TRANSTEL S A, F-4/A, 1999-05-14

TRANSTEL S A
F-4/A, 1999-05-14
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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<PAGE>

As filed with the Securities and Exchange Commission on May 14, 1999
Registration No. 333-49871
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

--------------

AMENDMENT NO. 4 TO
FORM F-4

REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933

--------------
TRANSTEL S.A. TRANSTEL PASS THROUGH TRUST
(Exact name of Registrant as (Exact name of Registrant as specified
specified in its charter) in its trust agreement)

COLOMBIA DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)

4813 4813
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)

c/o Wilmington Trust Company
Calle 15 #33-289 Rodney Square North
Autopista, Cali-Yumbo Km.2 1100 North Market Street
Cali-Valle, Colombia Wilmington, Delaware 19890-0001
57-2-680-8888 (302) 651-1000
(Address, including zip code, and (Address, including zip code, and
telephone number, including area telephone number, including area code,
code, of Registrant's principal of Registrant's principal executive
executive offices) offices)

--------------

CT CORPORATION With a copy to:
1633 Broadway, New York, New York Bernard E. Kury
10019 Dewey Ballantine LLP
(212) 664-1666 1301 Avenue of the Americas
(Name, address, including zip code, New York, New York 10019-1035
and telephone number, including area
code, for agent of service)

--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Proposed Proposed maximum
Title of each class of securities to Amount to be maximum offering aggregate offering Amount of
be registered registered(1) price per unit(2) price(2) registration fee(3)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exchange Certificates
(as defined herein).... U.S. $150.0 million 100% U.S. $150.0 million U.S.$44,250.00
- -------------------------------------------------------------------------------------------------------------------
Exchange Guarantee (as
defined herein)(4).....
- -------------------------------------------------------------------------------------------------------------------
Senior Notes (as defined
herein)(5).............
- -------------------------------------------------------------------------------------------------------------------
Total................... U.S. $150.0 million 100% U.S. $150.0 million U.S.$44,250.00
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents principal amount at maturity.
(2) Determined solely for the purposes of calculating the registration fee in
accordance with Rule 457 promulgated under the Securities Act.
(3) Calculated in accordance with Rule 457(f)(2) under the Securities Act,
based on the face value.
(4) No separate consideration will be received by the Issuer for issuing the
Exchange Guarantee.
(5) The registration fee was previously paid at the time of the filing of the
original registration statement which covered the Exchange Certificates.

--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

There are a total of 232 pages contained in this Registration Statement.
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This prospectus shall not constitute an offer to sell or +
+the solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion, dated

PROSPECTUS

Offer to Exchange All Outstanding
12 1/2% Pass Through Trust Certificates due 2007,

for

12 1/2% Pass Through Exchange Certificates due 2007,
in each case representing interests in 12 1/2% Senior Notes due 2007

issued by

TRANSTEL S.A.

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON JUNE 12, 1999 (AS SUCH DATE MAY BE EXTENDED, THE "EXPIRATION
DATE").

Transtel S.A. (the "Company" or "Transtel"), a Colombian corporation,
together with Transtel Pass Through Trust, a Delaware business trust (the
"Trust" or "Issuer"), created pursuant to the Trust Agreement of Transtel Pass
Through Trust, dated as of October 20, 1997 (the "Original Trust Agreement"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange all outstanding 12 1/2% Pass Through Trust Certificates due 2007 (the
"Original Certificates"), issued by the Trust, for a like aggregate principal
amount of 12 1/2% Pass Through Exchange Certificates due 2007 (the "Exchange
Certificates"), issued by the Trust, each representing a pro rata interest in
the $150.0 million aggregate principal amount of 12 1/2% Senior Notes due 2007
(the "Senior Notes"), issued by the Company. Both the Original Certificates and
the Exchange Certificates (together, the "Certificates") are guaranteed by the
Company. The Original Certificates and the Original Guarantee (as defined
herein) are collectively referred to herein as the "Original Securities" and
the Exchange Certificates and the Exchange Guarantee (as defined herein) are
collectively referred to herein as the "Exchange Securities." The terms of the
Exchange Securities are substantially identical to the terms of the Original
Securities, except that the Exchange Securities will have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and will not
contain terms restricting the transfer of such securities. For a complete
description of the Exchange Securities, see "Description of the Certificates"
and "Description of the Guarantees." The Company will not receive any cash
proceeds from, and will pay all expenses incident to, the Exchange Offer.
(Continued on the following page)

See "Risk Factors" beginning on page 19 for a discussion of certain risks
that should be considered by the Original Certificateholders in deciding
whether to tender Original Certificates in the Exchange Offer.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

-----------

THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. ORIGINAL CERTIFICATEHOLDERS (AS DEFINED HEREIN) ARE URGED TO READ
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL CERTIFICATES PURSUANT TO THE EXCHANGE OFFER.

-----------

The date of this Prospectus is .
<PAGE>

(Continued from previous page)

The issuance of the Original Certificates and the purchase of the Senior
Notes by the Trust that occurred on October 28, 1997 are referred to herein as
the "Offering." The holders of Original Certificates (the "Original
Certificateholders") and the holders of the Exchange Certificates (the
"Exchange Certificateholders") are collectively referred to as the
"Certificateholders". The Certificates represent undivided beneficial
interests in the assets of the Trust. Wilmington Trust Company is the Pass
Through Trustee (the "Pass Through Trustee") of the Trust. The Trust exists
for the sole purpose of issuing and selling the Certificates, investing the
proceeds from the issuance of the Original Certificates in the Senior Notes,
registering the Exchange Securities under the Securities Act, exchanging the
Original Securities for Exchange Securities, and engaging in only those other
activities necessary or incidental thereto.

The Senior Notes bear interest at a rate of 12 1/2% per annum payable
semiannually in cash on each May 1 and November 1 of each year (each referred
to herein as an "Interest Payment Date"), commencing May 1, 1998. Interest
distributions made on each May 1 and November 1 will be paid to the persons
who are the registered Certificateholders on the April 15 and October 15, as
the case may be, immediately preceding such Interest Payment Date. Each
Certificateholder will be entitled to receive a pro rata share of any payments
received by, or on behalf of, the Pass Through Trustee on behalf of the Trust
in respect of the Senior Notes.

Transtel S.A. is a holding company that conducts substantially all of its
operations through Operating Companies (as defined herein). Transtel S.A.
loaned a portion of the proceeds of the Senior Notes (totaling approximately
$95.5 million) to certain of its Operating Companies. These loans are
evidenced by Intercompany Notes (as defined herein). The Intercompany Notes
are senior unsecured obligations of each of such Operating Companies.
Therefore, other than claims under the Intercompany Notes, the Senior Notes
are effectively subordinated to all debt and other liabilities of the
Operating Companies. As of December 31, 1998, the Senior Notes are effectively
subordinated to Ps58.8 billion ($38.1 million) of debt and other liabilities
of the Operating Companies.

The Senior Notes are senior obligations of Transtel S.A. ranking pari passu
with all existing and future senior indebtedness of Transtel S.A. On December
31, 1998, Transtel S.A. issued $15.0 million of its Discount Notes (as defined
herein). Such Discount Notes rank pari passu with the Senior Notes in terms of
a contractual right of repayment. Such Discount Notes are the only senior
indebtedness of Transtel S.A., other than the Senior Notes. Therefore, as of
December 31, 1998, the Senior Notes ranked pari passu with $15.0 million of
indebtedness of Transtel S.A. The Senior Notes are secured by a pledge of the
Intercompany Notes and the Escrow Account (as defined herein). See
"Description of the Senior Notes--Security." The Discount Notes will be
guaranteed by the Operating Company or Operating Companies in which Transtel
S.A. invests the proceeds of the Discount Notes and/or in which Transtel S.A.
acquires the minority interests of such Operating Company. See "Summary--
Recent Development--Discount Notes."

The Senior Notes are redeemable, in whole or in part, at the option of the
Company, on or after November 1, 2002, at the redemption prices set forth
herein plus accrued and unpaid interest to the date of redemption. In
addition, in the event of the sale by the Company of at least $25.0 million of
its Capital Stock (as defined herein) in one or more Public Equity Offerings
(as defined herein) or to one or more Strategic Equity Investors (as defined
herein), on or prior to November 1, 2000, the Company may, at its option, use
the net cash proceeds of such sale or sales to redeem up to 35% of the Senior
Notes at a redemption price herein of the principal amount thereof plus
accrued and unpaid interest to the date of redemption. Upon a Change of
Control (as defined herein), the Company will be required to make an offer to
repurchase the Senior Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, to the date of repurchase.

2
<PAGE>

its own account in exchange for Original Certificates, where such Original
Certificates were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Certificates. See
"Plan of Distribution." If an Original Certificateholder does not exchange
such Original Certificates for Exchange Certificates pursuant to the Exchange
Offer, such Original Certificates will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the
Original Certificates may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. See "The
Exchange Offer--Consequences of Failure to Exchange; Resale of Exchange
Certificates".

The Trust will accept for exchange any and all Original Certificates that
are validly tendered on or prior to 5:00 p.m., New York City time, on the date
the Exchange Offer expires, which will be June 12, 1999, unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Original Certificates
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum number
of Original Certificates being tendered for exchange.

Any Original Certificates not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will
be subject to all the same limitations applicable thereto under the Trust
Agreement (except for certain rights to be registered under the Act which
terminate upon consummation of the Exchange Offer). Following consummation of
the Exchange Offer, all untendered and tendered but unaccepted Original
Certificates, if any, will continue to be subject to all of the existing
restrictions upon transfer provided thereon and neither the Company nor the
Trust will have any further obligation to such Original Certificateholders to
provide for registration under the Securities Act of the Original Certificates
held by them. To the extent that Original Certificates are not tendered and
accepted in the Exchange Offer, an Original Certificateholder's ability to
sell untendered and tendered but unaccepted Original Certificates could be
adversely affected. See "Risk Factors--Consequences of a Failure to Exchange."

Prior to this Exchange Offer, there has been no public market for the
Original Certificates and there can be no assurance that an active public or
private market for the Certificates will develop. The Company does not intend
to list the Certificates on any national securities exchange or to seek
admission thereof to trading on the National Association of Securities Dealers
Automated Quotation System. Even if a market for the Certificates should
develop, the Certificates could trade at a discount from their face value.

THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, ORIGINAL CERTIFICATEHOLDERS IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.

IN THIS PROSPECTUS, UNLESS OTHERWISE SPECIFIED OR THE CONTEXT OTHERWISE
REQUIRES, REFERENCES TO "Ps" OR "PESOS" ARE TO COLOMBIAN PESOS, REFERENCES TO
"DOLLARS," "U.S. $" AND "$" ARE TO UNITED STATES DOLLARS AND THE TERMS "UNITED
STATES" AND "U.S." MEAN THE UNITED STATES OF AMERICA, ITS TERRITORIES,
POSSESSIONS AND ALL AREAS SUBJECT TO ITS JURISDICTION.

3
<PAGE>

ENFORCEABILITY OF CIVIL LIABILITIES

The Company is a sociedad anomina organized under the laws of Colombia. The
directors and officers of the Company and certain experts named in this
Prospectus reside outside of the United States, and all or a substantial
portion of the assets of such persons and of the Company are located outside
the United States. As a result, it may not be possible for the Pass Through
Trustee, the Indenture Trustee (as defined herein), Guarantee Trustee (as
defined herein) or the Certificateholders to effect service of process within
the United States upon such persons, including with respect to matters arising
under the Securities Act, or to enforce against the Company or any of such
persons judgments of courts of the United States predicated upon the civil
liability provisions of the federal securities laws of the United States or
under the Certificate Guarantees. The Company has been advised by its
Colombian legal counsel, Annieta Mantilla & Asociados, Abogados that there is
doubt as to the enforceability, in original actions in Colombian courts, of
liabilities predicated solely on the United States federal securities laws and
as to the enforceability in Colombian courts of judgments of United States
courts obtained in actions predicated upon the civil liability provisions of
the United States federal securities laws. The Company has appointed CT
Corporation System, New York, New York, as its agent to receive service of
process with respect to any action brought against it in any federal or state
court in the State of New York, arising from this Exchange Offer and the
Certificate Guarantees. The Company has been advised by its Colombian legal
counsel that a claim by the Pass Through Trustee, the Indenture Trustee or a
United States Certificateholder in connection with this Exchange Offer or the
Certificate Guarantees may be brought in Colombian courts. See "Enforcement of
Foreign Judgments in Colombia."

AVAILABLE INFORMATION

The Company and the Trust have filed with the Commission under the
Securities Act, a registration statement (which term includes any amendments
thereto) (the "Registration Statement") on Form F-4, of which this Prospectus
(the "Prospectus") is a part, with respect to the Exchange Certificates
offered hereby. This Prospectus does not contain all the information set forth
in or annexed as an exhibit to the Registration Statement. Such additional
information, and other information filed by the Company, may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission maintained at 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, at prescribed rates. The Commission also
maintains an Internet Web Site at http://www.sec.gov that contains reports and
other information. Statements contained in this Prospectus describing the
contents of any contract or other document referred to herein do not
necessarily describe such documents in their entirety, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.

Neither the Company nor the Trust is currently subject to the information
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Upon the effectiveness of this Registration Statement, the
Company and the Trust will become subject to such requirements. The Trust
intends to seek and expects to receive exemptions from such requirements. The
Company intends to comply with such requirements, which will continue for so
long as the Company is required to do so pursuant to Section 15(d) of the
Exchange Act. In the event that the Company is not required or shall cease to
be required to file reports with Commission pursuant to the Exchange Act,
pursuant to the Indenture, the Company shall nevertheless continue to file
such reports with the Commission and the Indenture Trustee.

4
<PAGE>

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements. These forward-looking
statements reflect the Company's views with respect to future events and
financial performance. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors as
well as other factors discussed elsewhere herein. See "Risk Factors." The
words "believe," "expect" and "anticipate" and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of their dates. The
Company undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise. Many factors could cause the Company's actual results to differ
materially from historical results or the results projected in the forward-
looking statements. Among these factors are those identified in "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

MARKET AND POPULATION DATA

Market data used throughout this Prospectus was obtained from internal
company surveys and industry publications. Industry publications generally
state that the information contained therein has been obtained from sources
believed to be reliable, but that the accuracy and completeness of such
information is not guaranteed. The Company has not independently verified this
market data. Similarly, internal company surveys, while believed by the
Company to be reliable, have not been verified by any independent sources.

Data regarding population in Colombia are based on preliminary projections
of 1995 population figures calculated by the Departamento Administrativo
Nacional de Estadistica (National Administrative Department of Statistics)
("DANE") on the basis of the 1993 census. There can be no assurance that these
projections accurately reflect the current population in Colombia. Information
regarding subscriber penetration and line data in Colombia is derived from
information supplied by the Departamento Nacional de Planeacion (National
Planning Department) ("DNP") as of December 31, 1995.

EXCHANGE RATES

Until 1991, the Banco de la Republica of Colombia (the "Central Bank") set
an official exchange rate (the "Official Rate") applicable to all foreign
exchange transactions, based on its prevailing economic policy. Since October
1991, exchange rates have been freely set by the market. The Superintendencia
Bancaria of Colombia (the "Superintendency of Banking") calculates and
publishes daily the representative market rate, which is the weighted average
of the buy and sell rates quoted on the previous business day by certain
commercial banks and financial institutions in Santafe de Bogota, Cali,
Medellin and Barranquilla for the purchase and sale of Dollars (the
"Representative Market Rate"). The Representative Market Rate serves as a
basis for many foreign exchange transactions conducted on the foreign exchange
market and the free market as defined under Law 9 of 1991. From October 1991
through January 1995, the Central Bank set the Official Rate for certain
limited purposes. Since February 1994, the Central Bank issues buy and sell
quotations that form a band within which the Representative Market Rate can
move freely.

5
<PAGE>

The following table sets forth the Official Rate at the end of each period
indicated and, for each such period, the high, low, average and end of period
Representative Market Rate. The Federal Reserve Bank of New York does not
report a noon buying rate for Pesos.

<TABLE>
<CAPTION>
Official Rate Representative Market Rate
-------------------- --------------------------------------------------
% Change % Change
Period From Prior Period From Prior
End Period End Low High Average End Period End
--------- ---------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1992.................... Ps 811.8 14.8% Ps 632.6 Ps 720.5 Ps 682.5 Ps 738.0 16.7%
1993.................... 917.3 13.0 738.7 819.6 786.5 804.3 9.0
1994.................... 1,018.8 11.0 804.3 843.3 829.4 831.3 3.3
1995.................... N/A N/A 831.3 1,003.5 987.1 987.6 18.8
1996.................... N/A N/A 987.6 1,074.7 1,000.5 1,005.4 1.8
1997.................... N/A N/A 1,005.3 1,307.5 1,141.0 1,293.6 28.7
1998 ................... N/A N/A 1,341.9 1,577.2 1,433.6 1,542.1 19.2
1999 (through
March 31,1999)......... N/A N/A 1,525.6 1,596.6 1,533.5 1,561.0 1.2
</TABLE>
- --------
N/A means not applicable.
Sources: Central Bank; Superintendency of Banking

The Representative Market Rate calculated by the Superintendency of Banking
for April 30, 1999 was Ps1,604.44 for one Dollar. For the convenience of the
reader, this Prospectus contains translations of Peso amounts into Dollars,
unless otherwise indicated, at the Representative Market Rate as of December
31, 1998 of Ps1,542.11 for one Dollar. Unless otherwise noted, all financial
information included in this Prospectus has, for comparability purposes, been
restated in constant Pesos as of December 31, 1998, by indexing historical
amounts using the Colombian Middle-Income Consumer Price Index ("MCPI"). No
representation is made that the Peso or Dollar amounts shown in this
Prospectus could have been or could be converted into Dollars or Pesos, as the
case may be, at any particular rate or at all.

6
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety and should be read in
conjunction with the more detailed information and the financial statements,
including the notes thereto, included elsewhere in this Prospectus. As used in
this Prospectus, unless otherwise specified, the "Company" or "Transtel" means
Transtel S.A. and its non wholly-owned subsidiaries. Unless otherwise
specified, the financial information in this Prospectus is reflected in
constant Pesos as of December 31, 1998 and is presented in accordance with
generally accepted accounting principles in Colombia ("Colombian GAAP").
Certain capitalized terms used in this Prospectus are defined herein under the
caption "Glossary of Certain Telecommunications Terms."

The Company

The Company is the largest private telephone company in Colombia, providing
telephone services to both business and residential subscribers. The Company
currently owns and operates seven telephone systems serving ten cities, with an
aggregate population of approximately 3.1 million people, located in the
southwestern region of Colombia. Those cities are Palmira, Cartago, Popayan,
Buga, Yumbo, Jamundi, Cali, Girardot, Flandes and Ricaurte. In each city
(except in Cali where the Company joined with the local municipality in Yumbo
and in Flandes and Ricaute where the Company joined with the local municipality
in Girardot), the Company has joined with the local municipality in such city
to form an operating company to own and operate the telephone system, and the
Company owns a majority (60% or more) (other than Popayan where the Company
owns 51%) of the capital stock, with the balance being owned by the
municipality. As of December 31, 1998, the Company's systems provided service
to an aggregate of approximately 235,300 subscribers and had an average
penetration of approximately 23.9 lines per 100 people. On December 15, 1998,
the Company completed its acquisition of Cablevision S.A. and Suscripciones
Audiovisuales S.A. (together "Cablevision"). The statistical, financial and
other data in this Prospectus does not include information regarding
Cablevision, except where specifically indicated. For information regarding,
Cablevision see "Prospectus Summary--Recent Developments" herein.

The Company was formed in August 1993 by certain members of the Caicedo
family, a prominent Colombian family, and Guillermo Lopez, the Company's
President and a Director, to take advantage of the Colombian government's
recent initiatives to deregulate and privatize the state-owned
telecommunications sector. Managment's goal is to capitalize on the substantial
demand for telephone service which the Company believes exists throughout
Colombia. The Company has created an Expansion Plan (as defined herein)
pursuant to which the Company intends to increase the number of installed lines
and to upgrade its telephone networks to state-of-the-art digital and fiber-
optic technology. See "Business--Expansion Plan".

Colombia is one of the oldest democracies and most stable economies in Latin
America and is one of only three countries in Latin America rated investment
grade by all three major rating agencies. Annual inflation declined over the
past seven years from 26.8% in 1991 to 16.7% in 1998. See "Business--Colombia
and Colombian Telephony Market Overview".

The Company is located at Calle 15 #33-289, Autopista, Cali-Yumbo Km.2, Cali-
Valle, Colombia, and its telephone number is (572) 660-8888.

The Trust

The Trust is a statutory business trust, created under Delaware law pursuant
to the Original Trust Agreement and the filing of a certificate of trust with
the Delaware Secretary of State on October 20, 1997. The Trust is governed by
the Trust Agreement. Wilmington Trust Company is the Pass Through Trustee for
the Trust. HSBC Bank USA (formerly known as Marine Midland Bank) will act as
the paying agent, registrar, Indenture Trustee and Exchange Agent (as defined
herein). All action taken by the Trust will be conducted by the Pass Through
Trustee. The Trust exists for the exclusive purposes of (i) issuing and selling
the Certificates, (ii) using the

7
<PAGE>

proceeds from the sale of the Original Certificates to acquire the Senior
Notes, (iii) registering the Exchange Securities under the Securities Act, (iv)
exchanging the Original Securities for the Exchange Securities and (v) engaging
in only those other activities necessary or incidental thereto (such as
soliciting directions from the Certificateholders and taking such actions as
the Certificateholders owning a majority of the principal amount of the
Certificates direct). Accordingly, the Senior Notes will be the sole assets of
the Trust, and payments received in respect of the Senior Notes will be the
sole source of revenue of the Trust.

The Exchange Certificates will constitute a new issue of securities for which
there is no trading market. See "Risk Factors--Lack of a Market for the
Exchange Certificates; Risks Associated with Non-Investment Grade Debt."

The principal executive office of the Trust is c/o Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, and its telephone number is (302)
651-1000.

The Exchange Offer

Securities Offered.......... $150.0 million aggregate principal amount of 12
1/2% Exchange Certificates due 2007. Each
Exchange Certificate along with each Original
Certificate remaining outstanding after the
Exchange Offer, if any, represent pro rata
interests in all of the assets of the Trust,
including the Senior Notes and all payments of
principal, interest, redemption premium, if any,
and Additional Amounts (as defined herein), if
any, made in respect of the Senior Notes.

Exchange Agent.............. The exchange agent with respect to the Exchange
Offer is HSBC Bank USA (formerly known as Marine
Midland Bank) (in such capacity, the "Exchange
Agent"). The address, telephone and facsimile
numbers of the Exchange Agent are set forth in
"The Exchange Offer--Exchange Agent" and in the
accompanying Letter of Transmittal.

The Exchange Offer.......... Offer to exchange all outstanding Original
Certificates for Exchange Certificates. As of the
date hereof, $150.0 million aggregate principal
amount of Original Certificates are issued and
outstanding. The Company has agreed to make the
Exchange Offer in order to satisfy its
obligations under the Registration Rights
Agreement, dated as of October 28, 1997, among
the Company, the Trust, as Issuer, and BT Alex
Brown Incorporated, as initial purchaser (the
"Initial Purchaser") (the "Registration Rights
Agreement"). For a description of the procedures
for tendering, see "The Exchange Offer--
Procedures for Tendering Original Certificates."

Resale...................... Based on certain interpretive letters issued by
the staff of the Commission to third parties in
unrelated transactions, Original
Certificateholders (other than any holder who is
an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) who
exchange their Original Certificates for Exchange
Certificates pursuant to the Exchange Offer
generally may offer such Exchange

8
<PAGE>

Certificates for resale, resell such Exchange
Certificates, and otherwise transfer such
Exchange Certificates without compliance with the
registration and prospectus delivery provisions
of the Securities Act provided such Exchange
Certificates are acquired in the ordinary course
of the holders' business and such holders are not
participating in, and have no arrangement or
understanding with any person to participate in,
a distribution of such Exchange Certificates.
Each broker-dealer that receives Exchange
Certificates for its own account in exchange for
Original Certificates, where such Original
Certificates were acquired by such broker-dealer
as a result of market-making activities or other
trading activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such Exchange Certificates. See "Plan
of Distribution." If an Original
Certificateholder does not exchange such Original
Certificates for Exchange Certificates pursuant
to the Exchange Offer, such Original Certificates
will continue to be subject to the restrictions
on transfer contained in the legend thereon. In
general, the Original Certificates may not be
offered or sold, unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws. See "The Exchange Offer--Consequences of
Failure to Exchange; Resale of Exchange
Certificates".

Expiration Date;
Withdrawal................. The Exchange Offer will expire at 5:00 p.m., New
York City time, on June , 1999 (as such date may
be extended, the "Expiration Date"). Original
Certificates tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the
Expiration Date. Any Original Certificates not
accepted for exchange for any reason will be
returned without expense to the tendering holders
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
See "The Exchange Offer".

Conditions to Exchange The Exchange Offer is subject to certain
Offer...................... conditions. See "The Exchange Offer--Certain
Conditions to the Exchange Offer." The Exchange
Offer is not conditioned upon any minimum amount
of Original Certificates being tendered for
exchange.

U.S. Federal Income Tax
Considerations.............
The exchange of the Original Certificates for the
Exchange Certificates will not be a taxable event
to the holder for U.S. federal income tax
purposes and, thus, the holder will not recognize
any taxable gain or loss as a result of such
exchange. See "Taxation--United States."

Colombian Tax The exchange of the Original Certificates for the
Considerations............. Exchange Certificates will not be a taxable event
for Colombian tax purposes to "Non-Colombian
Holders" and therefore the holder will not
recognize any taxable gain or loss as a result of
such exchange. See "Taxation--Colombia."

9
<PAGE>

Certain ERISA Original Certificateholders should review the
Considerations............. information set forth under "Certain ERISA
Considerations" prior to acquiring an interest in
the Exchange Certificates.

Use of Proceeds............. None of the Company, the Trust or the Original
Certificateholders will receive any cash proceeds
from the issuance of the Exchange Certificates
offered hereby.

Procedures for Tendering
Original Certificates......
Tendering Original Certificateholders must
complete and sign a Letter of Transmittal in
accordance with the instructions contained
therein and forward the same by mail, facsimile
or hand delivery, or an Agent's Message (as
defined herein) in lieu thereof, together with
any other required documents, to the Exchange
Agent either with the Original Certificates to be
tendered or in compliance with the specified
procedures for guaranteed delivery of Original
Certificates. Certain brokers, dealers,
commercial banks, trust companies and other
nominees may also effect tenders by book-entry
transfer. Original Certificateholders whose
Original Certificates are registered in the name
of a broker, dealer, commercial bank, trust
company or other nominee are urged to contact
such person promptly if they wish to tender
Original Certificates pursuant to the Exchange
Offer. See "The Exchange Offer--Procedures for
Tendering Original Certificates."

Letters of Transmittal and Original Certificates
should not be sent to the Company or the Trust.
Such documents should only be sent to the
Exchange Agent.

Untendered Original Upon consummation of the Exchange Offer, the
Certificates............... Original Certificateholders, if any, will have no
further registration or other rights under the
Registration Rights Agreement. Original
Certificateholders who do not tender their
certificates in the Exchange Offer or whose
Original Certificates are not accepted for
exchange will continue to hold such Original
Certificates and will be entitled to all the same
rights and will be subject to all the same
limitations applicable thereto under the Trust
Agreement (except for certain rights to be
registered under the Act which terminate as a
result of this Exchange Offer). All untendered
and tendered but unaccepted Original
Certificates, if any, will continue to be subject
to all of the existing restrictions upon transfer
provided therein. To the extent that Original
Certificates are not tendered and accepted in the
Exchange Offer, an Original Certificateholder's
ability to sell untendered and tendered but
unaccepted Original Certificates could be
adversely affected.

Consequences of Exchanging Original Certificates Pursuant to the Exchange Offer

10
<PAGE>

pursuant to the Exchange Offer generally may offer such Exchange Certificates
for resale, resell such Exchange Certificates, and otherwise transfer such
Exchange Certificates without compliance with the registration and prospectus
delivery provisions of the Securities Act provided such Exchange Certificates
are acquired in the ordinary course of the holders' business and such holders
are not participating in, and have no arrangement or understanding with any
person to participate in, a distribution of such Exchange Certificates. Each
broker-dealer that receives Exchange Certificates for its own account in
exchange for Original Certificates, where such Original Certificates were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Certificates. See "Plan of
Distribution." If an Original Certificateholder does not exchange such Original
Certificates for Exchange Certificates pursuant to the Exchange Offer, such
Original Certificates will continue to be subject to the restrictions on
transfer contained in the legend thereon. In general, the Original Certificates
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. See "The Exchange Offer--
Consequences of Failure to Exchange; Resale of Exchange Certificates".

The Original Certificates are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
Following commencement of the Exchange Offer but prior to its consummation, the
Original Certificates may continue to be traded in the PORTAL market. However,
to the extent that Original Certificates are tendered and accepted in
connection with the Exchange Offer, any trading market for remaining Original
Certificates will be adversely affected. Following consummation of the Exchange
Offer, the Exchange Certificates will not be eligible for PORTAL trading.

The Exchange Certificates

The terms of the Exchange Certificates are identical in all material respects
to the Original Certificates, except for certain transfer restrictions and
registration rights relating to the Original Certificates.

Issuer of the Senior Transtel S.A., a Colombian corporation.
Notes......................

Issuer of the Original Transtel Pass Through Trust, a special purpose
Certificates............... Delaware business trust.

Issuer of the Exchange Transtel Pass Through Trust, a special purpose
Certificates............... Delaware business trust.

Maturity Date............... November 1, 2007.

Distribution Dates.......... Each May 1 and November 1, following the Exchange
Offer.

Interest Rate and Payment The Senior Notes bear interest at a rate of 12
Dates...................... 1/2% per annum payable semiannually on each May 1
and November 1, commencing May 1, 1998.

Escrow Account.............. The Company has deposited approximately $35.3
million of the net proceeds realized from the
sale of the Senior Notes, representing funds
sufficient to pay the first four interest
payments on the Senior Notes, in the Escrow
Account created pursuant to the Escrow and
Disbursement Agreement, dated as of October 28,
1998, among HSBC Bank USA (formerly known as
Marine Midland Bank), as Escrow Agent, the
Indenture Trustee , and the Company (the "Escrow
and Disbursement Agreement") (the "Escrow
Account")

11
<PAGE>

to be held by the Escrow Agent. Funds will be
disbursed from the Escrow Account only to pay
interest on the Senior Notes and, upon certain
repurchases or redemptions of the Senior Notes,
to pay principal of and premium, if any, thereon.

Refinancing Account......... The Company placed approximately $32.8 million of
the net proceeds realized from the sale of the
Senior Notes, representing funds sufficient for
the payment of indebtedness outstanding on
October 28, 1998 which the Company owed to
various financial institutions ("Other Existing
Indebtedness"), in an escrow account created
under the Escrow and Disbursement Agreement (the
"Refinancing Account") held by the Escrow Agent.

The Company has repaid the Other Existing
Indebtedness and the Refinancing Account (as
defined herein) has been terminated.

Optional Redemption......... The Senior Notes are redeemable, in whole or in
part, at the option of the Company on or after
November 1, 2002 at the redemption prices set
forth herein plus accrued and unpaid interest to
the date of redemption.

Redemption Upon Sale of
Capital Stock..............
At any time or from time to time on or prior to
November 1, 2000, in the event of the sale by the
Company of at least $25.0 million of its Capital
Stock in one or more Public Equity Offerings or
to one or more Strategic Equity Investors, the
Company may, at its option, use the net cash
proceeds of such sale or sales to redeem up to
35% of the Senior Notes at a redemption price
specified herein of the principal amount thereof
plus accrued and unpaid interest to the date of
redemption; provided, that at least 65% of the
initial aggregate amount of the Senior Notes
originally issued remains outstanding after any
such redemption.

Security.................... As of December 31, 1998, the Company has loaned
approximately $95.5 million of the proceeds of
the Senior Notes to its Operating Companies.
These loans are evidenced by intercompany notes
(the "Intercompany Notes"). The Senior Notes are
secured by a pledge of the Intercompany Notes and
the Escrow Account.

Ranking..................... Other than claims under the Intercompany Notes,
the Senior Notes are effectively subordinated to
all debt and other liabilities of the Operating
Companies. As of December 31, 1998, the Senior
Notes are effectively subordinated to Ps58.8
billion ($38.1 million) of debt and other
liabilities of the Operating Companies. The
Senior Notes are senior obligations of Transtel
S.A. ranking pari passu with all existing and
future senior indebtedness of Transtel S.A. On
December 31, 1998, Transtel S.A. issued $15.0
million of its Discount Notes. Such Discount
Notes rank pari passu with the Senior Notes in
terms of a contractual right of repayment. Such
Discount Notes are the only senior indebtedness
of Transtel S.A., other than the Senior Notes.
Therefore, as of December 31, 1998,

12
<PAGE>

the Senior Notes ranked pari passu with $15.0
million of indebtedness of Transtel S.A. The
Senior Notes are secured by a pledge of the
Intercompany Notes and the Escrow Account. See
"Description of Senior Notes--Security." The
Discount Notes will be guaranteed by the
Operating Company or Operating Companies in which
Transtel S.A. invests the proceeds of the
Discount Notes.

Change of Control........... Upon a Change of Control, the Company will be
required to make an offer to repurchase the
Senior Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest, to the date of repurchase. See "Risk
Factors--Inability to Redeem Senior Notes within
One Year."

Certain Covenants........... The Indenture imposes certain limitations on the
ability of the Company and its subsidiaries to,
among other things, incur additional
indebtedness, incur liens, pay dividends or make
certain other restricted payments, consummate
certain asset sales, enter into certain
transactions with affiliates, issue preferred
stock, merge or consolidate with any other person
or sell, assign, transfer, lease, convey, or
otherwise dispose of all or substantially all of
the assets of the Company and its subsidiaries.
Pursuant to the Indenture, the Company may not
loan more than 20% of the proceeds from the
issuance of the Senior Notes to any one Operating
Company. The amount loaned to each of the
Operating Companies was finalized as of December
31, 1998 and the balances as of that date are as
follows (in millions of Dollars):

<TABLE>
<S> <C>
Unitel................................................. $29.9
TeleJamundi............................................ 21.8
TelePalmira............................................ 22.8
TeleCartago............................................ 9.8
Caucatel............................................... 7.4
Bugatel................................................ 3.8
-----
$95.5
=====
</TABLE>

For additional information concerning (i) the Exchange Offer, see "The
Exchange Offer," (ii) the Exchange Certificates, see "Description of the
Certificates" and (iii) the Senior Notes, see "Description of the Senior
Notes."

Risk Factors

See "Risk Factors" for a discussion of certain factors which should be
considered by prospective investors in evaluating the exchange of the Original
Certificates for the Exchange Certificates.

Transtel Pass Through Trust--Summary Financial Data

The following summary financial data for the Trust have been derived from the
audited financial statements for the Trust as of and for the period from
October 20, 1997 (inception) through December 31, 1997 and as of and for the
year ended December 31, 1998, separately included elsewhere herein, both
prepared in accordance

13
<PAGE>

with U.S. GAAP. This information should be read in conjunction with, and is
qualified in its entirety by reference to "Transtel Pass Through Trust--
Selected Financial Data and Managements's Discussion and Analysis" and the
financial statements of the Trust, including the notes thereto, included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
As of or for the period
October 20, 1997 As of or for the year
through ended December 31,
December 31, 1997 1998
----------------------- ---------------------
(in thousands of Dollars)
<S> <C> <C>
Statement of Distributable
Income:
Distributable income--
interest..................... $ 3,281 $ 19,781
Statement of Assets and
Undivided Interests:
Total assets.................. 153,281 153,658
Undivided interest of
Certificateholders........... 153,281 153,658
</TABLE>

The Trust is a statutory business trust, created under Delaware law pursuant
to a trust agreement and the filing of a certificate of trust with the Delaware
Secretary of State on October 20, 1997. The Trust is governed by the Amended
and Restated Trust Agreement, dated October 28, 1997, among Transtel, S.A.,
Wilmington Trust Company, as pass through trustee and the holders of the
certificates. The Trust exists for the exclusive purposes of (i) issuing and
selling the certificates; (ii) using the proceeds from the sale of the
certificate to acquire the Senior Notes; and (iii) engaging in only those other
activities necessary or incidental thereto. Accordingly, the Senior Notes and
related accrued interest are and will be the sole assets of the Trust and
payments received in respect of the Senior Notes is and will be the sole source
or revenue of the Trust.

On October 28, 1997, the Trust sold $150.0 million of certificates
representing pro rata interests in the assets of the Trust. Concurrently, the
Trust used the proceeds of the sale to purchase $150.0 million of 12 1/2%
Senior Notes due 2007 issued by Transtel. On October 28, 1997 the Company
executed the Original Certificate Guarantee, for the benefit of the Original
Certificateholders, whereby the Company fully, irrevocably and unconditionally
guaranteed all of the Trust's obligations under the Original Certificates.

14
<PAGE>

Transtel S.A.--Summary Financial and Other Data

The Company was incorporated in 1993 and commenced offering telephone
services in September 1995. Accordingly, the Company has no commercial
operating history prior to such time, and results for 1995 are not directly
comparable to those of 1996. The Company was in a preoperating stage prior to
September 1, 1995 and capitalized all of its net expenses as deferred costs;
thus, no statement of income is presented for 1994. The summary statement of
income data for each of the years ended December 31, 1995, 1996, 1997 and 1998,
and the summary balance sheet data as of December 31, 1994, 1995, 1996, 1997
and 1998 have been derived from audited financial statements, including the
audited consolidated financial statements for the three years ended December
31, 1998 included elsewhere herein (the "Consolidated Annual Financial
Statements"). This information should be read in conjunction with, and is
qualified in its entirety by reference to, "Transtel S.A.--Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Annual Financial Statements, including the notes thereto,
included elsewhere in this Prospectus.

The Consolidated Annual Financial Statements included herein have been
prepared in conformity with Colombian GAAP (including restatement of the
financial information in constant pesos as of December 31, 1998), which differs
in certain significant aspects from generally accepted accounting principles in
the United States ("U.S. GAAP"). Note 31 to the Consolidated Annual Financial
Statements provides a discussion of the principal differences between Colombian
and U.S. GAAP as they relate to the Company and a reconciliation of net income
and shareholders' equity for the Company as of and for the years ended December
31, 1996, 1997 and 1998 to amounts calculated in accordance with U.S. GAAP.

Dollar equivalent information set forth below has been included solely for
the convenience of the reader, and is translated from Pesos at the
Representative Market Rate in effect on December 31, 1998 of Ps1,542.11 to one
Dollar. Such translation should not be construed as a representation that the
Peso amounts represent, or have been or could be converted into, Dollars at
that rate or any other rate.

Unless otherwise indicated, all financial information included in this
Prospectus has, for comparability purposes, been restated in constant Pesos as
of December 31, 1998 by indexing historical amounts using the MCPI. Although
the restatement of nominal Pesos into constant Pesos lessens the distorting
effect that an inflationary environment has on comparisons of Consolidated
Financial Statements over time, such restatement does not wholly eliminate
those distortions and evaluation of period-to-period trends may be difficult.
See "Risk Factors--Corporate Disclosure and Accounting Standards" and "Risk
Factors--Inflation."

15
<PAGE>

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------------
(in thousands of constant Pesos of December 31, 1998 purchasing
power and in thousands of Dollars, except per share amounts)
1995 1996 1997 1998 1998
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Income
Data:
Colombian GAAP:
Revenues.............. Ps 2,807,094 Ps 13,755,565 Ps 30,730,089 Ps 85,639,390 $ 55,534
Costs and expenses.... 1,337,658 8,273,861 19,585,706 43,690,931 28,332
Operating income...... 1,469,436 5,481,704 11,144,383 41,948,459 27,202
Interest expense...... 329,691 2,250,450 9,408,807 30,606,827 19,847
Income tax expense.... 431 380,041 1,347,014 5,185,064 3,362
Minority interest
expense.............. 595,671 2,654,826 4,759,974 10,004,372 6,487
Net income(1)......... 894,475 3,863,145 1,258,834 11,524,840 7,474
Earnings per share.... 0.39 0.97 0.28 1.84 --
U.S. GAAP:
Revenues.............. Ps 2,100,261 Ps 8,937,406 Ps 31,692,078 Ps 85,775,466 $55,622
Operating income
(loss)............... (2,746,361) (208,438) 6,913,210 40,573,581 26,310
Interest expense...... 1,878,027 9,803,423 17,044,196 33,619,389 21,801
Net loss.............. (3,427,116) (3,457,437) (2,590,525) 6,984,184 4,529
Basic and diluted
earnings (loss) per
share................ (0.11) (0.10) (0.08) 0.20 --
</TABLE>

<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------
(in thousands of constant Pesos of December 31,1998
purchasing power and in thousands of Dollars, except per share amounts)
1994 1995 1996 1997 1998 1998
----------- ------------ ------------ ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (end of period):
Colombian GAAP:
Cash.................. Ps 7,242 Ps 833,688 Ps15,943,884 Ps 3,226,399 Ps 3,574,256 $ 2,318
Properties, plant and
equipment, net....... -- 26,289,970 31,144,030 130,997,131 264,084,214 171,249
Total assets.......... 4,704,812 40,568,998 99,987,458 408,668,566 508,350,458 329,646
Short-term debt(2).... -- 3,119,883 20,709,482 18,584,628 21,449,577 13,909
12 1/2% Senior Notes
due 2007............. -- -- -- 224,474,459 231,316,500 150,000
20.32% Senior Discount
Notes due 2008....... -- -- -- -- 23,131,650 15,000
Other long-term
debt(3)(4)........... -- 14,015,692 30,190,136 11,346,025 45,008,576 29,186
Minority interest..... -- 10,936,213 20,284,410 49,052,598 57,812,814 37,489
Shareholders' equity.. 4,015,140 8,290,357 22,385,774 61,359,260 76,289,978 49,471
U.S. GAAP:
Cash.................. Ps -- Ps 833,688 Ps15,943,884 Ps 3,226,399 Ps 3,574,256 $ 2,318
Properties, plant and
equipment, net....... -- 30,169,147 38,176,375 143,900,953 291,984,440 189,341
Total assets.......... -- 37,355,166 72,530,567 369,246,016 464,274,047 301,063
Short-term
debt(2)(4)........... -- 3,576,668 21,340,995 19,650,283 23,256,234 15,081
12 1/2% Senior Notes
due 2007............. -- -- -- 224,474,459 231,316,500 150,000
20.32% Senior Discount
Notes due 2008....... -- -- -- -- 23,131,650 15,000
Other long-term
debt(3)(4)(5)........ -- 17,415,169 32,716,180 14,077,217 50,386,238 32,674
Minority interest..... -- 10,177,292 8,551,357 37,503,077 44,648,215 28,953
Shareholders' equity
(deficit)............ -- 2,463,242 (1,381,680) 33,082,031 40,213,610 26,077
</TABLE>

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------------
(in thousands of constant Pesos of December 31, 1998 purchasing power
and in thousands of Dollars, except Network and Operating Data)
1995 1996 1997 1998 1998
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Other Financial Data:
Colombian GAAP:
Capital
expenditures(6)....... Ps 18,688,441 Ps 12,192,329 Ps 63,165,351 Ps88,132,783 $ 57,151
Depreciation and
amortization(1)....... 372,454 1,484,922 4,520,502 11,972,262 7,763
Indebtedness(7)........ 21,524,610 54,475,913 249,733,242 326,964,835 212,024
Deficiency of earnings
to fixed
charges(8)(9)......... (13,836) (135,882) (1,600,376) N/A N/A
U.S. GAAP:
Capital
expenditures(6)....... Ps 18,693,156 Ps 12,498,184 Ps 64,384,081 Ps 89,744,234 $ 58,196
Depreciation and
amortization.......... 409,848 1,894,717 5,871,666 16,528,367 10,718
Deficiency of earnings
to fixed
charges(8)(9)......... (3,961,704) (6,271,305) (228,673) N/A N/A
Network and Operating
Data (end of period):
Systems in operation.... 1 1 7 8
Population.............. 317,995 317,995 3,058,600 3,058,600
Subscribers............. 22,260 29,528 95,475 235,311
Penetration(10)......... 7.0 9.3 19.2 23.9
</TABLE>
(footnotes on following page)

16
<PAGE>

- --------
(1) For Colombian GAAP purposes, as of January 1, 1996, TelePalmira changed
from the straight-line to the reverse sum of the years digits' method of
computing depreciation which had the effect of decreasing 1996 depreciation
(and increasing 1996 income before income taxes and minority interest) by
Ps1,088,426 ($706) and increasing 1996 net income by Ps653,054 ($423). For
U.S. GAAP purposes, all periods use the straight-line method.
(2) Short-term debt includes short-term debt, current portion of other long-
term debt, current portion of capital lease obligations, current portion of
DIAN Financing (U.S. GAAP only) and the current portion of the Transtel-
Siemens Purchase Agreement, the TeleGiarardot-Siemens Purchase Agreement
and an equipment purchase payable to IBM. See Notes 12, 16 and 19 to the
Consolidated Annual Financial Statements.
(3) Other long-term debt includes other long-term debt, capital lease
obligations, noncurrent portion of DIAN Financing (U.S. GAAP only) and the
noncurrent portion of the Transtel-Siemens Purchase Agreement, the
TeleGiarardot-Siemens Purchase Agreement and an equipment purchase payable
to IBM. See Notes 12, 19 and 20 to the Consolidated Annual Financial
Statements.
(4) The following table reconciles the U.S. GAAP amounts for short-term debt
and other long-term debt at December 31, 1998 to debt presented in
"Capitalization" and in the U.S. GAAP balance sheet on page F-45:

<TABLE>
<CAPTION>
Balance Sheet Caption Current Noncurrent Total
--------------------- ------- ---------- -----
<S> <C> <C> <C>
Short-term debt.................. Ps13,578,652 Ps -- Ps13,578,652
Other long-term debt............. 1,464,219 8,813,801 10,278,020
Capital lease obligations........ 4,808,809 30,665,784 35,474,593
DIAN Financing................... 1,107,958 3,323,874 4,431,832
Transtel-Siemens Purchase
Agreement, TeleGirardot-Siemens
Purchase Agreement and IBM
equipment purchases (included in
other current liabilities and
other noncurrent liabilities--
see Notes 16 and 20 of the
Consolidated Annual Financial
Statements)..................... 2,296,596 7,582,779 9,879,375
------------ ------------ ------------
Total......................... Ps23,256,234 Ps50,386,238 Ps73,642,472
============ ============ ============
</TABLE>

(5) Under U.S. GAAP, all capital leases are required to be recorded as
liabilities as they arise, including the Global I Lease, Global II Lease,
Global III Lease Global IV Lease, and future leases to be entered into
between Global and an Operating Company (the "Future Global Leases")
(together the "Global Leases") and the IBM Arrangement (as defined herein),
both of which comprise a portion of the Vendor Financing, and the DIAN
Financing. Under Colombian GAAP, the DIAN Financing and certain lease
payments are not required to be recorded as liabilities, including some of
the leasing arrangements included in the Vendor Financing. See Notes 30 and
31 to the Consolidated Annual Financial Statements and "Capitalization".
The principal amounts of Vendor Financing and the DIAN Financing
(undiscounted) that will be recorded, as they arise in the future, that are
not recorded as liabilities at December 31, 1998 are as follows
(in thousands):

<TABLE>
<S> <C> <C>
Vendor Financing:
Global Leases...................................... Ps98,304,345 $63,747
IBM Arrangement.................................... 713,997 463
Future Global Leases............................... 18,850,848 12,250
------------- -------
Total............................................ 117,909,190 76,460
DIAN Financing...................................... 20,644,227 13,387
------------- -------
Ps138,553,417 $89,847
============= =======
</TABLE>

(6) Capital expenditures consist of purchases of and advances on properties,
plant and equipment as reflected in the Company's consolidated statements
of cash flows.
(7) Indebtedness is calculated in accordance with the definition of
"Indebtedness" under the Indenture (which is based on Colombian GAAP),
which includes short-term debt, long-term debt, capital lease obligations
and obligations under the Vendor Financing and the DIAN Financing, as they
arise.
(8) For purposes of computing the deficiency of earnings to fixed charges,
"earnings" consist of income (loss) before income taxes, minority interests
and fixed charges, excluding capitalized interest. Fixed charges consist of
interest on all indebtedness (whether capitalized or expensed) and that
portion of operating lease expenses deemed to be interest expense.
(9) The ratio of earnings to fixed charges was 1.73 for the year ended December
31, 1998 under Colombian GAAP. The ratio of earnings to fixed charges was
1.44 for the year ended December 31, 1998 under U.S. GAAP.
(10) Penetration represents the number of installed lines per 100 people. In
Cartago, Jamundi, Buga, Yumbo, Cali and Girardot penetration includes the
installed lines of municipal competitors as of December 31, 1998 of
approximately 6,000 lines, 4,000 lines 28,700 lines, 4,700 lines, 445,000
lines and 7,000 lines as per the Company's estimates, respectively.

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Recent Developments

Cablevision

On December 15, 1998, the Company completed its acquisition of a 100%
interest in Cablevision S.A. and Suscripciones Audiovisuales S.A. (together
"Cablevision") for Ps20.4 billion ($13.2 million), which in combination operate
as the primary provider of cable and pay television services in Cali. This
investment offers Transtel access to an existing fiber optic network which
spans the city, and may be used to create synergies with its telephony
operations in Cali.

Cablevision offers the following two basic services: (i) a 4-channel UHF
service and (ii) a 50-channel service via its cable network. As of December 31,
1998, Cablevision provided service to 6,400 UHF subscribers and 14,153 cable
subscribers. Transtel is currently in the process of converting its UHF
subscribers to cable subscribers as it expands its network. Cablevision's
networks are capable of providing 80 channels as well as internet, data
transmission and other telephony services. Without additional incremental
capital expenditures, Cablevision's network has the capacity to service over
400,000 households in Cali.

In 1985, Law No. 42 formally established the subscriber television market by
permitting pay television services in Colombia. In 1986, Colombia's Ministry of
Communications granted Suscripciones Audiovisuales S.A. the right to provide
these services in exchange for a concession fee equivalent to 10% of annual
revenues. Cablevision S.A. was created in 1988 with the objective of promoting
and exploring business opportunities related to subscriber television and
telecommunication services. To comply with the Colombian operating
restrictions, Cablevision S.A. holds the concession, and Suscripciones
Audiovisuales S.A. performs the services and owns the operating infrustructure.
Cablevision holds the exclusive concession from the Comision Nacional de
Television ("CNTV") (National Television Commission) for the provision of pay
television services in Cali.

For the year ended December 31, 1998, Cablevision generated Ps5.8 billion
($3.8 million) of revenues and incurred a loss of Ps1.2 billion ($800,000).
Cablevision's total assets were Ps37.4 billion ($24.3 million) at December 31,
1998.

To date, Cablevision has focused on upper income households in Cali and has
cabled over 29% of the TV households defined by this market objective.
Cablevision expects to increase this penetration rate to 50% by 2002.

Discount Notes

On December 31, 1998, Transtel issued $15.0 million of its 20.32% Senior
Discount Notes due 2008 (the "Discount Notes"), pursuant to an Indenture dated
as of December 31, 1998 between the Company, the Subsidiary Guarantors (if any)
and Marine Midland Bank, as the trustee (the "Discount Note Indenture"). The
Discount Notes are unsecured senior obligations of the Company limited to $95.7
million aggregate principal amount at maturity. The initial accreted value of
the Notes is $15.0 million . The Discount Notes will accrete at a rate 20.22%
per annum, compounded semi-annually. Interest accrues at a rate of 0.10% per
annum on the accreted value from time to time and is payable in cash on each
February 13th and August 13th, commencing August 13, 1999. The Discount Notes
will mature on August 13, 2008. Cash interest on the Discount Notes will be
computed on the basis of a 360-day year of twelve 30-day months. The Discount
Notes were sold at a substantial discount from their accreted amount at
maturity. Each Discount Note has an issue price of $156.80 and a principal
amount at maturity of $1,000. The Discount Notes are senior obligations of the
Company ranking pari passu in right of payment with all existing and future
senior indebtedness of the Company, including the Senior Notes, and ranking
senior in right of payment to all existing and future subordinated indebtedness
of the Company, if any. The Company intends to use the proceeds of the Discount
Notes to acquire certain minority interests in the restricted subsidiaries of
the Company (whereby, such restricted subsidiaries would become wholly-owned
subsidiaries of the Company), to pay capital expenditures, to provide working
capital, to pay transaction expenses and/or fund strategic acquisitions. Upon
an investment of the proceeds of the Discount Notes by Transtel S.A. in an
Operating Company and/or upon the acquisition of certain minority interests in
an Operating Company, such Operating Company is required, pursuant to the
Discount Note Indenture, to guarantee the Discount Notes.

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RISK FACTORS

Original Certificateholders should consider carefully the following risk
factors as well as the other information contained in this Prospectus in
evaluating an investment in the Exchange Certificates, although the risk
factors set forth below are generally applicable to the Original Certificates
as well as the Exchange Certificates.

Trust's Dependence on Operating Companies to make Payments; No Guarantee by
Operating Companies; Not Wholly-Owned Operating Companies.

The Company is the only entity which has an obligation under the Senior
Notes. The Operating Companies are obligated to pay the Company under their
respective Intercompany Notes, but they have not guaranteed the Senior Notes
and have no obligation under the Certificates and therefore are not obligated
to make funds available to the Company or the Indenture Trustee in the event
the Company or the Indenture Trustee is unable to make payments on the Senior
Notes or the Certificates. Additionally, the Operating Companies are not
wholly-owned subsidiaries of the Company but instead are owned jointly by the
Company and local municipalities. See "Summary--Recent Developments--Discount
Notes." The Company owns approximately 60% or more of each of the Operating
Companies (other than Caucatel where the Company owns 51%). Any dividends
issued by the Operating Companies must be distributed pro rata to all of their
shareholders.

The Company cannot be assured that it will be able to generate significant
cash through dividends or other distributions from the Operating Companies in
the foreseeable future and there can be no assurance that the Company will be
able to generate any significant cash flow from the Operating Companies at any
time in the future. Since the Company's assets consist primarily of its
ownership interests in the Operating Companies, the Senior Notes (and
therefore the Certificates) will be effectively subordinated (other than as to
claims that the Company can make under the Intercompany Notes) to all existing
and future debt and other liabilities (including trade payables) of the
Operating Companies, and the Company's right to receive the assets of the
Operating Companies upon their liquidation or reorganization will be subject
to the claims of such Operating Companies' creditors (including trade
creditors). See "Transtel S.A.--Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."

Consequences of Failure to Exchange

Substantial Leverage of the Company; Insufficiency of Earnings to Cover Fixed
Charges

The Company is highly leveraged. Even though a portion of the proceeds of
the Offering was used to repay debt, after the Offering, the Company and its
subsidiaries had as of December 31, 1998 approximately Ps327.0 billion ($212.0
million) of Indebtedness, which includes the Senior Notes, the Discount Notes,
the Vendor Financing and the DIAN Financing which has arisen. The above amount
includes $15.0 million of Discount Notes, which are unsecured senior
obligations of the Company, which will aggregate $95.7 million principal
amount at maturity. The Indenture limits, but does not prohibit, the
incurrence of additional Indebtedness, secured or unsecured, by the Company
and its subsidiaries. Although funds sufficient to pay the first four interest
payments on the Senior Notes (and therefore on the Certificates) were placed
into the Escrow Account, future interest payments on the Senior Notes (and
therefore on the Certificates) will be payable from the Company's

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cash flow. The debt service requirements of any additional debt could make it
more difficult for the Company to make principal and interest payments on the
Senior Notes and consequently, the Trust's ability to make payments on the
Certificates. For the years ended December 31, 1996 and 1997, under Columbian
GAAP, earnings were insufficient to cover fixed charges by Ps135,882,000;
Ps1,600,376,000, respectively, although, the Company had a ratio of earnings
to fixed charges of 1.73 for the year ended December 31, 1998. On a U.S. GAAP
basis, earnings were insufficient to cover fixed charges by Ps6,271,305,000
and Ps228,673,000 for the years ended December 31, 1996 and 1997 respectively,
although, the Company had a ratio of earnings to fixed charges of 1.44 for the
year ended December 31, 1998.

There can be no assurance that the Company will be able to generate
sufficient cash flow to cover either the required interest and principal
payments or any required redemptions or repurchases of the Senior Notes and
consequently, the Trust's ability to make payments on the Certificates. If the
Company is unable to meet interest and principal payments or any required
redemptions or repurchases of the Senior Notes in the future, it may,
depending upon the circumstances which then exist, seek additional equity or
debt financing, attempt to refinance its existing indebtedness or sell all or
part of its business or assets to raise funds to repay its indebtedness. There
can be no assurance that the Company will be able to generate sufficient cash
flow to cover any required payment on the Senior Notes and consequently the
Trust would not have the ability to make the corresponding payment on the
Certificates. There can be no assurance that sufficient equity or debt
financing will be available, or, if available, that it will be on terms
acceptable to the Company, that the Company will be able to refinance its
existing indebtedness or that sufficient funds could be raised through asset
sales.

The high degree of leverage of the Company may have important consequences
to Certificateholders. In particular: (i) a substantial portion of the
Company's anticipated cash flow from operations will be required for the
payment of the Company's interest expense and principal repayment obligations
on the Senior Notes; (ii) the ability of the Company to obtain additional
financing in the future for working capital, acquisitions, capital
expenditures, repayment of debt, or other purposes is limited by restrictive
covenants in the Indenture; and (iii) the Company may be more vulnerable to
downturns in general economic conditions or in its business and may have less
flexibility to respond to changing business conditions and opportunities.

Colombian Political, Economic and Social Risks

The Company is located in Colombia and is subject to political, economic and
other uncertainties, including expropriation, nationalization, renegotiation,
or nullification of existing contracts, currency exchange restrictions and
international monetary fluctuations. Furthermore, Colombia has experienced
violence related to guerrilla activity. The Indenture will not require the
Company, and the Company does not intend, to maintain insurance against such
risks.

Cali and its metropolitan area, the Company's largest market, has been the
center of operations of one of Colombia's most powerful drug organizations,
and as such has suffered the violence resulting from the Colombian
government's efforts to curb the drug trade. Cali may also have received
portions of the capital generated by the drug trade, to the extent some of
such capital was reinvested locally. The Company believes that neither the
drug trade nor the efforts to curb it have had a material adverse effect on
its business. However, no assurance can be given that drug activity in the
future will not have a material adverse effect on the Company or that the
efforts to curb such activity will not have a material adverse effect on the
economy of the region and thereby on the Company.

Since March 1, 1996, the United States government has declined to recertify
Colombia as qualifying for United States foreign aid, due to a perceived
failure by Colombia to cooperate adequately in combating the drug trade.
However, on February 26, 1998, due to the recent operations performed by the
Colombian Army and the National Police Department against the Colombian drug
cartels, the United States government certified Colombia with a "waiver".
Although the certification with a waiver does not mean that Colombia is
qualified for United States foreign aid, it does mean that Colombia is not
subject to economic or trade sanctions. The certification

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with a waiver implies that the United States is able to vote in favor of
Colombia at the boards of multilateral agencies and credit institutions, such
as the World Bank, the Overseas Private Investment Corporation, OPIC, Export-
Import Bank, Eximbank and the Interamerican Development Bank, IDB.

It is impossible to predict what effect these events and conditions, which
are entirely outside the control of the Company, will have on the country or
on the Company. Certificateholders should recognize that these conditions and
events create significant uncertainties and risks, which could result in
material adverse effects on the Company and on its ability to meet its
obligations, including its obligations under the Senior Notes and
consequently, the Trust's ability to pay on the Certificates.

In addition to these political and social uncertainties, investment in
Colombia, as with all emerging markets, is subject to economic uncertainties.
Colombia is divided into thirty-two political subdivisions called
departamentos (departments). The Company's operations are dependent upon the
performance of the Colombian economy generally, and, in particular, upon the
performance of the economies of the Departamentos of Valle del Cauca and
Cauca. The economies of Colombia and these departamentos are in a stage of
development and structural reform, and the possibility exists that rapid
fluctuations in consumer prices, gross domestic product and interest rates
will occur. The Company's financial results may be affected by such
fluctuations in the economies of Colombia, of Valle del Cauca, of Cauca, and
of any other departamentos in which the Company operates in the future, and
such fluctuations may affect the ability of customers to pay for the Company's
services and on the ability of the market to support the growth of telephone
operations.

The Colombian government has historically exercised significant influence
over the Colombian economy. Governmental actions concerning the economy could
continue to have an important effect on Colombian entities, including the
Company, and on market conditions, prices and returns on Colombian securities,
including the Senior Notes and consequently, the Certificates. There can be no
assurance that recent policies that have resulted in favorable economic growth
will be maintained by this government or any new government or that such
growth will continue.

Holding Company Structure; Limitations on Access to Cash Flow of Operating
Companies; Effective Subordination

The Senior Notes will be the exclusive obligation of the Company, which is a
holding company with no business operations of its own. The operations of the
Company are conducted through the Operating Companies, which are separate and
distinct legal entities. Other than the obligation to repay to the Company the
Intercompany Notes, the Operating Companies have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Senior Notes or the
Certificates, to make any funds available to the Company to enable it to make
payments on the Senior Notes and consequently, to make the funds available to
the Trust to make payments on the Certificates, to make funds available in
order to make investments in the Operating Companies, to meet working capital
needs or other liabilities of the Company or for any other reason. In
addition, the Operating Companies are not wholly-owned subsidiaries of the
Company but instead are owned jointly by the Company and local municipalities.
See "Summary--Recent Developments--Discount Notes." Any dividends issued by
the Operating Companies must be distributed pro rata to all of their
shareholders. As a result, the Company cannot be assured that it will be able
to generate significant cash through dividends or other distributions from the
Operating Companies in the foreseeable future and there can be no assurance
that the Company will be able to generate any significant cash flow from the
Operating Companies at any time in the future. Since the Company's assets
consist primarily of its ownership interests in the Operating Companies, the
Senior Notes (and therefore the Certificates) will be effectively subordinated
(other than as to claims that the Company can make under the Intercompany
Notes) to all existing and future debt and other liabilities (including trade
payables) of the Operating Companies, and the Company's right to receive the
assets of the Operating Companies upon their liquidation or reorganization
will be subject to the claims of such Operating Companies' creditors
(including trade creditors).

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Intercompany Notes; Operating Company Cash Flow

Annual interest payments on the Senior Notes by the Company will be
approximately $18.8 million, plus any additional interest as required, through
November 1, 2007. The principal amount of the Senior Notes is due on November
1, 2007. As of December 31, 1998, the Company has lent $95.5 million (Ps147.3
billion) of the proceeds from the Senior Notes to six of its Operating
Companies as evidenced by Intercompany Notes which were executed as of
December 31, 1998. As of December 31, 1998, the date of summarized financial
information of each of these six Operating Companies included herein, the
Company had lent approximately $94.2 million (Ps146.6 billion) to these six
Operating Companies. See "Management's Discussion and Analysis--Liquidity and
Capital Resources--Year ended December 31, 1998 compared to the Year Ended
December 31, 1997." The Intercompany Notes bear interest at 12 1/2%, are
payable in U.S. dollars, and are also due on November 1, 2007. The
Intercompany Notes become due and payable upon the acceleration of the Senior
Notes issued by Transtel S.A. under the Indenture.

Although the interest payments on the Senior Notes for the first four
payments (through November 1, 1999) will be paid from the Escrow Account,
which was funded with a portion of the proceeds of the Senior Notes, the
ability of the Company to make payments of interest after November 1, 1999 and
of the $150.0 million principal balance due on November 1, 2007 will be
largely dependent upon the future performance of the Operating Companies and
their ability to pay the interest and principal due under the Intercompany
Notes. Many factors, some of which will be beyond the Company's and the
Operating Companies' control (such as prevailing economic conditions), may
affect their performance. There can be no assurance that the Operating
Companies will be able to generate sufficient cash flow to cover required
interest and principal payments when due on the Intercompany Notes or that the
Company will be able to generate sufficient cash flow for it to be able to
make its principal and interest payments in the future. Although no cash was
required for interest payments to Transtel S.A. by the six Operating Companies
from October 28, 1997 (closing date of the Senior Notes) through December 31,
1998 because of the Escrow Account, these six Operating Companies have not yet
been able to generate sufficient cash flow from operations through
December 31, 1998 to make such interest payments had they been due in cash. If
the Company is unable to make principal and interest payments in the future,
it may, depending upon the circumstances which then exist, seek additional
equity or debt financing, attempt to refinance its indebtedness or sell all or
part of its business or assets to raise funds to repay its indebtedness.

Limited Operating History; Potential Lack of Customer Demand

The Company is a new enterprise. It was incorporated in August 1993 and
commenced offering telephone services through TelePalmira on September 1,
1995. Most of the Company's systems have only recently begun to be operated by
Transtel. Unitel Wireless commenced operations on January 2, 1998.
TeleCartargo, Caucatel, TeleJamundi, Unitel Wireline and Bugatel commenced
operations on April 1, 1997; May 1, 1997; June 1, 1997; June 1, 1997; and July
1, 1997, respectively. TeleGirardot commenced operations on December 31, 1997.
The successful development and commercialization of these systems will depend
on a number of significant financial, logistical, technical, marketing, legal
and other factors, the outcome of which cannot be predicted. These Operating
Companies will require additional funds for capital expenditures, working
capital requirements, and other cash needs, including the costs of obtaining
additional equipment. In addition, there can be no assurance that the systems
will not encounter engineering, design, or other operational problems. There
can be no assurance that the Company can successfully develop any future
systems or that any of its systems will achieve commercial success.

Additionally, the extent to which prospective telephone customers will
choose to obtain telephone service from the Company is unclear. The Company
has incurred and will continue to incur significant operating expenses, has
made, and will continue to make, significant capital investments, has entered
into operating leases, equipment supply contracts and service arrangements, in
each case based upon certain expectations as to the anticipated market
acceptance of, and customer demand for, the Company's telephony services. The
failure to meet these expectations could have a material adverse effect on the
Company. A substantial portion of the

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Company's revenues to date have been derived from non-recurring connection
charges. The continuation of this revenue stream will depend on the Company
continuing to obtain new subscribers, which cannot be assured.

Risks Associated With Privatization and Management of Growth

The success of the Company's operating strategy is subject to factors that
are beyond the control of the Company and are impossible to predict, in part,
because the telecommunications industry has only recently begun to be
privatized in Colombia. The Company is unable to predict how consumer demand
for telecommunications services will develop over time. The size of the
Colombian market for telecommunications services, the rates of penetration of
the market and the sensitivity of potential subscribers to changes in prices,
among other factors, are uncertain. Moreover, the provision of telephony
service with additional calling features is without precedent in Colombia and,
therefore, the market acceptance and customer demand for such services is
uncertain. In addition, the Company's continued rapid growth will require the
training of new personnel, the expansion of its management information
systems, effective control of its expenses related to operations and systems
construction, and effective controls over the quality of new subscribers and
churn rate. If the Company is unable to satisfy these requirements, if it is
unable to generate sufficient revenue to meet its current expenses and future
obligations, or if it is otherwise unable to manage growth effectively, the
Company's ability to meet its obligations under the Senior Notes and
consequently, the Trust's ability to pay on the Certificates may suffer a
material adverse effect.

Network Rollout Risks; Reliance on Suppliers; Delays in Construction

The Company's service is dependent upon the completion and continued
viability of its network. The Company has completed portions of its network
and expects to incur significant expenditures to expand the geographic
coverage and increase the capacity of its network. The roll-out of the
Company's network is subject to risks and uncertainties that could delay the
rollout of the Company's services and increase the cost of construction.

With respect to wireless networks, one such risk is the availability, access
to, and continued use of, suitable base stations and switch sites. The
Company's ability to locate and retain suitable base stations and switch sites
is dependent on the cooperation of local planning authorities and potential
landlords. There can be no assurance that the Company will be successful in
obtaining property rights necessary to establish or maintain such base
stations and switch sites, or that delays in obtaining such rights will not
adversely affect the rate of the Company's network rollout.

The currently planned build out and upgrade of the Company's networks is
reliant on Siemens AG ("Siemens") for the supply of equipment and other
telecommunications supplies and for construction of the networks. There can be
no assurance that Siemens will honor its current obligations to supply
equipment and construct the networks or that it will desire or be able to
supply such equipment or undertake construction of future projects. Equipment
supplies are additionally subject to shortages and/or delays in delivery. In
addition, with respect to letters of intent to enter into purchase agreements
with respect to equipment, there can be no assurance that the letters of
intent are binding on Siemens or that definitive purchase agreements will be
entered into. Accordingly, there can be no assurance that currently planned
projects or future projects will be completed within the time periods
projected, or at all. Failure to obtain equipment on a timely basis, or at
all, could jeopardize subscriber contracts and could have a material adverse
effect on the Company.

The construction of the Company's networks in the municipalities of Palmira,
Jamundi, Yumbo, Cartago and Buga are currently governed by turn-key contracts
which obligate Siemens and the other contractors to finish construction or
installation. See "Business--Construction Arrangements." However, any future
projects will typically require substantial construction of new networks or
upgrades to existing networks, and no such construction obligation has been
undertaken by a third party. Construction activity will require qualified
subcontractors and necessary equipment to be secured on a timely basis, the
availability of which may vary significantly from location to location.
Construction projects may experience cost overruns and delays outside

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the control of the Company or its subcontractors, such as those caused by acts
of governmental entities, financing delays and catastrophic occurrences.
Delays also can arise from design changes and material or equipment shortages
or delays in delivery. Accordingly, there can be no assurance that such
projects will be completed within the amount budgeted therefor or on time, or
at all. Failure to complete construction within the amount budgeted or on time
could jeopardize subscriber contracts and could have a material adverse effect
on the Company.

If the Company were to decide to pursue other investments or make other
expenditures, other than the Expansion Plan, additional capital resources
would be required. If the Company is unable to fund such expenditures or
investments, or if the Company's cash flow from operations does not increase
from its present level, the Company might not be able to continue to pursue
its network construction and subscriber growth strategy.

Potential Need for Additional Equipment

The success of the Company's telecommunications system is partially
dependent on the completion of its Expansion Plan and its expansion plan in
TeleGirardot (the "TeleGirardot Expansion Plan"). See "Business--Expansion
Plan." Although the Company has entered into equipment purchase agreements
with Siemens and IBM, there can be no assurance that future network
evaluations or other similar factors will not necessitate the Company's re-
evaluation of its equipment needs. See "Description of Existing Indebtedness--
Global-Siemens Arrangements," "Description of Existing Indebtedness--Transtel-
Siemens Arrangement", "Description of Existing Indebtedness--IBM Arrangement"
and "Business--Description of the Operating Companies--TeleGirardot." If
equipment requirements do increase, additional capital or financing sources
would be required. There can be no assurance that the Company will be able to
fund such capital expenditures or obtain such financing on terms favorable to
the Company.

Contingency of Vendor Financing

The build out and upgrade of the Company's networks and the completion of
the Expansion Plan is reliant on equipment vendor financing from Siemens and
IBM. While there are four purchase agreements with Siemens and a purchase
agreement with IBM, the Company is negotiating the financing terms with
Siemens with respect to some of the equipment. See "Description of Existing
Indebtedness--Global-Siemens Arrangements." Additionally, the Company is
currently negotiating with Siemens to enter into contracts for the supply of
equipment to partially effect the TeleGirardot Expansion Plan. There can be no
assurance that the financing from Siemens will be available and if it is not
available, whether other financing will be available to the Company. In
addition, there can be no assurance that financing agreements will be
finalized and if finalized, whether the terms of such financing agreements
will be favorable to the Company.

Risks Associated With Colombian Pledge and Enforcement of Foreign Judgments

The Senior Notes are secured by a pledge of the Intercompany Notes. The
pledge is a security instrument governed primarily by the Codigo de Comercio
(Commercial Code) and the Codigo de Procedimiento Civil (Code of Civil
Procedure) and there can be no assurance that this arrangement will be
effective to create a senior perfected security interest in the Intercompany
Notes enforceable in the same manner and to the same extent as a security
interest granted under the laws of the United States. An action to enforce the
pledge can only be executed before a Colombian court. The process employed in
executing the pledge entails a court order to sell the pledged asset to the
public, either by public auction or through a local stock exchange, with the
proceeds of the sale going to pay the defaulted obligations. The right to
initiate the judicial proceedings to enforce a pledge expires four years after
the obligation becomes enforceable. Historically, the enforcement of pledges
before Colombian courts has been a long process. The delays of a trial to
enforce the pledge may have a material adverse effect on the Colombian court's
ability to obtain payment of the full value for the Senior Notes and
therefore, on the Trust's ability to repay the Certificates.

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<PAGE>

In addition, substantially all of the assets of the Company will be located
in Colombia. As a result, it may not be possible for the Pass Through Trustee,
the Indenture Trustee or the Exchange Certificateholders to enforce outside of
Colombia judgments against the Company, including enforcement in the United
States of judgments predicated upon the civil liability provisions of the
United States federal securities laws or a judgment to enforce the Certificate
Guarantees. The United States and Colombia do not have a treaty providing for
reciprocal recognition and enforcement of judgments in civil and commercial
matters. See "Enforcement of Foreign Judgments in Colombia." For a foreign
judgment to be effective and enforceable in Colombia, it must be proved in
accordance with the Rules of Court in Colombia, as contained in the Colombian
Code of Civil Procedure, pursuant to which a demand for an exequatur
(proceedings in the Colombian Judicial System for recognition of a foreign
judicial decision or arbitral award) must be presented before Colombia's
Supreme Court of Justice. Therefore, a final judgment for the payment of money
rendered by a federal or state court in the United States based on civil
liability, whether or not predicated solely upon the civil liability
provisions of the United States federal securities laws, would be enforceable
in Colombia against the Company only if it has been proven in accordance with
the Colombian Rules of Court. The Company also has been advised by its
Colombian counsel that there can be no assurance as to the enforceability, in
original actions in Colombian courts, of liabilities predicated solely on the
United States federal or other non-Colombian securities laws.

Competition

There is currently no restriction in Colombia on competition within the
local telephony business. It is possible that competitors, including companies
with substantially greater capital or other resources than the Company, could
commence operations in the Company's service area and offer wireline,
wireless, cellular, Personal Communication Services ("PCS") or other
competitive telecommunications services. The Company currently faces
competition in certain cities primarily from various state-run providers of
local telephony service. Competition is based on services offered, quality of
service and coverage area. See "Industry Overview; Legal and Regulatory
Environment" and "Business--Operating Companies--General."

Technological Risk; Risk of Obsolescence

The Company's Operating Companies generally use advanced technologies.
Although many of the technologies currently in use and to be used in the
future by the Company have been developed by international telecommunications
companies, such as Siemens, some have only recently been developed and
commercially introduced. There can be no assurance that the Operating
Companies will not experience technical problems in the commercial deployment
of these technologies, particularly because they are being introduced in a
developing country. In addition, the technology used in wireless
communications is evolving rapidly and one or more of the technologies
currently utilized or planned by the Company may not be preferred by its
customers or may become obsolete, which in either case would likely have a
material adverse effect on the Company. There can be no assurance that the
Company will be able to keep pace with ongoing technological changes in the
telecommunications industry.

Regulatory Risks

The privatization of telecommunications services in Colombia is dependent
upon Law 142 (as defined herein). There can be no assurance that material
adverse changes to Law 142 will not occur in the future. Additionally, certain
Operating Companies could become subject to service requirements, restrictions
on interconnection to government-owned or private telephone networks and
government requirements regarding rates and tariffs, among others. These
requirements may be difficult to comply with, particularly given demographic,
geographic, or other issues in a particular market. Further, changes in the
regulatory framework may limit the Operating Companies' ability to add
subscribers to developing systems. An Operating Company's failure to comply
with applicable governmental regulations or operating requirements could have
a material adverse effect on the Company. Further, the Company's current and
anticipated ownership interests in the Operating Companies are subject to
continued support by the Colombian government of privatization of the
telecommunications sector.

25
<PAGE>

Additionally, the pricing of the Company's services and related matters are
subject to regulation by the CRT (as defined herein). Changes in the
regulation of the Company's pricing, or a change in the interpretation of the
existing regulations, could have a material adverse effect on the Company. See
"Industry Overview; Legal and Regulatory Environment."

Furthermore, the frequency assigned to the Company with respect to Unitel's
fixed wireless system, which was assigned by the Ministerio de Comunicaciones
(Ministry of Communications), could be revoked if the Company operates out of
its assigned frequency, offers services other than those approved by the
Ministry of Communications or fails to comply with other regulations governing
such license.

Risk of Modification or Loss of Permits; Uncertainty as to Availability

Each of the Operating Companies' ability to exploit its respective existing
civil works permits is essential to the Company's construction of its network.
These permits are granted by the municipalities in the areas served. Although
the municipalities are required to grant such permits under Law 142, there can
be no assurance that these permits will not become difficult to obtain, that
the law will always require their issuance, or that some prohibited action of
any of the Operating Companies will not cause their termination, and the
occurrence of any of these events could have a material adverse effect on the
Company. The Operating Companies may have limited legal recourse if any of
these events were to occur.

Dependence on Other Telecommunications Providers

The success of the Company's telecommunication system will in many cases
depend upon access to the systems of other local telecommunications providers,
some of which may be competitors of the Company. Although access to such
service is required by Law 142, the revocation, loss, or modification of any
of the existing arrangements or the failure to obtain necessary agreements
and/or arrangements in the future could have a material adverse effect on the
Company. The Operating Companies are additionally required by Colombian law to
enter into interconnection arrangements with TELECOM. Although TELECOM is
currently providing such service and is required to continue to do so under
Colombian law, formal agreements are not in place with the Company's Operating
Companies, as is also the case with other telecommunications providers.

There can be no assurance that such arrangements will continue to be
regulated by the Colombian government. Additionally, a breach by any of the
Operating Companies of these interconnection agreements could lead to loss of
such agreements, which could have a material adverse effect on the Company.

Dependence on Key Personnel

The Company is currently managed by a small number of key management and
operating personnel whose efforts will largely determine the Company's
success. The success of the Company also depends upon its ability to hire and
retain qualified operating, marketing, financial, accounting and technical
personnel. Competition for qualified personnel in the telecommunications
industry is intense and, accordingly, there can be no assurance that the
Company will be able to hire or retain necessary personnel. The loss of key
management personnel would likely have a material adverse effect on the
Company. See "Management."

Corporate Disclosure and Accounting Standards

A principal objective of the securities laws of the United States, Colombia
and other countries is to promote disclosure of all material corporate
information. However, it is likely that there would be less or different
publicly available information about the Company in Colombia than would be
available about issuers listed on stock exchanges in the United States or
certain other countries. In addition, the Company prepares its financial
statements in accordance with Colombian GAAP, which differs in significant
respects from U.S. GAAP. Thus, Colombian financial statements and reported
earnings may differ from those of companies in other countries in this and
other respects. For example, shareholders' equity and net income (loss) as of
and for the year ended December 31, 1998 was Ps76.3 billion and Ps11.5
billion, respectively, under Colombian GAAP and Ps40.1

26
<PAGE>

billion and Ps7.0 billion, respectively under U.S. GAAP. For a description of
the principal differences between Colombian GAAP and U.S. GAAP, insofar as
they are relevant to the Company, see Note 31 to the Consolidated Annual
Financial Statements.

Currency Fluctuations, Foreign Exchange Controls, and Devaluation

Since the consummation of the Offering, a substantial amount of the
Company's debt obligations, including the Senior Notes, are denominated in
Dollars while the Company generates revenues in Pesos. In addition, the
Company has incurred and expects to continue to incur a significant portion of
its equipment costs in Dollars. Therefore, the Company is exposed to currency
exchange rate risks that could significantly affect the Company's ability to
meet its obligations and finance its network construction. The Company
currently does not plan to enter into hedging transactions with respect to
these foreign currency risks and it is unlikely that the Company would be able
to obtain hedging arrangements on commercially satisfactory terms with respect
to all such risks. The exchange rate of Pesos to the Dollar is a freely
floating rate which has declined in recent years. During 1996, 1997 and 1998,
the Peso devalued relative to the Dollar approximately 1.8%, 28.7% and 19.2%,
respectively. Any significant decrease in the value of the Peso relative to
the Dollar may have a material adverse effect on the Company and on its
ability to meet its obligations under the Senior Notes and consequently, on
the Trust's obligations under the Certificates. See "Exchange Rates."

The Colombian government does not currently restrict the ability of
Colombian persons or entities to convert Pesos into Dollars. See "Foreign
Investment and Exchange Controls in Colombia." However, Colombian law permits
the government to impose foreign exchange controls on dividend payments and
remittance of interest and principal in the event that the foreign currency
reserves of the Central Bank fall below a level equal to the value of three
months of imports into Colombia. No such foreign exchange controls are
currently applicable to payments on debt instruments such as the Senior Notes.
As of July 4, 1997, the Central Bank's currency reserves were sufficient for
approximately 10 months of imports. Nevertheless, there is no assurance that
such restrictions will not be imposed in the future, and any such restrictions
could prevent or restrict the Company's access to Dollars with which to meet
its obligations, including its obligations under the Senior Notes and
consequently, the Trust's obligations under the Certificates. There are no
limitations imposed by the Colombian government on nonresident or foreign
owners' ability to hold or vote the Senior Notes or the Certificates.

Inflation

Throughout most of the 1980s and 1990s, Colombia experienced high levels of
inflation. While the Colombian government adopted policies which resulted in
reducing the inflation rate from 26.8% in 1991 to 19.5%, 21.6%, 17.4% and
16.7% in 1995, 1996, 1997 and 1998, respectively, there can be no assurance
that the performance of the Colombian economy or its securities markets, the
operating results of the Company, or the value of the Certificates and Senior
Notes will not be adversely affected by continuing or increased levels of
inflation.

Lack of a Market for the Exchange Certificates; Risks Associated with Non-
Investment Grade Debt

The Exchange Certificates are new securities for which there currently
exists no trading market. The Company does not intend to list the Exchange
Certificates on any national securities exchange or to seek admission thereof
to trading on the National Association of Securities Dealers Automated
Quotation System. The liquidity of any market for the Exchange Certificates
will depend on the number of Exchange Certificateholders, the interest of
securities dealers in making a market in the Exchange Certificates and other
factors. Accordingly, there can be no assurance as to the development or
liquidity of any trading market for the Exchange Certificates.

To comply with the applicable state securities laws, the Exchange
Certificates may not be offered or sold by a Certificateholder unless they
have been registered or qualified for sale under such applicable state
securities laws or an exemption from registration or qualification is
available therefrom.

27
<PAGE>

The Company has not taken any action under the blue sky or state securities
laws to qualify the Exchange Certificates for sale and no state commission or
regulatory authority has received the Prospectus. However, the Exchange
Certificates may be offered and sold if such offer and sale is in compliance
with a securities exemption or a transactional exemption under the applicable
state securities laws.

Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of
securities similar to the Exchange Certificates. There can be no assurance
that the market, if any, for the Exchange Certificates will not be subject to
similar disruptions. Any such disruptions may have an adverse effect on the
Exchange Certificateholders. In addition, Colombia is generally considered by
international investors to be an "emerging market." Political, economic,
social and other developments in other "emerging markets" may have a material
adverse effect on the market value and liquidity of the Exchange Certificates.

Control by Certain Stockholders and Management

Certain of the Company's directors, executive officers and principal
stockholders beneficially own 100% of the outstanding common stock of the
Company. Accordingly, if they choose to act together, these persons will be
able to control the election of the Board of Directors and other matters voted
upon by the stockholders. A sale by one or more of these principal
stockholders to third parties could trigger the right of the
Certificateholders to require the Company to repurchase the Senior Notes. In
the event that an Offer to Purchase (as defined herein) occurs at a time when
the Company does not have sufficient available funds to purchase the Senior
Notes, or at a time when the Company is prohibited from purchasing the Senior
Notes, an Event of Default could occur under the Indenture.

Year 2000 Compliance

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, if not corrected, many computer applications
could fail or create erroneous results by or at the Year 2000. The Year 2000
issue affects virtually all companies and organizations. Many companies must
undertake major projects to address the Year 2000 issue. Each company's
potential costs and uncertainties will depend on a number of factors,
including its software and hardware and the nature of the industry. Companies
must coordinate with other entities with which they electronically interact,
including suppliers, customers, creditors, borrowers, and financial service
organizations. If a company does not successfully address Year 2000 issues, it
may face material adverse consequences.

The Company has made an assessment of its information technology ("IT")
systems including its computer software and databases to determine the extent
which modifications are required to prevent problems related to the Year 2000
issue, and the resources which will be required to make such modifications.
The Company has determined that some of its software systems, including SAT
(version 2.11), CG-UNO and CM-UNO are not Year 2000 compliant. The Company has
evaluated both new software solutions and upgrades of its current software to
replace these systems. The Company has already spent approximately $2 million
upgrading and expanding its software packages and purchasing newer software
packages. The Company has purchased the following software: Multiple Systems
Platform, Oracle 7, Domino Go WebServer, SP/2/, Network Servers, and
Microcomputers (see chart below). Additionally, the Company expects to spend
an additional $6 million purchasing the following additional software: Billing
and Customer Service, Financial, Human Resources and Procurement, and EWSD
Software (version 12) (see chart below). In most cases, the Company had
planned to upgrade or replace its current software systems however, the Year
2000 issue accelerated such replacement dates. The Company estimates that the
total costs associated with the Year 2000 modifications and its planned
upgrade of its computer systems will be approximately $8 million. These
investment costs were defined before the Senior Notes were issued and are
included in the projected capital expenditures. The financial impact to the
Company to ensure Year 2000 compliance has not been and is not anticipated to
be material to its business, financial condition or results of operations.

28
<PAGE>

Additionally, the Company has met with many of its suppliers (including IBM
de Colombia S.A., Oracle de Colombia S.A., Cabletron Systems, Open Systems
S.A., Siemens, Cisco Systems S.A., Citibank, American Power, OSI Corporation
and Mitsubishi de Colombia S.A.) and has been informed by each of these
suppliers that their individual Year 2000 issues were resolved by March 31,
1999, except for Open Systems S.A. which has committed to resolve its Year
2000 issues before May 30, 1999 and Siemens which has committed to resolve its
Year 2000 issues before July 31, 1999. The Company is also following a
detailed plan that the Superintendencia of Public Services released to address
Year 2000 issues and is developing an internal campaign oriented to create
awareness among the Company's employees.

In the event that the Company is unable to resolve the Year 2000 issue
before December 31, 1999, the following describes the "worst case scenario":
(i) accounts receivable problems due to incorrect dates on customers' bills;
(ii) accounts payable problems due to incorrect dates on incoming bills; (iii)
incorrect dates on toll ticketing tape which records the duration of customer
telephone calls; and (iv) incorrect statistical data including customer usage
data.

The Company has formulated a contingency plan in the event that, even after
having purchased the above described software, the "worst case scenario"
occurs. For example, should the new Billing and Customer Service software fail
to be Year 2000 compliant, the Company plans to reprogram the SAT system
(version 2.11) to recognize "00" or "2000". Should the new Financial, Human
Resources and Purchases software system fail to be Year 2000 compliant, the
Company would install a revised version of this software which is currently
being developed to be Year 2000 compliant (the cost of such revised version is
included in a maintenance contract with the supplier). Finally, should the
EWSD software (version 12) fail to be Year 2000 compliant, the Company would
add a "patch" which is currently being developed by Siemens to recognize "00"
or "2000". Due to the fact that many of the new software systems which the
Company has either purchased or intends to purchase, include a maintenance
contract which provides reprogramming should the system not be Year 2000
compliant, the estimated cost of the contingency plan is only $100,000.

Although, the Company has not made a complete assessment of its non-IT
systems (including elevators and other equipment which may contain
microcontrollers) for Year 2000 compliance, it has received a commitment from
Mitsubishi de Colombia S.A., the supplier of the elevators in the Unitel and
TelePalmira office buildings that the elevators are Year 2000 compliant.

29
<PAGE>

COSTS INCURRED:

<TABLE>
<S> <C>
Software Supplier Approximate
Investment
Multiple System Platform IBM $ 330,000
Oracle 7 Oracle 200,000
Domino Go WebServer Lotus 370,000
SP/2/ IBM 600,000
Network Servers IBM 120,000
Microcomputers IBM 380,000
--------
Total: $2,000,000
--------
--------

ANTICIPATED COSTS:

Software Supplier Estimated Cost
Billing, Customer Service, and Net Open System $ 500,000
Inventory SAP 4,500,000
Financial, Human Resources and Siemens AG 1,000,000
Procurement -------
EWSD Software Total: $6,000,000
-------
-------

CONTINGENCY PLAN COSTS:

Software Supplier Estimated Cost
Reprogramming SAT System (version 2.11)
SAT $100,000
Financial, Human Resources and Purchases
Sistemas de Informacion
Revised versions of
this software are
included in
maintenance contact.
"Patch" developed by Siemens to update
EWSD
Siemens "Patch" included in
cost of software.
Software (version 12) ------
Total: $100,000
------
------
</TABLE>

Colombian Withholding Tax

The Company has been advised by Lewin & Wills, the Company's Colombian tax
counsel, that payments on the Senior Notes will not be subject to Colombian
withholding tax. "Taxation--Colombia". This advice is based upon an
interpretation of the applicable legislation and regulations in the absence of
authoritative judicial or administrative precedents. If a contrary
interpretation were to be sustained, the Company would be required under the
Indenture (as defined herein) to pay such Additional Amounts (as defined
herein) as may be required so that the net payments would not be reduced as a
result of any such withholding taxes. Such Additional Amounts may include a
withholding tax at the rate of 35% and a withholding of remittance tax at the
rate of 7% on the net amount of the payments made to Non-Colombian Holders (as
defined herein) after deducting the withholding of income tax (a combined rate
of 39.55%). The payment of such Additional Amounts would adversely affect the
Company's cash flow and results of operations.

30
<PAGE>

DEFICIENCY OF EARNINGS TO FIXED CHARGES

The deficiency or ratio of earnings to fixed charges for each of the periods
set forth below has been computed on a consolidated basis and should be read
in conjunction with the Consolidated Annual Financial Statements included
elsewhere herein.

<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1996 1997 1998
------------ ------------- ----
(in thousands of constant Pesos of
December 31, 1998 purchasing power)
<S> <C> <C> <C> <C>
Colombian GAAP........................ Ps 135,882 Ps 1,600,376 (1)
U.S. GAAP............................. 6,271,305 228,673 (2)
</TABLE>
- --------
(1) The ratio of earnings to fixed charges under Colombian GAAP is 1.73.
(2) The ratio of earnings to fixed charges under U.S. GAAP is 1.44.

For purposes of computing deficiency or ratio of earnings to fixed charges,
"earnings" consist of income (loss) before income taxes, minority interests
and fixed charges, excluding capitalized interest. Fixed charges consist of
interest on all indebtedness (whether capitalized or expensed), amortization
of deferred financing costs and that portion of operating lease expense deemed
to be interest expense.

31
<PAGE>

USE OF PROCEEDS

The Company will not receive any cash proceeds from the issuance of the
Exchange Certificates offered hereby. The Original Certificates surrendered in
exchange for the Exchange Certificates will be cancelled and can not be
reissued. The issuance of the Exchange Certificates will not result in any
change in the aggregate indebtedness of the Company.

The net proceeds from the Offering were approximately $142.0 million
(Ps219.0 billion) after deducting offering fees and expenses of $8.0 million
(Ps12.3 billion). Approximately $35.3 million (Ps54.4 billion) was deposited
into the Escrow Account to satisfy the first four interest payments on the
Senior Notes. Approximately $32.8 million (Ps50.6 billion) was used to pay
existing debt and approximately $9.8 million (Ps15.1 billion) was used to pay
the Central Bank's withdrawal fee. The balance of the proceeds has been or
will be used to (i) fund a portion of the costs associated with the Expansion
Plan (approximately $38.3 million), (ii) acquire Girardot Telephone (as
defined herein) (approximately $6.9 million), (iii) acquire Cablevision
(approximately $13.2 million) and (iv) fund general corporate purposes,
including any future acquisitions (approximately $5.7 million).

The total cost of capital expenditures under the Expansion Plan is expected
to be approximately $178.2 million, of which approximately $7.7 million had
been financed with local bank borrowings, all of which have been repaid with
proceeds of the Offering, and approximately $1.5 million had been financed
with cash flow from operations. The remainder of the Expansion Plan,
approximately $169.0 million, is being financed from several sources
including: (i) the Offering; (ii) the sale of investments of $8.5 million;
(iii) the existing Global Leases, the IBM Arrangement, the Transtel-Siemens
Purchase Agreement and future Global Leases (the "Vendor Financing") (see
"Risk Factors--Contingency of Vendor Financing"); and (iv) the DIAN Financing
(collectively, the "Expansion Plan Financing") (see "Description of Existing
Indebtedness--DIAN Financing"). The following table sets forth the estimated
sources and uses for the Expansion Plan Financing, which includes the Equity
Contribution and sale of investments, as of December 31, 1998:

Sources of Funds

<TABLE>
<CAPTION>
(in millions
of Dollars)
<S> <C>
Senior Notes................................... $150.0
------
Equity Contribution............................ 24.0
Vendor Financing............................... 102.1
DIAN Financing................................. 20.2
Sale of Investments(1)......................... 8.5
------
154.8
------
Total Sources of Funds....................... $304.8
======
</TABLE>

32
<PAGE>

Uses of Funds

<TABLE>
<CAPTION>
Provided by the Offering
-------------------------- Provided
Operating Transtel by other
Companies S.A. Total sources Total
--------- -------- ------ -------- ------
(in millions of Dollars)
<S> <C> <C> <C> <C> <C>
Expansion Plan Capital
Expenditures(2)................. $38.3 $ -- $ 38.3 $130.7(7) $169.0
Refinancing of Existing Debt(3).. 22.4 10.4 32.8 21.8 54.6
Escrow Account(4)................ 23.1 12.2 35.3 35.3
Central Bank Deposit Withdrawal
Fee(5).......................... 6.4 3.4 9.8 9.8
Fees and Expenses................ 5.3 2.7 8.0 8.0
Acquisition of Girardot
Telephone....................... 6.9 6.9 6.9
Acquisition of Cablevision....... 13.2 13.2 13.2
General Corporate Purposes....... 5.7 5.7 2.3(8) 8.0
----- ----- ------ ------ ------
$95.5(6) $54.5 $150.0 $154.8 $304.8
===== ===== ====== ====== ======
</TABLE>
- --------
(1) Investments includes short-term and long-term certificates of deposits and
a temporary investment in a company owned by a shareholder of the Company.
See "Consolidated Annual Financial Statements--Notes 4 and 29" and
"Certain Related Party Transactions--Certain Other Transactions with
Gonzalo Caicedo Toro."
(2) The aggregate capital expenditures for the Expansion Plan total
approximately $178.2 million, of which approximately $7.7 million was
financed with local bank borrowings prior to October 28, 1997, all of
which was repaid with proceeds of the Offering, and $1.5 million was
financed with cash flow from operations prior to October 28, 1997. As of
December 31, 1998, favorable construction practices by the Company's
vendors have resulted in a reduction in capital expenditure of
approximately $3.6 million from the original expansion plan of $181.8
million.
(3) Proceeds from the Offering of $32.8 million and $21.8 million of the
Equity Contribution have been utilized to repay approximately $54.6
million of debt of the Company that was outstanding as of October 28,
1997.
(4) Represents sufficient funds to pay the first four interest payments (two
years) on the Senior Notes.
(5) The Company was required to deposit approximately $37.9 million of the net
proceeds of the Offering with the Central Bank. This non-interest bearing
deposit was withdrawn before the end of the required deposit period of 18
months by the Company to fund the Expansion Plan. Such withdrawal required
a fee determined by applying a discount declining from 28.5% to 1.8%
depending on the time of withdrawal of the deposit. The Company withdrew
the deposit to finance the Expansion Plan and paid a withdrawal fee of
$9.8 million on December 29, 1997.
(6) Transtel S.A. has loaned $95.5 million of the proceeds of the Senior Notes
to its Operating Companies which have been or will be used as indicated.
(7) Provided by Vendor Financing of $102.1 million, the sale of investments of
$8.4 million and DIAN Financing of $20.2 million.
(8) Provided by $2.2 million from the Equity Contribution and $0.1 million
from sale of investments.

33
<PAGE>

CAPITALIZATION

Colombian GAAP

The following table shows on a Colombian GAAP basis, as of December 31,
1998, the Company's capitalization. See "Use of Proceeds" and "Selected
Financial and Other Data." This table should be read in conjunction with the
Consolidated Annual Financial Statements and notes thereto included elsewhere
herein.

<TABLE>
<CAPTION>
December 31, 1998
----------------------
(in thousands of Pesos
of December 31, 1998
purchasing power and
in thousands of
Dollars)
<S> <C> <C>
Cash and unrestricted investments(1).................... Ps 36,440,097 $ 23,630
Restricted investments--Escrow Account(2)(3)............ 28,914,563 18,750
------------- --------
Total cash and investments.......................... Ps 65,354,660 $ 42,380
============= ========
Long-term debt (including current portion):
12 1/2% Senior Notes due 2007......................... Ps231,316,500 $150,000
20.32% Senior Discount Notes due 2008................. 23,131,650 15,000
Other long-term debt(4)............................... 10,278,020 6,664
Capital lease obligations(5).......................... 32,722,106 21,219
Other extended payment terms liabilities(6)........... 9,879,375 6,406
------------- --------
Total debt(6)(7).................................... 307,327,651 199,289
Minority interest....................................... 57,812,814 37,489
Shareholders' equity(8)................................. 76,289,978 49,471
------------- --------
Total capitalization................................ Ps441,430,443 $286,249
============= ========
</TABLE>

U.S. GAAP

The following table shows on a U.S. GAAP basis, as of December 31, 1998, the
Company's capitalization. See "Use of Proceeds" and "Selected Financial and
Other Data." This table should be read in conjunction with the Consolidated
Annual Financial Statements and notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
December 31, 1998
----------------------
(in thousands of Pesos
of December 31, 1998
purchasing power and
in thousands of
Dollars)
<S> <C> <C>
Cash and unrestricted investments(1).................... Ps 36,440,097 $ 23,630
Restricted investments--Escrow Account(2)(3)............ 27,503,663 17,835
------------- --------
Total cash and investments.......................... Ps 63,943,760 $ 41,465
============= ========
Long-term debt (including current portion):
12 1/2% Senior Notes due 2007......................... Ps231,316,500 $150,000
20.32% Senior Discount Notes due 2008................. 23,131,650 15,000
Other long-term debt(4)............................... 10,278,020 6,664
Capital lease obligations(5).......................... 35,474,593 23,004
DIAN Financing........................................ 4,431,832 2,873
Other extended payment terms liabilities (6).......... 9,879,375 6,406
------------- --------
Total debt(6)(7).................................... 314,511,970 203,947
Minority interest....................................... 44,648,215 28,953
Shareholders' equity(8)................................. 40,066,215 25,982
------------- --------
Total capitalization................................ Ps399,226,400 $258,882
============= ========
</TABLE>

34
<PAGE>

- --------
(1) Includes cash (Ps3.6 billion) and short-term investments (Ps29.9 billion)
and long-term (Ps2.9 billion) investments except for the Escrow Account
which is presented separately. See Note 4 to the Consolidated Annual
Financial Statements. Approximaptely Ps22.1 billion of the short-term
investments represents the net proceeds of the Discount Senior Notes which
were received on December 31, 1998.

(2) The Company deposited approximately Ps54.4 billion ($35.3 million) of the
net proceeds realized from the sale of the Senior Notes, representing U.S.
Treasury Bills and internal-only strips, which, at maturity, will be
sufficient to pay the first four interest payments on the Senior Notes,
into the Escrow Account. The May 1, 1998 and November 1, 1998 interest
payments were made from the Escrow Account. For Colombian GAAP, the Escrow
Account is carried at maturity value with unearned interest of Ps1.4
billion ($0.9 million) recorded as a liability. See Notes 4, 16 and 20 to
the Consolidated Annual Financial Statements. For U.S. GAAP, the Escrow
Account is carried at original cost plus accretion of interest income less
payments.

(3) In addition to the deposit in the Escrow Account, the Company deposited
approximately Ps50.6 billion ($32.8 million) of the net proceeds from the
sale of the Senior Notes into the Refinancing Account, which was used to
pay existing debt at October 28, 1998. On January 9, 1998 the Company paid
the remaining balance of existing debt with funds from the Refinancing
Account and on July 14, 1998 the balance of the Refinancing Account was
returned to the Company for general corporate purposes. Thus, the
Refinancing Account is nil at December 31, 1998.

(4) Other long-term debt at December 31, 1998 consisted of debt assumed in the
Cablevision acquisition in July and September 1998. See "Prospectus
Summary--Recent Developments" and Note 12 to the Consolidated Annual
Financial Statements.

(5) Amounts recorded as capital leases under Colombian and U.S. GAAP consist
of leases of land, the IBM Arrangement and the Global Leases for which
lease terms have commenced. In addition, certain equipment leases, which
are operating leases under Colombian GAAP, are capital leases under U.S.
GAAP (Ps2.8 billion). See Notes 19 and 31 (d)(vi) to the Consolidated
Annual Financial Statements.

(6) Other extended payment terms liabilities consist of the following (in
thousands):

<TABLE>
<S> <C> <C>
Transtel-Siemens Purchase Agreement...................... Ps3,931,497 $2,549
TeleGirardot-Siemens Purchase Agreement.................. 4,822,091 3,127
IBM-equipment purchases.................................. 1,125,787 730
----------- ------
Ps9,879,375 $6,406
=========== ======
</TABLE>

The above amounts are interest bearing, extended payment term equipment
purchases and are included in Other Current Liabilities and Other
Noncurrent Liabilities. See Notes 16 and 20 to Consolidated Annual
Financial Statements.

35
<PAGE>

As of December 31, 1998, only a portion of the Vendor Financing had been
incurred. The incurred amounts comprised the Transtel-Siemens Purchase
Agreement and a portion of the Global Leases. Under U.S. GAAP, all capital
leases are required to be capitalized as they arise, including the Global
Leases and the IBM Arrangement, both of which comprise a portion of the
Vendor Financing. Under Colombian GAAP, certain lease payments are not
required to be capitalized, including some of the leasing arrangements
included in the Vendor Financing, unless the purchase options are
exercised. The Company has informed the lessors that it will exercise the
purchase options, and, thus, will capitalize these leases under Colombian
GAAP as they arise. See Notes 30 and 31 to the Consolidated Annual
Financial Statements. Vendor Financing consists of the existing Global
Leases, the IBM Arrangement, the Transtel-Siemens Purchase Agreement and
future Global Leases as follows:

<TABLE>
<CAPTION>
Less Amounts Paid
or Recorded
Total as Liabilities Under Remaining
Vendor Colombian and U.S. Unrecorded Balances
Financing GAAP at December 31, 1998 December 31, 1998
--------- ------------------------- ----------------------
(in thousands)
<S> <C> <C> <C> <C>
Global Leases........... $ 83,037 $(19,290) $63,747 Ps 98,304,345
IBM Arrangement......... 3,440 (2,977) 463 713,997
Transtel-Siemens
Purchase Agreement..... 3,340 (3,340) -- --
-------- -------- ------- --------------
Existing Agreements... 89,817 (25,607) 64,210 99,018,342
Future Global Leases.... 12,250 -- 12,250 18,890,848
-------- -------- ------- --------------
Total Vendor
Financing............ $102,067 $(25,607) $76,460 Ps 117,909,190
======== ======== ======= ==============
</TABLE>

The amounts paid or recorded as liabilities as shown above consist of the
following:

<TABLE>
<CAPTION>
Amounts
Amounts recorded as
paid as of liabilities
December at December
31, 1998 31, 1998 Total
----------- ------------ --------------------
(in
thousands)
<S> <C> <C> <C> <C>
Global Leases................ Ps5,336,210 Ps24,411,584 Ps29,747,794 $19,290
IBM Arrangement.............. 1,479,040 3,471,821 4,590,861 2,977
Transtel-Siemens Purchase
Agreement................... 1,219,150 3,931,497 5,150,647 3,340
----------- ------------ ------------ -------
Ps8,034,400 Ps31,814,902 Ps39,489,302 $25,607
=========== ============ ============ =======
</TABLE>

Under Colombian and U.S. GAAP, the Global Leases (including the future
leases) will be treated as capital leases as and when the related equipment
is delivered, installed and tested. Substantially all of the IBM
Arrangement was recorded as a capital lease under Colombian and U.S. GAAP
at December 31, 1998. The Transtel-Siemens Purchase Agreement is recorded
as a liability at December 31, 1998 under both Colombian and U.S. GAAP. See
Notes 16 and 20 to the Consolidated Annual Financial Statements. The Future
Global Leases have not yet been negotiated. See Note 31(d)(vi) of the
Consolidated Annual Financial Statements for a summary of the remaining
unrecorded balances of the Vendor Financing.

(7) DIAN allows for the deferral of taxes and duties related to the purchase
of certain imported telecommunications equipment used by the Company,
through its Operating Companies, in the Expansion Plan. Based on the
expected imported equipment to be purchased under the Expansion Plan, the
Company estimates that it will defer approximately Ps31.2 billion ($20.2
million) of taxes and duties during the Expansion Plan that will be paid
over a five-year period commencing six months from the date of incurrence.
The DIAN Financing does not bear any interest and only approximately $4.2
million (Ps6.5 billion of which $1.4 million (Ps2.1 billion) has been
paid) was committed as of December 31, 1998 as Siemens had not yet
completed the delivery and installation of all of the equipment to be
leased under the

36
<PAGE>

Global Leases. DIAN Financing consists of approximately Ps23.7 billion
($15.4 million) of value-added tax and Ps7.5 billion ($4.8 million) of
duty. Prior to December 24, 1998, the value-added tax, when paid, may be
taken as a credit against income taxes to the extent that income taxes are
payable in a two year period or is refundable if not used as a credit. On
December 24, 1998 the Colombian government issued Law 488 which reforms the
tax rules as of January 1, 1999. Law 488, among other things, establishes
that the value-added tax paid may not be taken as a credit against income
taxes commencing in 1999 but may be treated as a deduction from taxable
income or capitalized as a cost of the respective asset. All DIAN Financing
other than Ps2.1 billion paid during 1998 will be subject to Law 488. Under
Colombian GAAP, amounts due under the DIAN Financing will be recorded as
each semi-annual payment is due, similar to an operating lease payment.
Under U.S. GAAP, the gross amount (undiscounted) representing value-added
tax and duty will be recorded equipment and liabilities at the dates that
the lease terms of the related Global Leases commence. As of December 31,
1998, $2.8 million (Ps4.4 billion) of the DIAN Financing is recorded as a
liability for U.S. GAAP. See Note 30 of the Consolidated Annual Financial
Statements.

(8) The total authorized share capital of the Transtel S.A. is 50,000,000,000
shares comprised of one class of common stock with a par value of one
Peso, of which 34,611,747,976 shares were outstanding at December 31,
1998.

37
<PAGE>

THE EXCHANGE OFFER

General

The Company, together with the Trust, hereby offers upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange all outstanding Original Certificates properly tendered on or prior
to the Expiration Date and not withdrawn as permitted pursuant to the
procedures described below for Exchange Certificates.

As of the date of this Prospectus, U.S.$150.0 million aggregate principal
amount at maturity of the Original Certificates was outstanding. This
Prospectus, together with the Letter of Transmittal, is first being sent on or
about May 14, 1999, to all Original Certificateholders known to the Company.
The Company's obligation to accept Original Certificates for exchange pursuant
to the Exchange Offer is subject to certain conditions set forth under "--
Certain Conditions to the Exchange Offer" below and to the terms and
provisions of the Registration Rights Agreement.

Purpose of the Exchange Offer

The Original Certificates were issued by the Trust on October 28, 1997 in
transactions exempt from the registration requirements of the Securities Act.
Accordingly, the Original Certificates may not be reoffered, resold, or
otherwise transferred in the United States unless registered pursuant to the
Securities Act or unless an applicable exemption from the registration and
prospectus delivery requirements of the Securities Act is available.

In connection with the issuance and sale of the Original Certificates, the
Company entered into the Registration Rights Agreement, which requires the
Company to use its best efforts to file with the Commission a registration
statement relating to the Exchange Offer by March 27, 1998, to use its best
efforts to cause the registration relating to the Exchange Offer to become
effective under the Securities Act by May 26, 1998, and to consummate the
Exchange Offer by June 25, 1998. The Exchange Offer is being made by the
Company to satisfy its obligations with respect to the Registration Rights
Agreement. The Company filed the registration statement on April 10, 1998. As
a result of the delay in filing, additional interest has accrued on the Senior
Notes (and therefore, on the Certificates) over and above the basic interest
amount at a rate of 0.50% per annum from March 28, 1998 through April 10,
1998. Due to the fact that the registration statement was not declared
effective by May 26, 1998, additional interest accrued on the Senior Notes
(and therefore, on the Certificates) at a rate of 0.50% per annum from May 27,
1998 through August 24, 1998, at a rate of 1% per annum from August 25, 1998
through November 22, 1998, at a rate of 1.5% per annum from November 23, 1998
through February 20, 1999 and at a rate of 2.0% per annum from February 21,
1999 through the date of this Prospectus (pursuant to the Indenture the
maximum additional interest is 2.0% per annum).

Resale Expiration Date; Extension; Termination; Amendment

Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, Original Certificateholders (other
than any holder who is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who exchange their Original Certificates
for Exchange Certificates pursuant to the Exchange Offer generally may offer
such Exchange Certificates for resale, resell such Exchange Certificates, and
otherwise transfer such Exchange Certificates without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
such Exchange Certificates are acquired in the ordinary course of the holders'
business and such holders are not participating in, and have no arrangement or
understanding with any person to participate in, a distribution of such
Exchange Certificates. Each broker-dealer that receives Exchange Certificates
for its own account in exchange for Original Certificates, where such Original
Certificates were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Certificates. See
"Plan of Distribution." If an Original Certificateholder does not exchange
such Original Certificates for Exchange Certificates pursuant to the Exchange
Offer, such Original Certificates will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the
Original Certificates may not be

38
<PAGE>

offered or sold, unless registered under the Securities Act, except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act
and applicable state securities laws. See "The Exchange Offer--Consequences of
Failure to Exchange; Resale of Exchange Certificates".

The Exchange Offer will expire at 5:00 p.m., New York City time, on June 12,
1999, unless the Company, in its sole discretion, has extended the period of
time for which the Exchange Offer is open (such date, as it may be extended,
is referred to herein as the "Expiration Date"). The Company expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open and thereby delay acceptance for
exchange of any Original Certificates, by giving oral notice (promptly
confirmed in writing) or written notice to the Exchange Agent and by giving
written notice of such extension to the holders thereof or by timely public
announcement communicated, unless otherwise required by applicable law or
regulation, by making a release through the Dow Jones News Service, in each
case, no later than 9:00 a.m. New York City time, on the next business day
after the previously scheduled Expiration Date. During any such extension, all
Original Certificates previously tendered will remain subject to the Exchange
Offer unless properly withdrawn.

In addition, the Company expressly reserves the right to terminate or to
amend the Exchange Offer, and not to accept for exchange any Original
Certificates not theretofore accepted for exchange, upon the occurrence of any
of the events specified below under "--Certain Conditions to the Exchange
Offer". If any such termination or amendment occurs, the Company will notify
the Exchange Agent and will either issue a press release or give oral or
written notice to the Original Certificateholders as promptly as practicable
in the manner set forth above with respect to an extension of the Expiration
Date.

For purposes of the Exchange Offer, a "business day" means any day other
than a Saturday, a Sunday or a date on which banking institutions in New York
City are not required to be open, and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.

Procedures for Tendering Original Certificates

The tender to the Company of Original Certificates by an Original
Certificateholder thereof as set forth below and the acceptance thereof by the
Company will constitute a binding agreement between the tendering Original
Certificateholder and the Company upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal.

Except as set forth below, an Original Certificateholder who wishes to
tender Original Certificates for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal or, in
the case of a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal, to the Exchange Agent at one of the addresses set forth below
under "Exchange Agent" on or prior to the Expiration Date. In addition, either
(i) certificates representing Original Certificates must be received by the
Exchange Agent along with the Letter of Transmittal or Agent's Message in lieu
thereof, or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Original Certificates, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company ("DTC") (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the Original Certificateholder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message"
means a message, transmitted by DTC to and received by the Exchange Agent and
forming a part of a book-entry confirmation, which states that DTC has
received an express acknowledgement from the DTC participant, which
acknowledgement states that such participant has received and agrees to be
bound by the Letter of Transmittal and that the Trust and the Company may
enforce such Letter of Transmittal against such participant.

THE METHOD OF DELIVERY OF ORIGINAL CERTIFICATES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE ORIGINAL
CERTIFICATEHOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED

39
<PAGE>

THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. NO
ORIGINAL CERTIFICATES, LETTERS OF TRANSMITTAL OR AGENT'S MESSAGE IN LIEU
THEREOF SHOULD BE SENT TO THE COMPANY.

Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Original Certificates surrendered for
exchange pursuant thereto are tendered (i) by a registered Original
Certificateholder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution (as defined below). In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantees must be by a
firm which is a member of a registered national securities exchange as a
member of the National Association of Securities Dealers, Inc. or by a
clearing agency, an insured credit union, a savings association or a
commercial bank or trust company having an office or a correspondent in the
United States (each an "Eligible Institution"). If Original Certificates are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Original Certificates surrendered for exchange must be
endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by, the registered holder thereof with the
signature thereon guaranteed by an Eligible Institution.

If the Letter of Transmittal or any Original Certificates or powers of
attorney are signed by transferors, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.

A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal or
delivery of an Agent's Message in lieu thereof accompanied by (i) the Original
Certificates (or a confirmation of book-entry transfer of such Original
Certificates into the Exchange Agent's account at the Book-Entry Transfer
Facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery (the "Notice of Guaranteed Delivery") or letter, telegram or
facsimile transmission to similar effect (as provided above) from an Eligible
Institution is received by the Exchange Agent. Issuances of Exchange
Certificates in exchange for Original Certificates tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made
only against timely deposit of the Letter of Transmittal or delivery of an
Agent's Message in lieu thereof (and any other required documents) and the
tendered Original Certificates.

All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Original Certificates tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all tenders of any particular Original Certificates not properly tendered or
to not accept any particular Original Certificates which acceptance might, in
the judgment of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Original Certificates
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Original Certificates in the
Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Original Certificates either before or
after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Original Certificates for exchange must be cured within such
reasonable period of time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of
Original Certificates for exchange, nor shall any of them incur any liability
for failure to give such notification.

By tendering, each Original Certificateholder will represent to the Company
that, among other things, the Exchange Certificates acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such Exchange Certificates, whether or not such person is the
holder, that neither

40
<PAGE>

the holder nor any such other person has an arrangement or understanding with
any person to participate in the distribution of such Exchange Certificates
and that neither the holder nor any such other person is an "affiliate" as
defined under Rule 405 of the Securities Act, of the Company, or if it is an
affiliate it will comply with the registration and prospectus requirements of
the Securities Act to the extent applicable.

Each broker-dealer that receives Exchange Certificates for its own account
in exchange for Original Certificates where such Original Certificates were
acquired by such broker-dealer as a result of market-making activities or
other trading activities must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Certificates. See "Plan of
Distribution."

Book-Entry Transfer

The Exchange Agent will make a request within two business days after the
date of this Prospectus to establish accounts with respect to the Original
Certificates at the Book-Entry Transfer Facility. DTC, for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Original Certificates by
causing the Book-Entry Transfer Facility to transfer such Original
Certificates into the Exchange Agent's account with respect to the Original
Certificates in accordance with the Book-Entry Transfer Facility's procedures
for such transfer. Although delivery of Original Certificates may be effected
through book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility, an appropriate Letter of Transmittal with any
required signature guarantee or an Agent's Message in lieu thereof and all
other required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth below on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.

Guaranteed Delivery Procedures

If an Original Certificateholder desires to accept the Exchange Offer and
time will not permit a Letter of Transmittal or Original Certificates to reach
the Exchange Agent before the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if
the Exchange Agent has received at its address set forth below on or prior to
the Expiration Date, a letter, telegram or facsimile transmission from an
Eligible Institution setting forth the name and address of the tendering
holder, the names in which the Original Certificates are registered and, if
possible, the certificate numbers of the Original Certificates to be tendered,
and stating that the tender is being made thereby and guaranteeing that within
three business days after the Expiration Date the certificates for all
physically tendered Original Certificates, in proper form for transfer, or a
Book-Entry Confirmation of such Original Certificates into the Exchange
Agent's account at the Book-Entry Transfer Facility, will be delivered by such
Eligible Institution together with a properly completed and duly executed
Letter of Transmittal or an Agent's Message in lieu thereof (and any other
required documents). Unless Original Certificates being tendered by the above-
described method are deposited with the Exchange Agent within the time period
set forth above (accompanied or preceded by a properly completed Letter of
Transmittal and any other required documents), the Company may, at its option,
reject the tender. Copies of Notice of Guaranteed Delivery which may be used
by Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent.

Withdrawal Rights

Tenders of Original Certificates may be withdrawn at any time prior to the
Expiration Date.

For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter
must be received by the Exchange Agent prior to the Expiration Date at its
address set forth below. Any such notice of withdrawal must specify the name
of the person having tendered the Original Certificates to be withdrawn,
identify the Original Certificates to be withdrawn (including the amount of
such Original Certificates), and (where Original Certificates have been
transmitted) specify the name in which such Original Certificates are
registered, if different from that of the withdrawing holder thereof.

41
<PAGE>

If Original Certificates have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the
withdrawing holder thereof must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Original Certificates have been tendered pursuant to
the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Original Certificates and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company in its sole discretion, which determination
will be final and binding on all parties. Any Original Certificates so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Original Certificates which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Original Certificates tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Original Certificates will be
credited to an account with such Book-Entry Transfer Facility specified by the
holder thereof) as soon as practicable after such withdrawal, rejection of
tender or termination of the Exchange Offer. Properly withdrawn Original
Certificates may be retendered by following one of the procedures described
under "--Procedures for Tendering Original Certificates" above at any time on
or prior to the Expiration Date.

Acceptance of Original Certificates for Exchange; Delivery of Exchange
Certificates

Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Original
Certificates properly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date and will issue the Exchange Certificates promptly after such
acceptance. See "The Exchange Offer--Certain Conditions to the Exchange
Offer." For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Original Certificates for exchange when, as
and if the Company has given oral and written notice thereof to the Exchange
Agent, with written confirmation of any oral notice to be given promptly
thereafter.

For each Original Certificate accepted for exchange, the Original
Certificateholder will receive Exchange Certificates having a principal amount
equal to that of the surrendered Original Certificates.

In all cases, issuance of Exchange Certificates for Original Certificates
that are accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of such Original Certificates
or a timely Book-Entry Confirmation of such Original Certificates into the
Exchange Agent's account at the Book-Entry Transfer Facility, a properly
completed and duly executed Letter of Transmittal or Agent's Message in lieu
thereof and all other required documents.

Certain Conditions to the Exchange Offer

The Exchange Offer shall not be subject to any conditions, other than that
(i) the Exchange Offer does not violate applicable law, rule, regulation or
any applicable interpretation of the Staff of the Commission (the "Staff"),
(ii) no action or proceeding is instituted or threatened in any court or by
any governmental agency which might materially impair the ability of the
Company or the Trust to proceed with the Exchange Offer and no material
adverse development has occurred in any existing action or proceeding with
respect to the Company or the Trust and (iii) all governmental approvals have
been obtained, which approvals the Company deems necessary for the
consummation of the Exchange Offer.

Exchange Agent

HSBC Bank USA (formerly known as Marine Midland Bank) has been appointed as
the Exchange Agent for the Exchange Offer. All tendered Original Certificates,
executed Letters of Transmittal or Agent's Messages in lieu thereof and other
related documents should be directed to the Exchange Agent at one of the
addresses set forth in the Letter of Transmittal. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent at the address set forth in the Letter of
Transmittal.

42
<PAGE>

HSBC Bank USA (formerly known as Marine Midland Bank) also acts as Indenture
Trustee under the Indenture.

Solicitation of Tenders

The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith. The Company will also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by
them in forwarding copies of this and other related documents to be beneficial
owners of the Original Certificates and in handling or forwarding tenders for
their customers.

No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there
has not been a change in the affairs of the Company since the respective dates
as of which information is given herein. The Exchange Offer is not being made
to (nor will tenders be accepted from or on behalf of) Original
Certificateholders in any jurisdiction in which the making of the Exchange
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction.

Transfer Taxes

Certificateholders who tender their Original Certificates for exchange will
not be obligated to pay any transfer taxes in connection therewith except that
Certificateholders who instruct the Company to register Exchange Certificates
in the name of, or request Original Certificates not tendered or not accepted
in the Exchange Offer be returned to, a person other than the registered
tendering holder will be responsible for the payment of any applicable
transfer tax thereon.

Accounting Treatment

The Exchange Certificates will be recorded at the book value of the Original
Certificates as reflected in the Company's accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company upon the exchange of Exchange Certificates for
Original Certificates. Expenses incurred in connection with the issuance of
the Exchange Certificates will be amortized over the term of the Exchange
Certificates.

Consequences of Failure to Exchange; Resale of Exchange Certificates

Original Certificateholders who do not exchange their Original Certificates
for Exchange Certificates pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Original Certificates as set
forth in the legend thereon as a consequence of the issuance of the Original
Certificates pursuant to the exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. Original Certificates not exchanged pursuant to the Exchange
Offer will continue to remain outstanding in accordance with their terms. In
general, the Original Certificates may not be offered or sold unless
registered under the Securities Act and under the applicable state securities
laws, except pursuant to an exemption from, or in a transaction not subject
to, the Securities Act and applicable state securities laws. The Company does
not currently anticipate that it will register the Original Certificates under
the Securities Act. However, if, prior to consummation of the Exchange Offer,
the Initial Purchaser holds any Certificates acquired by it and having, or
which are reasonably likely to be determined to have, the status of an unsold
allotment in the initial distribution, or any other Original Certificateholder
is not entitled to participate in the Exchange Offer, under the Registration
Rights Agreement, the Company, upon the request of the Initial Purchaser or
any such Original Certificateholder, shall simultaneously with the delivery of
Exchange Certificates in the Exchange Offer, issue and deliver to the Initial
Purchaser or any such Original Certificateholder, in exchange (the "Private
Exchange") for such Certificates held by such Initial Purchaser and any such
Original

43
<PAGE>

Certificateholder, a like principal amount of certificates issued by the Trust
that are identical in all material respects to the Exchange Certificates (the
"Private Exchange Certificates") (and which are entitled to the benefits of
the Trust Agreement); provided, however, the Company shall not be required to
effect such exchange if, in the written opinion of counsel for the Company (a
copy of which shall be in form and substance reasonably satisfactory to the
Initial Purchaser and be delivered to the Initial Purchaser and any Original
Certificateholder affected thereby), such exchange cannot be effected without
registration under the Securities Act. The Private Exchange Certificates shall
bear the same CUSIP number as the Exchange Certificates.

Based on certain no-action letters issued by the Staff to third parties in
unrelated transactions, the Company believes that Exchange Certificates issued
pursuant to the Exchange Offer may be offered for resale, resold or otherwise
transferred by holders thereof (other than (i) any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or (ii) any broker-dealer that purchased Original Certificates from the
Company to resell pursuant to Rule 144A or any other available exemption)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange Certificates are acquired in
the ordinary course of such holders' business and such holders have no
arrangement or understanding with any person to participate in the
distribution of such Exchange Certificates. If any holder has any arrangement
or understanding with respect to the distribution of the Exchange Certificates
to be acquired pursuant to the Exchange Offer, such holder (i) could not rely
on the applicable interpretations of the staff of the Commission and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Thus, any
Exchange Certificates acquired by such holder will not be freely transferable
except in compliance with the Securities Act. A broker-dealer who holds
Original Certificates that were acquired for its own account as a result of
market-making or other trading activities may be deemed to be an "underwriter"
within the meaning of the Securities Act and must, therefore, deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of Exchange Certificates. Each such broker-dealer that receives
Exchange Certificates for its own account in exchange for Original
Certificates, where such Original Certificates were acquired by such broker-
dealer as a result of market-making activities or other trading activities,
must acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with the resale of such Exchange Certificates. See
"Plan of Distribution."

In addition, to comply with applicable state securities laws, the Exchange
Certificates may not be offered or sold by a Certificateholder unless they
have been registered or qualified for sale under such applicable state
securities laws or an exemption from registration or qualification is
available therefrom.

The Company has not taken any action under the blue sky or state securities
laws to qualify the Exchange Certificates for sale and no state commission or
regulatory authority has reviewed the Prospectus. However, the Exchange
Certificates may be offered and sold if such offer and sale is in compliance
with a securities exemption or a transactional exemption under the applicable
state securities laws.

Participation in the Exchange Offer is voluntary. Original
Certificateholders are urged to consult their financial and tax advisors in
making their own decisions on what action to take.

As a result of the making of, and upon acceptance for exchange of all
validly tendered Original Certificates pursuant to the terms, of this Exchange
Offer, the Company will have fulfilled a covenant contained in the
Registration Rights Agreement. Any Original Certificates not tendered and
accepted in the Exchange Offer will remain outstanding and will be entitled to
all of the same rights and will be subject to all of the same limitations
applicable thereto under the Trust Agreement (except for certain rights to be
registered under the Act which terminate upon consummation of the Exchange
Offer). All untendered Original Certificates, and all Private Exchange
Certificates will be subject to the restrictions on transfer set forth in the
Indenture, except that the holders of Private Exchange Certificates will in
certain circumstances have rights to have their Private Exchange Certificates
registered under the Act for resale. To the extent that Original Certificates
are tendered and accepted in the Exchange Offer, an Original
Certificateholder's ability to sell untendered Original Certificates could be
adversely affected.

The Company may in the future seek to acquire untendered Original
Certificates in open market or privately negotiated transactions, through
subsequent exchange offers or otherwise. The Company has no present plan to
acquire any Original Certificates which are not tendered in the Exchange
Offer.

44
<PAGE>

TRANSTEL PASS THROUGH TRUST--

SELECTED FINANCIAL DATA AND MANAGEMENT'S DISCUSSION AND ANALYSIS

The following selected financial data for the Trust has been derived from
the audited financial statements of the Trust as of and for the period from
October 20, 1997 (inception) through December 31, 1997 and as of and for the
year ended December 31, 1998, separately included elsewhere herein, prepared
in accordance with U.S. GAAP.

<TABLE>
<CAPTION>
As of December 31, 1997
or for the period As of or for the
October 20, 1997 through Year ended
December 31, 1997 December 31, 1998
------------------------ -----------------
(in thousands of Dollars)
<S> <C> <C>
Statement of Distributable Income:
Distributable income--interest.... $ 3,281 $ 19,781
Statement of Assets and Undivided
Interests:
Total assets...................... 153,281 153,658
Undivided interests of
Certificateholders............... 153,281 153,658
</TABLE>

The Trust is a statutory business trust, created under Delaware law pursuant
to a trust agreement and the filing of a certificate of trust with the
Delaware Secretary of State on October 20, 1997. The Trust is governed by the
Amended and Restated Trust Agreement, dated October 28, 1997, among Transtel,
S.A., Wilmington Trust Company, as pass through trustee, and the holders of
the certificates. The Trust exists for the exclusive purposes of (i) issuing
and selling the certificates; (ii) using the proceeds from the sale of the
certificates to acquire the Senior Notes; and (iii) engaging in only those
other activities necessary or incidental thereto. Accordingly, the Senior
Notes of $150.0 million and related accrued interest are and will be the sole
assets of the Trust and payments received in respect of the Senior Notes is
and will be the sole source of revenue of the Trust.

The Senior Notes bear interest at a rate of 12 1/2% per annum payable
semiannually in cash on May 1 and November 1 of each year, commencing May 1,
1998. Interest distributions received on each May 1 and November 1 will be
paid to the persons who are the registered Certificateholders on the April 15
and October 15, as the case may be, immediately preceding such interest
payment date. Certain additional interest clauses may increase the interest
rate by a maximum of 2% for certain periods of time. The interest rates in
effect at December 31, 1997 and December 31, 1998 were 12 1/2% and 13 1/2%,
respectively. The additional interest increased to the maximum of 2% on
February 21, 1999, and thus the interest rate became 14 1/2% on that date.
Each Certificateholder will be entitled to receive a pro rata share of any
payments received by, or on behalf of, the trustee or on behalf of the Trust
in respect of the Senior Notes.

The distributable income earned for the period October 20, 1997 through
December 31, 1997 is interest accrued at 12 1/2% on the $150.0 million Senior
Notes receivable for that period. The distributable income for the year ended
December 31, 1998 is interest earned at 12 1/2% to 13 1/2% during that period
on the Senior Notes. Transtel made the required cash payments to the Trust for
interest of $9.6 million and $9.8 million on May 1 and November 1, 1998, and
the Trust made the same payments to the Certificateholders on those dates.

All payments to the Certificateholders are dependent upon payments of
Transtel on the Senior Notes.

45
<PAGE>

TRANSTEL S.A.--

SELECTED FINANCIAL AND OTHER DATA

The Company was incorporated in 1993 and commenced offering telephone
services, through its operating subsidiary TelePalmira, in September 1995.
Accordingly, the Company has no commercial operating history prior to such
time, and results for 1995 are not directly comparable to those of 1996. The
Company was in a preoperating stage prior to September 1, 1995 and capitalized
all of its net expenses as deferred costs; thus, no statement of income is
presented for 1994. The selected statement of income data for each of the
years ended December 31, 1995, 1996, 1997 and 1998, and the selected balance
sheet data as of December 31, 1994, 1995, 1996, 1997 and 1998 have been
derived from financial statements audited by Price Waterhouse, independent
accountants. The consolidated balance sheets at December 31, 1996, 1997 and
1998 and the related statements of income and of cash flows, of changes in
financial position and of changes in shareholders' equity for each of the
three years in the period ended December 31, 1998, and notes thereto, appear
elsewhere herein. This information should be read in conjunction with, and is
qualified in its entirety by reference to, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Annual Financial Statements of the Company, including the notes
thereto, included elsewhere in this Prospectus.

The Consolidated Annual Financial Statements included herein have been
prepared in conformity with Colombian GAAP (including restatement of the
financial information in constant pesos as of December 31, 1998), which
differs in certain significant aspects from U.S. GAAP. Note 31 to the
Consolidated Annual Financial Statements provides a discussion of the
principal differences between Colombian and U.S. GAAP as they relate to the
Company and a reconciliation of net income and shareholders' equity for the
Company as of and for the years ended December 31, 1996, 1997 and 1998, to
amounts calculated in accordance with U.S. GAAP.

Unless otherwise indicated, all financial information included in this
Prospectus has, for comparability purposes, been restated in constant Pesos as
of December 31, 1998 by indexing historical amounts using the MCPI. Although
the restatement of nominal Pesos into constant Pesos lessens the distorting
effect that an inflationary environment has on comparisons of the Consolidated
Annual Financial Statements over time, such restatement does not wholly
eliminate those distortions and evaluation of period-to-period trends may be
difficult. See "Risk Factors--Corporate Disclosure and Accounting Standards"
and "Risk Factors--Inflation."

46
<PAGE>

<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------------------
1995 1996 1997 1998 1998
------------ ------------ ------------ ------------ -------
(in thousands of constant Pesos of December 31, 1998 purchasing
power and in thousands of Dollars, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:
Colombian GAAP:
Revenues.............. Ps 2,807,094 Ps13,755,565 Ps30,730,089 Ps85,639,390 $55,534
Costs and expenses.... 1,337,658 8,273,861 19,585,706 43,690,931 28,332
Operating income...... 1,469,436 5,481,704 11,144,383 41,948,459 27,202
Interest expense...... 329,691 2,250,450 9,408,807 30,606,827 19,847
Income tax expense.... 431 380,041 1,347,014 5,185,064 3,362
Minority interest
expense.............. 595,671 2,654,826 4,759,974 10,004,372 6,487
Net income(1)......... 894,475 3,863,145 1,258,834 11,524,840 7,474
Earnings per share.... 0.39 0.97 0.28 1.84 --
U.S. GAAP:
Revenues.............. Ps 2,100,261 Ps 8,937,406 Ps31,692,078 Ps85,775,466 $55,622
Operating income
(loss)............... (2,746,361) (208,438) 6,913,210 40,573,581 26,310
Interest expense...... 1,878,027 9,803,423 17,044,196 33,619,389 21,801
Net loss.............. (3,427,116) (3,457,437) (2,590,525) 6,984,184 4,529
Basic and diluted
earnings (loss) per
share................ (0.11) (0.10) (0.08) 0.20 --
</TABLE>

<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------------
1994 1995 1996 1997 1998 1998
---------- ----------- ------------ ------------ ------------ --------
(in thousands of constant Pesos of December 31, 1998
purchasing power and in thousands of Dollars, except per share
amounts)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (end
of period):
Colombian GAAP:
Cash.................. Ps 7,242 Ps 833,688 Ps15,943,884 Ps 3,226,399 Ps 3,574,256 $ 2,318
Properties, plant and
equipment, net....... -- 26,289,970 31,144,030 130,997,131 264,084,214 171,249
Total assets.......... 4,704,812 40,568,998 99,987,458 408,668,566 508,350,458 329,646
Short-term debt(2).... -- 3,119,883 20,709,482 18,584,628 21,449,577 13,909
12 1/2% Senior Notes
due 2007............. -- -- -- 224,474,459 231,316,500 150,000
20.32% Senior Discount
Notes due 2008....... -- -- -- -- 23,131,650 15,000
Other long-term
debt(3)(4)........... -- 14,015,692 30,190,136 11,346,025 45,008,576 29,186
Minority interest..... -- 10,936,213 20,284,410 49,052,598 57,812,814 37,489
Shareholders' equity.. 4,015,140 8,290,357 22,385,774 61,359,260 76,289,978 49,471
U.S. GAAP:
Cash.................. Ps -- Ps 833,688 Ps15,943,884 Ps 3,226,399 Ps 3,574,256 $ 2,318
Properties, plant and
equipment, net....... -- 30,169,147 38,176,375 143,900,953 291,984,440 189,341
Total assets.......... -- 37,355,166 72,530,567 369,246,016 464,274,047 301,063
Short-term
debt(2)(4)........... -- 3,576,668 21,340,995 19,650,283 23,256,234 15,081
12 1/2% Senior Notes
due 2007............. -- -- -- 224,474,459 231,316,500 150,000
20.32% Senior Discount
Notes due 2008....... -- -- -- -- 23,131,650 15,000
Other long-term
debt(3)(4)(5)........ -- 17,415,169 32,716,180 14,077,217 50,386,238 32,674
Minority interest..... -- 10,177,292 8,551,357 37,503,077 44,648,215 28,953
Shareholders' equity
(deficit)............ -- 2,463,242 1,381,680 33,082,031 40,213,610 26,077
</TABLE>

47
<PAGE>

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
(in thousands of constant Pesos of December 31, 1998
purchasing power in thousands of Dollars, except Network and
Operating Data)
1995 1996 1997 1998 1999
------------ ------------ ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
Other Financial Data:
Colombian GAAP:
Capital
expenditures(6)....... Ps18,688,441 Ps12,192,329 Ps63,165,351 Ps 88,132,783 $ 57,151
Depreciation and
amortization(1)....... 372,454 1,484,922 4,520,502 11,972,262 7,763
Indebtedness(7)........ 21,524,610 54,475,913 249,733,242 326,964,835 212,024
Deficiency of earnings
to fixed charges(8)(9)
...................... (13,836) (135,882) (1,600,376) N/A N/A
U.S. GAAP:
Capital
expenditures(6)....... Ps18,693,156 Ps12,498,184 Ps64,384,081 Ps 89,744,234 $ 58,196
Depreciation and
amortization.......... 409,848 1,894,717 5,871,666 16,528,367 10,718
Deficiency of earnings
to fixed charges
(8)(9)................ (3,961,704) (6,271,305) (228,673) N/A N/A
Network and Operating
Data (end of period):
Systems in operation... 1 1 7 8
Population............. 317,995 317,995 3,058,600 3,058,600
Subscribers............ 22,260 29,528 95,475 235,311
Penetration(10)........ 7.0 9.3 19.2 23.9
</TABLE>
- --------
(1) For Colombian GAAP purposes, as of January 1, 1996, TelePalmira changed
from the straight-line to the reverse sum of the years digits' method of
computing depreciation which had the effect of decreasing 1996
depreciation (and increasing 1996 income before income taxes and minority
interest) by Ps1,088,426 ($706) and increasing 1996 net income by
Ps653,057 ($423). For U.S. GAAP purposes, all periods use the straight-
line method.
(2) Short-term debt includes short-term debt, current portion of other long-
term debt, current portion of capital lease obligations, current portion
of DIAN Financing (U.S. GAAP only) and the current portion of the
Transtel-Siemens Purchase Agreement, the TeleGiradot-Siemens Purchase
Agreement and an equipment purchase payable to IBM. See Notes 12, 16 and
19 to the Consolidated Annual Financial Statements.
(3) Other long-term debt includes other long-term debt, capital lease
obligations, noncurrent portion of DIAN Financing (U.S. GAAP only) and the
noncurrent portion of the Transtel-Siemens Purchase Agreement, the
TeleGiradot-Siemens Purchase Agreement and an equipment purchase payable
to IBM. See Notes 12, 19 and 20 to the Consolidated Annual Financial
Statements.
(4) The following table reconciles the U.S. GAAP amounts for short-term debt
and other long-term debt at December 31, 1998 to debt presented in
"Capitalization" and in the U.S. GAAP balance sheet on page F-45:

<TABLE>
<CAPTION>
Balance Sheet Caption Current Noncurrent Total
--------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Short-term debt.................. Ps13,578,652 Ps -- Ps13,578,652
Other long-term debt............. 1,464,219 8,813,801 10,278,020
Capital lease obligations........ 4,808,809 30,665,784 35,474,593
DIAN Financing................... 1,107,958 3,323,874 4,431,832
Transtel-Siemens Purchase
Agreement, TeleGirardot-Siemens
Purchase Agreement and IBM
equipment purchases (included in
other current liabilities and
other noncurrent liabilities--
see Notes 16 and 20 of the
Consolidated Annual Financial
Statements)..................... 2,296,596 7,582,779 9,879,375
------------ ------------ ------------
Total.......................... Ps23,256,234 Ps50,386,238 Ps73,642,472
============ ============ ============
</TABLE>

(5) Under U.S. GAAP, all capital leases are required to be recorded as
liabilities as they arise, including the Global Leases and the IBM
Arrangement, both of which comprise a portion of the Vendor Financing, and
the DIAN Financing. Under Colombian GAAP, the DIAN Financing and certain
lease payments are not required to be recorded as liabilities, including
some of the leasing arrangements included in the Vendor Financing. See
Notes 30 and 31 to the Consolidated Annual Financial Statements and
"Capitalization." The principal amounts of Vendor Financing and the DIAN
Financing (undiscounted) that will be recorded, as they arise in the
future, that are not recorded as liabilities at December 31, 1998 are as
follows (in thousands):

<TABLE>
<S> <C> <C>
Vendor Financing:
Global Leases...................................... Ps 98,304,345 $63,747
IBM Arrangement.................................... 713,997 463
Future Global Leases............................... 18,890,848 12,250
------------- -------
Total............................................. 117,909,190 76,460
DIAN Financing...................................... 20,644,227 13,387
------------- -------
Ps138,553,417 $89,847
============= =======
</TABLE>

(6) Capital expenditures consist of purchases of and advances on properties,
plant and equipment as reflected in the Company's consolidated statements
of cash flows.

48
<PAGE>

(7) Indebtedness is calculated in accordance with the definition of
"Indebtedness" under the Indenture (which is based on Colombian GAAP),
which includes short-term debt, long-term debt, capital lease obligations
and obligations under the Vendor Financing and the DIAN Financing, as they
arise.
(8) For purposes of computing the deficiency of earnings to fixed charges,
"earnings" consist of income (loss) before income taxes, minority
interests and fixed charges, excluding capitalized interest. Fixed charges
consist of interest on all indebtedness (whether capitalized or expensed)
and that portion of operating lease expenses deemed to be interest
expense.
(9) The ratio of earnings to fixed charges is 1.73 for the year ended December
31, 1998 under Colombian GAAP. The ratio of earnings to fixed charges for
the year ended December 31, 1998 under U.S. GAAP is 1.44.
(10) Penetration represents the number of installed lines per 100 people. In
Cartago, Jamundi, Buga, Yumbo, Cali and Girardot, penetration includes
the installed lines of municipal competitors as of December 31, 1998 of
approximately 6,000 lines, 4,000 lines, 28,700, lines, 4,700 lines,
445,000 lines and 7,000 lines as per the Company's estimates,
respectively.

49
<PAGE>

TRANSTEL S.A.-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

General

The Company is the largest private telephone company in Colombia, providing
telephone service to both business and residential subscribers. The Company
currently owns and operates telephone systems serving ten cities, with an
aggregate population of 3.1 million people, located in the southwestern region
of Colombia. As of December 31, 1998, such systems provided service to an
aggregate of approximately 235,300 subscribers and had an average penetration
of 23.9 lines per 100 people.

Throughout 1998 the Company has been implementing its Expansion Plan which
was designed to address in part the significant demand and growth for
telephone lines in each of its markets. Management intends to substantially
increase the number of lines installed from 56,800 at the date of acquisition
of each of the systems to approximately 222,200 lines by the completion of the
Expansion Plan which excludes activities of the Company's TeleGirardot which
was formed on December 31, 1997, following the implementation of the Expansion
Plan. See "Business--TeleGirardot--Expansion Plan and Growth Strategy." As of
December 31, 1998 the Company, in conjunction with Siemens, had completed the
installation of approximately 155,000 new lines, or approximately 94% of the
new lines to be installed pursuant to the Expansion Plan, and had upgraded all
of the existing 56,800 lines.

On December 15, 1998, the Company completed its acquisition of a 100%
interest in Cablevision for Ps20.4 billion, which operates as the primary
provider of cable and pay television services in Cali. This investment offers
Transtel access to an existing fiber optic network which spans the city, and
may be used to create synergies with its telephony operations in Cali.
Cablevision offers the following two basic services: (i) a 4-channel UHF
service and (ii) a 50-channel service via its 750 Mhz cable network. As of
December 31, 1998, Cablevision provided service to 6,400 UHF subscribers and
14,153 cable subscribers. Transtel is currently in the process of converting
its UHF subscribers to cable service and expanding its cablevision network.
Cablevision's networks are capable of providing 80 channels as well as
internet, data transmission and other telephony services. Without additional
incremental capital expenditures, Cablevision's network has the capacity to
service over 40,000 households in Cali. For the year ended December 31, 1998,
Cablevision had total assets, revenues and net loss of Ps37.4 billion, Ps5.8
billion and Ps1.2 billion, respectively. To date, Cablevision has focused on
upper income households in Cali and has cabled over 29% of the TV households
defined by this market objective. Cablevision expects to increase this
penetration rate to 50% by 2002.

The Company generates revenues by providing telephone services to its
commercial and residential subscribers. The Company's sources of revenue
consist of: (i) basic fixed charges based either on the predecessor telephone
operator or the existing competitive tariff structure, (ii) local usage
charges based on the number of minutes used per month; (iii) access charges
for national and international long distance tariffs collected for providing
such services to and from the Company's networks generated from incoming and
outgoing calls; (iv) the sale of equipment to subscribers; (v) value-added
services such as video conference calling and voice mail; and (vi) connection
fees from each new subscriber connected to the Company's network. In addition,
the Company expects to generate additional revenues from its subscribers'
growing use of the Internet. The Company's subscribers, who elect Internet
service, will pay a monthly service fee and related usage charges. All of the
Operating Companies were able to provide Internet access as of June 1, 1998.

The Company expects that connection fees will continue to comprise a
significant portion of the Company's near-term revenues as a result of the
expected growth in the Company's subscriber base. Various local institutions
are available to finance subscribers' connection fees. Typically, Transtel
installs a line thereby generating a connection fee receivable, which it
subsequently sells to local financial institutions on a non-discounted basis.
The Company believes that as subscribers are added to the network and existing
demand is satisfied, the composition of revenues will shift towards usage
derived revenue, including local, national and long distance usage charges. In
addition, the Company expects that value-added services will also comprise a
more

50
<PAGE>

significant portion of future revenues driven by Internet access and other
telephone services such as videoconference calling, voice mail and call
waiting.

Factors That Will Affect Future Results of Operations--Principal Sources of
Revenue and Expenses

The Company has formulated a business plan based on, among other
assumptions, the following ideas regarding penetration, call volume, usage
patterns, capital expenditures and churn, all of which could significantly
affect its future results of operations.

Penetration. In 1997, Colombia had an average penetration of approximately
15.5 lines per 100 people. At the time the Company initiated the development
and operation of telephone service in the municipality of Palmira, the
municipality had a penetration of approximately 4.9 lines per 100 people. The
Company has increased Palmira's subscriber base by 306% from 15,600 to 63,352
as of December 31, 1998, representing a penetration of approximately 19.9
lines per 100 people. The Company's systems provided service to an aggregate
of 235,300 subscribers and had an average penetration of approximately 24.9
lines per 100 people.

Call Volume/Usage. Charges for local and domestic long-distance service vary
with the price per minute and the number of minutes consumed on a monthly
basis. The charge per minute depends on the time of day, the day of the week
and the duration of calls. Telephone usage also depends on the number of lines
in service, the volume of minutes, the number of new lines to be installed and
the applicable tariffs. Telephone usage differs for residential, commercial
and rural subscribers.

Telephone usage in Colombia in terms of minutes has grown to 75.9 billion
minutes per annum in 1996, from 32.2 billion minutes per annum in 1994,
representing a compound annual growth rate ("CAGR") of 53.5%. Total usage for
1996 included 70.4 billion minutes of local calls, 4.9 billion minutes of
national long distance and 532 million minutes of international long distance.
According to the Ministry of Communications the average annual consumption per
subscriber in 1996 (including both residential and business subscribers) was
as follows: (i) 14,652 minutes (1,221 minutes per month) of local calls; (ii)
1,032 minutes (86 minutes per month) of domestic long distance calls; and
(iii) 110 minutes (9 minutes per month) of international long distance calls.
The Company believes that future usage in its markets will exceed historical
parameters as subscribers adjust to increased penetration, more reliable
service and a broader range of product offerings such as internet access and
other value added services. Additionally, the projected higher call completion
rates will contribute to this goal.

Revenues. The Company's revenues are comprised of: (i) basic fixed charges;
(ii) local usage charges; (iii) access charges of national and international
long distance calls; (iv) the sale of equipment to subscribers; (v) charges
for value-added services; and (vi) connection fees. The Company bills for its
services as they are provided except for connection fees as discussed below.
Telephone rates in Colombia, excluding connection fees, are subject to
inflationary adjustments on a monthly basis in accordance with regulations
from the CRT. For 1997 and 1996, the Colombian Consumer Price Index increased
17.4% and 19.5%, respectively, while basic telephone rates in constant pesos
increased approximately 3.6% and decreased approximately 2.4%, respectively.
The Company collects its service fees from its customers every month. The
local operator bills and collects a fixed monthly fee, local usage, long
distance and cellular revenues from each customer. The Company retains the
interconnection revenues associated with any long distance and cellular
incoming or outgoing calls. The CRT sets tariffs for all operators either in
accordance with their historical costs or levels established by such
operator's competition. This law has greatly benefited the Company by allowing
management to set its tariffs in accordance with its competitors' higher
historical operating costs, rather than the Company's much lower cost of
operations. The CRT also permits operators to increase tariffs as often as
monthly in order to capture the effects of local inflation. The rebalancing of
local tariffs permitted by the CRT and implemented by the Company at the end
of 1998 and the new increase in tariffs in 1999, based on inflationary rates,
will contribute to substantial future increases in average revenue per unit.

Tariffs. Tariffs and usage patterns differ significantly for the three major
categories of subscribers in Colombia: (i) residential, (ii)
commercial/industrial; and (iii) rural subscribers. In addition, Colombia
imposes a progressive tariff structure whereby higher income customers are
charged a higher tariff to subsidize lower

51
<PAGE>

income subscribers. Tariffs are based on the economic stratum for which the
subscriber qualifies. Rural customers are usually charged the highest tariffs
as an incentive to the telephone providers to service such customers.

The following table sets forth current tariff information for residential
and commercial customers of the Company.

<TABLE>
<CAPTION>
Service Residential Tariff Commercial Tariff
- ------- ------------------- -------------------
<S> <C> <C>
Connection Fees......................... Ps354,128 ($230) Ps501,965 ($326)
Basic Charges........................... 4,160 ($2.70)/month 7,987 ($5.18)/month
Local Usage Charges..................... 5.1 ($.003)/minute 6.6 ($.004)/minute
Long Distance Charges................... 37 ($.024)/minute 37 ($.024)/minute
</TABLE>

Connection Fees. Tariffs with respect to installation or connection as of
December 31, 1998 ranged in each of the Operating Companies from Ps117,601-
664,000 ($76-431) for residential subscribers and Ps370,000-664,000 ($240-431)
for commercial subscribers. As of December 31, 1998 the top 25 telephone
operators in Colombia had an average residential connection fee of Ps254,858
($165) and a commercial connection fee of Ps486,845 ($316). The Company sets
its connection tariffs in each municipality based either on its predecessor's
prices or those of its competitor's.

Under Colombian GAAP, the Company recognizes income from connection fees
when full payment is received from the customer, or when the customer signs
the promissory note and makes the initial payment on the connection fee, and
is assigned a telephone number. These events may occur prior to the time that
the customer is connected to the network and becomes a subscriber. As of
December 31, 1998, the Company has cumulatively recorded Ps4.4 billion ($2.9
million) connection fees income from 13,192 customers that did not yet have a
dial tone at that date. Connection fees are refundable only if the customer
cancels its service within six months of installation. Connection fee refunds
have been nominal.

Receivables from subscribers at December 31, 1996, 1997 and 1998 include
Ps5,007,857, Ps7,286,466 and Ps36,629,934, respectively, for connection fees
represented by promissory notes payable over up to 36 months at 37.2% annual
interest. During 1997, the Company sold with recourse promissory notes from
subscribers totaling Ps9,496,424 (including Ps1,460,450 existing at December
31, 1996) to a financial institution at book value. On December 17, 1997, the
recourse provisions for all outstanding receivables previously sold to the
financial institution and on all future sales of receivables were removed.
During 1998, the Company sold with no recourse promissory notes from
subscribers totaling Ps7,732,065 at book value. The Company continues to
collect principal and interest from these subscribers and remits such amounts
to the financial institution. Although the Company is unable to estimate the
fair value of the servicing, it believes its cost of servicing these accounts
is nominal. The allowance for doubtful accounts at December 31, 1997 was
adequate to cover the Company's recourse obligation. The uncollected balance
of promissory notes sold to the financial institution at December 31, 1998 is
Ps7,721,382. The Company believes that a majority of all receivables sold were
related to subscribers which already had a dial tone; although a dial tone
prior to its purchase was not a requirement of the financial institution.

Basic Charges. The Company's basic charges vary by municipality and are
negotiated based either on the predecessor telephone operator's or the
existing competitor's charges. For the year ended December 31, 1998, the
Company's average monthly basic fee for residential and commercial customers
was Ps4,119 ($2.67) as compared to the national average for the top 25
operators in Colombia which was Ps4,004 ($2.60). The following chart
illustrates the Company's residential and commercial basic monthly charges as
of December 31, 1998 for the Company's Operating Companies.

<TABLE>
<CAPTION>
TelePalmira TeleCartago Caucatel Bugatel Unitel TeleJamundi TeleGirardot
- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Ps3,482 ($2.26) Ps2,807 ($1.82) Ps3,461 ($2.24) Ps4,500 ($2.92) Ps5,354 ($3.47) Ps5,354 ($3.47) Ps3,877 ($2.51)
</TABLE>

Local Usage Charges. The Company collects a monthly local usage charge from
its customers. Local usage is based on the number of minutes generated by each
subscriber, valued at the price per minute existing at

52
<PAGE>

the time of billing. In 1998, the Company generated approximately 1,001
minutes per month per average residential and commercial subscriber and had a
monthly access charge of Ps4.31 ($.003) per minute.

Long Distance Charges. The Company collects long distance charges based on
the number and duration of calls. The Company retains the portion of such
revenues associated with access and remits the balance to the applicable long
distance service provider. Long distance access tariffs are set by the CRT and
are identical for all operators throughout Colombia. In 1998, the Company
generated approximately 282 minutes per month per average residential and
commercial subscriber and had a monthly average usage charge of Ps37 ($.024)
per minute. The use of the Company's local telephony network to provide a
pathway for incoming or outgoing calls by long distance operators generates an
access and usage charge per minute or fraction of completed call, which was
set at Ps30 per minute or fraction of a minute as of March 1, 1997. This
charge was increased according to the Tariff Update Index so that the access
charge beginning December 1, 1997 was Ps33 per minute. Additionally, the long
distance operator pays the local operator a charge of Ps500 per month for each
customer's bill which includes long distance charges. This billing charge
relates to the billing and collecting activities for such month, as well as
customer relations carried out by the local operator on behalf of the long
distance operator. The new competitors in the long distance market which began
operating in 1998 will contribute to significantly increased demand for long
distance service as competition forces service providers to offer lower rates
thereby generating higher revenues for the local telephone operators from
periodic increases in access tariffs and increasing usage.

Other Revenues. Other revenues consist of, among other things, the sale of
telephone equipment to subscribers, yellow pages and public telephones. In
addition, value-added services such as videoconference calling and Internet
access are expected to generate a significant portion of the Company's
revenues in the future. The Company intends to offer competitive tariffs for
the usage of such value-added services. In addition, the Company expects to
complement its value-added services by increasing the number of lines of its
existing subscriber base that may need to have a separate line for a fax
machine or the Internet instead of sharing it with the main telephone line.
The Company is presently installing a fiber optic loop in Cali to serve the
business community which will enable it to provide them with systems for data
transmission, video-conference and other value added services.

Operating Costs. The Company anticipates that it will incur operating costs
from the following primary activities: (i) operations, (ii) general
administrative expenses and (iii) sales and marketing. In each such category,
the Company's primary cost of operation will consist of personnel.
Substantially all of the expenses incurred by the Company during its
development period were deferred as preoperating costs and consisted primarily
of expenses associated with due diligence, research and execution of the
Company's acquisition strategy and formation of the Company's corporate
infrastructure. Such cumulative deferred costs (before accumulated
amortization) were Ps6.8 billion, Ps7.7 billion and Ps9.0 billion at December
31, 1996, 1997 and 1998, respectively. During the first quarter of 1999, the
Company made a decision to terminate approximately 155 employees of its
telephony operations and incurred a one-time expense totaling approximately
Ps341 million. These terminations relate principally to employees involved in
the construction or supervision of the construction of the telephone networks
that were substantially finished as of December 31, 1998, and the elimination
of certain administrative employees as the Company consolidates its
administrative functions centrally instead of at each municipality.
Additionally, the Company made a decision to terminate approximately 110
employees of Cablevision in the first quarter of 1999 that were in excess of
its ongoing needs and incurred a one-time expense of approximately Ps87
million. All terminations were completed during the first quarter and
substantially all related expenses were paid in cash during that quarter. The
remainder of the one-time expenses was paid in April 1999. The cost savings
from these terminations are estimated to be approximately Ps2.2 billion to
Ps2.7 billion in 1999.

Operating Expenses. Operating expenses consist of costs associated with
repairs and maintenance, network implementation and technology expenses, and
other operation costs. Initially, the cost of operation for the Company will
be limited to those associated with the turn-key contracts that the Company
has with Siemens, which also contain a warranty component to cover repairs and
damage. The Company expects that its operating expenses will increase but at a
lower rate than its growth in subscribers due to the downsizing of the
operations and cost reduction due to modernization and becoming more
efficient. Beyond the installation and warranty

53
<PAGE>

period, operating expenses will consist predominantly of general maintenance
and upkeep. For the year ended December 31, 1998, the Company incurred minimal
maintenance expense per line due to the fact that its networks are new and
digital systems. The Company expects that its annual maintenance expense will
increase to approximately Ps15,421 ($10) per line and that new lines will cost
an additional capital expenditure of Ps385,528 ($250) per line once the
network is fully built.

Administrative Expenses. Administrative expenses include information
technology expenses, finance and billing, management and miscellaneous costs.
Administrative expenses are expected to increase as the Expansion Plan is
executed due to the additional personnel the Company hired to oversee,
supervise and audit Siemens' construction of the networks for Palmira, Jamundi
and Yumbo. In the years ended December 31, 1996 and 1997, these additional
workers caused incremental administration costs of approximately Ps437 million
and Ps590 million, respectively. These workers are temporary and the costs
associated with their employment are expected to decrease following completion
of the networks.

Sales and Marketing Expenses. Sales and marketing expenses, consisting of
costs relating to the Company's sales and marketing department, advertising,
direct mailing programs and door-to-door survey activities, are expected to
remain constant throughout the Expansion Plan and to decrease thereafter,
reflecting costs associated with the launch and rollout of the Company's
services in each of its Operating Companies. Sales and marketing expenses are
expected to vary based on the size of each market. In 1998, in Palmira, the
average selling and marketing expense per new subscriber was Ps59,019 ($38).

Nonoperating income (expenses), net. Nonoperating income (expenses), consist
primarily of interest income, interest expense and net exchange losses. The
indentures for the Senior Notes and the Discount Notes impose certain
restrictions on the Company's ability to incur additional indebtedness.
Interest expense on the Senior Notes is $18.75 million (Ps28.915 billion)
annually excluding additional interest expenses. Interest expense on the
Discount Notes will be approximately $3.0 million (Ps4.700 billion) annually.
Since a significant portion of the Company's indebtedness, including the
Senior Notes, the Discount Notes and a portion of the Vendor Financing, is
denominated in Dollars, net exchange losses will be incurred if the exchange
rate of pesos to the Dollar continues its recent devaluation. The Company's
macroeconomic assumptions for 1999 regarding the peso/dollar exchange are that
the peso will devalue less than 13% relative to the dollar; however, first
quarter 1999 figures show a small peso appreciation.

Capital Expenditures. The Expansion Plan will cost the Company approximately
$178.0 million (Ps274,496 billion). The Company has contracted Siemens,
pursuant to fixed price equipment and turn-key
installation contracts, for the execution of a significant portion of the
Expansion Plan. Siemens has been continuing in its contracted efforts to
complete the construction and installation of the Company's new, modern
networks and substantially completed the Expansion Plan as of December 31,
1998. Upon completion of the Expansion Plan, the Company owns and operates
fully digital internal plant facilities and fiber optic primary networks in
each of the regions which it serves.

Churn. Churn consists of both residential and business customers that change
premises, disconnect telephone service once established, switch to other
service providers, if and where available, or terminate the Company's
services. In the years ended December 31, 1995, 1996, 1997 and 1998, the
Company as a whole experienced an annual average churn rate of less than
0.00%, 0.09%, 0.04% and 0.44%, respectively. Palmira was the only operating
telephone system in 1995 and 1996. Likewise, Palmira was the primary
contributor to the 1997 and 1998 churn. Management attributes the low churn
rate to (i) the significant unmet demand and the lack of quality telephone
service providers that has resulted in multi-year waiting lists, (ii) the
significant investment contributed by the customers, in the form of a
connection fee, to initiate service and (iii) the Company's ability to provide
high quality telephone services with an emphasis on customer service.
Management believes that these fundamentals exist in the markets in which it
operates and expects the churn rate to remain relatively low. The Company, as
a whole, experienced an average churn rate of 0.44% in the year ended December
31, 1998. While it takes a few years to develop a historical pattern of churn,
the Company expects its churn rate to approximately 0.40% for the year ending
December 31, 1999.

54
<PAGE>

Analysis of Historical Churn Rate

(since date of Company ownership)

TELEPALMIRA

<TABLE>
<CAPTION>
Average Churn Churn
Year Subscribers Subscribers rate
---- ----------- ----------- -----
<S> <C> <C> <C>
1995....................................... 20,126 0 0.00%
1996....................................... 25,888 23 0.09%
1997....................................... 39,209 20 0.05%
1998 ...................................... 56,998 246 0.43%

TELECARTAGO

<CAPTION>
Average Churn Churn
Year Subscribers Subscribers rate
---- ----------- ----------- -----
<S> <C> <C> <C>
1995....................................... -- -- --
1996....................................... -- -- --
1997....................................... 15,506 6 0.04%
1998....................................... 22,932 159 0.69%

CAUCATEL

<CAPTION>
Average Churn Churn
Year Subscribers Subscribers rate
---- ----------- ----------- -----
<S> <C> <C> <C>
1995....................................... -- -- --
1996....................................... -- -- --
1997....................................... 12,231 0 0.00%
1998 ...................................... 18,834 0 0.00%

TELEJAMUNDI

<CAPTION>
Average Churn Churn
Year Subscribers Subscribers rate
---- ----------- ----------- -----
<S> <C> <C> <C>
1995....................................... -- -- --
1996....................................... -- -- --
1997....................................... 2,729 0 0.00%
1998 ...................................... 6,952 20 0.29%

UNITEL

<CAPTION>
Average Churn Churn
Year Subscribers Subscribers rate
---- ----------- ----------- -----
<S> <C> <C> <C>
1995....................................... -- -- --
1996....................................... -- -- --
1997....................................... 2,922 4 0.14%
1998 ...................................... 21,475 160 0.75%

BUGATEL

<CAPTION>
Average Churn Churn
Year Subscribers Subscribers rate
---- ----------- ----------- -----
<S> <C> <C> <C>
1995....................................... -- -- --
1996....................................... -- -- --
1997....................................... 10,983 0 0.00%
1998 ...................................... 14,182 109 0.77%
</TABLE>

55
<PAGE>

TELEGIRARDOT

<TABLE>
<CAPTION>
Average Churn Churn
Year Subscribers Subscribers rate
---- ----------- ----------- -----
<S> <C> <C> <C>
1995....................................... -- -- --
1996....................................... -- -- --
1997....................................... -- -- --
1998 ...................................... 32,721 68 0.21%
</TABLE>

CONSOLIDATED

<TABLE>
<CAPTION>
Average Churn Churn
Year Subscribers Subscribers rate
---- ----------- ----------- -----
<S> <C> <C> <C>
1995....................................... 20,126 0 0.00%
1996....................................... 25,888 23 0.09%
1997....................................... 70,514 30 0.04%
1998 ...................................... 174,094 762 0.44%
</TABLE>

Annual 1996, 1997 and 1998

The following is a discussion of the consolidated financial condition as of
December 31, 1997 and 1998 and the results of operations of the Company for
the years ended December 31, 1996, 1997 and 1998. The discussion should be
read in conjunction with the Consolidated Annual Financial Statements of the
Company and the notes thereto included elsewhere herein. The Consolidated
Annual Financial Statements have been prepared in accordance with Colombian
GAAP, which differs in certain significant respects from U.S. GAAP. Note 31 to
the Company's Consolidated Annual Financial Statements provides a
reconciliation to U.S. GAAP of the Company's net income (loss) and
shareholders' equity (deficit) as of and for the years ended December 31,
1996, 1997 and 1998. Unless otherwise indicated, the financial information has
been presented in constant Pesos as of December 31, 1998. Dollar amounts are
translated from Pesos amounts at the Representative Market Rate on December
31, 1998, which was 1,542.11 Pesos to one Dollar. No representation is made
that the Peso or Dollar amounts shown herein could have been or could be
converted into Dollars or Pesos, as the case may be, at any particular rate or
at all.

Results of Operations

The composition of the Company's revenues for each of the years discussed
herein is as follows:

<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------------
1996 % 1997 % 1998 %
------------ ----- ------------- ----- ------------ -----
(in thousands of constant Pesos of December 31, 1998
purchasing power, except percents data)
<S> <C> <C> <C> <C> <C> <C>
Connection fees......... Ps 6,503,506 47.3% Ps 13,311,979 43.3% Ps37,672,864 44.0%
Local usage charges..... 1,502,541 10.9 4,054,250 13.2 12,097,921 14.1
Basic charges........... 1,300,637 9.5 2,815,468 9.2 8,211,840 9.6
Long-distance charges... 3,736,119 27.2 8,424,877 27.4 18,458,760 21.6
Other income............ 712,762 5.1 2,123,515 6.9 3,384,058 4.0
------------ ----- ------------- ----- ------------ -----
Total telephone....... 13,755,565 100.0 30,730,089 100.0 79,825,443 93.3
Pay television
services............... 5,813,947 6.7
------------ ----- ------------- ----- ------------ -----
Total Revenues........ Ps13,755,565 100.0% Ps 30,730,089 100.0% Ps85,639,390 100.0%
============ ===== ============= ===== ============ =====
</TABLE>

56
<PAGE>

The following table expresses certain financial data from the Company's
statement of income as a percentage of total revenues:

<TABLE>
<CAPTION>
Year Ended December 31
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Revenues........................................ 100.0% 100.0% 100.0%
------- ------- -------
Costs and expenses:
Operating costs............................... 21.3 25.0 20.9
Administrative expenses....................... 32.3 32.8 23.7
Marketing expenses............................ 6.5 5.9 6.4
------- ------- -------
Total....................................... 60.1 63.7 51.0
------- ------- -------
Operating income................................ 39.9 36.3 49.0
Nonoperating expenses........................... (8.9) (25.6) (37.5)
Net monetary inflation adjustment income........ 19.2 13.3 19.7
------- ------- -------
Income before income taxes and minority
interest....................................... 50.2 24.0 31.2
Income tax expense.............................. (2.8) (4.4) (6.1)
------- ------- -------
Income before minority interest................. 47.4 19.6 25.1
Minority interest............................... (19.3) (15.5) (11.7)
------- ------- -------
Net income...................................... 28.1% 4.1% 13.4%
======= ======= =======
</TABLE>
The following is a discussion of the consolidated results of operations of
the Company for the year ended December 31, 1998, the year ended December 31,
1997 and the year ended December 31, 1996.

Year ended December 31, 1998 Compared to the Year Ended December 31, 1997

Revenues. The total revenues for the year ended December 31, 1998 ("Annual
1998") increased by Ps54.909 billion, or 179%, to Ps85.639 billion from
Ps30.730 billion in the year ended December 31, 1997 ("Annual 1997"). The
increase in revenues for Annual 1998 was mainly attributable to the increase
in connection fee revenue associated with the Company's continued growth of
its subscriber base. The number of subscribers increased from 125,003 at
December 31, 1997 to 235,311 at December 31, 1998, excluding Cablevision. The
number of new subscribers increased primarily as a result of (i) organic
growth at the Operating Companies and (ii) the acquisition of TeleGirardot
which was consummated on December 31, 1997.

Connection fee revenue in Annual 1998 increased by Ps24.361 billion from
Ps13.312 billion in Annual 1997 to Ps37.673 billion, as a result of adding
110,308 subscribers during 1998. Pay television services were Ps5.814 billion
in Annual 1998 compared to nil in annual 1997 because of the acquisition of
Cablevision during 1998. Other operating revenues, including basic monthly
charges, local usage charges, long-distance charges and other fees for Annual
1997 increased by Ps24.734 billion from Ps17.418 billion in Annual 1997 to
Ps42.153 billion in Annual 1998. The increase in other operating revenues for
Annual 1998 is attributed to the increase in the number of subscribers and
also in the higher usage associated with that increase.

Costs and Expenses. Costs and expenses for Annual 1998 increased by Ps24.105
billion, or 123%, to Ps43.691 billion from Ps19.586 billion in Annual 1997.
The increase is primarily attributable to the increase in the operating costs
and the administrative and marketing expenses due to the increase in the
number of subscribers and the maintenance and expansion of the telephony
infrastructure in the cities of Palmira, Cartago, Yumbo, Jamundi, Buga,
Popayan and Girardot. The total operating costs and expenses related to the
pay television services of Cablevision were Ps7.206 billion in Annual 1998.

Operating costs for Annual 1998 increased by Ps10.240 billion from Ps7.679
billion in Annual 1997 to Ps17.919 billion, mainly as a result of increases in
salary costs, benefits and other labor expenses and pensions of
Ps2.503 billion; depreciation of Ps1.589 billion; and services, utilities,
maintenance and repairs of Ps1.127

57
<PAGE>

billion due to the increased number of municipalities served and the
acquisition of Cablevision during 1998. Cost of sales of telephones increased
by Ps0.429 billion due to the increased number of subscribers. Amortization
expense also increased by Ps0.741 billion to Ps1.558 billion in Annual 1998
from Ps0.818 billion in Annual 1997 because during 1998 amortization of
deferred costs at all subsidiaries started. The acquisition of Cablevision
accounted for Ps4.969 billion of the total increase in operating costs of
which Ps2.495 billion was programming costs and Ps0.399 billion was fees paid
to the government.

Administrative expenses for Annual 1998 increased by Ps10.221 billion to
Ps20.315 billion from Ps10.094 billion in Annual 1997. The increase was mainly
attributable to the increases in salaries, benefits and other labor payments
of Ps3.789 billion; provision for doubtful accounts of Ps0.695 billion;
provision for properties plant and equipment of Ps0.726; and amortization of
Ps4.364 billion due to the increased number of municipalities and subscribers
served and the acquisition of Cablevision during 1998. The provision for
writedown of properties, plant and equipment totaled Ps0.851 billion in Annual
1998 and consisted primarily of Ps0.597 billion relating to the analog plants
at TelePalmira, Caucatel, Bugatel and TeleCartago. All Operating Companies
have switched over to their new digital plants as of December 31, 1998. The
Company reduced the book value of the four analog plants at December 31, 1998
to an estimated residual value of Ps0.842 billion by this provision and will
pursue sales of these analog plants to other municipalities during 1999. In
the absence of sales, the residual value will be written off to expense over a
five-year period. The acquisition of Cablevision accounted for Ps1.711 billion
of the total increase in administrative expenses.

Marketing expenses for Annual 1998 increased by Ps3.644 billion to Ps5.457
billion from Ps1.813 billion in Annual 1997. The increase in marketing
expenses was primarily attributable to the higher commissions and benefits
paid to the sales agents of Ps1.716 billion due to the increase in the lines
sold and the acquisition of Cablevision during 1998. Additionally, publicity
increased by Ps0.975 billion and amortization increased by Ps0.403 billion
because market research and publicity costs of the new companies, which were
recorded as deferred costs in prior years, are now being amortized. The
acquisition of Cablevision accounted for Ps0.527 billion of the total increase
in marketing expenses.

Operating Income. Operating income for Annual 1998 increased by Ps30.804
billion from Ps11.144 billion in Annual 1997 to Ps41.948 billion. The increase
was mainly attributable to the increase in revenues as a result of the larger
number of subsidiaries in operation and of subscribers, net of the increase in
costs and expenses described above. Cablevision incurred an operating loss of
Ps1.366 billion in Annual 1998.

58
<PAGE>

Nonoperating Income (Expenses). Nonoperating income (expenses), net for
Annual 1997 and Annual 1998 consisted of the following:

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1998
------------ -------------
(in thousands of constant
Pesos of December 31, 1998
purchasing power)
<S> <C> <C>
Financial Income:
Interest income................................. Ps 6,531,421 Ps 17,244,564
Exchange gains.................................. 3,500,838 35,464,782
Other financial income.......................... 183,039 441,939
------------ -------------
10,215,298 53,151,285
------------ -------------
Financial Expenses:
Interest expense................................ (9,408,807) (30,606,827)
Bank commissions................................ (667,527) (1,043,537)
Exchange losses................................. (5,519,672) (53,914,297)
Bank expenses................................... (17,493) (86,859)
Other financial expenses........................ (311,628) (660,175)
------------ -------------
(15,925,127) (86,311,695)
------------ -------------
Other:
Donations....................................... (397,245) (322,652)
Tax on foreign indebtedness..................... (517,987)
Bonus to executive.............................. (495,786)
Sales of scrap and extra parts.................. 101,782
Other, net...................................... (743,537) 1,286,504
------------ -------------
(2,154,555) 1,065,634
------------ -------------
Ps(7,864,384) Ps(32,094,776)
============ =============
</TABLE>

Net nonoperating expenses increased from Ps7.864 billion for Annual 1997 to
Ps32.095 billion in Annual 1998. The increase was mainly due to the higher
interest expense on increased average borrowings of the Company for 1998,
including interest associated with the Senior Notes, net of an increase in
interest income, and an increase in net exchange losses and other expenses.
Interest expense increased from Ps9.409 billion in Annual 1997 to Ps30.607
billion in Annual 1998. An additional Ps2.500 billion of interest cost was
incurred on the Company's investments in its subsidiaries and expansion plan
projects and recorded as deferred costs in Annual 1998 as compared to Ps10.488
billion during the Annual 1997. These deferred costs are amortized when
commercial operations begin or projects are completed. The average borrowings
increased during Annual 1998 because the Senior Notes of $150 million
(Ps231.317 billion), which bore an average interest rate of 13.2% were
outstanding all year in Annual 1998. The significant increase in interest
income resulted from the temporary investment of a portion of the proceeds of
the Senior Notes including the Escrow Account. Similarly, net exchange losses
increased due to the U.S. dollar-denominated borrowings, consisting primarily
of the Senior Notes at December 31, 1998 being greatly in excess of the U.S.
dollar investment during 1998. Other nonoperating income for Annual 1998 were
Ps1.066 billion ($1.7 million) compared to other nonoperating expense of
Ps2.155 billion in Annual 1997 because the non reoccurrence of several 1997
costs (a tax on foreign borrowings which was only in effect in April through
June 1997 and a bonus to a Company executive), as well as several first
occurring income items in Annual 1998.

Net Monetary Inflation Adjustment Income. Net monetary inflation adjustment
income for Annual 1998 increased by Ps12.775 billion to Ps16.861 billion from
Ps4.086 billion in Annual 1997 as a result of the impact of inflationary
adjustments on the higher balance of nonmonetary assets as well as on the
income, expense and shareholders' equity accounts.

59
<PAGE>

Income Tax Expense. Income tax expense for Annual 1998 increased by Ps3.838
billion to Ps5.185 billion from Ps1.347 billion in Annual 1997 primarily
because of the substantial increase in taxable income in Annual 1998 compared
to Annual 1997. The effective tax rate is 18.3% in 1997 and 19.4% in 1998. See
Note 18 of the Consolidated annual Financial Statements.

Minority Interest. Minority interest for Annual 1998 increased by Ps5.244
billion to Ps10.004 billion from Ps4.760 billion for Annual 1997 because of
the increased net income of the operating subsidiaries.

Net Income. Net income increased by Ps10.266 billion from Ps1.259 billion
for Annual 1997 to Ps11.525 billion for Annual 1998 as a result of the factors
discussed above.

Year ended December 31, 1997 Compared to the Year Ended December 31, 1996

The Annual 1997 financial statements reflect the Company's first complete
year of operation of TeleCartago. Bugatel, Caucatel, Unitel and TeleJamundi,
and are therefore not directly comparable to the 1996 financial statements,
which only include the operations of TelePalmira, the Company's sole system at
that time.

Revenues. The total revenues for the year ended December 31, 1997 ("Annual
1997") increased by Ps16.974 billion, or 123%, to Ps30.730 billion from
Ps13.756 billion in the year ended December 31, 1996 ("Annual 1996"). The
increase in revenues for Annual 1997 was mainly attributable to the increase
in connection fee revenue associated with the Company's continued growth of
its subscriber base. The number of subscribers increased from 29,528 at
December 31, 1996 to 101,503 at December 31, 1997 as operations commenced in
the municipalities of Cartago, Popayan, Jamundi, Buga and Yumbo during 1997.
The number of new subscribers at TelePalmira increased during the same period
because of its increase in capacity and the modernization of its telephone
infrastructure. Although installation of switching infrastructure and antennas
was substantially completed at Unitel Wireless in the fourth quarter of 1997,
there was interference from unauthorized radio spectrum users, who were
subsequently removed by the Ministry of Communications. This delayed the
Company's launch of operations at Unitel Wireless until the first quarter of
1998.

Connection fee revenue in Annual 1997 increased by Ps6.808 billion from
Ps6.504 billion in Annual 1996 to Ps13.312 billion. Other operating revenues,
including basic monthly charges, local usage charges, long-distance charges
and other fees for Annual 1997 increased by Ps10.166 billion from Ps7.252
billion in Annual 1996 to Ps17.418 billion in Annual 1997. The increase in
other operating revenues for Annual 1997 is attributed to the increase in the
number of subscribers and also the higher usage associated with that increase.

Costs and Expenses. Costs and expenses for Annual 1997 increased by Ps11.312
billion, or 137%, to Ps19.586 billion from Ps8.274 billion in Annual 1996. The
increase is primarily attributable to the increase in the operating costs and
the administrative and marketing expenses due to the increase in the number of
subscribers and the maintenance and expansion of the telephony infrastructure
in the cities of Palmira, Cartago, Yumbo, Jamundi, Buga and Popayan.

Operating costs for Annual 1997 increased by Ps4.755 billion from Ps2.924
billion in Annual 1996 to Ps7.679 billion, mainly as a result of increases in
salary costs, benefits and other labor expenses of Ps1.385 billion; rental of
space and equipment of Ps0.194 billion; and services, utilities, maintenance
and repairs of Ps0.760 billion due to the increased number of municipalities
served. Cost of sales of telephones increased by Ps0.304 billion due to the
increased number of subscribers. Amortization expense also increased by
Ps0.673 billion in Annual 1997 from Annual 1996 because during 1997
amortization of deferred costs at all subsidiaries started. Other operating
costs increased substantially (Ps1.439 billion) in Annual 1997 compared to
Annual 1996 mainly because of additional security and various others costs due
to the continuing expansion and growth of the Company.

60
<PAGE>

Administrative expenses for Annual 1997 increased by Ps5.646 billion to
Ps10.094 billion from Ps4.448 billion in Annual 1996. The increase was mainly
attributable to the increases in salaries, benefits and other labor payments
of Ps0.662 billion; fees, studies and research of Ps0.425 billion; taxes other
than income of Ps0.629 billion; provision for doubtful accounts of 0.206
billion; air transportation of Ps0.521 billion and amortization of Ps1.548
billion due to the increased number of municipalities and subscribers served.

Marketing expenses for Annual 1997 increased by Ps0.911 billion to Ps1.813
billion from Ps0.902 billion in Annual 1996. The increase in marketing
expenses was primarily attributable to the higher commissions and benefits
paid to the sales agents of Ps0.355 billion due to the increase in the lines
sold and the increase in amortization of Ps0.468 billion because market
research and publicity costs of the new companies, which were recorded as
deferred costs in prior years, are now being amortized.

Operating Income. Operating income for Annual 1997 increased by Ps5.662
billion from Ps5.482 billion in Annual 1996 to Ps11.144 billion. The increase
was mainly attributable to the increase in revenues as a result of the larger
number of subsidiaries in operation and of subscribers, net of the increase in
costs and expenses described above.

Nonoperating Income (Expenses). Nonoperating income (expenses), net for
Annual 1996 and Annual 1997 consisted of the following:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1996 1997
----------------- -----------------
(in thousands of constant Pesos of
December 31, 1998 purchasing power)
<S> <C> <C>
Financial Income:
Interest income..................... Ps 652,810 Ps 6,531,421
Exchange gains...................... 355,032 3,500,838
Other financial income.............. 4,605 183,039
----------------- -----------------
1,012,447 10,215,298
----------------- -----------------
Financial Expenses:
Interest expense.................... (2,250,450) (9,408,807)
Bank commissions.................... (154,962) (667,527)
Exchange losses..................... (75,907) (5,519,672)
Bank expenses....................... (96,631) (17,493)
Other financial expenses............ (45,823) (311,628)
----------------- -----------------
(2,623,773) (15,925,127)
----------------- -----------------
Other:
Donations........................... (397,245)
Tax on foreign indebtedness......... (517,987)
Bonus to executive.................. (495,786)
Other, net.......................... 380,535 (743,537)
----------------- -----------------
380,535 (2,154,555)
----------------- -----------------
Ps(1,230,791) Ps (7,864,384)
================= =================
</TABLE>

Net nonoperating expenses increased from Ps1.231 billion for Annual 1996 to
Ps7.864 billion in Annual 1997. The increase was mainly due to the higher
interest expense on increased average borrowings of the Company for 1997,
including interest associated with the Senior Notes, net of an increase in
interest income, and an increase in net exchange losses and other expenses.
Interest expense increased from Ps2.250 billion in Annual 1996 to Ps9.409
billion in Annual 1997. An additional Ps10.765 billion of interest cost was
incurred on the Company's investments in its subsidiaries and expansion plan
projects and recorded as deferred costs in Annual 1997 as compared to Ps7.279
billion during Annual 1996. These deferred costs will be amortized when

61
<PAGE>

commercial operations begin or projects are completed. The average borrowings
increased during Annual 1997 because of the implementation of the Expansion
Plan, including operations in five new municipalities. Of the Ps224.474
billion raised by the offering of Senior Notes, Ps49.085 billion was used to
refinance borrowings of the Company, including borrowings repaid in January
1998. The significant increase in interest income resulted from the temporary
investment of a portion of the proceeds of the Senior Notes. Similarly, the
increase in net exchange losses increased due to the higher U.S. dollar-
denominated borrowings, consisting primarily of the Senior Notes at December
31, 1997. Other expenses for Annual 1997 were Ps2.154 billion compared to
other income of Ps0.381 billion in Annual 1996 because the first time
occurrence of several costs: donations to charities in the municipalities
served, a tax on foreign borrowings which was only in effect in April through
June 1997 and a bonus to a Company executive.

Net Monetary Inflation Adjustment Income. Net monetary inflation adjustment
income for Annual 1997 increased by Ps1.439 billion to Ps4.086 billion from
Ps2.647 billion in Annual 1996 as a result of the impact of inflationary
adjustments on the higher balance of nonmonetary assets as well as on the
income, expense and shareholders' equity accounts.

Income Tax Expense. Income tax expense for Annual 1997 increased by Ps0.967
billion to Ps1.347 billion from Ps0.380 billion in Annual 1996 as a result of
certain nondeductible expenses in 1997 and the fact that the operating
subsidiaries are only 90% exempt in Annual 1997. The effective tax rate is
5.5% in 1996 and 18.3% in 1997. See Note 18 of the Consolidated Financial
Statements.

Minority Interest. Minority interest for Annual 1997 increased by Ps2.105
billion to Ps4.760 billion from Ps2.655 billion for Annual 1996 because of
the increased net income of the operating subsidiaries.

Net Income. Net income decreased by Ps2.604 billion from Ps3.863 billion for
Annual 1996 to Ps1.259 billion for Annual 1997 as a result of the factors
discussed above.

Liquidity and Capital Resources

The fixed landline telephone business is a capital intensive business which
requires substantial investment to acquire and upgrade the telephone networks
in each of the Company's markets. From inception through December 31, 1997,
the Company expended an aggregate of approximately Ps48.1 billion to acquire
various interests in each of its existing telephone systems. During 1998, the
Company spent Ps20.383 billion to acquire Cablevision. In addition, the
Company has required significant capital for personnel hiring and training,
systems infrastructure development, sales and marketing programs and the
initial build-out under the Expansion Plan. To date, the primary sources of
capital have consisted of equity contributions by the Company's shareholders,
debt financing from Colombian banks and local branches of other international
financial institutions, cash flow generated by the operating systems, certain
Vendor Financing in the form of capitalized leases, the Senior Notes and the
Discount Notes.

Net cash used by operating activities during Annual 1998 was Ps15.936
billion as compared to Ps2.927 billion for Annual 1997. The increase in cash
used by operations for Annual 1998 was primarily caused by an increase in
accounts receivables and the net inflation adjustment from balance sheet
accounts, partially offset by an increase in accounts payable, due to the
Company's expansion. Net cash used in investing activities during Annual 1998
was Ps12.321 billion as compared to Ps217.748 billion used in Annual 1997.
Cash used in investing activities in Annual 1998 and Annual 1997 relates to
the construction of new network systems and the upgrade of existing network
systems. In addition, cash used in investing activities in Annual 1998
includes the net sales of short-term and long-term investments of Ps95.795
billion. Net cash provided by financing activities during Annual 1998 was
Ps13.188 billion as compared to Ps198.442 billion in Annual 1997. Cash
provided by financing activities during Annual 1998 primarily represents net
borrowing of Ps16.794 billion consisting principally of the Discount Notes of
Ps23.132 billion ($15.0 million) issued on December 31, 1998. As of December
31, 1998, the Company's borrowings were Ps278.305 billion, consisting
primarily of the Senior Notes of Ps231.317 billion issued on October 28, 1997
and the Discount Notes of Ps23.132 billion. As of December 31, 1998, the

62
<PAGE>

Company's borrowings denominated in Dollars were Ps260.792 billion and the
Company's borrowings denominated in Pesos were Ps17.513 billion. The Company
also has obligations under leases, some of which are not capitalized in
accordance with Colombian GAAP, but are required to be capitalized under U.S.
GAAP. See Notes 19, 30 and 31 to the Consolidated Annual Financial Statements.
During Annual 1997, the shareholders of the Company invested Ps37.054 billion
in the Company; however, no such investments occurred during 1998.

The Company's principal liquidity requirements will be for the Expansion
Plan, debt service (primarily on the Senior Notes), working capital and
general corporate purposes, including future acquisitions. The Expansion Plan
is projected to require aggregate capital expenditures of approximately $178.2
million, of which approximately $7.7 million had been financed with local bank
borrowings, all of which have been repaid with proceeds of the Offering, and
$1.5 million of cash flow from operations. The Company completed the build-out
of the Expansion Plan on December 31, 1998 and is financing the remainder of
the Expansion Plan with (i) approximately $38.3 million of the proceeds of the
Offering; (ii) approximately $102.1 million of Vendor Financing (see "Risk
Factors--Contingency of Vendor Financing"); (iii) the sale of investments of
$8.5 million; and (iv) approximately $20.2 million of DIAN Financing (see
"Description of Existing Indebtedness--DIAN Financing"). See "Use of
Proceeds." As of December 31, 1998, the Company had incurred approximately
$163.3 million of capital expenditures relating to the Expansion Plan.

As a result of the Offering the Discount Notes, the Vendor Financing, the
DIAN Financing and the incurrence of certain other indebtedness, the Company
will be required to satisfy certain debt service requirements. Following the
disbursements in May and November 1998 and 1999 of all the proceeds in the
Escrow Account, a substantial portion of the Company's cash flow will be
utilized to service the Senior Notes, the Vendor Financing and the DIAN
Financing. The Senior Notes will require semi-annual interest payments of
approximately $9.4 million and the Vendor Financing will require semi-annual
interest and principal payments of approximately $7.2 million. In addition,
the DIAN Financing will require semi-annual principal payments of
approximately $2.0 million. The cash interest due on the Discount Notes will
not exceed $44,000 in any year through 2008; however, the principal of $15.0
million plus accrued interest of $86.9 million will be due on August 13, 2008.
The Company is required to meet various financial covenants under the
Indenture. See "Description of Senior Notes--Certain Covenants." As of
December 31, 1998 and the date of this filing, the Company is in compliance
with all such financial covenants.

The Senior Notes are the exclusive obligation of the Company, which is a
holding company with no business operations of its own. The operations of the
Company are conducted through the Operating Companies, which are separate and
distinct legal entities. Other than the obligation to repay the Intercompany
Notes to the Company, the Operating Companies have no obligation, contingent
or otherwise, to pay any amounts due pursuant to the Senior Notes or the
Certificates, to make any funds available to the Company to enable it to make
payments on the Senior Notes and consequently, to make the funds available to
the Trust to make payments on the Certificates, to make funds available in
order to make investments in the Operating Companies, to meet working capital
needs or other liabilities of the Company or for any other reason. In
addition, the Operating Companies are currently not wholly-owned subsidiaries
of the Company but instead are owned jointly by the Company and local
municipalities. See "Summary--Recent Developments--Discount Notes." Any
dividends issued by the Operating Companies must be distributed pro rata to
all of their shareholders. As a result, the Company cannot be assured that it
will be able to generate significant cash through dividends or other
distributions from the Operating Companies in the foreseeable future and there
can be no assurance that the Company will be able to generate any significant
cash flow from the Operating Companies at any time in the future. Since the
Company's assets consist primarily of its ownership interests in the Operating
Companies, the Senior Notes (and therefore the Certificates) will be
effectively subordinated (other than as to claims that the Company can make
under the Intercompany Notes) to all existing and future debt and other
liabilities (including trade payables) of the Operating Companies, and the
Company's right to receive the assets of the Operating Companies upon their
liquidation or reorganization will be subject to the claims of such Operating
Companies' creditors (including trade creditors).

63
<PAGE>

<TABLE>
<CAPTION>
As of December 31, 1998
-------------------------
(in thousands of constant
Pesos of December 31, 1998
purchasing power and in
Dollars)
<S> <C> <C> <C>
Unitel............................................ Ps 46,248,423 $29,990,359
TeleJamundi....................................... 33,550,876 21,756,474
TelePalmira....................................... 35,144,466 22,789,857
TeleCartago....................................... 15,167,014 9,835,235
Caucatel.......................................... 11,387,010 7,384,045
Bugatel........................................... 5,711,214 3,703,506
------------- -----------
Ps147,209,013 $95,459,476
============= ===========
</TABLE>

The Intercompany Notes bear interest at 12 1/2%, are payable in U.S.
dollars, and are also due on November 1, 2007. The Intercompany Notes become
due and payable upon the acceleration of the Senior Notes issued by Transtel
S.A. under the Indenture.

Summarized financial information on a Colombian GAAP basis of each of the
Operating Companies that have issued an Intercompany Note to Transtel S.A. as
of and for the year ended December 31, 1998 are presented below. Other than
TelePalmira, which began its commercial operations in 1995, the other
Operating Companies listed below did not commence commercial operations until
generally mid-1997. See "Business-- Description of the Operating Companies."

INCOME STATEMENT INFORMATION OF SUBSIDIARIES WITH INTERCOMPANY NOTES
For the Year Ended December 31, 1998
(Amounts in thousands of constant Pesos of December 31, 1998 purchasing power)

<TABLE>
<CAPTION>
TelePalmira Unitel TeleJamundi TeleCartago Bugatel Caucatel
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues--
subscribers............ Ps18,937,848 Ps24,368,987 Ps2,288,894 Ps9,551,461 Ps7,215,700 Ps4,267,991
Operating income........ 11,279,167 18,712,863 174,504 6,207,239 3,792,301 1,344,040
Net income.............. 5,655,689 17,356,519 682,900 6,207,470 4,437,564 1,174,610
</TABLE>

CASH FLOW INFORMATION OF SUBSIDIARIES WITH INTERCOMPANY NOTES
For the year ended December 31, 1998
(Amounts in thousands of constant pesos of December 31, 1998 purchasing power)

<TABLE>
<CAPTION>
TelePalmira Unitel TeleJamundi TeleCartago Bugatel Caucatel
----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash flow provided by
operating activities... 1,985,904 13,991,208 6,577,918 3,454,058 1,317,747 414,154
Cash flow used by
investing activities... (4,466,085) (41,367,356) (17,173,169) (12,269,703) (8,087,656) (9,213,683)
Cash flow provided by
financing activities... 1,776,930 26,755,177 8,801,708 7,809,180 6,322,843 8,762,139
</TABLE>

64
<PAGE>

BALANCE SHEETS OF SUBSIDIARIES WITH INTERCOMPANY NOTES AT DECEMBER 31, 1998
(Amounts in thousands of constant Pesos of December 31, 1998 purchasing power)

<TABLE>
<CAPTION>
TelePalmira Unitel TeleJamundi TeleCartago Bugatel Caucatel
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Current assets.......... Ps 16,257,070 Ps 10,087,767 Ps 1,492,035 Ps 1,689,952 Ps 3,401,327 Ps 1,024,476
Receivable from Transtel
for share of Escrow
Account................ 6,359,040 9,530,831 8,633,979 2,606,098 1,835,754 2,094,607
Properties, plant and
equipment.............. 64,317,150 56,480,490 28,361,519 27,174,988 14,752,262 28,585,230
Other noncurrent
assets................. 29,990,196 19,754,009 7,745,946 8,022,877 7,550,442 4,888,445
------------- ------------- ------------ ------------ ------------ ------------
Total assets........... Ps116,923,456 Ps 95,853,097 Ps46,233,479 Ps39,493,915 Ps27,539,785 Ps36,592,758
============= ============= ============ ============ ============ ============
Current liabilities..... Ps 9,790,303 Ps 8,487,993 Ps 2,054,858 Ps 5,986,287 Ps 3,223,617 Ps 1,811,309
Capital lease
obligations............ 13,605,843 7,590,704 7,017,129 22,584 91,320 87,072
Intercompany Note to
Transtel............... 35,144,466 46,248,433 33,550,876 15,167,014 5,711,214 11,387,010
Interest accrued on
Intercompany Notes..... 292,355 664,873 239,437 83,830 68,067 161,027
Other intercompany
payables............... 239,169 8,027,409 281,754 151,802 26,721 101,957
Other noncurrent
liabilities............ 1,870,543 293,705 747,600 954,013 146,759 586,172
------------- ------------- ------------ ------------ ------------ ------------
Total liabilities...... 60,942,679 71,313,117 43,891,654 22,365,530 9,267,698 14,134,547
Total shareholders'
equity................. 55,980,777 24,539,980 2,341,825 17,128,385 18,272,087 22,458,211
------------- ------------- ------------ ------------ ------------ ------------
Total liabilities and
shareholders' equity.. Ps116,923,456 Ps 95,853,097 Ps46,233,479 Ps39,493,915 Ps27,539,785 Ps16,592,758
============= ============= ============ ============ ============ ============
</TABLE>

Other than TelePalmira, the Operating Companies are still in an early stage
of development and connection fee revenues comprise a substantial portion of
each subsidiaries' total revenues. Connection fees for the year ended December
31, 1998 were Ps3.773 billion, Ps17.537 billion, Ps0.902 billion, Ps4.869
billion, Ps3.293 billion and Ps1.255 billion at TelePalmira, Unitel,
TeleJamundi, TeleCartago, Bugatel and Caucatel, respectively.

In addition to the Intercompany Notes, these six Operating Companies have
capital lease obligations and short-term bank borrowings totaling Ps3.909
billion and Ps5.177 billion, respectively, included in current liabilities at
December 31, 1998. As indicated in the above summarized balance sheet
information, these six Operating Companies have total long-term capital lease
obligations of Ps28.415 billion at December 31, 1998. As the subsidiaries
install and accept the remaining Global Leases, the IBM Arrangement and the
related DIAN Financing, additional financial obligations totaling Ps111.270
billion will be incurred. See Notes 12, 30, and 31(d)(vi) to the Consolidated
Annual Financial Statements.

The Escrow Account is recorded as an asset by Transtel S.A. and is pledged
to partially secure the Senior Notes. Each of the six Operating Companies that
have issued Intercompany Notes has an intercompany receivable from Transtel
S.A. for that subsidiary's allocated portion of the Escrow Account since the
Escrow Account will be used to pay the first four interest payments (through
November 1, 1999). As Transtel makes interest payments from the Escrow
Account, the accrued interest due to Transtel S.A. under the Intercompany
Notes will be offset against these intercompany receivables.

65
<PAGE>

generate sufficient cash flow from operations through December 31, 1998 to
make such interest payments had they been due in cash. If the Company is
unable to make principal and interest payments in the future, it may,
depending upon the circumstances which then exist, seek additional equity or
debt financing, attempt to refinance its indebtedness or sell all or part of
its business or assets to raise funds to repay its indebtedness.

On December 31, 1998, the Company sold $15.0 million (Ps23.132 billion) of
its 20.32% Senior Discount Notes due 2008 in a private placement. The Company
intends to use the net proceeds of approximately $14.0 million (Ps21.590
billion) to acquire certain minority interests in the restricted subsidiaries
of the Company (whereby, such restricted subsidiaries would become wholly-
owned subsidiaries of the Company), to pay for capital expenditures, to
provide working capital, to pay transaction expenses and/or fund strategic
acquisitions. Interest at 0.10% will be payable in cash each year through
August 13, 2008. Interest at 20.22% per annum will accrue over the term of the
notes, and the total accrued interest of $86.9 million (Ps134.009 billion) and
principal of $15.0 million (Ps23.132 billion) will be due on August 13, 2008.
The Discount Notes will be unsecured senior obligations of the Company and
will be fully and unconditionally guaranteed on a senior, unsecured basis by
each Operating Company in which the Company acquires 100% of the minority
interest or provides indebtedness with the proceeds of the Discount Notes. No
guarantees have been required of nor has any indebtedness been provided to any
Operating Company as of the date hereof.

The Company expects to consider additional acquisitions that fit its
strategic plans. Although the Company has had discussions concerning such
potential acquisitions, to date, no agreements have been reached with regard
to any particular transaction. Any such acquisitions that the Company might
consider are likely to require additional equity and/or debt financing, which
the Company will seek to obtain as necessary. Management believes that, based
on its current operations and anticipated growth resulting from the Expansion
Plan, cash flow from the Expansion Plan Financing, cash flow from operations
and other sources of funds, including local borrowings, it will have adequate
funds to complete the Expansion Plan and to meet its future cash requirements.

Accounting for Inflation

As a Colombian company, the Company maintains its financial records in
Pesos. Colombian GAAP requires that the financial statements of Colombian
companies be adjusted to account for inflation. The inflation rate for the
year ended December 31, 1998 was 16.7%. Financial statements are adjusted for
the effects of inflation on the basis of changes in the Colombian MCPI. This
index is applied on a one-month lagging basis to nonmonetary assets and
liabilities, shareholders' equity, revenues and expense accounts. Monetary
balances are not adjusted because they reflect the purchasing power of the
currency on the date of the balance sheet. Foreign currency balances are not
adjusted because they are translated into Pesos at the exchange rate in effect
on the same date. The resulting net gain or loss from exposure to inflation is
reflected as "Net monetary inflation adjustment income (loss)" in the income
statement for each period in question. On December 24, 1998, the Colombian
Congress decreed a National Fiscal Change to apply after January 1, 1999. This
regulation eliminated future inflation adjustments relating to inventories and
revenues and expenses. See Notes 2 and 28 to the Consolidated Annual Financial
Statements.

Income Tax Matters

Consolidated income tax returns are not permitted in Colombia. The effective
statutory income tax rate for the Company was 35% for 1996, 1997 and 1998.
Under Colombian law, Transtel S.A. must pay a minimum tax which is presumed to
be not less than the greater of 5% of shareholders' equity for tax purposes at
the end of the immediately preceding year or 1.5% of gross assets for tax
purposes at the end of the immediate preceding year. Adjustments to income to
account for inflation are taken into account for income tax purposes; however,
operating companies such as Transtel's subsidiaries are not subject to such a
minimum income tax.

In accordance with Law 142 of 1994 and Law 223 of 1995, entities which
render basic residential telephony services and which are mixed capital
companies (i.e., companies with both public and private capital, such as the
Company's subsidiaries) are partially exempt from the payment of income taxes
for a term of seven years from 1996 with respect to profits which are retained
for upgrade, expansion or replacement of telephone systems.

66
<PAGE>

These companies are exempt from taxes on 100% of income related to basic
telephony services for 1996; thereafter the exemption reduces by 10 percentage
points each taxable year through 2000 and then reduces by 20 percentage points
in 2001 and 2002. After 2002, there is no exemption. See "Summary--Recent
Developments--Discount Notes."

Reconciliation to U.S. GAAP

The Consolidated Annual Financial Statements are prepared in accordance with
Colombian GAAP, which differ from U.S. GAAP in certain significant respects. A
comparison of the Company's net income (loss) and shareholders' equity
(deficit) at and for the years ended December 31, 1996, 1997 and 1998, under
Colombian GAAP and after reflecting the material adjustments which arise when
U.S. GAAP is applied instead of Colombian GAAP, is shown below:

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
(in thousands of constant Pesos of
December 31, 1998 purchasing power)
<S> <C> <C> <C>
Net Income (Loss)
Colombian GAAP...................... Ps 3,863,145 Ps 1,258,836 Ps11,524,840
U.S. GAAP........................... (3,457,437) (2,590,525) 6,984,184
Shareholders' Equity (Deficit)
Colombian GAAP...................... 22,385,774 61,359,260 76,289,978
U.S. GAAP........................... (1,381,680) 33,082,031 40,066,215
</TABLE>

As more fully described and quantified in Note 31 to the Consolidated Annual
Financial Statements, the major differences between Colombian GAAP and U.S.
GAAP in each period relate to: income taxes, revaluation of assets,
depreciation expense, capitalized interest, deferred charges, capital leases,
revenue recognition, reversal of monetary correction and purchase of
properties from a shareholder.

Effective with the first quarter of fiscal 1999, the Company will change
prospectively its method of accounting for connection fee income for U.S. GAAP
purposes from an "installation date basis", which historically has been
consistent with industry practice, to a "deferred basis". Under this new
policy, connection fee income less direct installation costs and direct
selling costs will be deferred and amortized into income over five years using
the straight-line method. This change will be made to reflect income in excess
of direct costs over an estimated service period.

Statement of Position No. 98-5, "Reporting on the Costs of Start-Up
Activities", which is effective for fiscal years beginning after December 15,
1998, will require the Company to change its accounting under U.S. GAAP for
organization costs. In 1999, all future organization costs will be expensed as
incurred and the balance of organization costs of Ps839,876 at December 31,
1998 will be expensed as a change in accounting. See Note 31(d)(v) to the
Consolidated Annual Financial Statements.

67
<PAGE>

BUSINESS

The Company

On December 15, 1998, the Company completed its acquisition of a 100%
interest in Cablevision. The statistical, financial and other data in this
Prospectus does not include information regarding Cablevision except where
specifically indicated. For information regarding Cablevision see "Prospectus
Summary--Recent Developments" herein.

In 1990 through the enactment of Decree 1900 ("Decree 1900"), Colombia's
government initiated the deregulation and privatization of the state-owned
telecommunications sector in order to promote competition and encourage
private investment and thereby improve service for its citizens. This was
followed by the enactment of Law 142 on July 11, 1994 ("Law 142"), which
established the basic guidelines and regulations to support the sector's
privatization. Prior to the enactment of Decree 1900, telephone service in
Colombia had been provided by the same government-owned entities that also
provided other basic utility services. Since most of these municipal entities
lacked sufficient capital, spending for basic utility services such as power
and water often took precedence over the delivery of telephone service. As a
result, many of these municipal service providers have failed to install
sufficient capacity to satisfy their customers' demand for telephone service.
For those customers who do currently receive telephone service through
municipal service providers, the municipal entities provide low-quality
service and offer few, if any, of the more commonly available value-added
services.

The Company was formed in August 1993 by certain members of the Caicedo
family, a prominent Colombian family, and Guillermo Lopez, the Company's
President and a Director, to take advantage of the opportunities created by
deregulation. Management's goal is to capitalize on the substantial demand for
telephone service which the Company believes exists throughout Colombia. This
belief is supported by the fact that Colombia's first and third largest
cities, Bogota and Medellin, respectively, where capital has been spent to
meet telephone demand, have recently achieved penetration in excess of 30
lines per 100 people, which is substantially higher than cities in the
Company's service area. The Company seeks to modernize and expand its
telephone systems to accommodate existing demand for telephone service and
future growth.

The Company's objective is to increase the penetration in each of its
markets and to provide high quality value-added telephone services to its
subscribers. For example, in May 1995, the Company, in conjunction with the
local municipality, acquired its first telephone system, the only system
serving the city of Palmira. At the time of the acquisition, this system had
approximately 15,600 subscribers, representing a penetration of approximately
4.9 lines per 100 people. Following the acquisition, the Company initiated its
Expansion Plan in Palmira, which consists of investing approximately $34.2
million to replace a portion of the existing Palmira system's infrastructure,
to upgrade the system with modern equipment from Siemens and to increase
system capacity to 60,000 lines, which implies a penetration of 18.9 lines per
100 people. The Company began offering telephone service in Palmira in
September 1995 and, as a result of the substantial demand, experienced
immediate and significant improvements in operating and financial results.
Under the Company's management, the Palmira system's subscriber base has grown
by 306%, increasing from approximately 15,600 at the time of acquisition to
approximately 53,350 at December 31, 1998. Subsequent to the acquisition of
TelePalmira, the Company acquired six additional operating companies,
increasing its number of subscribers from approximately 15,600 as of December
31, 1995 to approximately 235,300 as of December 31, 1998. In addition to the
subscribers with installed lines as of December 31, 1998, the Company had
11,471 additional customers who have signed promissory notes for new lines to
be installed.

Colombia and Colombian Telephony Market Overview

68
<PAGE>

achieved positive real economic growth every year since 1950 and averaged
compounded annual growth in Gross Domestic Product ("GDP") of approximately
4.7% from 1992 to 1996, one of the highest growth rates in Latin America.
Annual inflation has declined over the past six years from 26.8% in 1991 to
16.7% in 1998. In recent years, the Colombian government has encouraged
foreign investment and exports through reduced foreign exchange controls and
lower import quotas and tariffs. The Colombian government has also begun to
open certain public services, such as power and banking, to private sector
investment and is considering other sectors for privatization. In part as a
result of these policies, net foreign investment in Colombia has grown from
$3.5 billion in 1990 to $10.5 billion in 1997. During the same period,
Colombia has achieved increased diversification of its export base and the
value of its exports has grown from $6.7 billion to $11.6 billion. See "Risk
Factors--Colombian Political, Economic and Social Risks."

In 1995, Colombia had approximately 4.9 million installed lines,
representing a penetration of approximately 14.0 lines per 100 people, which
generated approximately $635.0 million of local telephony revenues,
representing approximately 44% of the $1.5 billion telecommunications
industry. Historically, local telephony has been treated as a utility. The
local telephony network is fragmented and approximately 30 municipal operators
service approximately 780 municipalities. Prior to deregulation, each
municipal operator had a monopoly in the region which it served and typically
provided limited and often marginal service. As a result, Colombia is
significantly underserved by existing wireline operators and demand for
telephone service substantially outweighs the supply of telephone lines. This
is evidenced by multi-year waiting lists and unsatisfied demand in Colombia
for approximately 1.2 million telephone lines as estimated by the DNP. The DNP
also projects that the country's existing installed line network will need to
more than double by 2007 in order to keep pace with growing demand.

The Colombian government, recognizing the importance of an effective
telecommunications infrastructure and the role that the telecommunications
industry plays in national development, identified the problems in the
telecommunications industry and, from 1990 to 1994, established the regulatory
environment required to support private sector participation. The government
enacted decrees addressing many facets of operation including interconnection,
numbering and tariffs. The 1994 deregulation introduced competition and
established a tariff environment under which telephone service providers are
encouraged to compete on the basis of efficiency and service rather than
price. Tariffs for all telecommunication services are established and overseen
by the Comision de Regulacion de Telecomunicaciones (Telecommunications
Regulatory Commission) (the "CRT"), which allows operators to set prices based
on either the current or historical cost of providing service. See "Risk
Factors--Regulatory Risks."

In 1995, the Colombian government opened the long distance market to
competition. Until recently, domestic and international long distance service
was provided exclusively by Empresa Nacional de Telecomunicaciones
("TELECOM"), a state-owned company, which had a monopoly on international and
long distance calls. The CRT has established a process under which the opening
of the long distance market to competition is to be reviewed. Licenses were
given to Orbitel (a private company) and Empresa de Telecomunicaciones de
Bogota (a government owned entity) and it is expected that operations will
start in 1999. The Company believes that the deregulation of the long distance
market will, as it has in other countries, serve to stimulate telephone usage,
due to the fact that price competition is likely to lower tariffs to the
consumer. The Company does not currently expect that it would qualify to be a
new entrant into the long distance market in the near future.

For additional information regarding Colombia and its telecommunications
industry, see "Annex--Republic of Colombia" and "Industry Overview; Legal and
Regulatory Environment."

Operating Companies

The Company has acquired interests in existing wireline telephone systems
serving the cities of Palmira, Cartago, Popayan, Buga and their surrounding
areas, and built new systems serving the cities of Yumbo, Jamundi, Cali and
their surrounding areas. In each case the Company has joined with the local
municipality to

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<PAGE>

form an operating company (each an "Operating Company" and, collectively the
"Operating Companies") to own and operate each telephone system. The Operating
Companies are (i) Empresa de Telefonos de Palmira S.A. E.S.P. ("TelePalmira"),
which services the cities of Palmira and Candelaria, (ii) Telefonos de Cartago
S.A. E.S.P. ("TeleCartago"), which services the city of Cartago, (iii)
Caucatel S.A. E.S.P. ("Caucatel"), which services the western section of the
city of Popayan, (iv) Empresa de Telefonos de Jamundi S.A. E.S.P.
("TeleJamundi"), which services the city of Jamundi; (v) Bugatel S.A. E.S.P.
("Bugatel"), which services the city of Buga and its surrounding regions; (vi)
Unitel S.A. E.S.P. ("Unitel"), which operates a wireline system ("Unitel
Wireline") in the city of Yumbo, a city adjacent to Cali, and a fixed wireless
system ("Unitel Wireless"), which commenced operations in January, 1998, that
services the city of Cali and (vii) Empresa de Comunicaciones Girardot S.A.
E.S.P. ("TeleGirardot"), which services the cities of Girardot, Flandes and
Ricaurte and which Transtel commenced operations of on December 31, 1997. In
addition, see "Prospectus Summary--Recent Developments" for a discussion of
the Company's acquisition of Cablevision which was completed on December 15,
1998.

Operating Companies--General

The existing shareholders of the Company have invested approximately Ps44.4
billion ($28.8 million) of equity in the Company, including the Equity
Contributions in July 1998. Approximately Ps34.2 billion ($22.2 million) of
the Equity Contribution has been used to repay local bank borrowings that were
used to finance start up expenses and a portion of the acquisition costs of
the Operating Companies.

The following table provides information regarding the Operating Companies:

<TABLE>
<CAPTION>
Unitel Unitel
TelePalmira TeleCartago Caucatel TeleJamundi Wireline Bugatel TeleGirardot Wireless(1) Total
----------- ----------- -------- ----------- -------- ------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Municipality served.. Palmira Cartago Popayan Jamundi Yumbo Buga Girardot Cali N/A
Population........... 318,000 125,900 76,600 59,100 72,000 337,400 161,000(1) 1,908,600 3,058,600
Commencement date of
Company's
operations.......... 9/95 4/97 5/97 6/97 6/97 7/97 12/97 1/98 N/A
Number of subscribers
at Commencement New New New
date................ 15,600 13,800 10,800 System System 10,700 23,500 System 50,900
Number of subscribers
as of December 31,
1996................ 29,528 N/A N/A N/A N/A N/A N/A N/A 29,528
Total subscribers
added for the year
ended December 31,
1997................ 20,534 17,544 13,755 5,032 3,986 11,124 N/A N/A 71,975
Number of subscribers
as of December 31,
1997................ 50,062 17,544 13,755 5,032 3,986 11,124 23,500 N/A 125,003
Total subscribers
added for the year
ended December 31,
1998................ 13,290 9,866 8,535 5,358 3,471 9,180 25,770 34,995 110,308
Number of subscribers
as of December 31,
1998................ 63,357 27,930 22,113 10,380 4,457 20,304 48,270 34,995 235,311(2)
Penetration(3)....... 19.9 29.7 28.9 31.5 19.7 15.1 35.8 24.4 23.9
</TABLE>
- --------
(1) Includes the neighboring cities of Flandes and Ricaurte.
(2) In addition to the subscribers with installed lines at December 31, 1998,
the Company has 11,741 additional customers who have signed promissory
notes for new lines to be installed after December 31, 1998.
(3) Penetration at December 31, 1998 represents the number of installed lines
per 100 people. In Cartago, Jamundi, Buga, Yumbo, Cali and Girardot,
penetration includes the installed lines of municipal competitors of
approximately 6,000 lines, 4,000 lines, 28,700 lines, 4,700 lines,
445,000, lines and 7,000 lines as per the Company's estimates,
respectively.

Expansion Plans

Expansion Plan

At the time of acquisition, the Company's systems generally lacked
sufficient capacity to service the demand of their customers in the respective
municipalities and utilized antiquated technology to provide limited service
to their customers. Based on extensive market demand studies, the Company
created an expansion plan (the

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<PAGE>

"Expansion Plan") which is designed to satisfy the significant demand for
telephone lines in each of its operating cities (excluding the cities serviced
by TeleGirardot). The Expansion Plan does not include TeleGirardot, for which
a separate expansion plan has been developed. Management intends to increase
the number of installed lines in its operating cities (excluding the cities
serviced by TeleGirardot) from an aggregate of 56,800 which serve 50,900
subscribers at the date of acquisition of each of its systems, to
approximately 222,200 lines and subscribers upon completion of the build-out
of the Expansion Plan by December 31, 1998. The Expansion Plan also involves
the upgrade of each of its telephone networks to state-of-the-art digital and
fiber-optic technology.

The Company has entered into agreements with Siemens for the purchase of
most of the telephone equipment required for the Expansion Plan and for the
installation of the equipment to be provided to the Company pursuant to fixed
price turn-key construction contracts. As of December 31, 1998, the Company,
in conjunction with Siemens, had completed the installation of approximately
155,000 new lines, or approximately 94%, of the Company's Expansion Plan and
had upgraded all of the existing 56,800 lines. In addition, the Company has
entered into an agreement with IBM de Colombia S.A. (an affiliate of
International Business Machines Corp. ("IBM")) for the purchase and
installation of hardware and software that will be used to offer value-added
services for its telephone systems which, together with the equipment provided
by Siemens, comprises most of the equipment necessary to complete the
Expansion Plan.

The Expansion Plan is projected to require aggregate capital expenditures of
approximately $178.0 million, approximately 70.0% of which will be incurred
pursuant to fixed price equipment purchase agreements (or letters of intent)
and turn-key installation contracts. As of October 28, 1997, approximately
$7.7 million was financed with local bank borrowings, all of which was repaid
with a portion of the proceeds of the Offering, and approximately $1.5 million
was financed with cash flow from operations. The remainder of the Expansion
Plan, approximately $168.8 million, has been or will be financed with (i)
approximately $38.3 million of the proceeds of the Offering; (ii)
approximately $102.1 million provided by the Company's vendors under equipment
financing agreements (with Siemens and IBM) or domestic leasing arrangements
(collectively, the "Vendor Financing") (see "Risk Factors--Contingency of
Vendor Financing"); (iii) the sale of investments of $8.4 million; and (iv)
approximately $20.0 million of DIAN Financing (see "Description of Existing
Indebtedness--DIAN Financing"). See "Use of Proceeds." As of December 31,
1998, the Company had substantially completed its Expansion Plan.

TeleGiradot Expansion Plan

As of December 31, 1998, TeleGirardot had 49,270 subscribers in Girardot.
Transtel expects, through its expansion plan (the "TeleGirardot Expansion
Plan"), to increase the number of installed lines in Girardot to 50,000 lines
by December 31, 1999. Transtel expects to incur approximately $4.0 million
under the TeleGirardot Expansion Plan which will be financed with cash flows
from its operations.

Business and Growth Strategy

The Company's objective is to become the leading provider of quality
telephone services in each city in which it operates. The Company's business
and growth strategy includes the following:

. Capitalize on Significant Demand for Telephony Services. The Company
believes that the low telephone penetration levels throughout Colombia,
in general, and the southwestern region in particular, provide a
substantial opportunity to quickly increase subscribers, net income and
cash flow in its markets. In the aggregate, the Expansion Plan assumes
that the Company increases penetration of its markets from approximately
16.9 lines per 100 people at the time of acquisition to 22.8 lines per
100 people upon completion of the Expansion Plan. Management expects
similar penetration increases with respect to the TeleGirardot Expansion
Plan. Management believes that these penetration levels are achievable,
especially when compared to two of Colombia's largest cities, Bogota and
Medellin, where substantial capital has already been spent to expand and
modernize the telephone systems and where penetration

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<PAGE>

levels are currently in excess of 30 lines per 100 people. Furthermore,
after operating in Palmira for only 37 months, the Company has added more
than 44,100 subscribers, which represents an increase in telephone
penetration from 4.9 lines per 100 people to approximately 19 lines per
100 people at December 31, 1997.

. Create Strategic Alliances with Municipalities. The Company seeks to
maintain a strong relationship with each of the municipalities in which
it operates. This is accomplished primarily by establishing a mixed
capital company in which both the Company and the municipality are
investors. This structure allows the municipality to enjoy the benefits
of privatization while maintaining an ongoing economic interest in these
telephone operations. At the same time, the Company realizes substantial
benefits from working together with the municipal government, including:
(i) access to extensive demographic information which allows the Company
to optimize its network build out; (ii) work permits and rights of way to
ensure that the build out plan is completed quickly and efficiently; and
(iii) access to public records regarding non-paying customers of the
local government's other utility services. In addition, in situations
where the Company has acquired existing telephone systems, management has
the opportunity to retain the qualified employees of those systems.

. Utilize International Expertise. Since its inception, the Company has
contracted for the support of various internationally recognized
consultants to complement its own expertise. Prior to entering a new
market, management completes a full market demand study and in certain
instances has relied on the services of independent research consultants,
to gather and assess projected levels of demand as well as other
demographic and competitive information. The Company then sizes and
designs its networks around these demand parameters. Commonwealth
Communications, Inc. advised the Company with respect to the selection of
equipment manufacturers and the design of the Palmira, Jamundi and Yumbo
wireline telephone systems, and Bellcore ("Bellcore") advised the Company
with respect to the selection of equipment and design of the Unitel
Wireless system in Cali. Pursuant to the Expansion Plan and the
TeleGirardot Expansion Plan, the Company will rely on Siemens for the
supply of equipment for both its wireline and wireless networks as well
as the design, construction and installation of most of its systems
pursuant to fixed price, turn-key contracts. In addition, the Company has
contracted with IBM to install Internet-related services. The Company has
also contracted C-NIX, a leading international information operating
systems provider ("C-Nix"), to upgrade its existing facilities and
enhance the interface between its management control and information
systems. Management believes that the Company has realized substantial
benefits from these telecommunication services and expects to continue to
utilize the expertise of these organizations.

. Install Modern Telephony Equipment. The Company seeks to install high-
capacity, modern telephony equipment with sufficient capacity to meet
each market's expected demand. In the case of its wireline networks, the
Company, in conjunction with its primary equipment vendor, Siemens, has
installed a fiber-optic trunk supported by fully digital local exchanges.
In the case of its wireless networks, the Company is installing a fixed
wireless system utilizing DECT (as defined herein) equipment provided by
Siemens. This modern technology allows the Company to offer its
subscribers a full range of traditional and non-traditional value-added
services, including call waiting, voice mail, Internet access, ISDN and
Centrex.

. Maximize Revenue Generation. The Company seeks to maximize the revenue
generated from each installed line by capitalizing on its efficient
operating structure and by offering subscribers a full range of telephony
services. One of the stated goals of the recent deregulation of the local
telephone markets by the Colombian government is to promote competition
among public and private operators on the basis of efficiency and
customer service, rather than price. The government accomplished this by
requiring operators to set tariffs, at their option, based on either (i)
their or their predecessor's costs or (ii) their competitors' costs, but
in no event below the cost of providing service. This law has benefited
the Company by allowing management to set tariffs at levels established
by inefficient municipal operators, rather than the Company's own lower
cost of operation. This pricing structure allows the Company to realize a
high return on its capital investment, especially when compared to its
inefficient municipal competitors. The Company's operating results are
further enhanced by the new, value-added telephony

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<PAGE>

services that the Company offers as a result of its system upgrades which
are not currently provided by its municipal competitors.

. Provide Excellent Customer Service. Telephone subscribers in Colombia
have historically received poor quality service. For example, under the
management of the municipality, in September 1995, Palmira customers were
able to complete approximately 40% of their calls and an estimated 17% of
subscribers experienced breakdowns which lasted an average of more than
12 hours. The Company utilizes sophisticated computer hardware and
software to manage, administer and correct telephone problems in its
telephone systems. This has resulted in a dramatic improvement in the
operating performance of its systems. In Palmira, in December 1998, the
Company's subscribers completed approximately 66% of their calls and only
5.5% of subscribers experienced breakdowns lasting only approximately 6
hours. In addition, the Company operates customer service centers in each
of the Company's markets and utilizes an aggregate of approximately 40
dedicated employees for this purpose.

. Pursue Selective Acquisitions and Other Business Opportunities. The
Company intends to selectively pursue acquisitions of additional
telephone networks from municipalities in Colombia engaged in
privatizations. The Company anticipates making bids for one or more
municipal systems in the upcoming months, including systems within and
beyond the southwestern region of Colombia. Management expects that any
future acquisitions will be structured similarly to its existing
acquisitions, including a substantial investment and ownership by the
municipality involved. The Company anticipates pursuing only those
markets which have low penetration levels and indications of significant
unmet demand for telephony service. In addition, the Company expects to
capitalize on the recent deregulation of the long distance market by
aligning itself with a strategic international partner.

Ownership and Management

In August 1993, in anticipation of the deregulation of Colombia's
telecommunications industry, Guillermo Lopez combined his managerial expertise
with the financial support of certain members of the Caicedo family (the
"Caicedo Investors") to form the Company. The Caicedo family is a prominent
Colombian family with a history of operating businesses in the southwestern
region of Colombia dating back more than 400 years. Currently, the Caicedo
family has interests in sugar cane, milling and processing businesses in the
region, including Colombina S.A. ("Colombina"), Ingenio Riopaila S.A. and
Ingenio Central Castilla S.A. The existing shareholders of the Company have
invested approximately Ps44.0 billion ($28.3 million) in the Company,
including the sale of common stock of the Company to the existing shareholders
for a purchase price of Ps37.0 billion ($24.0 million), which was
substantially completed in July 1997 (the "Equity Contribution").

Guillermo Lopez has been managing businesses for the Caicedo family for the
past 14 years. Prior to founding the Company, Mr. Lopez was the financial and
legal advisor to the Caicedo family with respect to their many business
interests and served as a member of the Board of Directors of several publicly
held companies in Colombia in which the Caicedo family had a substantial
interest. Since the Company's inception, Mr. Lopez has been actively involved
in all aspects of the business, including the acquisition of the Company's
telephone systems, the recruiting and hiring of the management team, and the
build-out and commencement of operations of the Company's systems.

Mr. Lopez has assembled a senior management team comprised of individuals
with extensive telecommunications industry experience both in Colombia and
throughout the world. Reporting directly to Mr. Lopez is a General Manager for
each of the Operating Companies. Collectively, this group of nine executives
has over 100 years of telephony industry experience and includes Mr. Jose
Fernando Ramirez, the General Manager of TeleCartago, with 12 years of
experience with TELECOM and TELECOM affiliated companies, Mr. Anibal E. Perez,
the Technology and Planning Vice President, with 15 years of experience with
Empresas Municipales de Cali ("EMCALI"), the municipally-owned telephone
company operating in Cali, Mr. Kenneth Spencer, the Marketing and Sales Vice
President, with 27 years of experience with Bell Canada, a subsidiary of Bell
Canada Enterprises, AT&T Canada, Bell South, Nortel (Europe) and Empresa de
Telecomunicacions de Santafe de Bogota and Mr. Attilio Ciampini, the Manager
for the Company's Outside Plant, with 30 years of

73
<PAGE>

experience with Bell Canada, a subsidiary of Bell Canada Enterprises. In
addition to the General Managers, Mr. Lopez's management team includes Mr.
Jorge Enrique Martinez, the Financial Vice President, who has nine years of
experience with Corporacion Financiera del Valle, and Mr. Carlos Arango, the
Corporate Development Vice-President, who has nine years of combined
experience with Transejes S.A., an affiliate of Dana Corporation, Carvajal
S.A. and Lloreda Grasas S.A.

Mr. Lopez has established important relationships with several
telecommunications consultants and equipment vendors. See "Business--Expansion
Plan."

Description of the Operating Companies

TelePalmira

Overview

TelePalmira services the municipalities of Palmira and Candelaria. Palmira
is located 15 kilometers from Cali. Palmira's population is approximately
254,700 people and is distributed among several socioeconomic levels, with a
majority of the population belonging to the middle income bracket of Colombia.
Palmira has a stable economic base which includes agriculture, agribusiness,
light manufacturing, transportation and business commerce. The area
surrounding Palmira produces sugar cane, coffee, rice, corn and other
agriculture products used as raw material in the industries of Palmira and
Yumbo. In addition, Palmira has an international airport with significant air
freight operations and facilities. Candelaria is a municipality adjacent to
Palmira with a population of approximately 63,300 people. Candelaria is an
important residential center for the workers of the labor intensive sugarcane
industry.

Customers and Competition

In 1997, TelePalmira's subscriber base was composed of approximately 83%
residential and 17% commercial subscribers. The Company believes that, through
its technology, it can offer custom-made solutions to the business needs of
its commercial subscribers, such as Centrex, ISDN, DID and high speed access
through fiber optics. As a result, the Company expects that it can increase
both usage by commercial subscribers and the number of lines per subscriber.
The Company also believes that it can increase its residential subscriber base
through its sales and marketing efforts and by encouraging Internet, facsimile
and other data applications in the home.

TelePalmira has no current competition in Palmira or Candelaria.

History

Prior to September 1, 1995, when TelePalmira began commercial operations,
telephone service for Palmira had been provided by Empresas Publicas
Municipales de Palmira, a public entity owned by the municipality of Palmira.
The telephone services provided at that time were generally below standard,
with substantial unmet demand. On May 31, 1995, Transtel and the municipality
of Palmira incorporated TelePalmira to provide telephony services in the
cities of Palmira and Candelaria. Transtel contributed approximately Ps15.9
billion ($10.3 million) in cash and the municipality of Palmira contributed
certain of its existing telecommunications assets and infrastructure valued at
approximately Ps10.7 billion ($6.9 million) to the capital of TelePalmira. In
return for these contributions, Transtel received 60% of TelePalmira's shares
and the municipality of Palmira received 40% of TelePalmira's shares.
Concurrently, TelePalmira purchased the remaining assets of Palmira's
telephony system for Ps14.3 billion ($9.3 million) in cash.

Expansion Plan and Growth Strategy

The portion of the Expansion Plan relating to TelePalmira is substantially
completed. The Expansion Plan involved the design, construction, installation
and operation of a local telephone network with a capacity of 60,000 lines, of
which 50,500 have been installed as of December 31, 1997, representing a 76.5%
completion of

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<PAGE>

the network installation. An implied penetration of 18.9 lines per 100 people
is expected upon completion of the Expansion Plan. The newly installed system
consists of an advanced network utilizing digital switching and fiber-optic
transmission technology. The new lines are supported by a digital host
installed in TelePalmira's Central Office and three digital remote switches
installed in newly constructed buildings. The estimated cost of TelePalmira's
completed Expansion Plan is approximately $34.2 million. This has been
financed with proceeds from certain Vendor Financing, debt obtained from local
financing institutions repaid with proceeds of the Offering, proceeds from the
Offering and the DIAN Financing.

TelePalmira's growth strategy is to provide the most advanced
telecommunications service in Palmira and Candelaria while improving the
percentage of calls completed and reducing the number of service calls and
breakdowns. The Expansion Plan has resulted in an increase in penetration for
TelePalmira from 4.9 lines per 100 people at September 1, 1995 to 19.9 lines
per 100 people at December 31, 1998. TelePalmira's growth strategy involves:
(i) increasing the number of lines available; (ii) actively marketing to new
subscribers; and (iii) offering high quality service to a substantial portion
of the population for whom telephony services were previously unavailable.

Results of Operations

At the time of the acquisition, Palmira had approximately 15,600 telephone
subscribers, representing a telephone penetration of approximately 4.9 lines
per 100 people. Following the acquisition, the Company initiated its Expansion
Plan in Palmira, which consists of investing approximately $34.2 million to
replace the existing Palmira system's infrastructure, to upgrade the system
with modern equipment from Siemens and to increase system capacity to
approximately 65,000 lines, which implies a penetration of 19.9 lines per 100
people. The Company began offering telephone service in Palmira in September
1995 and, as a result of the substantial demand, experienced immediate and
significant improvements in operating and financial results. Under the
Company's management, the Palmira system's subscriber base has grown by 220%,
increasing from approximately 15,600 at the time of acquisition to
approximately 63,350 at December 31, 1998. Under the Company's management,
revenues generated by the Palmira system have increased 15% for the year ended
December 31, 1998, as compared to the same period in 1997, to Ps18.9 billion
($12.2 million) from Ps16.4 billion ($10.6 million). Net income increased 16%
for the year ended December 31, 1998 as compared to the same period in 1997 to
Ps5.7 billion (3.6 million) from Ps4.9 billion ($3.2 million).

The following table demonstrates TelePalmira's significant operating
improvements since the date when it began commercial operations to December
31, 1997:

<TABLE>
<CAPTION>
September 1, December 31,
1995 1998
------------ ------------
<S> <C> <C>
Number of subscribers(1)............................. 15,600 63,352
Penetration(2)....................................... 4.9 19.9
Service calls(3)..................................... 28% 11%
Breakdowns(4)........................................ 17% 5.8%
Total subscriber out of service time per month(5).... 3 0.5
Average out of service time per breakdown(6)......... 12 1/2 6
Percentage of calls completed(7)..................... 40% 67%
</TABLE>
- --------
(1) Subscribers are defined as customers currently receiving telephone
service.
(2) Penetration represents the number of installed lines per 100 people.
(3) Percentage of total subscribers who have contacted the Company, relating
to maintenance or general operating inquiries, in the preceding monthly
period.
(4) Percentage of lines experiencing any breakdown in service in the preceding
monthly period.
(5) Average hours each line was out of service during the preceding monthly
period.
(6) Average time in hours to correct service breakdown once reported by the
subscriber in the preceding monthly period.
(7) Number of calls completed divided by the number of calls made on such
date.

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<PAGE>

TeleCartago

Overview

TeleCartago services the municipality of Cartago which is located 237
kilometers northeast of Cali and 18 kilometers from Pereira, the capital of
Risaralda, which is a city with a population of approximately 416,100 people.
Cartago's population is approximately 125,900 people and is distributed among
several socioeconomic levels, with a majority of the population belonging to
the middle income bracket of Colombia. Cartago is located within Colombia's
Zona Cafetera (coffee-growing region) and is one of the most important
agricultural centers in the northern Valle del Cauca. Overall, the Zona
Cafetera provides nearly half of the country's coffee production, but covers
only 1.2% of the country's geographic area. Cartago has a stable and diverse
economic base which includes agriculture, agri-business, light manufacturing,
cattle raising and construction. In addition, Cartago has an international
airport with significant air freight operations and facilities.

Customers and Competition

Upon the initiation of the Company's operation of TeleCartago in April 1997,
TeleCartago's subscriber base was composed of approximately 69% residential
and 31% commercial subscribers. The Company believes that, through its
technology, it can offer custom-made solutions to the business needs of its
commercial subscribers, such as Centrex, ISDN, DID and high speed access
through fiber optics. As a result, the Company expects that it can increase
both usage by commercial subscribers and the number of lines per subscriber.
The Company also believes that it can increase its residential subscriber base
through its sales and marketing efforts and by encouraging Internet, facsimile
and other data applications.

TeleCartago's only competition in Cartago is Empresa Regional de
Telecomunicaciones ("ERT"), a telephone service provider owned by the
Departamento of Valle del Cauca. ERT commenced operations in Cartago in 1995
and the Company estimates that ERT currently has 10,000 subscribers.

History

Prior to April 1, 1997, when TeleCartago began commercial operations,
telephone service for Cartago had been provided by both Empresas Publicas
Municipales de Cartago, a public entity owned by the municipality of Cartago,
and ERT. The telephone service provided at that time was generally below
standard, with substantial unmet demand for telephone services. On January 3,
1997, Transtel and the municipality of Cartago incorporated TeleCartago to
provide telephony services in the city of Cartago. Transtel contributed
approximately Ps4.9 billion ($3.2 million) in cash and the municipality of
Cartago contributed certain of its existing telecommunications assets and
infrastructure valued at approximately Ps2.6 billion ($1.7 million) to the
capital of TeleCartago. In return for these contributions, Transtel received
65% of TeleCartago's shares and the municipality of Cartago received 35% of
TeleCartago's shares.

Expansion Plan and Growth Strategy

The portion of the Expansion Plan relating to TeleCartago is substantially
completed. The Expansion Plan involved upgrading the central exchanges and the
14,100 existing lines acquired from the municipality and expanding the network
in Cartago. Once completed, the telephone network system will consist of an
advanced network utilizing digital switching and fiber-optic transmission
technology. The new lines will be supported by a digital host installed in
Cartago's Central Office and three digital remote switches installed in newly
constructed buildings. The estimated cost of TeleCartago's completed Expansion
Plan is approximately $18.3 million, to be financed with proceeds from Vendor
Financing, debt obtained from local financing institutions (and repaid with
the proceeds of the Offering), proceeds from the Offering and the DIAN
Financing. Following completion of the Expansion Plan, TeleCartago will have
approximately 25,100 lines and an implied penetration of 27.9 lines per 100
people. As of December 31, 1998, TeleCartago had installed 27,430 lines
(including new installed lines and switching upgrades) since acquisition,
resulting in an installed base of approximately 23,430 lines.

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<PAGE>

TeleCartago's growth strategy is to provide the most advanced
telecommunications service in Cartago and the surrounding regions. TeleCartago
plans to increase its penetration rate in Cartago by: (i) increasing the
number of lines available; (ii) actively marketing to new subscribers; and
(iii) offering high quality service to a substantial portion of the population
for whom telephony services were previously unavailable.

Caucatel

Overview

Popayan, the capital of the Departamento of Cauca, is located 189 kilometers
south of Cali. The city is the capital of the Departamento of Cauca and houses
several universities and various museums, churches and monasteries. Popayan's
population is approximately 212,800 people, of which approximately 76,600
people live in the western section of the city, where Caucatel operates.
Popayan's population is distributed among several socioeconomic levels, with a
majority of the population belonging to the middle income bracket of Colombia.
Popayan's economic base includes agriculture, agribusiness, light
manufacturing, cattle raising, mining and tourism.

Customers and Competition

Upon the initiation of Transtel's operation of Caucatel in May 1997,
Caucatel's subscriber base was composed of approximately 93% residential and
7% commercial subscribers. The Company believes that it can increase usage in
Popayan by offering Internet and other data application services to the
student population attending Popayan's universities. In addition, the
universities serve as a prime training center for potential employees of
Caucatel and the Company. Furthermore, as a result of Popayan's geographic
location within the region and its status as the capital of the Departamento
of Cauca, Popayan has significant commercial and trading activity. Therefore,
Caucatel will focus its marketing efforts on these potential commercial
subscribers.

Caucatel has no competitors in the western region of Popayan. Caucatel
services the western region of Popayan only. The eastern region is serviced by
Empresa Municipal de Telecomunicaciones de Popayan ("EMTEL"), a municipally
owned company which had approximately 8,500 subscribers as of December 31,
1997.

History

Prior to May 1, 1997, when Caucatel began commercial operations, telephone
service for Popayan had been provided by EMTEL, the municipally owned service
provider. Subsequently, EMTEL decided to split its operations into eastern and
western service areas and offered its western operations for sale. On April
30, 1997, Transtel and the municipality of Popayan incorporated Caucatel to
provide telephony services in the western section of the city of Popayan.
Transtel contributed to Caucatel approximately Ps1.0 billion ($648,000) in
cash and contributed assets valued at approximately Ps8.2 billion ($5.3
million) and the municipality of Popayan contributed its existing
telecommunications network and infrastructure valued at approximately Ps8.8
billion ($5.7 million) to the capital of Caucatel. In return for these
contributions Transtel received 51% of Caucatel's shares and the municipality
of Popayan received 49% of Caucatel's shares.

Expansion Plan and Growth Strategy

Caucatel's Expansion Plan was completed by December 31, 1997. As of December
31, 1997, Caucatel had a total of approximately 23,000 digital lines
(including approximately 3,400 newly installed digital lines and approximately
19,600 lines upgraded from analog to digital) and an implied penetration of
30.0 lines per 100 people. The telephone system consists of an advanced
network utilizing digital switching and fiber-optic transmission technology.
The new lines are supported by a digital host and various digital remote
switches. The cost of Caucatel's Expansion Plan is approximately $11.5
million, financed with proceeds from Vendor Financing, debt obtained from
local financing institutions (and repaid with the proceeds of the Offering),

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<PAGE>

proceeds from the Offering and the DIAN Financing. Following completion of the
Expansion Plan, Caucatel will have approximately 23,000 lines and an implied
penetration of 30.0 lines per 100 people.

Caucatel's growth strategy is to provide the most advanced
telecommunications service in the western section of Popayan and the
surrounding regions. Caucatel plans to increase its penetration rate in
Popayan by: (i) increasing the number of lines available; (ii) actively
marketing to new subscribers; (iii) offering high quality service to a
substantial portion of the population for whom telephony services were
previously unavailable; and (iv) providing value-added services including
voice mail, Internet services and videoconference calling.

TeleJamundi

Overview

TeleJamundi services the municipality of Jamundi, which is located 23
kilometers south of Cali. Jamundi's population is approximately 59,100 people.
Jamundi is currently undergoing growth of its population that is primarily
driven by the relocation of middle and upper-middle income people from Cali to
suburban locations such as Jamundi. This has resulted in the construction of
two major malls, institutional and recreational facilities, and residential
developments in Jamundi.

Customer Base and Competition

TeleJamundi expects its subscriber base to be composed of 93% residential
and 7% commercial subscribers. As a result of EMCALI's limited telephone
service, Jamundi has very low installed lines and penetration rates. As of
December 31, 1997, the municipality of Jamundi had approximately 11,000
installed lines and a penetration of 27.4 lines per 100 people.

EMCALI continues to provide telephone service in Jamundi and is
TeleJamundi's only competitor in the municipality.

History

Prior to June 27, 1997, when TeleJamundi began commercial operations,
telephone service for Jamundi had been provided exclusively by EMCALI. The
telephone services provided at that time were generally below standard, with
substantial unmet demand for telephone services. On September 29, 1993,
Transtel and the municipality of Jamundi incorporated TeleJamundi to provide
telephony services in the city of Jamundi. Transtel contributed approximately
Ps29.0 million ($18,800) in cash and the municipality of Jamundi contributed
demographic information, the necessary civil work permits and approximately
Ps12.5 million ($8,100) in cash to the capital of TeleJamundi. In return for
these contributions, Transtel received 70% of TeleJamundi's shares and the
municipality of Jamundi received 30% of TeleJamundi's shares.

Expansion Plan and Growth Strategy

TeleJamundi's Expansion Plan is currently underway and involves the design,
construction, installation and operation of a local telephone network with a
capacity of 15,000 lines, of which 11,000 lines were installed as of December
31, 1997. The newly installed system consists of an advanced network utilizing
digital switching and fiber-optic transmission technology. The new lines are
supported by a digital host and various digital remote switches. The estimated
cost of TeleJamundi's Expansion Plan is approximately $10.6 million, to be
financed with proceeds from Vendor Financing, debt obtained from local
financing institutions (and repaid with the proceeds of the Offering),
proceeds from the Offering and the DIAN Financing. Following completion of the
Expansion Plan, TeleJamundi will have approximately 15,000 lines and an
implied penetration of 34.2 lines per 100 people.

TeleJamundi's growth strategy is to provide the most advanced
telecommunications service in Jamundi. TeleJamundi expects to increase its
penetration rate by: (i) increasing the number of lines available; (ii)
actively marketing to new subscribers; (iii) offering high quality service to
a substantial portion of the population for

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<PAGE>

whom telephony services were previously unavailable; (iv) targeting EMCALI's
subscribers to switch to the Company's service; and (v) providing value-added
services.

Bugatel

Overview

The town of Buga is located in the heart of the Valle del Cauca, 97
kilometers northeast of Cali. Buga's surrounding regions boast prime fertile
farmlands typical of the Valle del Cauca. As with other cities in the Valle
del Cauca, Buga's stable economic base is derived largely from agriculture,
agribusiness and cattle raising and farming. Due to various historical
incidents, Buga is also the focus of religious tourism which streams to the
city steadily throughout the year giving rise to small commercial and lodging
businesses. Buga, together with its surrounding regions, has a population of
approximately 337,400 people. The demographic structure of Buga consists
primarily of middle income households.

Customers and Competition

Upon the initiation of the Company's operation of Bugatel in July 1997,
Bugatel's subscriber base was composed of approximately 66% residential and
34% industrial and commercial subscribers. The Company believes that, through
its technology, it can offer custom-made solutions to the business needs of
its commercial subscribers, such as Centrex, ISDN, DID and high speed access
through fiber optics. As a result, the Company expects that it can increase
both usage by commercial subscribers and the number of lines per subscriber.
The Company also believes that it can increase its residential subscriber base
through its sales and marketing efforts and by encouraging Internet, facsimile
and other data applications. Furthermore, the municipality is developing a
"dry port" facility. The Company intends to focus its marketing efforts on
these potential customers.

ERT, a telephone service provider owned by the Departamento of Valle del
Cauca, also operates in Buga and is Bugatel's only competitor in the
municipality. TELECOM and Teletulua compete with Bugatel in the surrounding
region of Buga. The Company estimates that, as of December 31, 1997, its
competitors had an aggregate of 30,700 lines.

History

Prior to July 1, 1997, when Bugatel began commercial operations, telephone
service for Buga had been provided by both Empresas Municipales de Buga, a
public entity owned by the municipality of Buga, and ERT. The telephone
services provided at that time were generally below standard, with substantial
unmet demand for telephone services. On June 16, 1997, Transtel and the
municipality of Buga incorporated Bugatel to provide telephony services in the
city of Buga. Transtel initially contributed Ps2.5 billion ($1.6 million) and
in July 1997, contributed an additional Ps4.7 billion ($3.1 million) for a
total of approximately Ps7.3 billion ($4.7 million) in cash. The municipality
of Buga contributed certain of its existing telecommunications network and
infrastructure valued at approximately Ps4.8 billion ($3.1 million) to the
capital of Bugatel. In return for these contributions, Transtel received 60%
of Bugatel's shares and the municipality of Buga received 40% of Bugatel's
shares.

Expansion Plan and Growth Strategy

Bugatel's Expansion Plan consists of upgrading central exchanges and
approximately 11,200 existing lines acquired from the municipality and
installing 9,900 additional lines in the city of Buga and 4,000 wireless lines
in the surrounding rural areas, for a total of approximately 25,100 installed
lines by December 31, 1998. Once completed, the telephone network system will
consist of an advanced network utilizing digital and fiber-optic transmission
technology. The new lines will be supported by a digital host and various
digital remote switches. As of December 31, 1997, Bugatel had a total of
approximately 21,600 digital lines (including approximately 17,800 newly
installed digital lines and approximately 3,800 lines upgraded from analog to
digital). The estimated cost of Bugatel's Expansion Plan is approximately
$15.0 million, to be financed with proceeds from Vendor Financing, debt
obtained from local financing institutions (and repaid with the proceeds of
the Offering), proceeds from the Offering and the DIAN Financing. Following
the completion of the Expansion Plan, Bugatel

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<PAGE>

will have approximately 25,100 lines and an implied penetration of 16.5 lines
per 100 people. As of December 31, 1997 Bugatel had a penetration of 12.0
lines per 100 people.

The Company's growth strategy is to provide the most advanced
telecommunications service in Buga and the surrounding regions. Bugatel
expects to increase its penetration rate by: (i) increasing the number of
lines available; (ii) actively marketing to new subscribers; (iii) offering
high quality service to a substantial portion of the population for whom
telephony services were previously unavailable; (iv) targeting ERT's
subscribers to switch to the Company's service; and (v) providing value-added
services.

Unitel Wireline

Overview

Unitel Wireline services the municipality of Yumbo, a small business
community located 12 kilometers north of Cali. Yumbo's population is
approximately 72,000 people. The second largest Colombian industrial park is
located in Yumbo. It has as tenants Colombian subsidiaries of multinational
companies such as The Goodyear Tire & Rubber Company, International Paper
Company, The B.F. Goodrich Company, Johnson & Johnson, Borden, Inc., Mobil
Corporation, Exxon Corporation and Texaco Inc.

Customers and Competition

Unitel expects that its subscriber base will be composed of 44% residential
and 56% commercial subscribers. Unitel also expects that its commercial
subscriber base will generate higher revenues per subscriber than any other
Operating Company. In addition, the Company expects to offer commercial
subscribers in Yumbo specialized equipment, such as PBX and direct fiber optic
cable. Historically, the municipality of Yumbo has been served by analog
remote switching stations established by EMCALI.

EMCALI provides telephone service in Yumbo and is Unitel's only competitor
in the municipality. The Company estimates that, as of December 31, 1997,
EMCALI had approximately 5,500 installed lines.

History

Prior to June 27, 1997, when Unitel began commercial operations, telephone
service for Yumbo had been provided by EMCALI. The telephone services provided
at that time were generally below standard, with substantial unmet demand. On
March 11, 1994, Transtel and the municipality of Yumbo incorporated Unitel to
provide telephone services in Yumbo. Transtel contributed approximately Ps78.4
million ($50,800) in cash and the municipality of Yumbo contributed
demographic information and approximately Ps19.6 million ($12,700 in cash to
the capital of Unitel. In return for these contributions, Transtel received
80% of Unitel's shares and the municipality of Yumbo received 20% of Unitel's
shares. On December 30, 1997, Unitel was indebted to the Company for
approximately Ps17.2 billion ($11.2 million) and the Company agreed with the
municipal shareholder to cancel approximately Ps6.5 billion ($4.2 million) of
such indebtedness in exchange for an additional approximately 15% of
ownership. This cancellation did not include the Intercompany Note from Unitel
to the Company.

Expansion Plan and Growth Strategy

Unitel's Expansion Plan is currently underway and involves the design,
construction, installation and operation of a local telephone network with a
capacity of 15,000 lines, of which approximately 5,250 were installed as of
December 31, 1997. The newly installed system consists of an advanced network
utilizing digital switching and fiber-optic transmission technology. The new
lines are supported by a digital host and various digital remote switches. The
estimated cost of Unitel's completed Expansion Plan in Yumbo is approximately
$15.3 million, to be financed with proceeds from Vendor Financing, debt
obtained from local financial institutions (and repaid with the proceeds of
the Offering), proceeds from the Offering and the DIAN financing. Following
completion of the Expansion Plan, Unitel will have approximately 15,000 lines
and an implied

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<PAGE>

penetration of 28.5 lines per 100 people. As of December 31, 1997, Unitel had
a penetration of 13.2 lines per 100 people. Due to its heavy commercial
subscriber base, Unitel will install a network consisting of maximum band
width and capacity. This capacity will also be utilized by the other Operating
Companies for the provision of Internet services, except Caucatel, which will
provide its own Internet service to its subscribers. The supporting Internet
services will be supplied by IBM as part of its pilot program for its Latin
American market development activities.

Unitel's growth strategy in Yumbo focuses on satisfying the needs of its
predominantly commercial subscribers. Unitel plans to increase its penetration
rate by: (i) increasing the number of lines available per subscriber; (ii)
implementing its marketing strategy; (iii) targeting EMCALI's subscribers to
switch to the Company's service; and (iv) providing value-added services.

Unitel Wireless

Overview

Cali is the second largest city in Colombia and is located in the
southwestern region of the country. Cali's population is approximately
1,908,600 people. Cali's population is distributed among all socioeconomic
levels, with a majority of the population belonging to the middle income
bracket of Colombia. Cali has a stable and diverse economic base which
includes agriculture, agribusiness, manufacturing and transportation. As of
December 31, 1995, EMCALI provided telephone service in Cali to approximately
386,800 subscribers, representing a penetration of 20.3 lines per 100 people.

Expansion Plan and Growth Strategy

As an alternative to the fixed landline services in Cali provided by EMCALI,
Transtel is implementing a fixed wireless system in order to penetrate the
Cali market. This technology is cost effective, can be quickly deployed, and
has a transmission quality that is comparable to wireline systems. See
"Business--Technology." In addition, wireless services do not require the
civil works permits that would be required for a landline system. In September
1996, Telemercadeo was hired by Transtel to conduct a study of telephone
demand in certain sections of the city of Cali. The study estimated that there
was unmet commercial demand in the northern section of Cali for approximately
50,100 additional lines.

Unitel Wireless' Expansion Plan consists of the design, construction,
installation and operation of a fixed wireless system for 59,000 subscribers
in the city of Cali. The new subscribers will be served by Unitel's digital
host. The Company has hired Bellcore to evaluate the wireless technologies
available and to advise the Company with respect to the best application for
this market. Although installation of switching infrastructure and antennas
was substantially completed at Unitel Wireless in the fourth quarter of 1997,
there was an interference from unauthorized radio spectrum users, which was
subsequently removed by the Ministry of Communications. This delayed the
Company's launch of operations at Unitel Wireless until the first quarter of
1998. The estimated cost of Unitel Wireless' Expansion Plan in Cali is
approximately $73.1 million to be financed with proceeds from certain Vendor
Financing, debt obtained from local financing institutions (and repaid with
the proceeds of the Offering), proceeds from the Offering and the DIAN
Financing.

The Company's growth strategy is to provide the most advanced
telecommunications service in Cali. Unitel expects that its subscriber base
will be composed of approximately 50% residential and 50% commercial
subscribers. Unitel subscriber growth began to occur in the last quarter of
1997 and early 1998 after Transtel installed its telecommunications network
and implemented its marketing strategy. Transtel expects to achieve its
objectives in Cali by: (i) offering high quality service; (ii) meeting the
substantial demand that currently exists in Cali; (iii) targeting subscribers
of the municipality-owned competitor to switch to the Company's service; and
(iv) providing value-added services.

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TeleGirardot

Overview

TeleGirardot serves the cities of Girardot, Flandes and Ricaurte. Girardot
and Ricaurte are located 362 kilometers, east of Cali and 127 kilometers
southwest of Bogota. Flandes is located 363 kilometers east of Cali and 128
kilometers southwest of Bogota. The economic base of the three cities is
tourism, agriculture and cattle raising. The aggregate population of the three
cities is approximately 161,000 people.

Customers and Competition

Upon the commencement of Transtel's operation of TeleGirardot on December
31, 1997, TeleGirardot's subscriber base was composed of approximately 80%
residential and 20% commercial subscribers. TeleGirardot's competition in its
service area is TeleTequendama E.S.P., which currently has approximately 8,500
subscribers.

History

On December 31, 1997, TeleGirardot, a subsidiary, was formed by the Company
to acquire the telecommunication net assets of the municipality of Girardot's
wholly-owned subsidiary, Empresa de Telecomunicaciones de Girardot E.S.P.
("Girardot Telephone"). TeleGirardot was capitalized with Ps10.6 billion ($6.9
million) in cash contributed by the Company to TeleGirardot in exchange for a
60% interest in TeleGirardot. The municipality of Girardot contributed the net
assets of Girardot Telephone (which had approximately 23,500 subscribers)
totaling Ps7.1 billion ($4.6 million) to TeleGirardot in exchange for a 40%
interest in TeleGiradot. The municipality's telephone network had been in
operation since December 2, 1978.

Expansion Plan and Growth Strategy

As of December 31, 1998, TeleGirardot had 49,270 subscribers in Girardot.
Transtel expects, through the TeleGirardot Expansion Plan, to increase the
number of installed lines in Girardot to 50,000 lines by December 31, 1999.
Transtel expects to incur approximately $4.0 million under the TeleGirardot
Expansion Plan which will be financed with cash flow from its operations.

Services

The Company offers telephone services to residential and commercial
subscribers, including local calls and access to national and international
telephone carriers, Internet access and the ability to utilize standard modem
and fax equipment. The Company's basic residential service includes the
ability to activate a second telephone line without the need for a subscriber
premise visit. Residential and business services also include seven day a week
customer service.

The Company's basic telephone services include the following:

Call Divert/Forwarding diverts or forwards incoming calls to another
telephone number. The Company receives revenue for the diverted part of the
telephone call, as well as for the usual incoming call.

Call Barring prevents calls from being completed to specified groups of
numbers, such as "for fee" services and long distance telephone calls.

Caller Display enables subscribers with compatible equipment to identify the
telephone number of incoming calls.

Caller Return identifies and automatically redials the telephone number from
which the most recent incoming call was placed. The Company receives revenue
from the returned call.

The Company also offers a variety of special telephone services for an
additional fee, including the following:

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<PAGE>

Call Waiting alerts subscribers who are using their telephone that another
party is attempting to place a call to them; subscribers then have the option
of ignoring the new telephone call or answering it while placing their
existing call on hold. In addition to a subscription charge for call waiting,
the Company receives revenues from the second caller's telephone service
provider for completing a call that, in the absence of the Company's call
waiting feature, would not have been connected.

Three Way Calling enables subscribers to place conference telephone calls
with two additional parties. In addition to the subscription charge for
conference calling, the Company receives revenues from each of the telephone
calls placed to the participating parties.

Voice Mail enables subscribers to receive and retrieve voice mail messages,
whether at home or from an outside location. In addition to the subscription
charge for voice mail, the Company receives revenues from each of the
telephone calls placed to retrieve messages.

Alarm Calls enables subscribers to have telephone calls placed to their
number at a specified time (e.g., wake-up telephone calls or appointment
reminders). The Company receives a fee for each such call.

ISDN (Integrated Services Digital Network) allows two-way, simultaneous
voice and data transmission in digital formats over the same telephone line.
ISDN permits videoconferencing over a single line, for example, and also
supports many value-added networking capabilities, reducing costs for end-
users and resulting in a more efficient use of available facilities.

Internet The Company has entered into an agreement with IBM for the purchase
and installation of Internet hardware and software in each of the Operating
Companies. The Company expects to charge its Internet subscribers a monthly
service fee and a monthly usage fee to access the Internet. All of the
Operating Companies were able to provide Internet access by May 1, 1998 and
the Company expects to be one of the leading providers of Internet related
services in Colombia. See "Description of Existing Indebtedness--IBM
Arrangement."

The Company intends to continue to develop and introduce additional value-
added services in order to retain its competitive advantage and generate
additional revenues.

Marketing

Overview

The Company's primary marketing objectives are to: (i) create a regional
brand perceived as a reliable, high quality telephone company; (ii) achieve
increased market penetration rates in its operating markets; and (iii) educate
consumers as to the benefits of value-added services.

The Company markets to both residential and commercial subscribers in its
respective operating regions. Each Operating Company develops an in-depth
knowledge of its markets by analyzing the demographic and customer information
provided by its municipal shareholders as well as, in certain cases, the
market studies conducted for the Company by independent consultants. In
addition, the Company conducts its own door-to-door census in each of its
markets. Based on this information, the Company creates a detailed marketing
plan to increase subscribers and their use of services.

Sales

The Company uses a combination of door-to-door inquiries, selling booths and
networking to offer its services to consumers. Each Operating Company employs
its own trained sales force to contact potential subscribers. As of December
31, 1998, the Company and the Operating Companies employed a sales staff of
170 people, which is expected to continue to increase.

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Advertising

The Operating Companies use radio, television, newspapers and direct mail to
solicit new subscribers, establish brand awareness, retain subscribers and
stimulate usage. Radio and direct mail are the main methods by which the
Operating Companies advertise because these methods are relatively inexpensive
and offer high-volume coverage. National television and newspaper
advertisements are generally used only to establish the Operating Company's
name in the market when it commences operations and to maintain brand
recognition once the network is operating. The Operating Companies' direct
mail campaigns involve soliciting subscribers through the mail with printed
advertisements describing the telephone service offered. While the Operating
Companies generally have their own database of potential subscribers to whom
they direct their mail campaign, they also have access to the large subscriber
base served by the municipal utilities located in each of their respective
regions.

Customer Service

The Company has focused on providing its subscribers a high level of quality
service by establishing: (i) dedicated customer service centers in each of its
markets; and (ii) a seven-day-a-week customer service telephone hotline.

The Company has customer service representatives who are trained to receive
complaints from subscribers. Subscriber complaints are directly routed to the
engineering department through the Company's internal computer system. The
Company's customer service strategy has resulted in the reduction of customer
service calls and line repair.

Operations

Installation and Maintenance

The installation process for a new subscriber commences with the entry of a
service order into the Company's computerized subscriber administration system
("SAT"). The planning department then verifies that there is sufficient
capacity in the system and assigns a line. Once partial payment of the
connection fee has been received from the subscriber, the SAT system
automatically assigns a work order to an installer. A drop wire, internal
service wire and telephone jack are then installed and tested at the
customer's premises. Any equipment ordered by the customer is also installed.

Maintenance work is begun upon receipt of repair requests from the customer
service center or from the SAT system. Maintenance crews conduct both
preventive maintenance work as well as emergency repairs.

Billing

Transtel generates a monthly bill for each subscriber which itemizes
connection fees and local, cellular and long distance charges. The SAT system
generates all customer billing based on billing information provided by the
Central Office automated message accounting systems.

Credit and Collections

The Operating Companies offer potential subscribers flexible payment plans
of up to 36 months for connection fees and hardware. The subscriber signs a
contract with a partial payment of the connection fee and is billed for the
remaining balance on a monthly basis depending on the payment terms agreed
upon by the Company and the subscriber. Subscriber receivables are often
converted by the Operating Companies into cash by sale to local credit
institutions. The Operating Companies handle the collection of the connection
fees and any other outstanding payments.

A subscriber is charged interest for its failure to pay fees on time.
Service is suspended for failure to pay for two months and cancelled for
failure to pay for six months. Subscribers are charged substantial
reconnection expenses if their service is cancelled. To date, service
suspensions have not exceeded 1%.

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Subscribers can pay their telephone bills at a large number of different
banking institutions in their community.

Year 2000 Compliance

Additionally, the Company has met with many of its suppliers (including IBM
de Colombia S.A., Oracle de Colombia S.A., SAP S.A., Andina S.A., Cabletron
Systems, Open Systems S.A., Siemens, Cisco Systems S.A., Citibank, American
Power, OSI Corporation and Mitsubishi de Colombia S.A.) and has a commitment
from each of these suppliers that their individual Year 2000 issues will be
resolved before the first quarter of 1999. The Company is also following a
detailed plan that the Superintendencia of Public Services released to address
Year 2000 issues and is developing an internal campaign oriented to create
awareness among the Company's employees.

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COSTS INCURRED:

<TABLE>
<S> <C>
Software Supplier Approximate
Investment
IBM
Multiple System Platform Oracle $ 330,000
Oracle 7 Lotus 200,000
Domino Go WebServer IBM 370,000
SP/2/ IBM 600,000
Network Servers IBM 120,000
Microcomputers 380,000
-------
Total: $2,000,000
-------
-------

ANTICIPATED COSTS:

CONTINGENCY PLAN COSTS:

Software Supplier Estimated Cost
Reprogramming SAT System (version 2.11)
SAT $100,000
Financial, Human Resources and Purchases
Sistemas de Informacion Revised
Siemens versions of
this software
are included
in
maintenance
contact.
"Patch" developed by Siemens to update "Patch"
EWSD Software (version 12) included in
cost of
software.
-------
Total: $100,000
-------
-------
</TABLE>

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Technology

Initial Upgrades to Fixed Wireline Systems

Prior to takeover of a newly acquired system, Transtel personnel complete a
full inspection and appraisal of the existing network's elements, operational
procedures and performance parameters. This allows the Company to gather
accurate census, network inventory and subscriber record information which is
used in the network design process. Transtel then establishes new network
priorities and redesigns the network in order to raise it to international
standards. The table below describes certain characteristics of the typical
existing system acquired by Transtel and the Transtel upgrade.

<TABLE>
<CAPTION>
Typical Predecessor Transtel's
Predecessor System Capabilities Transtel Upgrade Service Capabilities
------------------ ------------ ---------------- --------------------
<S> <C> <C> <C> <C>
Network . LECs typically . Little provision . Design . System provides
Design employ a small for alternate parameters derived redundancy and
number of Central routing in the from alternate routing
Offices configured event of network recommendations of for all critical
in a star network failure international links
to serve densely consultants . Excess capacity
populated . Use ring designs designed to meet
communities and intelligent demand forecast
. Short subscriber service nodes to and overall
loops achieve system network
flexibility flexibility
Central
Office
Environment
Switching . Primarily . No basic . Replace analog . 100% touchtone
Systems vintage touchtone service with fully digital . Provisioned with
electromechanical . Intelligent Siemens EWSD custom calling,
and crossbar Network services technology IBM DID, E1, ISDN,
technologies beginning to RS/6000 server Centrex and most
. Limited appear in larger applications Intelligent
application of markets Network
analog SPC or . Digital services applications
digital switching provided on a . Full Internet,
systems case-by-case basis voice mail and
. Newer switches . Multiple vendor interactive voice
supported by older sourcing response services
software versions complicates
network interface,
maintenance and
service
restoration
Transmission . PDH systems . No add-drop . All Central . Capacity
. Switching system capability Office links sufficient to
interconnection . Fiber-to- utilize Siemens accommodate
achieved via customer services STM (SDH type) Internet and dense
copper, coaxial or not yet present multiplexers and data transmission
microwave links fiber-optic cable . Dedicated
. Selective use of channel services
digital microwave available upon
radio links IBM request via fiber,
RS/6000 server microwave radio or
applications HDSL copper
facilities
Network
Administration
General . Virtually no TMN . Few alarm . Centralized call . Digital network
Operations operating system monitoring or center for and standard
architecture network management efficient customer interfaces allow
capabilities service operation in
. Ability to . SAT from C-NIX compliance with
analyze traffic utilizes Oracle international TMN
trends limited Data Base and IBM standards
hardware to handle
administration and
billing
. Information
systems centrally
administered
through IBM's
TIVOLI and NETVIEW
network management
systems
Management/ . Manual . Repair times up . Fully automated . Fully flexible,
Recordkeeping to three months system automated system
. Typical line offers effective,
installation up to responsive system
one month management
Outside . All copper . Cable splices . Fiber optics . Key business
Plant facilities inadequately added to all major subscribers have
. A typical urban protected against trunks direct fiber
network design moisture . System rebuilt access to network
based on an . Co-location to provide maximum . Sufficient
underground degrades capacity (up to 64 capacity to serve
network with non- transmission fibers per cable) growing customer
pressurized pulp- quality and full needs
insulated copper . Rural signal insulation . All networks
cable extended via attenuation . OSP networks grounded and surge
cement conduits compensated with provided with 30% protected
open to water and lead coil reserve ratio of . Significant
dirt penetration technology which primary cable improvement in
. Secondary routes amplifies both pairs to switching operations
are aerial often noise and the capacity (reduction in
co-located with intended signal . Secondary cable service calls,
electric power . Frequent service is provided with a improved call
lines. Rural failures due to 30% reserve to the completion)
service provided poor network primary routes
through non- protection
redundant
microwave links or
higher gauge cable
</TABLE>

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Transtel's Planned Fixed Wireless System

Transtel is employing a fixed wireless technology from Siemens for both
urban and rural applications. This technology is called DECT. It has its
origins in the wireless PBX technology developed in Europe in the early 1990's
and is based on Time Division Multiple Access ("TDMA") transmission technology
(with reception and transmission slots offset in time).

Transtel selected DECT on the basis of regulatory, market and technical
considerations. Colombia segregates wireless technology into mobile and fixed
categories. Mobile technology (which includes PCS systems) requires operator
licensing and fees whereas fixed technology requires frequency assignment by
the Ministry of Communications. The radio spectrum from 1910-1930 mHz has been
assigned for fixed wireless technology by the Ministry of Communications. DECT
utilizes this frequency and offers digital capabilities. Other systems,
including CDMA and GSM technology, cannot currently be used in Colombia, as
equipment manufacturers have not yet modified their products for use at 1910-
1930 mHz. DECT also offers Transtel the rapid deployment capability it needs
to capture unsatisfied customer demand in target service areas.

DECT provides telecommunications services via antenna sites which may cover
an area of two to ten kilometers in diameter, depending on the density and
usage patterns of subscribers, topography, and existing construction. A
standard cell can cover up to 480 subscribers. Cell size may be modified over
time to accommodate traffic trends. The DECT system utilizes Adaptive
Differential PCM ("ADPCM") technology to compress voice and data
communications and achieve better transmission efficiency.

The basic components of DECT, starting from the subscriber's premises,
consist of a Radio Network Termination Unit ("RNT"), a Radio Base Station
("RBS"), the Radio Base Controller ("RBC") and a Radio Distribution Unit
("RDV").

RNT--Radio Network Termination Unit is a small base station unit
installed at the subscriber's location next to his telephone allowing for
two lines to the jack. The RNT accepts any standard telephone, facsimile,
modem or other telecommunications adjunct. The RNT has its own power
capability (including an eight-hour battery backup) and connects to an
antenna installed on the subscriber's roof or other location in "line of
sight" of the RBS.

RBS--Radio Base Stations are the units with sectorized or omnidirectional
antennas which receive and transmit to the RNT's, collect all traffic and
utilize copper cable or coaxial facilities to further aggregate
communications in the RBC. The RBS is powered remotely and supports up to
12 channels.

RBC--The Radio Base Controller supports up to 15 RBS interfaces, further
collects traffic and is linked to the RDU located at the Central Office.
The link can be either digital microwave, fiber-optic or coaxial cable
without distance limitations.

RDU--The Radio Distribution Unit is the final link in the chain of nodes
from the subscriber to the Central Office transporting telephone calls via
two Megabit channels directly to the switching network. It supports up to
four RBC interfaces.

There are other elements to the DECT system providing network management
capabilities, extended coverage and other features essential for a flexible
network.

Construction Arrangements

On April 30, 1996, each of TelePalmira, Unitel (with respect to its wireline
applications) and TeleJamundi entered into turn-key arrangements (the "Turn-
Key Arrangements") with Siemens S.A. and an affiliate of Siemens, to (i)
install the lines, switches and other equipment leased by each of these
Operating Companies from Global under the Global I Leases (as defined herein),
(ii) put in operation such lines and equipment, (iii) manage the "cut-over" to
the new system lines, install air conditioner equipment and train the
personnel who will operate the switching equipment, (iv) install SDH, (v)
expand, replace and install the Outside Plant, and (vi) complete expansion of
the network. The aggregate amount due to Siemens S.A. under these Turn-Key
Arrangements is approximately $8.3 million. Siemens S.A. has completed these
arrangements at December 31, 1998.

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For each of the Turn-Key Arrangements described in the paragraph above,
Siemens S.A. has provided the respective Operating Company with performance
bonds equivalent to (i) 10% of the amount of each Turn-Key Arrangement, (ii)
5% of the services contracted under each Turn-Key Arrangement, (iii) 10% of
the cost of the Outside Plant civil works and (iv) up to $100,000 for personal
or property liability.

On May 23, 1997, Transtel entered into a Turn-Key Arrangement with Siemens
S.A. to (i) install the lines, switches and other equipment that Transtel
agreed to contribute to the capital of Caucatel as part of its capital
contribution and which the Company acquired from Siemens pursuant to the
Transtel-Siemens Purchase Agreement, and (ii) put in operation such lines and
equipment. The aggregate amount due to Siemens S.A. under this Turn-Key
Arrangement is $533,494. This equipment was installed at December 31, 1997.

Interconnection Agreements

Local Connections

Each Operating Company which has a competitor in its local calling area must
enter into an arrangement with such competitor for access to the competitor's
network so that subscribers can complete local calls between the networks. Law
142 provides that each local service provider must permit each other local
service provider in its local calling area access to its network. Law 142
additionally empowers the CRT to regulate the tariffs associated with such
arrangements. The Company intends to have interconnection agreements between
each of the Operating Companies and their competitors. Interconnection
agreements have been signed between EMCALI and Unitel and between EMCALI and
TeleJamundi. In compliance with Law 142, ERT is interconnected with
TeleCartago and Bugatel and EMTEL is interconnected with Caucatel. However,
there are no written agreements which govern these arrangements.

Long-Distance Connections

Each Operating Company must enter into an interconnection arrangement with
TELECOM for access to the national and international long distance network.
Law 142 provides that TELECOM must permit the Operating Companies to have
access to such network and empowers the CRT to establish the tariff for such
access. At the present time, each of the Operating Companies has entered into
an interconnection agreement with TELECOM for national and international long
distance service at the CRT established tariffs. Such agreements were executed
on July 28, 1998.

By-Laws of Operating Companies

Set forth below is a brief description of certain provisions of the
estatutos sociales (by-laws) (the "by-laws") of each of the Operating
Companies (excluding Cablevision) and Colombian law with regard to each of the
Operating Companies' capital stock. This description does not purport to be
complete and is qualified in its entirety by reference to the by-laws of each
Operating Company.

Capital Stock

The capital stock of each Operating Company is divided into two classes of
common shares, Class A shares and Class B shares, each with par value of one
Peso. Law 142 provides that shares of private public service

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companies owned by the Colombian government are referred to as "Class A
shares", and shares owned by private investors are referred to as "Class B
shares".

Voting Rights

In accordance with the by-laws of each Operating Company, each Class A share
and Class B share entitles the holder thereof the right to one vote per share
at meetings of the shareholders of such Operating Company.

Preemptive Rights

In accordance with the by-laws of each Operating Company, holders of common
shares of each Operating Company are entitled to preemptive rights in
proportion to their holdings in the event of an issuance of additional shares
by such Operating Company.

Transfer

Under Law Decree 130 of 1976, each shareholder of a mixed capital company
which is a public company has pre-emptive rights with respect to shares
proposed to be sold by a private sector shareholder. These pre-emptive rights
are superior to any pre-emptive rights contained in the by-laws of such
company. Each of the municipalities of Palmira, Cartago and Yumbo have waived
pre-emptive rights. Under Law 226 of 1995, employees, former employees,
unions, pension funds and cooperative entities have pre-emptive rights with
respect to shares of a mixed capital company proposed to be sold by the public
company shareholder. These pre-emptive rights are superior to any pre-emptive
rights contained in the by-laws of such company.

The by-laws of each Operating Company provide that shareholders who wish to
transfer their common shares in an Operating Company must first offer such
shares to the Operating Company. If the Operating Company does not purchase
the shares from the transferor within 30 business days, the Operating Company
is required to offer such shares to the remaining shareholders on a pro rata
basis. Any shares not purchased by the remaining shareholders within the 30
business days following such offer may be offered to third parties, which in
the case of TelePalmira's, TeleCartago's and Unitel's by-laws, must be on
terms no less favorable to the terms offered to the remaining shareholders.

Shareholders' Meetings

The by-laws of each Operating Company provide that shareholders meetings may
be ordinary or extraordinary. Matters that may be considered at an ordinary
meeting are approval of the annual financial statements, distribution of
dividends, election of the members of the Board of Directors, appointment of
administrative officers, and other matters relating to the ordinary course of
the Company's business. Extraordinary meetings may be called at any time to
consider matters beyond the competence of an ordinary meeting, such as
dissolution of an Operating Company.

The quorum required for ordinary and extraordinary meetings of the
shareholders of the Operating Companies consists of two or more shareholders
representing at least 51% of the outstanding shares.

Board of Directors

The board of directors of each Operating Company has five members, who are
elected on a cumulative voting basis, and five alternate directors.

Dividends

The distribution of dividends by the Operating Companies is governed by Law
222 of 1995, which requires that any distribution of profits must be taken by
the favorable vote of 78% of the shares represented at a duly convened
shareholders' meeting. If a 78% majority vote cannot be obtained, the
Operating Company is obligated to distribute at least 50% of its liquid
profits to the extent such profits exceed accumulated losses from prior years.

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Legal Proceedings

Girardot Telephone was sued by TeleTequedama E.S.P., a local telephone
operator competitor, for Ps2.5 billion on June 4, 1997 for unfair competition
in TeleTequedama's zone of operations. A resolution and trial of this lawsuit
will not occur until during 1999. Girardot Telephone recorded a liability of
Ps2.5 billion at December 31, 1997 related to this lawsuit in connection with
its acquisition by the Company. Other than such litigation, neither the
Company nor any of the Operating Companies is currently a defendant in any
legal proceeding.

Properties

On September 18, 1996, Transtel purchased a 2,000 square meter building for
Ps2.0 billion ($1.3 million). See "Certain Related Party Transactions." In
addition, Transtel leases its headquarters at Calle 19N, No 2-29, Oficina
501A, Cali, Colombia. The monthly payment for such lease is Ps6.4 million
($4,200) and such lease runs on a year to year basis.

Each Operating Company owns the building where its Central Office is located
and certain smaller properties where some of its remote digital switches are
located. In addition, each Operating Company leases within the municipalities
it serves certain properties which are used for office space or for the
installation of other remote digital switches.

Employees

As of December 31, 1998, Transtel and its Operating Companies (excluding
Cablevision) had approximately 785 employees. As of December 31, 1998, 153 of
those employees were employed by TelePalmira, 103 by Bugatel, 84 by Caucatel,
43 by TeleJamundi, 241 by Unitel, 91 by TeleCartago, 65 by TeleGirardot and 5
by Transtel. Many of these employees are part of the construction phase of
projects that are currently taking place, and therefore the number of
employees will reduce once these projects are concluded. The Company is not a
party to any collective bargaining agreements and has never experienced a
strike or work stoppage. None of the employees are members of a union. The
Company believes its relations with its employees to be good.

During the first quarter of 1999, the Company terminated approximately 155
employees of its telephony operations. These terminations relate principally
to employees involved in the construction or supervision of the construction
of the telephone networks that were substantially finished as of December 31,
1998, and the elimination of certain administrative employees as the Company
consolidates its administrative functions centrally instead of at each
municipality. Additionally, the Company terminated approximately 110 employees
of Cablevision in the first quarter of 1999 that were in excess of its ongoing
needs. After these terminations, Transtel and its Operating Companies
(excluding Cablevision) had approximately 630 employees and Cablevision had
approximately 159 employees as of March 31, 1999. See "Transtel S.A.--
Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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DESCRIPTION OF EXISTING INDEBTEDNESS

Discount Notes

On December 31, 1998, Transtel issued $15.0 million of its 20.32% Senior
Discount Notes due 2008, pursuant to an Indenture dated as of December 31,
1998 between the Company, the Subsidiary Guarantors (if any) and Marine
Midland Bank, as the trustee (the "Discount Note Indenture"). The Discount
Notes are unsecured senior obligations of the Company limited to $95.7 million
aggregate principal amount at maturity. The initial accreted value of the
Notes is $15.0 million. The Discount Notes will accrete at a rate of 20.22%
per annum, compounded semi-annually. Interest accrues at a rate of 0.10% per
annum on the accreted value from time to time and is payable in cash on each
February 13th and August 13th, commencing August 13, 1999. The Discount Notes
will mature on August 13, 2008. Cash interest on the Discount Notes will be
computed on the basis of a 360-day year of twelve 30-day months. The Discount
Notes were sold at a substantial discount from their accreted amount at
maturity. Each Discount Note has an issue price of $156.80 and a principal
amount at maturity of $1,000. The Discount Notes are senior obligations of the
Company ranking pari passu in right of payment with all existing and future
senior indebtedness of the Company, including the Senior Notes, and ranking
senior in right of payment to all existing and future subordinated
indebtedness of the Company, if any. The Company intends to use the proceeds
of the Discount Notes to acquire certain minority interests in the restricted
subsidiaries of the Company (whereby, such restricted subsidiaries would
become wholly-owned subsidiaries of the Company), to pay capital expenditures,
to provide working capital, and to pay transaction expenses and/or fund
strategic acquisitions. Upon an investment of the proceeds of the Discount
Notes by Transtel S.A. in an Operating Company and/or upon the acquisition of
certain minority interests in an Operating Company, such Operating Company is
required, pursuant to the Discount Note Indenture, to guarantee the Discount
Notes.

Global-Siemens Arrangements

Global Telecommunications Operations, Inc. ("Global") is a British Virgin
Islands company owned by the same shareholders who own Transtel. Global was
formed in January 1995 for the exclusive purpose of acting as a financing
vehicle for the purchase of telecommunications equipment from Siemens AG
("Siemens"). As part of the Company's expansion plan, Global has entered into
four purchase agreements with Siemens for the provision of certain equipment
necessary for the Company's expansion plan. Global has entered or intends to
enter into lease agreements with the Operating Companies (other than Caucatel)
for the lease of such telecommunications equipment to those Operating
Companies on terms substantially similar to the financing to Global from
Siemens. Transtel purchased equipment to be used by Caucatel directly from
Siemens ($3.4 million switches and $533,494 for installation) and contributed
it to Caucatel as part of its capital. Caucatel is the only Operating Company
that does not lease its equipment from Global. Under these leases, if the
Operating Companies default under the leases, Global has the right to take
action against the assets leased thereunder including repossession or sale of
the equipment. Global has assigned to Siemens the lease payments under each of
the leases in the event of an event of default under the purchase agreements
occurs and is continuing. Upon commencement of the leases' lease terms, the
following leasing transactions with Global will be accounted for as capital
leases under Colombian GAAP and under U.S. GAAP.

Global I Purchase Agreement. On May 2, 1996, Global entered into a purchase
agreement with Siemens (as amended on July 28, 1997, the "Global I Purchase
Agreement") to purchase certain landline telecommunications equipment to be
used for the development of each of TelePalmira's, TeleJamundi's and Unitel's
respective wireline networks for an aggregate amount of approximately $19.3
million, of which 16% (approximately $3.1 million) was paid upon execution of
the Global I Purchase Agreement. The remaining 84% of the price of equipment
delivered and installed by Siemens under the Global I Purchase Agreement is
payable by Global in 24 semi-annual payments. Global's obligations under the
Global I Purchase Agreement are secured by a pledge of the Global I Leases (as
defined below). Siemens' obligations for delivery and installation were
completed on April 19, 1998.

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for TeleJamundi (the "Global--TeleJamundi I Lease") and for Unitel (the
"Global--Unitel I Lease") (the Global--TeleJamundi Lease, Global--TelePalmira
Lease, Global--TeleJamundi Lease and Global-Unitel I Lease are collectively
referred to as the "Global I Leases"). The lease term of each lease commenced
on April 19, 1998.

Global-TelePalmira I Lease. Pursuant to the Global-TelePalmira I Lease,
TelePalmira agreed to pay Global an aggregate amount of approximately $16.8
million to lease, for a 12-year term, certain switching and cable equipment
that Global purchased from Siemens under the Global I Purchase Agreement.
The Global-TelePalmira I Lease includes an option to purchase the equipment
for an additional $285,000 at the end of the lease term.

Global-TeleJamundi I Lease. Pursuant to the Global-TeleJamundi I Lease,
TeleJamundi agreed to pay Global an aggregate amount of approximately $5.9
million to lease, for a 12-year term, certain switching and cable equipment
that Global purchased from Siemens under the Global I Purchase Agreement.
The Global-TeleJamundi I Lease includes an option to purchase the equipment
for an additional $104,000 at the end of the lease term.

Global-Unitel I Lease. Pursuant to the Global-Unitel I Lease, Unitel
agreed to pay Global an aggregate amount of approximately $4.4 million to
lease, for a 12-year term, certain switching and cable equipment that
Global purchased from Siemens under the Global I Purchase Agreement for its
wireline applications. The Global-Unitel I Lease includes an option to
purchase the equipment for an additional $73,000 at the end of the lease
term.

Global II Purchase Agreement. On May 30, 1997, Global entered into a
purchase agreement, as amended on July 28 and October 29, 1997 and April 1,
1998, with Siemens (the "Global II Purchase Agreement") to purchase certain
landline and wireless telecommunications equipment to be used for the
development of each of TeleCartago's, Bugatel's and Unitel Wireless'
respective networks for an aggregate amount of approximately $39.8 million, of
which approximately $3.7 million was paid upon execution of the Global II
Purchase Agreement. The remaining price of equipment delivered and installed
by Siemens under the Global II Purchase Agreement is payable by Global in 24
semi-annual payments. Global's obligations to Siemens under the Global II
Purchase Agreement are secured by a pledge of the lease payments under the
Global II Leases (as defined below).

Global II Leases. On July 28, 1997, Global entered into a lease agreement
with Unitel (the "Global-Unitel II Lease"), TeleCartago (the "Global-
TeleCartago II Lease") and Bugatel (the "Global-Bugatel II Lease") for certain
of the equipment that is the subject of the Global II Purchase Agreement (the
Global-Unitel II Lease, the Global-TeleCartago II Lease, and the Global-
Bugatel II Lease are collectively referred to herein as, the "Global II
Leases"). The lease term of each lease will commence upon completion of
Siemens' delivery and installation obligations.

Global-Unitel II Lease. Pursuant to the Global-Unitel II Lease, Unitel
agreed to pay Global an aggregate amount of approximately $25.4 million to
lease, for a 12-year term, certain wireless telecommunications equipment
that Global purchased from Siemens under the Global II Purchase Agreement.
The Global-Unitel II Lease includes an option to purchase the equipment for
an additional $525,000 at the end of the lease term. The Company expects to
increase the Global-Unitel Lease II to $35.0 million to reflect
modifications to the lease. This project is in the testing process by
Global and the Company expects that it will be recorded as a capital lease
in July 1999.

Global-TeleCartago II Lease. Pursuant to the Global-TeleCartago II Lease,
TeleCartago agreed to pay Global an aggregate amount of approximately $9.5
million to lease, for a 12-year term, certain switching and cable equipment
that Global purchased from Siemens under the Global II Purchase Agreement.
The Global-TeleCartago II Lease includes an option to purchase the
equipment for an additional

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$55,800 at the end of the lease term. This project was finished and
recorded as a capital lease in March 1999.

Global-Bugatel II Lease. Pursuant to the Global-Bugatel II Lease, Bugatel
agreed to pay Global an aggregate amount of approximately $9.0 million to
lease, for a 12-year term, certain wireless telecommunications equipment
that Global purchased from Siemens under the Global II Purchase Agreement.
The Global-Bugatel II Lease includes an option to purchase the equipment
for an additional $53,700 at the end of the lease term. This project is in
the testing process and the Company expects that it will be recorded as a
capital lease in June 1999.

Global III Purchase Agreement. Global entered into a purchase agreement on
June 11, 1998 with Siemens (the "Global III Purchase Agreement") to purchase
certain landline and wireless telecommunications equipment to be used for the
development of each of TelePalmira's and Unitel's Wireless respective networks
for an aggregate amount of approximately $12.9 million. The price of equipment
delivered and installed by Siemens under the Global III Purchase Agreement is
payable by Global in 24 semi-annual payments. Global's obligations to Siemens
under the Global III Purchase Agreement are secured by a pledge of the lease
payments under the Global III Leases (as defined below).

Global III Leases. On September 1, 1998, Global entered into a lease
agreement with TelePalmira (the "Global-TelePalmira III Lease") and Unitel
(the "Global-Unitel III Lease") for certain equipment that is subject to the
Global III Purchase Agreement (the Global-TelePalmira III Lease and the
Global-Unitel III Lease are collectively referred to herein as, the "Global
III Leases"). The lease term of each lease will commence upon completion of
Siemens' delivery and installation obligations.

Global-TelePalmira III Lease. Pursuant to the Global-TelePalmira III
Lease, TelePalmira agreed to pay Global an aggregate amount of
approximately $1.4 million to lease, for a 12-year term, certain switching
telecommunications equipment that Global purchased from Siemens under the
Global III Purchase Agreement. The Global-TelePalmira III Lease includes an
option to purchase the equipment for an additional $9,332 at the end of the
lease term.

Global-Unitel III Lease. Pursuant to the Global-Unitel III Lease, Unitel
agreed to pay Global an aggregate amount of approximately $18.1 million to
lease, for a 12-year term, certain switching and emission
telecommunications equipment that Global purchased from Siemens under the
Global III Purchase Agreement. The Global-Unitel III Lease includes an
option to purchase the equipment for an additional $118,630 at the end of
the lease term.

Global IV Purchase Agreement. Global entered into a purchase agreement on
June 11, 1998 with Siemens (the "Global IV Purchase Agreement") to purchase
certain landline and wireless telecommunications equipment to be used for the
development of each of TelePalmira's, Bugatel's, TeleGirardot's and
TeleCartago's respective networks for an aggregate amount of approximately
$11.0 million. The price of equipment delivered and installed by Siemens under
the Global IV Purchase Agreement is payable by Global in 24 semi-annual
payments. Global's obligations to Siemens under the Global IV Purchase
Agreement are secured by a pledge of the lease payments under the Global IV
Leases (as defined below).

Global IV Leases. On September 1, 1998, Global entered into a lease
agreement with TelePalmira (the "Global-TelePalmira IV Lease"), Bugatel (the
"Global-Bugatel IV Lease"), TeleGirardot (the "Global-TeleGirardot IV Lease"),
and TeleCartago (the "Global-TeleCartago IV Lease") for certain equipment that
is subject to the Global IV Purchase Agreement (the Global-TelePalmira IV
Lease, the Global-Bugatel IV Lease, the Global-TeleGirardot IV Lease and the
Global-TeleCartago IV Lease are collectively referred to herein as, the
"Global IV Leases"). The lease term of each lease will commence upon
completion of Siemens' delivery and installation obligations. The Company
expects that this project will be delivered and accepted in July 1999; at
present it is in the testing process.

Global-TelePalmira IV Lease. Pursuant to the Global-Palmira IV Lease,
TelePalmira agreed to pay Global an aggregate amount of approximately $4.1
million to lease, for a 12-year term, certain switching and emission
telecommunications equipment that Global purchased from Siemens under the
Global IV Purchase Agreement. The Global-TelePalmira IV Lease includes an
option to purchase the equipment for an additional $26,589 at the end of
the lease term.

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Global-Bugatel IV Lease. Pursuant to the Global-Bugatel IV Lease, Bugatel
agreed to pay Global an aggregate amount of approximately $4.3 million to
lease, for a 12-year term, certain switching and emission
telecommunications equipment that Global purchased from Siemens under the
Global IV Purchase Agreement. The Global-Bugatel IV Lease includes an
option to purchase the equipment for an additional $27,890 at the end of
the lease term.

Global-TeleGirardot IV Lease. Pursuant to the Global-TeleGirardot IV
Lease, TeleGirardot agreed to pay Global an aggregate amount of
approximately $4.3 million to lease, for a 12-year term, certain switching
and emission telecommunications equipment that Global purchased from
Siemens under the Global IV Purchase Agreement. The Global-TeleGirardot IV
Lease includes an option to purchase the equipment for an additional
$27,846 at the end of the lease term.

Global-TeleCartago IV Lease. Pursuant to the Global-TeleCartago IV Lease,
TeleCartago agreed to pay Global an aggregate amount of approximately $4.3
million to lease, for a 12-year term, certain switching and emission
telecommunications equipment that Global purchased from Siemens under the
Global IV Purchase Agreement. The Global-TeleCartago IV Lease includes an
option to purchase the equipment for an additional $27,850 at the end of
the lease term.

Transtel-Siemens Arrangement

On May 23, 1997, Transtel entered into a purchase agreement with Siemens
(the "Transtel-Siemens Purchase Agreement") for certain telecommunications
equipment to be used by Caucatel in the installation of approximately 23,000
lines for approximately $3.3 million payable semiannually over a ten-year
period at an interest rate of LIBOR plus 1% (6.2% at December 31, 1998),
commencing six months after the completion of the Turn-Key Arrangements. The
obligations of Transtel under the Transtel-Siemens Purchase Agreement are
secured by a promissory note from Transtel. Siemens completed the installation
of this equipment in December 1997 and the payment obligation to Siemens is
recorded as a liability at December 31, 1997. As of December 31, 1998, the
balance was $2,549,427 (Ps3,391,497 thousand).

TeleGirardot-Siemens Arrangement

The Company has assumed Girardot Telephone's obligations under six purchase
agreements and executed one additional purchase agreement on July 2, 1978
totaling $4.5 million with Siemens (the "TeleGirardot-Siemens Purchase
Agreement") for certain telecommunications equipment now in use by
TeleGirardot. The contract amounts are generally payable over five-year
periods at interest rates of approximately 6.7% to 7.5%. Substantially all of
the equipment was installed and the liabilities recorded at December 31, 1997.
The balance payable at December 31, 1997 and 1998 are $4,440,951 (Ps6,848,435
thousand) and $3,126,944 (Ps4,822,091 thousand), respectively.

IBM Arrangement

The Company has entered into an agreement with International Business
Machines Corp. ("IBM") whereby IBM has agreed to finance and to provide and
install all the Internet and voice mail related hardware and software for the
Company's telephone systems and the Company has agreed to pay IBM an aggregate
amount of $3.4 million for such equipment. On October 1 and October 28, 1997,
Unitel and Caucatel entered into 60 month leases with IBM for $2.8 million and
$532,008 respectively, for this equipment. The lease term of each lease
commenced on June 11, 1998. The leases are capital leases under Colombian and
U.S. GAAP.

DIAN Financing

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the Expansion Plan, the Company estimates that it will defer approximately
Ps31.1 billion ($20.2 million) of taxes and duties during the expansion plan
that will be paid over a five-year period commencing six months from the date
of incurrence (the "DIAN Financing"). The DIAN Financing does not bear any
interest. DIAN Financing consists of approximately Ps23.7 billion ($15.4
million) of value-added tax and Ps7.4 billion ($4.8 million) of duty. Prior to
December 24, 1998, the value-added tax, when paid, may be taken as a credit
against income taxes to the extent that income taxes are payable in a two year
period or is refundable if not used as a credit. On December 24, 1998 the
Colombian government issued Law 488 which reforms the tax rules as of January
1, 1999. Law 488, among other things, establishes that the value-added tax
paid may not be taken as a credit against income taxes commencing in 1999 but
may be treated as a deduction from taxable income or capitalized as a cost of
the respective asset. All DIAN Financing other than Ps2.1 billion paid during
1998 will be subject to Law 488. No DIAN Financing amounts were due at
December 31, 1997 as Siemens had not yet completed the delivery and
installation of the equipment to be leased under the Global Leases. As of
December 31, 1998, the DIAN Financing has been recorded as a memorandum
account related to the Global I Purchase Agreement of $4.2 million (Ps6.5
billion) of which had been paid $1.4 million (Ps2.1 billion) (see Note 11).
The corresponding amounts of the Global Purchase Agreements II, III, IV and V
of $16.0 million (Ps24.6 billion) will be recorded during 1999.

Assumption of Cablevision Debt

As part of the acquisition of Cablevision, the Company assumed Cablevision's
long-term debt which at December 31, 1998 totaled approximately Ps10.3 billion
($6.7 million). These amounts are payable to banks and other financial
institutions and bear interest at 32%. The amounts are payable in the year
ending December 31 as follows: Ps1.4 billion in 1999, Ps2.9 billion in 2000,
Ps1.7 billion in 2001, Ps2.0 billion in 2002, Ps1.4 billion in 2003 and Ps1.2
billion in 2004. Additionally, short-term debt assumed at Cablevision, which
consisted of bank overdrafts and notes, totaled Ps4.1 billion ($2.6 million)
at December 31, 1998.

Other Indebtedness

The Company had other bank overdrafts and short-term notes of Ps9.5 billion
($6.2 million) outstanding at December 31, 1998.

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<PAGE>

INDUSTRY OVERVIEW; LEGAL AND REGULATORY ENVIRONMENT

Colombia is one of the oldest democracies and most stable economies in Latin
America and is one of only three countries in Latin America rated investment
grade by all three major rating agencies. Colombia has achieved positive real
economic growth every year since 1950 and averaged compounded annual growth in
Gross Domestic Product ("GDP") of approximately 4.7% from 1992 to 1996, one of
the highest growth rates in Latin America. Annual inflation has declined over
the past six years from 26.8% in 1991 to 17.7% in 1997. In recent years, the
Colombian government has encouraged foreign investment and exports through
reduced foreign exchange controls and lower import quotas and tariffs. The
Colombian government has also begun to open certain public services, such as
power and banking, to private sector investment and is considering other
sectors for privatization. In part as a result of these policies, net foreign
investment in Colombia has grown from $3.5 billion in 1990 to $10.5 billion in
1997. During the same period, Colombia has achieved increased diversification
of its export base and the value of its exports has grown from $6.7 billion to
$11.6 billion. See "Risk Factors--Colombian Political, Economic and Social
Risks."

In 1995, Colombia had approximately 4.9 million installed lines,
representing a penetration of approximately 14.0 lines per 100 people which
generated approximately $635 million of revenues representing approximately
44% of the $1.5 billion telecommunications industry. Historically, local
telephony has been treated as a utility. The local telephony network is
fragmented and approximately 30 municipal operators service approximately 780
municipalities. Prior to deregulation, each municipal operator had a monopoly
in the region which it served and typically provided limited and often
marginal service. As a result, Colombia is significantly underserved by
existing wireline operators and demand for telephone service substantially
outweighs supply for telephone lines. This is evidenced by multi-year waiting
lists and unsatisfied demand in Colombia for approximately 1.2 million
telephone lines as estimated by the DNP. The DNP also projects that the
country's existing installed line network will need to more than double by
2007 in order to keep pace with growing demand.

In 1990, the Ministry of Communications issued Decree 1900 which permitted
private sector's participation in the state-owned telecommunications industry.
The decree launched a deregulation process which resulted in the privatization
of local wireline telecommunications, the sale of cellular licenses and the
planned privatization of the national long distance carrier, TELECOM. Law 142
established the basic guidelines for the privatization of basic services,
including telecommunications, thereby introducing open competition in the
telecommunications sector and promoting a tariff environment whereby
participants would be encouraged to compete on the basis of efficiency and
service rather than price.

There is currently no restriction in Colombia on competition within the
local telephony business and therefore any person can organize and operate a
telephone company provided such person has obtained the civil works permits
for the construction of the telephone networks from the local municipalities
in the market in which such person operates. Law 142 prohibits a municipality
from denying a company the permit requirements for such works. In addition,
telephone companies are required to enter into interconnection agreements with
the long distance carrier, TELECOM, and other local municipalities for the
provision of national and international long distance services and local
service, respectively. Law 142 requires that this access be granted. See
"Business--Interconnection Agreements--Local Connections" and "Business--
Interconnection Agreements--Long-Distance Connections."

Telephone companies are subject to the supervision of the Superintendencia
de Industria y Comercio (Superintendency of Industry and Commerce), which is
empowered to enforce antitrust regulations, protect free

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<PAGE>

competition in the marketplace and protect consumer rights on a case by case
basis, and to the supervision of the Superintendencia de Sociedades
(Superintendency of Corporations), which is entitled by Colombian Commercial
Law to exercise regulatory control over certain activities of
telecommunication service providers. The Superintendencia de Servicios
Publicos (Superintendency of Public Services) ("SPS") was created as a new
organization under Law 142 to review the management and performance of
utilities. Telecommunications service providers are required by Law 142 to
appoint an external professional reviewer to also review their management and
performance. This requirement may be waived by the SPS if it is satisfied that
a company's internal controls are sufficient.

Pursuant to such new regulations, the CRT was created as a special
administrative unit with administrative, technical and financial independence
to oversee the telecommunications sector. The CRT is funded by the companies
it regulates, which are required to pay a fee for this purpose. For 1996, this
fee was set at 0.65% of 1995 operating expenses. The CRT is chaired by the
Minister of Communications, and also includes, as members, the Director of the
DNP and three technical experts appointed by the President of Colombia for
three-year terms. Whereas the SPS is responsible for oversight and control and
has the power to impose sanctions for non-compliance with regulations, the CRT
performs the regulatory functions in the industry such as the establishment of
tariffs for all telecommunication services, which allows operators to set
prices in accordance with costs or at levels established by their competitors.
In addition, the CRT issues regulations for the purpose of promoting
competition, reviews the efficiency of monopolistic service providers, sets
technical standards for telephone services to ensure continuous, quality
service to telephone subscribers, and is also appointed to resolve disputes
among telephone service providers and between providers and consumers. The CRT
also has the authority to review the efficiency of service providers and order
the liquidation of monopolistic service providers which are found to be
inefficient. Where competition is lacking, the CRT may also set fixed fees for
services.

The CRT restricts the activities of telephone service providers in order to
ensure free competition in the marketplace. For example, users may not be
required to purchase other services together with telephone service or be
required to purchase telephone equipment. Service providers are obligated to
permit other licensed service providers access to their telephone networks on
the basis of "equal access--equal fees."

Local telephone service providers are free to set their own fees within
maximum and minimum limits set by the CRT. The minimum is the cost of
providing the service and the maximum is set for each service provider based
on its expenses and infrastructure investment. The maximum and minimum limits
are set for five-year periods and adjusted annually for inflation. The limits
can be modified within the five-year period if there is a prior agreement
between the CRT and the service provider to do so or in extraordinary
circumstances.

Domestic and international long distance service has been provided
exclusively by TELECOM, which has had a monopoly on international and long
distance calls. However, in 1995, the Colombian government opened the long
distance market to competition. The CRT has established a process under which
the opening of the long distance market to competition is to be reviewed.
Licenses were given to Orbitel (a private company) and Empresa de
Telecomunicaciones de Bogota (a government-owned entity) and it is expected
that operations will start in 1999. The conditions for a new entrant include:
(i) an initial payment of $150.0 million for a ten-year license, which is
automatically renewed at no cost for an additional ten-year period and a
monthly payment of 5% of the gross revenues to the Ministry of Communications
payable over the duration of the license; (ii) the members of the consortium
must have at least 400 million minutes of international long distance traffic;
(iii) the operation of a minimum of 150,000 local telephone lines in Colombia
but in no case serving over 35% of the Colombian telephone market; and (iv)
the provision of universal service to a wide range of municipalities
throughout Colombia. It is expected that tariffs will be under a regulated
competitive system until 1999. The Company believes that the deregulation of
the long distance market will, as it has in other countries, serve to
stimulate phone usage, due to the fact that price competition is likely to
lower tariffs to the consumer. The Company does not currently expect that it
would qualify to be a new entrant into the long distance market in the near
future.

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MANAGEMENT

Directors and Officers

The directors and executive officers of the Company are as follows:

<TABLE>
<S> <C>
Gonzalo Caicedo Toro.............. Director
Guillermo O. Lopez................ Director and President
Victoria E. Meza.................. Director and General Secretary
Jorge Enrique Martinez............ Director and Financial Vice President
Anibal E. Perez................... Director and Technology and Planning Vice
President
Carlos A. Arango.................. Corporate Development Vice President
Kenneth H. Spencer................ Marketing and Sales Vice President
Attilio Ciampini.................. Manager of Outside Plant
</TABLE>

Gonzalo Caicedo Toro, 51, has been a member of the Board of Directors of the
Company since August 1993. Mr. Caicedo is an economist by training and an
investor in agribusiness, particularly in the sugar cane industry. He is an
investor, as well as a member of the Board of Directors of several Colombian
companies, including Ingenio Riopaila, S.A., Ingenio Central Castilla, S.A.
and Colombina S.A.

Guillermo O. Lopez, 42, is a lawyer by training and has been a director of
several Colombian companies, such as Colombina S.A. and Ingenio Central
Castilla, S.A. and a consultant for other companies. Before joining Transtel,
Mr. Lopez provided business, financial and managerial advice to the Caicedo
Investors and has been a member of the Board of Directors and President of the
Company since December 1994. Between 1992 and 1993, his principal occupation
was the creation of Transtel. Upon incorporation of the Company, Mr. Lopez
joined the Company as General Manager and held that position until he was
appointed President.

Victoria E. Meza, 34, has been a member of the Board of Directors of the
Company since December 1994 and has been General Secretary since December
1993. Before joining Transtel, Ms. Meza worked as a prosecuting attorney in
the Ministry of Finance.

Jorge Enrique Martinez, 49, has been a member of the Board of Directors of
the Company since December 1994. Mr. Martinez worked for Corporacion
Financiera del Valle S.A., a financial institution specializing in project
finance and investment banking for nine years as Credit Executive and Manager.
Mr. Martinez joined Transtel in 1993 as Projects Manager and became Financial
Vice President in 1996.

Anibal E. Perez, 40, has been a member of the Board of Directors of the
Company since January 1997. Mr. Perez worked for EMCALI from September 1993 to
October 1996, as Director of External Affairs, Vice President of Network
Planning and General Manager. Mr. Perez joined Transtel in October 1996 as
Technology and Planning Vice President.

Carlos A. Arango, 44, has been Corporate Development Vice President since
July 1997. From 1988 to 1992, Mr. Arango was Finance Manager of Transejes
S.A., an affiliate of Dana Corporation. From 1992 to January 1994, Mr. Arango
was Corporate Planning Director of Carvajal S.A., responsible for annual
strategic business planning, budget, forecasting and economic engineering
analysis. From 1994 to 1997, Mr. Arango was Controller for Corporate
Development of Lloreda Grasas S.A., responsible for the reengineering process
of the company.

Kenneth H. Spencer, 51, has been Marketing and Sales Vice President since
June 1998. Mr Spencer has 27 years experience in telecommunications with
senior sales and marketing positions in Bell Canada and as a Director of
Projects for AT&T Canada, Bell South, Nortel (Europe) and most recently with
Empresa de Telcomunicaciones de Santafe de Bogota.

Attilio Ciampini, 52, has been Manager for the Company's Outside Plant since
April 1, 1997. From 1988 to 1991, Mr. Ciampini worked for Bell Canada as
Access Network Section Manager. From 1991 to 1994, Mr. Ciampini worked as
Access Network Management Consultant for Bell Sygma Telecom Solutions. Mr.
Ciampini joined Transtel on April 1, 1997 as Technical Manager for Unitel
Wireless.

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Statutory Auditor

Transtel and each of its subsidiaries, as required by the Colombian
Commercial Code, has a revisor fiscal ("statutory auditor"). The statutory
auditor is elected by the shareholders' general assembly for a one-year period
beginning on the date of election. The statutory auditor may be reelected
indefinitely. Pursuant to the Commercial Code, the statutory auditor has the
obligation to audit a company's annual financial statements and review tax
returns of each company in order to indicate their agreement with the
accounting records. The statutory auditor also reports on a company's
compliance with shareholders and board of directors' resolutions, certain
Colombian laws and regulations, and requests by Colombian government entities.
The statutory auditor, who has no power over a company's operations, is
authorized to investigate and require correction of noncompliance with certain
laws, including convening an extraordinary session of the Board of Directors
or the shareholders' general assembly. Commencing in 1997, the Company's
statutory auditor has been Price Waterhouse, independent accountants.

Management Compensation

While the Company's directors are not compensated for their services, as of
December 31, 1997, the Company's officers were compensated according to the
Colombian salary standards for executive officers in the telecommunications
sector. The aggregate compensation of all executive officers of the Company
was approximately Ps1.3 billion for the year ended December 31, 1997. In
addition, the Company made contributions totalling Ps82.8 million for the year
ended December 31, 1997 as determined by the Social Security Institute for
health, pension and other benefits.

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PRINCIPAL SHAREHOLDERS

The following table sets forth the aggregate number of shares of Transtel's
voting securities beneficially owned following the Equity Contribution by: (i)
each person known by Transtel to be a beneficial owner of more than 5% of any
class of Transtel's voting securities; and (ii) each director of Transtel. As
of December 31, 1998, there were 34,611,747,976 shares of common stock issued
and outstanding.

<TABLE>
<CAPTION>
Number of Percentage
Shares of Shares
Beneficially Beneficially
Named and Address(1) of Beneficial Owner Owned Owned
- ---------------------------------------- -------------- ------------
<S> <C> <C>
Guillermo Lopez.................................. 17,305,873,988 50%
Gonzalo Caicedo Toro............................. 17,305,873,988(2) 50%(2)
Comyersiones S.C.S............................... 2,083,598,736 6%
Maria Eugenia Llano.............................. 1,374,006,281 4%
Valentina Caicedo Toro........................... 2,957,198 --
</TABLE>
- --------
(1) The address for each listed shareholder is c/o Transtel, S.A., Calle 15
#33-289, Autopista, Cali-Yumbo Km. 2, Cali-Valle, Colombia.
(2) The "Number of Shares Beneficially Owned" and "Percentage of Shares
Beneficially Owned" for Gonzalo Caicedo Toro include the shares registered
in the name of Maria Eugenia Llano, his wife, the shares registered in the
name of Valentina Caicedo Toro, his daughter, and the shares registered in
the name of Gonzalo Caicedo Toro & Cia. S.C.S., which is owned 50% by
Maria Eugenia Llano and 50% owned by Gonzalo Caicedo Toro.

CERTAIN RELATED PARTY TRANSACTIONS

Ingenio Riopaila, S.A. and Ingenio Central Castilla, S.A. Shares

Transtel and Gonzalo Caicedo Toro have entered into several transactions. In
the first of these transactions, during 1996, Mr. Caicedo pledged to certain
banks part of his shares in two Colombian companies, Ingenio Riopaila, S.A.
and Ingenio Central Castilla, S.A. as collateral for loans that such banks
made to Transtel in the principal amount of Ps17.3 billion ($11.2 million)
(the "Secured Loans"). In the second transaction, during the first quarter of
1997, Transtel borrowed Ps8.2 billion ($5.3 million) (the "Other Loans") and
loaned the proceeds to Mr. Caicedo (the "Caicedo Loan"). Mr. Caicedo used the
proceeds from the Caicedo Loan to remove certain liens from certain other
shares of Ingenio Riopaila, S.A. and Ingenio Central Castilla, S.A. owned by
him. Mr. Caicedo then created a trust (the "Caicedo Trust") that borrowed from
third parties Ps25.5 billion ($16.5 million) (the "Trust Loan"). In April
through July 1997, Mr. Caicedo used Ps8.1 billion ($5.2 million) of the
proceeds of this loan to repay the Other Loans on behalf of Transtel. The
repayment of the Other Loans by Mr. Caicedo, on behalf of Transtel, was
credited by Transtel as a repayment by Mr. Caicedo of the Caicedo Loan. Mr.
Caicedo used the remaining proceeds of the Trust Loan (Ps17.3 billion ($11.2
million)) to make a capital contribution, in July 1997, to Transtel, in
partial satisfaction of the Equity Contribution. Transtel used this money for
the repayment of the Secured Loan. In addition, in July 1997, Mr. Caicedo made
a partial equity contribution of Ps0.9 billion ($588,000).

Certain Other Transactions with Gonzalo Caicedo Toro

In addition to the transactions outlined above, the Company has been
involved in a number of transactions with Mr. Caicedo. In 1995, the Company
loaned Mr. Caicedo a total of approximately Ps10.0 billion($6.5 million) of
which Mr. Caicedo repaid approximately Ps7.9 billion ($5.1 million) of that
loan in the same year. In 1996, the Company lent Mr. Caicedo an additional
approximately Ps11.0 billion ($7.1 million). These loans were repaid in full
by Mr. Caicedo in 1996 with (i) approximately Ps7.8 billion ($5.0 million) in
cash, (ii) the assignment of a 2,000 square meter building located in the
municipality of Cali that the Company valued at approximately Ps2.0 billion
($1.3 million), and (iii) the transfer by Mr. Caicedo of the capital stock of

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Comyersiones S.C.S., which owns 7.59% of Colombina, the largest candy
manufacturer in Colombia, that the Company valued at approximately Ps3.1
billion ($2.0 million). As of August 31, 1997, Mr. Caicedo had repaid the
balance of additional net loans made to him in 1997 of Ps1.6 billion ($1.1
million), including the Caicedo Loan discussed above. The loans to Mr. Caicedo
were non-interest bearing and had no maturity dates.

Purchase Agreements and Lease Agreements with Global

As part of the Company's tax planning, Global, a British Virgin Island
company owned by the same shareholders who own Transtel, has entered into
purchase agreements and letters of intent with Siemens for the purchase of
certain telecommunications equipment to be leased by Global to the Operating
Companies to develop their respective networks according to the Expansion
Plan. In connection with these equipment purchases, Global and the Company
have entered into or intend to enter into long-term equipment financing
arrangements with Siemens under which Siemens will provide financing for up to
85% of the total cost of such equipment, or approximately $83.4 million. See
"Description of Existing Indebtedness--Global-Siemens Arrangements" for the
terms of the existing financing arrangements, and see "Risk Factors--
Contingency of Vendor Financing." Global in turn has entered into or intends
to enter into lease agreements with the Operating Companies for the lease of
such equipment. As security for these arrangements, Global has assigned to
Siemens the lease payments under the Global leases in case an event of default
occurs and is continuing under the Purchase Agreements. See "Description of
Existing Indebtedness--Global-Siemens Arrangement."

Undertakings by Global Regarding Indebtedness and Line of Business

As a condition precedent to the Offering, Global entered into a Letter of
Undertaking, among Global, Siemens, Transtel and the Indenture Trustee (the
"Global Undertaking Letter"), whereby Global agreed that it would incur
additional indebtedness only if Transtel and the Operating Companies are in
compliance with the covenant described under "Description of the Senior
Notes--Certain Covenants--Limitation on Indebtedness" after giving effect to
any lease or guaranty arrangements entered into by Transtel or any Operating
Company in connection with such indebtedness and such indebtedness is used for
the purchase of telecommunications equipment to be leased to an Operating
Company. Pursuant to the Global Undertaking Letter, Global has also agreed not
to engage, directly or indirectly, in any business other than in the business
of purchasing telecommunications equipment and the leasing of such equipment
to the Operating Companies. In addition, Global has agreed that to the extent
it sells or otherwise disposes of any equipment leased under the Global Leases
(collectively, the "Equipment"), it will apply all cash proceeds received by
it in respect of any sale of, collection from, or other realization upon any
Equipment to prepay on a pro rata basis the Senior Notes and any amounts owing
by Global to Siemens under the Global Purchase Agreements.

Dividends

In April 1998 Transtel S.A. paid a dividend to its shareholders in respect
of the years 1995 and 1996 in an aggregate amount of approximately Ps3.1
billion (approximately $2.0 million). After being informed that these payments
were not in compliance with the Indenture, the shareholders refunded the
payments to Transtel in June 1998 with interest at a rate of 29.75% per annum
(the rate earned by the shareholders on their certificates of deposit during
the period).

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<PAGE>

DESCRIPTION OF THE CERTIFICATES

Pursuant to the terms of the Trust Agreement, the Pass Through Trustee will
issue the Exchange Certificates on behalf of the Trust and exchange the
Original Certificates for the Exchange Certificates. The Certificates will
represent undivided beneficial interests in the assets of the Trust. The terms
of the Exchange Certificates are substantially identical to the terms of the
Original Certificates, except that the Exchange Certificates will have been
registered under the Securities Act and will not contain terms restricting
transfer of such Exchange Certificates. This summary of certain provisions of
the Certificates and the Trust Agreement does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all the
provisions of the Trust Agreement, including the definitions therein of
certain terms. Wherever particular defined terms of the Trust Agreement are
referred to herein, such defined terms are incorporated herein by reference. A
copy of the form of the Trust Agreement is available without charge upon
request from the Pass Through Trustee.

General

Legal title to the Senior Notes will be held at all times by the Trust as a
separate legal entity, except where the laws of any jurisdiction where the
Senior Notes are located require title to be held by a trustee in which case
legal title will be held by the Pass Through Trustee in trust for the benefit
of the Certificateholders. Each Certificate will represent a pro rata share of
the principal amount of the Senior Notes held by the Trust as well as any
other property held by the Trust from time to time, including all payments of
principal, interest, redemption premium, if any, and Additional Amounts, if
any, paid by the Company in respect of the Senior Notes.

Payments and Distributions

All payments of principal, interest, redemption premium or other amounts in
respect of the Senior Notes received by, or on behalf of, the Trust will to
the extent reasonably practicable, be distributed to Certificateholders on the
date such payments are received. From and after October 28, 1997, the Senior
Notes will bear interest at a rate of 12 1/2% per annum payable semiannually
in cash on each May 1 and November 1 of each year, (each referred to herein as
an "Interest Payment Date") commencing May 1, 1998. Interest distributions
made on each May 1 and November 1 will be paid to the persons who are the
registered Certificateholders on the April 15 and October 15, as the case may
be, immediately preceding such Interest Payment Date. Each Certificateholder
will be entitled to receive a pro rata share of any payments received by, or
on behalf of, the Pass Through Trustee on behalf of the Trust in respect of
the Senior Notes.

Voting Rights

So long as the Senior Notes are held by the Trust or the Pass Through
Trustee, as the case may be, the Pass Through Trustee will not (i) direct the
time, method and place of conducting any proceeding for any remedy available
to the Indenture Trustee, or execute any trust or power conferred on the Pass
Through Trustee with respect to the Senior Notes, (ii) waive any past default
that is waivable under the Senior Notes, (iii) exercise any right to rescind
or annul a declaration that the Senior Notes are due and payable, (iv) consent
to any amendment, modification or termination of the Indenture or the Senior
Notes, where such consent is required, without, in each case, obtaining the
prior approval of a Majority In Interest of Certificateholders, except that if
such consent under the Indenture would require the consent of each holder of
Senior Notes affected thereby, no such consent will be given by the Pass
Through Trustee without the prior consent of each Certificateholder (see
"Description of the Senior Notes--Modification and Waiver"), or (v) take any
other action, except as described below. If the Indenture Trustee requests the
Pass Through Trustee to take any action with respect to the Senior Notes,
including, but not limited to, a request for its consent to any amendment,
modification, waiver or supplement under the Indenture, the Pass Through
Trustee will immediately mail a notice to each Certificateholder registered as
of the date of such notice of the proposed action, and will take such action
with respect to the Senior Notes as it is instructed by the
Certificateholders; provided, however, that the Pass Through Trustee will not
be required to take any action with respect to the Senior Notes, the
Indenture, or the Certificates if it has not been assured of being indemnified
therefor.

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Any required approval of the Certificateholders may be given at a meeting of
Certificateholders convened for such purpose or pursuant to their written
consent. The Pass Through Trustee will cause a notice of any meeting at which
Certificateholders are entitled to vote, or of any matter upon which action by
written consent of such Certificateholders is to be taken, to be given to each
Certificateholder in the manner set forth the Trust Agreement.

Supplemental Trust Agreements

The Trust Agreement may be supplemented from time to time by the Pass
Through Trustee and the Company, without the consent of the
Certificateholders, to, among other things, cure any ambiguity, to correct or
supplement any provision in the Trust Agreement which may be defective or
inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under the Trust Agreement, provided
that such action shall not adversely affect the interests of the
Certificateholders.

The Trust Agreement may be supplemented by the Pass Through Trustee and the
Company with the consent of a Majority In Interest of the Certificateholders;
provided, however, that no such supplement may, without the consent of each
Certificateholder affected thereby, (i) reduce the amount of, or delay the
timing of, any receipts by the Pass Through Trustee of payments on the Senior
Notes or distributions that are required to be made, under the Trust
Agreement, on the Certificates, or change any date of payment on any
Certificate, or change the place of payment where, or the coin or currency in
which, any Certificate is payable, or impair the right to institute suit for
the enforcement of any such payment or distribution on or after the
Distribution Date or Special Distribution applicable thereto; or, (ii) permit
the disposition of any Senior Note in the Trust Property except as permitted
by the Trust Agreement, or otherwise deprive any Certificateholder of the
benefit of the ownership of the Senior Notes in the Trust; or (iii) reduce the
percentage of the aggregate Fractional Undivided Interests of the Trust which
is required for any such supplemental agreement, or reduce such percentage
required for any waiver (of compliance with certain provisions of this Trust
Agreement or certain defaults hereunder and their consequences) provided for
in this Trust Agreement; or (iv) modify any of the provisions of Section 10.02
or Section 7.05 of the Trust Agreement, except to increase any such percentage
or to provide that certain other provisions of this Trust Agreement cannot be
modified or waived without the consent of the Holder of each Certificate
affected thereby; or (v) have the effect of any of the events described in
Section 9.02 of the Indenture; or (vi) otherwise adversely affect such
Certificateholder.

Prior to the execution of any supplement, the Pass Through Trustee will be
entitled to receive, and shall be fully protected in relying upon, an opinion
of counsel stating that the execution of such supplemental agreement is
authorized or permitted by the Trust Agreement.

Termination of the Pass Through Trust

Pursuant to the Trust Agreement, the Trust shall terminate upon the
distribution to all Certificateholders of all amounts required to be
distributed to them pursuant to the Trust Agreement and the disposition of all
funds or property held by the trust.

Events of Default and Certain Rights Upon an Event of Default

An event of default under the Trust Agreement (a "Certificate Event of
Default") is defined as the occurrence and continuance of an Event of Default
under the Indenture (an "Indenture Default"). For a description of the
Indenture Defaults, see "Description of the Senior Notes--Events of Default."

The Trust Agreement provides that as long as an Indenture Default has
occurred and is continuing with respect to the Senior Notes, the Pass Through
Trustee will exercise such rights and take such actions with respect to the
Certificates and the Senior Notes as it is instructed to take pursuant to the
written directions of Certificateholders representing the required percentage
set forth in the Trust Agreement.

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The Indenture provides that if an Indenture Default has occurred and is
continuing with respect to the Senior Notes, the Indenture Trustee may declare
the unpaid principal amount of the Senior Notes immediately due and payable,
together with any interest accrued thereon. Under certain circumstances the
Senior Notes and any accrued and unpaid interest thereon automatically will
become due and payable without action by the Indenture Trustee. See
"Description of the Senior Notes--Events of Default."

Any amount paid to the Pass Through Trustee, on behalf of the Trust as
holder of the Senior Notes, by the Indenture Trustee under the Indenture
following an Indenture Default will be applied first, to cover all fees,
indemnity costs, expenses and compensation of the Pass Through Trustee;
second, will thereafter be applied as a distribution to the Certificateholders
in accordance with the Trust Agreement; and third, to the Company or to such
party as a court of competent jurisdiction shall direct.

Reports and Notices

Upon receipt of any annual and quarterly financial statements from the
Company under the Indenture, the Trust will forward a copy of such financial
statements to the Pass Through Trustee and the Registrar. See "Description of
the Senior Notes--Certain Covenants--Reports." Notices in respect of the
Certificates will be given by mail, first-class postage prepaid, to each
registered Certificateholder at the address of such Certificateholder set
forth in the securities register maintained by the Certificate Registrar with
respect to the Certificates. So long as the Certificates are represented by a
Global Certificate or Global Exchange Certificate, notices to the
Certificateholders may be given by delivery of the relevant notice to DTC,
Euroclear and Cedel for communication by them to the relevant account holders.

If, by reason of the suspension of the mails or for any other reason, it is
impracticable to give notice to the Certificateholders in the manner described
above, then such notification in lieu thereof as may be made by, or on behalf
of, the Pass Through Trustee will constitute sufficient provision of such
notice, if such notification, so far as may be practicable, approximates the
terms and conditions of the notice in lieu of which it is given. Neither the
failure to give notice nor any defect in any notice given to any particular
Certificateholder will affect the sufficiency of any notice with respect to
other Certificates. Such notices will be deemed to have been given on the date
of mailing.

Additional Amounts

All payments made by the Trust under or in respect of the Certificates will
be made free and clear of and without withholding or deduction for or on
account of any present or future tax, duty, fee, levy, impost, assessment or
other governmental charge (including penalties, interest, additions to tax and
any other liabilities related thereto) (collectively referred to as "Taxes")
imposed or levied by or on behalf of Colombia, the United States, or any other
jurisdiction in which the Trust, the Company or any of the Company's
Restricted Subsidiaries is organized or engaged in business for tax purposes
(each, a "Taxing Authority"). If the Trust is required to withhold or deduct
or if the Trust is otherwise required to pay any amount for or on account of
Taxes imposed by a Taxing Authority, from or in respect of any payment made
under or with respect to the Certificates, the Trust will pay such additional
amounts ("Additional Amounts") as may be necessary so that the net amount
received by each Certificateholder (including Additional Amounts) after such
withholding or deduction or other payment of Taxes will not be less than the
amount the Certificateholder would have received if such Taxes had not been
withheld or deducted or paid; provided that no Additional Amounts will be
payable with respect to a payment made to a Certificateholder (A) with respect
to any Tax which would not have been imposed, payable or due: (i) but for the
existence of any present or former connection between such Certificateholder
(or the beneficial owner of, or other person having a right to acquire an
interest in, such Certificate) and the relevant Taxing Authority, other than
the mere holding of a Certificate; (ii) if the Certificates are held in
definitive registered form and the presentation of the definitive Certificate
for payment had occurred within 30 days after the date such payment was due
and payable or was provided for, whichever is later; or (iii) but for the
failure of a Certificateholder that is not a "United States Person" as defined
in Section 7701(a)(30) of the United States Internal Revenue Code of 1986, as
amended, to comply with certification, information or other reporting

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requirements concerning the nationality, residence, identity or business
activity within the United States of such Certificateholder (or, if
applicable, the beneficial owner of, or other person having a right to acquire
an interest in, the Certificate) if such compliance is a condition to such
Taxes not having been imposed, payable or due with respect to the payment or
(B) if the beneficial owner of, or other person having a right to acquire an
interest in, such Certificate had been the Certificateholder and would not be
entitled to the payment of Additional Amounts under (A). Except as provided in
the second succeeding paragraph below, in no event will Additional Amounts be
payable with respect to any tax that is payable otherwise than by withholding
from payment of or with respect to principal of, or interest on, the
Certificates.

The Trust will also (i) make such withholding or deduction and (ii) remit
the full amount deducted or withheld to the relevant Taxing Authority in
accordance with applicable law. The Trust will make reasonable efforts to
obtain certified copies of tax receipts evidencing the payment of any Taxes so
deducted or withheld from each Taxing Authority imposing such Taxes. The Trust
will furnish to the Certificateholders, within 60 days after the date that the
payment of any Taxes so deducted or withheld is due pursuant to applicable
law, either certified copies of tax receipts evidencing such payment by the
Trust or, if such receipts are not obtainable, other evidence of such payments
by the Trust.

In addition, the Trust will, upon written request of a Certificateholder
(subject to the exclusions set forth in (A) and (B) of the first paragraph
above), and provided that reasonable supporting documentation is provided,
reimburse each such Certificateholder for the amount of any Taxes levied or
imposed by any Taxing Authority and paid by such Certificateholder as a result
of payments made by the Trust to such Certificateholder with respect to the
Certificates. Any payment pursuant to this paragraph shall be an Additional
Amount.

Whenever in the Trust Agreement, Indenture or in this Prospectus there is
mentioned in the context of the payment of amounts based upon the principal
of, premium, if any, interest or of any other amount payable under or with
respect to any Certificate, such mention shall be deemed to include mention of
the payment of Additional Amounts to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof.

In addition, the Trust will pay any stamp, issue, transfer, sales, use,
value-added, property, registration, documentary, enforcement or other similar
taxes and other duties (including interest and penalties) payable to any
Taxing Authority in respect of the creation, issue or offering of the
Certificates or any other documents directly related to such creation, issue
or offering.

Removal and Resignation of the Pass Through Trustee; Appointment of Successors

A Majority In Interest of the Certificateholders may remove the Pass Through
Trustee for cause or, if a Certificate Event of Default has occurred and is
continuing, with or without cause. If the Pass Through Trustee is removed by
the Certificateholders, a successor shall be appointed by the
Certificateholders holding at least 25% in principal amount of Certificates.
If the Pass Through Trustee resigns, the Company shall immediately appoint its
successor. If the Company fails to appoint a successor, the Certificateholders
holding at least 25% in principal amount of the outstanding Certificates may
appoint a successor. If a successor shall not have been appointed by the
Company or by the Certificateholder holding at least 25% in aggregate amount
of Certificates, within 30 days of notice of such resignation or removal, the
Pass Through Trustee or any Certificateholder may petition a court in the
State of Delaware to appoint a successor. Any Pass Through Trustee must meet
the applicable requirements of Section 3807 of the Delaware Business Trust
Act, 12 Del. c. (S)3801 et seq. Any Pass Through Trustee must at the time of
appointment have capital and surplus of at least $50,000,000. No resignation
or removal of the Pass Through Trustee and no appointment of a successor
trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.

Payment and Paying Agency

Payments in respect of the Certificates will be made to DTC, which payments
will be credited to the relevant accounts at DTC on the applicable payment
dates or, if the Certificates are not held by DTC, such payments will

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be made by check mailed to the address of the Certificateholder entitled
thereto as such address appears on the securities register for the
Certificates. HSBC Bank USA (formerly known as Marine Midland Bank) (HSBC Bank
USA and any co-paying agent chosen by the Pass Through Trustee and acceptable
to the Company, the "Paying Agent") will initially be the paying agent. The
Paying Agent will be permitted to resign as Paying Agent upon 30 days' written
notice to the Pass Through Trustee and the Company, in which event the Company
will appoint a successor to act as Paying Agent.

If any day for payment and other amounts payable in respect of the
Certificates is not a Business Day (as defined herein) in the applicable place
of payment, the Certificateholders will not be entitled to payment until the
next Business Day following such day in the place of payment or to any
interest or other sums in respect of such postponed payment. For purposes of
the Trust Agreement, "Business Day" means a day (other than Saturday and
Sunday) on which DTC, Euroclear and banks in New York, Delaware and Colombia
are open for business.

Certificate Registrar and Transfer Agent

HSBC Bank USA (formerly known as Marine Midland Bank) will act as registrar
and transfer agent for the Certificates (the "Certificate Registrar").

Registration of transfers of Certificates will be effected without charge by
or on behalf of the Trust, other than amounts with respect to any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Certificate Registrar will not be required to register or cause
to be registered the transfer of the Certificates after the Exchange
Certificates have been called for redemption.

Governing Law

The Trust Agreement and the Certificates will be governed by and construed
in accordance with the laws of the State of Delaware.

Information Concerning the Pass Through Trustee

The Pass Through Trustee, other than during the occurrence and continuance
of a Certificate Event of Default, will perform only such duties as are
specifically set forth in the Trust Agreement. The Pass Through Trustee is
under no obligation to exercise any of the powers vested in it by the Trust
Agreement at the request of any Certificateholder unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby. The Pass Through Trustee is not required to expend or risk
its own funds or otherwise incur personal financial liability in the
performance of its duties if the Pass Through Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.

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DESCRIPTION OF THE GUARANTEES

General

On October 28, 1997 the Company executed the Original Certificate Guarantee,
for the benefit of the Original Certificateholders, whereby the Company fully,
irrevocably and unconditionally guaranteed all of the Trust's obligations
under the Original Certificates (the "Original Guarantee"). Concurrently with
the issuance of the Exchange Certificates by the Trust, the Company will
execute a like guarantee evidenced by an Exchange Certificate Guarantee (the
"Exchange Certificate Guarantee"), for the benefit of the Exchange
Certificateholders, whereby the Company will fully, irrevocably and
unconditionally guarantee all of the Trust's obligations under the Exchange
Certificates (the "Exchange Guarantee"). The Certificate Guarantee and the
Exchange Certificate Guarantee (together the "Certificate Guarantees") will
have substantially identical terms. HSBC Bank USA (formerly known as Marine
Midland Bank) will act as guarantee trustee (together with any successor
guarantee trustee, the "Guarantee Trustee") under the Certificate Guarantees.

The Certificate Guarantees are guarantees by the Company of (i) the punctual
payment of the full amount, when due, of the principal of and interest on, and
fees and expenses due pursuant thereto, and (ii) the full and timely payment
as if payment had been made on a full and timely basis on the Senior Notes.
The Company's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Company to the
Certificateholders.

The Certificate Guarantees are irrevocable guarantees on a senior basis of
the Trust's obligations under the Certificates, and are not guarantees of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Company (a "Direct Action") to enforce its rights under
the Certificate Guarantees without first instituting a legal proceeding
against any other person or entity). The Certificate Guarantees are held by
the Guarantee Trustee for the benefit of the Certificateholders. The
Certificate Guarantees will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Trust. The Trust
Agreement provides that each Certificateholder by acceptance thereof agrees to
the provisions of the Certificate Guarantees and the Indenture.

Amendments and Assignment

The Certificate Guarantees may not be amended without the prior approval of
Certificateholders of not less than a majority in aggregate principal amount
of the Certificates outstanding.

Event of Default

An event of default under the Certificate Guarantees will occur upon the
failure of the Company to perform any of its payment obligations thereunder.
The Certificateholders of not less than a majority in aggregate principal
amount of the Certificates outstanding have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Certificate Guarantees or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Certificate Guarantees.

Any registered Certificateholder may institute a legal proceeding directly
against the Company to enforce its rights under the Certificate Guarantees
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity.

Information Concerning the Guarantee Trustee

The duties of the Guarantee Trustee are subject to limitations and
qualifications substantially similar to those described with respect to the
Pass Through Trustee under "--Information Concerning the Pass Through
Trustee."

Governing Law

The Certificate Guarantees will be governed by and construed in accordance
with the laws of the State of New York.

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Enforcement of Civil Liabilities

The Company has appointed CT Corporation System, New York, New York, as its
agent to receive service of process with respect to any action brought against
it in any federal or state court in the State of New York, arising out of the
Certificate Guarantees. See "Enforcement of Foreign Judgments in Colombia."

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DESCRIPTION OF THE SENIOR NOTES

General

The Senior Notes were issued under an Indenture (the "Indenture"), dated as
of October 28, 1997, between the Company and HSBC Bank USA (formerly known as
Marine Midland Bank), as indenture trustee (in such capacity, the "Indenture
Trustee"). The Indenture permits the issuance of up to $180.0 million of
Senior Notes thereunder, $150.0 million of which were offered pursuant to the
Offering consummated on October 28, 1997 (the "Initial Senior Notes") and
$30.0 million of which may be offered in the future (the "Additional Senior
Notes") subject to compliance with the first paragraph of clause (a) of the
"--Limitation on Indebtedness" covenant below. For purposes of this section of
the Prospectus, the term Senior Notes shall mean the Initial Senior Notes and
the Additional Senior Notes. In the event of such a future offering, the
Additional Senior Notes would have the same terms as the Initial Senior Notes
(including payment dates and maturity) and rank pari passu with the Initial
Senior Notes in all respects. The following summary of certain provisions of
the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part thereof by the Trust Indenture Act. Certain capitalized terms used
in this section of the Prospectus are defined below. Whenever particular
Sections or defined terms of the Indenture not otherwise defined herein are
referred to, such Sections or defined terms are incorporated herein by
reference. A copy of the Indenture is available upon request from the Company
or the Indenture Trustee. Concurrently with the issuance of the Original
Certificates, the Trust invested the proceeds therefrom in the Senior Notes
issued by the Company. For purposes of this section of the Prospectus,
"Holders" shall mean the holders of the Senior Notes. The Trust is the sole
Holder of the Senior Notes.

The Senior Notes were issued in registered form only, without coupons, in
denominations of $1,000 and integral multiples of $1,000. Initially, HSBC Bank
USA will act as Paying Agent and Registrar for the Senior Notes. The Senior
Notes may be presented for registration or transfer and exchange at the
offices of the Registrar, which will be the Registrar's corporate trust office
at 140 Broadway, 12th Floor, New York, New York 10005. The Company may change
any Paying Agent and Registrar without notice to the Holders. The Company will
pay the principal of (premium, if any), and interest on the Senior Notes at
the Paying Agent's corporate trust office in New York, New York. At the
Company's option, principal and interest may be paid by check mailed to the
registered address of the Holders or to the Paying Agent.

Principal, Maturity and Interest

The Senior Notes are limited in aggregate principal amount to $180.0
million. The Senior Notes will mature on November 1, 2007, and bear interest
from October 28, 1997 at a rate of 12 1/2% per annum payable semiannually in
cash on each May 1 and November 1 (each an "Interest Payment Date"),
commencing May 1, 1998. Interest on the Senior Notes will be computed on the
basis of a 360-day year of twelve 30-day months.

Redemption

Optional Redemption

The Senior Notes are not redeemable at the Company's option prior to
November 1, 2002. Thereafter, the Senior Notes will be subject to redemption
at the option of the Company, in whole or in part, upon not less than 30 nor
more than 60 days prior notice, at the following redemption prices (expressed
in percentages of the principal amount) set forth below plus accrued and
unpaid interest, if any, to the redemption date, if redeemed during the 12-
month period commencing November 1 of the years set forth below:

<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2002..................................................... 106.250%
2003..................................................... 104.688%
2004..................................................... 103.125%
2005..................................................... 101.565%
2006 and thereafter...................................... 100.000%
</TABLE>

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Notwithstanding the foregoing, in the event of the sale by the Company prior
to November 1, 2000 of at least $25.0 million of its Capital Stock (other than
Disqualified Stock) in one or more Public Equity Offerings, or to one or more
Strategic Equity Investors, the Company may, at its option, use the Net Cash
Proceeds of such sale or sales of Capital Stock to redeem up to 35% of the
Senior Notes at a redemption price equal to 112.50% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided that at least 65% of the initial principal amount of the
Senior Notes (including in such initial principal amount, the initial
principal amount of any Additional Senior Notes issued as contemplated by the
first paragraph under the heading "--General" above, if issued prior to the
date of the redemption pursuant to this paragraph) remains outstanding
immediately after such redemption. In order to effect the foregoing redemption
with the proceeds of any such sale of Capital Stock (other than Disqualified
Stock), the Company shall make such redemption not more than 120 days after
the consummation of any such sale or sales of Capital Stock.

Mandatory Redemption; Change of Control; Certain Asset Sales

The Company is not required to make any mandatory redemption or sinking fund
payments in respect of the Senior Notes. However, (i) upon the occurrence of a
Change of Control, the Company is obligated to make an Offer to Purchase (as
defined in "--Offer to Purchase Upon Change of Control") all or a portion of
each Holder's Senior Notes, in integral multiples of $1,000 at a purchase
price of 101% of the aggregate principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase and (ii) upon the
occurrence of an Asset Sale, the Company may be obligated to make a Net
Proceeds Offer (as defined in "--Certain Covenants--Limitation on Asset
Sales") for all or a portion of the outstanding Senior Notes at a price of
100% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of repurchase. See "--Offer to Purchase Upon Change of Control"
and "--Certain Covenants--Limitation on Asset Sales," respectively.

Selection; Effect of Notice of Redemption

In the case of any partial redemption, selection of the Senior Notes for
redemption will be made by the Indenture Trustee or Registrar on a pro rata
basis by lot or in accordance with any other method the Indenture Trustee
considers fair and appropriate, provided that no Senior Notes of $1,000 or
less shall be redeemed in part. The notice of redemption relating to such
Senior Notes shall state the portion of the principal amount thereof to be
redeemed. A new Senior Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder upon cancellation of
the original Senior Note. Upon redemption, unless the Company defaults in
providing the funds for such redemption, interest on Senior Notes called for
redemption will cease to accrue on and after the date fixed for redemption
and, upon redemption, such Senior Notes will then cease to be outstanding.

Offer to Purchase Upon Change of Control

The Indenture provides that upon the occurrence of a Change of Control the
Company shall be required to offer to repurchase all or a portion of each
Holder's Senior Notes, in integral multiples of $1,000 pursuant to the offer
described below (the "Offer to Purchase"), at a purchase price equal to 101%
of the aggregate principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of repurchase.

Within 30 days following the date upon which a Change of Control occurs, the
Company must send, by first class mail, a notice to each Holder, with a copy
to the Indenture Trustee and Paying Agent, which notice shall govern the terms
of the Offer to Purchase. Such notice shall state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 45 days
from the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date"). Holders will be required to surrender the
Senior Notes they wish to have redeemed, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Senior Note or Senior Notes
completed, to the Paying Agent at the address specified prior to the close of
business on the third Business Day prior to the Change of Control Payment
Date.

If an Offer to Purchase is made, there can be no assurance that the Company
will have available funds sufficient to pay the Change of Control purchase
price for all the Senior Notes that might be delivered by the

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Holders seeking to accept the Offer to Purchase. In the event the Company is
required to purchase outstanding Senior Notes pursuant to an Offer to
Purchase, the Company expects that it would seek third-party financing to the
extent it does not have available funds to meet its purchase obligations.
However, the Indenture limits the Company's ability to incur Indebtedness (see
"--Certain Covenants--Limitation on Indebtedness") and there can be no
assurance that the Company would be able to obtain such financing.

Disbursement of Funds--Escrow Account

As provided in the Indenture, the Company has placed approximately $35.0
million of the net proceeds realized from the sale of the Senior Notes,
representing funds sufficient to pay the first four interest payments on the
Initial Senior Notes, in an escrow account (the "Escrow Account") held by the
Escrow Agent for the benefit of Holders of the Senior Notes and the Indenture
Trustee in accordance with the Escrow and Disbursement Agreement. The Company
entered into the Escrow and Disbursement Agreement, which provides, among
other things, that funds may be disbursed from the Escrow Account only to pay
interest on the Senior Notes (or, if any Senior Notes have been retired by the
Company, funds representing the interest payment on the retired Senior Notes
may be paid to the Company on the date of retirement) and, upon certain
repurchases or redemptions of Senior Notes, to pay principal of and premium,
if any, on the Senior Notes being repurchased or redeemed. Pending such
disbursement, the Company will cause such funds contained in the Escrow
Account to be invested in cash items or Marketable Securities. Interest earned
on these Marketable Securities will be added to the Escrow Account. The Escrow
Account will be held in the corporate trust office of the Escrow Agent in New
York.

The Company granted to the Indenture Trustee for the benefit of the Holders
a security interest in the Escrow Account under the Escrow and Disbursement
Agreement. Such security interest secures the payment and performance when due
of all of the Obligations of the Company under the Indenture with respect to
the Senior Notes, as provided in the Escrow and Disbursement Agreement. The
ability of the Holders to realize upon any such funds or securities may be
subject to certain bankruptcy law limitations in the event of the bankruptcy
of the Company.

Upon the acceleration of the maturity of the Senior Notes or upon certain
redemptions and repurchases of the Senior Notes, the Escrow and Disbursement
Agreement provides for the foreclosure by the Indenture Trustee upon the net
proceeds of the Escrow Account. Under the terms of the Indenture, the proceeds
of the Escrow Account shall be applied to the Obligations under the Senior
Notes.

Ranking

The Senior Notes are senior obligations of the Company ranking pari passu
with all existing and future senior indebtedness of the Company: On December
31, 1998, the Company issued $15.0 million of its Discount Notes. Such
Discount Notes rank pari passu with the Senior Notes in terms of a contractual
right of repayment. Such Discount Notes are the only senior indebtedness of
the Company, other than the Senior Notes. Therefore, as of December 31, 1998,
the Senior Notes ranked pari passu with $15.0 million of indebtedness of the
Company. The Senior Notes are secured by a pledge of the Intercompany Notes
and the Escrow Account. See "Description of the Senior Notes--Security." The
Discount Notes will be guaranteed by the Operating Company or Operating
Companies in which Transtel S.A. invests the proceeds of the Discount Notes
and/or in which Transtel S.A. acquires the minority interests of such
Operating Company. See "Summary--Recent Development--Discount Notes."

The Company is a holding company that conducts substantially all of its
operations through its subsidiaries. Other than claims under the Intercompany
Notes, the Senior Notes are effectively subordinated to all existing and
future liabilities and Indebtedness of the Company's subsidiaries. Subject to
certain limitations set forth in the Indenture and as described under "--
Limitations on Liens" below, the Company and its Restricted Subsidiaries may
incur Indebtedness which is secured by assets of the Company and its
Restricted Subsidiaries. Any right of the Company to receive assets of the
Company's Restricted Subsidiaries or any future Restricted

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Subsidiaries of the Company, upon a Restricted Subsidiary's liquidation or
reorganization (and the consequent right of the Holders to participate in
those assets), are effectively subordinated to the claims of that Restricted
Subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such Restricted Subsidiary as in the case of
Indebtedness evidenced by Intercompany Notes, although other creditors of such
Restricted Subsidiary may be secured by certain assets of such Restricted
Subsidiary.

Security

The Company has loaned approximately $95.5 million of the proceeds of the
Senior Notes to its Operating Companies. These loans are evidenced by the
Intercompany Notes. The Company loaned approximately $22.8 million to
TelePalmira, approximately $29.9 million to Unitel, approximately $24.8
million to TeleJamundi, approximately $3.8 million to Bugatel, approximately
$7.4 million to Caucatel and approximately $9.8 million to TeleCartago.

The Senior Notes are secured by a first priority security interest in: (i)
the Intercompany Notes, which Intercompany Notes represent senior unsecured
obligations of each Restricted Subsidiary and rank senior in right of payment
to all existing and future subordinated Indebtedness of the respective
Restricted Subsidiary and pari passu with all existing and future Senior
Indebtedness of such Restricted Subsidiary; and (ii) pending disbursement
pursuant to the Escrow and Disbursement Agreement, the Escrow Account.

Certain Covenants

Limitation on Indebtedness

(a) Under the terms of the Indenture, the Company will not, and will not
permit any Restricted Subsidiary to, incur any Indebtedness; provided that the
Company and its Restricted Subsidiaries may incur Indebtedness if, after
giving effect to the incurrence of such Indebtedness and the receipt and
application of the proceeds therefrom, (i) no Default or Event of Default
shall have occurred and be continuing and (ii) the Indebtedness to Annualized
EBITDA Ratio as of the date of such incurrence shall not exceed (x) 6.0 to 1.0
if such incurrence occurs on or prior to the second anniversary of the Issue
Date, (y) 5.5 to 1.0 if such incurrence occurs after the second anniversary of
the Issue Date and on or prior to the third anniversary of the Issue Date and
(z) 5.0 to 1.0 if such incurrence occurs thereafter.

The foregoing limitation will not apply to: (i) Indebtedness evidenced by
the Initial Senior Notes; (ii) the existing Indebtedness, consisting of (A)
Indebtedness of the Company under the Transtel-Siemens Purchase Agreement in
an amount not to exceed $3.4 million; (B) the Obligations of the Restricted
Subsidiaries under the Global I Leases, Global II Leases and Global III Leases
in an aggregate amount not to exceed $95.0 million; (C) Obligations of the
Company under the DIAN Financing in an amount not to exceed $25.0 million,
(D) Obligations of the Company under the IBM Financing in an amount not to
exceed $3.4 million; (E) Obligations of the Company under the purchase money
financing existing on the Issue Date in an amount not to exceed $6.5 million;
and (F) Obligations of the Company under the Certificate Guarantees; (iii) the
Other Existing Indebtedness; (iv) the incurrence by the Company or its
Restricted Subsidiaries of Bank Indebtedness in an aggregate principal amount
at any one time outstanding, together with Indebtedness incurred under clause
(xi) below, not to exceed $25.0 million, as such amount may be permanently
reduced as specified in the "--Limitation on Asset Sales" covenant described
below; provided that the use of the proceeds of such Bank Indebtedness will
not be used to make Investments; (v) (A) the Guarantee by Restricted
Subsidiaries of Bank Indebtedness permitted to be incurred by the Company and
(B) the Guarantee by the Company of Bank Indebtedness permitted to be incurred
by Restricted Subsidiaries, in each case pursuant to clause (iv) above;
(vi) Indebtedness of the Company to any Restricted Subsidiary; provided that
(a) any such Indebtedness is unsecured and subordinated, pursuant to a
Subordination Agreement, in right of payment to the Senior Notes and (b) any
subsequent issuance or transfer of any Capital Stock which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
transfer of such Indebtedness to a Person not a Restricted

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Subsidiary shall be deemed, in each case, to constitute an incurrence of such
Indebtedness not permitted by this clause (vi); (vii) Indebtedness of a
Restricted Subsidiary issued to and held by the Company; provided that (a) any
subsequent issuance or transfer of any Capital Stock which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
transfer of such Indebtedness to a Person not a Restricted Subsidiary shall be
deemed, in each case, to constitute an incurrence of such Indebtedness not
permitted by this clause (vii) and (b) if such Indebtedness arises from loans
or advances made to a Restricted Subsidiary by the Company with the proceeds
of the Senior Notes, such Indebtedness shall be evidenced by an Intercompany
Note; (viii) the incurrence by the Company or its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount not to exceed $10.0
million at any one time outstanding; (ix) the incurrence (a "Permitted
Refinancing") by the Company or its Restricted Subsidiaries of Indebtedness
issued in exchange for, or the proceeds of which are used to extend,
refinance, renew, replace or refund Indebtedness incurred pursuant to the
first paragraph of this clause (a) or pursuant to clauses (i) (but, only as to
clause (i), only to the extent the proceeds thereof are used to purchase
Senior Notes tendered in an Offer to Purchase made as a result of a Change of
Control), (ii), (iv), (v), (vii) and (viii) above or theretofore incurred
pursuant to this clause (ix) ("Refinancing Indebtedness"); provided that: (a)
the net proceeds of such Refinancing Indebtedness shall not exceed the
principal amount of and required premium, if any, and accrued interest on the
Indebtedness so extended, refinanced, renewed, replaced, substituted or
refunded (or if such Indebtedness was issued at an original issue discount,
the face amount of such Indebtedness less the remaining unamortized portion of
the original issue discount of such Indebtedness at the time of the repayment
of such Indebtedness) and reasonable expenses incurred in connection
therewith; (b) the Refinancing Indebtedness shall have a final maturity not
sooner than, and an Average Life equal to or greater than, the final maturity
and remaining Average Life of the Indebtedness being extended, refinanced,
renewed, replaced or refunded; (c) if the Indebtedness being extended,
refinanced, renewed, replaced or refunded is subordinated in right of payment
to the Senior Notes, the Refinancing Indebtedness shall be subordinated in
right of payment to the Senior Notes pursuant to a Subordination Agreement;
(d) the obligor with respect to the Refinancing Indebtedness shall be the same
as the obligor with respect to the Indebtedness being extended, refinanced,
renewed or replaced or refunded, and there shall be no additional guarantors
(direct or indirect) with respect to any such Refinancing Indebtedness; and
(e) the Refinancing Indebtedness shall be unsecured, secured in compliance
with the "--Limitation on Liens" covenant, or, if the Indebtedness being
extended, refinanced, renewed, replaced or refunded is secured, the respective
Refinancing Indebtedness may be secured, but only to the same extent as the
Indebtedness being refinanced, renewed, replaced or refunded; (x) Indebtedness
of the Company or any Restricted Subsidiary (A) in respect of performance,
surety or appeal bonds provided in the ordinary course of business, (B) in
respect of Currency Agreements or Interest Rate Agreements incurred for the
purpose of hedging against currency or interest rate risks with respect to
Indebtedness incurred in accordance with the first paragraph of clause (a) of
"--Limitation on Indebtedness" and which the Company in good faith determines
is non-speculative in nature and is a bona fide hedge against fluctuations in
currency values or interest rates, respectively; provided, that in the case of
Currency Agreements that relate to other Indebtedness, such Currency Agreement
does not increase the Indebtedness of the obligor outstanding at any time
other than as a result of fluctuations in foreign currency exchange rates or
by reasons of fees, indemnities and compensation payable thereunder and in the
case of Interest Rate Agreements, the notional amount of such Interest Rate
Agreement does not exceed the underlying obligation or amount to which such
Interest Rate Agreement relates; and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing
any obligations of the Company or any of its Restricted Subsidiaries pursuant
to such agreements, in any case incurred in connection with the disposition of
any business, assets or Restricted Subsidiary of the Company (other than
Guarantees of Indebtedness incurred by any Person acquiring all or any portion
of such business, assets or Restricted Subsidiary of the Company for the
purpose of financing such acquisition), in a principal amount not to exceed
the gross proceeds actually received by the Company or any Restricted
Subsidiary in connection with such disposition; and (xi) Guarantees by the
Company of operating leases expensed under GAAP of its Restricted
Subsidiaries; provided that the Company's Obligations under such Guarantees
and Indebtedness incurred under clause (iv) shall not exceed $25.0 million.
The Company and its Subsidiaries may incur Acquired Debt only in compliance
with this covenant.

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(b) For purposes of determining any particular amount of Indebtedness under
the "--Limitation on Indebtedness" covenant, Liens on such Persons' assets or
obligations of such Persons with respect to letters of credit supporting
Indebtedness otherwise included in the determination of such particular amount
shall not be included. For purposes of determining compliance with the "--
Limitation on Indebtedness" covenant, (A) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above paragraph, the Company shall classify such item of
Indebtedness and only be required to include the amount of such Indebtedness
in one of such types of Indebtedness and (B) the amount of Indebtedness issued
at a price that is less than the principal amount thereof shall be equal to
the amount of the liability in respect thereof determined in conformity with
GAAP. The Indenture further provides that, notwithstanding any other provision
of the "--Limitation on Indebtedness" covenant, the maximum amount of
Indebtedness that the Company or a Restricted Subsidiary may incur pursuant to
the "--Limitation on Indebtedness" covenant shall not be deemed to be exceeded
due solely to the result of fluctuations in the exchange rates of currencies
after the date of the respective incurrence of Indebtedness otherwise in
conformity with the provisions of the "--Limitation on Indebtedness" covenant.

Limitation on Restricted Payments

So long as any of the Senior Notes are outstanding, the Company and its
Restricted Subsidiaries will not, directly or indirectly, (i) declare or pay
any dividend or make any distribution on Capital Stock of the Company or any
of its Restricted Subsidiaries (other than dividends or distributions payable
solely in shares of such Capital Stock held by holders of such Capital Stock
or in options, warrants, or other rights to acquire such shares of Capital
Stock), (ii) repurchase, redeem, retire or otherwise acquire for value any
shares of Capital Stock of the Company or any of its Restricted Subsidiaries
(including options, warrants or other rights to acquire such shares of Capital
Stock) held by any Person (other than any such Capital Stock owned by the
Company), (iii) make any voluntary or optional principal payment, or voluntary
or optional redemption, repurchase, defeasance, or other acquisition or
retirement for value, of Indebtedness of the Company that is subordinated in
right of payment to the Senior Notes or Indebtedness of Restricted
Subsidiaries that is subordinated to the Intercompany Notes, or (iv) make any
Investment in any Person (such payments or any other actions described in
clauses (i) through (iv) being collectively "Restricted Payments") if, at the
time of, and after giving effect to, the proposed Restricted Payment: (A) a
Default or Event of Default shall have occurred and be continuing, (B) the
Company could not incur at least $1.00 of Indebtedness under the first
paragraph of the "--Limitation on Indebtedness" covenant (without reliance
upon any of the exceptions in clauses (a)(i) through (xi) under "--Limitation
on Indebtedness") or (C) the aggregate amount expended for all Restricted
Payments (the amount so expended, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution) after the Issue Date shall exceed the sum
of (1) 50% of the aggregate amount of the Consolidated Net Income (or, if the
Consolidated Net Income is a loss, minus 100% of such loss) accrued on a
cumulative basis during the period (taken as one accounting period) beginning
on the first day of the fiscal quarter immediately following the Issue Date
and ending on the last day of the last fiscal quarter preceding the
Transaction Date for which annual or interim financial statements of the
Company have been delivered to the Indenture Trustee in compliance with the
covenant described in "--Reports", plus (2) 100% of the aggregate Net Cash
Proceeds received by the Company after the Issue Date from the issuance and
sale permitted by the Indenture of (A) its Capital Stock (other than
Disqualified Stock) to a Person who is not a Subsidiary of the Company, or (B)
the issuance to a Person who is not a Subsidiary of the Company of
Indebtedness of the Company that has been exchanged for or converted into
Capital Stock of the Company, plus without duplication of amounts included
pursuant to clause (1) above, (3) an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments) in any Person
resulting from payments of dividends, repayments of loans or advances, or
other transfers of assets, in each case to the Company or any Restricted
Subsidiary, or designations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), in the aggregate under this subclause (3) not to exceed the
amount of Investments previously made by the Company and its Restricted
Subsidiaries in such Person.

The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at
said date of declaration, such payment would comply with the foregoing

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paragraph; (ii) the payment of dividends or distributions by a Restricted
Subsidiary on its Capital Stock to the Company or any other Restricted
Subsidiary that owns equity interests in the Restricted Subsidiary making the
respective payment; (iii) in connection with a payment of dividends or
distributions by a Restricted Subsidiary to its shareholders generally, the
payment to the minority shareholders, if any, of such Restricted Subsidiary of
dividends or distributions (not to exceed their proportionate share of the
dividends or distributions so paid); provided that in no case shall any
Affiliate Minority Shareholder be entitled to receive dividends or
distributions pursuant to this clause (iii); (iv) so long as no Default or
Event of Default shall have occurred and be continuing, the making of any
principal payment or repurchase, redemption, retirement, defeasance or other
acquisition for value of Indebtedness of the Company which is subordinated in
right of payment to the Senior Notes, in exchange for, or out of the proceeds
of a substantially concurrent issuance of, shares of the Capital Stock of the
Company; (v) so long as no Default or Event of Default shall have occurred and
be continuing, a Permitted Refinancing; or (vi) Permitted Investments;
provided, that, with respect to Investments by the Company in a Restricted
Subsidiary, no more than an aggregate principal amount of $35.0 million of the
gross proceeds of the Initial Senior Notes shall be applied to make
Investments in the Capital Stock of Restricted Subsidiaries and provided
further that the aggregate Investment in any Restricted Subsidiary in the form
of Intercompany Notes shall not exceed 20% of the gross proceeds of the Notes.
The amounts referred to in clauses (i), (iii) and (iv) shall be included as
Restricted Payments in any computation made pursuant to the first paragraph
above.

Not later than the making of any Restricted Payment, the Company shall
deliver to the Indenture Trustee an Officers' Certificate (as defined in the
Indenture) stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the "--Limitation on
Restricted Payments" covenant were computed.

Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries

So long as any of the Senior Notes are outstanding, the Company will not,
and will not permit any Restricted Subsidiary to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction of any kind on the ability of any Restricted Subsidiary to (i) pay
dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary owned by the Company or any other
Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make loans or advances to the Company or
any other Restricted Subsidiary or (iv) transfer any of its property or assets
to the Company or any other Restricted Subsidiary.

The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Issue Date, including those in the Indenture
or in the Existing Indebtedness, and any Permitted Refinancings thereof;
provided that the encumbrances and restrictions in any such Permitted
Refinancings are in the aggregate not materially more restrictive than those
encumbrances or restrictions that are then in effect and that are being
extended, refinanced, renewed or replaced; (ii) existing under or by reason of
applicable law and not due to any contractual arrangement; (iii) in the case
of clause (iv) of the first paragraph of this covenant, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or
asset that is a lease, license, conveyance or contract or similar property or
asset, (B) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by the
Indenture, (C) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness for borrowed money, and that do not, individually
or in the aggregate, detract from the value of property or assets of the
Company or any Restricted Subsidiary in any manner material to the Company or
any Restricted Subsidiary, (D) existing pursuant to any purchase money
obligations for property solely with respect to the property acquired or (E)
existing pursuant to any mortgage or construction financing that imposes
restrictions solely on the real property acquired or improved; (iv) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that
has been entered into for the sale or disposition of all or substantially all
of the Capital Stock of, or property or assets of, such Restricted Subsidiary;
or (v) included in Bank Indebtedness or Guarantees incurred pursuant to
clauses (iv) and (v) of the second paragraph of the "--Limitation on
Indebtedness" covenant, respectively, so long as, in the case of this clause
(v), the relevant

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restrictions in no event restrict payments to the Company to be used by it to
make payments of principal, interest or other amounts as required pursuant to
the terms of the Senior Notes or the Indenture other than to require that no
such payment be made if there is a default or event of default with respect to
the Bank Indebtedness or Guarantees. Nothing contained in this "--Limitation
on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries"
covenant shall prevent the Company or any Restricted Subsidiary from (1)
creating, incurring, assuming or suffering to exist any Liens otherwise
permitted in the "--Limitation on Liens" covenant or (2) restricting the sale
or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.

Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries

Under the terms of the Indenture, the Company will not sell, and will not
permit any Restricted Subsidiary, directly or indirectly, to issue or sell any
shares of Capital Stock of a Restricted Subsidiary (including options,
warrants or other rights to purchase shares of such Capital Stock) except (i)
to the Company, a Wholly-Owned Subsidiary or, in the case of Restricted
Subsidiaries, the Municipal Shareholders of such Restricted Subsidiary so long
as such Restricted Subsidiary remains a Subsidiary of the Company; (ii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary; (iii) issuances
or sales to foreign nationals of shares of Capital Stock of Restricted
Subsidiaries, to the extent required by applicable law; and (iv) issuances or
sales of Capital Stock of Restricted Subsidiaries to persons who after such
issuance or sale will hold a minority interest in such Restricted Subsidiary;
provided that in the case of clauses (ii) and (iv), the Company or such
Restricted Subsidiary applies the Net Cash Proceeds, if any, of any such sale
in accordance with the "--Limitation on Asset Sales" covenant described
herein.

Limitation on Issuances of Guarantees by Restricted Subsidiaries

Under the terms of the Indenture, the Company will not permit any Restricted
Subsidiary, directly or indirectly, to Guarantee any Indebtedness of the
Company ("Guaranteed Indebtedness"), unless (i) such Restricted Subsidiary
simultaneously executes and delivers a Subsidiary Guarantee and (ii) such
Restricted Subsidiary waives and will not in any manner whatsoever claim or
take the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guarantee; provided that this paragraph shall not be applicable to
any Guarantee of any Restricted Subsidiary that (A) (x) existed at the time
such Person became a Restricted Subsidiary and (y) was not incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary or (B) Guarantees of Bank Indebtedness incurred by the Company
pursuant to clause (iv) of the second paragraph of the "--Limitation on
Indebtedness" covenant. If the Guaranteed Indebtedness is (A) pari passu with
the Senior Notes, then the Guarantee of such Guaranteed Indebtedness shall be
pari passu with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the Senior Notes, then the Guarantee of such Guaranteed
Indebtedness shall be subordinated to the Subsidiary Guarantee at least to the
extent that the Guaranteed Indebtedness is subordinated to the Senior Notes.

Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's and each Wholly-Owned Subsidiary's Capital Stock in such Restricted
Subsidiary (which sale, exchange or transfer is not prohibited by the
Indenture) or (ii) the release or discharge of the Guarantee or other
Indebtedness which resulted in the creation of such Subsidiary Guarantee,
except a release or discharge by or as a result of payment under such
Guarantee.

Under certain circumstances, the Company may cause the execution and
delivery of Subsidiary Guarantees. Each Subsidiary Guarantee delivered by a
Restricted Subsidiary is limited to such amount as will not, after giving
effect thereto, and to all other liabilities of such Restricted Subsidiary,
result in such amount constituting a fraudulent transfer or conveyance.

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Limitation on Transactions with Shareholders and Affiliates

Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, enter into, renew or
extend any transaction (including, without limitation, the purchase, sale,
lease or exchange of property or assets, or the rendering of any service) with
any legal or beneficial owner (or any Affiliate of such holder) of 5% or more
of any class of Capital Stock of the Company or with any Affiliate of the
Company or any Restricted Subsidiary (each of the foregoing, an "Affiliate
Transaction"), unless: (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or such Restricted Subsidiary than those that
would have been obtained at the time of such transaction or at the time of the
execution of the agreement providing therefor in a comparable arm's-length
transaction with a Person that is not such a Related Person and (ii) the
Company delivers to the Indenture Trustee: (x) with respect to any Affiliate
Transaction involving aggregate payments in excess of $250,000 but less than
$2.5 million, a resolution of the Board of Directors of the Company set forth
in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above, (y) with respect to any Affiliate Transaction
involving aggregate payments equal to or greater than $2.5 million but less
than $15.0 million, a resolution of the Board of Directors of the Company set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and (A) that such Affiliate Transaction has
been approved by at least three disinterested directors of the Board of
Directors of the Company and, in any case, by a majority of the disinterested
directors of the Board of Directors of the Company or (B) a written opinion as
to the fairness to the Company or such Restricted Subsidiary from a financial
point of view issued by an independent internationally recognized investment
banking firm or independent Colombian investment banking firm with respect to
any such Affiliate Transaction, and (z) with respect to any Affiliate
Transaction involving aggregate payments equal to or greater than $15.0
million, a resolution of the Board of Directors of the Company set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and a written opinion as to the fairness to the Company or
such Restricted Subsidiary from a financial point of view issued by an
independent internationally recognized investment banking firm with respect to
any such Affiliate Transaction.

Notwithstanding the foregoing, the following shall not be deemed Affiliate
Transactions: (i) any transaction between the Company and any of its
Restricted Subsidiaries or between Restricted Subsidiaries, provided such
transaction complies with clause (i) in the first paragraph above (other than
for amounts paid by a Restricted Subsidiary to the Company in respect of
corporate overhead); (ii) the payment of reasonable and customary regular fees
to directors of the Company who are not employees of the Company; (iii) any
payments or other transactions pursuant to any tax-sharing agreement between
the Company and any other Person with which the Company files a consolidated
tax return or with which the Company is part of a consolidated group for tax
purposes; (iv) Global I Leases, Global II Leases and Global III Leases, and
any extension, amendment, replacement or renewal thereof on substantially
similar terms; (v) any Restricted Payments not prohibited by the "--Limitation
on Restricted Payments" covenant; or (vi) equipment leases with Affiliates
entered into after the Issue Date; provided such leases comply with clause (i)
in the first paragraph above and the Company delivers to the Indenture Trustee
a resolution of the Board of Directors of the Company set forth in an
Officer's Certificate certifying that such Affiliate Transaction complies with
clause (i) in the first paragraph above, and contains terms substantially
similar to the terms of Global I Leases, Global II Leases and Global III
Leases, and any extension, amendment, replacement or renewal thereof.

Limitation on Liens

Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, create, incur, assume or suffer to exist any
Lien on any of its assets or properties of any character, or any shares of
Capital Stock or Indebtedness of any Restricted Subsidiary, except for
Permitted Liens.

The Indenture also provides that if the Company or any of its Restricted
Subsidiaries shall create, incur, assume or suffer to exist any Lien, other
than a Permitted Lien, on any assets or other property to secure Indebtedness
in violation of this covenant, the Company or such Restricted Subsidiary, as
the case may be, will make effective provision for securing the Senior Notes
equally and ratably with such Indebtedness as to such assets or other property
for so long as such Indebtedness shall be so secured.

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Notwithstanding the foregoing, Permitted Liens may not extend to the Escrow
Account, the Escrow and Disbursement Agreement or the Intercompany Notes.

Limitation on Modifications to Certain Documents

The Company will not, and will not permit any of its Restricted Subsidiaries
to: (a) after the issuance thereof, amend or modify (or permit the amendment
or modification of) any of the terms or provisions of the Intercompany Notes
in any manner adverse to the interests of the Holders and the Indenture
Trustee under the Pledge Agreement, or forgive or reduce (except to extent
resulting from actual repayment to the Company in cash) the principal amount
of the Indebtedness evidenced thereunder, or (b) amend or modify any of the
terms or provisions of its estatutos sociales or other charter documents and,
in the case of the Restricted Subsidiaries, any lease agreement to which an
Affiliate of such Restricted Subsidiary or an Affiliate of the Company is a
party, in any manner adverse to the interests of the Holders.

Limitation on Asset Sales

Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the
consideration received by the Company or such Restricted Subsidiary is at
least equal to the Fair Market Value of the assets sold or disposed of (as
determined in good faith by the Company's Board of Directors or if the Fair
Market Value of such assets (A) exceeds $10.0 million but is less than $25.0
million, the Company shall receive from an independent internationally
recognized investment banking firm or independent Colombian investment banking
firm or (B) exceeds $25.0 million, the Company shall receive from an
independent internationally recognized investment banking firm, a written
opinion in customary form as to the fairness, to the Company, of such Asset
Sale) and (ii) at least 75% of the consideration received consists of cash or
Cash Equivalents.

Upon the consummation of an Asset Sale, the Company may apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 270 days of receipt thereof either to (A) permanently prepay any
Bank Indebtedness and, in the case of any Bank Indebtedness outstanding under
a revolving credit facility, to effect a permanent reduction in the
availability under such revolving credit facility, (B) invest in property or
assets that are used in a Telecommunications Business, or the acquisition of
Capital Stock of any Person primarily engaged in a Telecommunications Business
if, as a result of such acquisition, such Person would become a Restricted
Subsidiary and such acquisition is in compliance with the "--Limitation on
Restricted Payments" covenant or (C) a combination of prepayment and
investment permitted by the foregoing clauses (A) and (B). On the 271st day
after an Asset Sale or such earlier date, if any, as the Board of Directors of
the Company or of such Restricted Subsidiary determines not to apply any
portion of the Net Cash Proceeds relating to such Asset Sale as set forth in
Clauses (A), (B) or (C) of the preceding sentence (each, a "Net Proceeds Offer
Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been
applied on or before such Net Proceeds Offer Trigger Date as permitted in
clauses (A), (B) or (C) of the preceding sentence (each a "Net Proceeds Offer
Amount") shall be applied by the Company to make an offer to purchase (the
"Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not
less than 30 nor more than 45 days following the applicable Net Proceeds Offer
Trigger Date, from the Holders on a pro rata basis that amount of Senior Notes
equal to the Net Proceeds Offer Amount at a price equal to 100% of the
principal amount of the Senior Notes to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase; provided, however, that if
at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with
any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale under the Indenture and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant.

Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$5.0 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time
as such Net Proceeds Offer Amount plus the aggregate amount of all Net
Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger
Date relating to such initial Net Proceeds Offer Amount

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from all Asset Sales by the Company and its Restricted Subsidiaries aggregates
at least $5.0 million, at which time the Company shall apply all Net Cash
Proceeds constituting all Net Proceeds Offer Amounts that have been so
deferred to make a Net Proceeds Offer (the first date the aggregate of all
such deferred Net Proceeds Offer Amounts is equal to $5.0 million or more
shall be deemed to be a Net Proceeds Offer Trigger Date).

Each Net Proceeds Offer will be mailed within not less than 30 nor more than
45 days following the applicable Net Proceeds Offer Trigger Date to the record
Holders as shown on the register of Holders, with a copy to the Pass Through
Trustee and the Indenture Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Senior Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly
tender Senior Notes in an amount exceeding the Net Proceeds Offer Amount,
Senior Notes of tendering Holders will be purchased on a pro rata basis (based
on amounts tendered). A Net Proceeds Offer shall remain open for a period of
20 Business Days or such longer period as may be required by law.

The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder in
connection with the repurchase of Senior Notes (and the repurchase by the
Trust of the Certificates) pursuant to a Net Proceeds Offer (whether or not
such rule by its terms would be applied to such offer as a matter of law). To
the extent that the provisions of any securities laws or regulations conflict
with the "Asset Sale" provisions of the Indenture, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under the "Asset Sale" provisions of the
Indenture by virtue thereof.

Conduct of Business

The Indenture provides that the Company and its Restricted Subsidiaries may
not, directly or indirectly, engage in any business other than the
Telecommunications Business in Latin America; provided that in the event a
Change of Control occurs in which one or more Strategic Equity Investors gain
control of the Company this covenant shall no longer be of force or effect.

Reports

For so long as any of the Senior Notes remain outstanding, the Company will
file with the Indenture Trustee: (i) within 120 days after the end of each
fiscal year, (a) audited year-end consolidated financial statements prepared
in accordance with GAAP and reconciled to U.S. GAAP and (b) the information
described in Item 303 of Regulation S-K under the Securities Act, (ii) by
January 30, 1998, (a) unaudited quarterly consolidated financial statements
prepared in accordance with GAAP and reconciled to U.S. GAAP and (b) the
information described in Item 303 of Regulation S-K under the Securities Act,
with respect to the quarter ending September 30, 1997 and (iii) thereafter,
through and including the quarter ending September 30, 1999, within 75 days
after the end of each of the first three fiscal quarters of each fiscal year
(year to date only), (a) unaudited quarterly consolidated financial statements
prepared in accordance with GAAP and reconciled to U.S. GAAP (provided, that,
such quarterly financial statements and reconciliation to U.S. GAAP shall
continue to be provided for a period to be agreed to between the Company and
the Holders if 66 2/3% in principal amount of the outstanding Senior Notes
request) and (b) the information described in Item 303 of Regulation S-K under
the Securities Act, with respect to such period. Upon qualification of the
Indenture under the Trust Indenture Act, the Company shall also comply with
the provisions of Trust Indenture Act Section 314(a). In the event that the
Company is not required or shall cease to be required to file reports with the
Commission pursuant to the Exchange Act, the Company shall nevertheless
continue to file such reports with the Commission and the Indenture Trustee.
If the Indenture Trustee (at the Company's request and expense) is to mail the
foregoing information to the Holders, the Company shall supply such
information to the Indenture Trustee at least five days prior thereto.

Additional Amounts

The Company has covenanted in the Indenture that (A) for so long as the
Trust is required to pay any amounts on the Certificates, the Company will pay
to the Trust as additional sums on the Senior Notes (a) such

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amounts as may be required so that the payments payable by the Trust will not
be reduced as a result of any Taxes imposed by any Taxing Authority on
payments to the Trust under the Indenture except to the extent that
the Trust would not have been obligated to pay Additional Amounts with respect
to such amounts if such payment had been made directly by the Trust to the
Certificateholder and (b) such amounts as may be necessary in order to satisfy
the obligation of the Trust to pay any (i) Additional Amounts in respect of
the Certificates, and (ii) any stamp, issue, transfer, sales, use, value-added
property, registration, documentary, enforcement or other similar taxes and
other duties (including interest and penalties) payable to any Taxing
Authority in respect of the creation, issue or offering of the Certificates or
any other documents directly related to such creation, issue or offering; and
(c) such amounts as may be required so that the payments payable by the Trust
will not be reduced as a result of any Taxes or other liabilities imposed on
the Trust, except to the extent that the Company is required to pay such Taxes
pursuant to (a) or (b) of this paragraph. See also "Description of the
Guarantees--Additional Amounts."

Events of Default

The following events are defined as "Events of Default" in the Indenture:

(a) default in the payment of principal of, or premium, if any, on, the
Senior Notes when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;

(b) default in the payment of interest on the Senior Notes when the same
becomes due and payable and such default continues for a period of 30 days;

(c) failure to perform or comply with the provisions described under "--
Offer to Purchase Upon Change of Control" or "--Limitation on Asset Sales,"
or the failure by the Company to deposit the amounts required to be
deposited in the Escrow Account and Refinancing Account, each in accordance
with the Escrow and Disbursement Agreement;

(d) failure to comply with the covenant described under "--Consolidation,
Merger and Sale of Assets;"

(e) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture, the Senior Notes or
the Escrow and Disbursement Agreement and such default or breach continues
for a period of 30 consecutive days after written notice by the Indenture
Trustee or the Holders of 25% or more in aggregate principal amount of the
Senior Notes outstanding (other than those referred to in (a), (b), (c) or
(d));

(f) there occurs with respect to (A) any issue or issues of Indebtedness
(other than Intercompany Notes) of the Company or any Subsidiary having an
outstanding principal amount of $5 million or more in the aggregate for all
such issues of all such Persons or (B) any Intercompany Note of any
Restricted Subsidiary, in each case, whether such Indebtedness now exists
or shall hereafter be created, (I) an event of default that has caused the
holder thereof to declare such Indebtedness to be due and payable prior to
its final Stated Maturity and such Indebtedness has not been discharged in
full or such acceleration has not been rescinded or annulled within 30 days
following such acceleration and/or (II) the failure to make a principal
payment at the final Stated Maturity and such defaulted payment shall not
have been made, waived or extended within 30 days of such payment default
or any longer grace period provided for in such Indebtedness;

(g) one or more final judgments rendered against the Company or any of
its Subsidiaries (other than any judgment as to which a reputable insurance
or bonding company has accepted full liability in writing) aggregating in
excess of $5.0 million which judgments are not stayed within 60 days after
their entry;

(h) certain events of bankruptcy, liquidation, insolvency, "concordato",
reorganization or administration affecting the Company or any Subsidiary;

(i) there occurs with respect to the Global I Purchase Agreement, the
Global II Purchase Agreement, the purchase agreements to be entered into in
connection with the Global III Leases, or any future Global arrangements
permitted under the Indenture an event of default that has caused Siemens
to declare Global's

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Obligations under such purchase agreements to be due and payable prior to
such Obligations' Stated Maturity and (A) such Obligations have not been
discharged in full, or (B) such acceleration has not been rescinded or
annulled within 10 days following such acceleration; and

(j) failure by Global to perform or comply with the Global Undertaking
Letter, or Global rejects being bound by the terms of the Global
Undertaking or repudiation by the Company of its obligations under the
Escrow and Disbursement Agreement for any reason.

If any Event of Default (other than an Event of Default specified in clause
(h) above that occurs with respect to the Company occurs and is continuing
under the Indenture, the Indenture Trustee or the Holders of at least 25% in
aggregate principal amount of the Senior Notes outstanding by written notice
to the Company and the Indenture Trustee, may declare the Senior Notes
outstanding to be immediately due and payable at 100% of the unpaid principal
thereof plus accrued and unpaid interest thereon, if any. Upon such
declaration, the principal of, premium, if any, and accrued interest on the
Senior Notes outstanding shall become immediately due and payable. In case of
an Event of Default specified in clause (h) above or an Event of Default
specified in clause (i) above, the Senior Notes then outstanding shall ipso
facto become immediately due and payable at 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of such
Event of Default, without any declaration or other act on the part of the
Indenture Trustee or any Holder.

At any time after a declaration of acceleration, but before a judgment or
decree for the payment of money due has been obtained by the Indenture
Trustee, the Holders of at least a majority in principal amount of the Senior
Notes may rescind and cancel such declaration and its consequences (i) if the
rescission would not conflict with any judgment or decree; (ii) if all
existing Events of Default have been cured or waived except non-payment of
principal or interest that has become due solely because of the acceleration;
(iii) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has become due
otherwise than by such declaration of acceleration, has been paid; (iv) if the
Company has paid the Indenture Trustee its reasonable compensation and
reimbursed the Indenture Trustee for its expenses, disbursements and advances;
and (v) in the event of the cure or waiver of certain Events of Default
specified in clause (h) above, the Indenture Trustee shall received an
Officers' Certificate and an Opinion of Counsel that such Event of Default has
been cured or waived. For information as to the waiver of defaults, see "--
Modification and Waiver."

The Holders of a majority in principal amount of the outstanding Senior
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Indenture Trustee or exercising any
trust or power conferred on the Indenture Trustee. However, the Indenture
Trustee may refuse to follow any direction that conflicts with law or the
Indenture that the Indenture Trustee determines may be unduly prejudicial to
the rights of Holders of Senior Notes not joining in the giving of such
direction or that may involve the Indenture Trustee in personal liabililty. A
Holder may pursue any remedy with respect to the Indenture or the Senior Notes
only if: (i) the Holder gives the Indenture Trustee written notice of a
continuing Event of Default; (ii) the Holders of at least 25% in principal
amount of the then outstanding Senior Notes make a written request to the
Indenture Trustee to pursue the remedy; (iii) such Holder or Holders offer
and, if requested, provide to the Indenture Trustee indemnity satisfactory to
the Indenture Trustee against any loss, liability or expense; (iv) the
Indenture Trustee does not comply with the request within 15 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and (v) during such 15-day period, the Holders of a majority in
principal amount of the outstanding Senior Notes do not give the Indenture
Trustee a direction inconsistent with the request. However, the right of any
Holder of a Senior Note to receive payment of the principal of, premium, if
any, or interest on, such Senior Note or to bring suit for the enforcement of
any such payment, on or after the due date expressed in the Senior Notes,
shall not be impaired or affected without the consent of the Holder.

The Indenture requires certain officers of the Company to certify, within
120 days after the end of each fiscal year, that a review has been conducted
of the activities of the Company and its Restricted Subsidiaries, and of the
Company's and its Subsidiaries' performance under the Indenture or the Escrow
and Disbursement Agreement, and that the Company has fulfilled all obligations
under the Indenture or the Escrow and

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Disbursement Agreement, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default and the nature and status
thereof. The Company will also be obligated to notify the Indenture Trustee of
any default or defaults in the performance of any covenants or agreements
under the Indenture or the Escrow and Disbursement Agreement.

Merger, Consolidation or Sale of Assets

The Company shall not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its
property or assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company (other than a consolidation or merger
with or into a Restricted Subsidiary with a positive net worth where minority
shareholders of Restricted Subsidiaries receive only stock of the surviving
entity; provided that, in connection with any such merger or consolidation,
clauses (i) and (iv) below are complied with and no consideration (other than
Common Stock in the surviving Person or the Company) shall be issued or
distributed to the shareholders of the Company) unless: (i) the Company shall
be the surviving Person, or the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or that acquired or
leased such property and assets of the Company shall be a corporation
organized and validly existing under the laws of Colombia or the United States
of America, any State thereof or the District of Columbia, and shall expressly
assume, by a supplemental indenture, executed and delivered to the Indenture
Trustee, all of the obligations of the Company under the Senior Notes and the
Indenture; (ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction on a pro forma basis, the
Company, or any Person becoming the successor obligor of the Senior Notes,
could incur at least $1.00 of Indebtedness under the first paragraph of clause
(a) of the "--Limitation on Indebtedness" covenant (without reliance upon any
of the exceptions in (a)(i) through (xi) under "--Limitation on
Indebtedness"); and (iv) the Company delivers to the Indenture Trustee an
Officers' Certificate (attaching, if applicable, the arithmetic computations
to demonstrate compliance with clause (iii)) and opinion of counsel, in each
case stating that such consolidation, merger or transfer and such supplemental
indenture complies with this provision and that all conditions precedent
provided for herein relating to such transaction have been complied with.

The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, the surviving entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture and the Senior Notes with the same effect as if such surviving
entity had been named as such; provided that solely for purposes of computing
amounts described in clause (C) of the first paragraph of the covenant "--
Limitation on Restricted Payments" above, any such surviving entity to the
Company shall only be deemed to have succeeded to and be substituted for the
Company with respect to periods subsequent to the effective time of such
merger, consolidation, combination or transfer of assets.

Bankruptcy ("Concordato")

Under Colombian law, the procedure for reorganization differs from that in
the United States. Under Law 222/1995, upon admittance of the Company to the
concordato proceeding, the Company cannot make any payment or settle any of
its obligations (including the Senior Notes) without obtaining a written
consent of the Superintendency of Corporations. Furthermore, the Company is
restricted from making any payments, as from the same date of admission to
concordato and until (i) the concordato proceeding is terminated by the
Superintendency of Corporations because of failure to reach any agreement, in
which case the Company enters immediately into mandate liquidation or (ii) an
agreement is reached between the Company and its creditors during the
concordato and is declared by the Superintendency of Corporations to have been
(x) fulfilled or (y) terminated due to a breach of obligations under such
agreement. Any creditor who fails to file a timely claim under the concordato
will be barred from the concordato proceeding (except if during any hearing
such creditors are accepted to be a party of the concordato agreement) and
cannot receive any payment from the debtor during the period referred to in
the preceding sentence, although the statute of limitations applicable to such
creditor's claim will be tolled during such period.

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Satisfaction and Discharge

The Indenture will cease to be of further effect, and the Indenture Trustee,
on demand of and at the expense of the Company, will execute proper
instruments acknowledging satisfaction and discharge of the Indenture, when
(1) either (a) the Company shall have irrevocably paid in full all Guaranteed
Obligations (as such term is defined in the Certificate Guarantee) to the
Guarantee Trustee (as such term is defined in the Certificate Guarantee)
pursuant to the terms of the Certificate Guarantee; or (b) all Senior Notes
theretofore authenticated and issued (other than (i) Senior Notes which have
been destroyed, lost or stolen and which have been replaced or paid and (ii)
Senior Notes for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter repaid to the
Indenture Trustee or discharged from such trust) have been delivered to the
Indenture Trustee for cancellation; or (c) all such Senior Notes not
theretofore delivered to the Indenture Trustee for cancellation (i) have
become due and payable; or (ii) will become due and payable within one year,
and the Company, in the case of (c)(i) or (ii) above, has deposited or caused
to be deposited with the Indenture Trustee as trust funds in trust an amount
sufficient to pay and discharge the entire indebtedness on such Senior Notes
not theretofore delivered to the Indenture Trustee for cancellation, for
principal of, premium, if any, and interest on the Senior Notes to the date of
such deposit (in the case of Senior Notes which have become due and payable)
together with irrevocable instructions from the Company directing the
Indenture Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be; (2) the Company has paid or caused to be paid
all other sums payable hereunder by the Company; and (3) the Company has
delivered to the Indenture Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of the Indenture have been complied
with.

Notwithstanding the satisfaction and discharge of the Indenture, the
obligations of the Company to the Indenture Trustee with respect to
compensation, indemnification and reimbursement, the obligations of the
Indenture Trustee to any authenticating agent, registrar, co-registrar, paying
agent or transfer agent under the Indenture and, if money shall have been
deposited with the Indenture Trustee pursuant to subclause (c) of clause (1)
above, the obligations of the Indenture Trustee with respect to notices of
default under the Indenture shall survive.

Amendment, Supplement and Waiver

Without Consent of Holders of Senior Notes

From time to time, the Company and the Indenture Trustee, without the
consent of the Holders of not less than a majority in aggregate principal
amount of the Senior Notes, may amend the Indenture for the following
purposes, so long as such change does not adversely affect the rights of any
of the Holders. The Indenture Trustee will be entitled to rely on such
evidence as it deems appropriate, including, without limitation, solely on an
Opinion of Counsel that such change does not adversely affect the rights of
any Holder, in executing any supplemental indenture.

Notwithstanding the provisions in the Indenture with respect to amending or
supplementing with consent of Holders of the Senior Notes, the Company and the
Indenture Trustee may amend or supplement the Indenture, the Notes or the
Escrow and Disbursement Agreement without the consent of any Holder of a
Senior Note: (a) to cure any ambiguity, defect or inconsistency; (b) to
provide for uncertificated Senior Notes in addition to or in place of
certificated Senior Notes; (c) to provide for the assumption of the Company's
obligations to the Holders of the Senior Notes in the case of a merger or
consolidation; (d) to execute and deliver any documents necessary or
appropriate to release Liens on the Escrow Account and the Refinancing
Account; (e) to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes or that does not adversely affect
the legal rights hereunder of any Holder of the Senior Notes; or (f) to comply
with requirements of the Commission in order to effect or maintain the
qualification of this Indenture under the Trust Indenture Act.

Upon the written request of the Company accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such
amended or supplemental Indenture, and upon receipt by the

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Indenture Trustee of the documents described in the Indenture, the Indenture
Trustee shall join with the Company in the execution of any amended or
supplemental Indenture authorized or permitted by the terms of the Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Indenture Trustee shall not be obligated to enter
into such amended or supplemental Indenture which affects its own rights,
duties or immunities under the Indenture or otherwise.

With Consent of Holders of Senior Notes

The Company and the Indenture Trustee may amend or supplement the Indenture,
the Senior Notes or the Escrow and Disbursement Agreement or any amended or
supplemental Indenture with the written consent of the Holders of Senior Notes
of not less than a majority in aggregate principal amount of the Senior Notes
then outstanding, and any existing Default and its consequences or compliance
with any provision of the Indenture, the Senior Notes or the Escrow and
Disbursement Agreement may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Senior Notes.

Upon the request of the Company accompanied by a resolution of the Board of
Directors of the Company authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Indenture Trustee of
evidence satisfactory to the Indenture Trustee of the consent of the Holders
of Senior Notes as aforesaid, and upon receipt by the Indenture Trustee of the
documents described in the Indenture, the Indenture Trustee shall join with
the Company in the execution of such amended or supplemental Indenture unless
such amended or supplemental Indenture affects the Indenture Trustee's own
rights, duties or immunities under the Indenture or otherwise, in which case
the Indenture Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.

It shall not be necessary for the consent of the Holders of Senior Notes to
approve the particular form of any proposed amendment or waiver, but it shall
be sufficient if such consent approves the substance thereof.

After such amendment, supplement or waiver becomes effective, the Company
shall mail to the Holders of Senior Notes affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of the Company to
mail such amended notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to provisions in the Indenture, the Holders of a
majority in aggregate principal amount of the Senior Notes then outstanding
may waive compliance in a particular instance by the Company with any
provision of the Indenture or the Senior Notes. However, without the consent
of each Holder affected thereby, an amendment or waiver may not (with respect
to any Senior Notes held by a non-consenting Holder of Senior Notes); (a)
reduce the principal amount of Senior Notes whose Holders must consent to an
amendment, supplement or waiver; (b) reduce the principal of or change or have
the effect of changing the fixed maturity of any Senior Note or change the
date on which any Senior Note may be subject to redemption or repurchase, or
reduce the redemption or repurchase price thereof; (c) reduce the rate of or
change or have the effect of changing the time for payment of interest,
including defaulted interest, on any Senior Notes; (d) waive a Default or
Event of Default in the payment of principal of or premium, if any, or
interest on the Senior Notes (except a rescission of acceleration of the
Senior Notes by the Holders of at least a majority in aggregate principal
amount of the Senior Notes and a waiver of the payment default relating solely
to the principal or interest that has become due solely because of the
acceleration); (e) make any Senior Note payable in money other than that
stated in the Senior Notes; (f) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of
Senior Notes to receive payments of principal of or interest on the Senior
Notes on or after the due date thereof or to bring suit to enforce such
payment; (g) waive a redemption payment with respect to any Senior Note (other
than certain payments referenced in the Indenture); (h) amend, change or
modify in any material respect the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control or
make and consummate a Net Proceeds Offer with respect to any Asset Sale that
has been consummated or modify any of the provisions or definitions with
respect thereto; (i) make any change in the foregoing amendment and waiver
provisions; or (j) directly or indirectly release Liens on all or
substantially all of the collateral except as permitted by the Escrow and
Disbursement Agreement.

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No Personal Liability of Incorporators, Stockholders, Officers, Directors, or
Employees

No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Senior Notes, the Indenture or the Escrow and Disbursement Agreement or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of the Senior Notes, by accepting a Senior Note, waives
and releases all such liability. The waiver and release are part of the
consideration of issuance of the Senior Notes.

Concerning the Indenture Trustee

The Indenture Trustee's address is HSBC Bank USA, 140 Broadway, 12th Floor,
New York, New York 10005. The Indenture provides that, except during the
continuance of a Default, the Indenture Trustee will not be liable, except for
the performance of such duties as are specifically set forth in such
Indenture. If an Event of Default has occurred and is continuing, the
Indenture Trustee will use the same degree of care and skill in its exercise
of the rights and powers vested in it by the Indenture as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs.

The Indenture, and provisions of the Trust Indenture Act incorporated by
reference therein, contain limitations on the rights of the Indenture Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Indenture Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue as trustee or resign.

Governing Law

The Indenture provides that the Indenture and the Senior Notes issued
thereunder will be governed by and construed in accordance with the laws of
the State of New York without regard to principles of conflict of laws.

Certain Definitions

Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other
capitalized term used herein for which no definition is provided.

"Acquired Debt" means, with respect to any specified Person, Indebtedness of
any other Person existing at the time such other Person merged with or into or
became a Restricted Subsidiary of such specified Person or Indebtedness
incurred by such Person in connection with the acquisition of assets,
including, without limitation, Indebtedness incurred or assumed in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Restricted Subsidiary of such specified Person or the acquisition
of such assets, as the case may be.

"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as applied to any Person, is defined to
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise.

"Affiliate Minority Shareholder" at any time shall mean any minority
shareholder of a Restricted Subsidiary which is an Affiliate (other than a
Restricted Subsidiary) or Related Person (other than a Restricted Subsidiary)
of the Company.

"Annualized Pro Forma EBITDA" means with respect to any Person, such
Person's Pro Forma EBITDA for the latest fiscal quarter preceding the date of
calculation for which financial statements are then available multiplied by
four.

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"Asset Acquisition" means (i) an Investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or shall be merged into or
consolidated with the Company or any of its Restricted Subsidiaries or (ii) an
acquisition by the Company or any of its Restricted Subsidiaries of the
property or assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or
line of business of such Person.

"Asset Sale" means any sale, transfer or other disposition (or series of
related sales, leases, transfers or dispositions) in one transaction or a
series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) any of the Capital Stock of any Restricted Subsidiary,
(ii) all or substantially all of the property or assets of an operating unit
or business of the Company (other than Capital Stock of the Company) or any of
its Restricted Subsidiaries or (iii) any other property or assets of the
Company or any of its Restricted Subsidiaries outside the ordinary course of
business of the Company or such Restricted Subsidiary and, in each case, that
is not governed by the provisions of the Indenture applicable to mergers,
consolidations and sales of assets of the Company; provided that (A) sales or
other dispositions of inventory, receivables and other current assets, (B)
sales or other dispositions of equipment that has become worn out, obsolete or
damaged or otherwise unsuitable for use in connection with the business of the
Company or its Restricted Subsidiaries, (C) sales and other dispositions
constituting Restricted Payments and Permitted Investments made in compliance
with the terms of the Indenture, (D) sales or other dispositions of assets
with a Fair Market Value (as certified in an Officers' Certificate) not in
excess of $500,000 and (E) issuances, sales or other dispositions of shares of
Capital Stock of Unrestricted Subsidiaries and issuances, sales or other
dispositions of shares of Capital Stock of Restricted Subsidiaries effected in
accordance with the "--Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries"; provided, in each case set forth in clause (E), that
the consideration received therefor by the Company, the Unrestricted
Subsidiary or the Restricted Subsidiary, as the case may be, has at least
substantially equal market value to the Company, the Unrestricted Subsidiary
or such Restricted Subsidiary as the shares of Capital Stock so issued, sold
or disposed of (as determined by the Board of Directors whose good faith
determination shall be conclusive and evidenced by a Board Resolution) shall
not be included within the meaning of "Asset Sale."

"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the
amount of such principal payment by (ii) the sum of all such principal
payments.

"Bank Indebtedness" means loans made by banks, trust companies and other
institutions principally engaged in the business of lending money to
businesses to the Company or a Restricted Subsidiary under a credit facility,
loan agreement or similar agreement.

"Board of Directors" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act with respect to
the Indenture from time to time.

"Board Resolution" means a copy of a resolution, certified by the secretary
of the duly convened meeting or the legal representative or statutory auditor
of the Company to have been duly adopted by the Board of Directors and to be
in full force and effect on the date of such certification, and delivered to
the Indenture Trustee.

"Business Day" means a day (other than a Saturday or Sunday) on which DTC,
Euroclear, Cedel and banks in New York, Delaware and Colombia are open for
business.

"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether outstanding at
the Issue Date or issued after the Issue Date, including, without limitation,
all Common Stock and Preferred Stock, and any and all rights, warrants or
options exchangeable for or convertible into any thereof.

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"Capitalized Lease" means, as applied to any Person, any lease or license
of, or other agreement conveying the right to use, any property (whether real,
personal or mixed, movable or immovable) of which the present value of the
obligations of such Person to pay rent or other amounts is required, in
conformity with U.S. GAAP, to be classified and accounted for as a finance
lease obligation; and "Capitalized Lease Obligation" is defined to mean the
capitalized present value of the obligations to pay rent or other amounts
under such lease or other agreement, determined in accordance with U.S. GAAP.

"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity of
365 days or less issued or directly and fully guaranteed or insured by the
United States of America or Colombia or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America or
Colombia, as the case may be, is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of 180 days or less of
any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than
$500.0 million; (iii) commercial paper with a maturity of 180 days or less
issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by S&P or at least P-1 by Moody's; (iv)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, as the case may be, in each case maturing within
one year from the date of acquisition; provided that the terms of such
agreements comply with the guidelines set forth in the United States Federal
Financial Agreements of Depository Institutions with Securities Dealers and
Others, as adopted by the United States Comptroller of the Currency; (v)
Colombian Peso deposits, with maturities of not more than 12 months from the
date of acquisition, in (A) Banco de Colombia, Banco Ganadero, Banco
Industrial Colombiano or Banco de Bogota or (B) any other bank or financial
institution incorporated under the laws of Colombia with total assets
exceeding the equivalent of $350.0 million; provided that the aggregate
principal amount of any such deposits in banks described in this subclause (B)
shall not exceed the equivalent of $10.0 million at any time outstanding; (vi)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by Colombia and backed
by the full faith and credit of Colombia maturing within one year from the
date of acquisition, in each case entered into with any of the Colombian banks
specified in the preceding clause (v); provided that such agreement with banks
described in subclause (v) (B) shall be deemed a deposit for purposes of the
$10.0 million limit in such subclause; and (vii) investments in money market
funds all of the assets of which consist of securities of the types described
in the foregoing clauses (i) through (vi).

"Cedel" means Cedel Bank, societe anonyme.

"Change of Control" means the occurrence of any of the following events:

(i) the sale, lease, transfer, conveyance or other disposition, whether
direct or indirect (by way of a merger, consolidation or otherwise), by the
Company or a Restricted Subsidiary of the Company, in one or a series of
related transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole, to any Person
other than a Restricted Subsidiary of the Company;

(ii) the adoption of a plan relating to the liquidation or dissolution of
the Company;

(iii) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Permitted Holders, becomes
the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of (a) more than 35% of the total voting rights of the Common
Stock of the Company and (b) a greater percentage of the voting power of
the total Common Stock of the Company than that represented by the voting
power of the Common Stock of the Company then beneficially owned, in the
aggregate, by the Permitted Holders; or

(iv) individuals who on the Issue Date constitute the Board of Directors
of the Company (together with any new directors whose election by the Board
of Directors or whose nomination for election by the Company's shareholders
was approved by a vote of at least a majority of the members of the Board
of Directors then in office who either were members of the Board of
Directors on the Issue Date or whose

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election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the members of the Board of
Directors then in office.

"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market or, if such shares are not listed or admitted to
trading on any national securities exchange or quoted on such automated
quotation system, the average of the closing bid and asked prices in the over-
the-counter market as furnished by any New York Stock Exchange member firm
that is selected from time to time by the Company for that purpose and is
reasonably acceptable to the Indenture Trustee.

"Collateral Agent" means HSBC Bank USA (formerly known as Marine Midland
Bank), as Collateral Agent under the Pledge Agreement, or any other successor
thereto appointed pursuant to such agreement.

"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or non-voting) of such Person's common stock or
ordinary shares, whether or not outstanding at the Issue Date, and includes,
without limitation, all series and classes of such common stock or ordinary
shares.

"Consolidated EBITDA" for any period means the Consolidated Net Income for
such period plus to the extent deducted in calculating Consolidated Net Income
(i) Consolidated Income Tax Expense, (ii) net monetary inflation adjustment,
(iii) depreciation and amortization expenses, (iv) Net Financial Expense, (v)
minority interest, (vi) interest expense attributable to Capitalized Leases in
accordance with U.S. GAAP (whether or not in accordance with GAAP) and (vii)
all other non-cash charges (other than non-cash charges which require an
accrual of or reserve for cash charges in future periods), less any non-cash
items which have the effect of increasing Consolidated Net Income for such
period, plus (less) to the extent deducted (included) in Consolidated Net
Income, extraordinary losses (gains) and non-recurring items (including gains
and losses on Asset Sales) deducted (included) in calculating Consolidated Net
Income, each (except with respect to (vi) above) determined in accordance with
GAAP.

"Consolidated Income Tax Expense" for any Person for any period means,
without duplication, the aggregate amount of net taxes based on income or
profits for such period of the operations for such Person and its consolidated
Subsidiaries with respect to such period in accordance with GAAP.

"Consolidated Indebtedness" means the aggregate amount of Indebtedness of
the Company and its Restricted Subsidiaries on a consolidated basis.

"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with GAAP; provided that the following items shall be
excluded in computing Consolidated Net Income (without duplication): (i) the
net income of any Person (other than net income attributable to a Restricted
Subsidiary) in which any Person (other than the Company or any of its
Restricted Subsidiaries) has a joint interest and the net income of any
Unrestricted Subsidiary, except to the extent of the amount of dividends or
other distributions actually paid to the Company or any of its Restricted
Subsidiaries by such other Person or such Unrestricted Subsidiary during such
period; (ii) the net income of any Restricted Subsidiary in which any Person
other than the Company or another Restricted Subsidiary has a minority
interest shall be excluded to the extent such net income is attributable to
such minority interests; (iii) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not at the
time permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary, except that (A) the Company's

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equity in the net income of any such Restricted Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate amount
of cash actually distributed by such Restricted Subsidiary during such period
to the Company or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Restricted Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Subsidiary for such period shall be
included in determining such Consolidated Net Income; (iv) without
duplication, any gains or losses (on an after-tax basis) attributable to Asset
Sales; (v) except for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of the
"--Limitation on Restricted Payments" covenant, any amount paid or accrued as
dividends on Preferred Stock of the Company owned by Persons other than the
Company and any of its Restricted Subsidiaries; and (vi) all extraordinary
gains and extraordinary losses.

"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.

"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.

"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures (other than any
maturity that results from an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Stated Maturity of the Senior Notes; provided, however, that any
Capital Stock that would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require the Company to repurchase
or redeem such Capital Stock upon the occurrence of a Change of Control
occurring prior to the Stated Maturity of the Senior Notes shall not
constitute Disqualified Stock if (i) the change of control provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions applicable to the Senior Notes contained in
the covenant described under "Offer to Purchase Upon Change of Control" and
(ii) such Capital Stock specifically provides that the Company will not
repurchase or redeem any such stock pursuant to such provisions prior to the
Company's repurchase of Senior Notes as are required to be repurchased
pursuant to the covenant described under "Offer to Purchase Upon Change of
Control."

"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent
in foreign currency, whose debt is rated "A" (or higher) by S&P or Moody's at
the time as of which any investment or rollover therein is made.

"Equity Market Capitalization" of any Person means, as of any day of
determination, the product of (a) the aggregate number of outstanding shares
of Common Stock of such Person on such day (which shall not include any
options or warrants on, or securities convertible or exchangeable into, shares
of Common Stock of such Person) and (b) the average Closing Price of such
Common Stock over the 20 consecutive Trading Days immediately preceding such
day. If no such Closing Price exists with respect to shares of any such class,
the value of such shares for purposes of clause (b) of the preceding sentence
shall be determined by an independent internationally recognized investment
banking firm.

"Escrow Account" means an escrow account for the deposit of approximately
$35.0 million of the net proceeds from the sale of the Senior Notes under the
Escrow and Disbursement Agreement, representing funds sufficient to pay the
first four interest payments on the Senior Notes.

"Escrow Agent" means HSBC Bank USA (formerly known as Marine Midland Bank),
as Escrow Agent under the Escrow and Disbursement Agreement, or any successor
thereto appointed pursuant to such agreement.

"Escrow and Disbursement Agreement" means the Escrow and Disbursement
Agreement, dated as of the date of the Indenture, by and among the Escrow
Agent, the Indenture Trustee and the Company, governing the disbursement of
funds from the Escrow Account and the Refinancing Account.

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"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.

"Existing Indebtedness" means (i) the Indebtedness of the Company under the
Transtel-Siemens Purchase Agreement, (ii) the Obligations of the Restricted
Subsidiaries under the Global I Leases, Global II Leases and the Global III
Leases, (iii) the Obligations of the Company under the DIAN Financing, (iv)
the obligations of the Company under the IBM Financing, and (v) the Other
Existing Indebtedness.

"Fair Market Value" means, with respect to any asset or property, the price
that could be negotiated in an arm's-length free-market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under
pressure or compulsion to complete the transaction. Unless otherwise specified
in the Indenture, Fair Market Value shall be determined by the Board of
Directors acting in good faith and shall be evidenced by a Board Resolution
delivered to the Indenture Trustee.

"GAAP" means, at any date of determination, generally accepted accounting
principles in Colombia as then in effect.

"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such other Person (whether arising by
virtue of partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has a corresponding
meaning.

"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise, contingently or otherwise, become liable,
directly or indirectly, for or with respect to, or become responsible for, the
payment of such Indebtedness, including an incurrence of Indebtedness by
reason of the acquisition of a Restricted Subsidiary. The term "incurrence"
has a corresponding meaning.

"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) any liability, contingent or
otherwise, of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or other
similar instruments (including reimbursement obligations with respect thereto
and purchase money obligations), (iv) all obligations of such Person to pay
the deferred and unpaid purchase price of property or services, which purchase
price is due more than 180 days after the date of placing such property in
service or taking delivery and title thereto or the completion of such
services, except Trade Payables, (v) all obligations of such Person as lessee
under Capitalized Leases in accordance with U.S. GAAP (whether or not in
accordance with GAAP); (vi) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person, (vii) all Indebtedness of other Persons Guaranteed by such
Person to the extent such Indebtedness is Guaranteed by such Person, (viii) to
the extent not otherwise included in this definition, the Net Obligation under
Currency Agreements and Interest Rate Agreements, (ix) all obligations of such
Person to pay deferred Colombian taxes and duties to DIAN (or any other
Colombian taxing authority) with respect to imported equipment purchases and
leases and (x) any and all deferrals, renewals, extensions and refundings of,
or amendments of or supplements to, any liability or obligation of the kind
described in this definition. The amount of Indebtedness of any Person at any
date shall be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent obligations,
the maximum liability upon the occurrence of the contingency giving rise to
the obligation, provided that (A) the amount outstanding at any time of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such

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Indebtedness at such time as determined in conformity with GAAP and (B) the
amount of Indebtedness for purposes of clause (vi) above shall be the lesser
of (x) the principal amount of the Indebtedness secured by the assets of the
relevant Person and (y) the Fair Market Value (as determined by the board of
directors of the relevant Person) of the assets securing such Indebtedness.

"Indebtedness to Annualized EBITDA Ratio" means, as at any date of
determination, the ratio of (i) the aggregate amount of Consolidated
Indebtedness to (ii) the Annualized Pro Forma EBITDA of the Company, each
calculated on the date of the incurrence of Indebtedness.

"Intercompany Note" means the promissory notes issued by a Restricted
Subsidiary to the Company upon making an advance or loan to such Restricted
Subsidiary with the proceeds of the Senior Notes, which Intercompany Notes (i)
are pledged to the Collateral Agent pursuant to the Pledge Agreement, (ii)
have the same Stated Maturity as the Senior Notes, (iii) contain a provision
that accelerates payment of the Intercompany Notes upon acceleration of the
Senior Notes and (iv) state that they are senior unsecured obligations of the
respective Restricted Subsidiary and rank senior in right of payment to all
existing and future subordinated Indebtedness of such Restricted Subsidiary
and rank pari passu with all Senior Indebtedness of such Restricted Subsidiary
(including the Indebtedness evidenced by the Global I Leases, Global II Leases
and Global III Leases).

"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement
designed to protect the Company or any of its Restricted Subsidiaries against
fluctuations in interest rates in respect of Indebtedness to or under which
the Company or any of its Restricted Subsidiaries is a party or a beneficiary
on the date of the Indenture or becomes a party or a beneficiary hereafter;
provided that the Net Obligation thereof does not exceed the principal amount
of the Indebtedness of the Company and its Restricted Subsidiaries that bears
interest at floating rates.

"Investment" means, with respect to any Person, any advance, loan, account
receivable (other than an account receivable arising in the ordinary course of
business), or other extension of credit (including, without limitation, by
means of any Guarantee) or any capital contribution to (by means of transfers
of property to others, payments for property or services for the account or
use of others, or otherwise), or any purchase or ownership of any stocks,
bonds, notes, debentures or other securities of, any other Person, and shall
include the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary. For purposes of the definition of "Unrestricted Subsidiary"
described below and the "--Limitation on Restricted Payments" covenant
described above, (i) "Investment" shall include the Fair Market Value of the
assets (net of liabilities) of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary and shall
exclude the Fair Market Value of the assets (net of liabilities) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company, and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its Fair
Market Value at the time of such transfer, in each case as determined by the
Board of Directors in good faith.

"Issue Date" means the original date of issuance of the Senior Notes.

"Lien" means any mortgage, charge, pledge, security interest, encumbrance,
lien (statutory or other), hypothecation, assignment for security, claim, or
preference or priority or other encumbrance of any kind upon or with respect
to any property, it being understood that Lien includes any lien granted in
any future receivables (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller or any agreement to
give any security interest).

"Marketable Securities" means (i) U.S. Government Securities maturing not
more than two years after the date of acquisition; (ii) any certificate of
deposit maturing not more than 270 days after the date of acquisition issued
by, or time deposit of, an Eligible Institution; (iii) commercial paper
maturing not more than 270 days

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after the date of acquisition issued by a corporation (other than an Affiliate
of the Company) with a rating, at the time as of which any investment therein
is made, of "A-1" (or higher) according to S&P or "P-1" (or higher) according
to Moody's; (iv) any banker's acceptances or money market deposit accounts
issued or offered by an Eligible Institution; and (v) any fund investing
exclusively in investments of the types described in clauses (i) through (iv)
above.

"Moody's" means Moody's Investors Service Inc. and its successors.

"Municipal Shareholder" of a Restricted Subsidiary means the shareholder of
such Subsidiary that is a municipality in which such Restricted Subsidiary
conducts its business and such municipality's related entities.

"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or Cash Equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or Cash Equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Restricted Subsidiary of the
Company) and proceeds from the conversion of other property received when
converted to cash or Cash Equivalents if converted within 12 months after
receipt, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to
such Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or
any other obligation outstanding at the time of such Asset Sale (excluding the
Senior Notes and the Bank Indebtedness incurred by the Company or a Restricted
Subsidiary pursuant to clause (iv) of the second paragraph of the "--
Limitation on Indebtedness" covenant) that either (A) is secured by a Lien on
the property or assets sold or (B) is required to be paid as a result of such
sale and (iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary of the Company as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of
such issuance or sale in the form of cash or Cash Equivalents, including
payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary of the Company) and proceeds from the conversion of
other property received when converted to cash or Cash Equivalents, net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.

"Net Financial Expense" for any period means financial expenses, which
include interest expense, commissions, discounts and other fees and charges
paid or accrued with respect to letters of credit and bankers' acceptance
financing, and exchange losses less financial income, which includes interest
income, commercial discounts and exchange gains, all determined on a
consolidated basis in accordance with GAAP.

"Net Obligation" means, at any date of determination, the net amount,
exclusive of any commission or administrative fees that a Person would be
obligated to pay upon the termination of an Interest Rate Agreement or
Currency Agreement.

"Obligations" means any principal, interest, penalties, fees, payments,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

"Other Existing Indebtedness" means Indebtedness outstanding on the Issue
Date owed to various financial institutions which was to be repaid with
proceeds in the Refinancing Account.

"Paying Agent" means HSBC Bank USA (formerly known as Marine Midland Bank),
as Paying Agent under the Indenture, or any successor thereto appointed
pursuant to the Indenture.

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"Permitted Holders" means Guillermo Lopez, Gonzalo Caicedo Toro, Gonzalo
Caicedo & Co., Maria Eugenia Caicedo Llano, Valentina Caicedo Toro or any
Person controlled by such Persons.

"Permitted Investment" means so long as no Default or Event of Default shall
have occurred and be continuing (i) an Investment by the Company in a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with
or into, or transfer or convey all or substantially all its assets to, the
Company or a Restricted Subsidiary; provided that (A) such Restricted
Subsidiary is a Wholly-Owned Subsidiary or an empresa mixta (mixed capital
company) under Law 142 with no Affiliate Minority Shareholders and (B) if such
Restricted Subsidiary ceases to be a Restricted Subsidiary (except by reason
of the sale by the Company or its Restricted Subsidiary of the Capital Stock
therein), then any Investment in such Restricted Subsidiary will be deemed to
be a Restricted Payment at the time of such event determined in accordance
with the "--Limitation on Restricted Payments" covenant; (ii) Cash
Equivalents; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; (iv) stock, obligations or securities received in
satisfaction of judgments; and (v) an Investment in any Person (other than a
Restricted Subsidiary) engaged in a Telecommunications Business not to exceed
$10.0 million in the aggregate for all Investments under this clause (v) at
any time outstanding (determined without regard to any write-downs or write-
offs thereof).

"Permitted Liens" means:

(i) Liens on (x) the Escrow Account and the Refinancing Account and all
funds and securities therein securing only the Senior Notes and (y) the
Intercompany Notes securing only the Senior Notes;

(ii) Liens to secure Bank Indebtedness incurred by the Company or the
Restricted Subsidiaries in compliance with clause (iv) or the second
paragraph of the "--Certain Covenants--Limitation on Indebtedness" covenant
and Guarantees incurred by the Company or the Restricted Subsidiaries in
compliance with clause (iv) of the second paragraph of "--Certain
Covenants--Limitation on Indebtedness" executed in connection therewith;

(iii) Liens on the property of the Company or its Restricted Subsidiaries
created solely for the purpose of securing purchase money obligations
incurred in compliance with the "--Certain Covenants--Limitation on
Indebtedness" covenant; provided that (a) such property so acquired is for
use in lines of business related to the Company's or its Restricted
Subsidiaries' business as it exists immediately prior to the issuance of
the related Indebtedness, (b) no such Lien shall extend to or cover other
property or assets of the Company and its Restricted Subsidiaries other
than the respective property so acquired and (c) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed the original
purchase price of such property or assets;

(iv) Liens on the property or assets of a Restricted Subsidiary acquired
after the Issue Date or on property or assets acquired in an asset purchase
transaction with a Person that is not an Affiliate created solely to secure
the Obligations that financed the acquisition of such Restricted Subsidiary
or such property or assets and which were incurred in compliance with the
"--Certain Covenants--Limitation on Indebtedness" covenant; provided that
(a) no such Lien shall extend to or cover property or assets of the Company
and its Restricted Subsidiaries other than the property or assets of the
Restricted Subsidiary so acquired or the property or assets so acquired and
(b) no such Lien shall extend to the Capital Stock of any Restricted
Subsidiary so acquired and (c) the principal amount of Indebtedness secured
by any such Lien shall not exceed the original purchase price of such
Restricted Subsidiary or such property or assets;

(v) Liens on assets of any entity existing at the time such entity or
assets are acquired by the Company or any of its Restricted Subsidiaries,
whether by merger, consolidation, purchase of assets or otherwise; provided
that such Liens (a) are not created, incurred or assumed in connection
with, or in contemplation of, such assets being acquired by the Company or
any of its Restricted Subsidiaries and (b) do not extend to any other
property of the Company or any of its Restricted Subsidiaries;

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(vi) Liens for taxes, assessments, governmental charges or claims that
are being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made;

(vii) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other similar Liens arising in the
ordinary course of business and with respect to amounts not yet delinquent
or being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made;

(viii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;

(ix) Liens on the Existing Indebtedness existing on the date of the
Indenture; provided such Liens on the Other Existing Indebtedness are
removed within 75 days after the Issue Date;

(x) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, statutory or regulatory obligations, bankers' acceptances,
surety and appeal bonds, government contracts, performance and return-of-
money bonds and other obligations of a similar nature incurred in the
ordinary course of business (exclusive of obligations for the payment of
borrowed money);

(xi) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of the
Company or any of its Restricted Subsidiaries;

(xii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries, taken as a whole;

(xiii) Liens encumbering property or assets under construction arising
from progress or partial payments by a customer of the Company or its
Restricted Subsidiaries relating to such property or assets;

(xiv) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease;

(xv) Liens in favor of the Company or any Restricted Subsidiary;

(xvi) Liens arising from the rendering of a final judgment or order
against the Company or any Restricted Subsidiary of the Company that does
not give rise to an Event of Default;

(xvii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;

(xviii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business of the Company and its Restricted Subsidiaries; and

(xix) Liens to secure Obligations under Capitalized Leases (except in
respect of sale leaseback transactions) on real or personal property of the
Company to the extent consummated in compliance with the Indenture;
provided that (A) at the time such Lien attaches to the real or personal
property of the Company, the Company shall be permitted to incur at least
$1.00 of Indebtedness under the first paragraph of the "--Certain
Covenants--Limitation on Indebtedness" covenant (without reliance upon any
of the exceptions in clauses (a)(i) through (xi) under "--Certain
Covenants--Limitation on Indebtedness").

"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

"Pledge Agreement" means the Pledge Agreement, dated as of the date of the
Indenture, between the Company and the Collateral Agent, whereby the Company
pledges the Intercompany Notes to the Indenture Trustee.

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"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock, whether now outstanding, or issued
after the Issue Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.

"Pro Forma EBITDA" means for any Person for any period the Consolidated
EBITDA of such Person after giving effect to the following: (i) if, during the
period commencing on the first day of the relevant period through the
Transaction Date (the "Reference Period"), the Company or any Restricted
Subsidiaries have engaged in any Asset Sale, Pro Forma EBITDA of the Company
for such period shall be reduced by an amount equal to the Consolidated EBITDA
(if positive), or increased by an amount equal to the Consolidated EBITDA (if
negative), directly attributable to the assets which are the subject of such
Asset Sale, (ii) if during such Reference Period the Company or any Restricted
Subsidiaries have effected any Asset Acquisition, Pro Forma EBITDA of the
Company for such period shall be calculated using the historical results of
such acquired entity on a pro forma basis as if such acquisition had occurred
on the first day of such Reference Period and (iii) if during such Reference
Period, (A) the Company designates a Restricted Subsidiary as an Unrestricted
Subsidiary, Pro Forma EBITDA for the Company shall be reduced by an amount
equal to the Consolidated EBITDA (if positive), or increased by an amount
equal to the Consolidated EBITDA (if negative), directly attributable to the
designated Unrestricted Subsidiary and (B) the Company designates an
Unrestricted Subsidiary as a Restricted Subsidiary, Pro Forma EBITDA for the
Company shall be increased by an amount equal to the Consolidated EBITDA (if
positive), or decreased by an amount equal to the Consolidated EBITDA (if
negative), directly attributable to the designated Restricted Subsidiary.

"Public Equity Offering" means underwritten public offerings or quotations
or placements of Common Stock of the Company (i) that have been registered
with the Commission under the Securities Act, (ii) that have been registered
with the Superintendency of Corporations so long as a Level 3 American
Depositary Receipt Program is established in the United States in conjunction
therewith or (iii) that have been listed on the London Stock Exchange or the
Luxembourg Stock Exchange.

"Refinancing Account" means an escrow account for the deposit of $32,762,036
million of the net proceeds from the sale of the Senior Notes under the Escrow
and Disbursement Agreement.

"Registrar" means HSBC Bank USA (formerly known as Marine Midland Bank), as
registrar under the Indenture, or any successor thereto appointed pursuant to
the Indenture.

"Related Person" means any holder (or any Affiliate of such holder) of 5% or
more of any class of Capital Stock of the Company and any Affiliate of the
Company or any Restricted Subsidiary.

"Restricted Subsidiary" means any Subsidiary of the Company (including any
Subsidiary which has an outstanding Intercompany Note to the Company and each
newly acquired or newly formed Subsidiary of the Company) other than an
Unrestricted Subsidiary.

"S&P" means Standard & Poor's Corporation and its successors.

"Stated Maturity" is defined to mean, (i) with respect to any debt security,
the date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii)
with respect to any scheduled installment of principal of or interest on any
debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.

"Strategic Equity Investor" means any Person (and any Subsidiary of such
Person) that, both as of the Trading Day immediately before the day of such
sale and the Trading Day immediately after the day of such sale, has an Equity
Market Capitalization of at least $1.0 billion (or the Peso equivalent on the
day of such sale) and is engaged in the Telecommunications Business.

"Subordination Agreement" shall mean an agreement, which may be incorporated
into the terms of the respective Indebtedness, for the benefit of the Holders
of the Senior Notes to the effect that (i) the Indebtedness

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subject to such Subordination Agreement is subordinated in right of payment to
the Senior Notes, (ii) in any bankruptcy, insolvency or similar proceeding
with respect to the respective obligor (or any guarantor) of such
Indebtedness, no payment shall be made thereon until the payment in full in
cash of all principal, interest and other amounts owing with respect to the
Senior Notes, (iii) if there is any default in any payment when due of
principal of, premium on, interest on or any other amount owing with respect
to any Senior Notes, then until all such payment defaults have been cured by
the payment in full in cash of the amounts then due, no payment shall be
permitted to be made on the Indebtedness subject to the Subordination
Agreement and (iv) if any payments are received by a holder of Indebtedness
subject to a Subordination Agreement in contravention of the provisions of the
Subordination Agreement, such amount shall be held for the benefit of, and
shall be turned over to the Trustee for the benefit of, the Holders of the
Senior Notes.

"Subsidiary" is defined to mean, with respect to any Person, any
corporation, association or other business entity (i) of which outstanding
Capital Stock having at least a majority of the votes entitled to be cast in
the election of directors is owned, directly or indirectly, by such Person
and/or one or more other Subsidiaries of such Person, or (ii) of which at
least a majority of voting interest is owned, directly or indirectly, by such
Person and one or more other Subsidiaries of such Person.

"Subsidiary Guarantee" is defined as the Guarantee of a Subsidiary in favor
of the Trustee for the benefit of the Noteholders substantially in the form of
the Exhibit relating thereto to the Indenture.

"Tax" is defined to mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest, additions to tax and any
other liabilities related thereto).

"Taxing Authority" is defined to mean any government or political
subdivision or territory or possession of Colombia, the United States, or any
jurisdiction in which the Trust, the Company or any of the Company's
Restricted Subsidiaries is organized or engaged in business for tax purposes
or any authority or agency therein or thereof having power to tax.

"Telecommunications Business" means the development, ownership and/or
operation of one or more telephone, telecommunications or information systems
and/or the provision of telephony, telecommunications and/or information
services and any related, ancillary or complementary business, including,
without limitation, local and long distance telephony, telecommunications and
other information and transmission services such as the Internet.

"Trade Payables" means any accounts payable or other indebtedness or
monetary obligation to trade creditors created, assumed or Guaranteed by the
Company or any of its Restricted Subsidiaries arising in the ordinary course
of business in connection with the acquisition of goods or services.

"Trading Day," with respect to a securities exchange or automated quotation
system, means a day on which such exchange or system is open for a full day of
trading.

"Transaction Date" means, with respect to the incurrence of any Indebtedness
by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is incurred and, with respect to any Restricted Payment, the date
such Restricted Payment is made.

"Trust Indenture Act" means the Trust Indenture Act of 1939, as it may be
amended from time to time.

"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any
Restricted Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company), other than a Subsidiary that has given a
Subsidiary Guarantee or has Intercompany Notes outstanding, to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Company or any Restricted
Subsidiary; provided that either (A) the Subsidiary to be so designated has
total assets of

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$10,000 or less or (B) if such Subsidiary has assets greater than $10,000, (x)
that such designation shall be deemed to be at the time of such designation
the making of a Restricted Payment at the time of such designation in an
amount equal to the Investment in such Subsidiary subject to the restrictions
contained in the "--Limitation on Restricted Payments" covenant described
above, (y) that no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such designation and (z)
the Company would be permitted to incur $1.00 of additional indebtedness under
the "--Limitation on Indebtedness" covenant described above, assuming the
effectiveness of such designation. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided
that immediately after giving effect to such designation (x) all Indebtedness
of such Subsidiary could be incurred under the "--Limitation on Indebtedness"
covenant described above and (y) no Default or Event of Default shall have
occurred and be continuing or result from such designation (treating all
outstanding Indebtedness of the Unrestricted Subsidiary as incurred at the
time of such designation). Any such designation by the Board of Directors
shall be evidenced to the Indenture Trustee by promptly filing with the
Indenture Trustee a copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.

"U.S. GAAP" means, at any date of determination, generally accepted
accounting principles in the United States as then in effect.

"U.S. Government Securities" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof, and shall
also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by
such depository receipt.

"Wholly-Owned Subsidiary" means any Subsidiary of the Company, all of the
outstanding Capital Stock (other than directors' qualifying shares), or in the
case of a non-corporate Subsidiary, other equity interests having ordinary
voting power for the election of directors or other governing body of such
Subsidiary, of which is owned by the Company or another Wholly-Owned
Subsidiary of the Company or a combination thereof.

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TAXATION

The following describes the opinion of Lewin & Wills with respect to certain
Colombian tax considerations and the opinion of Dewey Ballantine LLP with
respect to certain United States federal income tax considerations associated
with the exchange of Original Certificates for Exchange Certificates and the
ownership and disposition of the Exchange Certificates by Exchange
Certificateholders who acquire the Exchange Certificates pursuant to the
Exchange Offer. These opinions are based upon existing Colombian tax law and
United States federal income tax law, which is subject to change, possibly
retroactively. These opinions only describe the material Colombian tax
consequences to Non-Colombian Holders (as defined herein) and the material
United States federal income tax consequences to United States Holders (as
defined herein) of exchange for, ownership of and disposition of Exchange
Certificates and do not describe all aspects of Colombian or United States
federal income taxation.

The statements regarding Colombian and United States tax laws and practices
set forth below are based on the laws in force and as applied in practice on
the date of this Prospectus. These laws and practices are subject to changes
subsequent to the date of this Prospectus and any such changes may be
retroactive.

As used herein in referring to Certificateholders, a "Non-Colombian Holder"
means: (i) a natural person who is neither a citizen nor a resident of
Colombia; (ii) a company or other legal entity that is not organized under the
laws of Colombia or any political subdivision thereof; and (iii) any other
person that is not subject to Colombian income tax on a net income basis in
respect of the Certificates.

As used herein in referring to Certificateholders, a "United States Holder"
means: (i) a natural person who is either a citizen or a resident of the
United States; (ii) a corporation, partnership or other legal entity organized
under the laws of the United States, any State thereof or the District of
Columbia; (iii) an estate the income of which is subject to United States
federal income taxation regardless of its source; (iv) a trust (a) the
administration over which a United States court can exercise primary
supervision and (b) over which one or more United States persons have the
authority to control all substantial decisions; and (v) a person that for any
other reason is subject to United States federal income tax on a net income
basis in respect of the Exchange Certificates.

Colombia

The following is the opinion of Lewin & Wills regarding certain aspects of
Colombian tax law relevant to the Senior Notes and the Certificates. Lewin and
Wills has not provided an opinion regarding the tax laws of any jurisdiction
other than Colombia.

Non-Colombian Holders will not be required to file any tax returns in
Colombia solely by reason of their acquisition ownership or disposition of the
Certificates or their interest in the Senior Notes, and will not be subject to
Colombian income and remittance withholding taxes to the extent payments on
the Senior Notes do not constitute Colombian source income. Article 25 of the
Estatuto Tributario (the "Colombian Tax Code") provides that credits obtained
abroad (including bank loans and debt securities) by Colombian companies
carrying out activities deemed to be of interest to the social and economic
development of the country, as determined by the National Council on Economic
and Social Policies ("CONPES"), do not generate Colombian source income and
will not be considered to be possessed in Colombia. Resolution 54 of 1992
("Resolution 54") of CONPES and Decree 2105 of 1996 ("Decree 2105")
established that all activities pertaining to the primary, manufacturing and
service sector are deemed to be of interest to the social and economic
development of the country. Under Colombian law, the activities developed by
the Company's affiliates are categorized as being part of the service sector.
As a result, no income or remittance tax will be withheld on interest payments
on the Senior Notes by the Company or on payments by the Issuer on the
Certificates to Non-Colombian Holders.

The foregoing is based upon an interpretation of Resolution 54 and Decree
2105 by Lewin & Wills, the Company's Colombian tax counsel, in the absence of
authoritative judicial or administrative precedents. If a contrary
interpretation were to be sustained, or if Resolution 54 and/or Decree 2105
were to be rescinded or modified, the net amount of payments on the Senior
Notes from the Company to Non-Colombian Holders could

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be subject to withholding tax at the rate of 35% and withholding of remittance
tax at the rate of 7% on the net amount of the payment after deducting the
withholding of income tax (a combined rate of 39.55%). If withholding of such
taxes on interest payments on the Senior Notes or the Certificates were
required, the Company generally would be required to pay Additional Amounts to
Non-Colombian Holders as may be required so that the payments payable on the
Senior Notes and therefore on the Certificates would not be reduced as a
result of such taxes. The payment of such Additional Amounts would adversely
affect the Company's cash flow and results of operations. See "Description of
the Senior Notes--Additional Amounts."

Any gain realized on the sale, transfer, exchange or other disposition of a
Senior Note or Certificate by a Non-Colombian Holder is not subject to
Colombian capital gain taxes or to Colombian income tax.

There are no reciprocal tax treaties between the Colombian and the United
States governments regarding withholding.

There are no inheritance, gift or wealth taxes imposed by Colombia
applicable to the Senior Notes or the Certificates.

The exchange of the Original Certificates for the Exchange Certificates in
the Exchange Offer (see "The Exchange Offer") will not constitute a taxable
event to Non-Colombian Holders for Colombian income tax purposes.

United States

In General

The following is the opinion of Dewey Ballantine LLP regarding certain
aspects of United States federal income tax law relevant to the Senior Notes
and the Certificates. Dewey Ballantine LLP has not provided an opinion
regarding the tax laws of any jurisdiction other than the United States.

Under current law, the Trust will be classified as a grantor trust (and not
as an association taxable as a corporation) for United States federal income
tax purposes and each Exchange Certificateholder will be treated as the owner
of a pro rata undivided interest in the Senior Notes and any other property
owned by the Trust. Each Exchange Certificateholder will be required to report
on its United States federal income tax return its pro rata share of the
income from the Senior Notes and any other property owned by the Trust, in
accordance with the Exchange Certificateholder's method of accounting.

The following deals only with Exchange Certificates that are held as capital
assets by certain United States Holders, and does not address special aspects
of United States federal income taxation that may be applicable to Exchange
Certificateholders that are subject to special tax rules with respect to the
Exchange Certificates, such as dealers or traders in securities or currencies,
financial institutions, insurance companies, tax-exempt entities, persons
holding Exchange Certificates as a part of a "hedging," "conversion" or
"integrated" transaction or as a position in a straddle, or persons whose
"functional currency" is not the U.S. dollar. Moreover, this opinion does not
address the United States federal income tax treatment of Exchange
Certificateholders that do not acquire Exchange Certificates in exchange for
Original Certificates that were acquired as part of the initial distribution
at the initial issue price. The opinion below is based upon the provisions of
the United States Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), and regulations, rulings and judicial decisions thereunder as
of the date hereof; any such authority may be repealed, revoked or modified,
perhaps with retroactive effect, so as to result in United States federal
income tax consequences different from those discussed below. This opinion
does not discuss the potential impact of foreign, state and local or other
taxes on an Exchange Certificateholder by reason of its exchange of an
Original Certificate for an Exchange Certificate or its ownership or
disposition of an Exchange Certificate.

The Exchange

The exchange of Original Certificates for Exchange Certificates pursuant to
the Exchange Offer will not be a taxable event for United States federal
income tax purposes. Accordingly, an Exchange Certificateholder

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receiving Exchange Certificates pursuant to the terms of the Exchange Offer
will have the same adjusted tax basis and holding period in Exchange
Certificates, for United States federal income tax purposes, as such Original
Certificateholder had in the Original Certificates tendered in exchange
therefor.

Reporting of Interest Income

Each United States Holder of an Exchange Certificate will be required to
report interest (including any Additional Amounts) with respect to such
Exchange Certificate on its United States federal income tax return when such
interest is received or accrued by the Exchange Certificateholder, depending
upon its method of accounting. Such interest will be considered "foreign
source income" and, in general, "passive income" and, in the case of certain
United States Holders, "financial services income," for purposes of
calculating the Exchange Certificateholder's limitation on foreign tax
credits. In the case of an Exchange Certificateholder other than a
corporation, such interest income will, in general, also constitute
"investment income" for purposes of determining the deduction allowable for
investment interest.

In the event that Colombian income or remittance taxes are withheld with
respect to a payment by the Trust to a United States Holder, such Exchange
Certificateholder may deduct the amount of such taxes from its income, or,
alternatively, may, subject to generally applicable limitations, elect to
credit the amount of such taxes against its United States federal income tax
liability under the foreign tax credit provisions of the Internal Revenue
Code.

Sale, Exchange or Retirement

Upon the sale, exchange or retirement of an Exchange Certificate, a United
States Holder will recognize taxable gain or loss equal to the difference, if
any, between the amount realized on the sale, exchange or retirement and the
United States Holder's adjusted tax basis in such Certificate. A United States
Holder's adjusted tax basis in an Exchange Certificate generally will equal
the cost of the Original Certificate to the United States Holder of the
Original Certificate for which such Exchange Certificate was exchanged. Such
gain or loss generally will be capital gain or loss (except to the extent
attributable to accrued but unpaid interest that has not been included in
income, which will be taxable as ordinary income), and will be long-term
capital gain or loss if the Exchange Certificate has been held for more than
one year at the time of such sale, exchange or retirement, which holding
period will include the holding period of the Original Certificate. A reduced
tax rate on long-term capital gains will apply to a United States Holder that
is an individual, estate or trust. Any gain realized on a sale, exchange or
retirement of an Exchange Certificate by a United States Holder generally will
be treated as United States source income. Temporary regulations provide that
any loss realized generally should be treated as United States source loss.

United States Backup Withholding Tax and Information Reporting

A 31% backup withholding tax and information reporting requirements apply to
certain payments of principal of, and interest on, an obligation and to
proceeds of the sale or redemption of an obligation, to certain
noncorporate United States Holders. The payor will be required to withhold 31%
of any such payment within the United States on an Exchange Certificate to a
United States Holder (other than an "exempt recipient," such as a corporation)
if such United States Holder fails to furnish its correct taxpayer
identification number or otherwise fails to comply with, or establish an
exemption from, such backup withholding requirements. Payments
of principal and interest to a non-United States Holder will not be subject to
backup withholding tax and information reporting requirements if an
appropriate certification is provided by the Certificateholder to the payor
and the payor does not have actual knowledge or a reason to know that such
certification is false.

Any such withheld amounts are allowed as a credit against the Exchange
Certificateholder's United States federal income tax liability and may entitle
the Exchange Certificateholder to a refund provided the required information
is furnished to the IRS. In addition, certain penalties may be imposed by the
IRS on an Exchange Certificateholder who is required to supply information but
fails to do so or does so in an improper manner.

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New withholding tax regulations (the "New Withholding Regulations")
generally effective for payments made on, or the proceeds from the sale of,
the Senior Notes after December 31, 1999 (although in some cases the effective
date may not be until after December 31, 2000), alter the procedures that
withholding agents and payees must follow to comply with, or to establish an
exemption from, the information reporting and backup withholding tax
provisions. In particular, in the case of payments to foreign partnerships
(other than a payment to a foreign partnership that qualifies as a
"withholding foreign partnership" within the meaning of the regulations, and
payments to a foreign partnership where the interest paid on the Senior Notes
is effectively connected with a trade or business within the United States by
the foreign partnership), the partners of such partnership rather than the
foreign partnership itself will be required to provide the certification
necessary to establish exemption from the withholding tax and information
reporting requirements. Exchange Certificateholders should consult their own
tax advisors regarding the application to such holders of the New Withholding
Regulations.

PROSPECTIVE EXCHANGE CERTIFICATEHOLDERS OF THE EXCHANGE CERTIFICATES ARE
URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE PARTICULAR TAX CONSEQUENCES
OF EXCHANGING ORIGINAL CERTIFICATES FOR THE EXCHANGE CERTIFICATES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS.

CERTAIN ERISA CONSIDERATIONS

A fiduciary of an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a plan
subject to Section 4975 of the Internal Revenue Code, including an entity
whose underlying assets are deemed to include assets of such an employee
benefit plan or plan (collectively, an "employee benefit plan"), considering
the purchase of Exchange Certificates must determine that the purchase of the
Exchange Certificates is consistent with its fiduciary duties under Title I of
ERISA and does not result in a non-exempt prohibited transaction under Section
406 of ERISA or Section 4975 of the Internal Revenue Code. "Prohibited
transactions" within the meaning of ERISA and Section 4975 of the Internal
Revenue Code may result if the Exchange Certificates are acquired by an entity
using the assets of an employee benefit plan with respect to which the Company
or certain of its affiliates is a "party in interest" or "disqualified
person", as defined in ERISA and Section 4975 of the Internal Revenue Code,
respectively, unless the Exchange Certificates are acquired pursuant to an
applicable exemption. In addition, under certain circumstances, investments in
the Exchange Certificates by employee benefit plans might result in assets of
the Trust being deemed to constitute "plan assets" subject to the regulatory
restrictions of ERISA. The level of investment by employee benefit plans in
the Exchange Certificates will not be monitored or restricted for purposes of
determining whether the assets of the Trust may be deemed to constitute such
"plan assets" or avoiding such status. In light of the foregoing
considerations, any employee benefit plan or other entity subject to Title I
of ERISA or Section 4975 of the Internal Revenue Code proposing to acquire the
Exchange Certificates should consult with legal counsel.

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FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN COLOMBIA

The current legal framework for foreign investment in Colombia was
established by Law 9 of 1991, Resolution 51 of October 1991, as amended by
subsequent regulations, particularly Decree 1295 of 1996 (the "Foreign
Investment Statute") of the CONPES, and Resolution 21 of 1993 ("Resolution
21"), as amended by several resolutions issued by the Central Bank. The
guiding principles of the current regulatory framework are: (i) equality of
treatment: foreign and domestic investment in Colombia must receive equal
treatment, and discrimination is illegal; (ii) freedom of access: foreign
investment is permitted in any sector of the economy with the exception of
defense, national security, the processing, disposal, and discharge of toxic,
hazardous, or radioactive waste not produced in Colombia, and real estate
companies; and (iii) automatic procedures: except in a limited number of
cases, foreign investors need not follow any special authorization procedure
to invest in Colombia.

Under Colombian law there are three types of foreign capital investment.
First, there is direct investment, which is defined as any contribution (i.e.,
cash and debt capitalization) made by a foreigner into the capital of an
existing or newly formed company in Colombia. Second, there are investments
involving any acts or contracts whereby a foreign investor makes a
contribution to a company without taking an equity position; provided that the
income derived by the foreign investor depends on the profits generated by the
Company, and third, portfolio investment, which is made through a foreign
capital investment fund for the acquisition of shares and other securities
traded on Colombian stock exchanges.

Resolution 21 established two distinct foreign exchange markets: (i) the
formal foreign exchange market, which is conducted through authorized
financial intermediaries (each an "Authorized Intermediary") and is subject to
the procedures established by Resolution 21, as amended, which requires
certain specified transactions to be carried out through such Authorized
Intermediaries; and (ii) the free market, which is available for all
transactions not required to be conducted through Authorized Intermediaries,
including the exchange of foreign currency relating to professional services,
donations and sales of goods and services to tourists.

Since October 1991, exchange rates have been freely set by the market.

External Resolution No. 5 of 1997 of the Central Bank (the "Resolution"),
dated May 20, 1997, introduced fundamental changes to the regulation of
foreign indebtedness in Colombia.

From May 20, 1997 until the law is modified or repealed, Colombian residents
who obtain credits denominated in foreign currencies must make a deposit with
the Central Bank, prior to each disbursement of funds. The requirement applies
to both private and public entities. The deposit must be for 30% of the value
of the funds to be disbursed, converted into Colombian pesos at the
Representative Market Rate on the date of the conversion. The term of the
deposit required is 18 months. The deposit requirement applies without regard
to the term of the credit, with limited exceptions. After 18 months, the
deposit will be returned at its nominal value in Colombian pesos, in other
words, without interest or adjustment for devaluation.

It is no longer necessary to register foreign credit agreements with the
Central Bank prior to disbursement. Instead, one must provide proof of having
made the required deposit to the Central Bank. The following credit operations
are exempted from the deposit requirement: (i) credits in foreign currency
intended to finance investment by Colombians outside of Colombia, or for
personal expenses using credit cards; (ii) credits in foreign currency granted
to finance exports, with a term of one year or less, by Authorized
Intermediaries using funds from BANCOLDEX (the Colombian Government Foreign
Trade Bank), up to a maximum limit of $550,000 or the equivalent in other
currencies; (iii) credit operations entered into by Authorized Intermediaries
with financial institutions outside of Colombia, for the purpose of
implementing the operations such Authorized Intermediaries are authorized to
perform; (iv) the granting of credit in foreign currency by Colombian
residents or Authorized Intermediaries to Colombian residents who are outside
of Colombia; such credit may be granted directly or using the funds of public
agencies which provide discounts; although it is not necessary to make the
deposit in such cases, one must inform the Central Bank; (v) the import
financing of certain specified capital goods (see below); and (vi) the
financing of imports for a value of less than $5,000 or the equivalent in
other currencies.

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The import financing of certain capital goods is exempt from the deposit
requirement. The list of capital goods to which this exemption applies has
been expanded by the Resolution, and exempted goods now include all goods
categorized as "machinery" or "equipment" in lists used by the Colombian
taxation authority and by INCOMEX (a Foreign Trade Governmental Agency).

Foreign credits obtained by the government of Colombia, the departments or
other territorial entities and other decentralized public agencies (except
those which are designated as foreign exchange intermediaries) are also
subject to the deposit requirement. The Resolution provides that the interest
rate on such credits may not exceed the maximum preferred interest rate in the
New York market plus 5%, or the London interbank rate for one month plus 3%.
Nevertheless, when the credit is granted by Authorized Intermediaries, the
interest rate may exceed this maximum by an amount not exceeding the
Authorized Intermediaries discount margin.

The Resolution provides that credits in foreign currency may be obtained by
the placement of securities in the international capital markets, prior to
making the required deposit, so long as the credits are among those authorized
by the Resolution.

Users of free trade zones who obtain financing for the purchase of
merchandise must also make the deposit whenever the value of the financing is
greater than $5,000 and the term of the financing is greater than six months
from the date of the shipment or waybill. If the financing is for the purchase
of capital goods which are exempted, the deposit is not required.

PLAN OF DISTRIBUTION

Each broker-dealer that receives Exchange Certificates for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver this
Prospectus in connection with any resale of such Exchange Certificates. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer who holds Original Certificates acquired for its own
account as a result of market-making activities or other trading activities (a
"Participating Broker-Dealer") in connection with resales of Exchange
Certificates received in exchange for Original Certificates. If required by
the Securities Act, for a period not to exceed 180 days after the Expiration
Date, the Company will make this Prospectus, amended or supplemented,
available to any Participating Broker-Dealer for use in connection with any
such resale, provided that such Participating Broker-Dealer indicates in the
Letter of Transmittal that it is a broker-dealer. In addition, until September
10, 1999, (90 days after the Expiration Date), all dealers affecting
transactions in the Exchange Certificates may be required to deliver a
prospectus.

The Company will not receive any proceeds from the exchange of Original
Certificates for Exchange Certificates by broker-dealers. Exchange
Certificates received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing
of options on the Exchange Certificates or a combination of such methods of
resale, at market prices prevailing at the time of resale, or at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through broker-dealers who
may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any Exchange Certificates. Any
broker-dealer that resells Exchange Certificates that were received by it for
its own account pursuant to the Exchange Offer and any person that
participates in the distribution of such Exchange Certificates may be deemed
an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Certificates and any commissions or concessions
received by any such broker-dealers may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.

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ENFORCEMENT OF FOREIGN JUDGMENTS IN COLOMBIA

The courts of Colombia give effect to and enforce judgments of non-Colombian
courts through a process known as exequatur provided under Colombian law,
subject to the provisions of Articles 693 through 695 of the Colombian Code of
Civil Procedure. Such articles provide for enforcement by Colombian courts of
foreign judgments that are obtained without fraud and rendered after due
notice, provided that either (i) Colombia and the country where the foreign
judgment has been issued are parties to a treaty which recognizes the
enforceability of foreign judgments; or (ii) a judgment rendered by a court of
Colombia would be enforceable on a reciprocal basis in the country where such
foreign judgment is obtained, and that the foreign judgment (A) does not
relate to "in rem" rights vested in assets that were located in Colombia at
the time the suit was filed; (B) does not contravene any public policy laws or
regulations of Colombia, other than those governing judicial procedures; (C)
is a final judgment not subject to appeal in accordance with the applicable
foreign laws and an original certified copy of such judgment together with a
Spanish translation provided by an official translator, is filed with the
court; (D) does not refer to any matter upon which Colombian courts have
exclusive jurisdiction; (E) does not refer to any matter subject to a lawsuit
presently ongoing in Colombia or already decided by any court of Colombia; (F)
was obtained upon compliance with the applicable foreign laws relating to
service of process to the defendant, which compliance is presumed if the
judgment is final; and (G) is submitted to the exequatur procedure before the
Supreme Court of Colombia, which requires that the party proposing to enforce
the foreign judgment give prior judicial notice to any person or entity that
may be affected by the judgment.

Of those requirements imposed by the Colombian Code of Civil Procedure, the
two issues which are most likely to generate controversy in exequatur
proceedings are: (i) whether there exists an applicable treaty or reciprocity
between the two countries, as described in the previous paragraph; and (ii)
whether the foreign judgment contravenes Colombia's public policy laws and
regulations. The Company has been advised by Cavelier Abogados that the United
States and Colombia do not have a treaty providing for reciprocal recognition
and enforcement of judgments in civil and commercial matters; however, there
is a precedent (a ruling issued on July 19, 1994) in which the Supreme Court
of Colombia recognized the existence of such reciprocity based upon: (A)
evidence that a court in the State of Florida had accepted the validity of a
Colombian judgment in a certain case; and (B) declarations by the United
States lawyers acting as expert witnesses to the effect that courts in the
State of Florida had enforced judgments issued in Latin American countries
other than Colombia and that judgments issued by Colombian courts would be
enforced under the same principles. The Company can provide no assurance,
however, that this interpretation will prevail in future exequatur
proceedings. The Company does not believe, in the case of the Exchange
Certificates or the Certificate Guarantee, that a foreign judgment ordering
the payment of money would conflict with any of Colombia's current public
policy laws or regulations.

The Company has been advised by Cavelier Abogados that there can be no
assurance as to the enforceability, in original actions, in Colombian courts
of liabilities predicated solely on the United States federal or other non-
Colombian securities laws.

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BOOK-ENTRY; DELIVERY AND FORM

General

The Original Certificates offered and sold in reliance on Regulation S under
the Securities Act were initially represented by a single, permanent Global
Certificate in definitive, fully registered book-entry form (the "Regulation S
Global Certificate") which was registered in the name of a nominee of DTC and
deposited on behalf of the purchasers of the Original Certificates represented
thereby with the Trustee as custodian for DTC for credit to the respective
accounts of the purchasers (or to such other accounts as they may direct) at
the Euroclear System ("Euroclear") or Cedel Bank S.A. ("CEDEL"). The Original
Certificates offered and sold to "qualified institutional buyers" ("QIBs") in
reliance on Rule 144A under the Securities Act were initially represented by a
single, permanent Global Certificate in definitive, fully registered book-
entry form (the "Rule 144A Global Certificate," and, together with the
Regulation S Global Certificate, the "Original Global Certificates") which was
registered in the name of a nominee of DTC and deposited on behalf of
purchasers of the Original Certificates represented thereby with the Trustee
as custodian for DTC for credit to the respective accounts of the purchasers
(or to such other accounts as they may direct) at DTC. Except as set forth
below, the Exchange Certificates issued pursuant to the Exchange Offer will be
issued in global form (the "Exchange Global Certificates," and together with
the Original Global Certificates, the "Global Certificates").

Global Certificates

Upon the issuance of the Exchange Global Certificates, DTC or its custodian
will credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Exchange Global
Certificate to the accounts of persons who have accounts with such depositary.
Such accounts initially will be designated by the Exchange Agent. Ownership of
beneficial interests in an Exchange Global Certificate will be limited to
persons who are members of, or participants in, DTC (the "Agent Members") or
persons who hold interests through Agent Members. Ownership of beneficial
interests in the Exchange Global Certificates will be shown on, and the
transfer of that ownership will be effected only through, records maintained
by DTC or its nominee (with respect to interests of Agent Members) and the
records of Agent Members (with respect to interests of persons other than
Agent Members).

So long as DTC, or its nominee, is a registered holder of a Global
Certificate, DTC or such nominee, as the case may be, will be considered the
absolute owner or holder of the Certificates represented by such Global
Certificate for all purposes under the Indenture and the Certificates, and the
Agent Members, as well as any other persons on whose behalf Agent Members may
act (including Euroclear and CEDEL and account holders and participants
therein), will have no rights under the Indenture or under a Global
Certificate. Owners of beneficial interests in a Global Certificate will not
be considered to be the owners or holders of any Certificates under the
Indenture or the Certificates.

In addition, no beneficial owner of an interest in a Global Certificate will
be able to exchange or transfer that interest, except in accordance with the
applicable procedures of DTC (the "Applicable Procedures").

Payments in respect of each Global Certificate registered in the name of
DTC's nominee will be made to the order of DTC's nominee as the registered
owner of such Global Certificate. Neither the Company nor the Pass Through
Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in the
Global Certificates or for maintaining, supervising or reviewing any records
relating to such beneficial interests.

The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Certificate, will immediately
credit the accounts of Agent Members with payments in the amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Certificate as shown on the records of DTC or its nominee. The
Company also expects that payments by Agent Members to owners of beneficial
interests in such Global Certificate held through such Agent Members will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of

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customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such Agent Members.

Transfers between participants in DTC will be effected in the ordinary way
in accordance with the Applicable Procedures and will be settled in same-day
funds.

DTC has advised the Company that it will take any action permitted to be
taken by a Certificateholder only at the direction of one or more Agent
Members to whose account the DTC interests in the Global Certificates is
credited and only in respect of such portion of the aggregate principal amount
of Certificates as to which such Agent Member or Agent Members has or have
given such direction.

The Company understands: DTC is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meaning of New York Banking Law, a member of the federal Reserve System, a
"clearing corporation" within the meaning of the Uniform Commercial Code and a
"Clearing Agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").

Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Certificates among
participants of DTC, it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Company nor the Pass Through Trustee will have any responsibility
for the performance by DTC, its participants or indirect participants of their
respective obligations under rules and procedures governing its operations.

Certificated Certificates

Interests in a Global Certificate will be exchangeable or transferable, as
the case may be, for Exchange Certificates issued in the form of registered
definitive certificates ("Certificated Certificates") if (i) DTC notifies the
Company that it is unwilling or unable to continue as depositary for such
Global Certificates, or DTC ceases to be a "Clearing Agency" registered under
the Exchange Act, and a successor depositary is not appointed by the Company
within 90 days, or (ii) an Event of Default has occurred and is continuing
with respect to such Exchange Certificates and Exchange Certificateholders who
hold more than 25% in aggregate principal amount of the Exchange Certificates
at the time outstanding represented by the Global Certificates advise the
Trustee through DTC in writing that the continuation of a book-entry system
through DTC (or a successor thereto) with respect to the Global Certificates
is no longer required. Upon the occurrence of any of the events described in
the preceding sentence, the Company will cause the appropriate Certificated
Certificates to be delivered.

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LEGAL MATTERS

Certain legal matters with respect to the Senior Notes and the Exchange
Certificate Guarantee offered hereby will be passed upon for the Company by
Arrieta Mantilla & Asociados, Colombia, with respect to matters of Colombian
law. Certain legal matters with respect to Colombian tax law will be passed
upon for the Company by Lewin & Wills.

Certain legal matters with respect to the Exchange Certificate Guarantee
offered hereby will be passed upon for the Company by Dewey Ballantine LLP,
New York, New York with respect to matters of United States law.

Certain matters of Delaware law relating to the validity of the Exchange
Certificates, the enforceability of the Trust Agreement and the creation of
the Transtel Pass Through Trust will be passed upon by Richards, Layton &
Finger, special Delaware counsel to the Company and the Issuer. Richards,
Layton & Finger is also serving as counsel to Wilmington Trust Company in
connection with the issuance of the Exchange Certificates.

EXPERTS

The Consolidated Annual Financial Statements as of December 31, 1996, 1997
and 1998 and for each of the three years in the period ended December 31, 1998
included in this Prospectus, have been so included in reliance on the report
of Price Waterhouse, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

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GLOSSARY OF CERTAIN TELECOMMUNICATIONS TERMS

The following is a glossary of certain telecommunications terms appearing
elsewhere in this Prospectus.

Access Charges: The fees paid by IXCs to LECs for originating and
terminating long distance telephone calls on their local networks.

AIX Operating System: Refers to IBM's version of the UNIX operating system
to be used in conjunction with Transtel's Internet and voice mail platform.

ATM (Asynchronous Transfer Mode): A recently commercialized switching and
transmission technology that is one of a general class of packet technologies
that relay traffic by way of an address contained within the first five bits
of a standard fifty-three bit-long packet or cell. ATM switching was
specifically developed to allow switching and transmission of mixed voice,
data and video (sometimes referred to as "multimedia" information) at varying
rates. The ATM format can be used by many different information systems,
including LANs.

Broadband: Broadband communications systems can transmit large quantities of
voice, data and video by way of digital or analog signals. Examples of
broadband communications systems include DS-3 fiber-optic systems, which can
transmit 672 simultaneous voice conversations, or a broadcast television
station that transmits high-resolution audio and video signals into the home.
Broadband connectivity is also an essential element for interactive multimedia
applications.

CDMA (Code Division Multiple Access): A digital multiplexing scheme for
grouping/ungrouping numerous channels into a higher speed channel through code
division.

Central Offices: The switching centers or central switching facilities of
the LECs.

Centrex: Centrex is a service that offers features similar to those of a
Private Branch Exchange (PBX), except the equipment is located at the
carrier's premises and not at the premises of the customer. These features
include direct dialing within a given phone system, direct dialing of incoming
telephone calls, and automatic identification of outbound telephone calls.
This is a value-added service that carriers can provide to a wide range of
customers who do not have the size or the funds to support their own on-site
PBX.

DID (Direct Inward Dialing): Central Office service allowing for calls to be
made directly to the extension of a customer's PBX, without having to go
through an operator.

Digital: A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary code digits 0 and 1. Digital transmission and switching technologies
employ a sequence of these pulses to represent information as opposed to the
continuously variable analog signal. Digital transmission and switching
technologies offer a threefold improvement in speed and capacity over analog
techniques, allowing much more efficient and cost-effective transmission of
voice, video and data.

DS-O, E-1, E-3: Standard telecommunications industry digital signal formats,
which are distinguishable by bit rate (the number of binary digits (0 and 1)
transmitted per second). DS-O service has a bit rate of 64 kilobits per
second. E-1 service has a bit rate of 2 megabits per second and E-3 service
has a bit rate of 34 megabits per second.

EWSD: Brand name for Siemens digital switching system used in both private
and public telecommunications networks.

Fiber Optics: Fiber-optic cable is the medium of choice for the
telecommunications and cable industries. Fiber is immune to electrical
interference and environmental factors that affect copper wiring and satellite
transmission. Fiber-optic technology involves sending laser light pulses
across glass strands in order to transmit

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digital information. A strand of fiber-optic cable is as thick as a human hair
yet has significantly greater bandwidth capacity than copper cable, which is
many times greater in size.

Fiber-Optic Ring Network: The Company has designed its networks in ring
configuration in order to ensure that, if one segment of a network is damaged
or cut, the traffic is simply re-routed and sent to its destination in the
opposite direction. The Company uses a "self-healing" optical fiber-ring
architecture in its networks.

Frame Relay: Frame relay is a high-speed data packet switching service used
to transmit data between computers. Frame Relay supports data units of
variable lengths at access speeds ranging from 56 kilobits to 1.5 megabits.
This service is ideal for connecting LANs, but is not appropriate for voice
and video applications due to the variable delays that can occur. Frame Relay
was designed to operate at higher speeds on modern fiber-optic networks.

HDSL (High Bit Rate Digital Subscriber Line): A modern technology typically
used for establishing T1/E1 trunk facilities between the Central Office and
the subscriber over copper cable facilities. HDSL modems utilize only a few
copper pairs to digitally transmit a large number of circuits.

IBM's Netview: A network management system for information systems which
monitors and controls the physical network elements including, among other
things, routers, access servers, bridges, hubs and servers.

IBM RS/6000: A scaleable hardware platform group based on open systems
architecture used in corporate information networks worldwide. The hardware
supports IBM's Unix.

IBM's Tivoli: A family of products (registered trademark of IBM) for network
computing management of the software and hardware elements of corporate
information networks. Examples of network management include centralized
backup, software distribution, hardware inventory management and other
functions.

ISDN (Integrated Services Digital Network): A switched digital service
allowing for the transmission of voice, data and/or video signals over the
public switched telecommunications network. Colombia utilizes the
international ISDN standard which allows for Basic Rate (two by kilobit
channels and one 16 kilobit data channel) over the same copper pairs used for
traditional telephone service, or Primary Rate (30 64 kilobit channels and one
16 kilobit data channel).

ISP (Internet Service Provider): An Internet service provider provides
customers with access to the Internet by linking its network directly or
through other ISPs to the Internet backbone network.

IXC (Interexchange Carriers): See Long Distance Carrier.

LANs (Local Area Network): Corporate node for client server applications
used for corporate communications.

LEC (Local Exchange Carrier): A company providing local telephone services.

Long Distance Carriers or IXCs (Interexchange Carriers): Long distance
carriers provide services between local exchanges. TELECOM is the sole
provider of these services and may offer service over its own facilities.

mHz: Megahertz.

Mode: An individual point of origination and termination of data on the
network transported using frame relay or similar technology.

OSP (Outside Plant): Refers to the external network of a telecommunications
company which links subscribers to Central Office switching systems, and
Central Offices to each other. This includes the cable,

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splices, distribution cabinets and terminals of both copper and fiber
networks. The Outside Plant technically ends at the cable vault of the Central
Office. The rest of the technologies in the Central Office are referred to as
inside plant.

PBX (Private Branch Exchange): A switching system within an office building
which allows telephone calls from outside to be routed directly to the
individual instead of through a central number. The PBX also allows for
calling within an office by way of four-digit extensions. Centrex is a service
which can simulate this service from an outside switching source, thereby
eliminating the need for a large capital expenditure on a PBX.

PCS (Personal Communications Service): A type of wireless telephone system
that uses light, inexpensive handheld sets and communicates via low-power
antennas.

PDH (Plesiochronous Digital Hierarchy): Refers to a transmission signaling
standard. This is a more inflexible transmission scheme which is acceptable
for point to point.

POPs (Points of Presence): Locations where a long distance carrier has
installed transmission equipment in a service area that serves as, or relays
telephone calls to, a network switching center of that long distance carrier.

Private Line: A private, dedicated telecommunications connection between
end-use locations (excluding long distance carrier POPs).

Route Miles: The number of miles of the telecommunications path in which
fiber-optic cables are installed as it would appear on a network map.

SAT (Telecommunications Administration System): Brand name of C-NIX's
software. A software subscriber data base and administration system used for
inputting new service orders, assigning new, billing, installation and a range
of other functions critical to telephone operations.

SDH (Synchronous Digital Hierarchy): Refers to a transmission signaling
standard which allows for the multiplexing and demultiplexing of
telecommunications traffic at multiple points along a transmission path.

SPC (Stored Program Control): Stored program control switching systems
including both earlier analog and more recent digital systems.

STM (Synchronous Transfer Mode): Refers to the European signaling rates of
the SDH standard starting at STM 1 or 155 Megabits.

Switch: A sophisticated computer that accepts instructions from a caller in
the form of a telephone number. Like an address on an envelope, the numbers
tell the switch where to route the call. The switch opens or closes circuits
or selects the path or circuits to be used for transmission of information.
Switching is a process of interconnecting circuits to form transmission path
between users. Switches allow local telecommunications service providers to
connect telephone calls directly to their destination, while providing
advanced features and recording connection information for future billing.

Switched Traffic: Telecommunications traffic along a switched network.

TDMA (Time Division Multiple Access): Refers to a multiplexing scheme for
grouping/ungrouping various circuits into higher speed facilities through the
division of these signals into digital time slots.

TMN (Telecommunications Management Network): Refers to an international
standard for integrated network management of all of the physical network
elements of a public telecommunications network. TMN software systems perform
such critical functions as: fault management; traffic management; customer
administration; billing; and work force management.

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ANNEX A

REPUBLIC OF COLOMBIA

The following information has been made public by the Republic of Colombia
and has not been prepared or independently verified by the Company or any of
its affiliates. The Company is including such information solely because it is
readily available and may be useful to a reader. Such information is not, nor
is its inclusion herein meant to suggest that it is, all the information
concerning Colombia that is or may be material to an investor. Moreover, such
information pertains to Colombia as a whole and is not specific to the
location of the Company's business and should not be viewed as reflective of
such region. The following information should be read in conjunction with the
information set forth under "Risk Factors--Colombian Political, Economic, and
Social Risks." Investors who wish to know more about Colombia are urged to
consult the wide variety of information available from public sources.

Overview

Since 1950, Colombia has enjoyed positive real economic growth in every year
(ranging from a low of 1.0% in 1982 to a high of 8.5% in 1978) and relatively
stable rates of inflation (with a low of 2.2% in 1955 and a high of 32.6% in
1963). Inflation (as measured by the Colombian consumer price index ("CPI"))
averaged 22.3% between 1992 and 1996. Unlike other major Latin American
countries, Colombia did not restructure its debt with foreign creditors during
the 1980s, and instead entered into voluntarily syndicated loan agreements to
refinance certain maturities of its commercial bank debt. During the same
period, Colombia maintained access to new borrowings through multilateral and
bilateral credits. Colombia has regularly paid all principal and interest
payments on its external debt for over 60 years.

In June 1994, Ernesto Samper Pizano, former Minister of Economic Development
in the previous administration of Cesar Gaviria and a former Senator, was
elected President of Colombia. President Samper proposed a four-year national
development plan, El Salto Social (The Social Leap), which was approved by the
Congress in June 1995. El Salto Social looked to continue the economic and
political reforms of the Gaviria administration's Apertura policy, under which
the Government removed restrictions on foreign investment, eliminated import
quotas and reduced tariffs, entered into free trade agreements with regional
trading partners, reduced foreign exchange controls, granted greater
independence to the Central Bank, encouraged private sector participation in
the management of pension system assets and began a privatization program with
respect to certain state-owned companies and financial institutions. At the
same time, El Salto Social aimed to secure the benefits of these reforms for a
larger segment of the population.

Under El Salto Social, the Government, among other measures, has set out to:

. Increase government expenditures directed toward the social sector,
including higher spending on health, education and job training programs
and the implementation of the Red de Solidaridad Social (Social
Solidarity Network), while maintaining current levels of expenditures on
defense and justice;

. Increase tax revenues by improving tax collections and reducing
exemptions;

. Improve and develop infrastructure by attracting private investment
through privatizations and concessions;

. Implement measures, together with the Central Bank, to reduce inflation,
including reaching agreement with labor and business to restrict wage and
price increases;

. Maintain competitiveness of the exchange rate by implementing measures,
in conjunction with the Central Bank (which is primarily responsible for
setting the foreign exchange rate policy), to limit short-term capital
inflows and an appreciation of the peso; and

. Strengthen domestic savings by developing the domestic capital market,
and carefully investing the proceeds from increased exports of oil in the
international markets.

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The Colombian government believes that a continuation of nearly balanced
public sector budgets and the policies outlined above, together with projected
growth in oil exports and other factors, should contribute toward continued
moderate real GDP growth over the medium term.

However, for the past two years, the fiscal deficit created by an increase
in public expenditures has resulted in an increase in interest rates from
19.46% in 1995 to 21.63% in 1996 and a slow down in the economy's growth.

In June 1998 Andres Pastrana Arango was elected President of the Republic of
Colombia and took power on August 7, 1998. President Pastrana announced an
aggressive plan oriented to adjust the country's economy in two years which
will allow: (i) the reduction of fiscal deficit; (ii) the reduction of
inflation and domestic rates; and (iii) the increase of the economy's growth
rates to higher than 5% annually.

Geography and Population

Colombia is the fourth largest country in South America, with a territory of
441,020 square miles (1,141,748 square kilometers). Located on the
northwestern corner of the South American continent, Colombia borders Panama
and the Caribbean Sea on the north, Peru and Ecuador on the south, Venezuela
and Brazil on the east, and the Pacific Ocean on the west.

In 1993, according to the census conducted in that year, Colombia's
population was 35.9 million, approximately 73% of whom lived in urban areas.
Over 6.3 million people live in the metropolitan area of Bogota, the capital
of Colombia. Cali and Medellin, the second and third largest cities, have
populations of approximately 1.8 million and 1.7 million, respectively. The
most important urban centers, with the exception of Barranquilla (the largest
port city), are located in the Andes range. The population grew at a rate of
2.2% per year from 1985 through 1993, down from approximately 3.1% per year in
the 1960s.

Government and Political Parties

The Republic of Colombia is one of the oldest democracies in the Americas,
with regular transitions of power between successive administrations since
1957. The main political parties are the Partido Liberal and the Partido
Social Conservador to which President Pastrana belongs. There are other
minority parties, including the Alianza Democratica M-19, a former guerrilla
organization that became a recognized political party at the end of the 1980s.

In 1991, a popularly elected Constitutional Assembly approved a new
Constitution, replacing the Constitution of 1886. The main features of the new
Constitution include further governmental decentralization, increased
Congressional powers and the creation of several new public agencies. A number
of judicial reforms were also introduced to improve the government's ability
to combat the guerrilla- and narcotics-related violence, and to enhance
control and supervision over public officials.

Foreign Affairs and International Organizations

Colombia has diplomatic ties with 154 countries. Colombia is a member of the
United Nations, the International Monetary Fund (the "IMF") and the
International Bank for Reconstruction and Development (the "World Bank"). In
October 1995, Colombia assumed the presidency of the Group of 77 (Non-Aligned
Nations). On the regional level, Colombia is a member of the Organization of
American States, the Inter-American Development Bank (the "IDB"), the
Caribbean Development Bank, the Latin American Economic System and the Andean
Development Bank. Colombia is also party to several trade and commodity
agreements, including the Andean Pact, the Latin American Integration
Association, the Union of Banana Exporting Countries, the International Sugar
Association, the General Agreement on Tariffs and Trade ("GATT") and the World
Trade Organization.

In 1992, a free-trade zone was formed with Venezuela which has increased
commercial trade and financial activity between these two neighboring
countries. Colombia also has free trade agreements with Ecuador and Bolivia,
and a free trade agreement with Chile which became effective on January 1,
1994. The Andean Pact,

153
<PAGE>

which is designed to create a five-nation free-trade zone, was revived in
December of 1991. Pursuant to this agreement, Colombia, Venezuela, Peru,
Ecuador and Bolivia have implemented common external tariffs as of February 1,
1995.

Economy

Gross Domestic Product

Both agriculture and industry play a large role in the Colombian economy,
accounting for an estimated 18.3% and 18.0% of GDP in 1997, respectively. In
1997, agricultural activity increased by 0.7% in real terms (despite a
decrease in coffee production of 18.5%), industrial activity remained
constant, construction decreased by 0.2%, and services increased by 3.7%
(services include communications, a sector with a growth rate of 15% from 1996
to 1997, and that went from 2.0% of total GDP to 2.3% in the same period).
Between 1992 and 1996, GDP grew at an average annual rate of 4.7%. Real GDP
growth for 1997 was 3.1%, as compared with 2.0% in 1996, mainly as a result of
the strict monetary policy implemented in late 1994 to stabilize the growth of
aggregate demand and credit.

The following table sets forth the annual change in Colombia's real GDP by
sector for the periods indicated.

Real GDP Growth by Sector

<TABLE>
<CAPTION>
1993 1994 1995(1) 1996(1) 1997(1)
----- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Agriculture, Livestock, Fishing,
Forestry and Hunting
Coffee............................ (15.2)% (12.7)% 14.7 % (18.5)% (4.4)%
Other Agriculture and Livestock... 6.6 2.9 4.1 2.9 (0.3)
Fishing, Forestry and Hunting..... (2.4) (3.1) (7.0) (10.1) 0.5
Total Agriculture................. 3.2 0.9 5.2 0.2 (0.7)
Industry
Coffee Processing................. (16.9) (10.7) (18.3) 8.7 (0.0)
Manufacturing..................... 4.8 3.2 3.2 (3.8) 2.8
Total Industry.................... 1.6 1.6 1.0 (2.7) 2.5
Mining(3)........................... (1.7) 1.6 17.8 7.7 4.4
Construction........................ 18.2 19.2 5.2 (0.5) (0.2)
Services
Transportation and Storage........ 4.4 5.5 6.5 3.6 2.2
Communications.................... 4.0 (6.8) 4.3 7.6 15.0
Retail, Restaurants and Hotels.... 9.1 6.1 5.2 (0.3) 3.0
Financial Services................ 6.4 18.8 6.4 5.7 3.5
Housing........................... 4.0 6.1 2.0 3.2 2.8
Personal Services................. 2.9 6.5 7.0 7.1 3.2
Government........................ 0.2 2.7 7.8 10.9 4.5
Domestic Services................. 2.4 2.4 3.0 1.8 2.0
Utilities......................... 14.0 6.1 6.2 2.8 3.4
Total Services.................... 5.0 7.5 5.7 6.2 3.7
Subtotal............................ 4.0 5.1 5.1 3.1 2.5
Minus: Imputed Banking Services..... 13.8 16.2 10.0 9.2 3.9
Plus: Duties and Tariffs on
Imports............................ 48.2 26.0 11.8 2.8 11.6
Real GDP............................ 5.4 5.8 5.4 2.1 3.1
</TABLE>
- --------
(1) Preliminary.
(2) Includes petroleum.
Source: DANE and DNP.

154
<PAGE>

Foreign Trade

Colombia's trade has historically been, and continues to be, dominated by
the export of raw materials and the import of intermediate and capital goods.

The following table shows the trends in the composition of Colombia's
exports over the years indicated.

Trends in the Composition of Exports
1980-1996

<TABLE>
<CAPTION>
1980 1985 1990 1995(1) 1997(1)
-------------- -------------- -------------- --------------- ---------------
(millions of dollars and percentage of total exports)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Exports (FOB):
Oil and its
Derivatives........... $ 101.0 2.4% $ 451.3 11.6% $1,951.0 28.0% $ 2,189.9 21.3% $ 2,717.6 23.6%
Coffee................. 2,360.5 55.8 1,745.5 45.2 1,399.2 20.1 1,841.0 17.9 2,262.3 19.6
Coal................... 10.7 0.3 126.3 3.3 544.8 7.8 593.2 5.7 915.0 7.9
Nickel and Gold(2)..... 310.0 7.3 420.0 10.9 521.0 7.5 357.9 3.5 235.9 2.0
Nontraditional
Exports(3)............ 1,444.3 34.2 1,118.7 29.0 2,550.8 36.6 5,305.6 51.6 5,393.2 46.8
-------- ----- -------- ----- -------- ----- --------- ----- --------- -----
Total Exports.......... $4,226.5 100.0% $3,861.8 100.0% $6,966.8 100.0% $10,287.6 100.0% $11,524.5 100.0%
======== ===== ======== ===== ======== ===== ========= ===== ========= =====
</TABLE>
- --------
(1) Preliminary.
(2) Includes domestic purchases of gold by the Central Bank.
(3) Includes emeralds.
Source: The Central Bank--Economic Studies.

In 1997, exports are estimated to have amounted to $11,525 billion and are
estimated to have increased by 8.9% compared to 1996, primarily due to coal
(3.9%) and nontraditional goods (12.4%). In 1997, the volume of exports of
crude oil decreased by 6.3 due to the fall in international prices and exports
volume.

155
<PAGE>

The following table shows the composition of Colombia's exports for the
periods indicated.

Exports (FOB) by Groups of Products

<TABLE>
<CAPTION>
% of Total
1992 1993 1994 1995 1996(1) 1997(1) 1997
-------- -------- -------- --------- --------- -------- ----------
(millions of dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Mining
Oil and its
Derivatives.......... $1,395.6 $1,323.0 $1,318.2 $ 2,189.9 $ 2,900.0 $2,717.6 23.6%
Coal.................. 555.4 567.0 552.8 593.2 880.9 915.0 7.9
Emeralds.............. 179.7 399.6 422.3 452.4 174.7 141.4 1.2
Nickel................ 125.1 101.9 118.8 184.8 172.2 160.6 1.4
Gold(2)............... 363.5 312.5 304.6 173.1 204.3 75.3 0.7
Platinum.............. 0.1 15.4 37.2 NA NA NA NA
Others(3)............. 17.4 14.4 18.6 NA NA NA NA
-------- -------- -------- --------- --------- -------- -----
Total Mining............ $2,636.8 $2,733.8 $2,772.5 $ 3,593.4 $ 4,332.1 4,009.9 34.8%
Agriculture, Livestock,
Forestry and Fishing,
except Coffee.......... 1,095.6 1,062.7 1,239.0 955.2 1,003.1 1,091.7 9.5
Coffee.................. 1,258.9 1,139.7 1,990.5 1,841.0 1,579.4 2,262.3 19.6
Industry
Foods, Beverages and
Tobacco.............. 345.1 334.1 425.3 932.9 774.2 884.7 7.7
Textiles and
Apparel(4)........... 905.8 1,042.8 1,033.9 1,096.0 951.0 894.2 7.8
Wood and its
Derivatives.......... 18.7 18.9 13.8 10.7 20.2 8.9 0.1
Paper and its
Byproducts........... 184.0 198.5 214.1 254.7 222.9 249.8 2.2
Chemicals............. 389.8 441.0 544.8 898.6 964.7 1,167.9 10.1
Non-metallic
Minerals............. 105.0 109.5 119.5 55.0 65.3 68.5 0.6
Iron and Steel
Industries........... 101.7 90.8 126.1 122.9 130.2 156.7 1.4
Machinery and
Equipment............ 152.5 155.9 164.0 292.8 324.0 477.7 4.1
Other Industries(5)... 69.8 101.3 110.3 234.4 215.0 252.2 2.2
-------- -------- -------- --------- --------- -------- -----
Total Industry.......... $2,272.4 $2,492.8 $2,751.8 $ 3,898.0 $ 3,667.5 4,160.6 36.1%
-------- -------- -------- --------- --------- -------- -----
Total Exports......... $7,263.7 $7,429.0 $8,753.8 $10,287.6 $10,582.1 11,524.5 100.0%
======== ======== ======== ========= ========= ======== =====
</TABLE>
- --------
(1) Estimated.
(2) Includes domestic purchases of gold by the Central Bank.
(3) Includes salt, clay and sand mining and manufacture of fertilizers,
chemicals and other products.
(4) Includes leather, leather products and plastic.
(5) Includes jewelry, musical instruments, sporting goods and other products.
Source: Banco de la Republica, based on information provided by DANE.

Imports (FOB) increased by 21.5% in 1994 and 17.0% in 1995 and 1.3% in 1996,
due to a lowering of tariffs and an appreciation of the peso in real terms. In
1997, imports (FOB) are estimated to have totaled $15,378.9 million with a
14.5% growth relative to 1996. Imports (FOB) of consumer goods are estimated
to have increased by 28.2%, while imports of raw materials and intermediate
goods are estimated to have reached $6,576.5 million, similar to the amount in
1996. The growth in imports is primarily explained by the external purchase of
capital equipment (19.1%).

156
<PAGE>

The level of imports will continue to be affected by the opening of the
Colombian economy. The following table shows the composition of Colombia's
major imports for the periods indicated.

Imports (CIF)

<TABLE>
<CAPTION>
% of Total
1992 1993 1994 1995 1996(1) 1997(1) 1997
-------- -------- --------- --------- --------- --------- ----------
(millions of dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Consumer Goods
Non-Durable........... $ 439.4 $ 676.7 $ 1,010.0 $ 1,252.9 $ 1,440.2 NA
Durable............... 473.0 1,138.7 1,325.0 1,418.6 1,120.4 NA
-------- -------- --------- --------- --------- --------- -----
Total Consumer Goods.. $ 912.4 $1,815.4 $ 2,335.0 $ 2,671.5 $ 2,560.3 $ 2,340.4 17.1%
Raw Materials and
Intermediate Goods
Fuels(2).............. $ 344.3 $ 351.9 $ 322.0 $ 396.1 $ 412.7 NA
Agricultural.......... 297.2 228.4 296.0 338.1 481.3 NA
Industrial............ 2,941.7 3,589.6 4,180.0 5,420.3 5,643.4 NA
-------- -------- --------- --------- --------- --------- -----
Total Raw Materials
and Intermediate
Goods................ $3,583.2 $4,169.9 $ 4,798.0 $ 6,154.5 $ 6,537.4 $ 6,154.3 45.0%
Capital Goods
Construction
Materials............ $ 67.4 $ 119.4 $ 194.0 $ 259.3 $ 320.7 $ 421.1 3.1%
Agricultural.......... 35.7 51.4 73.0 70.5 63.7 59.1 0.4
Industrial............ 1,490.5 2,237.5 2,723.0 3,394.6 3,209.7 3,483.6 25.5
Transportation........ 574.3 1,426.4 1,751.0 1,302.8 991.4 1,217.3 8.9
-------- -------- --------- --------- --------- --------- -----
Total Capital Goods... $2,167.9 $3,834.7 $ 4,741.0 $ 5,027.2 $ 4,585.5 $ 5,181.1 37.9%
-------- -------- --------- --------- --------- --------- -----
Unclassified............ $ 5.3 $ 2.2 $ 9.0 -- -- NA
-------- -------- --------- --------- --------- --------- -----
Total................... $6,668.8 $9,822.2 $11,883.0 $13,853.2 $13,683.5 $13,675.9 100.0%
======== ======== ========= ========= ========= ========= =====
</TABLE>
- --------
NA means not available
(1) Preliminary.
(2) Includes oil derivatives and coal.
Source: DANE

The United States is Colombia's most important trading partner. In 1997,
trade between the two countries accounted for approximately 37% of Colombia's
total trade (exports and imports). Venezuela was Colombia's second largest
trading partner, accounting for a further 8.0% of total trade. A key component
of the Apertura program of reforms involved reducing trade barriers by
fostering economic integration with other countries. The Samper administration
has continued former President Gaviria's policies of promoting bilateral and
multilateral trade agreements with regional trading partners.

From 1990 to 1995, growth in exports occurred mainly with countries that are
members of the Andean Pact--primarily Venezuela, Peru and Ecuador. Exports to
Venezuela have grown from $443.0 million in 1991 to $988.8 million in 1997.
Similarly, exports to Peru have grown to $540.4 million and exports to Ecuador
have grown to $540.6 million in 1997. Imports from the Andean Pact countries
have also increased.

Direct Foreign Investment

Foreign investment in Colombia was traditionally directed towards the oil
and mining sectors. Previously, investment in sectors such as public services
was prohibited, and investments in the financial sector were limited to no
more than 49% foreign ownership of financial institutions. As part of the
Apertura process, the Gaviria administration enacted reforms designed to make
foreign investment in Colombia more attractive, such as the

157
<PAGE>

adoption of a legislative framework that ensures equal treatment of foreign
and local investors and foreign access to traditionally restricted economic
sectors.

The following table sets forth information on net foreign investment by
sector (excluding petroleum) for the periods indicated below.

Net Direct Foreign Investment by Sector(1)

<TABLE>
<CAPTION>
Jan.-
July
1993 1994 1995 1996 1997
---- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Petroleum..................................... $557 $ 825 $ 721 $1,101 NA
Agriculture and Fishing....................... 13 12 30 26 * 27
Mining........................................ 6 26 110 46 395
Manufacturing................................. 198 365 577 653 641
Public Services............................... 0 6 8 145 947
Construction.................................. 19 33 32 22 45
Commerce...................................... 31 81 132 151 143
Transportation and Communications............. 6 157 217 156 360
Finance(2).................................... 159 701 441 959 1,017
Social Services............................... 1 2 9 11 26
Others........................................ 3 6 8 1 0
---- ------ ------ ------ ------
Total......................................... $993 $2,214 $2,285 $3,271 $3,601
==== ====== ====== ====== ======
</TABLE>
- --------
Totals may differ due to rounding.
(1) Net foreign investment registered with the Central Bank, less remittances
of capital. The figures provided in this table represent the amount
officially registered for foreign investment with the Central Bank. In
contrast, the figures provided in the "Balance of Payments" table reflect
the amount actually invested in Colombia.
(2) Includes portfolio investment of $61.0 million in 1992, $44.0 million in
1993, $588.0 million in 1994, $243.0 million in 1995 and $245.0 million in
1996.

Source: The Central Bank.

Monetary System and Monetary Aggregates

The Central Bank was chartered in 1923. Following ratification of the new
Constitution in 1991, the Central Bank was granted greater independence from
the government in the formulation of monetary policy.

Monetary and exchange rate policy is set by the Central Bank's Board of
Directors. The Board of Directors is composed of seven members, five of whom
are permanent members appointed by the President for four-year terms, although
at the expirations of their terms, the President may not replace more than two
such members. The Minister of Finance, the sixth member of the Board of
Directors, is the sole representative of the government on the Board of
Directors. The seventh member, who is the Governor of the Central Bank, is
elected by the other six members. Unless all seven members of the Board of
Directors vote to do so, the Central Bank may not finance the government's
budget deficits, and the Central Bank is prohibited from making loans to the
private sector (except to provide liquidity to the financial system or for
intermediation of foreign indebtedness).

158
<PAGE>

Inflation and Interest Rates

The following table shows changes in the CPI and the producer price index
("PPI") and average deposit rates for the periods indicated.

Inflation and Interest Rates

<TABLE>
<CAPTION>
Short-term
Reference Rate
Period CPI(1) PPI(1) (DTF)(2)
------ ------ ------ --------------
<S> <C> <C> <C>
1992......................................... 25.1% 17.9% 26.7%
1993......................................... 22.6 13.2 25.8
1994......................................... 22.6 20.7 29.4
1995......................................... 19.5 15.4 32.3
1996......................................... 21.6 14.5 31.1
January..................................... 20.2 17.7 32.5
February.................................... 20.8 17.4 33.1
March....................................... 20.2 16.3 33.6
April....................................... 19.9 14.6 33.6
May......................................... 19.8 14.6 32.1
June........................................ 19.7 13.0 32.1
July........................................ 20.6 13.8 32.4
August...................................... 21.1 14.0 30.4
September................................... 21.6 14.4 28.4
October..................................... 21.9 15.5 28.7
November.................................... 21.9 15.0 28.5
December.................................... 21.6 14.5 28.0
1997
January..................................... 20.6 12.7 26.5
February.................................... 19.6 12.2 25.4
March....................................... 18.9 14.0 25.5
April....................................... 18.5 14.9 24.7
May......................................... 18.6 14.9 23.6
June........................................ 18.7 17.1 23.2
July........................................ 17.9 15.5 23.2
August...................................... 18.0 15.3 23.0
September................................... -- -- --
October..................................... 17.8 17.1 23.5
November.................................... 17.8 17.3 24.1
December ................................... 17.7 17.5 24.3
1998
January..................................... 17.6 18.5 24.5
February.................................... 18.0 21.2 24.8
March....................................... 19.2 18.6 27.1
April....................................... 20.7 18.6 29.9
May......................................... 20.7 19.1 31.9
June........................................ 20.7 17.6 36.6
July........................................ 17.9 15.5 23.0
August...................................... 18.0 15.3 23.0
September................................... 18.0 16.1 22.9
</TABLE>
- --------
(1) For the annual periods, percentage change over the twelve months ending
December 31 of each year; for monthly periods in 1996, percentage change
over the previous twelve months at end of each month indicated.
(2) Average for each of the years 1992-1997, and for each month in 1997 and
1998, of the short-term composite reference rate (Depositos a Termino Fijo
("DTF")), as calculated by the Superintendency of Banks.
Source: Superintendencia Bancaria y Banco de la Republica.

159
<PAGE>

Foreign Exchange Rates

Colombia's official monetary unit is the peso, the value of which was
established against foreign currencies under a crawling peg system between
1967 and 1991. Under this system, the nominal exchange rate was determined by
the Central Bank.

In February 1994, the Central Bank instituted a mechanism, which consists of
a 15% band within which the exchange rate is allowed to fluctuate. The Central
Bank intervenes by selling or purchasing its debt securities in order to
maintain the exchange rate within the 15% band. Such a band is allowed to
depreciate by small amounts to meet an annual target devaluation rate. In
December 1994, the Central Bank narrowed the band to 14%, shifted the band
downward by 7% and increased the rate at which it devalues the band to meet an
annual target devaluation rate of 13.6% for 1995. The band was set to reflect
a projected devaluation rate, in nominal terms, of 13.6% for 1996, 15.0% for
1997 and 13.0% for 1998.

PESO/DOLLAR

<TABLE>
<CAPTION>
Official Representative Market
--------------------- ---------------------------------------------
% Change % Change
From Prior From Prior
Period End Period End Low High Average Period End Period End
---------- ---------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1992.................... Ps811.8 14.8% Ps632.4 Ps720.5 Ps682.5 Ps738.0 16.7%
1993.................... 917.3 13.0 738.7 819.6 786.5 804.3 9.0
1994.................... 1,018.8 11.0 804.3 843.3 829.4 831.3 3.3
1995.................... N/A N/A 831.3 1,003.5 987.1 987.6 18.8
1996.................... N/A N/A 987.6 1,074.7 1,000.5 1,005.4 1.8
1997.................... N/A N/A 1,005.3 1,307.5 1,141.0 1,293.6 28.7
1998.................... N/A N/A 1,341.9 1,577.2 1,433.6 1,542.1 19.2
1999 (through March 31,
1999).................. N/A N/A 1,525.6 1,596.6 1,533.5 1,561.0 1.2
</TABLE>

Sources: Banco de la Republica, Superintendencia Bancaria

International Reserves

As of December 31, 1996, net international reserves were $9.9 billion,
representing coverage of approximately nine months of imports of goods and
approximately six months of imports of goods and services. Net international
reserves increased by $1.6 billion, or 18.9%, from December 31, 1995 to
December 31, 1996.

160
<PAGE>

The following table shows the composition of international reserves of the
Central Bank at each of the dates indicated.

<TABLE>
<CAPTION>
1992 1993(1) 1994(2) 1995 1996(2) 1997(2)
-------- -------- -------- -------- -------- --------
(millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
Gross International
Reserves:
Monetary Gold......... $ 172.2 $ 118.5 $ 111.9 $ 103.2 $ 95.7 $ 104.1
Special Drawing
Rights............... 47.9 158.1 169.9 176.6 176.3 172.3
Andean Pesos.......... 20.0 20.0 20.0 20.0 20.0 20.0
Foreign Exchange...... 7,231.4 7,346.0 7,453.4 7,733.7 9,185.6 9,039.1
Others(3)............. 256.5 289.8 348.2 423.8 462.6 575.4
-------- -------- -------- -------- -------- --------
Total............... $7,728.0 $7,932.4 $8,103.4 $8,457.3 $9,940.2 $9,910.9
Less: Short and Medium-
term Liabilities of
Banco de la Republica.. 14.8 63.3 101.1 132.9 43.6 29.4
-------- -------- -------- -------- -------- --------
Net International
Reserves............... $7,713.2 $7,869.1 $8,002.3 $8,324.4 $9,896.6 $9,881.6
======== ======== ======== ======== ======== ========
Reserves (Months of
Imports (FOB))
Goods................. 15.4 10.4 8.7 7.7 9.2 8.3
Goods and Services.... 8.8 6.8 5.7 5.1 5.8 5.2
</TABLE>
- --------
NA means not available
(1) Beginning in 1993, Colombia's method of valuing gold and foreign
currencies was changed from historical cost to market value at end of
period. In addition, the methodology for valuing international monetary
assets and liabilities was changed from a cash to an accrual basis. The
combined effect of these two changes was an increase in international
reserves of $254 million at December 31, 1993.
(2) Preliminary.
(3) Includes deposits in Latin American Reserve Fund and Andean Reserve Fund
and compensation agreements.
Source: The Central Bank.

Securities Markets

Colombia has three stock exchanges, one located in each of the cities of
Bogota, Medellin and Cali. The stock exchanges are owned by member firms that
are responsible for developing and implementing regulations governing trade on
their exchanges. Although self-regulating, they remain subject to the approval
and supervision of the Superintendency of Securities, the principal securities
market regulatory agency. According to the Superintendency of Securities, the
market capitalization of the three exchanges as of December 31, 1997 was $20.0
billion.

The total value of securities traded on the three Colombian stock exchanges
during 1997 was Ps42.1 billion (approximately $32.5 billion), representing
nominal growth of 15% over the value of securities traded in 1996. Both debt
and equity securities are traded on the three stock exchanges, including
stocks and bonds of private-sector corporations, although the vast majority of
securities traded are fixed income debt securities.

161
<PAGE>

INDEX TO FINANCIAL STATEMENTS

Transtel Pass Through Trust

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Statements of Assets and Undivided Interests at December 31, 1997 and
1998.................................................................... F-3
Statements of Distributable Income and Changes in Undivided Interests for
the Period October 20, 1997 (Inception) Through December 31, 1997 and
for the Year ended December 31,1998..................................... F-4
Statements of Cash Flows for the Period October 20, 1997 (Inception)
Through December 31, 1997 and for the Year ended December 31,1998....... F-5
Notes to the Financial Statements........................................ F-6

Transtel S.A.

Report of Independent Accountants........................................ F-8
Consolidated Balance Sheets at December 31, 1996, 1997 and 1998.......... F-9
Consolidated Statements of Income for the Years Ended December 31, 1996,
1997 and 1998........................................................... F-10
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended December 31, 1996, 1997 and 1998.................................. F-11
Consolidated Statements of Changes in Financial Position for the Years
Ended December 31, 1996, 1997 and 1998.................................. F-12
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, 1997 and 1998..................................................... F-13
Notes to the Consolidated Financial Statements........................... F-14
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustee of
Transtel Pass Through Trust

We have audited the accompanying statements of assets and undivided
interests of Transtel Pass Through Trust as of December 31, 1998 and 1997, and
the related statements of distributable income and changes in undivided
interests and of cash flows for the period from October 20, 1997 (inception)
through December 31, 1997 and for the year ended December 31, 1998. These
financial statements are the responsibility of the Trust. Our responsibility
is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements audited by us present fairly, in
all material respects, the assets and undivided interests of Transtel Pass
Through Trust as of December 31, 1998 and 1997, and the distributable income
and changes in undivided interests and cash flows for the period from October
20, 1997 (inception) through December 31, 1997 and for the year ended December
31, 1998, in conformity with generally accepted accounting principles in the
United States of America.

/s/ Price Waterhouse

Cali, Colombia
March 31, 1999

F-2
<PAGE>

TRANSTEL PASS THROUGH TRUST

STATEMENTS OF ASSETS AND UNDIVIDED INTERESTS
(Thousands of Dollars)

<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
-------- --------
<S> <C> <C>
ASSETS
Rceivable--Senior Notes due 2007
from Transtel S.A......................................... $150,000 $150,000
Accrued interest income...................................... 3,281 3,658
-------- --------
Total assets................................................. $153,281 $153,658
======== ========
UNDIVIDED INTERESTS OF CERTIFICATEHOLDERS
Undivided interests of Certificateholders.................. $153,281 $153,658
======== ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-3
<PAGE>

TRANSTEL PASS THROUGH TRUST

STATEMENTS OF DISTRIBUTABLE INCOME AND

CHANGES IN UNDIVIDED INTERESTS
(Thousands of Dollars)

<TABLE>
<CAPTION>
For the Period For the Year
October 20, 1997 Ended
(Inception) Through December 31,
December 31, 1997 1998
------------------- ------------
<S> <C> <C>
Distributable income--interest income.......... $ 3,281 $ 19,781
-------- --------
Undivided interests of Certificateholders:
Beginning of period.......................... -- 153,281
Proceeds from sale of Certificates........... 150,000
Income distributed to Certificateholders..... (19,404)
-------- --------
End of period.................................. $153,281 $153,658
======== ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-4
<PAGE>

TRANSTEL PASS THROUGH TRUST

STATEMENTS OF CASH FLOW
(Thousands of Dollars)

<TABLE>
<CAPTION>
For the Period
October 20, 1997 For the Year
(Inception) Through Ended
December 31, 1997 December 31, 1998
------------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Distributable income.................... $ 3,281 $ 19,781
Adjustments to reconcile distributable
income to net
cash provided by operations:
Accrued interest income............... (3,281) (377)
--------- --------
Net cash provided by operating activi-
ties.................................. -- 19,404
--------- --------
Cash flows from financing activities:
Proceeds from sale of Certificates.... 150,000
Income distributed to
Certificateholders................... (19,404)
--------- --------
150,000 (19,404)
--------- --------
Cash flows used by investing activities:
Purchase of Senior Notes from Transtel
S.A.................................. (150,000) --
--------- --------
Net change in cash.................... -- --
Cash at beginning of period........... -- --
--------- --------
Cash at end of period................. $ -- $ --
========= ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-5
<PAGE>

TRANSTEL PASS THROUGH TRUST

NOTES TO FINANCIAL STATEMENTS

Note 1--Nature of Operations

Transtel Pass Through Trust (the "Trust") is a statutory business trust,
created under Delaware law pursuant to a trust agreement and the filing of a
certificate of trust with the Delaware Secretary of State on October 20, 1997.
The Trust is governed by the Amended and Restated Trust Agreement, dated
October 28, 1997, among Transtel S.A., Wilmington Trust Company, as pass
through trustee, and the holders of the certificates (the
"Certificateholders"). The Trust exists for the exclusive purposes of (i)
issuing and selling the certificates, (ii) using the proceeds from the sale of
the certificates to acquire the Senior Notes; and (iii) engaging in only those
other activities necessary or incidental thereto. Accordingly, the Senior
Notes and related accrued interest will be the sole assets of the Trust and
payments received in respect of the Senior Notes will be the sole source of
revenue of the Trust.

On October 28, 1997, the Trust sold $150 million of certificates
representing pro rata interests in the assets of the Trust (the
"Certificates"). Concurrently, the Trust used the proceeds of the sale to
purchase $150 million of 12 1/2% Senior Notes due 2007 (the "Senior Notes")
issued by Transtel S.A. (the "Company").

Note 2--Significant Accounting Policies

Basis of presentation

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amount of
distributable income, assets and liabilities and disclosure of contingencies.
Actual results could differ from these estimates.

The Trust maintains its books and records on a cash basis. The accompanying
financial statements contain adjustments, not recorded in the Trust's
accounting records, to reflect the accrual method of accounting.

Interest income

Interest income is recorded on the accrual method using the contractual rate
of interest on the Senior Notes, including additional interest when
applicable.

Administrative expenses

Administrative expenses of the Trust are paid by the Company and are not
recorded in the financial statements of the Trust.

Note 3--12 1/2% Senior Notes due 2007

The Senior Notes bear interest at a rate of 12 1/2% per annum payable
semiannually in cash on May 1 and November 1 of each year commencing May 1,
1998. Interest distributions received on each May 1 and November 1 will be
paid to the persons who are the registered Certificateholders on the April 15
and October 15, as the case may be, immediately preceding such interest
payment date. Certain additional interest clauses may increase the interest
rate by a maximum of 2% for certain periods of time. The interest rates in
effect at December 31, 1998 and 1997 were 12 1/2% and 14%, respectively. On
February 21, 1999, the interest rate increased to the maximum rate of 14 1/2%.
Each Certificateholder will be entitled to receive a pro rata share of any
payments received by, or on behalf of, the trustee or on behalf of the Trust
in respect of the Senior Notes.

F-6
<PAGE>

TRANSTEL PASS THROUGH TRUST

NOTES TO FINANCIAL STATEMENTS--(Continued)

The Senior Notes are redeemable, in whole or in part, at the option of the
Company, on or after November 1, 2002, at the following redemption prices plus
accrued and unpaid interest to the date of redemption:

<TABLE>
<CAPTION>
Redemption
12-month period commencing November 1, Price
-------------------------------------- ----------
<S> <C>
2002........................................................... 106.250%
2003........................................................... 104.688
2004........................................................... 103.125
2005........................................................... 101.565
2006 and thereafter............................................ 100.000
</TABLE>

In addition, in the event of the sale by the Company of at least $25.0
million of its capital stock in one or more public equity offerings or to one
or more strategic equity investors, as defined, on or prior to November 1,
2000, the Company may, at its option, use the net cash proceeds of such sale
or sales to redeem up to 35% of the Senior Notes at a redemption price of
112.5% of the principal amount thereof plus accrued and unpaid interest to the
date of redemption. Upon a change of control, the Company will be required to
make an offer to repurchase the Senior Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, to the date of
repurchase.

Note 4--Federal Income Tax

The Trust is classified as a grantor trust for federal income tax purposes,
and therefore is not taxable. Each Certificateholder will be treated as the
owner of a pro rata undivided interest in each of the assets in the Trust.

F-7
<PAGE>

TRANSTEL S.A.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Transtel S.A.

We have audited the accompanying consolidated balance sheets of Transtel
S.A. and its subsidiaries as of December 31, 1996, 1997 and 1998, and the
related consolidated statements of income, of changes in shareholders' equity,
of changes in financial position and of cash flows for each of the three years
in the period ended December 31, 1998, all expressed in constant Colombian
pesos of December 31, 1998 purchasing power. 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 generally accepted auditing
standards in Colombia, which are substantially consistent with those in the
United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements audited by us present
fairly, in all material respects, the financial position of Transtel S.A. and
its subsidiaries at December 31, 1996, 1997 and 1998, and the results of their
operations, the changes in their financial position and their cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles in Colombia.

Accounting principles generally accepted in Colombia, as described in Notes
2 and 3 to the financial statements, vary in certain significant respects from
accounting principles generally accepted in the United States of America. The
application of the latter would have affected the determination of
consolidated net income expressed in constant Colombian pesos of December 31,
1998 purchasing power for each of the three years in the period ended December
31, 1998, and the determination of consolidated shareholders' equity also
expressed in constant Colombian pesos of December 31, 1998 purchasing power at
December 31, 1996, 1997 and 1998 to the extent summarized in Note 31 to the
consolidated financial statements.

/s/ Price Waterhouse

Cali, Colombia
March 2, 1999

F-8
<PAGE>

TRANSTEL S.A.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
1996 1997 1998 1998
------------- ------------- ------------- -----------
(Thousands of Pesos of December 31, 1998 (Thousands
--Note 2) of Dollars,
unaudited
--Note 3)
<S> <C> <C> <C> <C>
ASSETS
Current
Cash.................... Ps 15,943,884 Ps 3,226,399 Ps 3,574,256 $ 2,318
Short-term and temporary
investments (Note 4)... 6,112,096 121,317,359 58,847,016 38,160
Accounts receivable, net
(Note 5)............... 7,110,769 18,860,663 30,043,617 19,482
Inventories (Note 6).... 343,603 1,108,167 2,669,069 1,731
Prepaid expenses........ 192,041 598,397 789,798 512
------------- ------------- ------------- --------
Total current assets.... 29,702,393 145,110,985 95,923,756 62,203
Noncurrent
Accounts receivable
(Note 5)............... 6,182,926 16,160,545 42,282,631 27,419
Properties, plant and
equipment, net (Note
7)..................... 31,144,030 130,997,131 264,084,214 171,249
Deferred monetary
correction............. 565,928 2,734,192 3,975,713 2,578
Deferred costs (Note
8)..................... 15,418,318 56,437,611 61,415,085 39,825
Long-term investments
(Note 4)............... 45,273 36,341,174 2,933,388 1,902
Other assets (Note 9)... 136,811 2,500,561 4,947,373 3,208
Reappraisal of assets
(Note 10).............. 16,791,779 18,386,367 32,788,298 21,262
------------- ------------- ------------- --------
Total assets............ Ps99,987,458 Ps408,668,566 Ps508,350,458 $329,646
============= ============= ============= ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt (Note
12).................... Ps12,757,849 Ps 587,742 Ps13,578,652 $ 8,805
Current portion of other
long-term debt (Note
12).................... 7,876,103 15,142,235 1,464,219 949
Current portion of
capital lease
obligations (Note 19).. 75,530 243,722 4,110,110 2,665
Accounts payable (Note
13).................... 4,052,707 18,217,065 30,241,920 19,611
Tax liabilities (Note
14).................... 969,804 2,964,137 5,523,580 3,583
Labor liabilities (Note
15).................... 154,735 494,343 966,859 627
Other liabilities (Note
16).................... 249,160 7,996,977 3,707,496 2,404
Accrued pension
obligations (Note 17).. 618,380 538,615 349
------------- ------------- ------------- --------
Total current
liabilities............ 26,135,888 46,264,601 60,131,451 38,993
Long-term liabilities
12 1/2 % Senior Notes
due 2007 (Note 12)..... 224,474,459 231,316,500 150,000
20.32% Senior Discount
Notes due 2008 (Note
12).................... 23,131,650 15,000
Other long-term debt
(Note 12).............. 29,026,108 8,813,801 5,715
Capital lease
obligations (Note 19).. 1,164,028 1,305,417 28,611,996 18,554
Deferred monetary
correction............. 906,460 5,184,256 4,809,831 3,119
Accrued pension
obligations (Note 17).. 6,881,948 6,480,779 4,202
Other liabilities (Note
20).................... 84,790 14,146,027 10,951,658 7,103
------------- ------------- ------------- --------
Total liabilities....... 57,317,274 298,256,708 374,247,666 242,686
------------- ------------- ------------- --------
Minority interest (Note
21)..................... 20,284,410 49,052,598 57,812,814 37,489
------------- ------------- ------------- --------
Commitments (Note 30)
Shareholders' equity
(Note 22):
Common stock, Ps1 par
value, 50 billion
shares authorized;
34,611,747,976 shares
issued and outstanding
(5,039,801,222 in 1997
and 4,000,000,000 in
1996).................. 7,395,882 9,318,444 44,450,118 28,824
Premium on shares
issued................. 35,131,674
Retained earnings....... 4,757,620 6,016,454 17,541,294 11,375
Surplus from reappraisal
of assets (Note 10).... 10,232,272 10,892,688 14,298,566 9,272
------------- ------------- ------------- --------
Total shareholders'
equity................. 22,385,774 61,359,260 76,289,978 49,471
------------- ------------- ------------- --------
Total liabilities and
shareholder's equity... Ps99,987,458 Ps408,668,566 Ps508,350,458 $329,646
============= ============= ============= ========
Memorandum accounts (Note
11)..................... Ps36,338,002 Ps340,689,677 Ps241,968,461 $156,907
============= ============= ============= ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-9
<PAGE>

TRANSTEL S.A.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------
1996 1997 1998 1998
------------ ------------ ------------- -----------
(Thousands of Pesos of (Thousands
December 31, 1998-- of Dollars,
Note 2) unaudited
--Note 3)
<S> <C> <C> <C> <C>
Revenues (Note 23)...... Ps13,755,565 Ps30,730,089 Ps 85,639,390 $ 55,534
------------ ------------ ------------- --------
Costs and expenses:
Operating costs (Note
24).................. 2,923,582 7,678,937 17,918,723 11,620
Administrative
expenses (Note 25)... 4,448,128 10,093,796 20,315,024 13,173
Marketing expenses
(Note 26)............ 902,151 1,812,973 5,457,184 3,539
------------ ------------ ------------- --------
8,273,861 19,585,706 43,690,931 28,332
------------ ------------ ------------- --------
Operating income...... 5,481,704 11,144,383 41,948,459 27,202
------------ ------------ ------------- --------
Nonoperating income
(expenses)
Financial income (Note
27).................. 1,012,447 10,215,298 53,151,285 34,467
Financial expenses
(Note 27)............ (2,623,773) (15,925,127) (86,311,695) (55,970)
Other (Note 27)....... 380,535 (2,154,555) 1,065,634 691
------------ ------------ ------------- --------
(1,230,791) (7,864,384) (32,094,776) (20,812)
------------ ------------ ------------- --------
Net monetary inflation
adjustment income
(Note 28).............. 2,647,099 4,085,823 16,860,593 10,933
------------ ------------ ------------- --------
Income before income
taxes and minority
interest............. 6,898,012 7,365,822 26,714,276 17,323
Income tax expense (Note
18).................... (380,041) (1,347,014) (5,185,064) (3,362)
------------ ------------ ------------- --------
Income before minority
interest............. 6,517,971 6,018,808 21,529,212 13,961
Minority interest....... (2,654,826) (4,759,974) (10,004,372) (6,487)
------------ ------------ ------------- --------
Net income.......... Ps 3,863,145 Ps 1,258,834 Ps 11,524,840 $ 7,474
============ ============ ============= ========
Earnings per share (in
single Pesos and single
Dollars per share)..... Ps 0.97 Ps 0.28 Ps 1.84 $ --
============ ============ ============= ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-10
<PAGE>

TRANSTEL S.A.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

Years Ended December 31, 1996, 1997 and 1998

(Thousands of Pesos of December 31, 1998--Note 2 and shares in thousands)

<TABLE>
<CAPTION>
Common Shares Outstanding
------------------------- Surplus from Total
Number Premium on Retained Reappraisal Shareholders'
(Note 18) Amount Shares Issued Earnings of Assets Equity
------------------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... 4,000,000 Ps 7,395,882 Ps -- Ps 894,475 Ps -- Ps 8,290,357
Net income.............. 3,863,145 3,863,145
Increase during the
year................... 10,232,272 10,232,272
----------- ------------- ------------ ------------ ------------ ------------
Balance at December 31,
1996................... 4,000,000 7,395,882 4,757,620 10,232,272 22,385,774
Shares issued for cash
(Note 22).............. 1,039,801 1,922,562 35,131,674 37,054,236
Net income.............. 1,258,834 1,258,834
Increase during the
year................... 660,416 660,416
----------- ------------- ------------ ------------ ------------ ------------
Balance at December 31,
1997................... 5,039,801 9,318,444 35,131,674 6,016,454 10,892,688 61,359,260
Net income.............. 11,524,840 11,524,840
Shares issued from share
premium (Note 22)...... 29,571,947 35,131,674 (35,131,674)
Increase during the
year................... 3,405,878 3,405,878
----------- ------------- ------------ ------------ ------------ ------------
Balance at December 31,
1998................... 34,611,748 Ps44,450,118 Ps -- Ps17,541,294 Ps14,298,566 Ps76,289,978
=========== ============= ============ ============ ============ ============
</TABLE>

Retained earnings balances consist of the following:

<TABLE>
<CAPTION>
December 31,
------------------------------------
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Legal reserve............................. Ps 89,448 Ps 475,763 Ps 601,647
Appropriated for future construction...... 805,027 805,027 805,027
Appropriated for future acquisitions...... 3,863,145 3,476,830 4,609,780
Unappropriated retained earning........... -- 1,258,834 11,524,840
----------- ----------- ------------
Ps4,757,620 Ps6,016,454 Ps17,541,294
=========== =========== ============
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-11
<PAGE>

TRANSTEL S.A.

CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION

<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------------
1996 1997 1998 1998
------------ ------------- ------------- -----------
(Thousands of Pesos of December 31, 1998 (Thousands
--Note 5) of Dollars,
unaudited
--Note 3)
<S> <C> <C> <C> <C>
Sources of working
capital:
Net income............. Ps 3,863,145 Ps 1,258,834 Ps 11,524,840 $ 7,473
Items that do not
utilize (provide)
working capital:
Depreciation........... 264,696 611,156 2,555,384 1,657
Amortization........... 1,220,226 3,909,346 9,416,878 6,106
Deferred income taxes.. (4,249) (420,726) (273)
Allowance for writedown
of properties, plant
and equipment......... 110,594 851,271 552
Allowance for doubtful
accounts.............. 14,688 220,282 914,865 593
Allowance for
inventories........... 292,992 190
Gain on sale of
properties, plant and
equipment............. (235,444) (4,402) (3)
Minority interest...... 2,654,827 4,759,974 10,004,372 6,487
Net inflation
adjustment from non-
current balance sheet
account............... (2,408,252) (3,645,379) (15,247,377) (9,887)
Deferred monetary
correction, net....... (54,209) 740,208 (1,615,946) (1,048)
------------ ------------- ------------- --------
Working capital
provided by
operations............ 5,319,677 7,960,766 18,272,151 11,847
------------ ------------- ------------- --------
Financial resources
generated otherwise:
Sales proceeds from
properties, plant and
equipment............. 3,270,651 171,918 112
Issuance of Senior
Notes due 2007........ 224,474,459
Issuance of Senior
Discount Notes due
2008.................. 23,131,650 15,000
Accrued pension
obligations........... 6,881,948 (401,169) (259)
Increase (decrease) in
other debt............ 15,031,859 (29,026,108) 8,813,801 5,716
Capital lease
obligations........... 1,142,586 141,389 27,306,579 17,707
Increase in other
liabilities........... 14,061,237 3,647,672 2,366
Investment by minority
interest.............. 23,412,655
Shares issued for
cash.................. 37,054,234
------------ ------------- ------------- --------
19,445,096 276,999,814 62,670,451 40,642
------------ ------------- ------------- --------
Total financial
resources generated.. 24,764,773 284,960,580 80,942,602 52,489
------------ ------------- ------------- --------
Financial resources
utilized:
Purchases of
properties, plant and
equipment............. (9,089,674) (106,980,416) (136,710,967) (88,652)
Purchases of
reappraisal of
assets................ (10,347,549) (6,710)
Increase in deferred
costs................. (8,056,982) (43,742,835) (13,714,049) (8,893)
Increase in long-term
investments........... (14,928) (36,176,620)
Decrease in long-term
investments........... 33,240,557 21,555
Increase in other
assets................ (128,890) (2,099,592) (2,392,239) (1,551)
Noncurrent accounts
receivable............ (6,182,926) (9,977,618) (27,036,951) (17,532)
Dividends paid to
minority interest..... (2,159,303) (1,400)
Decrease in other
liabilities........... (73,213)
------------ ------------- ------------- --------
(23,546,613) (198,977,081) (159,120,501) (103,183)
------------ ------------- ------------- --------
Effect of revaluing to
constant pesos........ 2,157,835 9,296,381 15,416,812 9,997
------------ ------------- ------------- --------
Increase (decrease) in
working capital...... Ps 3,375,995 Ps 95,279,880 Ps(62,761,087) $(40,697)
============ ============= ============= ========
Changes in working
capital components:
Cash................... Ps15,110,197 Ps(12,717,485) 347,857 226
Short-term and
temporary
investments........... 6,100,439 115,205,262 (62,470,343) (40,510)
Accounts receivable.... 2,342,532 11,749,894 11,182,954 7,252
Inventories............ (73,025) 764,564 1,853,894 1,202
Prepaid expenses....... 53,896 406,356 191,401 124
Short-term debt........ (10,694,361) 12,170,106 (12,990,910) (8,424)
Current portion of
other long-term debt.. (6,869,114) (7,266,131) 13,678,016 8,870
Current portion of
capital lease
obligations........... (26,125) (168,191) (3,866,388) (2,507)
Accounts payable....... (1,662,710) (14,164,357) (12,024,855) (7,798)
Tax liabilities........ (709,308) (1,994,333) (2,559,443) (1,660)
Labor liabilities...... (91,527) (339,608) (472,516) (306)
Accrued pension
obligations........... (618,380) 79,765 52
Other liabilities...... (104,899) (7,747,817) 4,289,481 2,782
------------ ------------- ------------- --------
Increase (decrease) in
working capital....... Ps 3,375,995 Ps 95,279,880 Ps(62,761,087) $(40,697)
============ ============= ============= ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-12
<PAGE>

TRANSTEL S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------------
1996 1997 1998 1998
-------------- -------------- -------------- -----------
(Thousands of Pesos of December 31, 1998-- (Thousands
Note 2) of Dollars,
unaudited
--Note 3)
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............ Ps 3,863,145 Ps 1,258,834 Ps 11,524,840 $ 7,473
Adjustments to
reconcile net income
with net cash
Provided by
operations:
Depreciation......... 264,696 611,156 2,555,384 1,657
Amortization......... 1,220,226 3,909,346 9,416,878 6,106
Deferred income
taxes............... (4,249) (420,726) (273)
Allowance for
writedown of
property, plant and
equipment........... 110,594 851,271 552
Allowance for
doubtful accounts... 14,668 220,282 914,865 593
Allowance for
inventories......... 292,992 190
Gain on sales of
properties, plant
and equipment....... (235,443) (4,402) (3)
Minority interest.... 2,654,826 4,759,974 10,004,372 6,487
Net inflation
adjustment from
balance sheet
accounts............ (2,498,076) (3,702,202) (15,716,169) (10,191)
Deferred monetary
correction, net..... (54,209) 536,400 (1,615,946) (1,048)
Changes in operating
assets and
liabilities:
Accounts receivable.. (4,172,254) (15,841,744) (29,750,488) (19,292)
Inventories.......... 162,850 (258,292) (516,650) (335)
Prepaid expenses..... (53,896) (396,964) (132,785) (86)
Deferred costs....... (8,056,982) (9,039,624) (12,109,510) (7,853)
Other assets......... (128,890) (279,896) (1,050,231) (681)
Accounts payable..... 1,591,861 5,009,131 12,024,855 7,798
Labor liabilities.... 91,527 324,401 313,229 203
Tax liabilities...... 709,308 1,377,449 2,385,108 1,547
Accrued pension
obligations......... (485,018) (314)
Other liabilities.... 31,685 8,476,685 (4,417,522) (2,864)
-------------- -------------- -------------- --------
Net cash (used for)
provided by
operating
activities......... (4,594,938) (2,928,719) (15,935,653) (10,334)
-------------- -------------- -------------- --------
Cash flows from
investing activities:
Purchases of
properties, plant and
equipment............ (7,824,438) (52,739,359) (73,632,477) (47,748)
Advances on
properties, plant and
equipment............ (4,367,891) (10,425,992) (14,500,306) (9,403)
Acquisition costs..... (3,678,421)
Payment for purchase
of Cablevision, net
of cash acquired..... (20,154,906) (13,070)
Sales of properties,
plant and equipment.. 3,270,651 171,918 111
Purchases of
investments.......... (19,580,908) (257,434,713) (143,062,244) (92,770)
Proceeds from maturity
of short-term
investments.......... 13,465,540 103,368,178 234,382,704 151,988
Proceeds from sale of
temporary
investments.......... 3,162,641 4,474,203 2,901
-------------- -------------- -------------- --------
Net cash used by
investing
activities......... (15,037,046) (217,747,666) (12,321,108) (7,991)
-------------- -------------- -------------- --------
Cash flows from
financing activities:
Senior Notes due
2007................. 224,474,459
Senior Discount Notes
due 2008............. 23,131,650 15,000
Issuance costs of
Senior Notes and
Senior Discount
Notes................ (31,024,790) (1,019,457) (661)
Bank overdrafts
borrowings........... 7,492,414 19,177,590 5,016,040 3,252
Issuance of other
debt................. 49,127,322 127,618,761 34,210,006 22,184
Bank overdrafts
repayments........... (2,973,984) (18,589,848) (10,247,788) (6,645)
Repayments of other
debt................. (21,050,418) (169,114,932) (35,315,490) (22,901)
Shares issued for
cash................. 37,054,234
Dividends paid to
minority interest.... (2,159,303) (1,400)
Sale of customer
accounts receivable.. 9,496,424 7,332,065 4,755
Repayments of capital
lease obligations.... (25,677) (649,661) (7,759,917) (5,032)
-------------- -------------- -------------- --------
Net cash provided by
financing
activities......... 32,569,657 198,442,237 13,187,806 8,552
-------------- -------------- -------------- --------
Effect of revaluing to
constant pesos........ 2,172,524 9,516,663 15,416,812 9,997
-------------- -------------- -------------- --------
Net (decrease)
increase in cash..... 15,110,197 (12,717,485) 347,857 224
Cash at beginning of
year................. 833,687 15,943,884 3,226,399 2,092
-------------- -------------- -------------- --------
Cash at end of year... Ps 15,943,884 Ps 3,226,399 Ps 3,574,256 $ 2,316
============== ============== ============== ========
Supplemental disclosure
of cash flows
information:
Cash paid during the
year for:
Interest.............. Ps 8,697,337 Ps 14,179,517 Ps 42,206,049 $ 27,369
============== ============== ============== ========
Income taxes.......... Ps 23,790 Ps 2,775,484 Ps 6,874,535 $ 4,458
============== ============== ============== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-13
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Pesos of December 31, 1997--Note 2, unless otherwise specified)

Note 1--Reporting Entity

Transtel S.A. (hereafter, Transtel S.A. and its subsidiaries are referred to
as the "Company" or "Transtel") was created under Colombian law on August 23,
1993 for a term expiring on August 23, 2023; this term may be extended by an
amendment of the Company's bylaws. Transtel maintains its accounting records
and prepares its financial statements in Colombian pesos ("Pesos"). As more
fully explained in Note 2, the accompanying annual financial statements are
restated in constant Pesos of December 31, 1998 purchasing power.

The Company's business consists of the design, installation, operation and
ownership of fixed telephony networks in various areas of Colombia and,
commencing in 1998, the operating of pay television services in Cali.

To date, Transtel has grown primarily through the formation of subsidiaries
with municipalities as their minority shareholders. Transtel contributed cash
(except in the case of Caucatel where Transtel's contribution consisted of
cash and equipment) to each subsidiary in exchange for a majority ownership.
In exchange for a minority ownership position in the subsidiary, the relevant
municipality either (i) transferred its currently owned telecommunications
infrastructure along with its cooperation in various forms, including the
provision of its demographic information and the required civil works permits
on an expedited basis, or (ii) where such current infrastructure does not
exist, contributed nominal cash and demographic information and permits
cooperation only. Once the subsidiary structure is in place, Transtel then
focuses on expanding the subscriber base and either upgrading the current
infrastructure or building a new infrastructure, as the case may be.

As of December 31, 1998, Transtel has formed nine operating subsidiaries as
shown in the following chart:

<TABLE>
<CAPTION>
Date
Primary Date commercial Percent
area Incorporated operations owned by
Subsidiary served by Transtel began Transtel
---------- ----------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Empresa de Telefonos de
Jamundi S.A., E.S.P.
("TeleJamundi").............. Jamundi 9/29/93 6/1/97 70%
Unitel S.A. E.S.P.
("Unitel")................... Yumbo 3/11/94 6/1/97 95
Empresa de Tel fonos de
Palmira S.A., E.S.P. Palmira and
("TelePalmira").............. Candelaria 5/31/95 9/1/95 60
Telefonos de Cartago S.A.,
E.S.P. ("TeleCartago")....... Cartago 1/3/97 4/1/97 65
Caucatel S.A., E.S.P.
("Caucatel")................. Popayan 4/30/97 5/1/97 51
Bugatel S.A., E.S.P.
("Bugatel").................. Buga 6/16/97 7/1/97 60
Empresa de Telecomunicaciones
de Girardot S.A. E.S.P.
("TeleGirardot")............. Girardot 12/31/97 1/1/98 60
Suscripciones Auduovisuales
S.A.......................... Cali 1/31/98 100
Cablevision S.A............... Cali 1/31/98 100
</TABLE>

In addition to the above subsidiaries, Transtel formed TeleCauca S.A. E.S.P.
as a 98% owned subsidiary on December 27, 1996, Invercable S.A. as a 100%
owned subsidiary on July 27, 1998 and Unicable S.A. as a 100% owned subsidiary
on July 27, 1998; however, they have had no operations to date.

Transtel S.A. was in the preoperating stage until September 1, 1995. As of
December 31 1998, Transtel S.A. had no significant operations or assets and
liabilities except for its investments in its subsidiaries, the issuance of
the Senior Notes due 2007 and the Discount Notes due 2008 and the investments
of a portion of the proceeds therefrom.

F-14
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

TeleJamundi and Unitel were formed by Transtel S.A. contributing cash of
Ps29,054 and Ps89,872, respectively, for a 70% and 80% interest, respectively.
In December 1997, Transtel purchased an additional approximately 15% ownership
investment in Unitel by exchanging Ps6,485,602 of its advances to Unitel for
Unitel shares. The municipalities of Jamundi and Yumbo contributed Ps12,451
and Ps22,469 in cash for their minority interests in TeleJamundi and Unitel,
respectively, as these municipalities did not own existing telephony systems.

TelePalmira was formed on May 31, 1995 by Transtel S.A. contributing cash of
Ps15,981,244 for a 60% interest and the municipality of Palmira contributing a
portion of its telephony system with a fair value of Ps10,652,219 for a 40%
minority interest. Concurrently, TelePalmira purchased the remaining assets of
Palmira's telephony system for Ps14,383,138 in cash.

During the year ended December 31, 1997, Transtel S.A. acquired the
telephony operations of the municipalities of Cartago, Popayan, Buga and
Girardot. The acquisitions were effected by Transtel S.A. forming subsidiaries
with the municipalities having a minority interest as follows:

<TABLE>
<CAPTION>
Transtel S.A. Municipality
-------------------------- --------------------------
Ownership Ownership
Investment Percentage Investment Percentage
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
TeleCartago........... Ps 4,969,281(1) 65% Ps 2,675,766(3) 35%
Caucatel.............. 9,056,733(2) 51 8,818,077(4) 49
Bugatel............... 7,262,686(1) 60 4,861,791(3) 40
TeleGirardot.......... 10,585,448(1) 60 7,057,020(4) 40
------------ ------------
Ps31,874,148 Ps23,412,654
============ ============
</TABLE>

(1) Cash invested by Transtel S.A.
(2) Cash of Ps1,859,866 and equipment with a cost of Ps7,196,867 were
contributed by Transtel S.A.
(3) Portions of the telephony systems of Cartago and Buga were contributed
to the subsidiaries and recorded at estimated fair value.
(4) The entire telephony system was contributed to the subsidiary and
recorded at the municipality's historical book value plus Transtel's
portion of the excess of fair value over that book value.

Upon formation, TeleCartago and Bugatel paid the municipalities of Cartago
and Buga Ps10,640,748 and Ps6,182,051, respectively, in cash for the portion
of their telephony systems not contributed in exchange for stock in the
related subsidiary. Transtel financed these acquisitions by borrowing
Ps16,822,798 from banks.

On December 31, 1997, TeleGirardot was formed by Transtel contributing
Ps10,585,448 in cash for its 60% interest and the municipality of Girardot
contributing the net assets of its wholly-owned telephone subsidiary, Empresa
de Telecomunicaciones de Girardot E.S.P. ("Girardot Telephone"), totaling
Ps7,057,020 for its 40% minority interest. Transtel used a portion of the
proceeds from the Senior Notes due 2007 (see Note 12) to finance its
investment in TeleGirardot. The transaction has been accounted for at the
municipality's historical book value plus Transtel's portion of the excess of
fair value over that book value since prior accounting records for Girardot
telephone are available.

In July and September 1998, the Company acquired 97% of Suscripciones
Audiovisuales S.A. and Cablevision S.A. (together "Cablevision") for
Ps13,466,495 and Ps6,153,332 in cash, respectively. The Company acquired the
remaining 3% of both companies on December 15, 1998 for Ps763,376 in cash.
These companies own and operate the only license for the operation of pay
television services in the city of Cali and its surrounding area. Transtel
used a portion of the proceeds from the Senior Notes to finance this purchase.

F-15
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Because of the step acquisition of Cablevision, the consolidated income
statement for the year ended December 31, 1998 includes Cablevision's income
statement from January 1, 1998 with its preacquisition net loss reflected in
minority interest.

Except for TeleGirardot and Cablevision, separate financial information of
the operations prior to the acquisitions by the Company does not exist, thus,
no pro forma statement of income information is included herein for any of the
above acquisitions, except for TeleGirardot and Cablevision.

The following consolidated unaudited pro forma information of Transtel S.A.
is presented as if the acquisitions of Girardot Telephone and Cablevision had
occurred on January 1, 1996 and 1997, respectively:

<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Revenues........................... Ps22,650,324 Ps41,381,503 Ps85,639,390
Net income (loss).................. 5,964,274 (6,678,392) 9,200,882
Earnings (loss) per share (in sin-
gle Pesos per share).............. 1.49 (1.51) 1.47
</TABLE>

The above pro forma presentation is not comparable since the 1996
information only includes the Girardot Telephone acquisition. The net loss of
Girardot Telephone that is included in the above pro forma information for the
year ended December 31, 1997 includes a litigation loss of Ps2,545,101 and the
related income tax benefit of Ps178,119 (see Note 20). Additionally,
connection fees revenues decreased approximately Ps2,235,058 from 1996 to 1997
at Girardot Telephone because of a lack of network capacity at Girardot
Telephone during 1997.

Note 2--Basis of Financial Statement Presentation

Consolidation

Companies in Colombia must keep their accounting records and prepare their
financial statements in conformity with rules prescribed by the Government of
Colombia. These are considered by law to be accounting principles generally
accepted in Colombia ("Colombian GAAP"). Consolidated financial statements in
Colombia include the subsidiaries in which the Company owns, directly or
indirectly, more than 50% of the common stock. All of the Company's
subsidiaries are consolidated, eliminating intercompany accounts and
transactions.

Inflation accounting

The consolidated financial statements, as required by law, have been
adjusted for the effects of inflation on the basis of changes in the official
Colombian middle-income consumer price index ("MCPI"). This index is applied,
on a one-month lagging basis, to nonmonetary assets and liabilities,
shareholders' equity (excluding the surplus from reappraisal of assets) and
revenue and expense accounts. Monetary balances have not been adjusted because
they reflect the purchasing power of the currency at the date of the balance
sheet. The Company's management considers that the application of the one-
month lagging basis in the inflation adjustments does not deviate materially
from the calculation performed on a current-month basis.

The adjusted costs of the non-monetary assets may not exceed the net
realizable value of the assets.

The exposure to inflation is reflected in each non-monetary item of the
consolidated financial statements. The net gain or loss from exposure to
inflation is reflected as "Net monetary inflation adjustment income (loss)" in
the consolidated statements of income. The individual components of the
consolidated statements of income have been adjusted to reflect the effect of
inflation during the year. The net effect of inflation during the year on

F-16
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

these revenue and expense components is recorded as a portion of the "Net
monetary inflation adjustment income (loss)" account.

Accordingly, the "Net monetary inflation adjustment income (loss)" shown in
the income statement of the Company is the result of netting or offsetting the
following items:

A. A credit (or income entry) for inflation affecting non-monetary assets;

B. A charge (or expense entry) for inflation affecting non-monetary
liabilities and shareholders' equity; and

C. Charges and credits (for expense and income entries) representing
inflation adjustments made to expenses and revenues, respectively. Since
monetary inflation adjustments are offset in the net monetary inflation
adjustment account in the statement of income, the net effect on net income
from the expense and income inflation adjustments is zero. The inflation
adjustments to revenue and expenses are included in the individual revenue
and expense captions in the consolidated income statements.

Because expense and revenue inflation adjustments net to zero, the only
impact on the consolidated statement of income of the effects of inflation is
attributable to the restatement of non-monetary assets and liabilities and
shareholders' equity accounts.

The financial statements for 1996 and 1997 have been restated to constant
pesos of purchasing power of December 31, 1998. The constant pesos amounts
have been determined by applying an index derived from the MCPI to the nominal
amounts reflected in the statutory financial statements prepared under
Colombian GAAP. The indexes applied to the nominal financial statements data
for 1996 and 1997 were, 1.3580 and 1.1569, respectively. Some components of
the consolidated statements of cash flows, of changes in financial position
and of changes in shareholders' equity were restated using average indexes of
1.8888, 1.5558 and 1.1005 for 1996, 1997 and 1998, respectively.

On December 24, 1998, the Colombian Congress decreed a National Fiscal
Change to apply after January 1, 1999. This regulation eliminated future
inflation adjustments relating to inventories and revenues and expenses.

Note 3--Summary of Significant Accounting Policies

The Company's significant accounting policies and procedures are described
below:

Investments

Investments in equity securities in which ownership is temporary are carried
at cost. Investments in U.S. Treasury Bills and interest-only striPs held in
the Escrow Account are held-to-maturity investments and are carried at
maturity value with unearned interest recorded as a liability (amortized
cost). Investments in Ordinary Common Funds (fiduciary managed unit
investments in debt securities) are carried at cost, including reinvested
interest income. Investments in the Refinancing Account consist of money
market funds and are carried at cost.

Inventories

Inventories of materials, cables, spare parts and other supplies are stated
at the lower of average cost adjusted for inflation or market.

Properties, plant and equipment

Except for TeleGirardot, the amounts recorded for telecommunications
equipment and networks that were contributed to subsidiaries by municipalities
and minority interest are valued at estimated fair value of the

F-17
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

equipment and networks and are in proportion to the cash or fair value of
assets contributed to the subsidiaries by Transtel since the historical book
value records of these municipalities are non-existent or unreliable. Since
reliable historical book value amounts are available for Girardot Telephone,
the Company recorded the net assets obtained in that acquisition at the
municipality's historical book value plus Transtel's portion of the excess of
fair value over that book value was recorded as goodwill. Other purchases from
municipalities are recorded at amounts payable in cash. Subsequently, these
assets are adjusted for inflation.

Other properties, plant and equipment are recorded at historical cost
adjusted for the effects of inflation. Sales and retirements of these assets
are removed at their net inflation-adjusted cost, and differences between sale
proceeds and net inflation-adjusted cost were recorded as gains or losses,
according to each case.

Disbursements for additions to and substantial improvements of assets are
capitalized and adjusted for inflation. Interest costs incurred during the
construction period are capitalized. Maintenance and repair expenditures are
expensed as incurred.

Depreciation is calculated on the basis of the cost of assets, adjusted for
inflation, over their estimated useful lives as follows:

<TABLE>
<CAPTION>
Life in years
-------------
<S> <C>
Buildings.................................................... 20
Office equipment............................................. 10
Computer and communications equipment........................ 5
Telecommunication equipment.................................. 20
External telephony networks.................................. 20
Vehicles..................................................... 5
</TABLE>

Prior to January 1, 1996, the Company used the straight-line method of
depreciation. As of January 1, 1996, TelePalmira changed to the reverse sum of
the years method of depreciation, a method acceptable in Colombia. All other
operating subsidiaries have used this method from inception.

Allowance for doubtful accounts

The allowance for doubtful accounts is reviewed and updated at the end of
each year on the basis of evaluations of collectibility based on agings of
customer receivables and management's judgment. Uncollectible balances are
periodically charged against the allowance account.

Deferred costs

Items recorded as deferred costs include disbursements for software,
leasehold improvements, organization costs, preoperating expenses until
Transtel S.A. and each subsidiary commences commercial operations, costs of
market and demand studies and investigations, costs related to several
acquisitions and Senior Notes issuance costs. Acquisition costs represent
payments made to certain municipalities in connection with the acquisition of
their telephony operations to pay severance and pension costs of certain
employees. In addition, the Company has recorded as deferred costs interest on
the financing of its investments in and advances to its subsidiaries until
their commercial operations commence, interest on equipment under installation
and interest and exchange losses on the financing of its expansion plan
projects from the date that the proceeds are obtained until the projects are
completed.

These deferred costs are adjusted for inflation with a credit to "Deferred
monetary correction", a liability, and, concurrently, the inflation adjustment
of the part of shareholders' equity used to finance such costs is

F-18
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

deferred by a debit to an asset account "Deferred monetary correction". All
deferred costs, except Senior Notes issuance costs, and expenses arising from
monetary correction are amortized over five years on a straight-line basis
from the acquisition date, the studies and investigations and expansion plan
projects completion date, or the date when commercial operations begin, as the
case may be. The Senior Notes and Senior Discount Notes issuance costs are
amortized on a straight-line basis over the life of the bonds.

Goodwill

Goodwill represents Transtel's portion of the excess of the fair value over
the book value of the assets and liabilities acquired at the acquisition date
of Girardot Telephone. Negative goodwill represents the excess of the net book
value of Cablevision (including surplus from reappraisal of assets) over the
purchase price paid. Goodwill and negative goodwill are amortized over five
years on a straight-time basis from the acquisition dates.

Reappraisal of assets

Reappraisals of properties, plant and equipment, which increase
shareholders' equity are calculated as the excess of appraised values of
properties, plant and equipment (as periodically established by independent
appraisers) over their net adjusted book values. The initial reappraisal was
recorded in 1996. Such reappraisal amounts are not depreciated. A provision
charged to income is recorded when appraisals are lower than the net adjusted
book value of properties, plant and equipment.

Translation of foreign currency transactions and balances

Foreign currency transactions and balances are translated into Colombian
pesos at the representative market exchange rate. This representative rate for
the United States dollar in Colombian nominal pesos was Ps1,005.33, Ps1,293.58
and Ps1,542.11 per $1 at December 31, 1996, 1997 and 1998, respectively.
Foreign exchange differences are recognized as financial income or expense.
Foreign currency balances were borrowings from financial entities (Note 12),
other liabilities (Notes 16 and 20) and Senior Notes (Note 12) totaling
$13,428,312 (Ps20,707,935) at December 31, 1996, $157,102,275 (Ps242,268,989)
at December 31, 1997 and $189,616 (Ps292,408,195) at December 31, 1998, and
certificates of deposits and investments (Note 4) of $1,771,396 (Ps2,731,688)
at December 31, 1996, $54,318,325 (Ps93,764,832) at December 31, 1997 and
$33,470 (Ps51,614,026) at December 31, 1998.

Labor liabilities

Labor liabilities are adjusted at the end of each accounting period by
reference to legal provisions and labor agreements in force.

In accordance with the Colombian Labor Code, the Company is subject to Law
100, which requires that the Company and its employees contribute monthly to a
pension fund or the Social Security Institute based on a percentage of
salaries. On December 31, 1997, the Company assumed the defined benefit
pension liability of Girardot Telephone for certain personnel of the
municipality of Girardot that are retired or became employees of the Company.
The liability which was assumed was recorded on the basis of actuarial studies
and reflected all pension liabilities earned by the Girardot Telephone
employees through December 31, 1997. Subsequent adjustments in 1998 to the
defined benefit pension liability are based on an additional actuarial study.

Under Colombian labor regulations and Law 50, most Transtel employees other
than executives are entitled to receive one month's salary for each year of
service. The Company contributes these amounts within 30 days of its year-end
to a fund established by each employee.

F-19
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Recognition of revenues, costs and expenses

Revenues for telephone and pay television services are recognized in the
period during which the services are provided. Revenues from settlement of
traffic for national and international long distance calls are recognized on a
net basis and are based on estimates of traffic volume and rates. Certain
telephone revenues subject to final settlement are not recorded until
realization is probable. Revenues for connection fees for telephone lines are
recognized upon payment in cash or the execution of a promissory note (with a
10% down payment) by the customer and the Company's assignment of a telephone
number which is transferable to others by the customer. Actual connection with
a dial tone takes place within a day to approximately three months depending
on the customer's location in relation to the buildup of the system.
Connection fees for subscribers to pay cable television are recorded as income
to the extent of direct costs. The amounts in excess of direct costs, if any,
are deferred and amortized over the estimated average period of the
subscription.

The Company expenses all costs relating to programming as incurred because
the amounts are based on the number of subscribers using the programs. The
Company expects its prematurity period to end on December 31, 1999.
Depreciation expense of the cable plant, which is substantially finished,
during the prematurity period is calculated based on the normal expected
depreciation times a ratio that is the average subscribers in the year divided
by the total expected subscribers at the end of the prematurity period.

Use of estimates

The preparation of 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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Subsequent resolution of some matters
could differ from those estimates.

Income tax

The tax provision includes tax resulting from timing differences of items
which enter into taxable income in periods which differ from those recorded
for financial statement purposes. The tax benefit or expense relating to such
timing differences is recorded in net deferred income tax asset or liability
accounts.

Memorandum accounts

Items recorded as memorandum accounts include guarantees, remaining payments
on lease agreements and assets given as collateral. Contingent
responsibilities mainly represent the amounts of promissory notes receivable
from connection fees sold during 1997 and 1998 to a financial institution with
no recourse to be collected on behalf of the financial institution. Memorandum
accounts called fiscal accounts are also recorded for differences between
financial statement and data for income tax purposes. Nonmonetary memorandum
accounts are adjusted for inflation, with a charge or credit to reciprocal
memorandum accounts. Commitments represent the amount of agreements/contracts
entered into with third parties.

Statement of cash flows

For purposes of reporting cash flows, cash and cash equivalents are defined
as cash and highly liquid debt instruments with an original maturity of three
months or less, except those investments in Ordinary Common Funds and the
Refinancing Account which the Company considers part of its investing
activities. The statements of cash flows are prepared substantially in
conformity with generally accepted accounting principles in the United States
("U.S. GAAP").

F-20
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

During 1995 and 1997, the Company recorded non-cash transactions for
properties, plant and equipment and minority interest of Ps10,652,219 and
Ps23,412,655, respectively, related to the acquisitions of the telephony
assets of municipalities. An additional Ps23,541,532 of properties, plant and
equipment and various other net liabilities were recorded as part of the
acquisition of Girardot Telephone in 1997 and Ps34,493,155 of properties,
plant and equipment and reappraisals were recorded as part of acquisition of
Cablevision in 1998. Additionally, the Company recorded non-cash transactions
for land, equipment, capital lease and other obligations of Ps1,265,236,
Ps7,286,870 and Ps38,932,884 in 1996, 1997 and 1998, respectively.

Earnings per share

Earnings per share are computed by dividing net income applicable to common
shares by the weighted average number of subscribed and paid shares
outstanding for each year presented. Transtel's weighted average number of
shares used in the computation of earnings per share was 4,000,000,000,
4,433,250,509 and 6,271,965,569 in 1996, 1997 and 1998.

Convenience translation to U.S. dollars (unaudited)

The U.S. dollar ("Dollar") amounts presented in the financial statements and
accompanying notes have been translated from the Peso figures solely for the
convenience of the reader, at the exchange rate of 1,542.11 Pesos per Dollar,
which approximates the exchange rate which existed at December 31, 1998. Such
translation should not be construed as representations that the Peso amounts
represent, or have been or could be, converted into Dollars at that or any
other rate.

Note 4--Investments

Short-term and temporary investments consisted of the following:

<TABLE>
<CAPTION>
December 31,
---------------------------------------
1996 1997 1998
----------- ------------- -------------
<S> <C> <C> <C>
Temporary investment--100% of the
shares of Coinversiones S.C.S. (a
shareholder), at cost (see Note
29).............................. Ps3,162,641 Ps -- Ps --
Certificates of deposits (includes
$1,906,932 in 1996 and $2,860,398
in 1997)......................... 2,949,455 50,197,580 7,820,258
Escrow Account ($18,750,000)...... 28,059,307 28,914,563
Refinancing Account (includes
$14,610,878)..................... 22,932,254
Investments in Ordinary Common
Funds
($15,560,088 in 1997 and
$14,338,921 in 1998)............ 20,128,218 22,112,195
----------- ------------- -------------
Ps6,112,096 Ps121,317,359 Ps 58,847,016
=========== ============= =============

Long-term investments consisted of
the following:

Escrow Account ($17,877,489)...... Ps -- Ps 28,059,307 Ps --
Certificates of deposits due in
2000............................. 7,668,436 2,154,437
Other investments................. 45,273 613,431 778,951
----------- ------------- -------------
Ps 45,273 Ps 36,341,174 Ps 2,933,388
=========== ============= =============
</TABLE>
On August 31, 1996, the Company received 100% of the shares of Coinversiones
S.C.S., formerly Gonzalo Caicedo Toro & Cia. S.C.S. "GCT & Cia.",
("Coinversiones") from Mr. Gonzalo Caicedo Toro, a shareholder

F-21
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

of the Company, for Ps3,162,641 in payment of the Company's net advances to
him (see Notes 5 and 29). Coinversiones owns 6% of the Company and an interest
in Colombina S.A., a candy manufacturer in Colombia. The Company pledged the
shares of Coinversiones as collateral for certain of its borrowings. On July
21, 1997, the Company sold the shares in Coinversiones to Mr. Caicedo for cash
equal to the price paid by the Company. Since the Company's ownership of
Coinversiones was temporary, the investment was recorded at cost as a
temporary investment at December 31, 1996.

The Escrow Account is a trustee administered account containing U.S.
Treasury Bills and interest-only strips that secures the interest payments on
the 12 1/2% Senior Notes due 2007 for the years ending December 31, 1998 and
1999. The Refinancing Account is also a trustee administered account that
contains a portion of the proceeds of the 12 1/2% Senior Notes due 2007 that
is required to be used to retire other borrowings. The investments in the
Refinancing Account consist of money market funds. On January 9, 1998, the
Company used Ps8,978,979 of the Refinancing Account to pay the remaining other
borrowings. In July and September 1998 the trustee returned the remaining
balance of the Refinancing Account to Company for use in other corporate
purposes.

Balances in the Escrow Account at December 31, 1998 partially secure the
Senior Notes due 2007.

Certificates of deposits earned interest at rates between 25% and 30% in
1996, 20% and 22% in 1997 and 20% and 24% in 1998.

The Ordinary Common Funds fund investments earned interest at an average
rate in 1997 and 1998 of 21% and 22% for Peso balances, respectively, and 6%
and 5% for foreign currency balances, respectively.

Note 5--Accounts Receivable, Net

Accounts receivable consisted of the following:

<TABLE>
<CAPTION>
December 31,
------------------------------------------
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Subscribers.................... Ps 6,894,325 Ps 18,826,958 Ps 51,635,714
Advances to Siemens S.A. (see
Note 30)...................... 4,367,711 6,045,046 2,716,449
Advances to IBM for equipment
purchases..................... 1,083,975 304,291
Tax prepayments and other ad-
vances........................ 1,922,937 4,655,272 14,800,100
Employees...................... 44,877 34,703 30,740
Global Telecommunications
Operations, Inc., A related
party (see Note 30)........... 3,321,023 1,628,443
Other receivables.............. 78,533 2,673,328 3,524,933
------------ ------------- -------------
13,308,383 36,640,305 74,640,670
Less--Allowance for doubtful
accounts...................... (14,688) (1,619,097) (2,314,422)
------------ ------------- -------------
13,293,695 35,021,208 72,326,248
------------ ------------- -------------
Less--Noncurrent portion-sub-
scribers...................... (1,815,035) (5,734,553) (27,782,325)
Noncurrent advances to IBM,
Siemens S.A And Global
Telecommunications
Operations, Inc and other.. (4,367,891) (10,425,992) (14,500,306)
------------ ------------- -------------
(6,182,926) (16,160,545) (42,282,631)
------------ ------------- -------------
Ps 7,110,769 Ps 18,860,663 Ps 30,043,617
============ ============= =============
</TABLE>

F-22
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The activity in the allowance for doubtful accounts follows:

<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------
1996 1997 1998
-------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year............. Ps -- Ps 14,688 Ps1,619,097
Provision................................ 14,688 220,282 914,865
Balance from Girardot Telephone acquisi-
tion.................................... 1,384,127
Effect of revaluing to constant pesos.... (219,540)
-------- ----------- -----------
Balance at end of year................... Ps14,688 Ps1,619,097 Ps2,314,422
======== =========== ===========
</TABLE>

Receivables from subscribers at December 31, 1996, 1997 and 1998 include
Ps5,007,857, Ps7,286,466 and Ps36,629,934, respectively, for connection fees
represented by promissory notes payable over up to 36 months at 37.2% annual
interest. During 1997, the Company sold with recourse promissory notes from
subscribers totaling Ps9,496,424 (including Ps1,460,450 existing at December
31, 1996) to a financial institution at book value. On December 17, 1997, the
recourse provisions for all outstanding receivables previously sold to the
financial institution and on all future sales of receivables were removed.
During 1998, the Company sold with no recourse promissory notes from
subscribers totaling Ps7,732,065 at book value. The Company continues to
collect principal and interest from these subscribers and remits such amounts
to the financial institution. Although the Company is unable to estimate the
fair value of the servicing, it believes its cost of servicing these accounts
is nominal. The allowance for doubtful accounts at December 31, 1997 was
adequate to cover the Company's recourse obligation. The uncollected balance
of promissory notes sold to the financial institution at December 31, 1998 is
Ps7,721,382. Subsequent to December 31, 1998, the Company sold with no
recourse Ps1,326,784 of the December 31, 1998 balance from subscribers.

Note 6--Inventories

Inventories consisted of the following:

<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Materials............................... Ps -- Ps 325,159 Ps1,585,463
Cables.................................. 136,087 549,779 921,701
Spare parts............................. 199,764 195,473 381,408
Other................................... 7,752 37,756 73,489
--------- ----------- -----------
343,603 1,108,167 2,962,061
Less--Allowance for writedown of inven-
tories................................. (292,992)
--------- ----------- -----------
Ps343,603 Ps1,108,167 Ps2,669,069
========= =========== ===========
</TABLE>

F-23
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 7--Properties, Plant and Equipment, Net

Properties, plant and equipment consisted of the following:

<TABLE>
<CAPTION>
December 31,
------------------------------------------
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Land........................... Ps 1,879,353 Ps 4,503,985 Ps 6,101,004
Construction in progress....... 1,721,891 32,739,558 44,645,862
Buildings...................... 2,813,314 6,289,808 8,624,027
Office and computer equipment.. 611,613 2,381,078 3,805,219
Communications equipment....... 304,954 870,772 3,913,301
Telecommunications equipment... 14,304,461 43,734,552 88,799,615
External telephony networks.... 10,168,862 41,434,451 114,215,488
Vehicles....................... 424,547 810,302
------------ ------------- -------------
31,804,448 132,378,751 270,914,818
Less--Accumulated deprecia-
tion.......................... (660,418) (1,271,026) (5,883,735)
------------ ------------- -------------
Ps31,144,030 Ps131,107,725 265,031,083
Less--Allowance for writedown
of properties, plant and
equipment..................... (110,594) (946,869)
------------ ------------- -------------
Ps31,144,030 Ps130,997,131 Ps264,084,214
============ ============= =============
</TABLE>

Land and buildings at December 31, 1996, 1997 and 1998 include Ps1,308,670,
Ps1,687,312 and Ps3,662,788 capitalized under capital leases. Additionally,
office and computer equipment at December 31, 1996, 1997 and 1998 includes
Ps139,059, Ps226,107 and Ps4,287,951, respectively, capitalized under capital
leases (see Note 19).

Construction in progress at December 31, 1997 and 1998 consists primarily of
external telephony networks (Ps18,702,778 and Ps32,492,940),
telecommunications equipment (Ps6,559,556 and Ps1,336,058,) and buildings
(Ps7,316,380 and Ps8,739,235), respectively. The December 31, 1997 and 1998
construction in progress--telecommunications equipment primarily consists of
Ps5,546,120 and Ps461,465 related to projects assumed in TeleGirardot's
acquisition, respectively. The December 31, 1998 construction in progress--
building includes Ps785,204 relating to TeleGirardot.

Land and buildings at December 31, 1996, 1997 and 1998 include real estate
purchased by the Company in 1996 from Mr. Gonzalo Caicedo Toro, a shareholder,
for Ps100,358, Ps1,936,167 and Ps1,880,569, respectively (see Note 29).

F-24
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 8--Deferred Costs

Deferred costs consisted of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Software......................... Ps 422,021 Ps 761,980 Ps 810,238
Leasehold improvements and oth-
er.............................. 587,720 669,826 698,487
Organization costs............... 20,100 441,623 1,357,730
Preoperating expenses............ 3,388,859 3,548,822 4,632,215
Market and demand studies and
investigations.................. 3,430,698 4,118,390 4,646,850
Interest costs of investments in
and advances to subsidiaries and
on installation of equipment.... 8,793,703 17,289,514 17,305,781
Interest costs of expansion plan
projects........................ 1,992,120 5,031,849
Exchange loss costs of expansion
plan projects................... 276,491 4,379,459
Issuance costs of Senior Notes
and of Senior Discount Notes.... 28,756,178 32,755,531
Acquisition costs................ 3,678,421 3,709,133
------------ ------------ -------------
16,643,101 61,533,365 75,327,273
Less--Accumulated amortization... (1,224,783) (5,095,754) (13,912,188)
------------ ------------ -------------
Ps15,418,318 Ps56,437,611 Ps 61,415,085
============ ============ =============
</TABLE>

Note 9--Other Assets

Other assets consisted of the following:

<TABLE>
<CAPTION>
December 31,
----------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Goodwill............................... Ps -- Ps1,819,698 Ps1,852,513
Deferred income tax asset, net (see
Note 18).............................. 4,249 424,975
Spectrum usage......................... 458,953 396,722
Fiduciary Guarantee Trust.............. 1,060,427
Licenses............................... 1,588,537
Other.................................. 136,811 256,036 562,876
--------- ----------- -----------
136,811 2,538,936 5,886,050
Less--Accumulated amortization......... (38,375) (938,677)
--------- ----------- -----------
Ps136,811 Ps2,500,561 Ps4,947,373
========= =========== ===========
</TABLE>

The Fiduciary Guarantee Trust hold land and buildings which are pledged to
secure borrowings from financial entities of Ps738,912.

F-25
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 10--Reappraisal of Assets

Reappraisal of certain assets consisted of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Reappraisal of properties, plant
and equipment................... Ps16,791,779 Ps18,386,367 Ps 32,788,298
Less--Reappraisal related to
minority interest............. (6,559,507) (7,493,679) (8,142,183)
Less--Reappraisal of assets
from wholly-owned company
acquired (Cablevision)..... (10,347,549)
------------ ------------ -------------
Total reappraisal of assets re-
corded in shareholders' equity.. Ps10,232,272 Ps10,892,688 Ps 14,298,566
============ ============ =============
</TABLE>

The Ps10,347,549 is included in the negative goodwill recorded is Note 20
that is amortized to income over a five-year period.

Note 11--Memorandum Accounts

Memorandum accounts consisted of the following:

<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Debit fiscal (tax) accounts........ Ps 768,357 Ps 9,373,599 Ps 162,779
Credit fiscal (tax) accounts....... 736,654 8,722,968 31,096,950
Pledged income (see Note 12)....... 6,594,126
Remaining payments on operating
lease agreements (see Note 19).... 3,873,482 4,935,225 4,923,147
Commitments under the Global Lease
agreements (see Note 30).......... 27,257,240 174,375,161 138,344,830
Assets given as collateral (Note
4)................................ 3,162,641 79,050,868 28,914,563
Commitments under contracts and
agreements........................ 14,034,361 13,327,720
Commitments under IBM's lease
agreements (see Note 30).......... 5,052,425 749,697
Commitments under contracts with
Siemens (see Note 30)............. 26,487,986
Commitments under contracts with
DIAN Financing.................... 4,431,832
Promissory notes sold without
recourse to be collected on behalf
of a financial institution (see
Note 5)........................... 6,927,966 7,721,382
Other.............................. 539,628 5,134,992 12,295,561
------------ ------------- -------------
Ps36,338,002 Ps340,689,677 Ps241,968,461
============ ============= =============
</TABLE>

F-26
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The assets given as collateral are summarized as following:

<TABLE>
<CAPTION>
December 31,
-------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Shares of Coinversiones (see Note
4)................................. Ps3,162,641 Ps -- Ps --
Escrow Account (see Note 4)......... 56,118,614 28,914,563
Refinancing Account (see Note 4).... 22,932,254
----------- ------------ ------------
Ps3,162,641 Ps79,050,868 Ps28,914,563
=========== ============ ============
</TABLE>

Note 12--Debt

On October 28, 1997, the Company received the net proceeds from the sale of
$150 million (Ps224.474 billion) of its 12 1/2% Senior Notes due 2007. These
Senior Notes were sold to a pass through trust which issued certificates
("Certificates") representing pro rata interests in the Senior Notes to
qualified institutional buyers in the United States of America or non-U.S.
persons outside the United States. Interest payments on the Senior Notes are
due on May 1 and November 1, commencing May 1, 1998.

A portion of the net proceeds of the 12 1/2% Senior Notes due 2007 was used
to pay all existing short and long-term debt existing at October 28, 1997, and
other items, as follows:

<TABLE>
<S> <C>
Sale of 12 1/2% Senior Notes due 2007 ($150,000,000).......... Ps224,474,459
Payment of existing debt...................................... (49,035,751)
Escrow Account for first two years interest payments.......... (52,832,612)
Central Bank's withdrawal fee................................. (15,335,105)
Costs of issuance............................................. (12,385,953)
-------------
Cash available for the Company's expansion plan............... Ps 94,885,038
=============
</TABLE>

The indenture of the 12 1/2% Senior Notes due 2007 imposes certain
limitations on the ability of the Company and its subsidiaries to, among other
things, incur additional indebtedness, incur liens, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, issue preferred stock, merge or
consolidate with any other person or sell, assign, transfer, lease, convey, or
otherwise dispose of all or substantially all of the assets of the Company and
its subsidiaries. Under the most restrictive of these covenants, the Company
may pay dividends of no more than Ps6,306,492 as of December 31, 1998.

Transtel S.A. is dependent upon the transfer of funds from its subsidiaries
to make the required interest and principal payments on the Senior Notes and
the Certificates. The subsidiaries have not guaranteed the payment of the
Senior Notes or the Certificates and have no obligations to remit dividends or
other distributions to Transtel S.A. for payment on the Senior Notes and the
Certificates.

On December 31, 1998, the Company sold $15.0 million (Ps23.1 billion) of its
20.32% Senior Discount Notes due 2008 in a private placement. The net proceeds
of approximately $14.3 million (Ps22.1 billion) will be used to acquire
certain minority interests in the Company's subsidiaries, to pay for capital
expenditures, to provide working capital and/or fund future acquisitions.
Interest at 0.10% will be payable in cash each year through August 13, 2008.
Interest at 20.22% will accrue over the term of the Senior Discount Notes, and
the accrued interest of $86.9 million (Ps134.0 billion) and principal of $15.0
million (Ps23.1 billion) will be due on August 13, 2008. The Senior Discount
Notes are unsecured senior obligations of the Company and will be fully and
unconditionally guaranteed on a senior, unsecured basis by each subsidiary of
the Company in which the

F-27
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Company acquires 100% of the minority interest or provides indebtedness with
the proceeds of the Senior Discount Notes. As of March 2, 1999 the Company has
not acquired any minority interests or provided indebtedness to any
subsidiary.

Short-term debt consisted of the following:

<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997 1998
----------- --------- -----------
<S> <C> <C> <C>
Bank overdrafts............................ Ps4,479,902 Ps587,742 Ps6,024,668
</TABLE>

Borrowings from financial entities
<TABLE>
<S> <C> <C> <C>
Denominated in Pesos.................. 7,534,328 6,932,886
Denominated in Dollars................ 108,782 218,448
Letters of credit....................... 113,077 402,650
Other................................... 521,760
------------ --------- ------------
Total short-term debt................. Ps12,757,849 Ps587,742 Ps13,578,652
============ ========= ============
</TABLE>

The bank overdrafts and peso denominated borrowings from financial entities
bear interest at rates between 32% and 36% at December 31, 1998.

Approximately, Ps2,138,741 of short-term debt at December 31, 1996 were
secured by assets of Mr. Gonzalo Caicedo Toro, a shareholder of the Company.

Other long-term debt consisted of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1996 1997 1998
------------ ------------- ------------
<S> <C> <C> <C>
Denominated in Dollars
($13,428,312 in 1996,
$5,822,528 in 1997 and
$3,972,660 in 1998).......... Ps20,707,936 Ps 8,978,979 Ps 6,126,278
Denominated in Pesos.......... 16,194,275 6,163,256 4,151,742
------------ ------------- ------------
36,902,211 15,142,235 10,278,020
Less--Current portion........... (7,876,103) (15,142,235) (1,464,219)
------------ ------------- ------------
Total other long-term debt.. Ps29,026,108 Ps -- Ps 8,813,801
============ ============= ============
</TABLE>

Included in other long-term borrowings from financial entities is
Ps23,460,000 at December 31, 1996, which were secured by assets of Mr.
Caicedo. Additionally, approximately Ps24,793,948 of other long-term debt at
December 31, 1996 was guaranteed by Mr. Caicedo.

The Ps8,978,979 borrowings were paid on January 9, 1998 from proceeds of the
12 1/2% Senior Notes due 2007, which were included in short-term and temporary
investments at December 31, 1997. The Ps6,163,256 borrowings were assumed in
the Girardot Telephone acquisition, were secured by a pledge of revenues of
Ps6,594,126 and were paid in January 1998 by the Company.

The Ps10,278,020 relates to borrowings by the Company for Cablevision
acquisition during 1998. The borrowings bear interest at 32% and mature as
follows: Ps1,464,219 in 1999, Ps2,975,507 in 2000, Ps1,751,209 in 2001,
Ps1,418,854 in 2002, Ps1,436,682 in 2003 and Ps1,231,549 in 2004.

F-28
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 13--Accounts Payable

Accounts payable consisted of the following:

<TABLE>
<CAPTION>
December 31,
-------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Accrued interest expense............. Ps 924,875 Ps 4,981,311 Ps 5,877,876
Accrued costs and expenses of
services............................ 119,253 2,884,926 10,959,938
Empresa Nacional de
Telecomunicaciones--long distance... 575,757 3,454,947 2,477,222
Suppliers and trade current
accounts............................ 2,407,564 6,895,881 10,926,884
Shareholder (see Note 29)............ 25,258
----------- ------------ ------------
Ps4,052,707 Ps18,217,065 Ps30,241,920
=========== ============ ============
</TABLE>

Note 14--Tax Liabilities

Tax liabilities consisted of the following:

<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Income tax withholdings................... Ps335,070 Ps 255,373 Ps 318,315
Value-added tax payable................... 265,899 1,357,256 1,701,688
Income taxes payable...................... 254,587 1,351,263 3,114,868
Other..................................... 114,248 245 388,709
--------- ----------- -----------
Ps969,804 Ps2,964,137 Ps5,523,580
========= =========== ===========
</TABLE>

Note 15--Labor Liabilities

Labor liabilities consisted of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Salaries payable.............................. Ps -- Ps 96,384 Ps 6,213
Accrued severance compensation................ 89,497 199,672 463,131
Interest on severance compensation............ 9,404 47,002 64,117
Accrued vacation.............................. 55,834 149,595 423,379
Other......................................... 1,690 10,019
--------- --------- ---------
Ps154,735 Ps494,343 Ps966,859
========= ========= =========
</TABLE>

F-29
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 16--Other Current Liabilities

Other current liabilities consisted of:

<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Payable to Siemens AG for Transtel-Siemens
Purchase Agreement (see Notes 20 and 30)
($430,513 in 1998 and $276,008 in 1997)..... Ps -- Ps 425,634 Ps 663,898
Payable to Siemens S.A. for Turn-Key
Arrangement ($294,563)...................... 454,249
Payable to Siemens AG for TeleGirardot-
Siemens Purchase Agreement (see Note 30)
($1,031,891 in 1998 and $1,048,572 in
1997)....................................... 1,617,013 1,591,289
Payable to IBM ($26,852 in 1998 and $73,946
in 1997).................................... 114,033 41,409
Spectrum usage fees payable to the Colombian
Ministry of Communications.................. 458,953
Unearned interest income ($914,915 in 1998
and $1,065,425 in 1997)..................... 1,643,002 1,410,900
Deferred income-Girardot Telephone connection
fees........................................ 2,235,369
Other........................................ 249,160 1,048,724
--------- ----------- -----------
Ps249,160 Ps7,996,977 Ps3,707,496
========= =========== ===========
</TABLE>

The payable to Siemens AG for the Transtel-Siemens Purchase Agreement
relates to equipment acquired by Transtel S.A., which was contributed to
Caucatel, after progress payments of Ps751,125 ($487,076) had been made in
1997 (see Notes 20 and 30). The payable to Siemens S.A. at December 31, 1997
and 1998 is for the TeleGirardot-Siemens Purchase Agreement (see Note 30). The
liability to IBM relates to equipment acquired directly by Caucatel.

Unearned interest represents the difference between the maturity value of
the Escrow Account (see Note 4) and the cost of the investments deposited with
the Escrow Account trustee less accumulated amortization. The balance of
Ps1,410,900 at December 31, 1998 will be earned in 1999. Deferred income-
connection fees represents the connection fees recorded by Girardot Telephone
(see Note 1) to conform to the Company's revenue recognition accounting policy
(see Note 2). During 1998, the Company determined that Ps850,300 of this
deferred income could not be recorded as income and reversed it against the
related subscriber receivables. The remaining Ps1,385,069 met the Company's
revenue recognition policy and was recorded as income in 1998.

Note 17--Accrued Pension Obligations

On December 31, 1997, the Company assumed the defined benefit pension
liability totaling Ps7,500,328, of Girardot Telephone for certain personnel of
the municipality of Girardot that are retired or became employees of the
Company and have subsequently retired. The liability which was assumed is
recorded on the basis of actuarial studies and reflects all pension
liabilities earned by the Girardot Telephone employees through December 31,
1997. Since the acquisition occurred on December 31, 1997, there is no pension
expense related to this defined benefit plan included in the accompanying
consolidated statements of income during 1997. An additional actuarial study
was obtained as of December 31, 1998 and the liability at that date was based
on that study. Pension expense of Ps536,068 was accrued during 1998.

F-30
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table sets forth the funded status of the defined benefit plan
at December 31, 1997 and 1998:

<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation......................... Ps7,348,334 Ps7,019,394
Nonvested benefit obligation...................... 28,308
----------- -----------
Accumulated benefit obligation...................... Ps7,376,642 Ps7,019,394
=========== ===========
Projected benefit obligation........................ Ps7,500,328 Ps7,019,394
Less: Plan assets at fair value..................... -- --
----------- -----------
Unfunded projected benefit obligation............... 7,500,328 7,019,394
Unrecognized net transition obligation.............. -- --
Unrecognized net gain (loss)........................ -- --
----------- -----------
Net accrued pension cost recorded................... Ps7,500,328 Ps7,019,394
=========== ===========
</TABLE>

In Colombian, there in no legal requirement that pension obligations, other
than Social Security, be funded with payments to an outside fiduciary.

The following actuarial assumptions for the December 31, 1997 and 1998
calculations are net of the effects of inflation of approximately 25% in each
year:

<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------ ------
<S> <C> <C>
Discount rate.............................................. 6.0% 6.0%
Future salary increases.................................... 0.0% 0.0%
Number of covered employees:
Active................................................... 34 0
Retired.................................................. 36 79
</TABLE>

In accordance with the Colombian Labor Code, the Company is subject to Law
100, which requires that the Company and its employees, other than those in
TeleGirardot's defined benefit plan, contribute monthly to a pension fund or
the Social Security Institute based on a percentage of salaries.

Note 18--Income Tax

Consolidated income tax returns are not permitted in Colombia. The effective
statutory income tax rate for Transtel S.A. was 35% for 1996, 1997 and 1998.

Under Colombian law, Transtel S.A. must pay a minimum tax of 35% based on
income which is presumed to be not less than the greater of 5% of
shareholders' equity for tax purposes at the end of the immediately preceding
year or 1.5% of gross assets for tax purposes at the end of the immediately
preceding year, however, operating companies such as Transtel's subsidiaries
are not subject to such a minimum income tax.

In accordance with Law 142 of 1994 and Law 223 of 1995, entities which
render basic residential telephony services and which are mixed capital
companies (i.e., companies with both public and private capital, such as the
Company's subsidiaries) are exempt in 1995 and partially exempt from the
payment of income taxes for a term of seven years from 1996 with respect to
profits which are retained for upgrade, expansion or replacement of telephone
systems. These companies are exempt from taxes on 100% of income related to
basic telephony

F-31
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

services for 1996; thereafter, the exemption reduces by 10 percentage points
each taxable year through 2000 and then reduces by 20 percentage points in
2001 and 2002. After 2002, there is no exemption.

In July 1997, Law 383 of 1997 established that dividends declared from
companies similar to Transtel's subsidiaries and paid to government entities
are not taxable. As there is not a similar exclusion for private investors
such as Transtel S.A., the Company expects that future dividends or
distributions declared to Transtel S.A. will be taxable. Deferred income taxes
of Ps3,053,038 and Ps8,386,224 on Transtel S.A.'s distributable portion of net
income earned by its subsidiaries through December 31, 1997 and 1998,
respectively, have been netted against the tax benefit of net operating loss
carryforwards of Transtel S.A. of Ps3,057,287 and Ps8,811,199, respectively.

The total income tax provision for the year ended December 31, 1996, 1997
and 1998 is as follows:

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Current.................................. Ps380,041 Ps1,351,263 Ps5,605,790
Deferred tax benefit..................... (4,249) (420,726)
--------- ----------- -----------
Total.................................. Ps380,041 Ps1,347,014 Ps5,185,064
========= =========== ===========
</TABLE>

The following is a calculation of current income tax expense for the years
ended December 31, 1996, 1997 and 1998:

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Income before taxes and minority
interest........................ Ps 6,898,012 Ps 7,365,822 Ps 26,714,276
Non-deductible expenses.......... 364,450 2,739,389 1,108,536
Non-taxable income............... (60,742) (73,254) (351,995)
Dividends from subsidiaries...... 2,844,432
Difference between adjustment for
inflation for tax purposes and
for financial reporting
purposes........................ 78,757 407,822 (219,971)
Other............................ 52,337 (520,344)
------------ ------------ -------------
Adjusted income before taxes
and minority interest......... 7,332,814 10,439,779 29,574,934
Less--Exempt income.............. (6,246,983) (6,579,029) (13,558,390)
------------ ------------ -------------
Taxable income................... 1,085,831 3,860,750 16,016,544
------------ ------------ -------------
Statutory tax rate............... 35% 35% 35%
------------ ------------ -------------
Current income tax expense....... Ps 380,041 Ps 1,351,263 Ps 5,605,790
============ ============ =============
</TABLE>

The percentage of exempt income to the adjusted income before taxes and
minority interest was, 85.2%, 63.0% and 45.8% for the years ended December 31,
1996, 1997 and 1998, respectively. These percentages vary from the statutory
exemptions for the operating subsidiaries discussed earlier (100% in 1996, 90%
in 1997 and 80% in 1998) because the income of Transtel S.A. (unconsolidated)
is not exempt from income taxes; however, it is included in the consolidated
adjusted income before taxes and minority interest.

Transtel S.A. has tax loss carryforwards of Ps23,746,604 of which
Ps2,703,592 expires in 2001, Ps5,562,203 in 2002 and Ps15,480,809 in 2003.
Since consolidated returns are not allowed, only Transtel S.A. may use these
loss carryforwards.

F-32
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company's income tax returns for 1996, 1997 and 1998 are subject to
review and acceptance by the tax authorities. The tax returns for the year
ended December 31, 1998 of each company will be filed between April and June
1999. The Company's management and its legal advisors believe that no material
tax liabilities in excess of those recorded will arise as a result of any such
eventual reviews. The Company and its subsidiaries do not have any pending
claims from the tax authorities.

Note 19--Leases

Operating

Operating leases in effect at December 31, 1998 consisted of the following:

<TABLE>
<CAPTION>
Number of months Remaining amounts
------------------------------ ---------------------------------------
Class of asset Original term Remaining period Amount Purchase option Total
-------------- ------------- ---------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Computer equipment...... 36 13-36 Ps 53,827 Ps 9,049 Ps 62,876
Computer equipment...... 24 6-24 47,308 4,941 52,249
Equipment for 11,000
lines.................. 60 33 3,592,900 65,756 3,658,656
Office equipment........ 24 22 1,096 99 1,195
Vehicles................ 36 4-36 747,173 355,185 1,102,358
Power station........... 36 21 39,328 6,485 45,813
----------- --------- -----------
Total................... Ps4,481,632 Ps441,515 Ps4,923,147
=========== ========= ===========
</TABLE>

Such operating lease amounts, including purchase options, are due as
follows:

<TABLE>
<CAPTION>
Payable in the years Ending December 31,
----------------------------------------
<S> <C>
1999 Ps1,034,559
2000............................................................ 1,226,758
2001............................................................ 2,661,830
-----------
Ps4,923,147
===========
</TABLE>

Total rent expense was, Ps1,280,818, Ps1,775,817 and Ps1,805,888 in 1996,
1997 and 1998, respectively.

F-33
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Capital leases

The Company, in the ordinary course of business, has entered into two capital
lease arrangements with variable interest rates for the purchase of land.
Interest rates applicable to these capital leases were FTD (fixed time deposit
rate) +6% at December 31, 1998. During 1998, the Company recorded capital
leases with Global Telecommunications Operations, Inc. ("Global"), a related
party, and IBM for telephone equipment. The interest rates on these leases
ranged from 6.0% to 8.16%. See Note 30 for a description of the Global and IBM
leases. Future payments under the capital leases are as follows:

<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Total minimum lease payments.... Ps 3,037,837 Ps 3,007,833 Ps 45,360,734
Less: Imputed interest.......... (1,798,279) (1,458,694) (12,638,628)
------------ ------------ -------------
Present values of minimum lease
payments....................... 1,239,558 1,549,139 32,722,106
Less: Current portion........... (75,530) (243,722) (4,110,110)
------------ ------------ -------------
Ps 1,164,028 Ps 1,305,417 Ps 28,611,996
============ ============ =============
</TABLE>

<TABLE>
<CAPTION>
Payable in the years ending December 31,
----------------------------------------
<S> <C>
1999........................................................... Ps 8,986,912
2000........................................................... 6,623,675
2001........................................................... 7,260,844
2002........................................................... 4,887,531
2003........................................................... 17,601,772
------------
Total minimum lease payments................................... Ps45,360,734
============
</TABLE>

See Note 30 for additional commitments for leases with Global as part of the
Company's expansion plan.

Note 20--Other Noncurrent Liabilities

Other noncurrent liabilities consisted of the following:

<TABLE>
<CAPTION>
December 31,
----------------------------------
1996 1997 1998
-------- ------------ ------------
<S> <C> <C> <C>
Payable to Siemens AG for Transtel--
Siemens Purchase Agreement (see Note 16)
($2,118,914 in 1998 and $2,484,085 in
1997)................................... Ps -- Ps 3,830,732 Ps 3,267,599
Payable to Siemens AG for TeleGirardot-
Siemens Purchase Agreement (see Notes 16
and 30) ($2,095,053 in 1998 and
$3,392,379 in 1997)..................... 5,231,422 3,230,802
Payable to IBM (see Note 16) ($703,178 in
1998 and $634,490 in 1997).............. 978,454 1,084,378
Unearned interest income ($887,853 in
1997) (see Note 16)..................... 1,369,167
Cable television fees paid in advance.... 564,787
Accrued litigation loss.................. 2,545,101 2,200,000
Negative goodwill........................ 305,971
Other.................................... 84,790 191,151 298,121
-------- ------------ ------------
Ps84,790 Ps14,146,027 Ps10,951,658
======== ============ ============
</TABLE>

F-34
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Girardot Telephone was sued by TeleTequendama E.S.P., a local telephone
operator competitor, for Ps2,200,000 (nominal Pesos) on June 4, 1997 for
unfair competition in TeleTequendama's zone of operations. Although the
resolution and trial of this lawsuit will not occur during 1999, the Company
and Girardot Telephone agreed that Girardot Telephone would record,
concurrently with the acquisition of Girardot Telephone by the Company on
December 31, 1997, Ps2,200,000 (nominal Pesos) as an estimate of the liability
that is probable as a result of the litigation.

Note 21--Minority Interest

Minority interest in the net assets of subsidiaries consisted of the
following:

<TABLE>
<CAPTION>
December 31,
--------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Capital.............................. Ps10,474,231 Ps33,548,273 Ps33,814,766
Retained earnings.................... 3,250,672 8,010,646 15,855,865
Surplus from reappraisal of assets... 6,559,507 7,493,679 8,142,183
------------ ------------ ------------
Ps20,284,410 Ps49,052,598 Ps57,812,814
============ ============ ============
</TABLE>

Note 22--Shareholders' Equity

In July 1997, the existing shareholders subscribed to a total of
1,039,801,222 shares of the Company's common stock for a total of Ps37,054,236
(36 single Pesos per share). These shareholders paid Ps36,728,589 in July 1997
and the remaining unpaid balance of Ps325,647 was paid in October 1997. The
Company reduced a portion of its borrowings with the cash received.

On December 7, 1998 the Company issued 29,571,946,754 shares of common stock
to existing shareholders for no consideration. Such shares were equal to the
premium paid in nominal pesos on the 1997 sale divided by the par value of 1
single Peso per share.

As indicated Note 12, the Company may pay dividends of no more than
Ps6,306,492 as of December 31, 1998.

Legal reserve

Pursuant to Colombian law, 10% of the net profit of the parent company and
its Colombian subsidiaries in each year must be appropriated with a credit to
a "reserve fund" until it is equivalent to at least 50% of the subscribed
capital. This legal reserve may not be reduced to less than the indicated
percentage, except to cover losses in excess of undistributed profits.

Appropriated for future construction and acquisitions

Reserves other than the legal reserve, appropriated directly out of retained
earnings, are freely distributable by the shareholders in general meeting
subject to the Company meeting the covenants in the indenture of the Senior
Notes.

F-35
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 23--Revenues

Revenues consisted of the following:

<TABLE>
<CAPTION>
December 31,
--------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Connection fees...................... Ps 6,503,506 Ps13,311,979 Ps37,672,864
Local usage charges.................. 1,502,541 4,054,250 12,097,921
Basic charges........................ 1,300,637 2,815,468 8,211,840
Long distance charges................ 3,736,119 8,424,877 18,458,760
Telephone directory commissions...... 252,289 437,000 545,752
Pay television services.............. 5,813,947
Sales of telephones.................. 320,744 858,973 1,178,849
Other operating income............... 139,729 827,542 1,659,457
------------ ------------ ------------
Ps13,755,565 Ps30,730,089 Ps85,639,390
============ ============ ============
</TABLE>

Note 24--Operating Costs

Operating costs consisted of the following:

<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Salaries, benefits and other labor
payments............................. Ps1,413,201 Ps2,710,352 Ps 4,690,033
Pensions expenses..................... 85,462 172,870 695,746
Insurance............................. 65,416 120,969 220,201
Fees, studies and investigations...... 2,740 133,939 301,339
Rentals of space...................... 149,421 251,812 195,430
Other rent............................ 554,827 852,485 891,380
Taxes other than income............... 27,985 209,964 88,098
Services, utilities, maintenance and
repairs.............................. 107,241 867,178 1,994,492
Depreciation.......................... 149,852 401,241 1,990,082
Amortization.......................... 145,073 817,583 1,558,235
Cost of sales of telephones........... 202,231 505,769 934,857
Security.............................. 5,116 168,419 411,065
Fees to government by Cablevision..... 398,561
Programming costs..................... 2,494,966
Other................................. 15,017 466,356 1,054,238
----------- ----------- ------------
Ps2,923,582 Ps7,678,937 Ps17,918,723
=========== =========== ============
</TABLE>

F-36
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 25--Administrative Expenses

Administrative expenses consisted of the following:

<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Salaries, benefits and other labor
payments............................ Ps1,015,406 Ps 1,677,720 Ps 5,209,319
Pensions expenses.................... 42,022 93,480 350,404
Insurance............................ 74,929 125,657 187,815
Fees, studies and investigations..... 664,584 1,089,556 1,107,790
Travel expenses...................... 87,676 213,367 153,622
Rentals of space..................... 232,070 274,495 397,356
Other rent........................... 313,997 365,707 182,391
Taxes other than income.............. 163,107 792,036 870,420
Services, maintenance and repairs.... 600,539 1,072,088 687,988
Depreciation......................... 86,410 208,471 525,536
Amortization......................... 980,220 2,528,070 6,892,248
Air transportation................... 46,967 568,222 532,210
Provision for doubtful accounts...... 14,688 220,282 914,865
Provision for writedown of
properties, plant and equipment..... 110,594 851,271
Provision for writedown of
inventories......................... 292,992
Other................................ 125,513 754,051 1,158,797
----------- ------------ ------------
Ps4,448,128 Ps10,093,796 Ps20,315,024
=========== ============ ============
</TABLE>

Note 26--Marketing Expenses

Marketing expenses consisted of the following:

<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Salaries, benefits and other labor
payments............................... Ps463,063 Ps 818,357 Ps2,507,804
Pensions expenses....................... 27,827 55,938 82,110
Publicity............................... 161,897 35,912 1,010,841
Insurance............................... 6,136 7,264 32,749
Travel expenses......................... 2,553 4,514 11,566
Rentals of space........................ 28,134 23,337 120,026
Other rent.............................. 2,369 7,981 19,305
Services, maintenance and repairs....... 61,257 148,945 251,879
Depreciation............................ 28,434 1,444 39,766
Amortization............................ 94,933 563,693 966,395
Other................................... 25,548 145,588 414,743
--------- ----------- -----------
Ps902,151 Ps1,812,973 Ps5,457,184
========= =========== ===========
</TABLE>

F-37
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 27--Nonoperating Income (Expenses)

Financial income consisted of the following:

<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Interest....................... Ps 652,810 Ps 6,531,421 Ps 17,244,564
Exchange gains................. 355,032 3,500,838 35,464,782
Other financial income......... 4,605 183,039 441,939
------------ ------------- -------------
Ps 1,012,447 Ps 10,215,298 Ps 53,151,285
============ ============= =============

Financial expenses consisted of the following:

<CAPTION>
Year ended December 31,
------------------------------------------
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Interest....................... Ps(2,250,450) Ps (9,408,807) Ps(30,606,827)
Bank commissions............... (154,962) (667,527) (1,043,537)
Exchange losses................ (75,907) (5,519,672) (53,914,297)
Bank expenses.................. (96,631) (17,493) (86,859)
Other financial expenses....... (45,823) (311,628) (660,175)
------------ ------------- -------------
Ps(2,623,773) Ps(15,925,127) Ps(86,311,695)
============ ============= =============

Other income (expenses) consisted of the following:

<CAPTION>
Year ended December 31,
------------------------------------------
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Donations...................... Ps -- Ps (397,245) Ps (322,652)
Tax on foreign indebtedness.... (517,987)
Bonus to executive............. (495,786)
Sales of scrap and extra
parts......................... 101,782
Other, net..................... 380,535 (743,537) 1,286,504
------------ ------------- -------------
Ps 380,535 Ps (2,154,555) Ps 1,065,634
============ ============= =============
</TABLE>

Under legislation in effect for April through June 1997, the Colombian
Government taxed new foreign currency borrowings at 6% of the amount borrowed.
The Company incurred costs of Ps517,987 related to this tax during 1997.

F-38
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 28--Net Monetary Inflation Adjustment Income (Loss)

The net monetary inflation adjustment income (loss) consisted of the
following:

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Inflation adjustment of:
Investments................... Ps 6,464 Ps 119,282 Ps 167,229
Inventories................... 89,825 56,825 468,792
Properties, plant and
equipment.................... 4,602,169 6,379,703 18,556,002
Accumulated amortization...... (99,050) (217,938)
Accumulated depreciation...... (85,889) (136,925) (581,530)
Deferred charges.............. 1,313,165 2,196,095 8,550,860
Deferred monetary correction--
debit........................ (194,679) (106,851) (150,529)
Other assets.................. 40 259,909 475,299
Deferred monetary correction--
credit....................... 180,315 102,732 430,320
Shareholders' equity.......... (3,413,334) (5,069,518) (11,982,336)
------------ ------------ -------------
Subtotal.................... 2,498,076 3,702,202 15,716,169
Revenues...................... (842,004) (1,556,164) (3,524,526)
Expenses...................... 823,403 1,317,646 4,302,356
Costs......................... 167,624 622,139 366,594
------------ ------------ -------------
Total....................... Ps 2,647,099 Ps 4,085,823 Ps 16,860,593
============ ============ =============
</TABLE>

Note 29--Related Party Transactions

The Company has had significant transactions with Mr. Gonzalo Caicedo Toro, a
shareholder (see Note 4). The following table summarizes the significant
transactions with Mr. Caicedo:

<TABLE>
<CAPTION>
Balance due from (to) Mr. Caicedo
Year ended December 31,
-----------------------------------------
1996 1997 1998
------------- ------------- -----------
<S> <C> <C> <C>
Beginning of year...................... Ps 1,987,641 Ps (25,258) Ps--
Loans made............................. 10,970,270 13,441,416
Payments received:
Cash................................. (7,784,004) (4,641,546)
Land and building (see Note 7)....... (2,036,525)
Shares of Coinversiones (see Note
4).................................. (3,162,640)
Cash received from fiduciary rights
to a trust set up to manage the sale
of certain investments owned by Mr.
Caicedo............................. (7,462,420)
Debt assumed......................... (1,312,192)
------------- ------------- ------
End of year (see Note 5)............... Ps (25,258) Ps -- Ps--
============= ============= ======
</TABLE>

The loans were not interest bearing and had no maturity dates.

See Note 30 for transactions with Global Telecommunications Operations Inc.,
a related party.

F-39
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 30--Commitments

Global-Siemens Arrangements

Global Telecommunications Operations, Inc. ("Global") is a British Virgin
Islands company owned by the same shareholders who own Transtel. Global was
formed in January 1995 for the exclusive purpose of acting as a financing
vehicle for the purchase of telecommunications equipment from Siemens AG
("Siemens"). As part of the Company's expansion plan, Global has entered into
four purchase agreements with Siemens for the provision of certain equipment
necessary for the Company's expansion plan. Global has entered or intends to
enter into a lease agreement with each subsidiary other than Caucatel for the
lease of such telecommunications equipment to each subsidiary on terms
substantially similar to the financing to Global from Siemens. Transtel
purchased equipment to be used by Caucatel directly from Siemens ($3.4 million
switches and $533,494 for installation) and contributed it to Caucatel as part
of its capital. Caucatel is the only subsidiary that does not lease its
equipment from Global. Under these leases, if the subsidiaries default under
the leases, Global has the right to take action against the assets leased
thereunder including repossession or sale of the equipment. Global has
assigned to Siemens the lease payments under each of the leases in the event
of an event of default under the purchase agreements occurs and is continuing.
Upon commencement of the leases' lease terms, the following leasing
transactions with Global will be accounted for as capital leases under
Colombian GAAP since the Company expects to exercise the purchase options:

Global I Purchase Agreement. On May 2, 1996, Global entered into a purchase
agreement with Siemens (as amended on July 28, 1997, the "Global I Purchase
Agreement") to purchase certain landline telecommunications equipment to be
used for the development of each of TelePalmira's, TeleJamundi and Unitel's
respective wireline networks for an aggregate amount of approximately $19.3
million, of which 16% (approximately $3.1 million) was paid upon execution of
the Global I Purchase Agreement. The remaining 84% of the price of equipment
delivered and installed by Siemens under the Global I Purchase Agreement is
payable by Global in 24 semi-annual payments. Global's obligations under the
Global I Purchase Agreement are secured by a pledge of the Global I Leases (as
defined below). Siemens' obligations for delivery and installation were
completed on April 19, 1998.

Global I Leases. On August 1, 1996, Global entered into a lease agreement,
as amended on April 12, 1998, for TelePalmira (the "Global--TelePalmira I
Lease"). On April 19, 1998, Global entered into a lease agreement for
TeleJamundi (the "Global--TeleJamundi I Lease") and for Unitel (the "Global--
Unitel I Lease") (the Global--TelePalmira Lease, Global--TeleJamundi Lease and
Global-Unitel I Lease are collectively referred to as the "Global I Leases").
The lease term of each lease commenced on April 19, 1998.

Global-TelePalmira I Lease. Pursuant to the Global-TelePalmira Lease,
TelePalmira agreed to pay Global an aggregate amount of approximately $16.8
million to lease, for a 12-year term, certain switching and cable equipment
that Global purchased from Siemens under the Global I Purchase Agreement.
The Global-TelePalmira Lease includes an option to purchase the equipment
for an additional $285,000 at the end of the lease term.

Global-TeleJamundi I Lease. Pursuant to the Global-TeleJamundi Lease,
TeleJamundi agreed to pay Global an aggregate amount of approximately $5.9
million to lease, for a 12-year term, certain switching and cable equipment
that Global purchased from Siemens under the Global I Purchase Agreement.
The Global-TeleJamundi Lease includes an option to purchase the equipment
for an additional $104,000 at the end of the lease term.

F-40
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

applications. The Global-Unitel I Lease includes an option to purchase the
equipment for an additional $73,000 at the end of the lease term.

Global II Purchase Agreement. On May 30, 1997, Global entered into a
purchase agreement, as amended on July 28 and October 29, 1997 and April 1,
1998, with Siemens (the "Global II Purchase Agreement") to purchase certain
landline and wireless telecommunications equipment to be used for the
development of each of TeleCartago's, Bugatel's and Unitel Wireless'
respective networks for an aggregate amount of approximately $39.8 million, of
which approximately $4.5 million was paid upon execution of the Global II
Purchase Agreement. The remaining price of equipment delivered and installed
by Siemens under the Global II Purchase Agreement is payable by Global in 24
semi-annual payments. Global's obligations to Siemens under the Global II
Purchase Agreement are secured by a pledge of the lease payments under the
Global II Leases (as defined below).

Global-Unitel II Lease. Pursuant to the Global-Unitel II Lease, Unitel
agreed to pay Global an aggregate amount of approximately $25.4 million to
lease, for a 12-year term, certain wireless telecommunications equipment
that Global purchased from Siemens under the Global II Purchase Agreement.
The Global-Unitel II Lease includes an option to purchase the equipment for
an additional $525,000 at the end of the lease term. The Company expects to
increase the Global-Unitel II Lease to approximately $35.0 million to
reflect modifications to the lease. This project is in the testing process
by Global and the Company expects that it will be recorded as a capital
lease in July 1999.

Global III Purchase Agreement. Global entered into a purchase agreement on
June 11, 1998 with Siemens (the "Global III Purchase Agreement") to purchase
certain landline and wireless telecommunications equipment to be used for the
development of each of TelePalmira's and Unitel's Wireless respective networks
for an aggregate amount of approximately $12.9 million. The price of equipment
delivered and installed by Siemens under the Global III Purchase Agreements is
payable by Global in 24 semi-annual payments. Global's obligations to Siemens
under the Global III Purchase Agreement are secured by a pledge of the lease
payments under Global III leases (as defined below).

F-41
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Global-TelePalmira III Lease. Pursuant to the Global-TelePalmira III
Lease, TelePalmira agreed to pay Global an aggregate amount of
approximately $1.4 million to lease, for a 12-year term, certain Switching
telecommunications equipment that Global purchased from Siemens under the
Global III Purchase Agreement. The Global-TelePalmira III Lease includes an
option to purchase the equipment for an additional $9,332 at the end of the
lease term.

Global IV Purchase Agreement. Global entered into a purchase agreement on
June 11 1998 with Siemens (the "Global IV Purchase Agreement") to purchase
certain landline and wireless telecommunications equipment to be used for the
development of each of TelePalmira's, Bugatel's, TeleGirardot's and
TeleCartago's respective networks for an aggregate amount of approximately
$11.0 million. The price of equipment delivered and installed by Siemens under
the Global IV Purchase Agreements is payable by Global in 24 semi-annual
payments. Globals obligations to Siemens under the Global IV Purchase
Agreements are secured by a pledge of the lease payments under the Global IV
leases (as defined below).

Global IV Leases. On September 1, 1998, Global entered into a lease
agreement with TelePalmiara (the "Global-TelePalmira IV Lease"), Bugatel (the
"Global-Bugatel IV Lease") TeleGirardot (the "Global- TeleGirardot IV Lease")
and TeleCartago (the "Global-TeleCartago IV Lease") for certain of the
equipment that is subject to the Global IV Purchase Agreement (the Global-
TelePalmira IV Lease, the Global-Bugatel IV Lease, and the Global-TeleGirardot
IV Lease and the Global-TeleCartago IV lease are collectively referred to
herein as, the "Global IV Leases"). The lease term of each lease will commence
upon completion of Siemens' delivery and installation obligations. The Company
expects that this project will be delivered and accepted in July 1999; at
present it is in the testing process.

Global-TelePalmira IV Lease. Pursuant to the Global-TelePalmira IV
Lease, TelePalmira agreed to pay Global an aggregate amount of
approximately $4.1 million to lease, for a 12-year term, certain switching
and emission telecommunications equipment that Global purchased from
Siemens under the Global IV Purchase Agreement. The Global-TelePalmira IV
Lease includes an option to purchase the equipment for an additional
$26,589 at the end of the lease term.

Global-Bugatel IV Lease. Pursuant to the Global-Bugatel IV Lease,
Bugatel agreed to pay Global an aggregate amount of approximately $4.3
million to lease, for a 12-year term, certain switching and emission
telecommunications equipment that Global purchased from Siemens under the
Global IV Purchase Agreement. The Global-Bugatel IV Lease includes an
option to purchase the equipment for an additional $27,890 at the end of
the lease term.

F-42
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Global-TeleCartago IV Lease. Pursuant to the Global-TeleCartago IV
Lease, TeleCartago agreed to pay Global an aggregate amount of
approximately $4.3 million to lease, for a 12-year term, certain switching
and emission telecommunications equipment that Global purchased from
Siemens under the Global IV Purchase Agreement. The Global-TeleCartago IV
Lease includes an option to purchase the equipment for an additional
$27,850 at the end of the lease term.

Transtel-Siemens Arrangement

On May 23, 1997, Transtel entered into a purchase agreement with Siemens
(the "Transtel-Siemens Purchase Agreement") for certain telecommunications
equipment to be used by Caucatel in the installation of approximately
23,000 lines for approximately $3.3 million payable semiannually over a
ten-year period at an interest rate of LIBOR plus 1% (6.2% at December 31,
1998), commencing six months after the completion of the Turn-Key
Arrangements. The obligations of Transtel under the Transtel-Siemens
Purchase Agreement are secured by a promissory note from Transtel. Siemens
completed the installation of this equipment in December 1997 and the
payment obligation to Siemens was recorded as a liability at December 31,
1997. As of December 31, 1998, the balance was $2,549,427 (Ps3,931,497)
(see Notes 16 and 20).

TeleGiradot-Siemens Arrangement

The Company has assumed Girardot Telephone's obligations under six purchase
agreements and executed one additional purchase agreement on July 2, 1978
totaling $4.5 million with Siemens (the "TeleGirardot-Siemens Purchase
Agreement") for certain telecommunications equipment now in use by
TeleGirardot. The contract amounts are generally payable over five-year
periods at interest rates of approximately 6.7% to 7.5%. Substantially all of
the equipment was installed at December 31,1997. The balances payable at
December 31, 1997 and 1998 are $4,440,951 (Ps6,848,435) and $3,126,944
(Ps4,822,091), respectively, (see Notes 16 and 20).

IBM Arrangement

The Company has entered into an agreement with International Business
Machines Corp. ("IBM") whereby IBM has agreed to finance and to provide and
install all the Internet and voice mail related hardware and software for the
Company's telephone systems and the Company has agreed to pay IBM an aggregate
amount of $3.4 million for such equipment. On October 1 and October 28, 1997,
Unitel and Caucatel entered into 60 month leases with IBM for $2.8 million and
$532,008 respectively, for this equipment. The lease term of each lease
commenced in June 1998. The leases are capital leases under Colombian GAAP as
the Company expects to exercise the purchase options.

Construction Arrangements

On April 30, 1996, each of TelePalmira, Unitel (with respect to its wireline
applications) and TeleJamundi entered into turn-key arrangements (the "Turn-
Key Arrangements") with Siemens S.A., a Colombian corporation, to (i) install
the lines, switches and other equipment leased by each of these subsidiaries
from Global under the Global I Leases, (ii) put in operation such lines and
equipment, (iii) manage the "cut-over" to the new system lines, install air
conditioner equipment and train the personnel who will operate the switching
equipment, (iv) install a transmission signaling standard, (v) expand, replace
and install the outside plant, and (vi) complete expansion of the network. The
aggregate amount due to Siemens S.A. under these Turn-Key Arrangements is
approximately $8.3 million (Ps10.8 billion). Siemens S.A. has completed these
arrangements at December 31, 1998 and the unpaid balance at December 31, 1998
was $2,880,628 (Ps4,442,246).

For each of the Turn-Key Arrangements described in the paragraph above,
Siemens S.A. has provided the respective subsidiary with performance bonds
equivalent to (i) 10% of the amount of each Turn-Key Arrangement, (ii) 5% of
the services contracted under each Turn-Key Arrangement, (iii) 10% of the cost
of the outside plant civil works and (iv) up to $100,000 for personal or
property liability.

F-43
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

On June 18, 1997, June 30, 1997 and March 10, 1998 each of Transtel (in
place of Bugatel, which was not yet formed), TeleCartago and Unitel (with
respect to its wireless applications) entered into Turn-Key Arrangements with
Siemens S.A. to (i) install the lines, switches and other equipment leased by
Bugatel, TeleCartago and Unitel from Global under the Global II Leases, (ii)
put in operation such lines and equipment, and (iii) expand, replace and
install the outside plant for Bugatel and TeleCartago. The aggregate amount
due to Siemens under these Turn-Key Arrangements is approximately $9.4
million. Siemens S.A. has provided Transtel, TeleCartago, and Unitel with
performance bonds substantially similar to those provided to TelePalmira,
Unitel and TeleJamundi. As of December 31, 1997, Siemens S.A. had been paid
Ps1,798,174 for completed phases of the arrangement (see Note 7).
Additionally, the Company had advanced Ps804,577 to Siemens S.A. (see Note 5)
at December 31, 1997. As of December 31, 1998, Siemens finished TeleCartago's
network expansion for which the Company's debt was Ps1,920,526 ($1,245,388)
and the Company had advanced Ps2,716,449 ($1,761,514) (see Note 5) in order to
conclude the agreements for Bugatel and Unitel.

On May 23, 1997, Transtel entered into a Turn-Key Arrangement with Siemens
S.A. to (i) install the lines, switches and other equipment that Transtel
agreed to contribute to the capital of Caucatel as part of its capital
contribution and which the Company acquired from Siemens pursuant to the
Transtel-Siemens arrangements, and (ii) put in operation such lines and
equipment. The aggregate amount due to Siemens S.A. under this Turn-Key
Arrangement is $533,494. This equipment was installed at December 31, 1997 and
the remaining liability to Siemens S.A. was paid during 1998.

DIAN Financing

The Departamento de Impuestos y Aduanas ("DIAN") allows for the deferral of
value-added taxes and duties related to the purchase of certain imported
telecommunications equipment by the Company through its operating subsidiaries
in its expansion plan. Based on the expected imported equipment to be
purchased under the expansion plan, the Company estimates that it will defer
approximately Ps31.1 billion ($20.2 million) of taxes and duties during the
expansion plan that will be paid over a five-year period commencing six months
from the date of incurrence (the "DIAN Financing"). The DIAN Financing does
not bear any interest. DIAN Financing consists of approximately Ps23.7 billion
($15.4 million) of value-added tax and Ps7.4 billion ($4.8 million) of duty.
Prior to December 24, 1998, the value-added tax, when paid, may be taken as a
credit against income taxes to the extent that income taxes are payable in a
two year period or is refundable if not used as a credit. On December 24, 1998
the Colombian government issued Law 488 which reforms the tax rules as of
January 1, 1999. Law 488, among other things, establishes that the value-added
tax paid may not be taken as a credit against income taxes commencing in 1999
but may be treated as a deduction from taxable income or capitalized as a cost
of the respective asset. All DIAN Financing other than Ps2.1 billion paid
during 1998 will be subject to Law 488. No DIAN Financing amounts were due at
December 31, 1997 as Siemens had not yet completed the
delivery and installation of the equipment to be leased under the Global
Leases. As of December 31, 1998, the DIAN Financing has been recorded as a
memorandum account related to the Global I Purchase Agreement of $4.2 million
(Ps6.5 billion) of which had been paid $1.4 million (Ps2.1 billion) (see Note
11). The corresponding amounts of the Global Purchase Agreements II, III, IV
and V of $16.0 million (Ps24.6 billion) will be recorded during 1999.

Note 31--Differences Between Colombian GAAP And U.S. GAAP

The Company's financial statements are prepared in accordance with Colombian
GAAP. Because these principles differ in certain significant respects from
U.S. GAAP, this note presents restated U.S. GAAP balance sheets and statements
of income and a reconciliation to U.S. GAAP of net income and shareholders'
equity as of and for the years ended December 31, 1996, 1997 and 1998.

F-44
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

CONSOLIDATED BALANCE SHEETS

(Under U.S. GAAP)

<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------
1996 1997 1998 1998
------------- -------------- -------------- ----------
(Thousands of Pesos of December 31, 1998) (Thousands
of Dollars
--
unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current
Cash................... Ps15,943,884 Ps 3,226,399 Ps 3,574,256 $ 2,318
Short-term and
temporary
investments........... 6,112,097 119,674,357 57,436,116 37,245
Accounts receivable,
net................... 5,187,832 14,205,391 15,243,517 9,885
Advances to suppliers.. 1,883,013 3,606,130 10,706,745 6,942
Inventories............ 343,603 1,108,167 2,669,069 1,731
Prepaid expenses....... 231,964 1,647,538 4,883,153 3,167
------------- -------------- -------------- --------
Total current assets.. 29,702,393 143,467,982 94,512,856 61,288
Noncurrent
Accounts receivable.... 1,815,034 5,734,553 27,782,325 18,016
Properties, plant and
equipment, net........ 38,176,375 143,900,953 291,984,440 189,341
Deferred costs......... 847,227 33,164,941 34,559,067 22,410
Long-term investments.. 45,273 34,972,007 2,933,388 1,902
Income taxes........... 1,807,454 5,505,019 8,557,585 5,549
Other assets........... 136,811 2,500,561 3,944,386 2,557
------------- -------------- -------------- --------
Total assets.......... Ps72,530,567 Ps369,246,016 Ps464,274,047 $301,063
============= ============== ============== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt........ Ps12,757,849 Ps 587,742 Ps 13,578,652 $ 8,805
Current portion of
other long-term debt.. 7,876,103 15,142,235 1,464,219 949
Current portion of
capital lease
obligations........... 707,043 1,309,377 4,808,809 3,118
Current portion of Dian
Financing............. 1,107,958 718
Accounts payable....... 4,052,707 18,217,065 30,241,920 19,611
Tax liabilities........ 969,804 2,964,137 5,523,580 3,583
Labor liabilities...... 154,735 494,343 966,859 627
Other liabilities...... 249,160 6,353,974 2,296,596 1,489
Accrued pension
obligations........... 618,380 538,615 349
Deferred income........ 5,792,519 4,803,780 4,654,334 3,018
------------- -------------- -------------- --------
Total current
liabilities.......... 32,559,920 50,491,033 65,181,542 42,267
Long-term liabilities
12 1/2% Senior Notes
due 2007.............. 224,474,459 231,316,500 150,000
20.32% Senior Discount
Notes due 2008........ 23,131,650 15,000
Other long-term debt... 29,026,108 8,813,801 5,715
Capital lease
obligations........... 3,690,072 4,036,609 30,665,784 19,886
Dian Financing......... 3,323,874 2,155
Accrued pension
obligations........... 6,881,948 6,480,779 4,202
Other liabilities...... 84,790 12,776,859 10,645,687 6,903
------------- -------------- -------------- --------
Total liabilities..... 65,360,890 298,660,908 379,559,617 246,128
------------- -------------- -------------- --------
Minority interest....... 8,551,357 37,503,077 44,648,215 28,953
------------- -------------- -------------- --------
Shareholders' equity:
Common stock, Ps1 par
value, 50 billion
shares authorized;
34,611,747,976 shares
issued and outstanding
(5,039,801,222 in 1997
and 4,000,000,000 in
1996)................. 7,395,882 44,450,118 44,450,118 28,824
Accumulated deficit.... (8,777,562) (11,368,087) (4,383,903) (2,842)
------------- -------------- -------------- --------
Total shareholders'
equity............... (1,381,680) 33,082,031 40,066,215 25,982
------------- -------------- -------------- --------
Total liabilities and
shareholder's
equity............... Ps72,530,567 Ps369,246,016 Ps464,274,047 $301,063
============= ============== ============== ========
</TABLE>

F-45
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

TRANSTEL S.A.

CONSOLIDATED STATEMENTS OF INCOME
(Under U.S. GAAP)

<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
1996 1997 1998 1998
-------------- -------------- ------------- ------------
(Thousands of Pesos of December 31, 1998) (Thousands
of Dollars--
unaudited)
<S> <C> <C> <C> <C>
Revenues................ Ps 8,937,406 Ps 31,692,078 Ps 85,775,466 $55,622
-------------- -------------- ------------- -------
Costs and expenses:
Operating costs....... 2,868,079 9,000,569 18,574,681 12,045
Administrative
expenses............. 5,218,969 13,451,320 21,020,180 13,631
Marketing expenses.... 1,058,796 2,326,979 5,607,024 3,636
-------------- -------------- ------------- -------
9,145,844 24,778,868 45,201,885 29,312
-------------- -------------- ------------- -------
Operating income
(loss)............. (208,438) 6,913,210 40,573,581 26,310
-------------- -------------- ------------- -------
Nonoperating income
Financial income...... 1,012,447 10,215,299 53,151,285 34,466
Financial expenses.... (10,177,162) (21,432,009) (92,365,457) (59,895)
Other................. 113,074 (1,632,017) 1,079,012 699
-------------- -------------- ------------- -------
(9,051,641) (12,848,727) (38,135,160) (24,730)
-------------- -------------- ------------- -------
Net monetary inflation
adjustment income...... 3,284,279 6,872,111 15,716,060 10,191
-------------- -------------- ------------- -------
Income (loss) before
income taxes and
minority interest.... (5,975,800) 936,594 18,154,481 11,771
Income tax benefit (ex-
pense)................. 758,569 2,350,552 (2,132,498) (1,382)
-------------- -------------- ------------- -------
Income (loss) before
minority interest.... (5,217,231) 3,287,146 16,021,983 10,389
Minority interest....... 1,759,794 (5,877,671) (9,037,799) (5,860)
-------------- -------------- ------------- -------
Net income ( loss).... Ps (3,457,437) Ps (2,590,525) Ps 6,984,184 $ 4,529
============== ============== ============= =======
Basic and diluted income
(loss) per share
(in single Pesos and
single Dollars per
share)................. Ps (0.10) Ps (0.08) Ps 0.20 $ --
============== ============== ============= =======
</TABLE>

F-46
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(a) Reconciliation of net income:

The following summarizes the principal differences between accounting
practices under Colombian and U.S. GAAP and their effects on net income for
the years ended December 31, 1996, 1997 and 1998:

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Consolidated net income under Colom-
bian GAAP........................... Ps 3,863,145 Ps 1,258,834 Ps11,524,840
(i)Deferred income taxes........... 1,138,610 3,697,566 3,052,566
(ii)Surplus from reappraisal of
assets........................ -- -- --
(iii)Depreciation.................. (1,088,424) (3,172,280) (4,770,896)
(iv)Capitalized interest........... 295,506 1,165,267 1,474,772
(v)Deferred costs.................. (7,619,751) (8,701,582) (3,583,345)
(vi)Capital leases................. 396,864 1,207,842 (53,094)
(vii)Revenue recognition........... (4,818,159) 961,989 136,076
(viii)Reversal of deferred monetary
correction.................... (39,848) 2,109,536 (1,615,947)
(ix)Effect of the above differences
on minority interest.......... 4,414,620 (1,117,697) 966,572
(x)Distribution to shareholder..... -- -- --
(xi)Depreciation of Cablevision
assets........................ (147,360)
------------ ------------ ------------
Consolidated net income (loss) under
U.S. GAAP........................... Ps(3,457,437) Ps(2,590,525) Ps 6,984,184
============ ============ ============
</TABLE>

(b) Reconciliation of shareholders' equity:

The following summarizes the principal differences between accounting
practices under Colombian GAAP and U.S. GAAP and their effects on
shareholders' equity at December 31, 1996, 1997 and 1998:

<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Consolidated shareholders' equity
under Colombian GAAP............... Ps22,385,774 Ps61,359,260 Ps76,289,978
(i)Deferred income taxes.......... 1,807,454 5,505,020 8,557,586
(ii)Surplus from reappraisal of
assets....................... (10,232,272) (10,892,688) (14,298,566)
(iii)Depreciation................. (1,088,424) (4,260,704) (9,031,601)
(iv)Capitalized interest.......... 300,220 1,465,488 2,940,260
(v)Deferred costs................. (14,571,091) (23,272,673) (26,856,018)
(vi)Capital leases................ 415,064 1,622,906 1,569,812
(vii)Revenue recognition.......... (5,524,991) (4,563,002) (4,426,926)
(viii)Reversal of deferred
monetary correction.......... 340,529 2,450,065 834,118
(ix)Effect of the above
differences on minority
interest..................... 5,173,542 4,055,844 5,022,417
(x)Distribution to shareholder.... (387,485) (387,485) (387,485)
(xi)Depreciation of Cablevision
assets....................... (147,360)
------------ ------------ ------------
Consolidated shareholders' equity
(deficit) under U.S. GAAP.......... Ps(1,381,680) Ps33,082,031 Ps40,066,215
============ ============ ============
</TABLE>

F-47
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following summarizes the changes in shareholders' equity (deficit) under
U.S. GAAP for the three years ended December 31, 1996, 1997 and 1998:

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period.... Ps 2,463,242 Ps(1,381,680) Ps33,082,031
Shares issued..................... 37,054,236
Distribution to shareholder....... (387,485)
Net loss.......................... (3,457,437) (2,590,525) 6,984,184
------------ ------------ ------------
Balance at end of period.......... Ps(1,381,680) Ps33,082,031 Ps40,066,215
============ ============ ============
</TABLE>

The Company has no items of other comprehensive income.

(d) Summary of significant differences between Colombian and U.S. GAAP:

(i) Deferred income taxes

Under Colombian GAAP, deferred income taxes are generally recognized for
timing differences in a manner similar to Accounting Principles Board Opinion
No. 11.

Under U.S. GAAP, Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes", requires that deferred tax assets or
liabilities be recorded for the tax effects of temporary differences between
the financial and tax bases for assets and liabilities. A valuation allowance
is provided for deferred tax assets when it is considered more likely than not
that they will not be realized.

Total applicable income taxes (benefit) under U.S. GAAP are comprised of the
following components for 1996, 1997 and 1998:

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Current income tax expense (see
Note 18)....................... Ps 3,880,041 Ps 1,351,263 Ps 5,605,790
Deferred income tax benefit..... (1,138,610) (3,701,815) (3,473,292)
------------ ------------ ------------
Total benefit................... Ps (758,569) Ps(2,350,552) Ps 2,132,498
============ ============ ============
</TABLE>

F-48
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Temporary differences between the amounts reported in the financial
statements and the tax bases for assets and liabilities result in deferred
taxes. Tax losses in Colombian may be carried forward for five years; however,
consolidated tax returns and carrybacks are not allowed. The Company believes
there are no limitations which would preclude it from fully realizing the
established deferred tax asset. Deferred tax assets and liabilities at
December 31, 1996, 1997 and 1998 are as follows:

<TABLE>
<CAPTION>
December 31,
-------------------------------------
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Deferred tax assets:
Depreciation...................... Ps 272,497 Ps1,382,794 Ps 3,052,611
Preoperating expenses............. 1,224,909 4,564,972 5,948,846
Depreciation of Cablevision
assets........................... 51,576
Revenue recognition............... 168,634 134,966 125,441
Capital leases.................... 129,462 77,853 98,184
Inflation adjustment.............. 79,194 121,437
Tax benefit of net operating loss
carryforwards.................... 3,057,287 8,811,199
----------- ----------- ------------
Total........................... 1,874,696 9,217,872 18,209,294
----------- ----------- ------------
Deferred tax liabilities:
Capitalized interest.............. 67,242 399,048 840,509
Undistributed earnings of
subsidiaries..................... 3,053,038 8,386,224
Inflation adjustment.............. 256,517
----------- ----------- ------------
Total........................... 67,242 3,708,603 9,226,733
----------- ----------- ------------
Net deferred tax assets recorded
under U.S. GAAP.................... 1,807,454 5,509,269 8,982,561
Deferred tax asset recorded under
Colombian GAAP..................... (4,249) (424,975)
----------- ----------- ------------
Additional net deferred tax assets
recorded under U.S. GAAP........... Ps1,807,454 Ps5,505,020 Ps 8,557,586
=========== =========== ============
</TABLE>

A portion of the deferred tax assets can be realized through reversals of
existing taxable temporary differences; the remainder will be dependent on
future income, including dividends from the undistributed earnings of the
subsidiaries. Management believes that sufficient income will be earned in the
future to realize the remaining net deferred income tax assets.

Deferred tax benefit (expense) consisted of:

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Depreciation..................... Ps 272,497 Ps 1,110,297 Ps 1,669,817
Preoperating expenses............ 592,335 3,340,063 1,383,873
Depreciation of Cablevision
Assets.......................... 51,576
Tax benefit of net operating loss
carryforwards................... 3,057,287 5,753,912
Revenue recognition.............. 168,634 (33,668) (9,525)
Capital leases................... 119,026 (51,609) 20,331
Capitalized interest............. (66,192) (331,806) (441,461)
Inflation adjustment............. 52,310 (335,711) 377,955
Undistributed earnings of
subsidiaries.................... (3,053,038) (5,333,186)
------------ ------------ ------------
Ps 1,138,610 Ps 3,701,815 Ps 3,473,292
============ ============ ============
</TABLE>

F-49
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The factors involved in the differences between the amount of income taxes
computed at the statutory regular tax rate of 35.0% and the applicable income
taxes for the years ended December 31, 1996, 1997 and 1998 under U.S. GAAP are
as follows:

<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------
1996 1997 1998
------------------- -------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Tax expense (benefit) at
statutory rate......... Ps(2,091,530) (35.0)% Ps 327,808 35.0 % Ps6,354,069 35.0%
Increase (decrease)
resulting from
permanent differences:
Monetary correction.... 37,988 8 617,634 6 (87,681) (.48)
Exempt income of
telephony subsidiaries 1,447,716 23.9 (2,938,935) (24.65) (3,519,160) (19.39)
Other, net............. (152,743) (.7) (357,059) (2.05) (614,730) (3.39)
------------ ----- ------------ ------ ----------- ------
Tax (benefit) expense... Ps (758,569) (12.6)% Ps(2,350,552) (12.7)% Ps2,132,498 11.74%
============ ===== ============ ====== =========== ======
</TABLE>

While the statutory income tax rate is 35%, as more fully explained in Note
18, the Company's operating subsidiaries were 100% exempt from income taxes in
1996, 90% in 1997 and 80% exempt in 1998 and Transtel S.A. and each subsidiary
must file separate income tax returns. Such exemptions decline through 2002.
Transtel S.A. (the parent company) is subject to the 35% income tax rate. The
consolidated effective tax rate varies significantly from the statutory rate
because of these factors.

(ii) Surplus from reappraisal of assets

In accordance with Colombian GAAP, reappraisals of properties, plant and
equipment and long-term investments are made periodically and recorded in
offsetting accounts which are shown under the asset caption "Reappraisal of
assets" and the shareholders' equity caption "Surplus from reappraisals of
assets". Under U.S. GAAP, reappraisals of assets are not permitted.

For U.S. GAAP, the Company adopted SFAS 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" effective
January 1, 1996. In accordance with this standard, the Company periodically
evaluates the carrying value of long-lived assets to be held and used,
including goodwill and other intangible assets, when events and circumstances
warrant such a review. The carrying value of a long-lived asset is considered
impaired when the anticipated undiscounted cash flow from such asset is
separately identifiable and is less than its carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. No loss was recorded in 1996;
however, an impairment loss of Ps110,594 and Ps851,271 were recorded under
Colombian GAAP in 1997 and 1998, respectively. The impairment loss for U.S.
GAAP was Ps140,815 in 1998 which reduced the remaining book value of analog
equipment to zero.

(iii) Depreciation

Since January 1, 1996, the Company uses the reverse sum of the years method
of depreciation for Colombian GAAP purposes. The Company used the straight-
line method in 1995 for Colombian GAAP purposes. The straight-line method of
depreciation is used for U.S. GAAP in 1996, 1997 and 1998. Additional
depreciation expense of Ps1,088,424, Ps3,172,280 and Ps4,770,896 is recorded
under U.S. GAAP in 1996, 1997 and 1998, respectively. These amounts also
reflect the differences in the carrying value of analog equipment between U.S.
GAAP and Colombian GAAP. As of December 31, 1998, a residual value exists
under Colombian GAAP whereas under U.S. GAAP, the book value is nil.

F-50
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(iv) Capitalized interest

Under Colombian GAAP, the Company does not capitalize certain interest costs
on projects during construction which is required under U.S. GAAP. Under U.S.
GAAP the following adjustments to expenses are required:

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Reduction in interest expense for
amounts capitalized as properties,
plant and equipment................... Ps305,854 Ps1,218,730 Ps1,611,451
Less--Additional depreciation expense
on interest amounts capitalized....... (10,348) (53,463) (136,679)
--------- ----------- -----------
Ps295,506 Ps1,165,267 Ps1,474,772
========= =========== ===========
</TABLE>

(v) Deferred costs

For Colombian GAAP, the Company has deferred certain costs which are
expensed as incurred under U.S. GAAP. Under U.S. GAAP, the following costs,
which are deferred for Colombian GAAP, are expensed for U.S. GAAP:

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Preoperating expenses............. Ps -- Ps 159,963 Ps 1,083,393
Organization costs................ 20,100 165,040 329,892
Market and demand studies and
investigations................... 1,405,750 687,692 528,460
Interest costs of investments in
and advances to subsidiaries and
on installation of equipment..... 7,280,718 8,495,811 16,267
Interest costs of expansion plan
projects......................... 1,992,120 3,039,729
Exchange loss costs of expansion
plan projects.................... 276,491 4,102,968
------------ ------------ ------------
Increase in expenses............ 8,706,568 11,777,117 9,100,709
Less--Amortization expense
recorded under Colombian GAAP on
items which are expensed
as incurred under U.S. GAAP...... (1,086,817) (3,075,535) (5,517,364)
------------ ------------ ------------
Net increase in expenses........ Ps 7,619,751 Ps 8,701,582 Ps 3,583,345
============ ============ ============
</TABLE>

F-51
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The remaining deferred costs under U.S. GAAP consist of the amounts in the
following table. The periods of amortization are the same under Colombian and
U.S. GAAP.

<TABLE>
<CAPTION>
Life in years December 31,
------------- ---------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C> <C>
Software................ 5 Ps 422,021 Ps 761,980 Ps 810,238
Leasehold improvements.. 5 584,900 667,005 698,487
Acquisition costs....... 5 3,678,421 3,709,133
Issuance costs of Senior
Notes.................. 10 28,756,178 32,755,531
Organization costs...... 5 256,485 839,876
----------- ------------ ------------
1,006,921 34,120,069 38,813,265
Accumulated
amortization........... (159,694) (955,128) (4,254,198)
----------- ------------ ------------
Deferred costs, net..... Ps 847,227 Ps33,164,941 Ps34,559,067
=========== ============ ============
</TABLE>

(vi) Capital leases

All of the Company's operating leases for Colombian GAAP purposes, as
disclosed in Note 19, qualify as capital leases under U.S. GAAP. In addition
to the amounts shown under capital leases in Note 19, the following assets and
liabilities are recorded under U.S. GAAP; however, these U.S. GAAP amounts do
not include the Global Leases, the IBM Arrangement or the DIAN Financing
disclosed in Note 30, which will be recorded as liabilities under Colombian
and U.S. GAAP when the related equipment is delivered, installed and tested:

<TABLE>
<CAPTION>
December 31,
---------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Telephony networks.................. Ps3,403,182 Ps 4,209,679 Ps 4,208,822
Computer equipment.................. 201,741 465,936 339,181
Transport fleet and equipment....... 735,435 1,832,565 2,097,394
Generator........................... 190,340 84,500
----------- ------------ ------------
Total............................. 4,340,358 6,698,520 6,729,897
Less--Accumulated depreciation...... (500,208) (1,037,990) (2,180,190)
----------- ------------ ------------
Ps3,840,150 Ps 5,660,530 Ps 4,549,707
=========== ============ ============
</TABLE>

The above amounts include cumulative net inflation adjustments of Ps677,028,
Ps1,353,781 and Ps1,752,069 at December 31, 1996, 1997 and 1998, respectively.

<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Total minimum lease payments..... Ps 4,717,420 Ps 4,935,225 Ps 4,923,147
Less--Imputed interest........... (1,559,863) (1,138,379) (2,170,660)
------------ ------------ ------------
Present value of minimum lease
payments........................ 3,157,557 3,796,846 2,752,487
Less--Current portion............ (631,513) (1,065,654) (698,699)
------------ ------------ ------------
Long-term portion................ Ps 2,526,044 Ps 2,731,192 Ps 2,053,788
============ ============ ============
Deferred income from sale
leaseback....................... Ps 267,529 Ps 240,778 Ps 227,399
============ ============ ============
</TABLE>

F-52
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

During 1996, TelePalmira sold recently acquired new equipment for 11,000
telephone lines to Banco Industrial Colombiano Panama for Ps3,273,832 and
leased the equipment back under a capital lease for U.S. GAAP purposes for
total payments of Ps5,213,690. The gain on the sale of Ps267,528 is being
amortized as a reduction of lease expense over five years. The remaining
payments of Ps2,659,982 are included in the following table.

After the above U.S. GAAP adjustments, total minimum lease payments for all
capital leases under U.S. GAAP are as follows:

<TABLE>
<CAPTION>
December 31,
--------------------------------------
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Total minimum lease payments....... Ps7,755,258 Ps7,943,058 Ps50,283,881
Less--Imputed interest............. (3,358,143) (2,597,072) (14,809,288)
----------- ----------- ------------
Present value of minimum lease
payments.......................... 4,397,115 5,345,986 35,474,593
Less--Current portion.............. (707,043) (1,309,377) (4,808,809)
----------- ----------- ------------
Long-term portion.................. Ps3,690,072 Ps4,036,609 Ps30,665,784
=========== =========== ============
</TABLE>

The present value of the minimum lease payments consists of the following
correspondents:

<TABLE>
<CAPTION>
December 31,
------------------------------------
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Global Leases........................... Ps -- Ps -- Ps24,411,584
IBM Arrangement......................... 3,471,821
Land and other leases................... 4,397,115 5,345,986 7,591,188
----------- ----------- ------------
Ps4,397,115 Ps5,345,986 Ps35,474,593
=========== =========== ============
</TABLE>

The total minimum lease payments at December 31, 1998 are as follows under
U.S. GAAP:

<TABLE>
<CAPTION>
Payable in years ending December 31,
------------------------------------
<S> <C>
1999.............................................................. Ps10,021,471
2000.............................................................. 7,850,433
2001.............................................................. 9,922,674
2002.............................................................. 4,887,531
2003.............................................................. 17,601,772
------------
Total minimum lease payments.................................... Ps50,283,881
============
</TABLE>

F-53
<PAGE>

The following income statement effects are recorded under U.S. GAAP for the
above capital leases:

<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1996 1997 1998
---------- ------------ ------------
<S> <C> <C> <C>
Increase in interest expense........ Ps 578,109 Ps 404,583 Ps 510,607
Increase in depreciation expense.... 397,793 502,266 1,120,357
Decrease in (amortization of) gain
from sale of properties, plant and
equipment on leaseback............. 267,528 (26,752) (13,377)
Increase in inflation adjustment
income on capital lease
obligations........................ (677,028) (676,752) (471,417)
---------- ------------ ------------
Total............................. 566,402 203,345 1,146,170
---------- ------------ ------------
Rent expense:
Decrease in rent expense recorded
under Colombian GAAP............. (871,194) (1,226,174) (1,093,076)
Decrease in rent recorded as
deferred costs under Colombian
GAAP and reversed for U.S. GAAP
purposes (see v)................. (92,072) (185,013) --
---------- ------------ ------------
(963,266) (1,411,187) (1,093,076)
---------- ------------ ------------
Net decrease in expenses............ Ps(396,864) Ps(1,207,842) Ps 53,094
========== ============ ============
</TABLE>

Under U.S. GAAP, there are no operating lease commitments at December 31,
1997 except short-term space rentals.

F-54
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

If the equipment under Global Leases, the IBM Arrangement and the related
DIAN Financing of the value-added tax and duty described in Note 30 had been
installed and accepted (and thus the lease terms commenced) at December 31,
1998, the following additional lease and tax obligations on an unaudited pro
forma U.S. GAAP basis would have been outstanding:

<TABLE>
<CAPTION>
IBM DIAN
Global Leases Arrangement Financing Total
------------- ----------- ------------ -------------
(unaudited)
<S> <C> <C> <C> <C>
Total minimum lease or
tax and duty payments.. Ps138,344,830 Ps 749,697 Ps20,644,227 Ps159,738,754
Less--Imputed interest.. (40,040,485) (35,700) -- (40,076,185)
------------- ---------- ------------ -------------
Present value of minimum
lease payments......... 98,304,345 713,997 20,644,227 119,662,569
Less--Current portion... (23,069,009) (107,100) (2,918,443) (26,094,552)
------------- ---------- ------------ -------------
Long-term portion....... Ps 75,235,336 Ps 606,897 Ps17,725,784 Ps 93,568,017
============= ========== ============ =============
</TABLE>

The additional total minimum lease or tax and duty payments would have been
as follows under U.S. GAAP (unaudited):

<TABLE>
<CAPTION>
Payable in year ending December 31,
-----------------------------------
<S> <C>
1999........................................................ Ps 22,175,621
2000........................................................ 19,993,401
2001........................................................ 19,287,366
2002........................................................ 17,353,935
Thereafter.................................................. 80,928,430
-------------
Ps159,738,753
</TABLE>

Additionally, the Company is negotiating other Global Leases with total
minimum lease payments of approximately Ps 18.8 billion and the related DIAN
Financing of Ps4.0 billion to complete its expansion plan. Such leases would
be capital leases under U.S. GAAP; however, they are excluded from the above
pro forma presentation since no commitment has yet been incurred by the
Company or Global.

(vii) Revenue recognition

Under Colombian GAAP, revenues for connection fees for telephone lines are
recognized upon payment in cash or the execution of a promissory note (with a
10% down payment) by the customer and the Company's assignment of a telephone
number which is transferable to others by the customer. Under U.S. GAAP,
revenues from these connection fees are recorded at the date of actual
installation with a dial tone.

F-55
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revenues under U.S. GAAP consist of the following:

<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Connection fees....................... Ps1,685,347 Ps14,273,968 Ps37,808,940
Local usage charges................... 1,502,541 4,054,250 12,097,921
Basic charges......................... 1,300,637 2,815,468 8,211,840
Long distance charges................. 3,736,119 8,424,877 18,458,760
Telephone directory commissions....... 252,289 437,000 545,752
Pay television services............... 5,813,947
Sales of telephones................... 320,744 858,973 1,178,849
Other operating income................ 139,729 827,542 1,659,457
----------- ------------ ------------
Ps8,937,406 Ps31,692,078 Ps85,775,466
=========== ============ ============
</TABLE>

Effective with the first quarter of fiscal 1999, the Company will change
prospectively its method of accounting for connection fee income from an
"installation date basis", which historically has been consistent with
industry practice, to a "deferred basis". Under this new policy, connection
fee income less direct installation costs and direct selling costs will be
deferred and amortized into income over five years using the straight-line
method. This change will be made to reflect income in excess of direct costs
over an estimated service period.

(viii) Deferred monetary correction

The deferred monetary correction asset and liability are reversed for U.S.
GAAP purposes. The effects of the reversal on shareholders' equity and pretax
income are as following:

<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1996 1997 1998
---------- ------------ ------------
<S> <C> <C> <C>
Reversal of deferred monetary
correction recorded as:
Liabilities..................... Ps 906,460 Ps 5,184,256 Ps 4,809,831
Assets.......................... (565,931) (2,734,191) (3,975,713)
---------- ------------ ------------
Increase in shareholders' equity.. 340,529 2,450,065 834,118
Less: Prior year effect on
shareholders' equity............. (380,377) (340,529) (2,450,065)
---------- ------------ ------------
Increase (decrease) in pretax
income........................... Ps (39,848) Ps 2,109,536 Ps(1,615,947)
========== ============ ============
</TABLE>

(ix) Minority interest

The minority interests' share of the differences between Colombian GAAP and
U.S. GAAP are presented separately.

(x) Distribution to shareholder

Transtel purchased land and building from a major shareholder at appraised
value in August 1996. For U.S. GAAP, the difference between the amount paid
and the shareholder's historical basis is treated as a distribution to the
shareholder.

F-56
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(xi) Depreciation of Cablevision Assets

Under Colombian GAAP, goodwill or negative goodwill in an acquisition
accounted for as a purchase is determined as the purchase price paid in excess
of the acquiree's net worth, including reappraisal of assets. The assets of
the acquiree are recorded at book value adjusted for inflation and the amount
of asset reappraisals are shown as a separate caption in the balance sheet and
not depreciated. Such goodwill or negative goodwill is amortized over five
years.

Under U.S. GAAP, goodwill is the excess of the purchase price paid over the
fair value of the assets and liabilities acquired. The assets and liabilities
are recorded at fair value and assets are depreciated over their useful lives.
The Company amortizes goodwill over five years for U.S. GAAP.

Under Colombian GAAP, the consolidated balance sheet at December 31, 1998
includes "Reappraisal of assets" of Ps10,347,549 and "Negative goodwill" of
Ps305,969 related to the Cablevision acquisition during 1998. Under U.S. GAAP,
the net of those amounts (Ps10,041,580) is allocated as follows and
depreciated.

<TABLE>
<S> <C>
Land........................................................... Ps 139,336
Building....................................................... 557,344
Office and computer equipment.................................. 24,993
Telecommunications equipment................................... 1,861,585
External telephony networks.................................... 7,458,322
------------
10,041,580
Accumulated depreciation....................................... (147,360)
------------
Net............................................................ Ps 9,894,220
============
</TABLE>

(xii) Fiduciary Guarantee Trust and other reclassifications

Under Colombian GAAP, fiduciary guarantee trusts are formed to secure debts
by transferring the title of fixed assets to the trust. The net book value of
the trust is recorded as other assets and is amortized in the same way in
which the related fixed assets would be depreciated. Under U.S. GAAP, the
fixed assets used to form the fiduciary guarantee trust remain in natural
fixed assets classifications and are depreciated. The amounts reclassified as
fixed assets for U.S. GAAP purposes from the fiduciary guarantee trust are as
follows at December 31, 1998:

<TABLE>
<S> <C>
Land............................................................ Ps 212,086
Building........................................................ 848,341
-----------
1,060,427
Accumulated depreciation........................................ (57,440)
-----------
Net............................................................. Ps1,002,987
===========
</TABLE>

Certain other reclassifications have been made to the Colombian GAAP balance
sheet to conform to the U.S. GAAP presentation, primarily the reclassification
of certain receivables to advances to suppliers, prepaid expenses and
noncurrent other assets.

(xiii) Earnings per share

Under Colombian GAAP, earnings per share are computed by dividing net income
(loss) applicable to common shares by the weighted average number of common
shares outstanding for each period presented.

F-57
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Under U.S. GAAP, earnings per share are calculated on the basis of the
weighted average number of common shares outstanding, adjusted for stock
dividends issued by the Company which are considered outstanding since the
beginning of the earliest period presented. For U.S. GAAP, the weighted
average number of shares were 33,571,946,754; 34,005,197,263 and
34,611,747,976 during 1996, 1997 and 1998, respectively. These shares are
different than Colombian GAAP since the capitalization in 1998 of premium on
shares issued in July 1997 is treated as a stock issuance under U.S. GAAP as
of January 1, 1996.

Basic and diluted income (loss) per share under U.S. GAAP are the same and
were (0.10) single Pesos, (0.08) single Pesos and 0.20 single Pesos in 1996,
1997 and 1998, respectively.

(e) Additional disclosures required by U.S. GAAP

Concentration of credit risk

Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of accounts receivable resulting from
customer financing plans and sold to financial institutions. Concentration of
credit risk with respect to such receivables is limited to a large number of
customers comprising the Company's customer base; however, the Company's
customers are concentrated in Colombia and the ability of the customers to pay
amounts due depends, in part, upon the general condition of the Colombian
economy. Generally, the Company does not require collateral or other security
to support receivables.

Investments

Investments under U.S. GAAP are presented in the balance sheet as follows:

<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1998
------------- ------------
<S> <C> <C>
Short-term and temporary investments.............. Ps119,674,357 Ps57,436,116
Long-term investments............................. 34,972,007 2,933,388
------------- ------------
Ps154,646,364 Ps60,369,504
============= ============
</TABLE>

The investments consist of the following:

<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1998
------------- ------------
<S> <C> <C>
Certificates of deposits......................... Ps 57,866,016 Ps 9,974,695
Escrow Account................................... 53,106,445 27,503,663
Refinancing Account.............................. 22,932,254
Investments in Ordinary Common Funds............. 20,128,218 22,112,195
Other............................................ 613,431 778,951
------------- ------------
Ps154,646,364 Ps60,369,504
============= ============
</TABLE>

The Escrow Account investments are the only investments meeting the criteria
of SFAS No. 115. These investments consist of U.S. Treasury Bills and interest
only strips that secure, and mature at the same dates as, the first four
interest payments on the 12 1/2% Senior Notes due 2007. Under SFAS No. 115,
the Escrow Account investments are classified as held-to-maturity and are
recorded at amortized cost. All other investments are carried at cost, which
approximates market values.

F-58
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The carrying amount, gross unrealized gains and approximate fair value of
the Escrow Account investments at December 31, 1997 and 1998 are as follows:

<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998
------------ ------------
<S> <C> <C>
Carrying value (amortized cost)................... Ps53,106,445 Ps27,503,663
Gross unrealized gains............................ 146,895 932,075
------------ ------------
Approximate fair value............................ Ps53,253,340 Ps28,435,738
============ ============
</TABLE>

The contractual maturities of the Escrow Account investments are as follows:

<TABLE>
<CAPTION>
Amortized Approximate
Cost Fair Value
------------ ------------
<S> <C> <C>
Year ending December 31, 1999...................... Ps27,503,663 Ps28,435,738
============ ============
</TABLE>

Fair value of financial instruments

Cash, short-term and temporary investments and long-term investments except
the Escrow Account, current accounts receivable (except advances to IBM,
Siemens and Global) and accounts payable: The carrying amounts approximate
fair value because of the short maturity of these instruments or, in the case
of temporary investments, the subsequent sales price.

Noncurrent receivables from customers: The carrying amounts approximate fair
value because of the market rates of interest charged by the Company.

Escrow Account: Based on quoted market values, these investments have a fair
value of Ps28.4 billion at December 31, 1998.

12 1/2% Senior Notes due 2007: The Senior Notes, which were issued on
October 28, 1997, had a fair value of Ps99.2 billion at December 31, 1998
based on quoted market values.

20.32% Senior Discount Notes due 2008: The Senior Discount Notes, which were
issued on December 31, 1998, had a fair value equal to the carrying amount
based on the issue date.

Other long- and short-term debt: Substantially all of the Company's other
long- and short-term debt is variable rate borrowings; thus, the carrying
amounts of the Company's borrowings under these credit agreements approximate
their fair value.

Capital lease obligations: The Company's capital lease obligations contain
variable interest rates and approximate fair value.

F-59
<PAGE>

TRANSTEL S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Other current and noncurrent liabilities

Other current liabilities under U.S. GAAP consisted of:

<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Payable to Siemens AG for Transtel-
Siemens Purchase Agreement.............. Ps -- Ps 425,634 Ps 663,898
Payable to Siemens S.A. for Turn-Key
Arrangement............................. 454,249
Payable to Siemens AG for other
equipment............................... 1,617,013 1,591,289
Payable to IBM........................... 114,033 41,409
Spectrum usage fees payable to the
Colombian Ministry of Communications.... 458,953
Deferred income-Girardot Telephone
connection fees......................... 2,235,369
Other.................................... 249,160 1,048,723
--------- ----------- -----------
Ps249,160 Ps6,353,974 Ps2,296,596
========= =========== ===========
</TABLE>

Other noncurrent liabilities under U.S. GAAP consisted of the following:

<TABLE>
<CAPTION>
December 31,
----------------------------------
1996 1997 1998
-------- ------------ ------------
<S> <C> <C> <C>
Payable to Siemens AG for Transtel-
Siemens Purchase Agreement............ Ps -- Ps 3,830,732 Ps 3,267,599
Payable to Siemens A.G. for other
equipment............................. 5,231,422 3,230,802
Payable to IBM......................... 978,454 1,084,378
Accrued litigation loss................ 2,545,101 2,200,000
Cable television fees paid in advance.. 564,787
Other.................................. 84,790 191,150 298,121
-------- ------------ ------------
Ps84,790 Ps12,776,859 Ps10,645,687
======== ============ ============
</TABLE>

Recent accounting pronouncements

SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement
Benefits", revises disclosures about pension plans; however, it does not
change the measurement or recognition of those plans. SFAS No. 132 will
require additional information on changes in the benefit obligation and fair
value of plan assets. This statement is effective for year ending December 31,
1998.

F-60
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

No person has been authorized to give any information or to make any repre-
sentations in connection with this exchange offer other than those contained
in this Prospectus, and, if given or made, such other information and repre-
sentations must not be relied upon as having been authorized by the Company.
Neither the delivery of this Prospectus nor any sale made hereunder shall, un-
der any circumstances, create any implication that there has been no change in
the affairs of the Company since the date hereof or that the information con-
tained herein is correct as of any time subsequent to the date hereof. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy any securities other than the registered securities to which it re-
lates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.

---------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Enforceability of Civil Liabilities...................................... 4
Available Information.................................................... 4
Forward-Looking Statements............................................... 5
Market and Population Data............................................... 5
Exchange Rates........................................................... 5
Prospectus Summary....................................................... 7
Risk Factors............................................................. 19
Deficiency of Earnings to Fixed Charges.................................. 31
Use of Proceeds.......................................................... 32
Capitalization........................................................... 34
The Exchange Offer....................................................... 38
Transtel Pass Through Trust--Selected Financial Data and Management's
Discussion and Analysis................................................. 45
Transtel S.A.--Selected Financial and Other Data......................... 46
Transtel S.A.--Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 50
Business................................................................. 68
Description of Existing Indebtedness..................................... 92
Industry Overview; Legal and Regulatory Environment...................... 97
Management............................................................... 99
Principal Shareholders................................................... 101
Certain Related Party Transactions....................................... 101
Description of the Certificates.......................................... 103
Description of the Guarantees............................................ 108
Description of the Senior Notes.......................................... 110
Taxation................................................................. 139
Certain ERISA Considerations............................................. 142
Foreign Investment and Exchange Controls in Colombia..................... 143
Plan of Distribution..................................................... 144
Enforcement of Foreign Judgments in Colombia............................. 145
Book-Entry; Delivery and Form............................................ 146
Legal Matters............................................................ 148
Experts.................................................................. 148
Glossary of Certain Telecommunications Terms............................. 149
Annex A--Republic of Colombia............................................ 152
Index to Financial Statements............................................ F-1
</TABLE>

Until September 10, 1999 all dealers effecting transactions in the
registered securities, whether or not participating in this distribution may
be required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Offer to Exchange All Outstanding
12 1/2% Pass Through Trust Certificates due 2007,
for
12 1/2% Pass Through Exchange Certificates
due 2007,
in each case representing interests in 12 1/2% Senior Notes due 2007

issued by

Transtel S.A.

---------------

PROSPECTUS

---------------

May 14, 1999

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers.

Under both United States and Colombian law, the Company can indemnify its
directors and officers and purchase director and officer insurance. However
the Company's articles of incorporation and bylaws currently do not provide
for indemnification of any directors or officers, and the Company presently
does not have director and officer insurance.

Item 21. Exhibits and Financial Statement Schedules.

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
3.1 Transtel S.A.'s estatutos sociales, currently in effect.*
4.1 Indenture, dated as of October 28, 1997, between the Company
and HSBC Bank USA (formerly known as Marine Midland Bank), as
Indenture Trustee, as amended by First Amendment and Waiver to
Indenture, dated as of July 13, 1998.*
4.2 Form of Exchange Certificates.*
4.3 Pledge Agreement relating to Intercompany Notes pledged to
Noteholders by the Company.*
4.4 Trust Agreement of Transtel Pass Through Trust dated as of
October 20, 1997, by and between Transtel, as depositor, and
Wilmington Trust Company.*
4.5 Amended and Restated Pass Through Trust Agreement, dated as of
October 28, 1997, among the Company, as Depositor, Wilmington
Trust Company, as Pass Through Trustee, and HSBC Bank USA
(formerly known as Marine Midland Bank), as Registrar and
Paying Agent, as amended by First Amendment to Amended and
Restated Pass Through Trust Agreement, dated November 24,
1998.*
4.6 Escrow and Disbursement Agreement, dated as of October 28,
1997, among the Company, HSBC Bank USA (formerly known as
Marine Midland Bank), as Escrow Agent and HSBC Bank USA
(formerly known as Marine Midland Bank), as Indenture Trustee
under the Indenture, as amended by First Amendment and Waiver
to Escrow and Disbursement Agreement, dated as of July 13,
1998.*
4.7 Form of Exchange Certificate Guarantee, by the Company in
favor of HSBC Bank USA (formerly known as Marine Midland Bank)
and the Exchange Certificateholders.*
5.1 Opinion of Dewey Ballantine LLP to Transtel S.A. as to
legality of the Exchange Certificate Guarantee.
5.2 Opinion of Arrieta Mantilla & Asociados, Abogados as to
legality of the Senior Notes and the Exchange Certificate
Guarantee.*
5.3 Opinion of Richards, Layton & Finger as to legality of the
Exchange Certificates.
8.1 Opinion of Dewey Ballantine LLP regarding United States tax
matters.*
8.2 Opinion of Lewin & Wills regarding Colombian tax matters.*
10.1 Public Deed of Incorporation of TeleGirardot and Adoption of
Bylaws.*
10.2 Registration Rights Agreement, dated as of October 28, 1997,
among the Company, Transtel Pass Through Trust, as the Issuer
and BT Alex. Brown Incorporated, as Initial Purchaser.*
10.3 Global Telecommunications Operations, Inc. (Contract Number
1--1996) dated as of May 2, 1996 between Global
Telecommunications Operations Inc. and Siemens
Aktiengesellschaft ("Global I Purchase Agreement").*
10.4 Modification No. 1 to the Purchase and Sale Contract made by
and between Global Telecommunications Operations, Inc. and
Siemens Aktiengesellschaft dated as of July 28, 1997
("Amendment to Global I Purchase Agreement").*
</TABLE>

II-1
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
10.5 International Leasing Contract between Global
Telecommunications Operations, Inc. and Palmira Telephone
Company S.A. Public Services Corporation - TelePalmira S.A.
E.S.P. dated as of August 1, 1996 ("Global - TelePalmina I
Lease").*
10.6 Supplementary International Leasing Contract Undersigned in
the 1st of August, 1998 between Global Communications
Operations, Inc. and TelePalmira S.A. E.S.P. ("Amendment to
Global--TelePalmina I Lease").*
10.7 International Leasing Contract between Global
Telecommunications Operations, Inc. and Jamundi Telephone
Company S.A. Public Services Corporation - TeleJamundi S.A.
E.S.P. dated as of August 1, 1996 ("Global - TeleJamundi I
Lease).*
10.8 Supplementary International Leasing Contract Undersigned on
the 1st of August, 1996 between Global Communications
Operations, Inc. and TeleJamundi S.A. E.S.P. (""Amendment to
Global TeleJamundi I Lease'').*
10.9 International Leasing Contract between Global
Telecommunications Operations Inc. and Yumbo Telephone Company
S.A. Public Services Corporation - TeleYumbo S.A. E.S.P. dated
as of August 1, 1996 ("Global--Unitel I Lease").*
10.10 Supplement to the International Leasing Contract by and
between Global Telecommunications Operations Inc. and Unitel
S.A. E.S.P. former TeleYumbo S.A. E.S.P. dated as of April 19,
1998 ("Amendment to Global--Unitel I Lease").*
10.11 Global Telecommunications Operations, Inc. (Contract Number
2--1997) between Global Telecommunications Operations, Inc.
and Siemens Aktiengesellschaft dated as of May 30, 1997
("Global II Purchase Agreement").*
10.12 Modification No. 1 to the Purchase and Sale Contract made by
and between Global Telecommunications Operations, Inc. and
Siemens Aktiengesellschaft dated as of July 28, 1997
("Amendment to Global II Purchase Agreement").*
10.13 Modification No. 2-A to the Purchase and Sale Contract made by
and between Global Telecommunications Operations, Inc. and
Siemens Aktiengesellschaft dated as of October 29, 1997
("Amendment to Global II Purchase Agreement").*
10.14 Modification No. 2-B to the Purchase and Sale Contract made by
and between Global Telecommunications Operations, Inc. and
Siemens Aktiengesellschaft dated as of April 1, 1998
("Amendment to Global II Purchase Agreement").*
10.15 International Leasing Contract made by and between Global
Telecommunications Operations, Inc. and Sociedad Bugatel S.A.
E.S.P. dated as of July 28, 1997 ("Global-Bugatel II Lease").*
10.16 International Leasing Contract between Global
Telecommunications Operations Inc. and Unitel Corporation S.A.
E.S.P. dated as of July 28, 1997 ("Global-Unitel II Lease").*
10.17 International Leasing Contract made by and between Global
Telecommunications Operations Inc. and Sociedad Telefonos de
Cartago S.A. E.S.P. dated as of July 28, 1997 ("Global-
TeleCartago II Lease").*
10.18 Global Telecommunications Operations, Inc. (Contract No. 3-
1998) between Global Telecommunications Operations, Inc. and
Siemens Aktiengesellschaft dated as of June 1, 1998 ("Global
III Purchase Agreement").*
10.19 Global Telecommunications Operations, Inc. (Contract No. 4-
1998) between Global Telecommunications Operations, Inc. and
Siemens Aktiengesellschaft dated as of June 11, 1998 ("Global
IV Purchase Agreement").*
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
10.20 Special Administrative Unit National Tax and Customs Direction
Local Tax Administration of Cali dated as of September 18,
1997 (Resolution No. 0001) ("DIAN Financing").*
10.21 D.I.A.N. National Tax and Customs Direction Local Customs
Administration of Cali dated as of October 3, 1997 ("DIAN
Financing").*
10.22 Special Administrative Unit National Tax and Customs Direction
Southwestern Tax and Customs Administration dated as of
November 20, 1997 ("DIAN Financing").*
10.23 Special Administrative Unit National Tax and Customs Direction
Local Tax Administration of Cali dated as of August 30, 1996
(Resolution No. 0007) ("DIAN Financing").*
10.24 Special Administrative Unit National Tax and Customs Direction
Local Tax Administration of Cali dated as of August 30, 1996
(Resolution No. 0008) ("DIAN Financing").*
10.25 Special Administrative Unit National Tax and Customs Direction
Local Tax Administration of Cali dated as of August 30, 1996
(Resolution No. 0009) ("DIAN Financing").*
10.26 Special Administrative Unit National Tax and Customs Direction
Southwestern Tax and Customs Administration dated as of
October 23, 1997 (Resolution No. 000005) ("DIAN Financing").*
10.27 Supplement for Payment in Installments Orders as Per on Shore
Operation between Transtel S.A. and IBM de Colombia, S.A.
dated as of October 31, 1997 ("IBM Agreement").*
10.28 International Leasing Agreement between Global
Telecommunications Operations Inc. and the Empresa de
Telefonos de Palmira S.A. dated September 1, 1998 ("Global-
TelePalmira III Lease").*
10.29 International Leasing Agreement between Global
Telecommunications Operations Inc. and Unitel S.A. E.S.P.
dated September 1, 1998 ("Global-Unitel III Lease").*
10.30 Intentionally omitted.
10.31 International Leasing Agreement between Global
Telecommunication Operations Inc. and the Empresa de Telefonos
de Palmira S.A. dated September 1, 1998 ("Global-TelePalmira
IV Lease").*
10.32 International Leasing Agreement between Global
Telecommunications Operations Inc. and Bugatel S.A. E.S.P.
dated September 1, 1998 ("Global-Bugatel IV Lease").*
10.33 International Leasing Agreement between Global
Telecommunications Operations Inc. and Empresa de
Telecommunicaciones de Girardot S.A. E.S.P. dated September 1,
1998 ("Global-TeleGirardot IV Lease").*
10.34 International Leasing Agreement between Global
Telecommunications Operations Inc. and Empresa de Telefonos de
Cartago S.A. E.S.P. dated September 1, 1998 ("Global-
TeleCartago IV Lease").*
10.35 Amended and Restated Charter/Bylaws of Suscripciones
Audiovisuales S.A. dated February 19, 1998.
10.36 Charter/Bylaws of Cablevision S.A. dated January 23, 1998, as
amended on February 4, 1998.
10.37 Intercompany Note dated December 31, 1998, made by Empresa de
Telefonos de Jamundi S.A. E.S.P. in favor of Transtel S.A. in
the amount of $21,756,474.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
10.38 Intercompany Note dated December 31, 1998, made by Caucatel S.A. E.S.P. in
favor of Transtel S.A. in the amount of $7,384,045.*
10.39 Intercompany Note dated December 31, 1998, made by Telefonos De Cartago
S.A. E.S.P. in favor of Transtel S.A. in the amount of $9,835,235.*
10.40 Intercompany Note dated December 31, 1998, made by Unitel S.A. E.S.P. in
favor of Transtel S.A. in the amount of $29,990,359.*
10.41 Intercompany Note dated December 31, 1998, made by Bugatel S.A. E.S.P. in
favor of Transtel S.A. in the amount of $3,703,506.*
10.42 Intercompany Note dated December 31, 1998, made by TelePalmira S.A. E.S.P.
in favor of Transtel S.A. in the amount of $22,789,857.*
12.1 Computation of ratios of earnings to fixed charges.*
21.1 List of subsidiaries of Transtel S.A.*
23.1 Consent of Price Waterhouse.
23.2 Consent of Dewey Ballantine LLP (included in 5.1).*
23.3 Consent of Arrieta Mantilla & Asociados, Abogados (included in 5.2).*
23.4 Consent of Richards, Layton & Finger (included in 5.3).*
23.5 Consent of Lewin & Wills (included in 8.2).*
24.1 Power of Attorney of certain officers and directors of Transtel S.A.
(included on signature page).*
25.1 Form T-1 Statement of Eligibility of HSBC Bank USA (formerly known as
Marine Midland Bank) to act as trustee under the Indenture.*
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Amended and Restated Pass Through Trust Agreement.*
25.3 Form T-1 Statement of Eligibility of HSBC Bank USA (formerly known as
Marine Midland Bank) to act as Guarantee Trustee under the Exchange
Certificate Guarantee.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Exchange Agent Agreement.*
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.

(b) Schedules

All supplementary schedules are omitted because they are not required or
the required information, where material, is contained in the consolidated
financial statements of Transtel S.A. or the Notes thereto.

Item 22. Undertakings.

(1) The undersigned Registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the

II-4
<PAGE>

Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

(2) The undersigned registrant hereby undertakes: (1) To file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement: (i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933, (ii) To reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) ((S)230.424(b) of this chapter) if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement, (iii) To include any material
information with respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such information in
the registration statement;

(3) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(4) To removed from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.

(5) To file a post-effective amendment for the registration statement to
include any financial statements required by Rule 3-19 at the start of any
delayed offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Securities Act of
1933 need not be furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (5) and other information necessary to
ensure that all other information in the prospectus is at least as current as
the date of those financial statements.

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, Transtel S.A. duly
caused this Amendment No. 4 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Cali, Colombia, on
May 14, 1999.

Transtel S.A.
Registrant

/s/ Guillermo O. Lopez
By: _________________________________
Guillermo O. Lopez,
Director and President

Pursuant to the requirements of the Securities Act, this Amendment No. 4 to
the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.

Signature Title Date

* Director
- ------------------------------------- May 14, 1999
Gonzalo Caicedo Toro

* Director and
- ------------------------------------- President May 14, 1999
Guillermo O. Lopez

* Director and General
- ------------------------------------- Secretary May 14, 1999
Victoria E. Meza

* Director and
- ------------------------------------- Financial Vice May 14, 1999
Jorge E. Martinez President

* Director and
- ------------------------------------- Technology and May 14, 1999
Anibal E. Perez Planning Vice
President

* Corporate
- ------------------------------------- Development Vice May 14, 1999
Carlos A. Arango President

/s/ Guillermo O. Lopez
(*) By: _____________________________
Guillermo O. Lopez
Attorney-in-Fact

II-6
<PAGE>

Pursuant to the requirements of the Securities Act, Transtel Pass Through
Trust duly caused this Amendment No. 4 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Wilmington, and the State of Delaware, on May 14, 1999.

Transtel Pass Through Trust
Registrant

By: Wilmington Trust Company,
not in its individual capacity
but solely as Pass Through
Trustee

By: /s/ Norma P. Closs_

Name: Norma P. Closs

Title: Vice President

II-7

<PAGE>

EXHIBIT 5.1

DEWEY BALLANTINE LLP
1301 Avenue of the Americas
New York, New York 10019
Tel 212 259-8000 Fax 212 259-6333

May 13, 1999

Transtel S.A.
Calle 15, No. 33-289
Autopista, Cali-Yumbo Km.2
Cali-Valle, Colombia

Ladies and Gentlemen:

We have acted as special counsel to Transtel S.A., a sociedad anonima
incorporated under the laws of the Republic of Colombia (the "Company"), in
connection with a Registration Statement on Form F-4 (the "Registration
Statement") relating to: (i) the proposed offer to exchange all outstanding 12
1/2% Pass Through Trust Certificates due 2007, representing interests in 12 1/2%
Senior Notes due 2007 issued by the Company (the "Senior Notes") (the "Original
Certificates") for 12 1/2% Pass Through Exchange Certificates due 2007,
representing interests in the Senior Notes, registered under the Securities Act
of 1933, as amended (the "Securities Act") (the "Exchange Certificates") and
(ii) the Company's related guarantees of (a) the punctual payment of the full
amount, when due of the principal of and interest on, and fees and expenses due
pursuant to, the Original Certificates and (b) full and timely payment as if
payment had been made on a full and timely basis on the Senior Notes in exchange
for a like guarantee with regard to the Exchange Certificates.

We have examined such documents and records as we deemed appropriate,
including the following:

(i) Form of the Exchange Certificate Guarantee, made by the Company, as
guarantor, in favor of Marine Midland Bank, as guarantee trustee, and the
holders of the Exchange Certificates (the "Exchange Certificate Guarantee"); and

(ii) such other documents as we have deemed appropriate or necessary as the
basis for the opinions hereafter set forth.

In the course of our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such
<PAGE>

latter documents. In making our examination of documents executed by parties
other than the Company, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity and binding effect thereof on such parties.

Based upon the foregoing, we are of the opinion that:

The Exchange Certificate Guarantee, when executed and delivered, will
constitute a valid and legally binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by general
equitable principles (regardless of whether considered in a proceeding in equity
or at law).

As to due authorization by the Company and all other matters governed by
the laws of the Republic of Colombia, we have relied upon the opinion of Arrieta
Mantilla & Asociados, Abogados, dated April 26, 1999

We are members of the Bar of the State of New York and we express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York and the federal laws of the United States of America and the Delaware
General Corporation Law.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" contained in the Prospectus included therein. In giving this consent,
we do not thereby admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act or the Rules and
Regulations of the Securities and Exchange Commission thereunder.

Very truly yours,

/s/ Dewey Ballantine LLP

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form F-4 of our report dated March 2, 1999 relating to
the consolidated financial statements of Transtel S.A. and our report dated
March 31, 1999 relating to the financial statements of Transtel Pass Through
Trust, which appear in such Prospectus. We also consent to the references to us
under the headings "Experts" and "Transtel S.A.--Selected Financial and Other
Data" in such Prospectus. However, it should be noted that Price Waterhouse has
not prepared or certified such "Transtel S.A.--Selected Financial and Other
Data".

/s/ PRICE WATERHOUSE

Cali, Colombia
May 14, 1999