<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K/A
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1998
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-17316
----------------
SKYTEL COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
64-0518209
Delaware
(IRS Employer
(State or other jurisdiction Identification No.)
of incorporation or organization)
200 South Lamar Street,
SkyTel Centre, South Building,
Jackson, Mississippi 39201
(Address of principal executive offices)
(601) 944-1300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which
registered
None
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share,
together with associated rights to purchase
Series C Junior Participating Preferred Stock
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant: $993,331,686 as of March 18, 1999.
Indicate the number of shares of each of the Registrant's shares of each of
the Registrant's classes of common stock, as of the latest practicable date:
60,080,713 shares of Common Stock, par value $.01 per share, outstanding as of
March 18, 1999.
Documents incorporated by reference in this Annual Report on Form 10-K:
Portions of the definitive proxy statement relating to the 1999 Annual
Meeting of Stockholders in Part III, Items 10 (as related to Directors), 11,
12 and 13.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
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<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Financial Statement Schedules and
Reports on Form 8-K
(a)1. Financial Statements. See Index to Consolidated Financial Statements
on Page F-1 hereof.
2. Financial Statement Schedules of the Company.
<TABLE>
<S> <C>
II Valuation and Qualifying Accounts............................... FA-2
Report of Independent Public Accountants on Financial Statement
Schedule of the Company........................................... FA-3
</TABLE>
Schedules other than those listed above are omitted because of the absence
of conditions under which they are required or because the information is
included in the financial statements or notes thereto.
3. Exhibits required by Item 601 of Regulation S-K.
The following exhibits are filed as part of this Annual Report on Form 10-K.
Where such filing is made by incorporation by reference (I/B/R) to a
previously filed statement or report, such statement or report is identified
in parentheses. There may be omitted from the exhibits filed with this Annual
Report certain promissory notes, conditional sales contracts and other
instruments and agreements with respect to long-term debt of the Company, none
of which authorizes securities in a total amount that exceeds 10% of the total
assets of the Company on a consolidated basis. Pursuant to Item 601(b)(4)(iii)
of Regulation S-K, the Company hereby agrees to file with the SEC copies of
all such omitted promissory notes, conditional sales contracts and other
instruments and agreements as the Commission requests.
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page No.
------- ----------- ----------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Company
(Exhibit 3.3 to the Registration Statement on Form 10
filed on November 18, 1988 and effective on December 29,
1988)................................................... I/B/R
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of the Company filed May 30, 1996 with the
Secretary of State of the State of Delaware (Exhibit
4.20 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996)........................... I/B/R
3.3 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company filed May 22, 1998 with the
Secretary of State of the State of Delaware (Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998)............................ I/B/R
3.4 Bylaws of the Company, as amended (Exhibit 3.4 to the
Registration Statement on Form 10 of the Company filed
on November 18, 1988 and effective on December 29,
1988)................................................... I/B/R
4.1 Certificate of Designations of Series C Junior
Participating Preferred Stock of the Company (Exhibit 3
to the Registration Statement on Form 8-A of the Company
filed on August 3, 1989)................................ I/B/R
4.2 Rights Agreement dated as of July 26, 1989 between the
Company and NCNB Texas National Bank (Exhibit 2 to the
Registration Statement on Form 8-A of the Company filed
on August 3, 1989)...................................... I/B/R
4.3 Form of Right Certificate of the Company (Exhibit 1 to
the Registration Statement on Form 8-A of the Company
filed on August 3, 1989)................................ I/B/R
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page No.
------- ----------- ----------
<C> <S> <C>
4.4 Indenture dated as of May 28, 1992 between the Company
and NationsBank of Texas, N.A., as Trustee, relating to
the Company's 6.75 % Convertible Subordinated Debentures
Due May 15, 2002, including as an exhibit thereto the
form of Debenture (Exhibits 4.3 and 28 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1992)..................................... I/B/R
4.5 Form of Indenture between the Company and Texas Commerce
Bank National Association, as Trustee, relating to the
13.5% Senior Notes due 2002, including as an exhibit
thereto the form of the Note (Exhibit 4.8 to the
Company's Registration Statement on Form S-3 filed on
November 10, 1994 and effective on December 21, 1994)... I/B/R
4.6 Certificate of Designations of the $2.25 Cumulative
Convertible Exchangeable Preferred Stock of the Company
(Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993).......... I/B/R
4.7 Credit, Security, Guaranty and Pledge Agreement dated as
of December 21, 1995 by and among the Company, the
lenders referred to therein, Chemical Bank, Credit
Lyonnais New York Branch and J.P. Morgan Securities,
Inc. (Exhibit 4.7 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).............. I/B/R
4.8 Contribution Agreement of the Company dated as of
December 21, 1995 entered into in Connection with the
Credit, Security, Guaranty and Pledge Agreement dated as
of December 21, 1995 by and among the Company, the
lenders referred to therein, Chemical Bank, Credit
Lyonnais New York Branch and J.P. Morgan Securities,
Inc. (Exhibit 4.8 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).............. I/B/R
4.9 Patent and Security Agreement of the Company dated as of
December 21, 1995 entered into in connection with the
Credit, Security, Guaranty and Pledge Agreement dated as
of December 21, 1995 by and among the Company, the
lenders referred to therein, Chemical Bank, Credit
Lyonnais New York Branch and J.P. Morgan Securities,
Inc. (Exhibit 4.9 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).............. I/B/R
4.10 Trademark Security Agreement of the Company dated as of
December 21, 1995 entered into in connection with the
Credit, Security, Guaranty and Pledge Agreement dated as
of December 21, 1995 by and among the Company, the
lenders referred to therein, Chemical Bank, Credit
Lyonnais New York Branch and J.P. Morgan Securities,
Inc. (Exhibit 4.10 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995)......... I/B/R
4.11 Copyright Security Agreement of the Company dated as of
December 21, 1995 entered into in connection with the
Credit, Security, Guaranty and Pledge Agreement dated as
of December 21, 1995 by and among the Company, the
lenders referred to therein, Chemical Bank, Credit
Lyonnais New York Branch and J.P. Morgan Securities,
Inc. (Exhibit 4.11 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995)......... I/B/R
4.12 Subordination Agreement dated as of December 21, 1995 by
and among the Company and Chemical Bank (Exhibit 4.12 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1995)................................ I/B/R
4.13 Amendment No. 1 dated as of March 27, 1996 to the Credit,
Security, Guaranty and Pledge Agreement dated as of
December 21, 1995 by and among the Company, the lenders
referred to therein, Chemical Bank, Credit Lyonnais New
York Branch and J.P. Morgan Securities, Inc. (Exhibit
4.13 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995)........................... I/B/R
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page No.
------- ----------- ----------
<C> <S> <C>
4.14 Supplemental Indenture dated as of July 18, 1996 between
the Company and Texas Commerce Bank National
Association, as Trustee, relating to the 13.5% Senior
Notes due 2002 (Exhibit 4.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1996)................................................... I/B/R
4.15 Amendment No. 2 dated as of August 23, 1996 to the
Credit, Security, Guaranty and Pledge Agreement dated as
of December 21, 1995, as amended, by and among the
Company, the lenders referred to therein, Chase
Manhattan Bank, Credit Lyonnais New York Branch and J.P.
Morgan Securities, Inc. (Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996)..................................... I/B/R
4.16 Amendment No. 3 dated as of March 26, 1997 to the Credit,
Security, Guaranty and Pledge Agreement dated as of
December 21, 1995, as amended, by and among the Company,
the lenders referred to therein, Chase Manhattan Bank,
Credit Lyonnais New York Branch and J. P. Morgan
Securities, Inc. (Exhibit 4.19 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1996)................................................... I/B/R
4.17 Amendment No. 4 dated as of October 8, 1997 to the
Credit, Security, Guaranty and Pledge Agreement dated as
of December 21, 1995, as amended, by and among the
Company, the lenders referred to therein, Chase
Manhattan Bank, Credit Lyonnais New York Branch and J.P.
Morgan Securities, Inc. (Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1997)............................................... I/B/R
4.18 Amendment No. 5 dated as of October 20, 1998 to the
Credit, Security, Guaranty and Pledge Agreement dated as
of December 21, 1995, as amended, by and among the
Company, the lenders referred to therein, Chase
Manhattan Bank, Credit Lyonnais New York Branch and J.P.
Morgan Securities, Inc. ................................
4.19 Specimen Stock Certificate of the Company (filed as
Exhibit 4.27 to the Registration Statement of the
Company of Form S-8 filed on May 28, 1998).............. I/B/R
10.1* Employment Agreement dated November 19, 1988 between the
Company and John N. Palmer (Exhibit 10.9 to the
Registration Statement on Form 10 of the Company filed
on November 18, 1988 and effective on December 29,
1988)................................................... I/B/R
10.2* Employment Agreement dated November 19, 1988 between the
Company and Jai P. Bhagat (Exhibit 10.12 to the
Registration Statement on Form 10 of the Company filed
on November 18, 1988 and effective on December 29,
1988)................................................... I/B/R
10.3* Form of Indemnification Agreement (Exhibit 10.16 to the
Registration Statement on Form 10 of the Company filed
on November 18, 1988 and effective on December 29,
1988)................................................... I/B/R
10.4* 1988 Executive Incentive Plan, as amended, of the Company
including as exhibits thereto the forms of non-qualified
and incentive stock option agreements (Exhibit 10.18 to
the Registration Statement on Form 10 of the Company
filed on November 18, 1988 and effective on December 29,
1988)................................................... I/B/R
10.5* Form of Non-Qualified Stock Option Agreement for non-
officer directors of the Company (Exhibit 10.19 to the
Registration Statement on Form 10 of the Company filed
on November 18, 1988 and effective on December 29,
1988)................................................... I/B/R
10.6* 1990 Executive Incentive Plan of the Company including as
an exhibit thereto the form of non-qualified stock
option agreement (Exhibit 10.16 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1990)................................................... I/B/R
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page No.
------- ----------- ----------
<C> <S> <C>
10.7 Joint Venture Agreement dated as of April 11, 1991 by and
between Mtel International, Inc. and Radio Telefonia
Movil Metropolitana, S.A. de C.V. (Exhibit 10.27 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991)...................................... I/B/R
10.8* Employment Agreement dated as of December 14, 1992
between the Company and John E. Welsh III (Exhibit 10.28
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992)................................ I/B/R
10.9* Short-Term Management Incentive Plan (Exhibit 10.30 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1992)................................ I/B/R
10.10* Long-Term Management Incentive Plan (Exhibit 10.31 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992)...................................... I/B/R
10.11 Form of Stockholders Agreement among the Company, SkyTel
and Sky Acquisition Corp. (Exhibit 10.37 to the
Company's Registration Statement on Form S-4 filed on
October 26, 1994 and effective on December 14, 1994).... I/B/R
10.12* Employment Agreement dated June 1, 1994 between the
Company and Calvin C. LaRoche (Exhibit 10.32 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994)...................................... I/B/R
10.13 MCI Special Customer Arrangement between the Company and
MCI Telecommunications Corporation dated as of August
22, 1994 (Exhibit 10.33 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994)...... I/B/R
10.14 First Amendment to MCI Special Customer Arrangement
between the Company and MCI Telecommunications
Corporation dated as of January 9, 1995 (Exhibit 10.34
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994)................................ I/B/R
10.15* Amended 1990 Executive Plan of the Company (Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995)............................ I/B/R
10.16 Lease Agreement dated June 14, 1995 by and between
Security Centre, Inc. and the Company (Exhibit 10.30 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1995)................................ I/B/R
10.17 Stockholder Agreement dated as of September 15, 1995 by
and between the Company and Microsoft Corporation
(Exhibit 10.32 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).............. I/B/R
10.18 Stockholder Agreement dated as of March 29, 1996 by and
between the Company and Microsoft Corporation (Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996)....................... I/B/R
10.19 Contribution, Registration Rights and Standstill
Agreement dated as of September 19, 1996 by and among
the Company, Newbridge Latin America, L.P. and TPG
Partners, L.P. (Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1996)................................................... I/B/R
10.20 Stockholders and Exchange Rights Agreement dated as of
September 19, 1996 by and among Mtel Latin America,
Inc., Mtel International, Inc. and Newbridge Latin
America, L.P. (Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1996)................................................... I/B/R
10.21* Employment Agreement dated as of August 1, 1996 by and
between the Company and John T. Stupka (Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996)....................... I/B/R
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page No.
------- ----------- ----------
<C> <S> <C>
10.22* Employment Agreement dated as of August 15, 1996 by and
between the Company and Robert Kaiser (Exhibit 10.7 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996)....................... I/B/R
10.23* Form of Restricted Stock Agreement under the 1990
Executive Incentive Plan. (Exhibit 10.8 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996)..................................... I/B/R
10.24 Stock Purchase Agreement dated June 6, 1997 by and among
BGH S.A., Motorola International Development Corporation
and Jacobel S.A., as Sellers, and Mtel Latin America,
Inc., as Purchaser (Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1997)............................................... I/B/R
10.25 Form of Bridge Note of Mtel Latin America, issued as of
June 27, 1997 in the aggregate Amount of US$8 million
(Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997)............... I/B/R
10.26 Form of Promissory Note of Mtel Argentina S.A., issued as
of June 27, 1997 in the aggregate amount of US$8 million
(Exhibit 10.3 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997)............... I/B/R
10.27 Pledge Agreement dated June 27, 1997 by Mtel Latin
America, Inc., as Pledgor, in favor of Chase Manhattan
Bank, as Collateral Agent, for the benefit of BGH S.A.,
Motorola International Development Corporation and
Jacobel S.A., as Sellers (Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1997)............................................... I/B/R
10.28** Revised Form of Reseller Agreement.......................
10.29* 1998 Outside Directors' Stock Option Plan (Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998)............................ I/B/R
10.30* Form of Stock Option Agreement under the 1998 Outside
Directors' Stock Option Plan (filed as Exhibit 99.1 of
the Registration Statement of the Company on Form S-8
filed on May 28, 1998).................................. I/B/R
10.31** Amended and Restated Credit Facility dated as of December
31, 1998 between Mtel Latin America, Inc. and Credit
Lyonnais New York Branch ...............................
10.32** Amended and Restated Demand Promissory Note of Mtel Latin
America, Inc. issued as of December 31, 1998 in the
aggregate amount of US$20,000,000.......................
10.33** Stock Purchase Agreement dated as of January 28, 1999 by
and between Mtel Latin America, Inc. and Microsoft
Corporation.............................................
10.34** Form of Change of Control and Severance Benefits
Agreement...............................................
21.1** Subsidiaries of the Company..............................
23.1** Consent of Arthur Andersen LLP...........................
23.2 Consent of PricewaterhouseCoopers........................
27.1** Financial Data Schedule..................................
99.1 Consolidated Financial Statements of Comunicaciones
Mtel, S.A. de C.V. .....................................
</TABLE>
- --------
* Identifies each exhibit that is a "management contract or compensatory plan
or arrangement" required to be filed as an exhibit to this Annual Report on
Form 10-K pursuant to Item 14(c) of Form 10-K.
** Previously filed as an exhibit to the Company's Form 10-K for the year ended
December 31, 1998.
(b) Reports on Form 8-K
None.
(d) Exhibit 99.1 hereof sets forth the consolidated balance sheets of
Comunicaciones Mtel, S.A. del C.V., as of December 31, 1998 and 1997, and the
related consolidated statements of income, changes in stockholders' equity and
changes in financial position for the years ended December 31, 1998, 1997 and
1996, which are included pursuant to Rule 3-09 of the Securities and Exchange
Commission Regulation S-X.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to its
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 to be
signed on its behalf by the undersigned, thereunto duly authorized.
SKYTEL COMMUNICATIONS, INC.
Date: June 30, 1999 By: /s/ Robert Kaiser
-----------------
Robert Kaiser
Senior Vice President-Finance and
Chief Financial Officer
<PAGE>
Exhibit 99.1
[PRICEWATERHOUSECOOPERS PCN LETTERHEAD APPEARS HERE]
To the Stockholders of
Comunicaciones Mtel, S.A. de C.V.:
We have audited the accompanying consolidated balance sheets of Comunicaciones
Mtel, S.A. de C.V., as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in stockholders' equity and changes
in financial position for the years ended December 31, 1998, 1997 and 1996.
These financial statements have been prepared in accordance with generally
accepted accounting principles and 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. 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 provides a reasonable basis for our opinion.
Derived from our review, we agree with the translation, made by the Company, of
the financial statements in accordance with what is mentioned in FAS 52, as well
as with the determination of the effects arising from the differences between
U.S. and Mexican GAAP that were recognized. The translation of financial
statements was carried out considering the historical method in 1998 and 1997
and current method in 1996.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Comunicaciones
Mtel, S.A. de C.V., as of December 31, 1998 and 1997, and the consolidated
results of its operations, changes in stockholders' equity and changes in its
financial position for the years ended December 31, 1998, 1997 and 1996, in
conformity with generally accepted accounting principles.
PRICEWATERHOUSECOOPERS
/s/ Mario Salazar Erdmann, C.P.
- -------------------------------
By: Mario Salazar Erdmann, C.P.
Mexico, D.F.
February 4, 1999
<PAGE>
COMUNICACIONES MTEL, S.A. DE C.V.
---------------------------------
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1997
------------------------------------------------------------
(Notes 1 and 2)
-------------
<TABLE>
<CAPTION>
ASSETS
------
1998 1997
----------- -----------
<S> <C> <C>
CURRENT:
Available:
Cash $ 5,095,893 $ 1,608,872
Trade accounts and other accounts-net of
allowance for doubtful accounts of
$1,129,096 and $3,592,198 in 1998 and
1997, respectively 4,625,845 5,759,179
Taxes recoverable (Note 3) 805,124 1,379,812
Unappropriated advertising - 2,623
Inventories (Note 4) 2,566,062 3,358,118
Holding and affiliated companies (Note 5) - 874,897
----------- -----------
Total current assets $13,092,924 $12,983,501
----------- -----------
OTHERS ASSETS 2,345,479 221,871
EQUIPMENT - Net (Note 6) 9,649,546 5,774,540
INSTALLATION EXPENSES - NET (Note 7) 2,125,612 1,574,630
DEFERRED TAXES (Note 14) 72,214 68,995
----------- -----------
Total assets $27,285,775 $20,623,537
=========== ===========
<CAPTION>
LIABILITIES
-----------
1998 1997
----------- -----------
<S> <C> <C>
CURRENT:
Capital leases $ - $ 139,787
Trade accounts payable (mainly Motorola
amounting to $445,500 and $3,320,725 in
1998 and 1997, respectively) 5,812,847 5,508,818
Taxes payable 559,368 305,014
Other accrued liabilities 431,586 608,536
Deferred income (Note 13) 246,060 -
Deferred taxes (Note 14) 848,610 -
Holding and affiliated companies (Note 5) 793,106 -
----------- -----------
Total current liabilities $ 8,691,577 $ 6,562,155
SENIORITY PREMIUM (Note 8) 18,606 14,450
COMMITMENTS AND CONTINGENCY (Note 9) - -
----------- -----------
Total liabilities $ 8,710,183 $ 6,576,605
----------- -----------
MINORITY INTEREST (Note 10) $ 360 $ 360
----------- -----------
STOCKHOLDERS' EQUITY
--------------------
CAPITAL STOCK (Note 11) $13,021,342 $13,021,342
EARNED CAPITAL:
Accumulated results 5,788,912 6,767,337
Legal reserve 391,471 234,064
Net income (Note 12) 8,497,827 3,148,149
TRANSLATION ADJUSTMENT (9,124,320) (9,124,320)
----------- -----------
Total stockholders' equity $18,575,232 $14,046,572
----------- -----------
Total liabilities and stockholders'
equity $27,285,775 $20,623,537
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
2
<PAGE>
COMUNICACIONES MTEL, S.A. DE C.V.
---------------------------------
CONSOLIDATED INCOME STATEMENTS
------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Notes 1 and 2)
---------------
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES FOR SERVICE $49,168,979 $46,199,288 $30,656,128
REVENUES FOR SALES 13,344,730 9,211,176 6,509,988
----------- ----------- -----------
$62,513,709 $55,410,464 $37,166,116
----------- ----------- -----------
COST OF SERVICE $15,934,230 $14,018,229 $12,643,110
COST OF SALES 12,526,430 9,969,480 5,537,753
----------- ----------- -----------
$28,460,660 $23,987,709 $18,180,863
----------- ----------- -----------
Gross profit $34,053,049 $31,422,755 $18,985,253
----------- ----------- -----------
OPERATING EXPENSES:
Selling $ 8,123,193 $ 9,806,554 $ 5,988,915
Administrative 12,099,655 14,469,552 6,203,747
----------- ----------- -----------
$20,222,848 $24,276,106 $12,192,662
----------- ----------- -----------
DEPRECIATION AND AMORTIZATION $ 1,933,494 $ 1,442,967 $ 1,210,672
----------- ----------- -----------
Operating income $11,896,707 $ 5,703,682 $ 5,581,919
----------- ----------- -----------
INTEGRAL COST OF FINANCING
Interest expense-net $ 465,172 $250,414 $ 281,017
Foreign-exchange income-net (2,166,087) (1,096,487) (5,028)
----------- ----------- -----------
$(1,700,915) $ (846,073) $ 275,989
----------- ----------- -----------
Income before provisions $13,597,622 $ 6,549,755 $ 5,305,930
----------- ----------- -----------
PROVISIONS FOR:
Income tax and assets tax (Note 14) $ 3,181,785 $ 2,181,003 $ 647,885
Employees' profit sharing 132,648 833,970 504,797
Deferred income tax and employees' profit sharing (Note 14) 845,394 (106,342) 82,317
----------- ----------- -----------
$ 4,159,827 $ 2,908,631 $ 1,234,999
----------- ----------- -----------
Income before equity earnings of subsidiary and translation loss $ 9,437,795 $ 3,641,124 $ 4,070,931
TRANSLATION LOSS (939,968) (492,948) --
MINORITY INTEREST (Note 10) -- (27) --
----------- ----------- -----------
Net income $ 8,497,827 $ 3,148,149 $ 4,070,931
----------- ----------- -----------
COMMON SHARES 4,104,245 4,104,245 4,104,245
----------- ----------- -----------
Net income per common share $2.07 $0.77 $0.99
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
COMUNICACIONES MTEL, S.A. DE C.V.
---------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
(Notes 1 and 2)
---------------
<TABLE>
<CAPTION>
Earned (deficit) capital (Note 12):
Capital -----------------------------------
stock Accumulated Legal Net Translation Stockholders'
(Note 11) results reserve Income adjustment Equity
----------- ------------- --------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $13,021,342 $ 2,899,953 $ 30,517 $ 4,070,931 $(9,124,320) $10,898,423
Application of the income for 1996 3,867,384 203,547 (4,070,931)
Net income 3,148,149 3,148,149
----------- ------------- --------- ------------ ------------- --------------
Balance at December 31, 1997 $13,021,342 $ 6,767,337 $234,064 $ 3,148,149 $(9,124,320) $14,046,572
Application of the income for 1997 2,990,742 157,407 (3,148,149)
Dividends (3,969,167) (3,969,167)
Net income 8,497,827 8,497,827
----------- ------------- --------- ------------ ------------- --------------
Balance at December 31, 1998 $13,021,342 $ 5,788,912 $391,471 $ 8,497,827 $(9,124,320) $18,575,232
=========== ============= ========= ============ ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
COMUNICACIONES MTEL, S.A. DE C.V.
---------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
-------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
(Notes 1 and 2)
---------------
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 8,497,827 $ 3,148,149 $ 4,070,931
Minority interest - 27 -
Depreciation and amortization 1,933,494 1,442,967 1,210,672
Deferred income tax and employees' profit sharing 845,394 (106,343) 82,317
Doubtful accounts 959,286 2,743,532 1,376,055
Obsolete inventories and lost pagers reserve 746,927 820,798 138,025
Translation loss 348,093 158,467 -
----------- ----------- -----------
$13,331,021 $ 8,207,597 $ 6,878,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade accounts and other accounts (174,048) (3,445,248) (2,280,066)
Taxes recoverable 574,688 (642,763) (231,634)
Inventories (487,791) (1,574,972) (386,223)
Unappropriated advertising and other assets (2,120,985) 368,293 84,164
Increase (decrease) in:
Trade accounts payable 164,242 3,687,396 (369,708)
Taxes payable and other accrued liabilities 77,404 (1,130,240) 1,634,519
Deferred income 246,060 - -
Holding and affiliated companies 1,668,003 (804,310) (1,503,839)
Seniority premium 1,366 (1,190) (4,209)
----------- ----------- -----------
Resources provided by operating activities $13,279,960 $ 4,664,563 $ 3,821,004
----------- ----------- -----------
FINANCING ACTIVITIES:
Capital leases $ - $ (362,375) $ -
Dividends (3,969,167) - -
Translation adjustment - - (282,140)
Lease back - - (607,438)
----------- ----------- -----------
$(3,969,167) $ (362,375) $ (889,578)
----------- ----------- -----------
INVESTING ACTIVITIES:
Investments in equipment $(5,175,200) $(2,729,601) $(2,566,113)
Installation expenses (648,572) (533,550) (281,090)
----------- ----------- -----------
$(5,823,772) $(3,263,151) $(2,847,203)
----------- ----------- -----------
NET INCREASE IN CASH $ 3,487,021 $ 1,039,037 $ 84,223
CASH AT BEGINNING OF YEAR 1,608,872 599,501 515,278
----------- ----------- -----------
CASH AT THE END OF YEAR $ 5,095,893 $ 1,638,538 $ 599,501
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
COMUNICACIONES MTEL, S.A. DE C.V.
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
1. Corporate purpose:
------------------
Comunicaciones Mtel, S.A. de C.V. the ("Company") was incorporated on
August 10, 1990 and began its operations in December 1991.
The corporate purpose of the Company, according to its corporation
charter, is to provide people with paging/messaging services.
In November 1997, the Company acquired 99.99% of the stock of Empresas
Chiapanecas, S.A. de C.V., and changed its name to CMtel Importaciones, S.A. de
C.V., the ("subsidiary"). All significant intercompany balances and transactions
have been eliminated from the financial statements.
As of January 1, 1998, the personnel that worked in the Company started
to form part of CMTEL Importaciones, S.A. de C.V., a subsidiary company, which
signed employer substitution agreements with each employee. The personnel
seniority, as well as the benefits and other rights and obligations are the same
that it had in the Company until December 31, 1997.
2. Accounting policies:
-------------------
The principal accounting policies followed by the Company and its
subsidiary observed in the preparation of these financial statements, are
summarized below:
a) Translation of financial statements -
The financial statements were prepared in accordance with accounting
principles generally accepted in Mexico and have been translated to
U.S. dollars in accordance with FASB-52.
In order to comply with what is established in FASB 52, The Company's
management has adopted the historical method for the translation of
its financial statements as of December 31, 1998, and 1997; current
method in 1996.
The Company translates its financial statements in the following way:
Balance sheet -
-- In 1998 and 1997 the nonmonetary assets have been
translated to the foreign-exchange rate in effect as of the
date of the acquisition (For the previous nonmonetary
assets and those acquired in 1996 the acquisition year
considered as the base for the translation was 1996).
-- In 1996 the nonmonetary assets and the other balance sheet
accounts were translated at the exchange rate of December
31, 1996, which was 7.864 pesos per dollar.
6
<PAGE>
- The stockholders' equity has been translated at the exchange rate of the
contribution date.
Statement of income-
- the income statements were translated by applying the exchange rate in
effect in each month to the monthly result.
Translation adjustment-
- In 1998 and 1997 the difference that result from applying different
exchange rates in the translation of the financial statements was applied to
income, in 1996 to the stockholders' equity, in the translation adjustment
account.
b) Differences between U.S. GAAP and Mexican GAAP-
The Company recognized in its financial statements the effects arising from
the following differences between U.S. GAAP and Mexican GAAP:
1) The effects of inflation, recognized by the Company, were eliminated.
2) The liability for seniority premium was determined in accordance with
FASB 87, based on actuarial computations, using actual interest rates.
3) the deferred income tax and employees' profit sharing were recognized
based on FASB-109.
4) the preoperating expenses were applied to income.
c) Foreign currency-
The assets and liabilities denominated in foreign currency are valued at
the exchange rate of the balance-sheet date.
The exchange differences resulting from the translation of balances
denominated in foreign currency are applied to income for the year and form part
of the integral cost of financing.
d) Reserve for doubtful accounts-
This reserve was calculated based on a study which consisted in the
investigation of the main causes that make clients to suspend their payments,
valuating in this way the recovery degree of the portfolio.
e) Inventories-
Inventories are valued at market price.
7
<PAGE>
f) Equipment valuation-
The Company's equipment is recorded at cost of acquisition.
g) Depreciation and amortization-
The Company follows the practice of depreciating the equipment on the
ending balance-sheet date, based on the probable useful lives of the assets.
Amortization is calculated on the beginning balance-sheet date at the rate
of 10% a year.
h) Installation expenses-
The installation expenses are recorded at the cost they were incurred.
i) Indemnities-
Severance payments to dismissed personnel are charged to income in the year
in which they are made.
j) Income tax-
The Company recognizes the deferred taxes under the FASB-109.
k) Revenue Policy-
The revenues from the traditional service are recorded at the time of the
rendering of the service.
The revenues from the "Skycard" service are recorded at the time of the
rendering of the service.
The revenues from the messages not used by the user in the period of the
"Skycard" service are recorded on the date of termination of the period
contracted.
l) In the 1997 statement of changes in financial position, exist changes in
assets and liabilities to acquisition of the subsidiary by $29,666.
3. Taxes recoverable:
-----------------
This item is made up of an income tax amounting to $439,049 ($657,487 in
1997) derived from provisional payments made during the year, which correspond
solely to minority interest, as well as a recoverable value-added tax amounting
to $366,075 ($709,881 in 1997).
8
<PAGE>
4. Inventories:
------------
At December 31, inventories consist of:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Pagers $3,202,022 $2,890,759
Inventories in maintenance 112,334 127,379
Other inventories and auxiliary
equipment 40,374 45,303
---------- ----------
$3,354,730 $3,063,441
Obsolete inventories and
lost pager reserve (788,668) (484,823)
---------- ----------
$2,566,062 $2,578,618
Goods in transit -- 779,500
---------- ----------
$2,566,062 $3,358,118
========== ==========
</TABLE>
5. Holdings and affiliated companies:
----------------------------------
a) The holding and affiliated companies at December 31, are as
follows:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Televisa, S.A. de C.V. $ -- $3,062,523
Mtel, International (1) 144,710 (2,173,195)
Grupo Televisa, S.A. (1) 325,781 229,875
Merkatel, S.A. de C.V. (1,350,126) (316,261)
Mtel Argentina 49,871 --
Bepsa de Paraguay 22,467 22,467
Television Independiente
de Mexico 22,751 29,319
Ahorrasi 120,569 --
Corporacion Novavision (119,965) --
Other minor accounts (9,164) 20,169
----------- ----------
$ (793,106) $ 874,897
=========== ==========
</TABLE>
(1) Holding companies.
b) The account balance with Televisa, S.A. de C.V. bore interest at the
average rate of 23.72% in 1998, 19.87% in 1997 and 30.68% in 1996.
The balances of account with other affiliated companies do not bear
interest and due to their nature are short-term balances, even
though these accounts do not have specific due dates.
c) The account balance with Grupo Televisa, S.A. includes provisional
income tax payments amounting to $1,811,371 ($255,417 in 1997) made
during the year, which correspond solely to majority interest.
9
<PAGE>
d) During 1998 and 1997, the Company carried out transactions with
holding and affiliated companies as follows:
<TABLE>
<CAPTION>
Thousands
--------------------------------------------------------------
Income from
Costs and expenses services rendered
---------------------------- ----------------------------
1998 1997 1996 1998 1997 1996
----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Televisa, S.A. de C.V. $ -- $1,773 $3,201 $2,142 $2,135 $1,097
Mtel International (1) 772 392 1,342 196 360 204
Merkatel, S.A. de C.V. 6,988 5,504 3,817 18 8 17
Mtel Argentina -- -- -- 75 43 301
Telecomunicaciones
Skytel Venezuela -- -- -- 137 27 --
Ahorrasi -- -- -- 155 -- --
Corporacion Novavision -- -- -- 55 -- --
Other minor accounts 71 78 92 291 396 367
------ ------ ------ ------ ------ ------
$7,781 $7,747 $8,452 $3,069 $2,969 $1,986
====== ====== ====== ====== ====== ======
</TABLE>
6. Equipment:
----------
a) Equipment as of December 31, consists of:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
R.F. transmission equipment $ 7,515,991 $ 4,232,178
Computer equipment 2,409,728 1,725,445
Software 2,552,604 2,168,222
Office equipment 1,088,026 757,912
Transportation equipment 168,648 118,432
Booths 68,354 66,240
Tools 6,797 5,988
----------- -----------
$13,810,148 $ 9,074,417
Accumulated depreciation (4,160,602) (3,299,877)
----------- -----------
$ 9,649,546 $ 5,774,540
=========== ===========
</TABLE>
b) The depreciation charged to income was of $1,833,114 ($1,373,013 in
1997 and $1,151,928 in 1996.)
10
<PAGE>
7. Installation expenses:
---------------------
As of December 31, this item is analyzed as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Installation expenses $2,466,455 $1,817,883
Accumulated amortization (347,132) (246,752)
---------- ----------
$2,119,323 $1,571,131
Intangible assets 6,289 3,499
---------- ----------
$2,125,612 $1,574,630
========== ==========
</TABLE>
The amortization for the year was of $100,380 ($69,954 in 1997 and $58,744
in 1996).
8. Seniority Premium:
-----------------
The seniority premium liability plan as of December 31, under FASB No. 87 is
as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation $ - $ -
Nonvested benefit obligation 18,606 14,450
------- -------
Accumulated benefit obligation $18,606 $14,450
Plan assets - -
------- -------
Accumulated benefit obligation in
excess of plan assets $18,606 $14,450
------- -------
Projected benefit obligation $21,625 $16,768
Plan assets - -
------- -------
Projected benefit obligations in
excess of plan assets $21,625 $16,768
------- -------
Unfunded projected benefit
obligation to be recognized
in future years:
Unrecognized prior service cost $(3,422) $ 731
Unrecognized net loss (5,886) (6,548)
------- -------
Net projected liability $12,317 $10,951
Intangible asset 6,289 3,499
------- -------
Balance sheet liability $18,606 $14,450
======= =======
</TABLE>
The Subsidiary determined the costs, assets and liabilities derived from
seniority premium, using actual interest rates in the actuarial valuation.
11
<PAGE>
9. Commitments and contingency:
----------------------------
As of December 31, the subsidiary is contingently liable for indemnities
which are payable to dismissed personnel in accordance with Mexican Labor Law
and are expensed when incurred.
As of December 31, 1998, there are commitments for the sale of
approximately 7,000 pager equipment in 1999 for the amount of $315,000.
10. Minority interest:
------------------
Minority interest consists of:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Capital stock $ 810 $ 810
Accumulated results (450) (477)
Net results for the year -- 27
----- -----
$ 360 $ 360
===== =====
</TABLE>
11. Capital stock:
--------------
At December 31, 1998, the capital stock is represented by:
<TABLE>
<CAPTION>
Shares Amount
--------- -----------
<S> <C> <C>
Fixed Capital 100,000 $ 8,708
Variable Capital 4,004,245 13,012,634
--------- -----------
4,104,245 $13,021,342
========= ===========
</TABLE>
The shares are common, registered and fully paid.
12. Earned (deficit) Capital:
-------------------------
The net income for the year is subject to the application of at least a
5% in order to increase the legal reserve, until this reserve is equal to 20% of
the restated capital stock, and to other applications that might be passed by
the Stockholders' Meeting.
Dividends, either in cash or in other forms, paid by the Company and its
subsidiary will be subject to a Mexican withholding tax in accordance with the
Income Tax Law, if the dividends are paid from earnings that have not been
subject to Mexican income taxes. As of December 31, 1998, cumulative earnings
that have been subject to income tax and can be distributed by the Company free
of Mexican withholding tax were approximately $4,591,301.
The stockholders approved cash dividends of approximately $3,969,167,
such dividends were paid in 1998 free of Mexican withholding taxes.
12
<PAGE>
13. Deferred income:
---------------
At the end of 1997, a new form of commercialization of these services,
called "Skycard", was started by the Company. It consists in paying in advance a
specific number of messages.
If the user does not use the total amount of messages in a three-month
period, he loses the right to use the remaining messages, unless he requests
that they be accumulated in his next advance payment.
As of December 31, 1998, the amount of the services not enjoyed by the
user is $246,060. As of December 31, 1997, this amount was not representative.
14. Provisions:
----------
a) During 1998, taxable income of $9,358,191 ($6,414,715 in 1997 and
$1,905,544 in 1996), was obtained and which income tax of $3,181,785 ($2,181,003
in 1997 and $647,885 in 1996) was due. In 1996, the company amortized $120,018
which represents the total tax loss obtained in 1995.
b) The Company and its subsidiary credited assets tax of $270,803 in
1998, $240,344 in 1997 and $84,284 in 1996, against the income tax.
c) The Company and its subsidiary recognize the deferred taxes under the
FASB-109, in which the deferred tax liabilities and assets are determinated
based on the difference between the financial statements and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to be reversed.
The components of net deferred tax under U.S. GAAP consist of the
following:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Current liabilities -
Tax income:
Inventories $(839,782) $(1,141,760)
Trade accounts receivable 361,311 1,221,347
------------ ------------
$(478,471) $ 79,587
------------ ------------
Employees' profit sharing:
Inventories -- $ (335,812)
Trade accounts receivable -- 359,220
------------ ------------
-- $ 23,408
------------ ------------
Total current liabilities $(478,471) $ 102,995
------------ ------------
Long term assets -
Tax income:
Equipment $(562,097) $ (177,018)
Deferred cost 191,958 219,732
Seniority premium 5,954 4,913
Royalties tax provisions 49,066 40,138
------------ ------------
$(315,119) $ 87,765
============ ============
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Employees' profit sharing:
Equipment -- $(134,129)
Deferred cost -- (886)
Seniority premium 1,861 1,445
Royalties tax provisions 15,333 11,805
----------- ------------
$ 17,194 $(121,765)
----------- ------------
Total long term assets $(297,925) $ (34,000)
----------- ------------
Deferred taxes-net $(776,396) $ 68,995
=========== ============
</TABLE>
The deferred tax has been computed at the corporate income tax rate. For
the fiscal year 1999, it will be 32% (34% in 1997 and 1996).
During 1996, in accordance with what is provided for by the income tax
law, the fixed assets depreciation for the year is restated through the month of
June. For purposes of calculating the deferred taxes, the Company decided to
recognize the restatement of the depreciation for the year through December,
thereby recognizing a favorable effect in income for the year amounting to
$253,705 in advance.
15. Financial instruments:
----------------------
The financial instruments recorded in the balance sheet include cash,
accounts and notes receivable, marketable securities and accounts payable. For
these items the carrying amounts approximate fair value due to the short
maturity of these instruments.
14
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 4, 1999 included as Exhibit 99.1 in this Annual Report on
Form 10-K/A for the year ended December 31, 1998 into SkyTel Communication,
Inc.'s, formerly Mobile Telecommunication Technologies Corp., previously filed
Registration Statements on Form S-8, File Nos. 33-31617, 33-42494, 33-55722,
33-62032, 33-64583 and 333-53727 and Registration Statement on Form S-3, File
No. 333-16245.
PRICEWATERHOUSECOOPERS
Mexico, D.F.
June 30, 1999
