =============
</TABLE>
F-38
<PAGE>
f. Accounting for Derivative Instruments and Hedging Activities
------------------------------------------------------------
SFAS 133 "Accounting for Derivative Instruments and Hedging Activities"
establishes a new model for accounting and reporting standards for derivatives
and hedging activities. The Company currently does not engage in hedging
activities and has no derivative instruments as there is no substantial
organized market for financial instruments and derivatives in Venezuela.
Management believes adoption of SFAS 133 will not have a material impact on
CANTV's financial statements.
F-39
<PAGE>
Exhibit Index
Exhibit 10: Agreement dated February 21, 2000 between The Bolivarian Republic of
- ----------
Venezuela, acting through its Ministry of Infrastructure, and Compania Anonima
Nacional Telefonos de Venezuela (CANTV)
<PAGE>
[The Agreement below is an English translation
of a Spanish language document.]
Bolivarian Republic of Venezuela - Ministry of Infrastructure, Office of the
Minister
EIGHTH-YEAR REVIEW OF AGREEMENT
By and between the Bolivarian Republic of Venezuela, through the Ministry of
Infrastructure, represented herein by Minister of Infrastructure ALBERTO EMERICH
ESQUEDA TORRES, Venezuelan, of legal age, bearer of Identification Card No.
636,073, as evidenced by Presidential Decree No. 632 dated January 10, 2000,
published in the Official Gazette of the Bolivarian Republic of Venezuela No.
36,866 of January 10, 2000, sufficiently empowered for this proceeding in
accordance with article 48 of the Decree with the Scope and Force of the Organic
Law of the Central Administration which, hereinafter and for purposes of this
Agreement, shall be known as the Republic, and Compania Anonima Nacional
Telefonos de Venezuela (CANTV), a corporation domiciled in Caracas, registered
in the Mercantile Registry carried by the former Court of Commerce of the
Federal District, at No. 2, Book 387, dated June 20, 1930, of which the most
recent revision of the bylaws was registered at the First Mercantile Registry of
the Judicial Circuit of the Federal District, State of Miranda on September 14,
1998, at No. 39, Book 208-A-pro, represented herein by its Chairman, GUSTAVO
ROOSEN, Venezuelan, of legal age, domiciled in Caracas, bearer of Identification
Card No. 2,938,282, who is duly empowered as evidenced in the minutes of the
regular stockholders meeting dated March 30, 1999, as provided in Article 11-b
of the Company's Corporate Bylaws, which hereinafter, and for the sole purpose
of this agreement, shall be known as the Concession Holder, who have agreed to
enter into this Agreement which shall be governed by the following clauses:
CHAPTER I
PURPOSE OF THE AGREEMENT
CLAUSE 1: PURPOSE
The object of this Agreement is to establish the regulatory system necessary to
prepare for the period of free competition, in execution of the mandate set
forth in CLAUSE 22 of the Contract, upon the occasion of the review of the
eighth (8th) year of the limited competition period and for consideration of the
agreement signed by CONATEL and the Concession Holder on October 27, 1999.
CLAUSE 2: SCOPE
This Agreement covers the regulatory system applicable to the preparatory
transition period of free competition in accordance with CLAUSE 4 of this
Agreement, specifically in the following areas:
A) Quality Parameters for Basic Telecommunications Services.
B) System for Evaluation of Compliance with Quality Objectives of Basic
Telecommunications Services.
C) Plant Modernization.
<PAGE>
D) Rate System for Basic Telecommunications Services.
CLAUSE 3: DEFINITIONS
For purposes of this Agreement, the following terms shall have the following
meanings, which shall have preference over any others:
CONATEL: Agency of the National Executive charged with regulating
telecommunications.
The Contract: Concession Contract between the Republic and the Concession
Holder dated October 14, 1991, amended as of November 4 of the same year and
approved by the Congress of the Republic in the Accord published in the Official
Journal of the Republic of Venezuela No. 34,850, dated November 27, 1991.
Basic Services: Local, domestic or international fixed switchboard telephone
services, in existence now or in the future according to technological advances
in the telephone industry.
Parameters: Variables by which the quality of service is measured, which are
conformed by a set or family of indicators which permit presentation, in the
simplest form, of the principal characteristics of an attribute of quality of
service.
Indicator: Representative measure of the status of a quality attribute for a
given period.
Methodology: Defines the procedure, variables, sources, opportunity, measurement
frequency and formula(s) involved in the calculation of the indicator.
Objective: Pre-established numerical value for an indicator or parameter, which
must be reached within a given period of time.
Deviation: Permitted difference between the agreed annual objective and the
minimum or maximum value fixed for each parameter or indicator.
Period of free competition: Period which shall begin as of November 27, 2000,
the date on which the limited competition system provided in CLAUSE 21 of the
Contract closes, and, thereafter, other operators may begin to provide basic
services.
Operating division: Geographical area in which the Concession Holder exercises
its operational management, with boundaries according to the distribution of the
Telephone Facilities in the federal districts of the Republic, as set forth in
Annex "C" of this Agreement.
Places where the Concession Holder has no physical presence: Geographical areas
in which neither a switching station nor an external plant of the Concession
Holder exist.
Idle lines: Difference between lines installed (nominal capacity) and lines in
service.
2
<PAGE>
CLAUSE 4: TERM
This Agreement shall be in effect as of the date it is signed until December 31,
2000, except for those clauses related to rate matters, which shall be subject
to the provisions established in CLAUSE 22 of this Agreement. It is understood
that the Concession Holder, upon expiration of the term of this Agreement, shall
be subject to those rules and regulations concerning quality established by the
Public Authorities which apply to basic telecommunications services operators.
CHAPTER II
SERVICE QUALITY PARAMETERS
CLAUSE 5: ESTABLISHING PARAMETERS AND INDICATORS
The Republic and the Concession Holder agree, in preparation for the period of
free competition, to establish the following parameters and indicators to
measure the quality of service provided by the Concession Holder:
a) Billing effectiveness
- - Billing complaints
- - Regular billing time
b) Accessibility to telephone service
- - Waiting time for obtaining the service
- - Waiting list
- - Requests to service areas where the Concession Holder does not have a physical
presence
c) Efficiency of service by operator (services associated with numbers 80021515,
15, 100, 101, 103, 122, the same as all those which will be provided after this
Agreement takes effect).
- - Average waiting time for a response from the operator
- - Percentage of answered calls to operator services
d) Network operation quality
- - Time for establishment of the calls
- - Percentage of completed calls
- - Getting a dial tone
e) "Retainability" of the service
- - Actual problems reported for every 100 lines in service
- - Problems fixed in less than 24 to 48 hours
- - Average problem repair time
f) Customer satisfaction
CLAUSE 6: OBJECTIVES
The Concession Holder shall comply with the objectives established for the
parameters and indicators specified in the preceding CLAUSE in accordance with
Annex "A", and will likewise comply with objectives which, in accordance hereto,
may be subsequently defined.
3
<PAGE>
CLAUSE 7: UPGRADE PERIOD
The parties agree to the establishment of an upgrade period of three months
beginning as of January 1, 2000, to enable the Concession Holder to upgrade its
physical infrastructure, systems and other operational resources to the new
parameters and respective objectives which shall be established in this
Agreement. It is understood that this upgrade period shall be applicable only
to those parameters and indicators for which the objectives are not defined in
Annex "A" or whose methodologies differ substantially from those in effect prior
to the signing of this Agreement.
CONATEL may conduct any inspections it deems necessary during the upgrade period
to which this CLAUSE makes reference for the purpose of adjusting the objectives
and methodologies to be agreed upon at the expiration of the first quarter.
CLAUSE 8: DEADLINES FOR DEFINITION OF OBJECTIVES NOT DETERMINED IN ANNEX "A"
AND MEASUREMENT METHODOLOGIES
Determination of the objectives for the parameters and indicators specified
below shall be governed according to the following guidelines, including
consideration of international trends and the Concession Holder's status with
respect to such matters:
A) Customer satisfaction: For purposes of fixing the objectives and
methodologies to measure the parameter of customer satisfaction, each party
shall appoint one (1) expert to a Committee whose objective shall be to submit,
within one month following appointment, the Survey model whereby this parameter
shall be measured. The results of the Survey conducted during the first quarter
of 2000 shall serve as the basis for establishment of the objectives which the
Concession Holder must meet. The Survey shall consist of questions aimed at
determining customer satisfaction with the services provided by the Concession
Holder and not of generic questions referring to the latter, thus making it
possible to measure this parameter objectively.
B) Time to establish calls: The parties agree to perform the measurements of
this indicator during the first quarter of 2000, upon prior determination of the
methodology to follow which, by mutual agreement, shall be established based
upon the timetable agreed to by the parties. Once the first quarter's results
have been evaluated, the annual objective and the monthly permitted deviation
shall be established.
C) Accessibility to telephone service in places where the Concession Holder has
no physical presence: Accessibility to service in places where the Concession
Holder has no physical presence shall be measured according to the percentage of
requests pending attention by the Concession Holder and which have been recorded
before December 31, 1999. To that end, the Concession Holder shall execute the
plan submitted to CONATEL, containing the timetable of projects to be executed
in order to be able to attend to fifty per cent (50%) of the aforementioned
requests. Additionally, if new requests are submitted in zones where the
Concession Holder has no physical presence, which together with those recorded
before December 31, 1999, equal or exceed one hundred fifty (150) requests
within a geographical area having a radius of 1.5 kilometers, they shall be
assessed for feasibility according to the technology permitted to the Concession
Holder, and within 45 to 60 days the Concession Holder and CONATEL shall define
4
<PAGE>
the terms under which they shall be incorporated into the plan. If it is
determined that such requests cannot be added to the plan in question, it shall
be understood that such geographical areas may be served by other basic services
operators, if and when such operators employ, in that capacity, the same
technology permitted to the Concession Holder.
D) Efficiency of service by operator: The objectives for services associated
with numbers 101 and 80021515 shall be fixed before the close of the first
quarter of 2000, after evaluating the performance of such services during the
first two months of the year. Such evaluation shall serve as the basis for
fixing the annual objective and the monthly deviation for this parameter.
The Concession Holder agrees to initiate, within a period not to exceed three
months from execution of this Agreement, implementation of the measures
indicated in the Annual Plan for Improvement of Business Services contained in
Annex "B", to achieve immediate improvement in the performance of Business
Service Offices associated with number 80021515. In addition, the Concession
Holder shall submit, within thirty days following execution of this Agreement, a
timetable for quarterly implementation of the Plan.
CHAPTER III
SYSTEM FOR EVALUATION OF COMPLIANCE
WITH THE QUALITY OBJECTIVES
CLAUSE 9: METHODOLOGY FOR MEASURING THE QUALITY PARAMETERS
The methodology for measurement and determination of compliance with the quality
parameters shall be defined by CONATEL and the Concession Holder prior to the
close of the first quarter of 2000, based on the timetable fixed by mutual
agreement for that purpose.
CLAUSE 10: INSPECTIONS AND AUDITS
The Concession Holder's compliance with the objectives can be measured from the
inspections conducted by CONATEL, as well as from the results of the audits
which it performs, without prejudice to the provisions of CLAUSE 12 of this
Agreement. As provided in CLAUSE 27 of the Contract, the Concession Holder shall
provide all necessary support and facilitate both access to its facilities as
well as all pertinent information to enable CONATEL, either through its
employees or through third parties hired and sufficiently accredited and
identified for such purposes, to perform its inspection and audit tasks
meticulously. In the case of inspections and audits conducted by persons other
than CONATEL employees, CONATEL agrees to include, in the respective contracts
entered into with such third parties, a clause that guarantees the
confidentiality of the information which such parties obtain during and at the
time of such activities. CONATEL agrees to require any third parties to whom it
has entrusted the inspection and audit tasks to post a bond in order to
guarantee performance of the obligations.
CLAUSE 11: COMPLIANCE REPORTS AND DEADLINES FOR THEIR SUBMITTAL
The Concession Holder shall submit quarterly reports to CONATEL within fifteen
(15) business days following the close of the quarter under analysis. Such
reports shall provide evidence that they are valid and conform with the
parameters, that compliance during the month is based upon the agreed
methodology, that the permitted deviation comports with the agreed method, and
shall further specify any measures taken or improvements achieved with respect
to failures detected
5
<PAGE>
during the quarter covered in the report, if applicable, as well as any measures
taken for the purpose of executing the corrective plan, if any exist, to which
CLAUSE 12 makes reference. In addition, the report may contain the Concession
Holder's reasons for believing he should be free from liability for any possible
default.
Reports shall be submitted that itemize the information received from each of
the Concession Holder's operating divisions throughout the country.
CLAUSE 12: DEVIATIONS
It is the Concession Holder's obligation to maintain service quality within the
range permitted by the deviations indicated as set forth in Annex "A" of this
Agreement, as well as those which may be fixed in accordance with CLAUSE 8,
which shall apply to the set of indicators that define each parameter.
Compliance with such obligation can be evidenced by the monthly records
contained in the quarterly reports submitted in accordance with CLAUSE 11 of the
results of the inspections conducted by CONATEL, or the results of the audits
conducted by the Concession Holder.
If, in CONATEL's judgment and on the basis of the foregoing instruments, there
is a degree of deviation higher than that permitted for any of the parameters
and service quality indicators, CONATEL shall notify the Concession Holder, who
shall submit a corrective plan to the satisfaction of CONATEL within not more
than fifteen (15) consecutive days from receipt of the notification, which it
shall fully implement within the quarter following the quarter during which the
non-compliance occurred. Notwithstanding, the Concession Holder may submit a
plan which exceeds three months, provided it is approved by CONATEL. Such
corrective plan shall contain the mechanisms to be employed by the Concession
Holder during the implementation period in order to reach the average level of
the affected parameter or indicator and maintain such level within the limits
permitted under the agreed deviation.
If, after analyzing the regular quarterly progress reports of the implementation
of this Agreement, CONATEL determines that as of the close of the period fixed
for execution of the submitted corrective plan, the average quarterly deviation
persists at a level higher than that permitted for the parameter(s) or
indicator(s) that are the subject of the submitted corrective plan, the
CONCESSIONAIRE shall submit a new corrective plan and shall comply with CLAUSE
13 of this Agreement.
CLAUSE 13: PENALTY CLAUSE. COMPENSATION TO SUBSCRIBERS
With respect to the situation described in the last paragraph of CLAUSE 12, the
Concession Holder shall compensate subscribers from the corresponding operating
division with a credit equivalent to an average basic rental amount calculated
on the subscriber's immediately preceding monthly basic rental. These amounts
shall be credited within two months after due proof and notice to the Concession
Holder, by CONATEL, of the situation that generates the compensation.
Compensation shall be paid one time only for each parameter or indicator not
complied with per line in each month.
6
<PAGE>
CLAUSE 14: CRITERIA FOR EVALUATION OF ANNUAL OBJECTIVES FOR ALL PARAMETERS
Based upon the instruments referred to in CLAUSE 12 of this Agreement, CONATEL
shall verify compliance with the established annual objectives. The annual
objectives for each one of the quality parameters shall be deemed complied with
if the Concession Holder meets or exceeds the objective established for the
respective parameter or quality indicator as of the end of year 2000. If it is
determined that these objectives have not been met, the sanctions stipulated in
the Contract shall be applied.
If there is justification for a sanction in the form of a fine in accordance
with the Contract due to annual non-compliance with the same parameter or
indicator whereby subscribers were compensated according to CLAUSE 13, then the
amounts actually credited by the Concession Holder to the subscribers receiving
this compensation shall be applied to the amount of the applicable fine.
CLAUSE 15: MEASUREMENT OF THE QUALITY PARAMETERS
Except for those parameters whose objectives and methodologies are still to be
defined before the start of the first quarter of 2000, calculation of compliance
with the objectives, annual and monthly or for the time periods measured in the
inspections, shall begin as of January 1, 2000. In the other cases, such
calculation shall be performed starting in the second quarter of 2000,
inclusive.
CLAUSE 16: EXCEPTIONS FOR REGULAR BILLING TIME INDICATOR
Exceptional cases, which shall not be taken into account for purposes of
computing the objectives of the regular billing time indicator, shall include
significant anomalies caused by the "Project which corrects the failures caused
by the change of digits associated with the change of millenium (Y2K Project)",
and the implementation of the "Regulatory Numbering Framework" or "National
Numbering Plan" which may be in effect. In these cases, the Concession Holder
shall notify CONATEL of the problem that occurred, its impact and the respective
corrective action plan, so that CONATEL may approve the application, if deemed
appropriate, of special billing times of one hundred eighty (180) days for local
and domestic long distance calls and one (1) year for international long
distance calls, which shall commence being computed as of the moment the
respective calls are made; upon expiration of these times, the Concession Holder
may not conduct any corresponding billing. This measure shall have temporary
effects and shall be conditioned upon the duration of the facts of the situation
that trigger it.
CLAUSE 17: SPECIAL SYSTEM
The parties shall apply the special systems described below:
a. Maximum billing time: The Concession Holder may not charge subscribers for
Local, Domestic Long Distance and International Long Distance calls not billed
after 110 days from the time when they were made. The special time periods
established in CLAUSE 16 of this Agreement shall be applied to International
Collect Calls and calls made through third-party operators which could not be
reconciled within the time set forth above.
7
<PAGE>
b. Service malfunctions and interruptions: When telephone service is
interrupted or malfunctioning so as to degrade service for more than seventy-two
(72) consecutive hours after having been reported, the Concession Holder shall
compensate the subscriber, even when the interruption or malfunction is due to
an act of God or force majeure, provided that the Concession Holder can access
the facilities within its territory and make the corresponding repairs. Such
compensation shall consist of a credit in an amount equivalent to the average
basic charge calculated based on the basic monthly charge immediately prior to
the interruption or malfunction. In each case, the Concession Holder is
obligated to restore service to the subscriber as soon as possible without
degradation of service quality. The compensation to which this clause makes
reference shall be credited on the affected subscriber's monthly bill within not
more than three months following the interruption or malfunction. This
compensation shall not be attributed to any provision of CLAUSE 14 of this
Agreement.
CHAPTER IV
PLANT MODERNIZATION
CLAUSE 18: MODERNIZATION
The Concession Holder agrees to carry out an accelerated modernization program
in order to achieve a national annual average objective of eighty percent (80%)
digitalization of its internal plant by the end of year 2000, as established in
CLAUSES 19 and 20 of this Agreement.
CLAUSE 19: GENERAL CRITERIA FOR DIGITALIZATION
For purposes of calculating the "digitalization" objective, the following items
shall be considered:
a) Removal of groups of 1000 lines from the ARF and Pentaconta plants,
currently idle, to improve the service quality of the active lines at these
plants.
b) Removal of analog plants, using the currently idle digital plant.
c) Removal of the existing analog plant, replacing it with new digital lines.
It is understood that upon reaching eighty percent (80%) digitalization, as
provided in CLAUSE 18, the Concession Holder may not install new analog lines.
CLAUSE 20: GEOGRAPHICAL DISTRIBUTION
The digitalization referred to in CLAUSE 18 shall be implemented as uniformly as
possible within the country's federal districts, taking into consideration the
characteristics of the existing plant in each of these. To that end, the
following digitalization objectives for each federal district shall be
established for digitalization of existing plants:
1. The objective for each federal district shall be considered reached if a
minimum of seventy percent (70%) digitalization is reached in each of the
following federal districts: Amazonas, Bolivar, Delta Amacuro, Miranda,
Tachira, Anzoategui, Carabobo, Guarico, Monagas, Sucre, Barinas, Cojedes, Lara,
Nueva Esparta and Zulia.
8
<PAGE>
2. The objective for each federal district shall be considered reached if a
minimum of sixty percent (60%) digitalization is reached in each of the
following federal districts: Falcon, Portuguesa, Trujillo, Merida, Vargas,
Aragua, Apure, Federal District and Yaracuy.
For purposes of calculating the objective and as part of the Executed
Digitalization Program during 2000, account shall be taken of those plants which
are of such a nature and size as to make it structurally impossible to complete
the performance timetable before the end of year 2000, provided they are duly
documented by the Concession Holder and approved by CONATEL during the plan
formulation stage, and the transfers involved are completed during the first
forty-five (45) days of 2001. Likewise, for the purpose of meeting the
digitalization objectives, account shall be taken of those plants for which the
performance timetable equals or exceeds eighty percent (80%) as of December 31,
2000, provided that the total of lines involved does not represent more than one
percent (1%) of the Digitalization Program total.
To that end, CONATEL shall approve the Modernization Plan to which reference is
made in CLAUSE 9 of the Contract submitted by the Concession Holder. If CONATEL
does not propose corrections to the plan before the end of January 2000, the
plan shall be deemed approved.
CLAUSE 21: PUBLIC TELEPHONES
The Concession Holder agrees to submit during the first quarter of 2000 a study
of the public telephone objective stipulated in the Contract for 2000, to enable
CONATEL to consider a review of such objective.
CHAPTER V
RATE SYSTEM
CLAUSE 22: RATE SYSTEM
After having reviewed the method for capping and re-balancing the rates
established in the Contract for Basic Services, the Republic and the Concession
Holder agree to adjust such method and, consequently, following publication in
the Official Journal of the Bolivarian Republic of Venezuela of the Rate
Resolution stipulated in CLAUSE 32 until November 27, 2000, apply the rate
system set forth in this Agreement and detailed in Annex "D" hereof.
Nevertheless, if the rates applicable to the period of free competition have not
been established as of such date, this Agreement shall remain in effect until
December 31, 2000. In such event, before the close of the year 2000, the parties
shall review and agree upon the rates which the Concession Holder shall
temporarily apply during the beginning of the period of free competition, until
such time as the appropriate Public Authority establishes the new rate system
for all basic telecommunications services operators.
CLAUSE 23: RESIDENTIAL SERVICE RATES FOR THE OBLIGATORY SUPPLY PLANS
In accordance with CLAUSE 32, the Republic shall fix the rates applicable to,
and essential characteristics of, the basic residential telecommunications
services as established in the obligatory supply plans indicated below. The
rates to be approved by the Republic shall be those
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<PAGE>
established in Annex "D", which have been converted to Bolivars in the manner
set forth in CLAUSE 30.
Essential characteristics shall mean the rate plans for residential services,
the basic rental amount, the number of free minutes, and the local per-minute
charge established for each plan.
Initial Reference Charge for the Obligatory Supply Plans:
- -----------------------------------------------------------------------------
Basic Rental Free minutes Local Minute Charge
- -----------------------------------------------------------------------------
Plan A US$7.300 40 US$0.0441
- -----------------------------------------------------------------------------
Plan B US$11.200 65 US$0.0312
- -----------------------------------------------------------------------------
Plan C US$12.597 90 US$0.0285
- -----------------------------------------------------------------------------
Plan F US$60 2500 Charge for Additional Minute
From 1 to 500 min: US$0.0100
From 501 to 1000 min: US$0.0090
From 1001 to 1500 min: US$0.0085
From 1501 to 2000 min: US$0.0080
From 2001 min: US$0.0075
- --------------------------------------------------------------------------------
The additional minute charges under Plan F based on consumption volume shall be
applicable uniformly to all minutes over the established free minutes level and,
consequently, the charge per minute shall not be calculated in an escalating
manner.
Prepayment Mode: the Concession Holder shall also provide an obligatory supply
plan with a prepayment option for basic telephone service using the following
rates:
Initial Reference Charge for the Basic Telephone Plan featuring the Prepayment
option:
- -------------------------------------------------------------------------------
Charge per Minute Minimum consumption
- -------------------------------------------------------------------------------
Prepayment Plan US$0.09 Bs.10,000.00 in 60 days
- -------------------------------------------------------------------------------
In each case, application of this option may be undertaken only with prior
approval by CONATEL of the respective "service contract" which sets forth the
conditions and terms of provision of the service using this method of payment.
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<PAGE>
Furthermore, the Republic, in accordance with CLAUSE 32, shall fix the rates
applicable to, and essential characteristics of, the basic telephone plan under
the prepayment option. The rates to be approved by the Republic shall be those
established in Annex "D", which have been converted to Bolivars in the manner
set forth in CLAUSE 30.
The Concession Holder may offer other plans which feature prepayment options
under the established local-minute rate and contain a minimum consumption level
which is less than the above.
The Concession Holder shall be required to offer the obligatory plans.
CLAUSE 24: PLAN SWITCHING
Customers enrolled in the Basic, Intermediary and Advanced "Special Savings"
Plans, existing before the Resolution that will fix the new rates takes effect,
shall be automatically reclassified in plans A, B and C, described in Annex "D",
respectively, at no cost to the subscriber.
Residential subscribers may ask at their discretion and at no charge to switch
rate plans as many as two times within one year. Beginning with and including
the third plan switch, and for each additional plan switch within the same
period, the Concession Holder may charge the fee established in Annex "D" for
this amount.
In no case may the Concession Holder, in any plan changes following the initial
automatic reclassification, transfer a subscriber from his current rate plan to
another plan without his prior consent, or force such subscriber to switch to
another plan different from that chosen by such subscriber.
CLAUSE 25: OPTIONAL COMPLEMENTARY PLANS FOR RESIDENTIAL SERVICES
Pursuant to CLAUSE 32, the Republic shall fix the applicable rates and essential
characteristics established for the optional complementary plans as indicated
below. The rates to be approved by the Republic shall be those established in
Annex "D", which have been converted to Bolivars in the manner set forth in
CLAUSE 30.
The optional complementary plans may be modified by the Concession Holder
without the need for additional authorization or approval by CONATEL. In such
case, the modification shall be published one month prior to its taking effect
in at least two (2) nationally circulating daily newspapers for three (3)
consecutive days and shall notify all users listed on the Concession Holder's
regular billing schedule and CONATEL.
Initial Reference Charge for the Complementary Plans:
- --------------------------------------------------------------------------
Basic Rental Free minutes Local Minute Charge
- --------------------------------------------------------------------------
Plan D US$20 360 US$0.0280
- -------------------------------------------------------------------------
Plan E US$27 600 US$0.0255
- -------------------------------------------------------------------------
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The Concession Holder may offer subscribers other optional complementary plans,
which in no case shall feature a basic rental which exceeds eighty U.S. Dollars
(US$80).
CLAUSE 26: NON-RESIDENTIAL SERVICE RATES
Pursuant to CLAUSE 32, the Republic shall fix the Basic Rental rates applicable
to Non-Residential Service at an initial amount equivalent to US$21.00, and the
local per-minute rates at an initial amount equivalent to US$0.0374. The rates
shall be those established in Annex "D", which have been converted to Bolivars
in the manner set forth in CLAUSE 30.
CLAUSE 27: LONG DISTANCE RATES
Pursuant to CLAUSE 32, the Republic shall fix the Long Distance rates as
established below:
Domestic Long Distance: The rate is set at a weighted average level as of the
beginning of year 2000 equivalent to US$0.1875 per minute. The rates shall be
those established in Annex "D", which have been converted from U.S. Dollars to
Bolivars in the manner set forth in CLAUSE 30.
The parties also agree to modify the times established for application of the
normal and reduced Domestic Long Distance rates under the terms established in
Annex "D".
The Concession Holder may establish additional discounts on the rates set forth
in Annex "D" for Domestic Long Distance services.
International Long Distance: The rate is set at a weighted average level as of
the beginning of year 2000 equivalent to US$0.7437 per minute. The rates shall
be those established in Annex "D", which have been converted from U.S. Dollars
to Bolivars in the manner set forth in CLAUSE 30.
The Domestic Long Distance and International Long Distance rates shall not be
subject to new adjustments in 2000, except for special adjustments which shall
be valid in accordance with the Special Rate Adjustment Procedure set forth in
CLAUSE 31.
The Concession Holder may not combine or grant additional special discounts on
the Domestic Long Distance and International Long Distance rates or associate
them with specific plans established for residential or non-residential
customers. Accordingly, the Concession Holder may only offer additional
discounts on the Domestic Long Distance and International Long Distance rates if
they apply to all plans.
CLAUSE 28: PUBLIC TELEPHONE RATES
Pursuant to CLAUSE 32, the Republic shall fix the rates applicable to Public
Telephone Services as established below. The rates to be approved by the
Republic shall be those established in Annex "D", which have been converted to
Bolivars in the manner set forth in CLAUSE 30.
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A) Local Use
1. Reference charge for one minute of local use
- -------------------------------------------------------------
a) Public telephones: TPM, TPT and Teletasa US$0.0312
- -------------------------------------------------------------
b) Special public telephone US$0.0630
- -------------------------------------------------------------
The parties understand "special public telephone" to mean those public
telephones located in special places or establishments approved by CONATEL,
currently installed or proposed by the Concession Holder. For purposes of
operating special public telephones, the Concession Holder shall inform users on
each telephone of this type, in a clear and visible manner, of the special rate
to be applied. This type of telephone shall be clearly identified for purposes
of differentiating it from regular public telephones.
Initially, the operation of this type of public telephone shall be permitted in
establishments holding a "five (5) star" rating, as established in the Organic
Tourism Law and its regulations, and which are enrolled as such in the National
Tourism Registry carried by the Tourism Corporation of Venezuela.
2. Reference charge for the Domestic Long Distance Public Telephone (DDN)
signal:
- -----------------------------------------------------
Normal rate US$0.0329
- -----------------------------------------------------
Reduced rate US$0.0280
- -----------------------------------------------------
3. Frequency of the Domestic Long Distance Public Telephone (DDN) signal:
One (1) pulse every ten (10) seconds
B) Reference charge for International Long Distance Service (LDI)
The rates applied for minutes of use shall be those indicated by country for
International Long Distance telephone service as provided in CLAUSE 27 and
contained in Annex "D".
C) Reference charge for Credit Card Service
- ------------------------------------------
Local Use US$0.232
- ------------------------------------------
LDN Use US$0.594
- ------------------------------------------
LDI Use US$1.2256
- ------------------------------------------
CLAUSE 29: LEASED PUBLIC TELEPHONE
Pursuant to CLAUSE 32, the Republic shall fix the rates and characteristics
applicable to the Leased Public Telephone Service as established below. The
rates to be approved by the Republic shall be those established in Annex "D",
which have been converted to Bolivars in the manner set forth in CLAUSE 30.
In all cases, this option may be offered only with CONATEL's prior approval of
the respective Service Contract which contains the conditions and terms for
providing of such service.
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Reference charges for Leased Public Telephone Service
- ---------------------------------------------------------------
Local Use US$0.063
- ---------------------------------------------------------------
Maintenance fee US$21.00
- ---------------------------------------------------------------
Free minutes 60
- ---------------------------------------------------------------
CLAUSE 30: ESTABLISHING RATES
The parties agree that the rate schedule shall be applied by means of two
adjustments, the first to be carried out one month after the publication to
which CLAUSE 32 of this Agreement makes reference as provided in Article 14 of
the Telecommunications Law, and the second, as of June 16 of the same year, as
provided in Annex "D".
The rates contained in this Agreement have been stated in U.S. Dollars adjusted
in accordance with international rate fluctuation, and they constitute an
initial reference charge for establishing the rates contained in Annex "D".
For conversion of the rates set forth in this Agreement to Bolivars, the parties
have agreed to apply the Bolivars-to-U.S. Dollar exchange rate expectations
according to the following monthly estimates for 2000:
- ------------------------------------------------------------------------------
Closing Rates Month Average Average Cumulative
(Bs./US$) (Bs./US$) Rate (Bs./US$)
- ------------------------------------------------------------------------------
651.00
- ------------------------------------------------------------------------------
January 658.09 654.55 654.55
- ------------------------------------------------------------------------------
February 665.18 661.64 657.97
- ------------------------------------------------------------------------------
March 672.27 668.73 661.64
- ------------------------------------------------------------------------------
April 679.36 675.82 665.15
- ------------------------------------------------------------------------------
May 686.45 682.91 668.77
- ------------------------------------------------------------------------------
June 693.55 690.00 672.27
- ------------------------------------------------------------------------------
July 700.64 697.10 675.88
- ------------------------------------------------------------------------------
August 707.73 704.19 679.48
- ------------------------------------------------------------------------------
September 714.82 711.28 682.96
- ------------------------------------------------------------------------------
October 721.91 718.37 686.56
- ------------------------------------------------------------------------------
November 729.00 725.46 690.04
- ------------------------------------------------------------------------------
The conversion of the rates stated in U.S. Dollars in this document to the
figures in Bolivars referred to in Annex "D" and to be published in the
Resolution to which CLAUSE 32 makes reference shall be effectuated subject to
the following provisions:
a) The basic residential rental rates for obligatory supply plans A, B and
C corresponding to the period from the effective date of the approved
rates to June 15, 2000, shall be determined by applying the exchange rate
of 651 Bs./US$.
Beginning June 16, 2000, an increase of 5.82% shall take effect on basic
residential rental rates for obligatory supply plans A, B and C.
14
<PAGE>
b) The conversion of U.S. Dollars to Bolivars corresponding to the service
rates for Domestic Long Distance and International Long Distance shall be
effectuated by applying the exchange rate of 651 Bs./US$, and there shall
be no adjustment during the effective period of this Agreement, except as
provided in CLAUSE 31.
c) A conversion rate shall be applied to nonresidential basic rental,
residential and nonresidential local use, public telephone local use,
residential and nonresidential installation and subscription, and the
residential basic rental of Plan F and the complementary plans offered by
the Concession Holder in the following manner:
1. Until June 15, 2000, a conversion rate of 670.21 Bs./US$ shall be
applied.
2. As of June 16, 2000, a conversion rate of 709.25 Bs./US$ shall be
applied, except with respect to complementary plans.
d) For other services not explicitly indicated in this Principal Document,
an exchange rate of 606.00 Bolivars per U.S. Dollar was applied to the
rates in effect for December 1999. The rate level for 2000 shall be
determined by applying the following conversion rates to the above rate
level:
1. Until June 15, 2000, a conversion rate of 670.21 Bs./US$ shall be
applied.
2. As of June 16, 2000, a conversion rate of 709.25 Bs./US$ shall be
applied.
Likewise, in these cases, pursuant to CLAUSE 32, the Republic shall fix the
applicable rates established in Annex "D".
CLAUSE 31: SPECIAL RATE ADJUSTMENTS
Beginning in March 2000, both parties shall effectuate a follow-up process at
the close of each month on the fluctuation of the cumulative average exchange
rate for 2000, in comparison with the expectations described in CLAUSE 30. If a
variance is found, pursuant to the terms established in Annex "E", special
adjustments shall be made which shall be valid for all rates set forth in Annex
"D", and in accordance with the Special Rate Adjustment Procedure set forth in
Annex "E" of this Agreement. The resulting rate adjustment shall be verified and
approved by CONATEL as provided in the Resolution referred to in CLAUSE 32.
Notwithstanding, in the case indicated in Annex "E" (3-c), the resulting rates
shall be published in a new Rate Resolution which will be established for this
purpose by the Ministry of Infrastructure.
For these purposes, the official information to be used each month shall be the
rates announced by the Central Bank of Venezuela.
15
<PAGE>
CHAPTER VI
FINAL PROVISIONS
CLAUSE 32: RATE RESOLUTION
The rates applicable to the rate plans and their respective adjustments in 2000
established in CLAUSE 30 of this Agreement, shall be those fixed by the Ministry
of Infrastructure in a Resolution which shall be published in the Official
Journal immediately following execution of this Agreement. The rates shall take
effect as provided in the Resolution.
CLAUSE 33: GOOD FAITH COMMITMENT
The parties agree to take any action necessary to perform in good faith all the
obligations contained in this Agreement.
CLAUSE 34: THE CONCESSION HOLDER'S WAIVER OF THE EXERCISE OF LEGAL ACTION
The Concession Holder waives the exercise of any type of legal administrative
action now or in the future against the Republic deriving from the failure to
approve the rate adjustments corresponding to the period from the third quarter
of 1999 to the date of execution of this Agreement. Consequently, it is
expressly understood that such waiver shall be conditioned upon the Republic's
performance of the essential terms and obligations established in this
Agreement.
CLAUSE 35: EIGHTH-YEAR REVIEW
The provisions contained in this document constitute regulatory changes to be
imposed for the period of free competition which is part of the eighth-year
review process, as set forth in CLAUSE 22 of the Contract. As a consequence,
the parties acknowledge that it is advisable for the effective period of this
Agreement, to modify the rates as well as to modernize and qualify objectives in
the terms established in this Agreement and, therefor, by execution hereof,
declare the eighth-year review concluded and deem resolved the differences that
have arisen between the parties prior to the signing of this Agreement related
to the definition of the expansion and modernization objectives and
methodologies, the waiting time for obtaining service and billing errors,
without prejudice to CONATEL's rights provided under CLAUSES 27 and 28 of the
Contract.
Upon execution of this Agreement, Annexes "A", "B" and "C" of the Contract shall
be replaced in their entirety and, consequently, for the term of this Agreement,
only the quality and digitalization objectives established pursuant to this
Agreement shall control.
CLAUSE 36: PRINCIPAL DOCUMENT AND ANNEXES
This Agreement consists of this Principal Document and the following Annexes,
which together form an integral part hereof:
Annex A: "Year 2000 Quality Parameters and Indicators"
Annex B: "Business Service Improvement Plan"
Annex C: "CANTV Operating Divisions"
Annex D: "Rates"
Annex E: "Special Rate Adjustment Procedure"
16
<PAGE>
The parties agree that in the event of doubt as to the scope and meaning of a
contractual provision, the stipulations contained in the Principal Document of
the agreement shall prevail over those incorporated into the Annexes.
CLAUSE 37: BINDING NATURE OF THE CONCESSION CONTRACT
The clauses of the Contract shall be applied to all matters not specifically set
forth in this Agreement. In the event of dispute, the provisions of this
Agreement shall prevail.
Likewise, if due to any circumstance the parties fail to reach agreement with
respect to the definition of methodologies, objectives or any other element to
which this Agreement makes reference within the required time periods or any
others specifically created for that purpose, the Concession Holder shall submit
proposals regarding the issues in dispute, which shall be submitted to CONATEL
for approval. If there are objections and modifications to the proposals
submitted, CONATEL shall notify the Concession Holder in the appropriate manner.
In such event, the Concession Holder shall be obligated to apply the objections
and modifications.
CLAUSE 38: SPECIAL DOMICILE
The Republic and the Concession Holder elect as special and exclusive domicile,
for all effects deriving under this Agreement, the city of Caracas, and the
courts thereof to which they declare themselves subject.
Three (3) counterparts are hereby executed with the same tenor and to the same
effect, in the City of Caracas on the ________ ( __ ) day of the month of ______
of the year 2000.
[signatures and stamps follow]
For the Concession Holder For the Republic
By: /s/ GUSTAVO ROOSEN By: /s/ ALBERTO EMERICH ESQUEDO TORRES
- ---------------------- --------------------------------------
Gustavo Roosen Alberto Emerich Esqueda Torres
President of CANTV Minister of Infrastructure
17
<PAGE>
BOLIVARIAN REPUBLIC OF VENEZUELA. Dr. ASTRID CAROLINA GOMEZ DE RODRIGUEZ NOTARY
PUBLIC (1) TWENTY-FIFTH OF THE MUNICIPALITY LIBERTADOR OF THE FEDERAL DISTRICT.
Caracas, February 21, 2000. 190(DEGREES) and 140(DEGREES). The foregoing
document drafted by Dr. EUNISIS MORENO DE PASCHER, Esq., enrolled in the
national register for lawyers under No. 8292, was submitted for authentication
and devolution as per form No. 400/9 dated: 2/18/2000. Its signatories were
present and identified themselves: ALBERTO EMERICH ESQUEDA TORRES AND GUSTAVO
ROOSEN, of legal age, domiciled in Caracas, of VENEZUELAN nationality, married,
holders of Identification Cards Nos. 636,073 and 2,938,282. The original having
been read to them and compared with its photocopies in the Notary's presence,
the executing parties have said: "ITS CONTENTS ARE CORRECT, AND OURS ARE THE
SIGNATURES WHICH APPEAR AT THE BOTTOM OF THE INSTRUMENT". Whereupon they
declared it to be authentic in the presence of the witnesses: MAIGRETT RIVAS AND
YANETH PARRA, bearers of Identification Cards Nos. 12,539,194 and 6,887,136,
inserting it under No. 25, Book 23, of the Books of Authentication carried by
this Notary. The subscribing Notary states for the record having viewed the
following documents: 1) Presidential Decree No. 632 dated January 10, 2000,
published in the Official Journal of the Bolivarian Republic of Venezuela No.
36,866, dated 1/10/2000, with such authority as is provided in Article 48 of the
Decree and with the Scope and Force of the Organic Law of Central
Administration; 2) Certificate of Incorporation and Bylaws of Compania Anonima
Nacional Telefonos de Venezuela (C.A.N.T.V.), registered in the Mercantile
Registry held by the former Court of Commerce of the Federal District, at No. 2,
Book 387, dated June 20, 1930, of which the most recent revision of the bylaws
was registered at the First Mercantile Registry of the Judicial Circuit of the
Federal District, State of Miranda on September 14, 1998, inserted at No. 39,
Book 208-A-Pro; 3) Minutes of the Regular Stockholders Meeting dated March 30,
1999, as provided in Article 11(b). And further for the record authorizes
MARIBEL PADILLA, bearer of Identification Card No. V-5,430,584, to witness the
signing of this instrument at Park Central, East Tower, Floor 50, Ministry of
Infrastructure, at 5:00 P.M.
[signatures and stamps follow]
18
<PAGE>
NOTARY PUBLIC
By: /s/ DR. ASTRID CAROLINA DE RODRIGUEZ
- ------------------------------------------
Dr. Astrid Carolina de Rodriguez
SIGNATORIES
By: /s/ ALBERTO EMERICH ESQUEDA TORRES
--------------------------------------
Alberto Emerich Esqueda Torres
(Minister of Infrastructure)
By: /s/ GUSTAVO ROOSEN
-----------------------
Gustavo Roosen
(CANTV President)
THE WITNESSES:
By: /s/ MAIGRET RIVAS
- ---------------------------
MAIGRET RIVAS
By: /s/ YANETH PARRA
- ---------------------------
YANETH PARRA
AUTHORIZED OFFICER
By: /s/ MARIBEL PADILLA
-------------------------
19
<PAGE>
Annex A
"PARAMETERS AND QUALITY INDICATORS"
YEAR 2000
This Annex contains the parameters and quantitative objectives of quality of
service with which to measure the quality of service of the Concession Holder's
telephone network for the year 2000. These parameters are:
1. Accessibility to the telephonic service:
1.1. Waiting time for obtaining the service: Average of the time elapsed from
the request (date of commercial approval) and the installation of the service.
Delays not attributed to the customer and/or third parties (municipal and
national regulatory agencies) duly documented for verification shall not be
computed. The computation shall consider only the service requests from
residences inside the local area of coverage. The high risk zones (defined by
competent entities) shall be excluded.
National annual objective: 67 days
Monthly maximum: 77 days
1.2. Waiting list: Pending requests more than a month old based on the date of
commercial approval of the request of the customer, excluding the cases
indicated in clause 1.1.
Annual objective: 82%
Monthly maximum: 90%
1.3. Requests attended in zones without physical presence: Percentage of
requests recorded as of December 31, 1999, in zones without a physical presence
that shall be attended during the year 2000.
Annual objective: 50%
2. Retainability of the telephone service:
2.1. Actual complaints reported for every 100 lines in service, per month:
Annual average: 2.5% /month
Monthly maximum
by operating division: 2.9% /month
<PAGE>
2.2. Percentage of breakdowns repaired in less than 24 hours:
Annual average: 70.0%
Monthly minimum
by operating division: 59.5%
2.3. Percentage of breakdowns repaired in less than 48 hours:
Annual average: 90.0%
Monthly minimum
by operating division: 76.5%
2.4. Average Time to Fix Breakdowns: Total time elapsed, in hours, from the
time actual breakdowns are reported until repaired, among the total actual
problems reported by the customers.
Annual average: 25 hours
Monthly maximum,
by operating division: 28.8 hours
3. Quality of operation of the network:
3.1. Percentage of calls completed for local traffic, domestic long distance
and international long distance: Percentage of calls attempted and correctly
dialed, which are successfully connected to the party being called (includes
cases when the party being called either answers, rings but does not answer, the
line is busy, a prerecorded machine answers, a suspended subscriber tone is
received, or it is a toll-free call).
- -------------------------------------------------------------------------------
Domestic Annual Monthly Minimum
Calls Objective (%) by Operating Division (%)
- -------------------------------------------------------------------------------
Local 96.5 82.0
- -------------------------------------------------------------------------------
DLD 95.5 81.2
- -------------------------------------------------------------------------------
ILD 96.5 82.0
- -------------------------------------------------------------------------------
3.2. Time to complete call: Time that elapses since the last digit is dialed
until an answering tone is received.
Objective: To be established during the first quarter of the year 2000.
3.3. Percentage of calls initiated that receive a dial tone in no more than
three seconds during peak hours (results to be evaluated during first quarter):
Annual Objective: 98%
2
<PAGE>
4. Efficiency of operator service:
4.1. Average waiting time for operator answer: Average time in which operators
delay in answering user calls.
Service Domestic Annual Goal (sec) Monthly maximum (sec)
------- ------------------------- ---------------------
15 5 6.5
100 8.0 8.8
101 15.0 16.5
103 20.0 22.0
122 20.0 22.0
80021515 (*)
* Measure of the time that elapses from the moment the customer requests the aid
of a Telemarketing Executive (option "zero" in the robot menu) until receiving
attention. It begins with a parameter of 3.5 minutes and its behavior is
evaluated during the first quarter of 2000, in order to establish objectives for
subsequent quarters which imply improvements in this index.
4.2. Percentage of traffic calls answered directed to Operator Services:
Percentage of calls that were answered by the different operator services.
Operator Domestic Annual Monthly Minimum,
Service (%) Objective (%) by Division
----------- --------------- -----------------
100 65.0 58.5
103 75.0 67.5
122 55.0 49.5
15 65.0 58.5
The objectives for services 101 and 800 21515 shall be fixed after evaluating
their behavior during the first quarter of 2000.
5. Effectiveness of billing:
5.l. Billing claims: Claims outstanding for every 100 invoices, monthly.
Annual Domestic Monthly maximum
--------------- ---------------
CANTV's own services 0.35 0.5
Services of third parties 0.11(*)
(*) During the first quarter of the year 2000 and subject to evaluation
of the success of the parameter, agreement will be reached with
respect to objectives that will be established for subsequent
quarters in the year 2000.
The base for the measurement of both indicators shall be total valid claims.
When CONATEL deems it advisable it will revise the "Procedure for Investigation
of Billing Complaints". The
3
<PAGE>
Concession Holder shall submit the breakdown of complaints by type of service on
a quarterly basis, as additional information.
5.2. Regular Billing Time: Number of days elapsed since the Domestic Long
Distance and International Long Distance calls were made, as generated in the
CANTV network, until such calls were billed.
Domestic Annual Objective: 95% less than or equals to of 45 days
6. User satisfaction: To be agreed between the parties upon completion of
the first surveys conducted by third parties.
4
<PAGE>
REPUBLIC OF VENEZUELA. Dr. ASTRID CAROLINA GOMEZ DE RODRIGUEZ, NOTARY PUBLIC (1)
TWENTY-FIFTH OF THE MUNICIPALITY LIBERTADOR OF THE FEDERAL DISTRICT. Caracas,
February 21, 2000. 189(DEGREES) and 140(DEGREES). This is the Annex and/or plan
referred to in the document drafted by Dr. EUNISIS MORENO DE PASCHER, Esq.,
enrolled in the national register for attorneys under No. 8292, submitted for
Authentication and Devolution as per form No. 400/9 dated: 2/18/2000. Signed on
this date by the authorized parties: ALBERTO EMERICH ESQUEDA TORRES AND GUSTAVO
ROOSEN, inserting it under No. 25, Book 23, of the Books of Authentication
carried by this Notary.
[signatures and stamps follow]
NOTARY PUBLIC
By: /s/ DR. ASTRID CAROLINA DE RODRIGUEZ
- ------------------------------------------
Dr. Astrid Carolina de Rodriguez
SIGNATORIES
By: /s/ ALBERTO EMERICH ESQUEDA TORRES
--------------------------------------
Alberto Emerich Esqueda Torres
(Minister of Infrastructure)
By: /s/ GUSTAVO ROOSEN
-----------------------
Gustavo Roosen
(CANTV President)
5
<PAGE>
Annex B
"COMMERCIAL SERVICE IMPROVEMENT PLAN"
This Annex contains the plan for improvement of the services provided by the
"800 21515" Service Center, as well as to the Commercial Service Offices which
the Concession Holder will be connected to in the year 2000.
1. "800 21515" Service Center
1.1. To increase to 570 the lines of access to the service, by means of the
installation of 270 additional lines, which will permit an increase of 1,600,000
calls attended monthly.
1.2 To increase to 240 the number of telemarketing executives by hiring 50
additional executives to attend calls.
1.3 To raise the service indicators to the level recognized as the
international standard, and, following evaluation of new programs, traffic
fluctuation, staff increases and improvements in customer service procedures, to
develop specific plans for achieving such standards.
2. Plan for improvement of Commercial Service Offices "OAC's"
2.1 Upgrading the Commercial Service Offices: Minimum conditions of operation
focusing on the criteria of Security and Customer Service (Infrastructure and Q-
Matic).
Year 2000 goal: 11 offices
2.2 Automation of Offices: To network the offices at the domestic level,
integrate the information applications and add the On Line Collection System,
SRL (integration of the cash and service systems in a single executive).
Year 2000 goal: increase from 3 to 89 offices equipped with SRL
2.3 Telecommunications Services Learning Center: Process of training and
certifying staff to permit training of member Agents.
Year 2000 goal: increase from 32 to 801 certified executives
2.4. Teller windows: To continue with the installation of payment points in
business and public places with heavy traffic volume.
Year 2000 goal: increase from 74 to 100 windows
<PAGE>
2.5. Full Service Points (PAI): To provide various service alternatives by
establishing a network of contact points which make it possible to satisfy the
customer's needs in the area of telecommunications.
Year 2000 goal: increase from 2 to 20 PAIs.
2
<PAGE>
REPUBLIC OF VENEZUELA. Dr. ASTRID CAROLINA GOMEZ DE RODRIGUEZ NOTARY PUBLIC (1)
TWENTY-FIFTH OF THE MUNICIPALITY LIBERTADOR OF THE FEDERAL DISTRICT. Caracas,
February 21, 2000. 189(DEGREES) and 140(DEGREES). This is the Annex and/or plan
referred in the document drafted by Dr. EUNISIS MORENO DE PASCHER, Esq.,
enrolled in the national register for attorneys under No. 8292, submitted for
Authentication and Devolution as per form No. 400/9 dated: 2/18/2000. Signed on
this date by the authorized representatives: ALBERTO EMERICH ESQUEDA TORRES AND
GUSTAVO ROOSEN, inserting it under No. 25, Book 23, of the Books of
Authentication carried by this Notary.
[signatures and stamps follow]
NOTARY PUBLIC
By: /s/ DR. ASTRID CAROLINA DE RODRIGUEZ
- ------------------------------------------
Dr. Astrid Carolina de Rodriguez
SIGNATORIES
By: /s/ ALBERTO EMERICH ESQUEDA TORRES
--------------------------------------
Alberto Emerich Esqueda Torres
(Minister of Infrastructure)
By: /s/ GUSTAVO ROOSEN
----------------------
Gustavo Roosen
(CANTV President)
3
<PAGE>
Annex C
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CAPITAL REGION (ZONE I)
- ------------------------------------------------------------------------------
UBIC. OPERATING FEDERAL
CONT. CCCC PLANT SERIAL DIV. ENTITY
- ------------------------------------------------------------------------------
2212 2019 BOLEITA 02-232,4,5,7,8,9
- ---------------------------------------------------------
2233 2022 URBINA 02-241,2,3
- ---------------------------------------------------------
3610 3610 TURUMO 02-244
- ---------------------------------------------------------
2235M 2023 MIRANDA 02-242,3
- ---------------------------------------------------------
2236 2032 LIMONCITO 02-2912
- ---------------------------------------------------------
3606 3612 FILA DE MARICHES 02-5320
- ---------------------------------------------------------
2513 2138 CNT-LOS CORTIJOS (**) 02-500
- ---------------------------------------------------------
2222 2017 CALIFORNIA I 02-271
- ---------------------------------------------------------
2222 2018 CALIFORNIA II 02-272
- ---------------------------------------------------------
2225P 2027 PETARE 02-2566 ZONE I MIRANDA
- ---------------------------------------------------------
2226 2025 PALO VERDE 02-251,2
- ---------------------------------------------------------
2237 2026 MACARACUAY 02-256,7,8
- ---------------------------------------------------------
2313 2029 CHACAO 02-261 al 267
- ---------------------------------------------------------
2314 2030 LOS PALOS GDES. I 02-283
- ---------------------------------------------------------
2314 2030 LOS PALOS GDES. II 02-284
- ---------------------------------------------------------
2314 2031 LOS PALOS GDES. 02-285,6
- ---------------------------------------------------------
2323 2120 CAFETAL 02-985
- ---------------------------------------------------------
2323 2121 CAFETAL II 02-986
- ---------------------------------------------------------
2323 2121 CAFETAL III 02-987
- ------------------------------------------------------------------------------
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CAPITAL REGION (ZONE I)
- ---------------------------------------------------------------------------
UBIC. OPERATING FEDERAL
CONT. CCCC PLANT SERIAL DIV. ENTITY
- ---------------------------------------------------------------------------
3202 3204 TEQUES 02-364
- ----------------------------------------------------
3202 3202 TEQUES 02-321,2,3
- ----------------------------------------------------
3203R 3203 SANT. OMERO 02-322
- ----------------------------------------------------
3204P 3212 SAN PEDRO 02-378
- ----------------------------------------------------
3205 3205 CARRIZALES 02-383
- ----------------------------------------------------
3205C 3206 COL. DE CARRIZALES 02-383
- ----------------------------------------------------
3207 3207 SAN ANTONIO 02-371,372
- ----------------------------------------------------
3224 3209 SAN ANTONIO 02-373
- ----------------------------------------------------
3208 3208 LAS MINAS 02-372,373
- ----------------------------------------------------
3210 3210 SAN JOSE 02-3751
- ----------------------------------------------------
3215 3214 PARACOTOS 02-3911
- ----------------------------------------------------
3216 3213 EL JARILLO 02-392
- ----------------------------------------------------
3912 3903 OCUMARE DEL TUY II 039-240, 50
- ----------------------------------------------------
3913 3905 SAN FCO. DE YARE 038-29
- ----------------------------------------------------
3914 3911 SANTA LUCIA I 039-47
- ----------------------------------------------------
3914 3912 SANTA LUCIA II 039-481
- ----------------------------------------------------
3915 3907 SANTA TERESA 039-31
- ----------------------------------------------------
3917 3904 AVE MARIA 039-281
- ----------------------------------------------------
3922 3916 CUA 039-91
- ----------------------------------------------------
3923 3918 CHARALLAVE 039-96,8
- ----------------------------------------------------
3924 3914 LOS ANAUCOS 039-82 MIRANDA MIRANDA
- ----------------------------------------------------
3926 3919 TACATA 039-9910
- ----------------------------------------------------
3603 3603 CUIDAD FAJARDO 02-381
- ----------------------------------------------------
3607 3607 GUATIRE I 02-341,44
- ----------------------------------------------------
3600 3600 TRAPICHITO 02-361,2,3
- ----------------------------------------------------
3602 3602 SANTIAGO DE LEON 02-3691
- ----------------------------------------------------
3605 3605 VALLE ARRIBA 02-3416
- ----------------------------------------------------
3616 3616 PALO ALTO 02-347
- ----------------------------------------------------
3413 3413 CAUCAGUA I 034-61
- ----------------------------------------------------
3413 3414 CAUCAGUA II 034-62
- ----------------------------------------------------
3424 3404 HIGUEROTE 034-230,36
- ----------------------------------------------------
3426 3409 T. DE MAMPORAL I 034-41
- ----------------------------------------------------
3426 3411 T. DE MAMPORAL II 034-421
- ----------------------------------------------------
3426 3432 T. DE MAMPORAL 034-42
- ----------------------------------------------------
3431 3427 SAN FDO. DEL GAUPO 034-820
- ----------------------------------------------------
3432 3424 CUPIRA 034-79
- ----------------------------------------------------
3433 3426 EL GUAPO 034-810
- ----------------------------------------------------
3435 3418 S. JOSE DE RIO CHICO 034-721
- ----------------------------------------------------
3435 3420 RIO CHICO 034-74
- ----------------------------------------------------
3437 3416 TAC. DE LA LAGUNA 034-7110
- ----------------------------------------------------
3442 3408 CHIRIMENA 034-381
- ---------------------------------------------------------------------------
2
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CAPITAL REGION (ZONE II)
- ------------------------------------------------------------------------------
UBIC. OPERATING FEDERAL
CONT. CCCC PLANT SERIAL DIV. ENTITY
- ------------------------------------------------------------------------------
2513 2064 LOS CAOBOS I 02-571
- -----------------------------------------------------
2513 2064 LOS CAOBOS II 02-572
- -----------------------------------------------------
2513 2065 LOS CAOBOS III 02-5730
- -----------------------------------------------------
2513 2065 LOS CAOBOS IV 02-574
- -----------------------------------------------------
2513 2067 LOS CAOBOS 02-575,6,7,8
- -----------------------------------------------------
2513 2058 CENTRO NACIONAL 02-531
- -----------------------------------------------------
2516 2060 SAN AGUSTIN I 02-545
- -----------------------------------------------------
2516 2059 SAN AGUSTIN II 02-541
- -----------------------------------------------------
2516 2128 SAN AGUSTIN 02-___ 3
- -----------------------------------------------------
2517 2050 ROMULO GALLEGOS I 02-551
- -----------------------------------------------------
2517 2057 ROMULO GALLEGOS II 02-552
- -----------------------------------------------------
2517 2124 ROMULO GALLEGOS 02-550,2
- -----------------------------------------------------
2813 2061 CARACAS I 02-561
- -----------------------------------------------------
2813 2061 CARACAS II 02-562
- -----------------------------------------------------
2813 2062 CARACAS III 02-563
- -----------------------------------------------------
2813 2063 CARACAS 02-564 ZONE II FEDERAL DISTRICT
- -----------------------------------------------------
2712 2080 ALTA FLORIDA 02-730
- -----------------------------------------------------
2712 2079 ALTA FLORIDA 02-731
- -----------------------------------------------------
2713 2106 EL ROSAL 02-951,2,3,4
- -----------------------------------------------------
2513 2137 CNT - EL ROSAL (**) 02-500
- -----------------------------------------------------
2714 2085 FLORIDA 02-761,2,3
- -----------------------------------------------------
2716 2087 LA SALLE I 02-781
- -----------------------------------------------------
2716 2087 LA SALLE II 02-782
- -----------------------------------------------------
2716 2088 LA SALLE 02-793,4
- -----------------------------------------------------
2513 2135 CNT - LA SALLE (**) 02-500
- ------------------------------------------------------------------------------
3
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CAPITAL REGION (ZONE II)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2912 2081 BELLO MONTE II 02-751
- ---------------------------------------------------
2912 2129 BELLO MONTE 02-753,4
- ---------------------------------------------------
2913 2107 CHUAO 02-959
- ---------------------------------------------------
2914 2100 MERCEDES II 02-992
- ---------------------------------------------------
2914 2122 MERCEDES III 02-991,3
- ---------------------------------------------------
2924 2119 FCO. SALIAS III 02-979
- ---------------------------------------------------
2924 2116 FCO. SALIAS 02-975,6,7,8
- ---------------------------------------------------
2924A 2115 VALLE ARRIBA 02-9756136
- ---------------------------------------------------
2924P 2117 ALTO PRADO 02-979,6
- ---------------------------------------------------
2933 2101 TRINIDAD I 02-945 ZONE II MIRANDA
- ---------------------------------------------------
2933 2102 TRINIDAD II 02-941
- ---------------------------------------------------
2933 2104 TRINIDAD III 02-943
- ---------------------------------------------------
2933 2131 TRINIDAD IV 02-944,45
- ---------------------------------------------------
2934 2110 LOS GUAYABITOS 02-962
- ---------------------------------------------------
2935 2111 EL HATILLO 02-961,3
- ---------------------------------------------------
2935L 2113 LOMAS D/L LAGUNITA 02-963819
- ---------------------------------------------------
2935P 2114 POTRO REDONDO 02-963883
- -----------------------------------------------------------------------------------
2936H 2103 HOYO DE LA PUERTA 02-942 ZONE II FEDERAL DISTRICT
- -----------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CAPITAL REGION (ZONE III)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2814 2094 LA PASTORA 02-860,1,2,3
- -----------------------------------------------------------------
2814 2090 LA PASTORA 02-864
- -----------------------------------------------------------------
2816A 2097 ALTA VISTA 02-872,3
- -----------------------------------------------------------------
2822 2096 NUEVA CARACAS 02-870,2,3
- -----------------------------------------------------------------
2822 2095 NUEVA CARACAS 02-871
- -----------------------------------------------------------------
2825 2083 23 DE ENERO I 02-8585
- -----------------------------------------------------------------
2836 3300 EL JUNKO 02-4121
- -----------------------------------------------------------------
2837 3301 LUIS HURTADO 02-422
- -----------------------------------------------------------------
2412 2051 FCO. FAJARDO 02-471,2
- -----------------------------------------------------------------
2413 2053 MADERERO 02-481,2,4
- -----------------------------------------------------------------
2413 2054 MADERERO 02-4830
- -----------------------------------------------------------------
2414 2048 FCO. FAJARDO II 02-442
- -----------------------------------------------------------------
2414 2048 FCO. FAJARDO III 02-443
- -----------------------------------------------------------------
2416 2049 SAN MARTIN III 02-451,452
- -----------------------------------------------------------------
2416 2050 SAN MARTIN I 02-461
- -----------------------------------------------------------------
2416 2050 SAN MARTIN II 02-462
- -----------------------------------------------------------------
2513 2136 CNT-SAN MARTIN (**) 02-500 ZONE III FEDERAL DISTRICT
- -----------------------------------------------------------------
2423 2042 CARICUAO I 02-431
- -----------------------------------------------------------------
2423 2042 CARICUAO II 02-432
- -----------------------------------------------------------------
2423 2043 CARICUAO 02-4330
- -----------------------------------------------------------------
2423K 2044 KENNEDY 02-43343
- -----------------------------------------------------------------
2423M 2045 MACARAO 02-43354
- -----------------------------------------------------------------
2426R 2046 RIO CRISTAL 02-43358
- -----------------------------------------------------------------
2427J 2047 ADJUNTAS 02-433,4
- -----------------------------------------------------------------
2612 2073 CHAGUARAMOS I 02-661
- -----------------------------------------------------------------
2612 2073 CHAGUARAMOS II 02-662
- -----------------------------------------------------------------
2612 2077 CHAGUARAMOS 02-690,693
- -----------------------------------------------------------------
2615 2070 PRADO DE MARIA 02-631,32,33
- -----------------------------------------------------------------
2622 2075 COCHE I 02-681
- -----------------------------------------------------------------
2622 2075 COCHE II 02-682
- -----------------------------------------------------------------
2624 2074 JARDINES 02-671,2
- -----------------------------------------------------------------------------------------------------
3102 3102 MAIQUETIA 02-332
- -----------------------------------------------------------------
3102 3103 MAIQUETIA 02-331
- -----------------------------------------------------------------
3104 3107 MACUTO 02-334
- -----------------------------------------------------------------
3119 3119 CARABALLEDA 02-394,396
- -----------------------------------------------------------------
3118 3118 LOS CARACAS 02-3379
- -----------------------------------------------------------------
3115 3116 NAIGUATA 02-337 VARGAS VARGAS
- -----------------------------------------------------------------
3109 3108 CATIA LA MAR I 02-351
- -----------------------------------------------------------------
3109 3109 CATIA LA MAR II 02-352
- -----------------------------------------------------------------
3107 3112 AEROPUERTO 02-355
- -----------------------------------------------------------------
3306 3306 CARAYACA 02-3361
- -----------------------------------------------------------------
3113 3113 LAS SALINAS 02-3681
- -----------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CENTRAL REGION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4114 4106 CAMORUCO I 041-21
- -----------------------------------------------------------------
4114 4106 CAMORUCO II 041-22
- -----------------------------------------------------------------
4114 4108 CAMORUCO 041-23,4,5
- -----------------------------------------------------------------
4114G 4109 CAMORUCO-GUATAPARO 041-260
- -----------------------------------------------------------------
4116 4119 EL TRIGAL 041-42
- -----------------------------------------------------------------
4116 4120 EL TRIGAL 041-430
- -----------------------------------------------------------------
4118 4124 NAGUANAGUA I 041-66
- -----------------------------------------------------------------
4118 4125 NAGUANAGUA II 041-67,8
- -----------------------------------------------------------------
4128b 4107 EL BOSQUE 041-230
- -----------------------------------------------------------------
4134 4140 LA ENTRADA 041-930
- -----------------------------------------------------------------
4123 4121 LA FUNDACION I 041-47,8,77
- -----------------------------------------------------------------
4125 4136 EL MOLINO 041-979
- -----------------------------------------------------------------
4127 4122 VALENCIA CENTRO 041-57,8,9
- -----------------------------------------------------------------
4127B 4123 SAN BLAS 041-590
- -----------------------------------------------------------------
4129 4110 VALENCIA SUR 041-31
- -----------------------------------------------------------------
4129 4113 VALENCIA SUR 041-35,83
- -----------------------------------------------------------------
4143 4900 CAMPO CARABOBO 049-290 CARABOBO CARABOBO
- -----------------------------------------------------------------
4147 4133 TOCUYITO I 041-95
- -----------------------------------------------------------------
4147 4134 TOCUYITO II 041-96
- -----------------------------------------------------------------
4147 4142 TOCUYITO III 041-940
- -----------------------------------------------------------------
4113C 4127 CASTILLITO 041-7145
- -----------------------------------------------------------------
4115 4112 ISABELICA I 041-33
- -----------------------------------------------------------------
4115 4112 ISABELICA II 041-34
- -----------------------------------------------------------------
4115 4111 ISABELICA III 041-32,3,84
- -----------------------------------------------------------------
4117A 4117 LAS AGUITAS 041-380
- -----------------------------------------------------------------
4117B 4117 LAS AGUITAS 041-84
- -----------------------------------------------------------------
4117P 4118 PIEDRAS NEGRAS 041-381
- -----------------------------------------------------------------
4137D 4130 ESMERAL.-MONTESERINO 041-810,2
- -----------------------------------------------------------------
4138 4126 LA ESMERALDA 041-710,20
- -----------------------------------------------------------------
4145 4128 FLOR AMARILLO 041-780,5
- -----------------------------------------------------------------
4146 4501 CENTRAL TACARIGUA 045-3510
- -----------------------------------------------------------------
4152 4502 BELEN 045-390
- -----------------------------------------------------------------
4154 4504 GUIGUE I 045-42
- -----------------------------------------------------------------
4154 4503 GUIGUE II 045-411
- -----------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CENTRAL REGION
- ----------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- ----------------------------------------------------------------------------
4162 4507 GUACARA 045-64
- --------------------------------------------
4163 4512 CIUDAD ALIANZA 045-71
- --------------------------------------------
4164P 4515 PARAPARAL 045-812,13
- --------------------------------------------
4166 4505 SAN JOAQUIN I 045-51
- --------------------------------------------
4166 4506 SAN JOAQUIN II 045-521
- --------------------------------------------
4167N 4514 NEGRO PRIMERO 045-810
- --------------------------------------------
4168P 4509 LA PRADERA 045-620
- --------------------------------------------
4178 4513 VIGIRIMITA 045-910
- --------------------------------------------
4198 4321 MARIARA 043-630
- --------------------------------------------
4172 4909 BEJUMA I 049-91
- --------------------------------------------
4172 4910 BEJUMA II 049-92 CARABOBO CARABOBO
- --------------------------------------------
4172 4911 BEJUMA 049-930
- --------------------------------------------
4173 4902 CANOABO 049-710
- --------------------------------------------
4174 4903 CHIRGUA 049-750
- --------------------------------------------
4175 4905 MIRANDA 049-81
- --------------------------------------------
4176 4907 MONTALBAN 049-85
- --------------------------------------------
4212 4203 PUERTO CABELLO 042-61,2
- --------------------------------------------
4213 4206 CUMBOTO 042-644
- --------------------------------------------
4205 LA SORPRESA 042-642,65
- --------------------------------------------
4213P 4211 EL PALITO 042-77
- --------------------------------------------
4244 4208 MORON I 042-720
- ----------------------------------------------------------------------------
4812 5800 SAN CARLOS III 058-330
- --------------------------------------------
4843 5801 LAS VEGAS 058-5100
- --------------------------------------------
4852 5810 EL PAO 058-760 COJEDES COJEDES
- --------------------------------------------
4854 5808 TINACO 058-71
- --------------------------------------------
4855 5804 TINAQUILLO 058-660,6
- --------------------------------------------
4872 5812 EL BAUL 058-81
- ----------------------------------------------------------------------------
7
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CENTER PLAIN REGION
- -------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- -------------------------------------------------------------------------------
4313 4330 EL LIMON 043-83
- -----------------------------------------------
4314 4306 LA BARRACA 043-32
- -----------------------------------------------
4314 4307 LA BARRACA 043-33
- -----------------------------------------------
4315 4311 LAS DELICIAS 043-41
- -----------------------------------------------
4315 4312 LAS DELICIAS 043-420
- -----------------------------------------------
4316 4317 LA ROMANA 043-54
- -----------------------------------------------
4316 4315 LA ROMANA 043-51,3
- -----------------------------------------------
4317 4308 LAS ACACIAS 043-34
- -----------------------------------------------
4317 4309 LAS ACACIAS 043-35,8
- -----------------------------------------------
4318 4314 MARACAY CENTRO 043-46,7
- -----------------------------------------------
4318 4313 MARACAY CENTRO II 043-45
- -----------------------------------------------
4325R 4316 LAS INDUSTRIAS 043-51,3
- -----------------------------------------------
4327S 4310 LOS SAMANES I 043-3525
- -----------------------------------------------
4327 4327 LOS SAMANES II 043-720
- -----------------------------------------------
4328 4336 SAMAN DE GUERE 043-690 ARAGUA ARAGUA
- -----------------------------------------------
4332 4331 CHORONI 043-9110
- -----------------------------------------------
4333 4332 OCUMARE DE LA COSTA 043-931
- -----------------------------------------------
4334M 4326 LA MORITA 043-710
- -----------------------------------------------
4342 4322 PALO NEGRO 043-670
- -----------------------------------------------
4446 4412 TURMERO 044-63,1
- -----------------------------------------------
4462 4408 MAGDALENO 044-4610
- -----------------------------------------------
4464 4414 VILLA DE CURA 044-864
- -----------------------------------------------
4465 4418 LOS TANQUES 044-89
- -----------------------------------------------
4512 4606 SAN CASIMIRO I 048-571
- -----------------------------------------------
4512 4621 SAN CASIMIRO II 046-560
- -----------------------------------------------
4513 4603 SAN SEBASTIAN I 046-51
- -----------------------------------------------
4513 4604 SAN SEBASTIAN II 046-520
- -----------------------------------------------
4514 4612 BARBACOAS 046-670
- -----------------------------------------------
4515 4607 CAMATAGUA I 046-590
- -----------------------------------------------
4515 4620 CAMATAGUA II 046-591
- -------------------------------------------------------------------------------
8
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CENTER PLAIN REGION
- --------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- --------------------------------------------------------------------------------
4413 4401 LA VICTORIA I 044-21
- ------------------------------------------------
4413 4402 LA VICTORIA II 044-220
- ------------------------------------------------
4401 3305 COLONIA TOVAR 044-551
- ------------------------------------------------
4422 4403 EL CONSEJO I 044-31
- ------------------------------------------------
4422 4404 EL CONSEJO II 044-320
- ------------------------------------------------
4413E 4422 TEJERIAS 044-341
- ------------------------------------------------
4424 4426 ZUATA 044-361 ARAGUA ARAGUA
- ------------------------------------------------
4442 4413 CAGUA 044-7
- ------------------------------------------------
044-93_,__
- ------------------------------------------------
4445 4409 SAN MATEO I 044-51
- ------------------------------------------------
4445 4410 SAN MATEO II 044-521
- ------------------------------------------------
4447 4318 SANTA CRUZ DE ARAGUA 043-616
- ------------------------------------------------
4448 4419 BELLA VISTA 044-952
- --------------------------------------------------------------------------------
4612 4602 SAN JUAN DE LOS MORROS 046-31,32
- ------------------------------------------------
4622 4613 ORTIZ 046-690
- ------------------------------------------------
4635 3814 ALTAGRACIA DE ORITUCO 038-340
- ------------------------------------------------
4636 3804 SAN JOSE DE GUARIBE 038-410
- ------------------------------------------------
4754 3800 LEZAMA 038-2110
- ------------------------------------------------
4653 4615 CALABOZO 046-71,2
- ------------------------------------------------
4664 4609 EL SOMBRERO 046-63
- ------------------------------------------------
4672 4707 CAMAGUAN 047-710
- ------------------------------------------------
4712 3504 VALLE DE LA PASCUA I 035-41,2
- ------------------------------------------------
4723 3509 CHAGUARAMAS 035-750 GUARICO GUARICO
- ------------------------------------------------
4725 3510 LAS MERCEDES 035-790
- ------------------------------------------------
4726 3505 CABRUTA 035-610
- ------------------------------------------------
4732 3807 EL SOCORRO 038-580
- ------------------------------------------------
4734 3812 SANTA MARIA DE IPIRE 038-81
- ------------------------------------------------
4735 3805 TUCUPIDO 038-520
- ------------------------------------------------
4736 3809 ZARAZA I 038-61
- ------------------------------------------------
4736 3817 ZARAZA 038-62
- ------------------------------------------------
4736 3810 ZARAZA II 038-621
- ------------------------------------------------
4736 3811 ZARAZA III 038-622
- ------------------------------------------------
4738 3816 SAN RAFAEL DE LAYA 038-450
- --------------------------------------------------------------------------------
9
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CENTER PLAIN REGION
- -------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- -------------------------------------------------------------------------------
4912 4701 SAN FDO. DE APURE 047-2
- -----------------------------------------------
4912 4703 SAN FDO. DE APURE 047-41
- -----------------------------------------------
4923 4706 BIRUACA I 047-65
- -----------------------------------------------
4923 4705 BIRUACA II 047-640
- -----------------------------------------------
4926 4718 SAN JUAN DE PAYARA 047-590
- -----------------------------------------------
4932 4709 ACHAGUAS I 047-81 APURE APURE
- -----------------------------------------------
4932 4710 ACHAGUAS II 047-820
- -----------------------------------------------
047-9610
- -----------------------------------------------
4953 4714 MANTECAL 047-940
- -----------------------------------------------
4964 4702 EL RECREO 047-310
- -----------------------------------------------
4992 4712 ELORZA 047-91
- -------------------------------------------------------------------------------
4925 4806 PUERTO PAEZ 048-910 AMAZONAS APURE
- -------------------------------------------------------------------------------
9312 4800 PUERTO AYACUCHO 048-210
- ----------------------------------------------- AMAZONAS AMAZONAS
9315 4804 SAN FDO. DE ATABAPO 048-411
- -------------------------------------------------------------------------------
10
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CENTER WEST REGION
- --------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- -------------------------------------------------------------------------------
5112 5106 BARQUISIMETO II 051-31
- -----------------------------------------------
5112 5107 BARQUISIMETO 051-32,3
- -----------------------------------------------
5113 5115 MORAN 051-50,1
- -----------------------------------------------
5113 5116 MORAN 051-520,5
- -----------------------------------------------
5114 5114 AYACUCHO 051-40,5,6,7
- -----------------------------------------------
5115 5112 OBELISCO 051-42
- -----------------------------------------------
5115 5110 OBELISCO 051-41,3
- -----------------------------------------------
5116 5117 SANTA ELENA 051-53
- -----------------------------------------------
5116 5118 SANTA ELENA 051-540,55
- -----------------------------------------------
5125I 5126 LAS INDUSTRIAS 051-690
- -----------------------------------------------
5126 5109 UNION 051-370
- -----------------------------------------------
5127 5124 SANTA ISABEL 051-660
- -----------------------------------------------
5128 5129 PATA E PALO 051-73
- -----------------------------------------------
5131C 5111 LA CARUCIENA 051-417,34
- -----------------------------------------------
5132 5302 BOBARE 053-250
- -----------------------------------------------
5133 5300 DUACA I 053-21
- -----------------------------------------------
5133 5301 DUACA II 053-220
- -----------------------------------------------
5135 5144 RIO CLARO 051-980
- -----------------------------------------------
5139C 5125 LOS CREPUSCULOS 051-670 LARA LARA
- -----------------------------------------------
5142 5119 CABUDARE II 051-61,2
- -----------------------------------------------
5142C 5122 CABUDARE I 051-63
- -----------------------------------------------
5142M 5121 LA MORA 051-622,35
- -----------------------------------------------
5142P 5120 LA PIEDAD 051-621
- -----------------------------------------------
5146 5142 SARARE 051-921
- -----------------------------------------------
5152 5305 AGUADA GRANDE 053-340
- -----------------------------------------------
5155 5306 SANTA INES 053-3610
- -----------------------------------------------
5157 5304 SIQUISIQUE 053-31
- -----------------------------------------------
5162 5316 EL TOCUYO 053-63
- -----------------------------------------------
5165 5319 GUARICO 053-720
- -----------------------------------------------
5166 5321 HUMOCARO ALTO 053-7410
- -----------------------------------------------
5167 5322 HUMOCARO BAJO 053-780
- -----------------------------------------------
5173 5312 CUBIRO 053-480
- -----------------------------------------------
5174 5308 QUIBOR 053-41
- -----------------------------------------------
5176 5313 SANARE 053-490
- -----------------------------------------------
5213 5214 CARORA II 052-215,22
- -----------------------------------------------
5213C 5200 CARORA I 052-210
- -----------------------------------------------
5223 5204 ATARIGUA 052-7510
- -------------------------------------------------------------------------------
11
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
CENTER WEST REGION
- --------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- --------------------------------------------------------------------------------
5512 5505 ACARIGUA 055-4
- -------------------------------------------------
5512 5503 ACARIGUA 055-21,2,3
- -------------------------------------------------
5513 5506 ARAURE I 055-51
- -------------------------------------------------
5513 5508 ARAURE II 055-52
- -------------------------------------------------
5516B 5504 BARAURE 055-216,22
- -------------------------------------------------
5522 5512 AGUA BLANCA 055-921
- -------------------------------------------------
5523 5605 LA APARICION 056-621
- -------------------------------------------------
5524 5515 PAYARA 055-990
- -------------------------------------------------
5525 5513 PIMPINELA 055-980
- -------------------------------------------------
5526 5511 RIO ACARIGUA 055-9100
- -------------------------------------------------
5527 5510 SAN RAFAEL DE ONOTO 055-890 PORTUGUESA PORTUGUESA
- -------------------------------------------------
5529 5607 OPSINO 056-82
- -------------------------------------------------
5553 5609 SANTA ROSALIA 056-840
- -------------------------------------------------
5562 5606 LA MISION 056-6810
- -------------------------------------------------
5563 5603 PIRITU 056-61
- -------------------------------------------------
5565 5600 VILLA BRUZUAL - TUREN 056-21
- -------------------------------------------------
5712 5701 GUANARE 057-51,3
- -------------------------------------------------
5712F 5702 FRANCISCO DE MIRANDA 057-51,3
- -------------------------------------------------
5712S 5703 SAN FRANCISCO 057-519
- -------------------------------------------------
5718 5706 MESA CAVACA 057-680
- -------------------------------------------------
5722 5704 BOCONOITO 057-631
- --------------------------------------------------------------------------------
5725 5710 CAMPO ELIAS 057-850 PORTUGUESA TRUJILLO
- --------------------------------------------------------------------------------
5732 5707 GUANARITO 051-711
- -------------------------------------------------
5734 5705 PAPELON 057-670
- -------------------------------------------------
5742 5708 BISCUCUY 057-81
- ------------------------------------------------- PORTUGUESA PORTUGUESA
5742 5709 BISCUCUY II 057-82
- -------------------------------------------------
5745 5712 CHABASQUEN 057-890
- --------------------------------------------------------------------------------
5412 5402 SAN FELIPE 054-4
- -------------------------------------------------
5413 5400 SAN FELIPE 054-31,2
- -------------------------------------------------
5413C 5401 COCOROTE 054-321
- -------------------------------------------------
5424 5408 GUAMA 054-610
- -------------------------------------------------
5433 5303 AROA 053-271
- -------------------------------------------------
5434 5406 FARRIAR 054-6210
- -------------------------------------------------
5435 5403 MARIN 054-51
- -------------------------------------------------
5437 5417 YUMARE 054-7810
- -------------------------------------------------
5460 5412 BORAURE 054-670
- -------------------------------------------------
5425 5411 SAN PABLO 054-650 YARACUY YARACUY
- -------------------------------------------------
5426 5141 CAMPO ELIAS 051-890
- -------------------------------------------------
5442 5413 NIRGUA 054-71
- -------------------------------------------------
5442 5414 NIRGUA 054-720
- -------------------------------------------------
5442 5415 NIRGUA II 054-721
- -------------------------------------------------
5443 5416 SALOM 054-7510
- -------------------------------------------------
5453 5134 CHIVACOA 051-830
- -------------------------------------------------
5454 5140 SABANA DE PARRA 051-881
- -------------------------------------------------
5455 5138 URACHICHE 051-860
- -------------------------------------------------
5458 5133 YARITAGUA 051-820
- --------------------------------------------------------------------------------
12
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
NORTHWEST REGION
- --------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- --------------------------------------------------------------------------------
6116 6131 FRONTERAS 061-49,57
- ------------------------------------------------
6117 6124 LAS DELICIAS I - II 061-51,2
- ------------------------------------------------
6117 6132 LAS DELICIAS 061-590,83
- ------------------------------------------------
6118 6120 COQUIVACOA I - II 061-41,2
- ------------------------------------------------
6118 6121 COQUIVACOA 061-430
- ------------------------------------------------
6126L 6122 LAGOMAR 061-480
- ------------------------------------------------
6123H 6111 LOS HATICOS 061-23,29
- ------------------------------------------------
6172 6135 LA LAGO (FG.) 061-64,65
- ------------------------------------------------
6173R 6118 EL TREBOL 061-360
- ------------------------------------------------
6174C 6137 CAMPO ALEGRE 061-86,87
- ------------------------------------------------
6175 6114 SAN FELIPE 061-31,32
- ------------------------------------------------
6175F 6114 SAN FELIPE 061-310
- ------------------------------------------------
6214 6109 URDANETA I 061-22
- ------------------------------------------------
6214 6108 URDANETA II 061-21
- ------------------------------------------------
6214 6110 URDANETA 061-238
- ------------------------------------------------
6216 6133 SAN FRANCISCO 061-61
- ------------------------------------------------
6216 6134 SAN FRANCISCO 061-61,62
- ------------------------------------------------
6219 6116 LAS INDUSTRIAS 061-34
- ------------------------------------------------
6219 6117 LAS INDUSTRIAS 061-35,36
- ------------------------------------------------
6252 6206 CHIQUINCURA 062-480
- ------------------------------------------------
6253 6209 EL CARMELO 062-530
- ------------------------------------------------
6254 6202 LA CANADA I 062-41
- ------------------------------------------------
6254 6203 LA CANADA II 062-42
- ------------------------------------------------
6255 6208 POTRERITOS 062-511 ZULIA ZULIA
- ------------------------------------------------
6256 6204 LOS CORTUOS 062-470
- ------------------------------------------------
6113 6144 BELLA VISTA 061-97,8
- ------------------------------------------------
6125 6142 BELLA VISTA III 061-91
- ------------------------------------------------
6125 6143 BELLA VISTA 061-92,3
- ------------------------------------------------
6142 6212 SAN RAFAEL DEL MOJAN I 062-71
- ------------------------------------------------
6142 6213 SAN RAFAEL DEL MOJAN II 062-721
- ------------------------------------------------
6212 6214 ISLA DE TOAS 062-760
- ------------------------------------------------
6215 6219 SINAMAICA 062-930
- ------------------------------------------------
6225 6218 PARAGUAIPOA 062-910
- ------------------------------------------------
6232 6217 CAMPO MARA 062-830
- ------------------------------------------------
6235 6216 LA SIERRITA 062-810
- ------------------------------------------------
6236 6215 SANTA CRUZ DE MARA 062-791
- ------------------------------------------------
6241 6211 TAMARE-MARA 062-680
- ------------------------------------------------
6242 6221 CARRASQUERO 062-940
- ------------------------------------------------
6119 6125 LOS OLIVOS I 061-53
- ------------------------------------------------
6119 6126 LOS OLIVOS II 061-54
- ------------------------------------------------
6119 6128 LOS OLIVOS 061-554,64
- ------------------------------------------------
6129 6139 SAN MIGUEL 061-66,7,8
- ------------------------------------------------
6133P 6127 PANAMERICANA 061-550
- ------------------------------------------------
6146A 6130 EL AMPARO 061-560
- ------------------------------------------------
6147L 6129 CUATRICENTENARIO 061-55,56
- ------------------------------------------------
6263 6201 CAMPO LA CONCEPCION 062-32
- ------------------------------------------------
6254 6210 LA PAZ 062-610
- --------------------------------------------------------------------------------
13
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
NORTHWEST REGION
- --------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- --------------------------------------------------------------------------------
6412 6403 CABIMAS 064-41
- --------------------------------------------------
6413 6409 LAS CABILLAS 064-714
- --------------------------------------------------
6413C 6408 LAS CABILLAS 064-710
- --------------------------------------------------
6414L 6407 LOS LAURELES 064-61
- --------------------------------------------------
6416D 6405 LAS DELICIAS 064-510
- --------------------------------------------------
6423 6413 PALMAREJO 064-960
- --------------------------------------------------
6425 6415 SANTA RITA (FG) 064-940
- --------------------------------------------------
6426 6417 PUNTA GORDA 064-990
- --------------------------------------------------
6427 6410 EL MENE 064-8110
- --------------------------------------------------
6442 6600 PUERTOS ALTAGRACIA 066-210
- --------------------------------------------------
6448 6604 SABANETA DE PALMA 066-751
- --------------------------------------------------
6512 6500 CIUDAD OJEDA 065-2
- --------------------------------------------------
6512 6502 CIUDAD OJEDA 065-311
- --------------------------------------------------
6512J 6504 CIUDAD OJEDA-TIA JUANA 065-51
- --------------------------------------------------
6515 6704 PUEBLO NUEVO-BARALT I 065-621
- --------------------------------------------------
6515 6703 PUEBLO NUEVO-BARALT II 067-620
- --------------------------------------------------
6522 6509 LAGUNILLAS 065-730
- --------------------------------------------------
6523 6506 CAMPO ROJO 065-721
- --------------------------------------------------
6526 6706 EL VENADO 067-850 ZULIA ZULIA
- --------------------------------------------------
6542 6700 BACHAQUERO 067-21
- --------------------------------------------------
6554 6702 MENE GRANDE 067-61
- --------------------------------------------------
6556 6705 SAN TIMOTEO 067-690
- --------------------------------------------------
6557M 6501 CIUDAD OJEDA - TAMARE 065-310,4
- --------------------------------------------------
6558O 6503 CIUDAD OJEDA - UNION 065-410
- --------------------------------------------------
6313 6306 MACHIQUES 063-730
- --------------------------------------------------
6323 6304 LAS PIEDRAS 063-640
- --------------------------------------------------
6324 6305 SAN JOSE DE PERUA 063-62
- --------------------------------------------------
6332 6300 LA VILLA DEL ROSARIO 063-510
- --------------------------------------------------
6812 7506 SANTA BARBARA 075-55
- --------------------------------------------------
6832 7501 CASIGUA EL CUBO 075-340
- --------------------------------------------------
6833 7500 EL GUAYABO 075-300
- --------------------------------------------------
6834 7505 ENCONTRADOS 075-500
- --------------------------------------------------
6835 7508 SANTA CRUZ DEL ZULIA 075-5810
- --------------------------------------------------
6837 7503 PUEBLO NUEVO-EL CHIVO 075-4310
- --------------------------------------------------
6842 7121 BOBURES 071-710
- --------------------------------------------------
6844 7124 EL BATEY 071-730
- --------------------------------------------------
6845 7126 GIBRALTAR 071-742
- --------------------------------------------------------------------------------
14
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
NORTHWEST REGION
- --------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- --------------------------------------------------------------------------------
5813 6802 CORO CENTRO 068-51
- -------------------------------------------------
5813 6803 CORO CENTRO 068-520,53
- -------------------------------------------------
5817 6813 LA VELA 068-78
- -------------------------------------------------
5817 6814 LA VELA 068-77
- -------------------------------------------------
5826 6811 TOCOPERO 068-741
- -------------------------------------------------
5827 6812 PIRITU 068-750
- -------------------------------------------------
5828 6810 PUERTO CUMAREBO 068-72
- -------------------------------------------------
5828 6809 PUERTO CUMAREBO II 068-711
- -------------------------------------------------
5828 6824 PUERTO CUMAREBO 068-71
- -------------------------------------------------
5843 6815 PEDREGAL 068-811
- -------------------------------------------------
5853 6607 CAPATARIDA 066-8310
- -------------------------------------------------
5855 6605 DABAJURO 066-81
- -------------------------------------------------
5856 6412 MENE MAUROA 064-920
- -------------------------------------------------
5864 6816 CHURUGUARA 068-91
- -------------------------------------------------
5864 6817 CHURUGUARA II 068-920
- -------------------------------------------------
5865 6818 MAPARARI 068-9310
- -------------------------------------------------
5866 6819 STA. CRUZ DE BUCARAL 068-960
- -------------------------------------------------
5872 6806 CABURE 068-6110
- -------------------------------------------------
5874 6808 LA CRUZ DE TARATARA 068-650
- -------------------------------------------------
5878 6807 SAN LUIS 068-630 FALCON FALCON
- -------------------------------------------------
5913 6902 PUNTO FIJO 069-45
- -------------------------------------------------
5913 6905 PUNTO FIJO 069-46,7,8
- -------------------------------------------------
5925C 6904 PUERTA MARAVEN 069-462
- -------------------------------------------------
5925C 6908 PUERTA MARAVEN 069-481
- -------------------------------------------------
5925C 6909 PTA. CARDON-COMUNIDAD 069-483
- -------------------------------------------------
5934J 6903 JUDIBANA 069-480,47
- -------------------------------------------------
5936 6917 LOS TAQUES 069-770
- -------------------------------------------------
5937 6916 ADICORA 069-880
- -------------------------------------------------
5938 6913 PUEBLO NUEVO 069-81
- -------------------------------------------------
5939 6915 SANTA ANA 069-860
- -------------------------------------------------
5833 4220 CAPADARE 042-9610
- -------------------------------------------------
5836 4218 TOCUYO DE LA COSTA 042-9110
- -------------------------------------------------
5942 4213 TUCACAS 042-830
- -------------------------------------------------
5943 4212 BOCA DE AROA 042-820
- -------------------------------------------------
5944 4217 CHICHIRIVICHE 042-85
- -------------------------------------------------
5944 4216 CHICHIRIVICHE 042-86
- -------------------------------------------------
5945 4219 SAN JUAN DE LOS CAYOS 042-950
- -------------------------------------------------
5946 4221 MIRIMIRE 042-970
- -------------------------------------------------
5947 4223 YARACAL 042-9810
- --------------------------------------------------------------------------------
15
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
ANDES REGION
- --------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- --------------------------------------------------------------------------------
7363 7803 EL CANTON 078-250 TACHIRA BARINAS
- --------------------------------------------------------------------------------
7612 7606 SAN CRISTOBAL I-II 076-43,4
- ------------------------------------------------
7612 7604 SAN CRISTOBAL 076-41,2
- ------------------------------------------------
7613 7608 CONCORDIA 076-47,6
- ------------------------------------------------
7614 7611 PIRINEOS 076-55
- ------------------------------------------------
7614 7609 PIRINEOS 076-56,53
- ------------------------------------------------
7615 7610 PARAMILLO I 076-562
- ------------------------------------------------
7615P 7639 PARAMILLO II 076-530
- ------------------------------------------------
7617 7612 PALO GORDO I 076-571
- ------------------------------------------------
7617 7613 PALO GORDO II 076-572
- ------------------------------------------------
7618L 7605 LAS LOMAS 076-411
- ------------------------------------------------
7622 7627 CORDERO 076-96
- ------------------------------------------------
7623 7625 INDEPENDENCIA I 076-83
- ------------------------------------------------
7623 7632 INDEPENDENCIA II 076-880
- ------------------------------------------------
7626 7634 PALMIRA 076-944
- ------------------------------------------------
7627 7633 TARIBA 076-940
- ------------------------------------------------
7628 7624 ZORCA 076-821
- ------------------------------------------------
7642 7715 ABEJALES 077-760
- ------------------------------------------------
7647 7704 EL PINAL I 077-37
- ------------------------------------------------
7647 7732 EL PINAL II 077-340
- ------------------------------------------------
7651 7616 SAN JOSECITO 076-64
- ------------------------------------------------
7714 7626 BOROTA 076-840 TACHIRA TACHIRA
- ------------------------------------------------
7674 7622 SAN ANTONIO 076-710
- ------------------------------------------------
7676 7630 URENA 076-870,4
- ------------------------------------------------
7712 7720 COLON 077-91
- ------------------------------------------------
7716 7701 MICHELENA 077-230
- ------------------------------------------------
7732 7707 LA FRIA 077-41
- ------------------------------------------------
7737 7711 UMUQUENA 077-470
- ------------------------------------------------
7743 7709 COLONCITO I 077-45
- ------------------------------------------------
7743 7710 COLONCITO II 077-460
- ------------------------------------------------
7748 7523 HERNANDEZ 075-871
- ------------------------------------------------
7751 7517 LA TENDIDA 075-770
- ------------------------------------------------
7752 7718 LA GRITA I 077-82
- ------------------------------------------------
7752 7717 LA GRITA II 077-811
- ------------------------------------------------
7755 7713 PREGONERO 077-710
- ------------------------------------------------
7757 7719 SEBORUCO 077-860
- ------------------------------------------------
7762 7725 EL COBRE 077-970
- ------------------------------------------------
7763 7706 QUENIQUEA 077-390
- ------------------------------------------------
7765 7703 SAN JOSE DE BOLIVAR 077-32
- ------------------------------------------------
7663 7615 RUBIO 076-620
- ------------------------------------------------
7664B 7620 BRAMON 076-6900
- ------------------------------------------------
7665 7619 DELICIAS 076-680
- ------------------------------------------------
7666 7618 SANTA ANA 076-67
- --------------------------------------------------------------------------------
4972 7804 GUASDUALITO I 078-31
- ------------------------------------------------
4972 7805 GUASDUALITO II 078-320
- ------------------------------------------------
4973 7806 EL AMPARO 078-350 TACHIRA APURE
- ------------------------------------------------
4974 7714 EL NULA 077-7210
- --------------------------------------------------------------------------------
16
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
ANDES REGION
- --------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- --------------------------------------------------------------------------------
7412 7405 MERIDA CENTRO 074-52
- --------------------------------------------------
7412 7405 MERIDA CENTRO 074-51
- --------------------------------------------------
7414 7423 TIBISAY 074-620
- --------------------------------------------------
7414 7406 TIBISAY 074-63
- --------------------------------------------------
7415 7403 SANTA MARIA 074-44
- --------------------------------------------------
7417 7407 LA PEDREGOZA 074-660
- --------------------------------------------------
7418C 7408 URB. CARABOBO 074-665
- --------------------------------------------------
7422 7409 LA PUNTA 074-716
- --------------------------------------------------
7432 7411 MUCUCHIES 074-820
- --------------------------------------------------
7433 7415 MUCURUBA 074-850
- --------------------------------------------------
7435 7412 TABAY 074-830
- --------------------------------------------------
7442 7416 APARTADEROS 074-8800
- --------------------------------------------------
7444 7319 PUEBLO LLANO 073-830
- --------------------------------------------------
7445 7321 SANTO DOMINGO 073-880
- --------------------------------------------------
7452 7137 CHACHOPO 071-8830
- --------------------------------------------------
7455 7138 TIMOTES 071-890 MERIDA MERIDA
- --------------------------------------------------
7464 7417 EJIDO 074-210
- --------------------------------------------------
7472 7418 LAGUNILLAS 074-961
- --------------------------------------------------
7512 7515 TOVAR 075-730
- --------------------------------------------------
7515 7514 BAILADORES 075-700
- --------------------------------------------------
7517 7519 LA PLAYA 075-7810
- --------------------------------------------------
7518 7518 ZEA 075-760
- --------------------------------------------------
7519 7513 CANAGUA 075-681
- --------------------------------------------------
7532 7509 CHIGUARA 075-610
- --------------------------------------------------
7536 7510 MESA DE BOLIVAR 075-640
- --------------------------------------------------
7537 7511 SANTA CRUZ DE MORA 075-670
- --------------------------------------------------
7542 7521 EL VIGIA 075-81,2
- --------------------------------------------------
7546 7420 LA AZULITA 074-970
- --------------------------------------------------
7547 7422 STA. ELENA DE ARENALES 074-9910
- --------------------------------------------------
7548 7504 TUCANI 075-441
- --------------------------------------------------
7549 7421 MUCUJEPE 074-9810
- --------------------------------------------------
7562 7128 ARAPUEY 071-7810
- --------------------------------------------------------------------------------
7565 7123 NUEVA BOLIVIA I 071-722
- -------------------------------------------------- MERIDA TRUJILLO
7565 7122 NUEVA BOLIVIA II 071-721
- --------------------------------------------------------------------------------
7566 7125 PALMARITO 071-7410
- -------------------------------------------------- MERIDA MERIDA
7569 7127 TORONDOY 071-7510
- --------------------------------------------------------------------------------
17
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
ANDES REGION
- --------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- --------------------------------------------------------------------------------
7112 7110 VALERA 071-51
- -------------------------------------------------
7113 7103 VALERA - CENTRO 071-21,87
- -------------------------------------------------
7114 7104 LIMONCITO 071-31
- -------------------------------------------------
7117 7106 LA BEATRIZ I 071-36
- -------------------------------------------------
7117 7105 LA BEATRIZ II 071-351
- -------------------------------------------------
7125 7134 LA QUEBRADA 071- 10
- -------------------------------------------------
7126 7108 CARVAJAL 071-44
- -------------------------------------------------
7133 7144 ESCUQUE 071-950
- -------------------------------------------------
7134 7141 MOTATAN 071-92
- -------------------------------------------------
7136 7142 MESETA DE CHIMPIRE 071-9310
- -------------------------------------------------
7143 7135 LA MESA DE ESNUJAQUE 071-860
- -------------------------------------------------
7144 7132 LA PUERTA 071-83
- -------------------------------------------------
7145 7129 MENDOZA FRIA 071-810
- -------------------------------------------------
7153 7112 BETIJOQUE I 071-62
- -------------------------------------------------
7153 7113 BETIJOQUE II 071-630
- -------------------------------------------------
7154 7116 EL DIVIDIVE 071-660
- -------------------------------------------------
7156 7115 SABANA DE MENDOZA I 071-64
- -------------------------------------------------
7156 7120 SABANA DE MENDOZA II 071-690 TRUJILLO TRUJILLO
- -------------------------------------------------
7166 7119 LA CEIBA 071-6820
- -------------------------------------------------
7173 7118 EL JAGUITO 071-671
- -------------------------------------------------
7237 7158 ZONA RICA 071-680
- -------------------------------------------------
7214 7200 TRUJILLO 072-31
- -------------------------------------------------
7214 7201 TRUJILLO 072-360
- -------------------------------------------------
7216 7131 SAN LAZARO 071-820
- -------------------------------------------------
7223 7212 MONAY 072-890
- -------------------------------------------------
7224 7208 PAMPAN 072-81
- -------------------------------------------------
7225 7206 PAMPANITO 072-711
- -------------------------------------------------
7227 7211 SANTA ANA 072-850
- -------------------------------------------------
7232 7213 CARACHE 072-910
- -------------------------------------------------
7233 7214 CUICAS 072-940
- -------------------------------------------------
7236 7207 EL PRADO 072-721
- -------------------------------------------------
7243 7215 CHEJENDE 072-951
- -------------------------------------------------
7252 7202 BOCONO 072-520
- -------------------------------------------------
7254 7210 EL BATATAL 072-841
- -------------------------------------------------
7258 7133 SAN JOSE DE TOSTOS 071-841
- --------------------------------------------------------------------------------
18
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
ANDES REGION
- --------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- --------------------------------------------------------------------------------
7313 7301 BARINAS II 073-2
- ------------------------------------------------
7313 7303 BARINAS 073-32,3
- ------------------------------------------------
7314B 7302 ALTO BARINAS I 073-410,12
- ------------------------------------------------
7314B 7302 ALTO BARINAS II 073-330
- ------------------------------------------------
7315B 7304 AGUSTIN CODAZZI 073-336,26,8
- ------------------------------------------------
7316 7308 CUATRICENTENARIA 073-462
- ------------------------------------------------
7316 7308 CUATRICENTENARIA 073-460
- ------------------------------------------------
7323 7316 BARINITAS 073-810
- ------------------------------------------------
7324 7327 CALDERAS 073-860
- ------------------------------------------------
7332 7310 BARRANCAS 073-7110 BARINAS BARINAS
- ------------------------------------------------
7335 7314 SABANETA 073-75
- ------------------------------------------------
7337 7315 VEGUITAS 073-781
- ------------------------------------------------
7362 7322 CIUDAD BOLIVIA 073-910
- ------------------------------------------------
7364 7337 CHAMETA 073-970
- ------------------------------------------------
7365 7800 SANTA BARBARA I 078-21
- ------------------------------------------------
7365 7801 SANTA BARBARA II 078-22
- ------------------------------------------------
7313S 7335 SOCOPO 073-980
- ------------------------------------------------
7367 7808 CAPITANEJO 078-391
- ------------------------------------------------
7368 7324 BUM BUM 073-950
- ------------------------------------------------
7369 7309 LIBERTAD 073-630
- --------------------------------------------------------------------------------
19
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
EASTERN REGION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8113 8115 ANZOATEGUI 081-66
- -----------------------------------------------------------------
8113 8116 PUERTO LA CRUZ 081-65,7,8
- -----------------------------------------------------------------
8116S 8117 EL SAMAN 081-63,7
- -----------------------------------------------------------------
8117P 8118 PARAISO 081-63,5,7
- -----------------------------------------------------------------
8123G 8120 GUANTA 081-682
- -----------------------------------------------------------------
8126M 8119 PTO. LA CRUZ-MUNICIPAL 081-63,5,7,8
- -----------------------------------------------------------------
8127D 8138 LAS DELICIAS 081-690
- -----------------------------------------------------------------
8128 8103 CANTACLARO 081-380
- -----------------------------------------------------------------
8142 8125 BARCELONA 081-77
- -----------------------------------------------------------------
8142 8123 BARCELONA 081-74,5,6
- -----------------------------------------------------------------
8142B 8131 BOYACA 081-710
- -----------------------------------------------------------------
8146 8130 INTERCOMUNAL 081-860,67
- -----------------------------------------------------------------
8147 8128 LECHERIAS 081-810,82
- -----------------------------------------------------------------
8149M 8124 PUEBLO MESONES 081-765,45
- -----------------------------------------------------------------
8152 8111 BOCA DE UCHIRE 081-510
- -----------------------------------------------------------------
8155 8105 PUERTO PIRITU 081-410
- -----------------------------------------------------------------
8162 8108 CLARINES 081-451
- -----------------------------------------------------------------
8163 8113 GUANAPE 081-5410
- -----------------------------------------------------------------
8164 8112 SABANA DE UCHIRE 081-5210
- -----------------------------------------------------------------
8165 8114 VALLE DE GUANAPE 081-590 ANZOATEGUI ANZOATEGUI
- -----------------------------------------------------------------
8175 8110 ONOTO 081-480
- -----------------------------------------------------------------
8212 8202 ANACO 082-2
- -----------------------------------------------------------------
8212 8203 ANACO 082-24,51,2
- -----------------------------------------------------------------
8215 8211 SAN MATEO 082-950
- -----------------------------------------------------------------
8217 9209 URICA 082-380
- -----------------------------------------------------------------
8219 8214 SANTA ROSA 082-930
- -----------------------------------------------------------------
8232 8208 ARAGUA DE BARCELONA 082-81
- -----------------------------------------------------------------
8233 8204 CANTAURA I 082-51
- -----------------------------------------------------------------
8233 8205 CANTAURA II 082-52
- -----------------------------------------------------------------
8233 8206 CANTAURA III 082-531
- -----------------------------------------------------------------
8234 8310 EL CHAPARRO 083-86
- -----------------------------------------------------------------
8236 8207 SANTA ANA 082-78
- -----------------------------------------------------------------
8312 8301 EL TIGRE 083-31,5
- -----------------------------------------------------------------
8314P 8302 PUEBLO NUEVO 083-410
- -----------------------------------------------------------------
8315 8313 EL TIGRITO 083-550,56
- -----------------------------------------------------------------
8316 8307 SAN TOME 083-61
- -----------------------------------------------------------------
8325R 8303 CONJUNTO RESID. RHAME 083-412,15
- -----------------------------------------------------------------
8334 8308 PARIAGUAN I 083-81
- -----------------------------------------------------------------
8334 8309 PARIAGUAN II 083-821
- -----------------------------------------------------------------
</TABLE>
20
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
EASTERN REGION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
9124 8516 CUIDAD PIAR 085-910
- -----------------------------------------------------------------
9212 8603 PUERTO ORDAZ 086-22
- -----------------------------------------------------------------
9212 8604 PUERTO ORDAZ 086-230
- -----------------------------------------------------------------
9213 8615 ALTA VISTA 086-61,2
- -----------------------------------------------------------------
9214 8611 SAN FELIX 086-4
- -----------------------------------------------------------------
9214 8621 SAN FELIX 086-71
- -----------------------------------------------------------------
9215 8606 EL ROBLE 086-31,2
- -----------------------------------------------------------------
9215D 8607 DONA BARBARA 086-3172
- -----------------------------------------------------------------
9215E 8609 EL ROBLE 146 086-319
- -----------------------------------------------------------------
9215F 8608 EL ROBLE 145 086-318
- -----------------------------------------------------------------
9217 8613 UNARE 086-51,2,3 BOLIVAR BOLIVAR
- -----------------------------------------------------------------
9217N 8614 UNARE - 307 086-5272
- -----------------------------------------------------------------
9221 8610 CHIRICA 086-340
- -----------------------------------------------------------------
9222 8605 LOS O 086-291
- -----------------------------------------------------------------
9224 8617 MATANZAS 086-940,44
- -----------------------------------------------------------------
9112 8503 CIUDAD BOLIVAR 085-2
- -----------------------------------------------------------------
9113 8507 VISTA HERMOSA 085-4
- -----------------------------------------------------------------
9114 8509 SABANITA 085-51
- -----------------------------------------------------------------
9115M 8504 LAS MOREAS 085-31
- -----------------------------------------------------------------
9117 8510 EL PERU 085-591
- -----------------------------------------------------------------
9122 8513 LA PARAGUA 085-8110
- -----------------------------------------------------------------
9123 8515 SAN FCO. DE LA PARAGUA 085-8210
- -----------------------------------------------------------------------------------------------------
9132 8511 SOLEDAD 085-710 BOLIVAR ANZOATEGUI
- -----------------------------------------------------------------------------------------------------
9146 3506 CAICARA DEL ORINOCO 035-67
- -----------------------------------------------------------------
9243 8806 EL MANTECO 088-51
- -----------------------------------------------------------------
9244 8811 EL PAI MAR 088-811
- -----------------------------------------------------------------
9245 8805 EL PAO 088-430
- -----------------------------------------------------------------
9246 8804 GURI 088-3110
- -----------------------------------------------------------------
9248 8800 UPATA 088-21 BOLIVAR BOLIVAR
- -----------------------------------------------------------------
9248C 8822 EL CALLAO 088-6
- -----------------------------------------------------------------
9253 8812 EL DORADO 088-911
- -----------------------------------------------------------------
9256 8808 GUASIPATI 088-671
- -----------------------------------------------------------------
9257 8816 SANTA ELENA DE UAIREN 088-951
- -----------------------------------------------------------------
9258 8818 TUMEREMO 088-71
- -----------------------------------------------------------------
</TABLE>
21
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
EASTERN REGION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8613 9103 MATURIN 091-41,2,3,4
- -----------------------------------------------------------------
8615I 9108 LOS GODOS-INDUSTRIAS 091-514,52
- -----------------------------------------------------------------
8616 9107 LOS GODOS 091-51,2
- -----------------------------------------------------------------
8617J 9104 JUANICO 091-41
- -----------------------------------------------------------------
8625B 9105 MATURIN-ARBOLEDA 091-41,3
- -----------------------------------------------------------------
8633 9114 CARIPITO 091-71
- -----------------------------------------------------------------
8633 9115 CARIPITO II 091-72
- -----------------------------------------------------------------
8636 9116 MIRAFLORES 091-860
- -----------------------------------------------------------------
8637 9118 QUIRIQUIRE 091-870
- -----------------------------------------------------------------
8643 9206 CAICARA DE MATURIN 092-3110
- -----------------------------------------------------------------
8644 9200 JUSEPIN 092-210
- -----------------------------------------------------------------
8645 9220 LA TOSCANA 092-270
- -----------------------------------------------------------------
8652 9213 AGUASAY 092-4710
- -----------------------------------------------------------------
8653 9202 FURRIAL 092-230
- -----------------------------------------------------------------
8654 9210 EL TEJERO 092-411 MONAGAS MONAGAS
- -----------------------------------------------------------------
8655 9207 PUNTA DE MATA I 092-360
- -----------------------------------------------------------------
8655 9208 PUNTA DE MATA II 092-371
- -----------------------------------------------------------------
8656 9212 SANTA BARBARA 092-450
- -----------------------------------------------------------------
8660 9222 SAN VICENTE 092-220
- -----------------------------------------------------------------
8662 9215 ARAGUA DE MATURIN 092-541
- -----------------------------------------------------------------
8663 9214 CARIPE 092-510
- -----------------------------------------------------------------
8664 9204 CHAGUARAMAL 092-250
- -----------------------------------------------------------------
8666 9219 SAN ANTONIO-MATURIN 092-5810
- -----------------------------------------------------------------
8668 9216 TERESEN 092-5510
- -----------------------------------------------------------------
8673 8704 TEMBLADOR I 087-91
- -----------------------------------------------------------------
8673 8705 TEMBLADOR II 087-921
- -----------------------------------------------------------------
8675 8702 BARRANCAS 087-711
- -----------------------------------------------------------------
8618 8703 URACOA 087-790
- -----------------------------------------------------------------
8781 8620 CHAGUARAMAS 086-840
- ---------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
EASTERN REGION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8814 9519 SAN RAFAEL 095-61
- ---------------------------------------------------------------------------------------------------
8814 9501 SAN RAFAEL 095-63,4
- -----------------------------------------------------------------
8815 9526 VILLA ROSA I 095-692
- -----------------------------------------------------------------
8815 9527 VILLA ROSA II 095-693
- -----------------------------------------------------------------
8824 9521 JORGE COLL 095-620,72
- -----------------------------------------------------------------
8825 9536 SAN PEDRO DE COCHE 095-9910
- -----------------------------------------------------------------
8832S 9505 LA ASUNCION 095-420,23
- -----------------------------------------------------------------
8838 9507 PUERTO FERMIN 095-48
- -----------------------------------------------------------------
8843 9525 EL YAQUE 095-6910
- -----------------------------------------------------------------
8846 9534 PUNTA DE PIEDRAS 095-980
- -----------------------------------------------------------------
8852 9530 BOCA DE POZO 095-9150 NUEVA ESPARTA NUEVA ESPARTA
- -----------------------------------------------------------------
8853 9531 BOCA DE RIO 095-93
- -----------------------------------------------------------------
8862 9514 ALTAGRACIA 095-560
- -----------------------------------------------------------------
8864 9510 JUAN GRIEGO 095-53
- -----------------------------------------------------------------
8868 9515 SANTA ANA 095-570
- -----------------------------------------------------------------
8873 9533 EL ESPINAL 095-971
- -----------------------------------------------------------------
8874 9532 LA GUARDIA 095-950
- -----------------------------------------------------------------
8877 9518 SAN JUAN BAUTISTA 095-590
- -----------------------------------------------------------------
8884 9528 CONEJERO (FG) 095-740
- -----------------------------------------------------------------
8885P 9509 PLAYA EL AGUA 095-49
- -----------------------------------------------------------------
8886S 9529 EL VALLE 095-870
- ---------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
EASTERN REGION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8412 9303 CUMANA 093-31,2,3,4
- ------------------------------------------------------------
8414G 9304 GRAN MARISCAL 093-31,2
- ------------------------------------------------------------
8415 9305 VILLA OLIMPICA 093-51,2
- ------------------------------------------------------------
8416 9307 CUMANA-AEROPUERTO I 093-671
- ------------------------------------------------------------
8416 9308 CUMANA-AEROPUERTO II 093-672
- ------------------------------------------------------------
8434 9318 SANTA FE DE SUCRE 093-21
- ------------------------------------------------------------
8443 9313 MARIGUITAR 093-91
- ------------------------------------------------------------
8444 9314 SAN ANTONIO DEL GOLFO 093-93
- ------------------------------------------------------------
8452 9309 ARAYA 093-71
- ------------------------------------------------------------
8454 9310 MANICUARE 093-75
- ------------------------------------------------------------
8463 9311 CUMANACOA 093-81
- ------------------------------------------------------------
8513 9402 CARUPANO 094-31,2
- ------------------------------------------------------------
8514G 9404 GUAYACAN 094-31,2
- ------------------------------------------------------------
8515P 9403 PLAYA GRANDE 094-3157
- ------------------------------------------------------------
8516 9407 SAN JOSE DE AREOCUAR 094-430 SUCRE SUCRE
- ------------------------------------------------------------
8522 9414 EL PILAR 094-670
- ------------------------------------------------------------
8525 9415 TUNAPUY 094-690
- ------------------------------------------------------------
8532 9405 CASANAY 094-410
- ------------------------------------------------------------
8537 9428 SAN VICENTE 094-470
- ------------------------------------------------------------
8542 9409 CARIACO 094-51
- ------------------------------------------------------------
8543 9408 GUACA 094-450
- ------------------------------------------------------------
8545 9425 STA. MARIA DE CARIACO 094-540
- ------------------------------------------------------------
8552 9413 EL MORRO DE PTO. SANTO 094-640
- ------------------------------------------------------------
8554 9411 RIO CARIBE 094-61
- ------------------------------------------------------------
8564 9420 IRAPA 094-97
- ------------------------------------------------------------
8568 9416 YAGUARAPARO 094-710
- ------------------------------------------------------------
8569 9426 EL POBLADO 094-530
- ------------------------------------------------------------
8572 9417 GUIRIA I 094-81
- ------------------------------------------------------------
8572 9418 GUIRIA II 094-820
- ------------------------------------------------------------
8576 9419 YOCO 094-930
- -------------------------------------------------------------------------------------------------
9412 8700 TUCUPITA 087-210 DELTA AMACURO DELTA AMACURO
- -------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF
TELEPHONE PLANTS
(OF THE CANTV OPERATING DIVISIONS)
Amazonas, Portuguesa, Tachira, Merida y Bolivar
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
UBIC.
CONT. CCCC PLANT SERIAL OPERATING DIV. FEDERAL ENTITY
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4925 4806 PUERTO PAEZ 048-910 AMAZONAS APURE
- ----------------------------------------------------------------------------------------------
9312 4800 PUERTO AYACUCHO 048-210 AMAZONAS AMAZONAS
- -----------------------------------------------------
9315 4804 SAN FDO. DE ATABAPO 048-411
- ---------------------------------------------------------------------------------------------
5725 5710 CAMPO ELIAS 057-850 PORTUGUESA TRUJILLO
- ---------------------------------------------------------------------------------------------
7363 7803 EL CANTON 078-250 TACHIRA BARINAS
- ---------------------------------------------------------------------------------------------
4972 7804 GUASDUALITO I 078-31
- -----------------------------------------------------
4972 7805 GUASDUALITO II 078-320 TACHIRA APURE
- -----------------------------------------------------
4973 7806 EL AMPARO 078-350
- -----------------------------------------------------
4974 7714 EL NULA 077-7210
- ---------------------------------------------------------------------------------------------
7565 7123 NUEVA BOLIVIA I 071-722 MERIDA TRUJILLO
- -----------------------------------------------------
7565 7122 NUEVA BOLIVIA II 071-721
- ---------------------------------------------------------------------------------------------
9132 8511 SOLEDAD 085-710 BOLIVAR ANZOATEGUI
- ---------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
REPUBLIC OF VENEZUELA. Dr. ASTRID CAROLINA GOMEZ DE RODRIGUEZ, NOTARY PUBLIC
(1) TWENTY-FIFTH OF THE MUNICIPALITY LIBERTADOR OF THE FEDERAL DISTRICT.
Caracas, February 21, 2000. 189 (degrees) and 140 (degrees). This is the Annex
and/or plan referred to in the document drafted by Dr. EUNISIS MORENO DE
PASCHER, Esq., enrolled in the national register for attorneys under No. 8292,
submitted for Authentication and Devolution as per form No. 400/9 dated:
2/18/2000. Signed on this date by the authorized representatives: ALBERTO
EMERICH ESQUEDA TORRES AND GUSTAVO ROOSEN, inserting it under No. 25, Book 23,
of the Books of Authentication carried by this Notary.
[signatures and stamps follow]
NOTARY PUBLIC
By: /s/ DR. ASTRID CAROLINA DE RODRIGUEZ
- ----------------------------------------
Dr. Astrid Carolina de Rodriguez
SIGNATORIES
By: /s/ ALBERTO EMERICH ESQUEDA TORRES
--------------------------------------
Alberto Emerich Esqueda Torres
(Minister of Infrastructure)
By: /s/ GUSTAVO ROOSEN
----------------------
Gustavo Roosen
(CANTV President)
26
<PAGE>
ANNEX D
"RATES"
I. Private Service Telephone
<TABLE>
<CAPTION>
Until June 15 After June 16
------------- -------------
<S> <C> <C>
1. CONNECTION TO THE NETWORK:
a) Right of subscription:
1. Residential Bs. 44,442.36 Bs. 47,031.15
2. Non-Residential Bs. 87,450.21 Bs. 92,544.22
3. PBX Bs. 198,779.20 Bs. 210,358.17
4. CPA (with or without incoming
direct dialing) Bs. 238,079.38 Bs. 251,947.60
b) Installation of telephone: Until June 15 After June 16
------------- -------------
1. Main residential Bs. 43,746.46 Bs. 46,294.73
2. Additional residential Bs. 12,861.37 Bs. 13,610.55
3. Main non-residential Bs. 47,373.32 Bs. 50,132.84
4. Additional non-residential Bs. 15,855.63 Bs. 16,779.22
5. PBX Bs. 50,133.37 Bs. 53,053.66
6. CPA Bs. 50,133.37 Bs. 53,053.66
c) Equipment Terminal Bs. 23,540.30 Bs. 24,911.53
d) Refund to the client for inadvertent cut-off:
1. Residential Bs. 15,801.91 Bs. 16,722.38
2. Non-residential Bs. 18,042.58 Bs. 19,093.57
</TABLE>
<PAGE>
2. BASIC CHARGES:
a) Obligatory Plans for Basic residential telephone service:
<TABLE>
<CAPTION>
Free Minutes Basic Charge Basic Charge
------------
To June 15 After June 16
---------- -------------
<S> <C> <C> <C>
Plan A 40 Bs. 4,752.30 Bs. 5,028.88
Plan B 65 Bs. 7,291.20 Bs. 7,715.55
Plan C 90 Bs. 8,200.65 Bs. 8,677.92
Plan F 2500 Bs. 40,212.60 Bs. 42,555.00
</TABLE>
Maximum charges for the prepayment Plan:
To June 15 After June 16
---------- -------------
Per minute charge Bs. 60.32 Bs. 63.83
Minimum Consumption in 60 days: Bs. 10,000.00
OPTIONAL COMPLEMENTARY PLANS:
Free Minutes Basic charge
------------
(Initial)
-------------
Plan D 360 Bs. 13,404.20
Plan E 600 Bs. 18,095.67
Maximum amounts of basic charges for the Optional Complementary Plans:
January to June 15 After June 16
------------------ -------------
Basic charge Bs. 53,616.80 Bs. 56,740.00
Maximum Charge per move: (applicable only after the third move in the
same year) Bs. 4,000.00
2
<PAGE>
b) Non-Residential Clients
<TABLE>
<CAPTION>
To June 15 After June 16
---------- -------------
<S> <C> <C>
Main telephone Bs. 14,074.41 Bs. 14,894.25
Addl. telephone Bs. 1,741.74 Bs. 1,843.20
c) PBX (Monthly
charge/local line w/o
pulse limit)* Bs. 23,709.97 Bs. 25,091.09
d) CPA (with or w/o
incoming DD - mo.
charge/local line) Bs. 40,262.76 Bs. 42,608.08
e) CPA for assigned
extension Bs. 240.88 Bs. 254.91
</TABLE>
*Private PBX centers for a single line are considered non-residential
telephone lines
3. LOCAL USE
a) Residential Clients
Charge/minute (Bolivares/ minute or fraction of minute)
-------------------------------------------------------
<TABLE>
<CAPTION>
Obligatory Plans Until June 15 After June 16
------------- -------------
<S> <C> <C>
Plan A Bs. 29.56 Bs. 31.28
Plan B Bs. 20.91 Bs. 22.13
Plan C Bs. 19.10 Bs. 20.21
Plan F (addl./minute
charge):
From 1 to 500 minutes Bs. 6.70 Bs. 7.09
From 501 to 1000 min Bs. 6.03 Bs. 6.38
From 1001 to 1500 min Bs. 5.70 Bs. 6.03
From 1501 to 2000 min Bs. 5.36 Bs. 5.67
From 2001 min. and after Bs. 5.03 Bs. 5.32
Complementary Plans
Plan D Bs. 18.77 ---
Plan E Bs. 17.09 ---
</TABLE>
3
<PAGE>
b) Non-Residential Clients
Charge/Minute (Bolivares / minute or fraction of minute)
--------------------------------------------------------
Until June 15 After June 16
------------- -------------
Bs. 25.07 Bs. 26.53
4. "TELEAMIGO" SERVICE
<TABLE>
<CAPTION>
Until June 15 After June 16
------------- -------------
<S> <C> <C>
a) Complete Package Bs. 5,084.08 Bs. 5,380.23
b) Call waiting Bs. 2,554.76 Bs. 2,703.58
c) Conference calls Bs. 2,554.76 Bs. 2,703.58
d) Rapid dialing Bs. 2,554.76 Bs. 2,703.58
e) Call blocking Bs. 2,933.78 Bs. 3,104.68
f) Installation Charge Bs. 2,900.93 Bs. 3,069.91
g) Access code Change Bs. 2,170.99 Bs. 2,297.46
</TABLE>
5. Domestic Long Distance Service (DDN)
Regular rate Bs./minute: Bs. 128.63
Reduced rate Bs./minute: Bs. 109.34
The normal rate shall be applied on week days between the hours of 6:00 a.m.
and 7:00 p.m.
The reduced rate shall be applied on week days from 7:01 p.m. to 5:59 a.m., and
on holidays and weekends for a 24 hour day.
Domestic Long Distance calls shall be billed for each second of duration.
Single Charge for Operator Service on Domestic Long Distance Calls
Until June 15 After June 16
------------- -------------
Bs. 829.94 Bs. 878.29
4
<PAGE>
6. Other Miscellaneous Services (unless otherwise indicated, the charges
specified shall apply each time the service is provided):
<TABLE>
<CAPTION>
Until June 15 After June 16
------------- -------------
<S> <C> <C>
a) Reconnect Main telephone:
1. Residential Bs. 8,594.59 Bs. 9,095.23
2. Non-Residential Bs. 10,026.67 Bs. 10,610.73
b) Internal move Bs. 10,367.24 Bs. 10,971.14
c) External move:
1. To same zone or sector Bs. 45,105.22 Bs. 47,732.62
2. To different zone or sector Bs. 66,849.05 Bs. 70,743.03
d) Maintenance
1. Replacement of Terminal Equipment Bs. 23,540.30 Bs. 24,911.53
e) Directory Service
1. Change of number Bs. 7,524.05 Bs. 7,962.33
2. Private number service (monthly charge) Bs. 896.50 Bs. 948.72
3. Change from private to Directory Bs. 3,207.35 Bs. 3,394.18
4. Correction in directory Bs. 0.00 Bs. 0.00
5. Repetition in directory Bs. 666.00 Bs. 704.79
f) Change of company Bs. 6,966.39 Bs. 7,372.19
g) Linking numbers Bs. 96.36 Bs. 101.98
h) Unlinking numbers (per line) Bs. 1,161.08 Bs. 1,228.71
</TABLE>
II. Public Telephone Service
A) Domestic Use
1. Charge per local minute of use:
<TABLE>
<CAPTION>
Until June 15 After June 16
------------- -------------
<S> <C> <C>
a) Public telephones:
TPM, TPT and Teletasa Bs. 20.91 Bs. 22.13
b) Special public telephone Bs. 42.22 Bs. 44.68
</TABLE>
5
<PAGE>
2. Charge for Domestic Long Distance (DDN) public telephone signal:
Normal rate: Bs. 21.44
Reduced rate: Bs. 18.22
3. Frequency of the signal - Domestic Long Distance (DDN): One (1) pulse
every 10 seconds
B) International Long Distance Service (LDI): The same rates shall apply
per minutes of use indicated by country in the International Direct Dialing
telephone service (DDI).
C) Credit Card Service
<TABLE>
<CAPTION>
Initial Charge Until June 15 After June 16
-------------- ------------- -------------
<S> <C> <C>
Local Use Bs. 155.81 Bs. 164.88
LDN Use Bs. 398.26 Bs. 421.45
LDI Use Bs. 821.41 Bs. 869.25
</TABLE>
III. Leased public telephone:
<TABLE>
<CAPTION>
Until June 15 After June 16
------------- -------------
<S> <C> <C>
Local Use Bs. 42.22 Bs. 44.68
Maintenance Fee Bs. 14,074.41 Bs. 14,894.25
Minutes Free 60 60
</TABLE>
The same rates for use for Domestic Long Distance and International Long
Distance shall be applied to leased public telephones.
6
<PAGE>
IV. Domestic Telex Service
A. Connection to the Network:
<TABLE>
<CAPTION>
Until June 15 After June 16
------------- -------------
<S> <C> <C>
1. Refundable Security Deposit
- Regular Subscriber Bs. 200,369.56 Bs.212,041.17
- Subscriber PBX
(per main line) Bs. 255,128.82 Bs.269,990.17
- Regular subscriber or
regular remote Bs. 200,369.56 Bs.212,041.17
2. Installation of main line:
- Subscriber regular or remote Bs. 22,774.31 Bs. 24,100.92
- regular subscriber PBX
(per main line) Bs. 30,490.87 Bs. 32,266.98
3. Reconnection (does not apply
in cases of suspension due to
fault of subscriber) Bs. 0.00 Bs. 0.00
B. Access to the Network: Until June 15 After June 16
------------- -------------
Basic Monthly Rental:
- Regular Subscriber Bs. 5,094.87 Bs. 5,391.65
- Subscriber PBX (for main line) Bs. 6,968.64 Bs. 7,374.56
- Subscriber regular remote Bs. 4,977.91 Bs. 5,267.88
C. Use
Domestic Telex Service:
Signal charge Bs. 10.64 Bs. 11.26
</TABLE>
7
<PAGE>
Frequency of Telex Signal:
<TABLE>
<CAPTION>
Section Km. Normal Rate Special Rate
------- -- ----------- -------------
<S> <C> <C> <C>
1 0 to 40 7.5 sec. 12.0 sec.
2 41 to 90 5.0 sec. 8.0 sec.
3 91 to 170 4.0 sec. 5.5 sec.
4 171 to 300 3.0 sec. 4.5 sec.
5 301 to 500 2.5 sec. 4.0 sec.
6 More than 500 2.0 sec. 3.5 sec.
</TABLE>
Schedules: The Normal Rate applies from Monday to Friday between 7:00 a.m.
and 6:59 p.m. The Special Rate applies from Monday to Friday between 7:00
p.m. and 6:59 a.m.; Saturdays, Sundays and holidays for a 24 hour day.
V. Other Services
Until June 15 After June 16
------------- -------------
External move Bs.23,837.80 Bs. 25,226.36
Change of company Bs.12,140.09 Bs. 12,847.26
VI. International Telephone Service
International Direct Dialing (DDI)
Destinations Bs./ minutes
------------ ------------
USA/Puerto Rico 403.14
Colombia 440.00
Canada 575.00
Spain 525.00
Italy-Vatican 425.00
United Kingdom 570.00
Peru 500.00
Mexico 510.00
Argentina 543.00
Ecuador 580.00
Brazil 510.00
8
<PAGE>
Portugal 410.00
France 515.00
Dominican Republic 525.00
Chile 580.00
Germany 580.00
Cuba 770.00
Panama 770.00
Curacao 760.00
Switzerland 580.00
Aruba 760.00
Bolivia 460.00
Rest of Central America 860.00
Rest of Antilles 760.00
Greece 510.00
Uruguay 850.00
Rest of South America 850.00
Scandinavia 540.00
Japan 490.00
Hong Kong 740.00
Rest of East Asia 740.00
Rest of West Asia 740.00
Rest of Europe 580.00
Belgium 550.00
Israel 995.00
Taiwan 995.00
Rest of world 1,000.00
9
<PAGE>
Marine telephone communications between Venezuela and Ships utilizing the
Inmarsat satellite network:
<TABLE>
<CAPTION>
Zone Until June 15 After June 16
---- ------------- -------------
<S> <C> <C>
Atlantic Bs. 5,848.30 Bs. 6,188.97
Pacific Bs. 5,848.30 Bs. 6,188.97
Indian Bs. 5,848.30 Bs. 6,188.97
</TABLE>
The rates contemplated for international telephone service shall be applied
through (LDI) Operators in the same manner as DIRECT DIALING INTERNATIONAL
(DDI). In the case of the service through DDI, the rate charged shall be based
on the actual duration of the communication, with the understanding that
fractions of a minute will be counted as full minutes.
Service via the LDI operator in the station-to-station mode shall be offered
only when the respective call cannot be made directly by the subscriber through
DDI.
Operator Service Charge: (applicable to all subscribers to Direct Dialing
International (DDI), be it person-to-person or station-to-station, in the
following manner):
Until June 15 After June 16
------------- -------------
Bs. 1,466.44 Bs. 1,551.86
10
<PAGE>
VII. lnternational Telex Service
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(Bs./minute of use)
---------------------------------------------------
Destination Until June 15 After June 16
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
a) North America
United States 1,536.53 1,626.03
Canada 1,536.53 1,626.03
Mexico 2,762.01 2,922.89
- --------------------------------------------------------------------------------------------------
b) Central America
Panama 2,619.35 2,771.93
Remainder of Central America 2,619.35 2,771.93
- --------------------------------------------------------------------------------------------------
c) Antilles
Cuba 2,164.47 2,290.55
Dominican Republic 2,164.47 2,290.55
Remainder of Antilles 2,164.47 2,290.55
- --------------------------------------------------------------------------------------------------
d) South America
Chile 2,762.01 2,922.89
Peru 2,419.83 2,560.79
Ecuador 2,762.01 2,922.89
Colombia 2,762.01 2,922.89
Bolivia 2,351.56 2,488.54
Brazil 2,750.32 2,910.52
Argentina 2,419.83 2,560.79
Uruguay 2,419.83 2,560.79
Remainder of South America 2,419.83 2,560.79
- --------------------------------------------------------------------------------------------------
e) Europe
Italy and the Vatican 2,419.83 2,560.79
Portugal 2,432.00 2,573.66
Spain 2,432.00 2,573.66
France and Monaco 2,394.40 2,533.87
Switzerland, Germany and
Liechtenstein 2,394.40 2,533.87
Remainder of Europe 2,189.80 2,317.35
- --------------------------------------------------------------------------------------------------
f) Remainder of the world 2,761.57 2,922.44
- --------------------------------------------------------------------------------------------------
g) INMARSAT
Atlantic Ocean 4,497.93 4,759.93
Pacific Ocean 4,497.93 4,759.93
Indian Ocean 4,497.93 4,759.93
- --------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
VIII. Exempt Calls
The following calls shall be exempt from payment:
a) to emergency service numbers
b) to operators to request long-distance communication or to file
complaints
c) to use information services
d) calls to the telex information service
e) to test the terminal equipment of any subscriber at numbers
161,162,163 (telex)
f) to transmit telegrams using 121.
12
<PAGE>
REPUBLIC OF VENEZUELA. Dr. ASTRID CAROLINA GOMEZ DE RODRIGUEZ NOTARY PUBLIC (1)
TWENTY-FIVE OF THE MUNICIPALITY LIBERTADOR OF THE FEDERAL DISTRICT. Caracas,
February 21, 2000. 189th and 140th. This is the Annex and/or plan referred in
the document drafted by Dr. EUNISIS MORENO DE PASCHER, ESQ., enrolled in the
national register for attorneys under No. 8292, submitted for Authentication and
Devolution as per form No. 40019 dated 2/18/2000. Signed on this same date by
the authorized representatives: ALBERTO EMERICH ESQUEDA TORRES and GUSTAVO
ROOSEN, inserting it under No. 25, Book 23, of the Books of Authentications
carried by this Notary.
[signatures and stamps follow]
NOTARY PUBLIC
By: /S/ DR. ASTRID CAROLINA DE RODRIGUEZ
- -----------------------------------------
Dr. Astrid Carolina de Rodriguez
SIGNATORIES
By: /S/ ALBERTO EMERICH ESQUEDA TORRES
--------------------------------------
Alberto Emerich Esqueda Torres
(Minister of Infrastructure)
By: /S/ GUSTAVO ROOSEN
-----------------------
Gustavo Roosen
(CANTV President)
13
<PAGE>
ANNEX E
"SPECIAL RATE ADJUSTMENT PROCEDURE"
For the purposes provided in Clause 31 of the Agreement with respect to monthly
reporting and monitoring of fluctuation in the aggregate effective rate of
exchange, in comparison with the projections agreed to among the parties, the
special adjustments which are applicable shall be determined based upon the
following Special Rate Adjustment Procedure. To such effect, the official data
to be utilized for determination of the aggregate effective rate of exchange
will be that published by Banco Central de Venezuela for each month of the
period.
Special Rate Adjustment Procedure.
(1) Determination of the effective aggregate rate of exchange (effective TCPA).
For purposes of verifying the level of the average effective aggregate rate of
exchange, the parties shall determine the average aggregate rate of exchange for
the year 2000 up to the month immediately prior to the analysis. To such
effect, the average rate of exchange at the close of each month of the elapsed
period shall be weighted with a peso equivalent to the calendar days of each
respective month and the result of the sum of the elements of each month shall
be divided among the total number of days elapsed in the year up to the month
immediately prior, including, as indicated below:
Effective TCPA = \\n=i-1\\ (Tc\\(n)\\ x D\\(n)\\)
--------------------
[SIGMA] Da\\(i-1)\\
\\n=i\\
Where:
\\i\\: month for which the report is prepared
Effective TCPA: Average aggregate rate of exchange up to month \\i-1\\
Tc\\(n)\\: Average effective rate of exchange at the close of month
\\n\\
D\\(n)\\: Calendar days in month n
Da\\(i-1):\\ Days in the aggregate from the January 1, 2000 to the
close of the month immediately prior to the report.
(2) Determination of deviation in the average aggregate rate of exchange.
The following is a comparison of the results obtained in point 1 above with
respect to the average aggregate rate of exchange agreed to for the month
immediately prior to preparation of the analysis as set forth in Clause 30 of
the Eighth Year Review Agreement.
To such effect, the following formula shall be used:
Percentage of registered variation = (effective TCPA / agreed TCPA - 1) x
100
<PAGE>
(3) Procedure for the first rate adjustment.
(a) In the event that the previously determined registered variation
percentage is lower than 2.5%, the agreed rates shall remain
unchanged.
(b) If, to the contrary, the registered variation percentage falls between
2.5% and 7.5%, the Concessionaire may effect an adjustment to the
agreed rates, following verification and approval by CONATEL, using
the following factor:
Adjustment factor = 1 + (registered variation percentage - 2.5) / 100
The manner in which the new rates are calculated for each of the
services shall be as follows:
Adjusted rate \\(j)\\ = prior rate \\(j)\\ * adjustment factor
Where \\j\\ denotes each of the basic telecommunication services.
The resulting rates shall enter into effect one month after publication by the
Concessionaire in daily newpapers of national circulation in accordance with
Telecommunications Law.
(c) In the event the registered variation percentage exceeds 7.5%, it will
be necessary for both parties to review the agreement with respect to
general rate levels, in which case, the Republic shall approve any new
applicable rates by means of a Resolution issued to such effect.
(d) At the time a rate adjustment occurs, there shall also be a
readjustment of the agreed average aggregate rate of exchange, as set
forth in Clause 30 of the Eighth Year Review Agreement, in the
following manner:
Agreed adjusted TCPA =
agreed TCPA X (1 + registered variation percentage)
Where:
The registered variation percentage to be used shall be calculated for
the month prior to the analysis.
In this manner, any subsequent monthly verifications shall be realized
using the agreed adjusted TCPA.
(4) Procedure for subsequent adjustments.
Any subsequent adjustments shall follow the same form as the procedure
indicated in point 3, but shall use the agreed adjusted TCPA.
Adjustments shall only be deemed subsequent adjustments if the sum of
aggregate adjustments does not exceed 5%. In no event shall the sum of
aggregate adjustments for the year 2000 exceed 5%.
2
<PAGE>
In the event aggregate adjustments exceed 5%, it will be necessary for
both parties to review the portion of the Agreement concerning general
rate levels in its entirety.
3
<PAGE>
REPUBLIC OF VENEZUELA. Dr. ASTRID CAROLINA GOMEZ DE RODRIGUEZ, NOTARY PUBLIC (1)
TWENTY-FIFTH OF THE LIBERTADOR MUNICIPALITY OF THE FEDERAL DISTRICT. Caracas,
the twenty-first (21/st/) of February, 2000. 189(DEGREES) and 140(DEGREES). This
is the Annex and/or plan referred to in the document drafted by the attorney Dr.
EUNISIS MORENO DE PASCHER, inscribed in the legal registry under No. 8292,
presented for its Authentication and Devolution in accordance with form No.
40019, dated: 2/18/2000. Signed this same date by its grantors: ALBERTO EMERICH
ESQUEDA TORRES AND GUSTAVO ROOSEN, inserted under No. 25, Book 23, of the Books
of Authentication registered with this Notary.
[signatures and stamps follow]
NOTARY PUBLIC:
By: /s/ DR. ASTRID CAROLINA DE RODRIGUEZ
- ------------------------------------------
Dr. Astrid Carolina de Rodriguez
By: /s/ ALBERTO EMERICH ESQUEDA TORRES
--------------------------------------
Alberto Emerich Esqueda Torres
(Minister of Infrastructure)
By: /s/ GUSTAVO ROOSEN
-----------------------
Gustavo Roosen
(CANTV President)
4
<PAGE>
OFFICIAL JOURNAL
OF THE BOLIVARIAN REPUBLIC OF VENEZUELA
- ------------------------------------------------------------------------------
Year CXXVII __ MONTH V Caracas, Tuesday, February 22, 2000 Number 36,897
- ------------------------------------------------------------------------------
Summary
-------
National Constitutional Assembly
Law which authorizes the National Executive to Contract and Execute Public
Credit Operations - (See No. 5 424 Extraordinario of the Official Journal of the
Bolivarian Republic of Venezuela, dated 12/29/99) (This summary nullifies the
publication in Official Journal No. 36 859 dated 12/29/99).
National Legislative Commission
Decree which establishes Regulation of the Functions of the National Legislative
Commission.
Presidency of the Republic
Decree No. 686 which appoints the citizen Jose Luis Perisse Seoane as
Viceminister of Infrastructure Management. (Reprinted due to a material error
by the publisher)
Ministry of the Interior and Justice
Resolution appointing the citizen Coronel (Army) Cesar Osvelio Mendez Gonzalez
as Coordinator of Administrative Matters for the Ministry of the Interior and
Justice, with title of General Director.
Resolution appointing citizen Cesar Osvelio Mendez Gonzalez, Coordinator of
Administrative Matters for the Ministry of the Interior and Justice, the
responsibility of management of funds.
Ministry of Finance
Resolution appointing the citizen Adolfo Castillo Noguera as General Director of
the Office of Information, effective as of January 3, 2000. (Reprinted due to a
material error by the publisher)
Resolution appointing the citizen Rosalba Aristimuno de Garrido as Director of
the General Bureau of the Secretary of the Ministry.
Superintendency of Banks and Other Financial Institutions
Resolution delegating to citizen Jose Darbisi Torin, Coordinator of Inspections,
the power to sign legal instruments and documents related thereto.
Resolution delegating to the citizen Maria Elena Fumero Mesa, Legal Advisor, the
power to sign legal instruments and documents related thereto.
Superintendency of Insurance
Resolution appointing those citizens mentioned therein as members of the
National Insurance Board, which is the advisory body of the Superintendency of
Insurance.
Ruling which nullifies the administrative act contained in Resolution No. 2163,
which revokes the authorization for Luis Alberto Torres to act as an insurance
agent.
Ministry of Health and Social Development
Resolution appointing the citizen Dr. Ely Saul Gonzalez Diaz, as General
Coordinator of the Health Project among the Ministry of Health and Social
Development, the World Bank and the Inter-American Development Bank.
Ministry of the Infrastructure
Resolution establishing a rate system for basic telephone service nationally,
which includes two adjustments: the first, beginning as of the month following
publication of the rates established in this Resolution by CANTV in two daily
<PAGE>
newpapers with national circulation; and the second, beginning as of June 16,
2000.
Fiscal General of the Republic
Resolution appointing the citizen and attorney Lisbeth Da Costa Rois as Chief of
the Department of Technical-Scientific Consultation.
Resolution appointing the citizen Mariana Palomares Morales as Chief of
Coordination of Attention to Public Matters.
Resolution appointing the citizen and attorney Carmen Teresa Alvarez Valladares
as third Joint Counselor in the Office of Human Rights.
Resolution appointing the citizen and attorney Mariela Hurtado, second Joint
Counselor in the Office of Human Rights.
National Electoral Board
Official Notices
- --------------------------------------------------------------------------------
National Legislative Commission
The National Legislative Commission
In exercise of the powers granted by the National Constitutional Assembly, by
means of the Decree governing the Method of Transfer of Public Power, published
in the Official Journal of the Republic of Venezuela number 36,859, dated
December 29, 1999.
Decree
as follows:
REGULATION OF THE FUNCTIONS OF THE NATIONAL LEGISLATIVE COMMISSION
CHAPTER I
NATURE, DOMICILE AND TERM
Article 1. Nature and Term. The National Legislative Commission appointed by
---------------
the National Constitutional Assembly shall exercise in a provisional status
until the effective installation of the National Assembly, all jurisdictional
and competent authority attributed by the Decree governing the Method of
Transfer of Public Power, published in the National Journal of the Republic of
Venezuela number 36,859 dated December 29, 1999 by the Decree governing
Expansion of the Jurisdictional Authority of the National Legislative Commission
published in the Official Journal of the Republic of Venezuela No. 36,884 dated
February 3, 2000, and by this Regulation.
Article 2. Headquarters. The National Legislative Commission shall meet in the
------------
City of Caracas, in the Palacio Federal Legislativo. It may under exceptional
circumstances meet in a different location or in another city of the Republic by
agreement of an absolute majority of its members.
Chapter II
EXECUTIVE BOARD
Article 3. Composition; Elections; Term. The National Legislative Commission
----------------------------
shall have an Executive Board composed of a President and two Vice Presidents
elected from among the Legislators present at the meeting for election of
officers, in a public vote, and shall be those who receive the most votes from
the Legislators present. The members of the Executive Board shall hold office
until the installation of the National Assembly.
Article 4. Presidential Powers. The President of the National Legislative
-------------------
Commission shall have the following powers:
1. Convening ordinary and special meetings of the National Legislative
Committee.
2. Opening, extending, suspending and concluding meetings.
3. Providing an agenda and order of the day for each meeting.
4. Conducting proceedings in accordance with these Regulations and exercising
control over any Legislators who infringe these Regulations.
2
<PAGE>
5. Coordinating, jointly with the First Vice President, the functions of the
National Legislative Commission, its Subcommittees and the Secretary.
6. Directing administrative and personnel services jointly with the Second Vice
Presidents, and preparing data and matters related to implementation of the
budget of the National Legislative Committee.
- --------------------------------------------------------------------------------
Republic of Venezuela
MINISTRY OF FINANCE
Superintendency of Insurance
Years 189/th/ and 140/th/
Caracas, 2/14/2000 Number FSS-0143
Superintendent of Insurance
As to the use of the powers conferred by Article 36, First Paragraph of the Laws
of Insurance and Reassurance Companies, in accordance with Articles 36, 37 and
38 therein and Article 30 of the General Regulations of the Laws of Insurance
and Reassurance Companies.
With respect to the memorandum dated January 27, 2000 of the National Insurance
Board, with the participation of the Superintendency of Insurance, that the
citizens Oscar Rojas Ugueto and Javier Alcorta, principal and substitute
members, respectively, have resigned their positions as representatives of the
reassurance sector before the National Insurance Board.
With respect to the memorandum dated January 27, 2000 of the National Insurance
Board in which the Superintendency of Insurance is informed of the list of four
(4) proposed candidates for the reassurance sector to become substitute members
of the National Insurance Board.
Resolved
To appoint as members of the National Insurance Board, the advisory body of the
Superintendency of Insurance, not affiliated with the Ministry of Finance, and
on behalf of the Reassurance Companies, as of the date of publication of this
Resolution until the appointment of a new National Insurance Board, the persons
indicated below:
Principal:
- ---------
Daniel Porras Boada, Venezuelan, of legal age, domiciled in Caracas, holder of
citizen identification card No. 2,100,875.
Substitutes:
- -----------
Wilfredo Silva Pimentael, Venezuelan, of legal age, domiciled in Caracas, holder
of citizen identification card No. 3,666,875.
Humberto Filorio, Mexican, of legal age, domiciled in Caracas, holder of citizen
identification card No. 82,199,638.
Communicate and Publish
Morelia J. Corredor
Superintendent of Insurance
- --------------------------------------------------------------------------------
MINISTRY OF HEALTH AND SOCIAL DEVELOPMENT
Bolivarian Republic of Venezuela
Ministry of Health and Social Development
Number 086 As of the 18/th/ of February of the year 2000 189/th/ and 140/th/
At the behest of the citizen President of the Republic and in accordance with
the provisions of Article 4, Section 3, Article 6, Section 2 and Article 36 of
the Administrative Career Law, and pursuant to Resolution No. 1368 dated
1/13/93, citizen Dr. Ely Saul Gonzalez Diaz, holder of citizen's identification
card No. 5,623,816, is hereby appointed General Coordinator of the Health
Project among the Ministry of Health and Social Development, the World Bank, and
the Inter-American Development Bank, in substitution of Dr. Jorge
3
<PAGE>
Diaz Polanco, who has assumed another assignment.
Resolution No. 262-99, dated 6/8/99, is hereby waived.
Communicate and Publish
Gilberto Rodriguez Ochoa
Ministry of Health and Social Development
- --------------------------------------------------------------------------------
MINISTRY OF THE INFRASTRUCTURE
Bolivarian Republic of Venezuela
Ministry of the Infrastructure
No. 023 Caracas, February 21, 2000 189/th/ and 140/th/
Resolution
In accordance with the provisions of numeral 8 of Article 37 and Article 48 of
the Decree and with the scope and force of the Organic Law of the Central
Administration; in accordance with the provisions of Article 14 of the Law of
Telecommunications and in observance of the provisions of Clause 22 of the
Concession Agreement entered into October 14, 1991, as amended on November 4,
1991, between the Republic of Venezuela and Compania Anonima Nacional Telefonos
de Venezuela (CANTV), with respect to the eighth (8/th/) year review of the
period of limited competition provided for under such agreement, and of the
Agreement entered into between the same parties dated February 21, 2000; this
Office
Resolves:
I
Rating Method
Article 1: The following method for computing rates for basic domestic
telephone service is hereby established, which shall consist of two adjustments:
the first, beginning as of the month following publication of the rates
established in this Resolution by CANTV in two daily newpapers with national
circulation; and the second, beginning as of June 16, 2000.
Article 2: The following maximum rates for Private Telephone Service are
approved until June 15, 2000 and from June 16 forward:
1. Connection to the network:
Until June 15 From June 16
------------- ------------
(a) Right to subscription:
- -Residential Bs 44,442.36 Bs 47,031.15
- -NonResidential Bs 87,450.21 Bs 92,544.22
- -PBX Bs 198,779.20 Bs 10,358.17
- -CPA Bs 238,079.38 Bs 251,947.60
(with or without direct entry discount)
(b) Installation of telephone:
- -Main residential Bs 43,746.46 Bs 46,294.73
- -Aux. residential Bs 12,861.37 Bs 13,610.55
- -Main nonresid. Bs 47,373.32 Bs 50,053.66
- -Aux. nonresid. Bs 15,855.63 Bs 16,779.22
- -PBX Bs 50,133.37 Bs 53,053.66
- -CPA Bs 50,133.37 Bs 53,053.66
(c) Team terminal Bs 23,540.30 Bs 24,941.53
(d) Compensation to caller for inadvertent disconnection:
- -Residential Bs 15,801.91 Bs 16,722.38
- -Nonresidential Bs 18,042.58 Bs 19,093.57
2 Basic rental
(a) Mandatory basic residential telephone plans:
Free minutes Basic Rental Basic Rental
Until June 15 As of June 16
------------- -------------
Plan A 40 Bs 4,752.30 Bs 5,028.88
Plan B 65 Bs 7,291.20 Bs 7,715.55
Plan C 90 Bs 8,200.65 Bs 8,677.92
Plan F 2500 Bs40,212.60 Bs42,555.00
Maximum amounts for prepayment plan:
Until June 15 As of June 16
------------- -------------
Amount per minute Bs 60.32 Bs. 63.83
4
<PAGE>
With respect to the prepayment plan, the sum fixed for minimum consumption over
a period of sixty days is Bs 10,000.00.
During the year 2000, CANTV must maintain effective the obligatory offering
plans provided in this Resolution and may not under any circumstance modify Plan
F identified above.
(b) Optional complementary plans:
Free Minutes Initial Basic Rental
------------ --------------------
Plan D 360 Bs 13,404.20
Plan E 600 Bs 18,095.67
Plans D and E, as well as any other Optional Complementary Plan implemented by
CANTV in the year 2000, may be modified by CANTV without the need for additional
authorization or approval beyond that established herein, provided it maintains
a basic rental rate which does not exceed:
Maximum basic rental amounts for optional complementary plans
January to June 15 From June 16
------------------ ------------
Basic Rental Bs 53,616.80 Bs 56,740.00
In the event there exist modifications to the essential elements of the optional
complementary plans, the optional complementary plans shall be published one
month prior to entering into effect in two daily newspapers of national
circulation for three consecutive days; the National Telecommunications
Commission (CONATEL) shall receive the same notice at the same time and all
regularly billed users of CANTV shall likewise be informed.
Callers subscribing to the existing plans prior to the time this resolution
enters into effect shall be automatically reclassified in the following manner:
Existing Plan Substitute Plan
- ------------- ---------------
Basic Plan Plan A
Intermediate Plan Plan B
Advanced Plan Plan C
Residential subscribers may request a change of plan at their convenience up to
a maximum of two opportunities within a single year with no additional charge.
Beginning with and including the third such change and for each additional
change during the same period CANTV may charge a minimum fee of four thousand
Bolivares (Bs 4,000.00).
(c) Nonresidential Customers:
Until June 15 From June 16
------------- ------------
Main Telephone Bs 14,074.41 Bs 14,894.25
Auxiliary Telephone Bs 1,741.74 Bs 1,843.20
(d) PBX (Monthly rental for each urban line without signal quotas)*
Until June 15 From June 16
------------- ------------
Bs 23,709.97 Bs 25,091.09
(e) CPA (with or without direct entry-monthly rental discount for urban lines)
Until June 15 From June 16
------------- ------------
Bs 40,262.76 Bs 42,608.08
(f) CPA per assigned extension
Until June 15 From June 16
------------- ------------
Bs 240.88 Bs 254.91
* The PBX private facilities with only a single line shall be considered
nonresidential telephones for purposes of this Resolution.
3. Local Use.
(a) Residential customers.
Amount per Minute
(Bolivares per minute or fraction thereof)
Mandatory
Offering Plans Until June 15 From June 16
- -------------- ------------- ------------
Plan A Bs 29.56 Bs 31.28
Plan B Bs 20.91 Bs 22.13
Plan C Bs 19.10 Bs 20.21
5
<PAGE>
Plan F (amount per additional minute)
1 to 500 minutes Bs 6.70 Bs 7.09
501 to
1000 minutes Bs 6.03 Bs 6.38
1001 to
1500 minutes Bs 5.70 Bs 6.03
1501 to
2000 minutes Bs 5.36 Bs 5.67
2001 minutes
or more Bs 5.03 Bs 5.32
Optional Complementary Plans
Plan D Bs 18.77 ---
Plan E Bs 17.09 ---
The amounts in additional minutes provided in Plan F, with respect to the volume
of consumption, shall be uniformly applied to all minutes which exceed the level
of the free minutes established in this Resolution.
(b) Nonresidential customers:
Amount per minute (Bolivares per minute or fraction thereof)
Until June 15 From June 16
------------- ------------
Bs 25.07 Bs 26.53
4. Teleamigo service:
Until June 15 From June 16
------------- ------------
Complete package Bs 5,084.08 Bs 5,380.23
Call waiting Bs 2,554.76 Bs 2,703.58
Conference calls Bs 2,554.76 Bs 2,703.58
Rapid dialing Bs 2,554.76 Bs 2,703.58
Blocked calls Bs 2,933.78 Bs 3,104.68
Installation charge Bs 2,900.93 Bs 3,069.91
Key change service Bs 2,170.99 Bs 2,297.46
5. Domestic Long Distance Service (DDN)
A single rate is established for residential and nonresidential callers to all
destinations within the domestic territory of:
Normal Rate Bs/minute Bs 128.63
Reduced Rate Bs/minute Bs 109.34
The normal rate shall apply to business days during the hours between 6:00 a.m.
and 7:00 p.m.
The reduced rate shall apply to business days during the hours between 7:01 p.m.
and 5:59 a.m., and on holidays and weekends shall apply to a 24-hour day.
Domestic Long Distance Calls shall be billed for each second of duration.
Single charge for operator service for Domestic Long Distance Calls:
Until June 15 From June 16
------------- ------------
Bs 829.94 Bs 878.29
6. Other miscellaneous services
Unless otherwise indicated, the charges reflected below will apply to each use
of service:
Until June 15 From June 16
------------- ------------
(a) Principal
telephone
reconnection
- - Residential Bs 8,594.59 Bs 9,095.23
- - Nonresidential Bs 10,026.67 Bs10,610.73
(b) Internal move Bs 10,367.24 Bs10,971.14
(c) External move
- - To the same zone
or sector Bs 45,105.22 Bs47,732.62
- - To a different
zone or sector Bs 66,849.05 Bs70,743.03
(d) Maintenance:
- - Repositioning
terminal
equipment Bs 23,540.30 Bs24,911.53
(e) Directory
Listing Service
- - Number change Bs 7,524.05 Bs 7,962.33
- - Unlisted number
service (monthly
charge) Bs 896.50 Bs 948.72
- - Change from
unlisted to
directory listing Bs 3,207.35 Bs 3,394.18
- - Directory
correction Bs 0.00 Bs 0.00
- - Repetition in
directory Bs 666.00 Bs 704.79
(f) Change
of name Bs 6,966.39 Bs 7,372.19
6
<PAGE>
(g) Number
linking Bs 96.36 Bs 101.98
(h) Unlinking of
numbers
(per line) Bs 1,161.08 Bs 1,228.71
Article 3.- The following maximum rates are approved until June 15, 2000 and
from June 16 forward for Public Telephone Service:
1. Domestic Use:
(a) Amount per minute of local use:
Until June 15 From June 16
------------- ------------
Public Telephones:
TPM, TPT &
Teletasa Bs 20.91 Bs 22.13
Special Public
Telephones Bs 42.22 Bs 44.68
(b) Amount per signal for Domestic Long Distance public telephones (DDN):
Normal Rate Bs 21.44
Reduced Rate Bs 18.22
(c) Frequency of signals for Domestic Long Distance (DDN):
One (1) signal for each ten (10) seconds
2. International Long Distance Service (LDI):
The same rates shall apply to minutes of use indicated by countries
participating in the International Direct Dial (DDI) telephonic service.
3. Credit Card Services:
Initial charge Until June 15 From June 16
- -------------- ------------- ------------
Local Use Bs 155.81 Bs 164.88
LDN Use Bs 398.26 Bs 421.45
LDI Use Bs 821.41 Bs 869.25
Article 4.- The following maximum rates are approved until June 15, 2000 and
from June 16 forward for Leased Public Telephone Service:
Until June 15 From June 16
------------- ------------
Local Use Bs 42.22 Bs 44.68
Maintenance fee Bs 14,074.41 Bs 14,894.25
Free minutes 60 60
Rates applied to leased telephone use shall be the same as those provided for
Domestic Long Distance and International Long Distance use.
Article 5. The following maximum rates are approved until June 15, 2000 and
from June 16 forward for Domestic Telex Service:
1. Network connection:
Until June 15 From June 16
------------- ------------
(a) Reimbursable
security deposit:
- - Regular caller Bs 200,369.56 Bs 212,041.17
- - PBX caller (for
each principal
line) Bs 255,128.56 Bs 269,990.17
- - Regular remote
caller Bs 200,369.56 Bs 212,041.17
(b) Installation of
principal line:
- - Regular or
regular remote
caller Bs 22,774.31 Bs 24,100.92
- - PBX caller (for
each principal
line) Bs 30,490.87 Bs 32,266.98
(c) Reconnection
(shall not apply in
cases of suspension
that are the fault
of caller) Bs 0.00 Bs 0.00
2. Network access
Basic Monthly
Rental Until June 15 From June 16
- ------ ------------- ------------
- - Regular caller Bs 5,094.87 Bs 5,391.65
- - PBX caller (for
each principal
line) Bs 6,968.64 Bs 7,374.56
- - Regular remote
caller Bs 4,977.91 Bs 5,267.88
3. Use:
Domestic Telex Service:
Until June 15 From June 16
------------- ------------
Amount per
signal Bs 10.64 Bs 11.26
7
<PAGE>
4. Frequency of Telex Signal:
Normal rate Special rate
Segment Kilometers per per
- ------- ---------- --- ---
1 0 to 40 7.5 sec. 12.0 sec.
2 41 to 90 5.0 sec. 8.0 sec.
3 91 to 170 4.0 sec. 5.5 sec.
4 171 to 300 3.0 sec. 4.5 sec.
5 301 to 500 2.5 sec. 4.0 sec.
6 more than
500 2.0 sec. 3.5 sec.
The Normal Rate shall apply Monday thru Friday from 7 a.m. to 6:59 p.m. The
Special Rate shall apply Monday thru Friday from 7 p.m. to 6:59 a.m., and on
Saturdays, Sundays and holidays such rate shall apply to a 24 hour day.
Article 6.- The following maximum rates are approved until June 15, 2000 and
from June 16 forward for services specified below:
Until June 15 From June 16
------------- ------------
External move Bs 23,837.80 Bs 25,226.36
Change of name Bs 12,140.09 Bs 12,847.26
Article 7.- The following maximum rates are approved until June 15, 2000 and
from June 16 forward for International Telephone Service:
1. International Direct Dial (DDI):
Destination Bs./Minute
- ----------- ----------
USA/Puerto Rico 403.14
Colombia 440.00
Canada 575.00
Spain 525.00
Italy - Vatican 425.00
United Kingdom 570.00
Peru 500.00
Mexico 510.00
Argentina 543.00
Ecuador 580.00
Brazil 510.00
Portugal 410.00
France 515.00
Dominican Republic 525.00
Chile 580.00
Germany 580.00
Cuba 770.00
Panama 770.00
Curacao 760.00
Switzerland 580.00
Aruba 760.00
Bolivia 60.00
Rest of Central America 60.00
Rest of the Antilles 760.00
Greece 510.00
Uruguay 850.00
Rest of South America 850.00
Scandinavia 540.00
Japan 490.00
Hong Kong 740.00
Rest of East Asia 740.00
Rest of West Asia 740.00
Rest of Europe 580.00
Belgium 550.00
Israel 995.00
Taiwan 995.00
Rest of the World 1,000.00
2. Maritime telephone communications between Venezuela and ships associated with
the Inmarsat Satellite network:
Zone Until June 15 From June 16
- ---- ------------- ------------
Atlantic Bs 5,848.30 Bs 6,188.97
Pacific Bs 5,848.30 Bs 6,188.97
Indian Bs 5,848.30 Bs 6,188.97
The rates contemplated by the International Telephone Service shall be applied
by operators (LDI) in the same manner as dispatched through the International
Direct Dial (DDI) system. In the case of service by DDI, the rate charged will
be based upon effective duration of the communication, with the understanding
that fractions of minutes shall be counted as whole minutes.
The service dispatched by LDI operators in the station-to-station mode shall
only be offered when the respective call cannot be made directly by the caller
through DDI.
3. Operator Service Charges:
Operator charges shall be applied to all callers who are members of the
International Direct Dial (DDI) system, whether person-to-person or station-to-
station in the following manner:
Until June 15 From June 16
------------- ------------
Bs 1,466.44 Bs 1,551.86
8
<PAGE>
Article 8.- The following maximum rates are approved until June 15, 2000 and
from June 16 forward for International Telex Service:
Destination
- -----------
(Bs. per minute of use)
Until June 15 From June 16
------------- ------------
a) North America:
- -United States 1,536.53 1,626.03
- -Canada 1,536.53 1,626.03
- -Mexico 2,762.01 2,922.89
b) Central America:
- -Panama 2,619.35 2,771.93
- -Rest of Central
America 2,619.35 2,771.93
c) Antilles:
- -Cuba 2,164.47 2,290.55
- -Dominican
Republic 2,164.47 2,290.55
- -Rest of the
Antilles 2,164.47 2,290.55
d) South America:
- - Chile 2,762.01 2,922.89
- - Peru 2,419.83 2,560.79
- - Ecuador 2,762.01 2,922.89
- - Colombia 2,762.01 2,922.89
- - Bolivia 2,351.56 2,488.54
- - Brazil 2,750.32 2,910.52
- - Argentina 2,419.83 2,560.79
- - Uruguay 2,419.83 2,560.79
- - Rest of South
America 2,419.83 2,560.79
e) Europe:
- - Italy and
The Vatican 2,419.83 2,560.79
- - Portugal 2,432.00 2,573.66
- - Spain 2,432.00 2573.66
- - France and
Monaco 2,394.40 2,533.87
- - Switzerland.
Germany and
Liechtenstein 2,394.40 2,533.87
- - Rest of Europe 2,189.80 2,317.35
f) Rest of the
world: 2,761.57 2,922.44
g) Inmarsat:
Atlantic 4,497.93 4,759.93
Pacific 4,497.93 4,759.93
Indian 4,497.93 4,759.93
II
Final Provisions
Article 9.- Excluded from payment are calls made:
1. To emergency service numbers.
2. To operators to request long distance calls or to file claims.
3. To use information services.
4. To use telex information services.
5. To test terminal equipment of any caller through the numbers 161, 162, 163
(telex).
6. To send telegrams using the number 121.
Article 10.- Authorization for special rate adjustments resulting pursuant to
the procedure for Special Rate Adjustments provided in clause 31 of the Eighth
Year Review Agreement entered into between the Republic and Compania Anonima
Nacional de Telefonos de Venezuela dated _________, provided that all such rate
adjustments have been verified and approved by the National Telecommunications
Commission (CONATEL).
Article 11.- For purposes of this Resolution, holidays shall be those days
specified in the Law of National Holidays and the Organic Labor Laws.
Article 12.- The rates fixed in this Resolution shall become effective one (1)
month from the date of publication referred to in Article 14 of the Law of
Telecommunications and in accordance with the provisions established in Article
1 of this Resolution.
Article 13.- The rates provided in this Resolution shall remain in force until
November 27, 2000. However, if new rates applicable to the rate-free period
have not been established by November 27, 2000, the rates provided in this
Resolution shall continue in effect until December 31, 2000, or until such time
as competent public authorities establish a new rate schedule for operators of
basic telephone services.
Communicate and publish
9
<PAGE>
ALBERTO EMERICH ESQUEDA TORRES
Minister of Infrastructure
- --------------------------------------------------------------------------------
FISCAL GENERAL OFFICE OF THE REPUBLIC
Bolivarian Republic of Venezuela
Public Ministry
Office of the General Fiscal Agency of the Republic
Caracas, February 14, 2000
Resolution
No. 47
JAVIER ELECHIGUERRA NARANJO, Fiscal General of the Republic, in exercise of the
faculties provided in Articles 1 and 15 of the Organic Law of the Public
Ministry and 37 of Statutes of the Ministry of Public Personnel, as decreed in
Resolution No. 60 dated 3/4/99, published in the Official Journal of the
Republic of Venezuela No. 36.654 of the same date, by virtue of this Resolution,
does hereby appoint the citizen attorney CARMEN TERESA ALVAREZ VALLADARES,
holder of citizen's identification card no. 6,931,175, to fill the position of
JOINT COUNSELOR III in the Bureau of Human Rights, a subdivision of the General
Sectorial Department for Defense of Citizen's Rights of this Office, which
position is currently vacant, who previously performed the position of Joint
Counselor II in the above referenced bureau.
This appointment shall become administratively effective as of February 16,
2000.
Communicate and publish
JAVIER ELECHIGUERRA NARANJO
Fiscal General of the Republic
FISCAL GENERAL OFFICE OF THE REPUBLIC
Bolivarian Republic of Venezuela
Public Ministry
Office of the General Fiscal Agency of the Republic
Caracas, February 14, 2000
Resolution
No. 48
JAVIER ELECHIGUERRA NARANJO, Fiscal General of the Republic, in exercise of the
faculties provided in Articles 1 and 15 of the Organic Law of the Public
Ministry and 37 of Statutes of the Ministry of Public Personnel, as decreed in
Resolution No. 60 dated 3/4/99, published in the Official Journal of the
Republic of Venezuela No. 36.654 of the same date, by virtue of this Resolution,
does hereby appoint the citizen attorney MARIELA HURTADO, holder of citizen's
identification card no. 10,800,122, who previously performed the position of
Joint Counselor 8 in the Bureau of Doctrine and Inspection, to fill the position
of JOINT COUNSELOR II in the Bureau of Human Rights, a subdivison of the General
Sectorial Department for Defense of Citizen's Rights of this Office, in
substitution of the attorney Carmen Teresa Alvarez Valladares, who has vacated
said position.
This appointment shall become administratively effective as of February 16,
2000.
Communicate and publish
JAVIER ELECHIGUERRA NARANJO
Fiscal General of the Republic
10
<PAGE>
METHODOLOGY FOR MEASURING QUALITY OF SERVICE PARAMETERS
1. ACCESSIBILITY TO TELEPHONE SERVICE
1.1 WAITING TIME TO OBTAIN SERVICE.
Annual average of the time elapsed between the request (date of commercial
approval) and the installation of service (date of completion of the service
order). Delays attributable to the customer and/or third parties (municipal
and/or national regulatory agencies) are not computed, but are duly documented
for verification. Only service requests for domiciles within the area of local
coverage are considered for computation and high risk zones (as defined by
competent persons) are excluded.
a.- FORM OF MEASUREMENT: Measured by means of the CANTV service order system.
b.- VARIABLES USED AS INDICATORS:
b.1.- The sum of waiting time, in days, to satisfy service orders.
b.2.- Total satisfied service orders.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
b.1 / b.2
d.- POINT OF MEASUREMENT:
The files of satisfied service orders.
e.- SIZE OF SAMPLING:
All satisfied service orders.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
Monthly, considering the orders satisfied during a year, until the close of the
month.
g.- REPORTS:
Total monthly aggregate delivered quarterly. Results at domestic level.
h.- PERIOD USED AS OBJECTIVE:
Annual, at the domestic level, evaluated quarterly, where the monthly results
are not larger than the annual objective plus permitted deviation.
i.- OBSERVATIONS:
In the event any of the exclusions shall apply, the waiting time for obtaining
service shall begin to be counted upon surpassing the following:
No physical presence (outside the area of local coverage of the
Facility).
High risk zones (insecurity of personnel in installations and
equipment of CANTV), as defined by competent persons.
Conditions under which the available technology, as authorized for
CANTV, cannot be attended.
<PAGE>
Conditions under which municipal and/or national regulations impede
providing service using the authorized available technology.
2
<PAGE>
1.2.- WAITING LIST FOR OBTAINING SERVICE
Percentage of requests pending that are more than one month old, beginning as of
the date of commercial approval of the customer request, excluding the cases
outlined in item i of this point.
a.- FORM OF MEASUREMENT: Measured by means of the CANTV service order system.
b.- VARIABLES USED AS INDICATORS:
b.1.- The number of requests pending which are outstanding for more than one
month.
b.2.- The total of requests pending.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
(b.1 / b.2) *100
d.- POINT OF MEASUREMENT:
The files of pending service orders.
e.- SIZE OF SAMPLING:
All pending service requests which are outstanding for more than one month.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
Monthly, considering the requests pending as of the close of the month.
g.- REPORTS:
Total monthly aggregate delivered quarterly. Results at the national level.
h.- PERIOD USED AS OBJECTIVE:
Annual, at the national level, evaluated quarterly, where the monthly results
are not larger than the annual objective plus permitted deviation.
i.- OBSERVATIONS:
Pending requests falling in the following areas shall be excluded from the total
outstanding:
No physical presence (outside the area of local coverage of the
Facility).
High risk zones (insecurity of personnel in installations and equipment of
CANTV), as defined by competent persons.
Conditions under which the available technology, as authorized for CANTV,
cannot be attended.
Conditions under which municipal and/or national regulations impede
providing service using the authorized available technology.
3
<PAGE>
1.3 PERCENTAGE OF REQUESTS TO BE ATTENDED IN ZONES WITHOUT A PHYSICAL PRESENCE.
Percentage of pending service requests to be attended in places where CANTV does
not have a physical presence as of December 31, 1999, and which have not been
registered before that date. The attention to such requests shall be regulated
by a plan which CANTV shall present to CONATEL. Zones lacking a physical
presence shall be defined as geographical areas in which neither a transformer
facility nor an external plant of CANTV exist.
a.- FORM OF MEASUREMENT: Measured by means of the CANTV service order system and
the plan established by CANTV for this purpose.
b.- VARIABLES USED AS INDICATORS:
b.1.- The sum of satisfied service orders, as established in the plan.
b.2.- The total number of service orders located in places where CANTV lacks a
physical presence, registered as of December 31, 1999, plus those incorporated
into the plan as effected through the provisions established in item i of this
section.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
(b.1 / b.2) * 100
d.- POINT OF MEASUREMENT:
The files of satisfied service orders.
e.- SIZE OF SAMPLING:
The total number of service orders located in places where CANTV lacks a
physical presence, registered as of December 31, 1999, plus those incorporated
into the plan as effected through the provisions established in item i of this
section.
f.- TIME AND FREQUENCY OF MEASUREMENTS.
Monthly, in accordance with a performance schedule.
g.- REPORTS:
Total monthly aggregate delivered quarterly. Results at the national level. At
the close of each month they shall indicate the percentage of requests attended
in areas in which the plan was utilized and at the close of each quarterly
period they shall indicate the progress of the scheduled works.
h.- PERIOD USED AS OBJECTIVE:
Annual
i.- OBSERVATIONS:
The plan shall be presented by CANTV to CONATEL no later than the second two-
week period of January and shall be evaluated quarterly. This plan shall include
a schedule of works to be performed in order to attend to 50% of the registered
pending requests as of the end of the year 1999 in zones lacking a physical
presence. The plan shall reflect the date of the conclusion of the work, the
zone to be covered, the maximum number of requests to be attended and a schedule
4
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of planned monthly installation. Additionally, in the event new requests are
presented in zones where CANTV lacks a physical presence, which together with
those registered as of December 31, 1999 shall equal or exceed one hundred fifty
(150) requests within a geographical area having a radius of 1.5 kilometers, a
feasibility study shall be undertaken in accordance with CANTV's permitted
technology, and within a period of between 45 and 60 days CANTV and CONATEL
shall clarify and define the terms of its incorporation into the plan.
When requests are eliminated for causes attributable to the customer which can
be proved and audited, CANTV may tabulate any new requests attended to in the
areas established in the plan as satisfying the objectives. In the event
sufficient requests are not presented from these areas, the difference may be
tabulated for purposes of achieving the objectives, maintaining as a base for
calculations the number of requests registered through December 31, 1999 in all
zones where CANTV does not have a physical presence as of such date, plus those
which result from adjustments to the plan.
5
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2.- RETAINABILITY OF THE TELEPHONE SERVICE
2.1 ACTUAL PROBLEMS REPORTED FOR EACH 100 LINES IN SERVICE
Percentage of actual problems which were reported for each 100 lines in service,
per month.
a.- FORM OF MEASUREMENT:
Measured by means of CANTV's problem control system.
b.- VARIABLES USED AS INDICATORS:
b.1.- The total number of actual breakdowns, reported by customers during the
month being measured.
b.2.- The total number of lines in service at the end of the month, derived from
the report on plant capacity and utilization.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
(b.1 / b.2) *100 (For calculation of the annual objective, determine the
average of the values obtained for variables b.1 and b.2 for each month of the
year).
d.- POINT OF MEASUREMENT:
The problem control system of CANTV.
e.- SIZE OF SAMPLING:
All Actual breakdowns reported by customers during the month being measured.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
Measured for 24 hours during business days, excluding holidays of CANTV.
g.- REPORTS:
Total monthly aggregate, delivered quarterly. Results drawn discriminately at
the national level by Operating Division.
h.- PERIOD USED AS OBJECTIVE:
Annual, national level, maximum monthly, conducted by Operating Division,
evaluated quarterly.
i.- OBSERVATIONS:
Actual reported problems are defined as any breakdown that is detected as a
result of a complaint or claim by a customer, and which upon investigation is
determined to have affected service and is the responsibility of CANTV.
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2.2 PERCENTAGE OF BREAKDOWNS REPAIRED WITHIN 24 TO 48 HOURS.
Percentage of breakdowns that were repaired in less than 24 to 48 hours during
business days.
a.- FORM OF MEASUREMENT:
Measured by means of CANTV's problem control system.
b.- VARIABLES USED AS INDICATORS:
b.1.- The number of actual breakdowns reported by customers repaired within 24
hours following the time the report was received by CANTV.
b.2.- The number of actual breakdowns reported by customers repaired within 48
hours following the time the report was received by CANTV.
b.3.- The number of actual breakdowns reported by customers.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
(b.1 / b.3) *100 (For calculation of the annual objective, determine the
average of the values obtained for variables b.1, b.2 and b.3 for each month of
the year).
d.- POINT OF MEASUREMENT:
The problem control system of CANTV.
e.- SIZE OF SAMPLING:
All actual breakdowns reported by customers.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
Measured for 24 hours during business days, excluding holidays of CANTV.
g.- REPORTS:
Total monthly aggregate, delivered quarterly. Results drawn discriminately at
the national level by Operating Division.
h.- PERIOD USED AS OBJECTIVE:
Annual, national level, maximum monthly, conducted by Operating Division,
evaluated quarterly.
i.- OBSERVATIONS:
When the nature of the breakdown requires an agreement for the time of repair
and, at the customer's request, a date is fixed, the time is tabulated as of the
moment the agreement is reached until the repair is completed.
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2.3 AVERAGE TIME TO REPAIR BREAKDOWNS
The sum of the time elapsed, in hours, as of the moment the actual breakdown was
reported until completion of the repair, divided by the total number of actual
breakdowns repaired as reported by customers.
a.- FORM OF MEASUREMENT:
Measured by means of CANTV's problem control system.
b.- VARIABLES USED AS INDICATORS:
b.1.- The sum of the time elapsed, in hours, as of the time the actual
breakdown was reported until completion of the repair.
b.2.- The total number of actual breakdowns repaired, reported by customers.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
(b.1 / b.2)
d.- POINT OF MEASUREMENT:
The problem control system of CANTV.
e.- SIZE OF SAMPLING:
All repaired actual breakdowns reported by customers.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
Measured for 24 hours during business days, excluding holidays of CANTV.
g.- REPORTS:
Total monthly aggregate, delivered quarterly. Results drawn discriminately at
the national level by Operating Division.
h.- PERIOD USED AS OBJECTIVE:
Annual, national level, maximum monthly, conducted by Operating Division,
evaluated quarterly.
i.- OBSERVATIONS:
When the nature of the breakdown requires an agreement for the time of repair
and, at the customer's request, a date is fixed, the time is tabulated as of the
moment the agreement is reached until the repair is completed.
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3. QUALITY OF NETWORK FUNCTIONABILITY
3.1 PERCENTAGE OF CALLS COMPLETED FOR LOCAL TRAFFIC, NATIONAL LONG DISTANCE AND
INTERNATIONAL LONG DISTANCE
Percentage of attempted calls, correctly dialed, that are successfully connected
to the party called, which shall include cases when the party called answers,
rings with no answer, is busy, an answering machine answers, a recorded
announcement machine answers, a suspended subscriber tone is received or it is a
free call.
a.- FORM OF MEASUREMENT:
Fixed facilities, analog and digital, and a sampling of mobile facilities, shall
be measured with "MCOR" equipment or any similar equipment which may be
acquired.
b.- VARIABLES USED AS INDICATORS:
b.1.- Completed local calls: calls completed by MCOR equipment whose first
digit is not "0" or "1".
b.2.- Attempted local calls: calls attempted by MCOR equipment that have
received sufficient digits to be completed and whose first digit is not "0" or
"1".
b.3.- Completed domestic long distance calls: calls completed by MCOR
equipment whose two first digits fall between "02" and "09".
b.4.- Attempted domestic long distance calls: calls attempted by MCOR
equipment that have received sufficient digits to be completed and whose two
first digits fall between "02" and "09".
b.5.- Completed international calls: calls completed by MCOR equipment whose
two first digits are "00".
b.6.- Attempted international calls: calls attempted by MCOR equipment that
have received sufficient digits to be completed and whose two first digits are
"00".
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
All facilities will be weighed in accordance with the number of attempted MCOR
calls or calls using similar equipment, for local traffic, domestic long
distance and international long distance. This value is obtained by measuring
dispersion of traffic at the national level taken at digital facilities, using
the annual average from the prior year. The average value obtained each month
of the year shall be used to calculate the annual average.
c.1.- Percentage of Completed Local Calls: (b.1/b.2)* 100
c.2.- Percentage of Completed Domestic Long Distance Calls: (b.3/b.4)* 100
9
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c.3.- Percentage of Completed International Calls: (b.5/b.6)* 100
A weighing function expressing the number of analog and digital customers
existing monthly at the Plant shall be applied to the three cases above.
d.- POINT OF MEASUREMENT:
At the local facility of origin.
e.- SIZE OF SAMPLING:
All fixed facilities and all mobile facilities, the mobile facilities having a
minimum of two measurements annually.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
A minimum of seven continuous days a month, 24 hours a day.
g.- REPORTS:
Total monthly calculation, delivered quarterly. Results drawn discriminately at
the national level by Operating Division.
h.- PERIOD USED AS OBJECTIVE:
Annual, national level. Monthly minimum, evaluated quarterly.
i.- OBSERVATIONS:
The number of customers used for weighing completed calls shall be taken from
the Capacity and Utilization Report prepared by the Plant on a monthly basis.
While measuring the indicator "Receiving a Dial Tone", there shall be an
interruption for one hour in each facility (between 10:00 and 12:00), as with
the measurement of the indicator "Percentage of Completed Calls for Local
Traffic, Domestic Long Distance and International Long Distance", in order for
the sampling to be significant.
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4. OPERATOR SERVICE EFFICIENCY
4.1 AVERAGE WAITING TIME FOR OPERATOR TO ANSWER
Average time, measured in seconds, that operators delay in answering calls from
users: Problem Reporting Service (15), Customer Attention Center (80021515),
Domestic Long Distance (100), Information (103), International Long Distance
(122) and Reverse Charges Center (101).
4.1.1 PROBLEM REPORTING SERVICE (15)
The average time, measured in seconds, that Problem Reporting Service Operators
delay in answering calls from users.
a.- FORM OF MEASUREMENT:
Calls reporting problems are measured by an Automated Call Distributor.
b.- VARIABLES USED AS INDICATORS:
b.1.- The sum total of waiting time, measured in seconds, from the moment that
calls from Users enter the Automated Call Distributor until they are answered by
Operators or parties being called by Users.
b.2.- Total number of calls received (sum total of calls answered and
abandoned).
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
(b.1/b.2) To calculate monthly objectives, variables b.1 and b.2 are measured
during the corresponding month. To calculate annual objectives, variables b.1
and b.2 are measured in the aggregate during the year.
d.- POINT OF MEASUREMENT:
The entry of the call into the Automated Call Distributor.
e.- SIZE OF SAMPLING:
Total number of calls.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
From the moment that calls from Users enter the Automated Call Distributor,
during business days, except for CANTV holidays.
g.- REPORTS:
Total monthly calculation, evaluated quarterly and measured annually. Results
at national level.
h.- PERIOD USED AS OBJECTIVE:
Annual, national level, evaluated quarterly.
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4.1.2 CUSTOMER ATTENTION CENTER
The time, measured in seconds, that the customer waits to receive the operator's
attention once this option has been selected on the system.
a.- FORM OF MEASUREMENT:
When a call is answered on the automated system, the customer has the
possibility of being attended by an operator by dialing the corresponding
option, transfering his or her own call to the Automated Call Distribution
Center and computing the time as of that moment, measured by a statistical
package, until the operator answers or the user abandons the call.
b.- VARIABLES USED AS INDICATORS:
b.1.- The sum total of waiting time, computed as of the moment that calls are
received by the Automated Call Distribution Center until they are answered by
Operators or the User abandons the call.
b.2.- Total number of calls received by the Automated Call Distribution Center.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
b.1/b.2
d.- POINT OF MEASUREMENT:
Statistical package used by the Automated Call Distribution Center.
e.- SIZE OF SAMPLING:
Total number of calls received by the Automated Call Distribution Center.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
From the time a call enters the call waiting line, until answered by an operator
or abandoned by the user; from 7:30 a.m. to 7:00 p.m., Monday to Friday, and
from 8:00 a.m. to 2:00 p.m. on Saturdays. CANTV holidays are excluded.
g.- REPORTS:
Total monthly calculation, evaluated quarterly and measured annually. Results
at national level.
h.- PERIOD USED AS OBJECTIVE:
Annual.
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4.1.3 DOMESTIC LONG DISTANCE SERVICE (100), DOMESTIC REVERSE CHARGES SERVICE
(101), INFORMATION (103) AND INTERNATIONAL LONG DISTANCE (122)
Average time, measured in seconds, during which Domestic Long Distance (100),
Domestic Reverse Charges Service (101), Information (103) and International Long
Distance (122) operators delay in answering calls from Users.
a.- FORM OF MEASUREMENT:
Calls for Information Service (103) are measured by the Automated Call
Distributor of the Directory Assistence System. Calls for National Long
Distance (100 and 101) and International (122) are measured by their respective
digital facilities.
b.- VARIABLES USED AS INDICATORS:
b.1.- The sum total of waiting time measured in seconds: the percentage of
answered calls received in X seconds (where X is the annual objective of each
service) are converted into average answer time using a conversion program based
on the tables of Erlang C. Luego; the daily call volume shall be multiplied by
the average answer time. The results shall be aggregated to derive a monthly
total.
b.2.- Total number of calls received monthly.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
b.1/b.2, for each of the services. In calculating the monthly objective,
variables b.1 and b.2 are measured during the corresponding month. In
calculating the annual objective, variables b.1 and b.2 are measured in the
aggregate during the year.
d.- POINT OF MEASUREMENT:
From entry of the call into the call waiting line.
e.- SIZE OF SAMPLING:
Total number of calls.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
From the time a call enters the call waiting line, during business days, from
six (6) in the morning until midnight of the same day. CANTV holidays are
excluded.
g.- REPORTS:
Total calculated monthly, delivered quarterly. Aggregate results at national
level.
h.- PERIOD USED AS OBJECTIVE:
Annual, nationally, maximum monthly with evaluation quarterly.
i.- OBSERVATIONS:
When statistical data are not available due to exceptional circumstances,
calculations shall be taken from data available for the corresponding month.
Supporting data shall be Annexed with the respective justifications. In the
case of Domestic Reverse Charges Service (101), the same
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methodology as Long Distance Service shall be used until new technology is
implemented and the parties agree on the appropriate manner of calculation.
14
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4.2. PERCENTAGE OF CALLS ANSWERED FROM TRAFFIC TO OPERATOR SERVICES
Percentage of calls answered by different operator services. "Calls answered" is
defined as those calls which are ultimately answered by either a human operator
or by robot.
a.- FORM OF MEASUREMENT:
At digital facilities, using statistical packages; at analog facilities, by
manual statistical sampling.
b.- VARIABLES USED AS INDICATORS:
b.1.- Calls answered: in accordance with operator services.
b.2.- Calls attempted: calls attempted for each service operator which have
received a sufficient number of digits to be received..
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
(b.1/b.2)* 100
d.- POINT OF MEASUREMENT:
At the local center of origin.
e.- SIZE OF SAMPLING:
All fixed digital facilities and the size of the statistical sample for analog
facilities.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
Five business days of each month, 24 hours per day.
g.- REPORTS:
Total calculated monthly, delivered quarterly. Results drawn discriminately at
national level by Operating Division.
h.- PERIOD USED AS OBJECTIVE:
Annual, nationally, minimum monthly with evaluation quarterly.
i.- OBSERVATIONS:
The sample model to be used at analog facilities shall be defined by agreement
among the parties. While this model is being defined, measurements shall only be
taken at digital facilities. In the case of the Customer Attention Center,
reports will not be delivered until a sample statistical model and the objective
to be used are defined.
In the case of the Domestic Reverse Charges Service (101), measurements will be
taken during the first quarter of the year 2000 in order to determine the
objective to be used for that year; no reports will be delivered during this
quarterly period.
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5.- EFFECTIVENESS OF BILLING
5.1.- BILLING CLAIMS
Claims arising from each 100 invoices, per month.
5.1.1.- CLAIMS FOR CANTV'S OWN SERVICES
a.- FORM OF MEASUREMENT:
Billing claims sent to customer attention points which are directed to CANTV for
reception, expedited via the Attention to Claims System.
b.- VARIABLES USED AS INDICATORS:
b.1.- Total number of claims arising from billing, except those arising from
services rendered by third parties (Infolin, 900 Service, Telcel, Movilnet,
Infonet, Digitel, Elca and others that may be used), as well as claims for
overpayment and rates claims.
b.2.- Total number of bills issued.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
(b.1/b.2)* 100 In calculating the monthly objective, variables b.1 and b.2
shall be measured during the corresponding month. In calculating the annual
objective, variables b.1 and b.2 shall be measured in the aggregate for such
year.
d.- POINT OF MEASUREMENT:
Attention to Claims System.
e.- SIZE OF SAMPLING:
Total billing claims arising from services performed by CANTV and total billing
invoices issued by the Billing System.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
Monthly
g.- REPORTS:
Total calculated monthly, delivered quarterly. Results at national level.
h.- PERIOD USED AS OBJECTIVE:
Annual, nationally, maximum monthly with evaluation quarterly.
i.- OBSERVATIONS:
(1) CANTV shall present quarterly an itemized breakdown of claims per type of
service, as additional information. These reports shall be presented using
absolute values, registered and converted to billing claims.
(2) A Billing Claim shall be understood to mean any claim based on customer
disagreement with one or various charges reflected in the same invoice from
CANTV.
(3) Exceptional cases which shall not be considered in the computation of this
indicator include significant adjustments caused by the "Procedure which
corrects errors created by the conversion of digits associated with the
millennium change (Y2K Project)", as well as the implementation of
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the "Regulatory Numbering Framework" or "National Numbering Plan" which are in
effect. In such cases, CANTV shall notify the Regulatory Agency of any problems
sustained, their impact and the appropriate corrective action plan.
(4) The origin and processing of claims shall be determined by CANTV through
its "Procedure for Investigation of Billing Claims", which may be reviewed by
the Regulatory Agency at its discretion.
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5.1.2. THIRD PARTY CLAIMS
a.- FORM OF MEASUREMENT:
Billing claims sent to customer attention points which are directed to CANTV for
reception, expedited via the Attention to Claims System.
b.- VARIABLES USED AS INDICATORS:
b.1.- Total number of claims arising from billing, except those arising from
services rendered by third parties (Infolin, 900 Service, Telcel, Movilnet,
Infonet, Digitel, Elca and others that may be used), but excepting claims of
overpayment and rate claims.
b.2.- Total number of bills issued.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
(b.1/b.2)* 100 In calculating the monthly objective, variables b.1 and b.2 shall
be measured during the corresponding month. In calculating the annual objective,
variables b.1 and b.2 shall be measured in the aggregate for such year.
d.- POINT OF MEASUREMENT:
Attention to Claims System.
e.- SIZE OF SAMPLING:
Total billing claims arising from services performed by Third Parties and total
billing invoices issued by the Billing System.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
Monthly
g.- REPORTS:
Total calculated monthly, delivered quarterly. Results at national level.
h.- PERIOD USED AS OBJECTIVE:
Annual, nationally, with evaluation quarterly.
i.- OBSERVATIONS:
(1) During the first quarter of the year 2000, and following evaluation of
performance indicators, the parties shall agree on objectives that will govern
subsequent quarters in 2000.
(2) CANTV shall present quarterly an itemized breakdown of claims per provider
as additional information. These reports shall be presented using absolute
values, registered and converted to billing claims.
(3) A Billing Claim shall be understood to mean any claim based on customer
disagreement with one or various charges reflected in the same invoice from
CANTV.
(4) Exceptional cases which shall not be considered in the computation of this
indicator include significant adjustments caused by the "Procedure which
corrects errors created by the conversion of digits associated with the
millennium change (Y2K Project)", as well as the implementation of the
"Regulatory Numbering Framework" or "National Numbering Plan" which are in
effect. In such cases, CANTV shall notify the Regulatory Agency of any problems
sustained, their impact and the appropriate corrective action plan.
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(5) The origin and processing of claims shall be determined by CANTV through
its "Procedure for Investigation of Billing Claims", which may be reviewed by
the Regulatory Agency at its discretion.
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5.2.- REGULAR BILLING TIME
The number of days elapsed as of the time International and Domestic Long
Distance calls are made until the time such calls are billed.
a.- FORM OF MEASUREMENT:
Determined based on days elapsed from the date of the call until the close of
the cycle during which such call was billed.
b.- VARIABLES USED AS INDICATORS:
b.1.- Total number of international and domestic long distance calls billed
over a period of less than 45 days.
b.2.- Total number of international and domestic long distance calls billed.
c.- CALCULATION TO OBTAIN INDICATOR/WEIGHING/TABULATION:
(b.1/b.2)* 100 In calculating the monthly objective, variables b.1 and b.2
shall be measured during the corresponding month. In calculating the annual
objective, variables b.1 and b.2 shall be measured in the aggregate for such
year.
d.- POINT OF MEASUREMENT:
Database of the Billing System.
e.- SIZE OF SAMPLING:
Total number of calls billed during the measurement period.
f.- TIME AND FREQUENCY OF MEASUREMENTS:
Monthly
g.- REPORTS:
Total calculated monthly, delivered quarterly. Results at national level.
h.- PERIOD USED AS OBJECTIVE:
Annual.
i.- OBSERVATIONS:
(1) The calculation used to obtain the indicator shall be based on the total
number of days elapsed from the date calls are made until the time the billing
process is concluded with respect to such bills.
(2) The measurement of this indicator shall not include services provided by
third parties or international reverse charges calls.
(3) Exceptional cases which shall not be considered in the computation of this
indicator include significant adjustments caused by the "Procedure which
corrects errors created by the conversion of digits associated with the
millennium change (Y2K Project)", as well as the implementation of the
"Regulatory Numbering Framework" or "National Numbering Plan" which are in
effect. In such cases, CANTV shall notify the Regulatory Agency of any problems
sustained, their impact and the appropriate corrective action plan.
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<PAGE>
1.- METHODOLOGY FOR FORMULATING THE OBJECTIVES FOR THE "TIME TO ESTABLISH A
CALL" INDICATOR
The "Time to Establish a Call" is the time that elapses from the moment the last
digit is dialed until an answering tone or signal is received. The answering
tones or signals which shall be considered are as follows: ringing signal, busy
signal, nonexisting line signal, congested circuit tone, answering machine,
recorded message or answer by robot or operator.
a.- FORM OF MEASUREMENT:
Manual Measurement, with a stopwatch or wrist watch, of calls made to different
types of traffic (Intra, Inter, DDN, DDI, Mobile Cellular Phone and Special
Services). A test matrix will be produced to assure that the calls are carried
out.
b.- SELECTION OF SAMPLING:
For each week of measurement, 7 digital facilities (AXE, EWSD, NEAX, Micro-1000,
SED and 5ESS) and 3 analog facilities (ARF, Pentaconta y Mobiles) of different
technologies shall be selected in accordance with the proportions in which they
exist in the region.
c.- MEASURING PERIOD:
The 4 week period between 2/7/2000 and 3/3/2000.
d.- SIZE OF SAMPLING:
All measurements will be carried out in:
1. Capital Region
Intra Traffic: Digitals (21 calls); Analogs (9 calls)
Inter Traffic: Digitals (189 calls); Analogs (81 calls)
DDN Traffic: Digitals (189 calls); Analogs (81 calls)
DDI Traffic: Digitals (21 calls); Analogs (9 calls)
SE Traffic: Digitals (49 calls); Analogs (21 calls)
TMC Traffic: Digitals (84 calls); Analogs (36 calls)
2. Central Region
Intra Traffic: Digitals (21 calls); Analogs (9 calls)
Inter Traffic: (90 calls); Analogs (36 calls)
DDN Traffic: Digitals (189 calls); Analogs (81 calls)
DDI Traffic: Digitals (21 calls); Analogs (9 calls)
SE Traffic: Digitals (49 calls); Analogs (21 calls)
TMC Traffic: Digitals (84 calls); Analogs (36 calls)
3. Western Region
Intra Traffic: Digitals (21 calls); Analogs (9 calls)
Inter Traffic: Digitals (117 calls); Analogs (24 calls)
DDN Traffic: Digitals (189 calls); Analogs (81 calls)
DDI Traffic: Digitals (21 calls); Analogs (9 calls)
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SE Traffic: Digitals (49 calls); Analogs (21 calls)
TMC Traffic: Digitals (84 calls); Analogs (36 calls)
4. Eastern Region
Intra Traffic: Digitals (21 calls); Analogs (9 calls)
Inter Traffic: Digitals (87 calls); Analogs (39 calls)
DDN Traffic: Digitals (189 calls); Analogs (81 calls)
DDI Traffic: Digitals (21 calls); Analogs (9 calls)
SE Traffic: Digitals (49 calls); Analogs (21 calls)
TMC Traffic: Digitals (84 calls); Analogs (36 calls)
e.- TIME AND FREQUENCY OF MEASUREMENTS:
During business days from 9 a.m. to 12 noon and 2 p.m. to 5 p.m.
f.- ANALYSIS OF RESULTS:
The results will be analyzed over the ten business days following the conclusion
of the final measurement, i.e., 3/8/2000 to 3/21/2000.
g.- ESTABLISHING OBJECTIVES:
In accordance with the analysis of the results, the different alternatives for
the achievement of objectives shall be presented within a period not exceeding 5
days.
h.- OBSERVATIONS:
. A matrix of test calls shall be Annexed
. The measurements shall be taken by answering machines, except in cases of
mobile cellular phones, CPA and special services.
. In the case of DDI calls, the measurements shall be taken by CANTV's
international center automatic answering machine.
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CANTV
Switchboard Engineering & Maintenance Division
TEST MATRIX OF TIME TO ANSWER SIGNALS FROM COMPLETED CALLS
<TABLE>
<CAPTION>
Start Time:
End Time:
Region: Western
-----------------------------------------------------------------------------------------------------------
INTRA INTER LDN DDI
- ------------------------------------------------------------------------------------------------------------------------------------
Facility Type ATT ARF ARF ITT NEAX EWSD SDE/MT MOV CPA AXE ATT EWSD NEAX ITT ARF MOV SDE MTEL DDI
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TIBISAY EWSD
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
LA LAGO ATT
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
Santa Barbara ATT
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
CABUDARE EWSD
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
CIUDAD OJEDA NEAX
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
URDANETA NEAX
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
La Mesa de MTEL
Chipire
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
PUNTO FIJO ARF
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
BARINAS ITT
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
INTRA INTER LDN DDI
- ------------------------------------------------------------------------------------------------------------------------------------
Facility Type ATT ARF ARF ITT NEAX EWSD SDE/MT MOV CPA AXE ATT EWSD NEAX ITT ARF MOV SDE MTEL DDI
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
CHIQUINQUIRA MOV
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
CANTV
Switchboard Engineering & Maintenance Division
TEST MATRIX OF TIME TO ANSWER SIGNALS FROM COMPLETED CALLS
Start Time:
End Time:
Region: Western
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
SPECIAL SERVICES TMC
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Facility Type 15 100 101 103 122 171 800-21515 012-8001901 014- 016- 018-
- ---------------------------------------------------------------------------------------------------------------------------------
TIBISAY EWSD
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ---------------------------------------------------------------------------------------------------------------------------------
LA LAGO ATT
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ---------------------------------------------------------------------------------------------------------------------------------
St Barbara ATT
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ---------------------------------------------------------------------------------------------------------------------------------
CABUDARE EWSD
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ---------------------------------------------------------------------------------------------------------------------------------
Ciudad Ojeda NEAX
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ---------------------------------------------------------------------------------------------------------------------------------
URDANETA NEAX
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ---------------------------------------------------------------------------------------------------------------------------------
CHIPIRE MTEL
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ---------------------------------------------------------------------------------------------------------------------------------
PUNTO FIJO ARF
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ---------------------------------------------------------------------------------------------------------------------------------
BARINAS ITT
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ---------------------------------------------------------------------------------------------------------------------------------
CHIQUINQUIRA MOV
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ---------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
TEST MATRIX OF TIME TO ANSWER SIGNALS FROM COMPLETED CALLS
Start Time:
End Time:
Region: CAPITAL
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
INTRA INTER LDN DDI
- ---------------------------------------------------------------------------------------------------------------------------
Facility Type AXE ATT ARF ARF ITT EWSD MOV CPA AXE ATT EWSD NEAX ITT ARF MOV SDE MTEL DDI
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FAJ. 472 AXE
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ---------------------------------------------------------------------------------------------------------------------------
CHAC 261 AXE
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ---------------------------------------------------------------------------------------------------------------------------
CHAG. 693 ATT
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ---------------------------------------------------------------------------------------------------------------------------
TRINIDAD ATT
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ---------------------------------------------------------------------------------------------------------------------------
FDA-762 EWSD
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ---------------------------------------------------------------------------------------------------------------------------
PAST. 861 EWSD
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ---------------------------------------------------------------------------------------------------------------------------
CARRIZAL EWSD
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ---------------------------------------------------------------------------------------------------------------------------
CAOBOS-572 ARF
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ---------------------------------------------------------------------------------------------------------------------------
FAJ-442 ITT
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ---------------------------------------------------------------------------------------------------------------------------
SAN JOSE 375 MOV
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
INTRA INTER LDN DDI
- ---------------------------------------------------------------------------------------------------------------------------
Facility Type AXE ATT ARF ARF ITT EWSD MOV CPA AXE ATT EWSD NEAX ITT ARF MOV SDE MTEL DDI
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Time Call 2
- ---------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
CANTV
Switchboard Engineering & Maintenance Division
TEST MATRIX OF TIME TO ANSWER SIGNALS FROM COMPLETED CALLS
Start Time:
End Time:
Region: CAPITAL
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
SPECIAL SERVICES TMC
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Facility Type 15 100 101 103 122 171 800-21515 012-8001901 014- 016- 018-
- ----------------------------------------------------------------------------------------------------------------------------------
Faj. 472 AXE
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------------------
CHAC 261 AXE
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------------------
Chag. 693 ATT
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------------------
Trinidad ATT
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------------------
Fda-762 EWSD
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------------------
PAST. 861 EWSD
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------------------
Carrizal EWSD
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------------------
Caobos-572 ARF
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------------------
Faj-442 ITT
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
SPECIAL SERVICES TMC
- -----------------------------------------------------------------------------------------------
Facility Type 15 100 101 103 122 171 800-21515 012-8001901 014- 016- 018-
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
San Jose 375 MOV
- -----------------------------------------------------------------------------------------------
Time " Call 1
- -----------------------------------------------------------------------------------------------
Time " Call 2
- -----------------------------------------------------------------------------------------------
Time " Call 3
- -----------------------------------------------------------------------------------------------
</TABLE>
TEST MATRIX OF TIME TO ANSWER SIGNALS FROM COMPLETED CALLS
Start Time:
End Time:
Region: CENTRAL
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
INTRA INTER LDN DDI
- ------------------------------------------------------------------------------------------------------------------------------------
Facility Type AXE ATT ARF ARF ITT EWSD MOV SDE/MT NEAX CPA AXE ATT EWSD NEAX ITT ARF MOV SDE MTEL DDI
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calabozo AXE
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
La Romana AXE
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
Camoruco AXE
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
Pt. Ayacucho ATT
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
San Felipe EWSD
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
San Fernando EWSD
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
NIRGUA NEAX
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
Maracay C. ARF
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
Acarigua ITT
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
El Consejo MOV
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CANTV
Switchboard Engineering & Maintenance Division
TEST MATRIX OF TIME TO ANSWER SIGNALS FROM COMPLETED CALLS
Start Time:
End Time:
Region: CENTRAL
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
SPECIAL SERVICES TMC
- --------------------------------------------------------------------------------------------------
Facility Type 15 100 101 103 122 171 800-21515 012-8001901 014- 016- 018-
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calabozo AXE
- --------------------------------------------------------------------------------------------------
Time " Call 1
- --------------------------------------------------------------------------------------------------
Time " Call 2
- --------------------------------------------------------------------------------------------------
Time " Call 3
- --------------------------------------------------------------------------------------------------
La Romana AXE
- --------------------------------------------------------------------------------------------------
Time " Call 1
- --------------------------------------------------------------------------------------------------
Time " Call 2
- --------------------------------------------------------------------------------------------------
Time " Call 3
- --------------------------------------------------------------------------------------------------
Camoruco AXE
- --------------------------------------------------------------------------------------------------
Time " Call 1
- --------------------------------------------------------------------------------------------------
Time " Call 2
- --------------------------------------------------------------------------------------------------
Time " Call 3
- --------------------------------------------------------------------------------------------------
Pto. Ayacucho ATT
- --------------------------------------------------------------------------------------------------
Time " Call 1
- --------------------------------------------------------------------------------------------------
Time " Call 2
- --------------------------------------------------------------------------------------------------
Time " Call 3
- --------------------------------------------------------------------------------------------------
San Felipe EWSD
- --------------------------------------------------------------------------------------------------
Time " Call 1
- --------------------------------------------------------------------------------------------------
Time " Call 2
- --------------------------------------------------------------------------------------------------
Time " Call 3
- --------------------------------------------------------------------------------------------------
San Fernando EWSD
- --------------------------------------------------------------------------------------------------
Time " Call 1
- --------------------------------------------------------------------------------------------------
Time " Call 2
- --------------------------------------------------------------------------------------------------
Time " Call 3
- --------------------------------------------------------------------------------------------------
NIRGUA NEAX
- --------------------------------------------------------------------------------------------------
Time " Call 1
- --------------------------------------------------------------------------------------------------
Time " Call 2
- --------------------------------------------------------------------------------------------------
Time " Call 3
- --------------------------------------------------------------------------------------------------
Maracay C. ARF
- --------------------------------------------------------------------------------------------------
Time " Call 1
- --------------------------------------------------------------------------------------------------
Time " Call 2
- --------------------------------------------------------------------------------------------------
Time " Call 3
- --------------------------------------------------------------------------------------------------
Acarigua ITT
- --------------------------------------------------------------------------------------------------
Time " Call 1
- --------------------------------------------------------------------------------------------------
Time " Call 2
- --------------------------------------------------------------------------------------------------
Time " Call 3
- --------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
SPECIAL SERVICES TMC
- --------------------------------------------------------------------------------------------------
Facility Type 15 100 101 103 122 171 800-21515 012-8001901 014- 016- 018-
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
El Consejo MOV
- --------------------------------------------------------------------------------------------------
Time " Call 1
- --------------------------------------------------------------------------------------------------
Time " Call 2
- --------------------------------------------------------------------------------------------------
Time " Call 3
- --------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
CANTV
Switchboard Engineering & Maintenance Division
TEST MATRIX OF TIME TO ANSWER SIGNALS FROM COMPLETED CALLS
Start Time:
End Time:
Region: Eastern
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
INTRA INTER LDN DDI
- -----------------------------------------------------------------------------------------------------------------------------------
Facility Type ARF NEAX SDE/MT MOV CPA AXE ATT EWSD NEAX ITT ARF MOV SDE MTEL DDI
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LECHERIAS NEAX
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- -----------------------------------------------------------------------------------------------------------------------------------
Puerto Ordaz NEAX
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- -----------------------------------------------------------------------------------------------------------------------------------
Las Moreas NEAX
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- -----------------------------------------------------------------------------------------------------------------------------------
CARUPANO NEAX
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- -----------------------------------------------------------------------------------------------------------------------------------
SF dela Paragua MTEL
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- -----------------------------------------------------------------------------------------------------------------------------------
MIRAFLORES SDE
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- -----------------------------------------------------------------------------------------------------------------------------------
EL TEJERO SDE
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- -----------------------------------------------------------------------------------------------------------------------------------
Puerto Ordaz ARF
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- -----------------------------------------------------------------------------------------------------------------------------------
ANZOATEGUI ARF
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 1
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- -----------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- -----------------------------------------------------------------------------------------------------------------------------------
CANTAURA MOV
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Time Call 1
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 2
- ------------------------------------------------------------------------------------------------------------------------------------
Time Call 3
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CANTV
Switchboard Engineering & Maintenance Division
TEST MATRIX OF TIME TO ANSWER SIGNALS FROM COMPLETED CALLS
Start Time:
End Time:
Region: Eastern
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
SPECIAL SERVICES TMC
- -----------------------------------------------------------------------------------------------------------------------
Facility Type 15 100 101 103 122 171 800-21515 012-8001901 014- 016- 018-
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lecherias NEAX
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------
Puerto Ordaz NEAX
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------
Las Moreas NEAX
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------
Carupano NEAX
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------
Paragua MTEL
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------
Miraflores SDE
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------
El Tejero SDE
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------
Puerto Ordaz ARF
- ----------------------------------------------------------------------------------------------------------------------
Time" Call 1
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------
Anzoategui ARF
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
SPECIAL SERVICES TMC
- -----------------------------------------------------------------------------------------------------------------------
Facility Type 15 100 101 103 122 171 800-21515 012-8001901 014- 016- 018-
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------
Cantaura MOV
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 1
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 2
- ----------------------------------------------------------------------------------------------------------------------
Time " Call 3
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
2.- METHODOLOGY FOR FORMULATING THE OBJECTIVES FOR THE INDICATOR "PERCENTAGE OF
CALLS ANSWERED FROM TRAFFIC DIRECTED TO CUSTOMER ATTENTION SERVICE CENTER (CAC)
80021515"
Percentage of calls answered by the Customer Attention Service Center (CAC)
80021515
a.- FORM OF MEASUREMENT:
Measured manually through calls made in phases from the caller's facility of
origin.
b.- SELECTION OF SAMPLING:
For each week of measurement, 7 digital facilities (AXE, EWSD, NEAX, Micro-1000,
SED and 5ESS) and 3 analog facilities (ARF, Pentaconta and Mobiles) of different
technologies shall be selected in accordance with the proportions in which they
exist in the region.
c.- MEASURING PERIOD:
The 4-week period between 2/7/2000 and 3/3/2000.
d.- SIZE OF SAMPLING:
Total sampling will be measured in four regions: Capital, Central, Western and
Eastern, and 20 calls will be made per facility, for a total of 200 calls per
region.
e.- TIME AND FREQUENCY OF MEASUREMENTS:
During business days from 9 a.m. to 12 noon and 2 p.m. to 5 p.m.
f.- ANALYSIS OF RESULTS:
The results will be analyzed over the 10 business days following the conclusion
of the final measurement, in effect 3/8 to 3/21/2000.
g.- ESTABLISHING OBJECTIVES:
In accordance with the analysis of the results, the different alternatives for
the achievement of objectives shall be presented within a period not exceeding 5
days.
h.- OBSERVATIONS:
A matrix of test calls shall be annexed.
1
<PAGE>
CANTV
Switchboard Engineering & Maintenance Division
TEST MATRIX OF PERCENTAGE OF ANSWERED CALLS
Start Time:
End Time:
Region: CAPITAL
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
800-2-1515
- -----------------------------------------------------------------------------------------------------------------------------------
Facility Type C-1 C-2 C-3 C-4 C-5 C-6 C-7 C-8 C-9 C-10 C-11 C-12 C-13 C-14 C-15 C-16 C-17 C-18 C-19 C-20
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Faj 472 AXE
- -----------------------------------------------------------------------------------------------------------------------------------
Chac 261 AXE
- -----------------------------------------------------------------------------------------------------------------------------------
Chaj. 693 ATT
- -----------------------------------------------------------------------------------------------------------------------------------
Trinidad ATT
- -----------------------------------------------------------------------------------------------------------------------------------
Fda-762 EWSD
- -----------------------------------------------------------------------------------------------------------------------------------
Past. 861 EWSD
- -----------------------------------------------------------------------------------------------------------------------------------
Carrizal EWSD
- -----------------------------------------------------------------------------------------------------------------------------------
Caobos 472 ARF
- -----------------------------------------------------------------------------------------------------------------------------------
Faj. 442 ITT
- -----------------------------------------------------------------------------------------------------------------------------------
San Jose 375 MOV
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
CANTV
Switchboard Engineering & Maintenance Division
TEST MATRIX OF PERCENTAGE OF ANSWERED CALLS
Start Time:
End Time:
Region: Central
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
800-2-1515
- -----------------------------------------------------------------------------------------------------------------------------------
Facility Type C-1 C-2 C-3 C-4 C-5 C-6 C-7 C-8 C-9 C-10 C-11 C-12 C-13 C-14 C-15 C-16 C-17 C-18 C-19 C-20
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Calabozo AXE
- -----------------------------------------------------------------------------------------------------------------------------------
La Romana AXE
- -----------------------------------------------------------------------------------------------------------------------------------
Camoruco AXE
- -----------------------------------------------------------------------------------------------------------------------------------
Pto. Ayacucho ATT
- -----------------------------------------------------------------------------------------------------------------------------------
San Felipe EWSD
- -----------------------------------------------------------------------------------------------------------------------------------
San Fernando EWSD
- -----------------------------------------------------------------------------------------------------------------------------------
Nirgua NEAX
- -----------------------------------------------------------------------------------------------------------------------------------
Maracay C. ARF
- -----------------------------------------------------------------------------------------------------------------------------------
Acarigua ITT
- -----------------------------------------------------------------------------------------------------------------------------------
El Consejo MOV
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
CANTV
Switchboard Engineering & Maintenance Division
TEST MATRIX OF PERCENTAGE OF ANSWERED CALLS
Start Time:
End Time:
Region: Western
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
800-2-1515
- ------------------------------------------------------------------------------------------------------------------------------------
Facility Type C-1 C-2 C-3 C-4 C-5 C-6 C-7 C-8 C-9 C-10 C-11 C-12 C-13 C-14 C-15 C-16 C-17 C-18 C-19 C-20
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tibisay EWSD
- ------------------------------------------------------------------------------------------------------------------------------------
La Lago ATT
- ------------------------------------------------------------------------------------------------------------------------------------
Santa Barbara ATT
- ------------------------------------------------------------------------------------------------------------------------------------
Cabudare EWSD
- ------------------------------------------------------------------------------------------------------------------------------------
Ciudad Ojeda NEAX
- ------------------------------------------------------------------------------------------------------------------------------------
Urdaneta NEAX
- ------------------------------------------------------------------------------------------------------------------------------------
Mesa de Chipire MTEL
- ------------------------------------------------------------------------------------------------------------------------------------
Punto Fijo ARF
- ------------------------------------------------------------------------------------------------------------------------------------
Barinas ITT
- ------------------------------------------------------------------------------------------------------------------------------------
Chiquinquira MOV
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
CANTV
Switchboard Engineering & Maintenance Division
TEST MATRIX OF PERCENTAGE OF ANSWERED CALLS
Start Time:
End Time:
Region: Eastern
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
800-2-1515
- ------------------------------------------------------------------------------------------------------------------------------------
Facility Type C-1 C-2 C-3 C-4 C-5 C-6 C-7 C-8 C-9 C-10 C-11 C-12 C-13 C-14 C-15 C-16 C-17 C-18 C-19 C-20
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lecherias NEAX
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Ordaz NEAX
- ------------------------------------------------------------------------------------------------------------------------------------
Las Moreas NEAX
- ------------------------------------------------------------------------------------------------------------------------------------
Carupano NEAX
- ------------------------------------------------------------------------------------------------------------------------------------
S.F. Paragua MTEL
- ------------------------------------------------------------------------------------------------------------------------------------
Miraflores SDE
- ------------------------------------------------------------------------------------------------------------------------------------
El Tejero SDE
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Ordaz ARF
- ------------------------------------------------------------------------------------------------------------------------------------
Anzoategui ARF
- ------------------------------------------------------------------------------------------------------------------------------------
Cantaura MOV
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
