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Transtel SA – ‘6-K’ for 9/30/04

On: Thursday, 12/2/04, at 11:11am ET · For: 9/30/04 · Accession #: 1140437-4-337 · File #: 333-49871

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

12/02/04  Transtel SA                       6-K         9/30/04    1:133K                                   Office Tiger LLC/FA

Report of a Foreign Private Issuer — Form 6-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 6-K         Report of a Foreign Private Issuer                    46    224K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Indebtedness Old Notes Senior Notes Unitel
1	1st Page - Filing Submission
2	Unitel
10	Indebtedness
30	Old Notes
31	Senior Notes

6-K 1st Page of 46 TOC ↑Top Previous Next ↓Bottom Just 1st
 
================================================================================

 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A - 16 OR 15(d) - 16 UNDER
 THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH ENDED SEPTEMBER 30, 2004

 COMMISSION FILE NUMBER: 333-49871

 TRANSTEL S.A.
 (Translation of Registrant's name into English)

 Calle 15 No. 32-591
 Yumbo, Colombia
(Address of principal executive offices)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT FILES OR WILL FILE
 ANNUAL REPORTS UNDER COVER OF FORM 20-F OR FORM 40-F.

 Form 20-F [X] Form 40-F [ ]

INDICATE BY CHECK MARK IF THE REGISTRANT IS SUBMITTING THE FORM 6-K IN PAPER AS 
 PERMITTED BY REGULATION S-T RULE 101(b)(1):____

Indicate by check mark if the registrant is submitting the form 6-K in paper as 
permitted by Regulation S-T Rule 101(b)(7): ____                                

 INDICATE BY CHECK MARK WHETHER THE REGISTRANT BY FURNISHING THE INFORMATION
CONTAINED IN THIS FORM IS ALSO THEREBY FURNISHING THE INFORMATION TO THE
COMMISSION PURSUANT TO RULE 12G3-2(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934.
YES [ ] NO [X]

================================================================================

6-K 2nd Page of 46 TOC 1st Previous Next ↓Bottom Just 2nd
OVERVIEW                                                                        

   The term "Transtel" refers to Transtel S.A. and the term "Company" refers
to Transtel and its consolidated subsidiaries identified below. Transtel's      
consolidated subsidiaries consist of its majority-owned Operating Subsidiaries  
identified below and three wholly-owned subsidiaries: Morris Lease Asset I, Ltd.
("MLA"), Suscripciones Audiovisuales E.U. ("Suscripciones") and Cablevision E.U.
(together with Suscripciones, "Cablevision").                                   

  Transtel owns and operates seven telephone systems through the following
subsidiaries (referred to herein as the "Operating Subsidiaries"):              

          LEGAL NAME OF OPERATING SUBSIDIARY               REFERRED TO HEREIN AS
          ----------------------------------------------   ---------------------
Bugatel S.A. E.S.P.                              Bugatel    
Caucatel S.A. E.S.P.                             Caucatel   
Empresa de Telecomunicaciones de Girardot S.A.              
  E.S.P.                                          TeleGirardot
Empresa de Telefonos de Jamundi S.A. E.S.P.      TeleJamundi
Empresa de Telefonos de Palmira S.A. E.S.P.      TelePalmira
Telefonos de Cartago S.A. E.S.P.                 TeleCartago
Unitel S.A. E.S.P.                               Unitel     

     MLA, which was formed in February 2004 in connection with our Restructuring
described herein, holds certain telecommunications equipment used by the        
Operating Subsidiaries. Through Cablevision, Transtel holds the exclusive       
license to provide pay television service in Cali and the surrounding area.     
References to "Pesos" or "Ps" are to the Colombian peso and references to       
"Dollars" and "$" are to the United States dollar.                              

OUR BUSINESS                                                          

 We are the largest private telephone company in Colombia. Our Operating
Subsidiaries own and operate seven telephone systems and one cable system,      
providing voice, data and other media services to commercial and residential    
subscribers in Cali and nine other cities in southwestern Colombia. As of       
September 30, 2004, we had approximately 204,690 telephone, 24,511 Internet and 
10,631 pay television subscribers.                                              

   We operate from a robust platform employing exclusively digital switching
and fiber-optic transmission technology, with 280,378 gates, 331,000 pairs and  
over 541 km of deployed fiber rings. Our systems include a deployed fiber optic 
network in Cali, which we acquired as part of our acquisition of Cablevision,   
our pay television subsidiary. In addition to serving our pay-television        
subscribers, this fiber, together with other fiber-optic loops built by the     
Company, provides the backbone for our data products, including our "Fast Link" 
technology and Uniweb, our full service Internet service provider or "ISP",     
supported by Sun Microsystems and Cisco hardware and software.                  

We began operations in 1995 with one system, TelePalmira, and 15,600  
subscribers. We grew rapidly through select acquisitions, planned organic growth
and the implementation of our build-out plan for the expansion and upgrade of   
the infrastructure required to satisfy the significant demand for telephone     
lines in each of our markets (the "Expansion Plan"). We have recently completed 
the restructuring (the "Restructuring") of the financial obligations we incurred
to fund our initial growth, including the Expansion Plan.                       

As a result of the completion of the Expansion Plan, our technological
infrastructure is able to accommodate continued growth without significant      
additional capital expenditure. Our built-out network has a 280,378             
installed-line capacity and served 204,690 subscribers, as of September 30,     
2004. The following table shows our installed-line capacity and subscribers     
served by Operating Subsidiary.                                                 

                                                        [Enlarge/Download Table]

                                                                                   UNITEL                                          
                                                                         ----------------------------                              
              TELEPALMIRA    TELECARTAGO     CAUCATEL      TELEJAMUNDI     WIRELINE       WIRELESS        BUGATEL     TELEGIRARDOT 
             -------------  -------------  -------------  -------------  -------------  -------------  -------------  -------------
                                                                                                                                   
Capacity            71,164         29,462         20,278         12,239         53,419         35,000         22,124         36,692
Subscribers         65,724         17,753         16,682          7,850         21,339         25,460         18,065         31,817

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We believe the relatively low penetration levels in the Colombian market for    
telephone services present growth opportunities to providers like us. The       
Departamento Nacional de Planeacion has set a target for average national       
telephone penetration of 30 lines per 100 persons by 2007. The country still    
trails this objective (currently approximating 18 lines per 100 persons) but it 
is believed that penetration will continue to grow. In fact, the penetration    
within two of Colombia's largest cities, Medellin and Bogota, exceeds this      
target, averaging 38.2 and 34.4, respectively. However, penetration in Cali     
(approximately 26.0), the country's second largest city, noticeably trails that 
of its peer cities. We believe that, with an aggressive sales plan and a weak   
competitor, the incumbent, EMCALI, which has been undergoing financial          
restructuring since 2001, we will grow our operations in Cali (through Unitel)  
faster than in any other municipality.                                          

    In addition, we believe that our data products offer us an opportunity for
further expansion using our existing platform. Despite the widespread           
availability of "free" Internet service from competitors, we are enjoying strong
revenue growth (expecting over 10% in 2004) in our Internet products and        
services and believe that the market will be increasingly willing to pay for    
high speed, high quality products and services of the type we offer. Our        
strategy is to use these products and services as a lead offering in the        
cross-selling and marketing of our other products and services and to capture   
more of the higher margin residential and non-residential customers.            

OUR RESTRUCTURING                                                     

In our recently completed Restructuring, we restructured an aggregate 
$309.6 million of outstanding indebtedness, of which $198.4 million was         
exchanged for restructured obligations and $111.2 million was capitalized in    
exchange for Transtel equity. Except for the claims of our principal            
pre-Restructuring equipment vendor Siemens AG and related entities              
(collectively, "Siemens"), the Restructuring did not affect the existing        
obligations of the Operating Subsidiaries to their creditors, including         
obligations to suppliers and vendors, local banks and, in respect of deferred   
value-added taxes and duties in connection with the purchase and importation of 
telecommunications equipment, DIAN. The Restructuring was approved by Transtel's
creditors and shareholders on November 25, 2003 and formally closed as of       
February 24, 2004.                                                              

     As part of the Restructuring, Siemens transferred its equipment leases with
the Operating Subsidiaries, together with title to the leased assets, to Morris 
Lease Asset I, Ltd. ("MLA"), which was formed in February 2004 for this purpose.

 NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

   The following discussion of our results of operations for the nine months
ended September 30 2004 and 2003 should be read in conjunction with our         
Unaudited Consolidated Interim Financial Statements as of and for the nine      
months ended September 30, 2004 and 2003 and the notes thereto, included        
elsewhere herein. Our Unaudited Consolidated Interim Financial Statements have  
been prepared in accordance with Colombian GAAP, which differs in certain       
respects from U.S. GAAP. Note 9 to our Unaudited Consolidated Interim Financial 
Statements provides a description of the principal differences between U.S. GAAP
and Colombian GAAP as they relate to our Unaudited Consolidated Interim         
Financial Statements, and reconciliation to U.S. GAAP of net income and total   
shareholders' equity for the periods and as of the dates presented. Unless      
otherwise indicated, the financial information has been presented in constant   
Pesos as of September 30, 2004. Dollar amounts are translated from Pesos amounts
at the Representative Market Rate on September 30, 2004, which was Ps 2,595.17  
Pesos to one Dollar (September 30, 2003 Ps 2,889.39 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. This section contains forward-looking statements that
involve risks and uncertainties.                                                

KEY FACTORS AFFECTING REVENUE AND RESULTS OF OPERATIONS                         

REVENUES                                                              

   We earn our revenues principally from local telephone services, including
monthly fees for service, local usage charges and access charges for providing  
interconnection to national and international long distance and cellular        
carriers. We also earn revenue from data and Internet services and from our     
non-core pay television services.                                               

  The principal components of our telephone service revenues are (i) basic
charges for service, billed as a fixed monthly charge; (ii) local usage charges 
for local calls, billed on the basis of impulses (three minutes) consumed; and  
(iii) access charges for interconnection to national and international long     
distance networks and cellular carriers, billed on a per minute basis.          

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The main factors that influence our telephone service revenues are as 
follows:                                                                        

     .    Subscriber levels. The number of subscribers connected to our networks
         directly affects our revenue from basic charges and call traffic that
   generates local usage charges and access charges. The number of
         subscribers connected to our networks depends not only our ability to
         add new subscribers but also on the turnover, or "churn", rate of our
         existing subscribers. Churn consists of any subscriber whose service,
          once established, is disconnected, whether by us or voluntarily by the
subscriber.                                                 

The following tables show information on our average annual subscriber
churn by Operating Subsidiary and on a consolidated basis for each of the last  
five years and the nine months ended on September 30, 2004:                     

                                                        [Enlarge/Download Table]

                               TELEPALMIRA                 TELECARTAGO                 CAUCATEL                   TELEJAMUNDI       
                        -------------------------   -------------------------  -------------------------  ------------------------- 
                         SUBSCRIBERS                 SUBSCRIBERS                SUBSCRIBERS                SUBSCRIBERS              
      YEAR ENDED        -------------               -------------              -------------              -------------             
     DECEMBER 31,         AVE   CHURN  CHURN RATE    AVE    CHURN  CHURN RATE    AVE   CHURN  CHURN RATE    AVE   CHURN  CHURN RATE 
----------------------  ------  -----  ----------   ------  -----  ----------  ------  -----  ----------  ------  -----  ---------- 
                                                                                                                                    
1999 .................  66,256    469        0.70%  30,264    257        0.90% 23,211    164        0.70% 11,866    101        0.90%
2000 .................  68,693  5,167        7.50%  32,335  7,362       22.80% 23,313  4,676       20.10% 12,691  1,239        9.80%
2001 .................  64,478  6,435        9.90%  24,521  3,964       16.20% 18,983  2,346       12.40% 11,197  1,874       16.70%
2002 .................  66,445  6,074        9.10%  23,690  2,410       10.20% 18,800  2,848       15.20% 10,843  1,039        9.60%
2003 .................  65,615  3,855        5.90%  22,098  4,420       20.00% 18,560  2,797       15.10% 10,273  1,510       14.70%
Nine months ended                                                                                                                   
 September 30, 2004 ..  65,598  2,413        3.68%  19,159  5,318       27.76% 17,153  2,649       15.44%  8,798  1,935       21.99%

                                                        [Enlarge/Download Table]

                             UNITEL                     BUGATEL                  TELEGIRARDOT                  CONSOLIDATED         
                   --------------------------  -------------------------  --------------------------  ----------------------------  
                    SUBSCRIBERS                 SUBSCRIBERS                 SUBSCRIBERS                 SUBSCRIBERS                 
    YEAR ENDED     --------------              -------------              --------------              ---------------               
   DECEMBER 31,     AVE     CHURN  CHURN RATE   AVE    CHURN  CHURN RATE   AVE    CHURN   CHURN RATE    AVE     CHURN   CHURN RATE  
------------------ ------  ------  ----------  ------  -----  ----------  ------  ------  ----------  -------  ------   ----------  
                                                                                                                                    
1999 ............. 56,309     498        0.90% 23,257    201        0.90% 50,659     324        0.60% 261,822   2,014         0.80% 
2000 ............. 63,198  24,663       39.10% 26,692  5,508       20.60% 47,596  15,836       33.30% 274,518  64,451        23.50% 
2001 ............. 45,096   9,404       20.90% 21,115  2,975       14.10% 37,654   2,412        6.40% 223,044  29,410        13.20% 
2002 ............. 46,554   4,668       10.00% 20,997  2,179       10.40% 37,205   3,541        9.50% 224,534  22,759        10.10% 
2003 ............. 49,851   7,486       15.00% 19,629  3,846       19.60% 36,374   3,469        9.50% 222,400  27,383        12.30% 
Nine months ended                                                                                                                   
 September 30,                                                                                                                      
 2004............. 48,314   5,821       12.05% 17,999  2,640       14.67% 35,193   5,853(*)    16.63% 212,214  26,629(*)      12.55%

(*)  Includes 3,968 subscribers of Teletequendama en Liquidacion S.A.E.S.P.     
("Teletequendama") whose lines were managed by TeleGirardot during the          
liquidation of Teletequendama. In the third quarter of 2004, the Superintendency
of Public Utilities completed the sale to Empresa de Telecomunicaciones de      
Bogota of Teletequendama, including its subscriber base.                        

SUBSCRIBER GROWTH                                                               

The following table provides information regarding the Operating Companies:     

                                                        [Enlarge/Download Table]

                          TELEPALMIRA  TELECARTAGO  CAUCATEL  TELEJAMUNDI    UNITEL     BUGATEL  TELEGIRARDOT    TOTAL 
                          -----------  -----------  --------  -----------  ----------  --------  ------------  --------
                                                                                                                       
Municipality                  Palmira      Cartago   Popayan      Jamundi  Yumbo/Cali  Bugatel   Girardot (!)     N/A  
NUMBER OF SUBSCRIBERS                                                                                                  
As of start date               15,600       13,800    10,800          New Systems        10,700        23,500    74,400
As of December 31, 1998        63,357       27,930    22,113       10,390      39,452    20,304        48,270   231,816
As of December 31, 1999        68,803       32,844    23,721       12,737      67,716    26,931        53,454   286,206
As of December 31, 2000        63,636       25,482    19,045       11,498      43,053    21,423        37,618   221,755
As of December 31, 2001        65,977       23,863    19,020       10,897      45,138    20,987        37,683   223,565
As of December 31, 2002        65,900       23,278    18,800       10,688      48,975    20,681        36,855   225,177
As of December 31, 2003        65,866       21,819    17,946        9,831      49,133    18,668        34,480   217,743
As of September 30, 2004       65,724       17,753    16,682        7,850      46,799    18,065        31,817   204,690

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    .    Traffic levels. The amount of traffic on our systems directly affects
          the usage components of our revenues including local usage charges and
   access charges. Our fixed-line network services face increasing
      competition from other telecommunications services that affect our
traffic levels.                                             

   .    Tariff levels. The rates we charge for our services are regulated by
        the Comision de Regulacion de Telecomunicaciones (the "CRT") and are
          generally subject to inflationary adjustments. Our revenues from basic
         charges and local usage charges increased in 2003 and the nine months
      ended in September 2004 primarily due to an increase in our rates.
Changes in regulation can affect our revenues.              

       .    We are allowed by law to set tariffs for our basic charges and
          local usage charges either in accordance with our historical
         costs or at levels established by our competition. This has
              generally benefited us by allowing management (where applicable)
        to set tariffs in accordance with our competitions' higher
             historical rates, rather than our own 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. For
            2003 and the nine months ended September 30, 2004, our average
   rates, in constant Pesos, for basic charges increased
          approximately 28.0% and 14.4%, respectively, and our average
             rates for local usage charges increased approximately 25.9% and
12.9%, respectively.                              

          .    Pursuant to agreements with the long distance carriers with terms
           running through 2009, our access charges are based on minutes
               used. The carriers have asked the CRT to require us, prior to the
              termination of our current agreements, to adopt fixed-fee access
           charges based on the capacity we allocate to the carriers. We
      cannot predict what effect this change would have on our
revenues.                                         

         .    In 2005, we will be required to offer our subscribers the option
               of (i) being billed for local usage charges either per minute, on
             the basis of actual minutes used, or (ii) per "impulse" (i.e. a
              unit of three minutes), or (iii) on a flat monthly fee basis. We
        cannot predict what effect this will have on our revenues.

 .    Subscriber Mix. Our revenues and profitability are affected by our
  subscriber mix (residential and commercial subscribers). As of
     December 31, 2003 and September 30, 2004, our subscriber base was
composed of approximately 80% residential and 20% commercial
     subscribers. Commercial subscribers and more affluent residential
        subscribers tend to produce higher traffic levels, tend to pose less
          payment risk and consume more of our value added and data and Internet
services. For these reasons, we are seeking to designing and
         implementing marketing programs aimed to capture more of these higher
         margin customers. The following table shows our average tariffs as of
September 30, 2004 for residential and commercial customers.

                          TARIFF
                           -----------------------------------------------------
SERVICE                           RESIDENTIAL                  COMMERCIAL       
------------------------   -------------------------   -------------------------
Basic Charges ..........   Ps   17,994 ($6.99)/month   Ps   21,593 ($8.39)/month
Local Usage Charges ....   Ps  28.00 ($0.011)/minute   Ps  33.60 ($0.013)/minute
Access Charges .........   Ps   65.32 ($0.02)/minute   Ps   65.32 ($0.02)/minute

OPERATING COSTS.                                                                

The main factors that influence our operating costs are:              

.    Sales and marketing expenses. We expect Unitel to be our primary 
         vehicle for growth. In Cali, Unitel's principal competitor is EMCALI.
          Owing, in part, to EMCALI's continuing financial difficulties, we have
         been able to develop and maintain a strong position in the region. We
       do not anticipate a need for substantial increases in our sales and
marketing efforts to reach our targets in the region.       

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 .    Churn and receivable write-offs. We believe that churn in 2003 was
        unusually high because of our focus on the Restructuring and related
   local uncertainty as to the outcome. In 2004, we have witnessed
         continued churn within our system and our competitors' operations. We
      believe that this is attributable to a number of factors including
    aggressive competition and reductions in mobile phone tariffs by
      several new entrants in the cellular market seeking to gain market
       share. We believe that this is a temporary market aberration. Going
forward, we expect that some competitive behavior will be   
         unsustainable and consumers will respond favorably to our competitive
          and less expensive tariffs. We are also implementing a number of sales
 and marketing efforts to counter this competition and through
          September 30, 2004 connected new subscribers equivalent to over 57% of
        subscribers lost. We also expect continued net additions through the
fourth quarter.                                             

.    Restructuring expenses. Throughout 2003 and the nine months ended
         September 30, 2004, we incurred significant non-recurring charges for
  professionals engaged in connection with the Restructuring. In
    accordance with guidelines established by the Superintendency of
          Companies, we will fully expense any restructuring-related charges not
        previously amortized, including certain charges incurred in 2003, in
          2004. (Under prior guidelines, such expenses would have been amortized
      over the life of the related indebtedness.) These costs total $6.3
millions for the nine months ended September 30, 2004.      

   .    Personnel costs. We hired a significant number of employees in order
      to facilitate the implementation of the Expansion Plan. Since that
          time we have been reducing headcount. Where appropriate, we attempt to
         take advantage of opportunities to rationalize our operations, and in
2003 we merged certain functions of Unitel and Suscripciones
         Audiovisuales in order to lower costs (including personnel costs). At
         present we do not anticipate making further substantial reductions in
personnel costs.                                            

     .    Systems repairs and maintenance. Our systems, installed or upgraded in
connection with the Expansion Plan, are relatively new, and 
        accordingly we do not expect to incur material repair or maintenance
costs in connection with their operation.                   

MONETARY AND FOREIGN EXCHANGE GAIN (LOSS)                             

     Due principally to levels of unhedged Dollar-denominated debt, fluctuations
in the value of the Peso against the Dollar can have a significant impact on our
net income (loss). We generally record a net monetary and foreign exchange gain 
when the Peso appreciates against the Dollar and a net monetary and foreign     
exchange loss when the Peso depreciates against the Dollar. In 2003, we recorded
a net monetary and foreign exchange loss of Ps46,108 million ($16.6 million).   
For the nine months ended September 30, 2004, we recorded a net monetary and    
foreign exchange gain of Ps 1,022,762 million ($0.394 million).                 

EBITDA                                                                          

   For illustrative purposes and to facilitate the reader's understanding of
our operating results, we report information on our EBITDA, which we calculate  
as described below. EBITDA is not intended to represent our cash flow or results
of operations in accordance with Colombian or United States GAAP for any period.
We calculate our EBITDA as follows: For any period, determined in accordance    
with Colombian GAAP on a consolidated basis for Transtel and its subsidiaries,  
net income for such period plus to the extent deducted in calculating such net  
income, (i) income tax expense, (ii) net monetary inflation adjustment, (iii)   
depreciation and amortization expenses, (iv) net financial expense, (v) minority
interest and (vi) all other non-cash charges (other than non-cash charges which 
require an accrual of a reserve for cash charges in future periods), less any   
non-cash items which have the effect of increasing net income for such period,  
plus (less) to the extent deducted (included) in net income, extraordinary      
losses (gains) and nonrecurring items (including gains and losses on asset      
sales) deducted (included) in calculating net income.                           

RESULTS OF OPERATIONS                                                           

     The composition of the Company's revenues for each of the nine months ended
September 30, 2004 and 2003 discussed herein is as follows:                     

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                                                                [Download Table]

                                         NINE MONTH ENDED SEPTEMBER 30,             
                           -------------------------------------------------------- 
                                 2003            %             2004            %    
                           ---------------   --------    ---------------   -------- 
                               (In thousands of constant Pesos of September 30,     
                                   purchasing power, except percents data)          
                                                                                    
Connection fees .......... Ps      775,996          1%   Ps      688,859          1%
Local usage charges ......      40,904,625         38%        39,027,224         38%
Basic charges ............      28,066,745         26%        29,996,303         29%
Long distance charges ....      20,124,670         19%        17,679,619         17%
Internet charges .........       3,587,875          3%         3,858,855          4%
Other operating income ...       9,093,808          8%         6,622,563          6%
                           ---------------   --------    ---------------   -------- 
Total Telephone ..........     102,553,719         95%        97,873,423         95%
Pay television services ..       5,787,745          4%         5,000,738          5%
                           ---------------   --------    ---------------   -------- 
Total .................... Ps  108,341,464        100%   Ps  102,874,161        100%
                           ===============   ========    ===============   ======== 

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

                                     NINE MONTHS ENDED SEPTEMBER
                                     ---------------------------
                                     2003           2004
                                     ------------   ------------
Revenues .................................         100.00%        100.00%       
                                     ============   ============
Costs and expenses:                                                             
Operating costs ........................          31.39          30.54      
Administrative and selling expenses ....          29.20          38.69      
                                     ------------   ------------
Total ................................          60.59          69.23    
                                     ------------   ------------
Operating income .........................          39.41          30.77        
Non-operating expenses ...................         (91.04)        (40.10)       
Net monetary correction ..................          47.90          38.53        
                                     ------------   ------------
Gain (Loss) before income taxes                                                 
and minority interest ...................          (3.74)         29.20       
Income tax expense .......................          (6.30)         (7.67)       
                                     ------------   ------------
Gain (Loss) before minority interest .....         (10.04)         21.53        
Minority interest ........................          (0.12)         (1.66)       
                                     ------------   ------------
Net income (loss) ........................         (10.16)         19.87        
                                     ============   ============
EBITDA ...................................          68.28%         71.49%       

NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2003                                                              

Revenues. Total revenues for the nine months ended September 30, 2004 
decreased by Ps 5,467 million ($2.1 million), or 5.0%, from Ps108,341 million   
($41.7 million) to Ps102,874 million ($39.6 million.) for the nine months ended 
September 30,2003 and 2004 respectively. This reduction in revenues over the    
periods under consideration is primarily the result of a Ps 6,161 million ($2.3 
million) effect of constant peso restatement of 2003's nine months revenues.    

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Revenue from local usage charges decreased by Ps 1,877 million ($0.7  
million), or 4.5 %, from Ps40,904 million ($15.7 million) to Ps 39,027 million  
($15.0million) for the nine months ended September 30,2003 and 2004             
respectively. This decrease is mainly due to effect of constant peso restatement
by Ps 2.326 million ($0.9 million ), offset, in part, by the 11% tariff increase
we implemented in the first half of 2004.                                       

     Revenue from basic charges increased by Ps 1,929 million ($0.7 million), or
6.8%, from Ps28,067 million ($10.8 million) to Ps 29,996 million ($11.6 million)
for the nine months ended September 30,2003 and 2004 respectively. This increase
was primarily due to an average tariff increase of 14.4% during the nine months 
ended September 30, of 2004.                                                    

Revenue from long distance charges decreased by Ps 2,445 million      
($0.9 million) or 12.14 %, from Ps 20,125 million ($7.7 million) to Ps 17,680   
million ($6.8 million) for the nine months ended September 30, 2003 and 2004    
respectively. This decrease is consequence of a reduction in the Company's fixed
line traffic and resulting loss of access charges due to shift from national    
long distance usage and fixed-to-mobile usage and the effect of constant peso   
restatement of 2003's nine months by Ps 1,144 million ($0.4 million).           

Cost of revenues. Cost of revenues decreased by Ps 2,591 million ($1.0
million), or 7.6% from Ps 34,011 million ($13.1million) to Ps 31,420 million    
($12.1million) for the nine months ended September 30, 2003 and 2004,           
respectively, The decrease was mainly due to: decrease in a) maintenance by Ps  
1.669 million ($0.6 million) from Ps 3,127 million ($1.2 million) to Ps 1,458   
million (0.5 million) b) transmission rights by Ps 0.423 million ($0,1 million) 
from Ps 2,414 million ($0.9 million) to Ps 1,991 million ($0.8 million) and c)  
salaries by Ps 0. 712 million (0.2 million) from Ps4,427 million ($1.7 million) 
to Ps 3,715 million (1.4 million), offset by an increase in depreciation by Ps  
2,637 million ($1,0 million) from Ps 12,599 million ($4.8 million) to Ps15,236  
($5.8 million) .                                                                

   Operating Expenses. Operating expenses increased by Ps8,169 million ($3.1
million), or 25.8 %, from Ps 31,635 million ($12.2 million) to Ps 39,804million 
($15.3million) for the nine months ended September 30, 2003 and 2004,           
respectively. The increase was mainly due to: (i) a change in amortization      
schedules which were adjusted to be in accordance with recent guidelines from   
the Superintendency of Companies (which require that the costs associated with  
the restructuring be fully amortized in 2004). Initially, the Company had       
elected to amortize such costs over the period ending December 2007. In         
accordance with this change, the Company amortized Ps 14,422 million ($5.5      
million) during the nine months ended September of 2004 as compared with the    
amortization of Ps 6,019 ($2.3 million) over the same period in 2003, and (ii)  
an increase in depreciation by Ps 0.862 million ($0.3 million) from Ps 2,748    
million ($1.0 million) to Ps 3,610 million ($1.3 million), offset by a reduction
in provision for doubtful accounts receivable by Ps2,325 million ($0.8 million) 
from Ps 5,716 million ($2.2 million) to Ps3,391 ($1.3 million).                 

 Operating Income. Operating income decreased by Ps 11,045 million ($4.2
million), or 25.9%, from income of Ps42,695 million ($16.4 million) to Ps 31,650
million ($12.2 million) for the nine months ended September 30, 2003 and 2004,  
respectively. The decrease in operating income was mainly due to an increase in 
depreciation and amortization of the costs of the restructuring.                

    EBITDA. EBITDA decreased by Ps 0.433 million ($0.1 million), or %, from Ps
73,980 million ($28.5 million) to Ps 73,547 million ($28.3 million) for the nine
months ended September 30, 2003 and 2004, respectively.                         

    Non-Operating Income (Expenses), Net. Non-operating income (expenses), net
for the nine months ended September 30,2003 and 2004, is as follows:            

 BLANK SPACE

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                               NINE MONTHS ENDED SEPTEMBER 30,
                               -------------------------------
                               2003             2004
                               --------------   --------------
                              (in millions of constant pesos
                               of September 30, 2004
                             purchasing power)
FINANCIAL INCOME (expenses):                                                    
Interest ............................   Ps     646,360   Ps     668,307         
Exchange gains ......................           65,250        9,082,552         
                               --------------   --------------
                                      711,610        9,750,859
                               --------------   --------------
Interest bonds ......................      (58,577,360)     (36,707,763)        
Interest expenses ...................      (13,748,396)     (12,277,087)        
Bank commissions ....................       (1,326,290)      (1,471,453)        
Exchange losses .....................      (21,846,910)      (8,059,790)        
Others ..............................         (687,949)      (2,653,780)        
                               --------------   --------------
                                   (96,186,905)     (61,169,873)
                               --------------   --------------
Financial income (expenses), net ....      (95,475,295)     (51,419,014)        
                               --------------   --------------
OTHER:                                                                          
Other income (expenses) .............       (3,163,914)      10,168,616         
                               ==============   ==============
Total Non operating Income (expenses)   Ps (98,639,209)  Ps (41,250,398)        
                               ==============   ==============

Net Non-Operating Expenses. Net non-operating expenses decreased by   
Ps57,389 million ($22.1million), or 58.2%, from Ps 98,639 million ($38.0million)
to Ps 41,250 million ($15.9 million) for the nine months ended 2003 and 2004,   
respectively. This decrease is mainly due to the restructuring of debt (as      
further described in the Note 4 to the Company's Unaudited Consolidated Interim 
Financial Statements) and a positive exchange rate effect for the nine months   
ended September 30, 2004 (revaluations) compared to the nine months ended       
September 30, 2003 (devaluations).                                              

     Net Monetary Inflation Adjustment Income. Net monetary inflation adjustment
income decreased by Ps12,258 million ($4.7 million), from Ps 51,892 million     
($20.0 million) to Ps39,634 million ($15.3 million) for the nine months ended   
September 30, 2003 and 2004, respectively as a result of inflationary           
adjustments on non monetary balance accounts.                                   

Income Tax Expense (Benefit). Income tax expense increased by Ps1,058 
million ($0.4 million) from Ps6,828 million($2.6 million) to Ps7,886 million    
($3.0 million) for the nine months ended September 30, 2003 and 2004            
respectively.                                                                   

   Net Income. Net Income increased by Ps 31,445 million ($12.1 million), or
285% from loss Ps11,011 million ($4.2million) to Ps20,434 million ($7.8 million)
for the nine months ended September 30, 2003 and 2004 respectively, as a result 
of the factors discussed above.                                                 

LIQUIDITY AND CAPITAL RESOURCES                                                 

OVERVIEW                                                              

    We have substantial indebtedness and related payment obligations that will
leave only a limited amount of operating cash flow for our working capital      
contingencies or long term investment in our business. In addition, we are      
required under the indenture (the "Senior Notes Indenture") governing the 12 1/2
% Senior Secured Convertible Notes issued by Transtel and described in detail in
"Indebtedness" below (the "Senior Notes") to prepay the Senior Notes to the     
extent we have excess cash flow for any quarter after payment of operating      
expenses and scheduled debt service and retention of a minimum cash balance of  
Ps7,785 million ($3.0 million) and a reserve for annual capital expenditures of 
Ps3,893 million ($1.5 million), as adjusted for 2004.                           

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6-K 10th Page of 46 TOC 1st Previous Next ↓Bottom Just 10th
   The build-out of our networks is complete. Accordingly, our principal use
of funds is for repayment of debt, payment of operating expenses and, in 2004,  
payment of accrued, non-recurring Restructuring expenses. We believe that we    
will operate within our annual capital expenditure budget and will incur costs  
related to the organic growth of our networks and periodic upgrades to our      
operating systems. Costs associated with our continued growth will include      
expansion of our secondary networks and additions to our internal plant         
including cards for new subscribers.                                            

    Required principal repayments under our Senior Notes begin on December 31,
2005, with Ps 19,723 million ($7.6 million) due December 31, 2005, Ps 39,446    
million ($15.2 million) due on December 31, 2006, Ps 39,446 million ($15.2      
million) due on December 31, 2007 and Ps 296,109 million ($114.1 million) due at
maturity on December 31, 2008, in each case reduced in forward order of maturity
by the amount of any prepayments from Excess Cash Flow (as defined in the Senior
Notes Indenture).                                                               

 At the closing of the Restructuring, we paid from cash on hand Ps17,128
million ($6.6 million) representing a portion of the restructuring fee owed by  
the Company to certain of its creditors in connection with the Restructuring    
(the "Restructuring Fee"). Additionally, during the nine months ending September
30, of 2004, we paid Ps 30,392 million ($11.4 million) in interest expense under
our Senior Notes. On October 29, 2004 the Company paid the Ps6,207 million ($2.4
million) balance of the Restructuring Fee.                                      

We expect our principal cash needs for the balance of 2004 to include 
Ps25,646 million ($4.5 million) for interest expense under our Senior Notes.    

SOURCE OF FUNDS                                                       

    The Company has satisfied and continues to provide for its working capital
needs exclusively from cash generated by operating activities. For the nine     
months ended September 30, 2004, cash used in operating activities was Ps 9,884 
million ($3.8 million), net cash used in investing activities was Ps 5,411      
million ($2.0 million), and net cash used in financing activities was Ps 2,859  
million ($1.1 million).                                                         

We had net accounts receivable of Ps 55,814 million ($21.5 million) at
September 30, 2004. Approximately Ps31,253 million ($12.0 million) of these net 
accounts receivable is attributable to subsidies for lower income subscribers   
owed to the Company by the Colombian Ministry of Communication, (Fondo de       
Telecomunicaciones). The Company expects that such owed amounts will be         
recovered in full on the terms provided in Resolution 425 of the Ministry of    
Communication (2002).                                                           

The Senior Notes Indenture limits our ability to incur additional     
indebtedness.                                                                   

   The Company is required to apply 100% of any Excess Cash Flow (as defined
in the Senior Notes Indenture) to the prepayment of the Senior Notes. We did not
generate Excess Cash Flow in the first, second or third quarter of 2004 and do  
not expect to generate any Excess Cash Flow for the balance of 2004. We believe 
that our current sources of funds will be adequate to meet our currently        
anticipated cash requirements for 2004 and subsequent periods. However, we do   
not expect these sources to be sufficient to meet our cash needs at the maturity
of our Senior Notes on December 31, 2008 and expect that we will need to        
refinance our indebtedness under the Senior Notes prior to that date. There can 
be no assurance that we will be able to refinance our indebtedness on terms that
we find acceptable if at all.                                                   

INDEBTEDNESS                                                          

PRINCIPAL CATEGORIES OF INDEBTEDNESS                        

     Pursuant to the Restructuring, Transtel restructured an aggregate of $309.6
million of outstanding indebtedness, of which $198.4 million was exchanged for  
restructured obligations and $111.2 million was capitalized in exchanged for    
Transtel equity. After giving effect to the Restructuring in accordance with    
Colombian GAAP, our principal categories of indebtedness include:               

 .    Senior Notes ($152,086,000). In connection with the Restructuring,
   Transtel issued $152,086,000 principal amount of Senior Secured
         Convertible Notes due December 31, 2008, at an interest rate of 12.5%
       per annum. The Senior Notes are jointly and severally guaranteed by
each of Transtel's subsidiaries (other than Cablevision).   

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     .    Convertible Notes ($30,743,946). In connection with the Restructuring,
       Transtel issued $33,065,000 initial principal amount of Convertible
          Subordinated Notes due December 31, 2008. The Convertible Notes do not
have any required interest or principal payments, except on 
redemption.                                                 

.    Base Notes ($18,624,000). In connection with the Restructuring,  
       Transtel issued in the aggregate (i) $9,718,000 principal amount of
  floating rate senior unsecured notes due 2014, (ii) $1,725,619
     principal amount of Dollar denominated promissory notes and (iii)
         $7,180,397 principal amount of Peso-denominated promissory notes. The
        Base notes are interest-free trough February 24, 2007 and thereafter
         bear interest, in the case of dollar-denominated base notes, at three
        month Libor, adjusted quarterly, and in the case of Peso-denominated
        base notes, at Colombian Unidad de Valor Real ("UVR"), a daily index
      issued by the Colombian Central Bank based on the average accreted
         inflation rate within a three month period applying a formula defined
      by agreement. No principal payments are required on the base notes
prior to maturity on February 24, 2014.                     

     Our Senior Notes and our Convertible Notes mature on December 31, 2008. Our
Base Notes mature on February 24, 2014.                                         

FINANCIAL STATEMENTS OF GUARANTORS (UNAUDITED)

          Summarized financial information on a Colombian GAAP (Unaudited) basis
of each of the Operating Companies that issued an Intercompany Note to Transtel,
as of and for the nine months ended September 30, 2004 is presented as follows: 

 BLANK SPACE

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 INCOME STATEMENT INFORMATION OF GUARANTORS SUBSIDIARIES

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004

 (AMOUNTS IN THOUSANDS OF CONSTANT PESOS OF SEPTEMBER 30, 2004 PURCHASING POWER)

                                                        [Enlarge/Download Table]

                                PALMIRA        UNITEL       JAMUNDI       CARTAGO       GIRARDOT       BUGATEL      CAUCATEL   
                              ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
                                                                                                                               
Total revenues-subscribers ..   30,584,433    34,260,121     2,771,413     9,942,111    10,165,843     8,206,267     5,990,741 
Operating income ............   12,319,714    11,520,520       521,798     3,067,815     2,707,285     3,211,024     1,136,558 
Net income ..................    2,611,216     4,431,171       617,563      (674,605)    1,364,567     1,408,592      (550,687)

CASH FLOW INFORMATION OF GUARANTORS SUBSIDIARIES

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004

 (AMOUNTS IN THOUSANDS OF CONSTANT PESOS OF SEPTEMBER 30, 2004 PURCHASING POWER)

                                                        [Enlarge/Download Table]

                                PALMIRA        UNITEL       JAMUNDI       CARTAGO       GIRARDOT       BUGATEL      CAUCATEL   
                              ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
                                                                                                                               
Cash flow (used in) provided                                                                                                   
 by operating activities ....   (3,940,556)    1,111,726       429,222    (2,255,398)   (1,036,416)     (705,133)   (1,400,354)
Cash flow used in investing                                                                                                    
 activities .................     (537,615)   (1,587,442)            -      (113,276)      (87,866)     (187,413)     (128,051)
Cash flow provided (used) by                                                                                                   
 financing activities .......   (2,838,868)   (3,551,477)     (557,985)      320,297      (334,060)      356,521       159,485 

 BALANCE SHEETS OF GUARANTORS SUBSIDIARIES

 (AMOUNTS IN THOUSANDS OF CONSTANT PESOS OF SEPTEMBER 30, 2004 PURCHASING POWER)

                                                        [Enlarge/Download Table]

                                PALMIRA        UNITEL       JAMUNDI       CARTAGO       GIRARDOT       BUGATEL      CAUCATEL  
                              ------------  ------------  ------------  ------------  ------------  ------------  ------------
                                                                                                                              
Current assets ..............   11,086,399    17,334,993     1,372,099     3,439,859     2,756,660     2,670,266     1,639,952
Property plant and                                                                                                            
 Equipment, net .............  128,244,646   331,515,354    72,164,650    83,511,318    69,025,753    61,672,177    54,821,794
Other Noncurrent assets .....   71,117,160    23,738,235     5,627,027    19,096,581     9,312,189    13,616,669     8,820,796
                              ------------  ------------  ------------  ------------  ------------  ------------  ------------
Total assets ................  210,448,205   372,588,582    79,163,776   106,047,758    81,094,602    77,959,112    65,282,542
                              ============  ============  ============  ============  ============  ============  ============
Current liability ...........   11,501,833    47,317,885     3,233,888     9,076,278     6,069,009    11,140,154     5,032,739
Intercompany to Transtel ....   88,070,624   177,458,967    12,543,221    62,064,491    29,998,730    32,919,897    22,301,087
Other Noncurrent                                                                                                              
liabilities .................    8,572,586    30,500,197     5,159,057     3,504,027    12,459,059     2,466,715     3,554,933
                              ------------  ------------  ------------  ------------  ------------  ------------  ------------
  Total liabilities .........  108,145,043   255,277,049    20,936,166    74,644,796    48,526,798    46,526,766    30,888,759
Total shareholders equity ...  102,303,162   117,311,533    58,227,610    31,402,962    32,567,804    31,432,346    34,393,783
                              ------------  ------------  ------------  ------------  ------------  ------------  ------------
Total liabilities and                                                                                                         
shareholders equity .........  210,448,205   372,588,582    79,163,776   106,047,758    81,094,602    77,959,112    65,282,542
                              ============  ============  ============  ============  ============  ============  ============

ACCOUNTING FOR INFLATION                                                        

As a Colombian Company, the Company maintains its financial records in
Colombian pesos. Colombian GAAP requires that the financial statements of       
Colombian companies be adjusted to account for inflation. The inflation rate for
the nine months ended September 30, 2004 was 5.30%. Financial statements are    
adjusted for the effects of inflation on the basis of changes in the Colombian  
Middle Income Consumer Price Index (the "MCPI"). This index is applied on a     
one-month lagging basis to non-monetary assets and liabilities and shareholders'
equity (except the valuation surplus). 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.                                                             

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INCOME TAX MATTERS                                                              

   The Company calculates the income tax for the nine months ended September
30, 2004 applying 35% rate over the fiscal profits. In accordance with law 788  
of 2002 and 863 of 2003, an additional 10% was calculated over the 2003 income  
tax, and, an additional 5% rate was calculated over the 2003 income tax as a    
prepayment of 2004 income tax.                                                  

RECONCILIATION TO U.S. GAAP                                                     

We prepare our Unaudited Consolidated Interim Financial Statements in 
accordance with Colombian GAAP, which differs in significant respects from U.S. 
GAAP.                                                                           

Under U.S. GAAP, we recorded net income of Ps 76,901,697 for the nine 
months ended September 30, 2004 (compared with a gain of Ps 20,434,311 under    
Colombian GAAP), a net loss of Ps130,647 for the nine months ended September 30,
2003 (compared with a net loss of Ps11,011,300 under Colombian GAAP).           

    Shareholders' equity (deficit) determined in accordance with U.S. GAAP was
Ps 124,763,606 as of September 30, 2004 (compared with a equity of Ps           
236,862,538 under Colombian GAAP), Ps (273,495,482) as of September 30, 2003    
(compared with a deficit of Ps 103,832,089) under Colombian GAAP). For a        
discussion of the principal differences between Colombian GAAP and U.S. GAAP as 
they relate to our consolidated net income (loss) and shareholders' equity and a
quantitative reconciliation of these differences, see Note 9 to our Unaudited   
Consolidated Interim Financial Statements.                                      

 BLANK SPACE

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TRANSTEL S.A. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS

                                                        [Enlarge/Download Table]

                                                          AT DECEMBER 31,         AT SEPTEMBER 2004 (UNAUDITED)    
                                                         -----------------     ------------------------------------
                                                               2003                  2004                 2004     
                                                         -----------------     -----------------    ---------------
                                                             THOUSANDS OF COLOMBIAN PESOS OF         U.S. DOLLARS  
                                                                   PURCHAS ING POWER                (IN THOUSANDS) 
                                                             AS OF SEPTEMBER 30, 2004 (NOTE 2)         (NOTE 2)    
                                                         ---------------------------------------    ---------------
                                                                                                                   
                         ASSETS                                                                                    

CURRENT ASSETS                                                                                                     
  Cash and cash equivalents ............................ Ps     22,125,086     Ps      2,855,867    $         1,100
  Accounts receivable, net (Note 3) ....................        32,107,298            24,420,514              9,410
  Inventories, net .....................................         2,693,465             2,725,337              1,050
  Prepaid expenses .....................................         1,105,994               918,530                354
                                                         -----------------     -----------------    ---------------
    Total current assets ...............................        58,031,843            30,920,248             11,914

LONG-TERM INVESTMENTS, NET .............................           813,058               802,208                309
LONG-TERM ACCOUNTS RECEIVABLE (Note 3) .................        29,738,111            31,393,508             12,097
PROPERTY, PLANT AND EQUIPMENT, NET .....................       845,191,090           829,543,695            319,649
DEFERRED CHARGES, NET ..................................       124,339,997            70,434,643             27,141
DEFERRED MONETARY ADJUSTMENT ...........................         4,221,239             3,779,232              1,456
INTANGIBLE ASSETS, NET .................................         2,572,495             1,624,169                626
OTHER ASSETS ...........................................             1,616                     -                  -
EXCESS OF APPRAISED VALUES OVER NET BOOK ...............                 -                                         
 VALUES OF FIXED ASSETS ................................        47,557,334            45,163,660             17,403
                                                         -----------------     -----------------    ---------------
TOTAL ASSETS ........................................... Ps  1,112,466,783     Ps   1,013,661,36    $       390,595
                                                         =================     =================    ===============

        LIABILITIES AND SHAREHOLDERS' DEFICIENCY                                                                   

CURRENT LIABILITIES                                                                                                
  Financial obligations (Note 5) ....................... Ps      7,062,618     Ps      7,744,593    $         2,984
  Accounts payable (Note 6) ............................        75,741,830            51,806,439             19,963
  Accrued tax liabilities ..............................        24,774,505            18,950,656              7,302
  Accrued payroll liabilities ..........................         1,219,827             1,139,081                439
  Other liabilities ....................................        20,132,644            11,088,276              4,273
  Accrued pension obligations ..........................         1,270,960             1,206,990                465
                                                         -----------------     -----------------    ---------------
    Total current liabilities ..........................       130,202,384            91,936,035             35,426

BONDS PAYABLE (Note 4) .................................       577,965,307           519,517,940            200,186
CONVERTIBLE LIABILITIES ................................       331,300,943                     -                  -
FINANCIAL OBLIGATIONS (Note 5) .........................         7,498,499             5,289,791              2,038
ACCOUNTS PAYABLE (Note 6) ..............................        24,337,250            16,064,097              6,190
ACCRUED TAX LIABILITIES ................................        25,717,660            25,593,842              9,862
DEFERRED MONETARY ADJUSTMENT ...........................        15,421,426            14,026,003              5,405
OTHER LIABILITIES ......................................         2,316,600             2,200,000                848
ACCRUED PENSION OBLIGATIONS ............................         6,380,820             6,059,658              2,335
                                                         -----------------     -----------------    ---------------
TOTAL LIABILITIES ......................................     1,121,140,889           680,687,366            262,290
                                                         -----------------     -----------------    ---------------
MINORITY INTEREST ......................................        95,157,983            96,111,459             37,035
SHAREHOLDERS' EQUITY (DEFICIENCY) (Notes 7) ............      (103,832,089)          236,862,538             91,270
                                                         -----------------     -----------------    ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)  Ps  1,112,466,783     Ps   1,013,661,36    $       390,595
                                                         =================     =================    ===============
MEMORANDUM ACCOUNTS .................................... Ps    741,118,650     Ps    712,615,958    $       274,593
                                                         =================     =================    ===============

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TRANSTEL S.A. - AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        [Enlarge/Download Table]

                                                  THREE MONTHS ENDED                 
                                     ----------------------------------------------- 
                                      SEPTEMBER 30,            SEPTEMBER 30,         
                                         2004                      2004              
                                     --------------   ------------------------------ 
                                      THOUSANDS OF COLOMBIAN PESOS      U.S. DOLLARS 
                                     PURCHASING POWER AS OF SEPTEMBER  (IN THOUSANDS)
                                      2004, EXCEPT PER SHARE AMOUNTS                 
                                                (Note 2)                  (Note 2)   
                                                                                     
REVENUES                                                                             
    Telecommunications Services:                                                     
  Service revenues ................. Ps  36,544,375   Ps  33,352,669   $      12,852 
                                     --------------   --------------   ------------- 
Total Revenues .....................     36,544,375       33,352,669          12,852 
                                     --------------   --------------   ------------- 
COST OF SERVICES                                                                     
  Cost of telecommunications                                                         
   services ........................      6,726,392        5,764,629           2,221 
  Depreciation and amortization ....      4,703,431        5,348,898           2,061 
                                     --------------   --------------   ------------- 
Total Cost of Services .............     11,429,823       11,113,527           4,282 
                                     --------------   --------------   ------------- 
GROSS PROFIT                             25,114,552       22,239,142           8,570 
                                     --------------   --------------   ------------- 
OPERATING EXPENSES                                                                   
  Administrative ...................      2,432,479        3,818,912           1,472 
  Depreciation and amortization ....      4,445,993        7,401,369           2,852 
  Provision for write-down of                                                        
   assets ..........................      3,008,878        1,875,806             723 
                                     --------------   --------------   ------------- 
Total Operating Expenses ...........      9,887,350       13,096,087           5,047 
                                     --------------   --------------   ------------- 
OPERATING INCOME                         15,227,202        9,143,055           3,523 
                                     --------------   --------------   ------------- 
OTHER INCOME (EXPENSE)                                                               
  Financing (expense) income, net ..    (42,066,899)     (16,288,256)         (6,276)
  Other income (expenses) ..........     (3,593,824)       1,601,696             617 
                                     --------------   --------------   ------------- 
Total Other (Expense) ..............    (45,660,723)     (14,686,560)         (5,659)
                                     --------------   --------------   ------------- 
LOSS BEFORE INCOME TAX AND                                                           
 NET MONETARY ADJUSTMENT GAIN ......    (30,433,521)      (5,543,505)         (2,136)
                                     --------------   --------------   ------------- 
MONETARY ADJUSTMENT GAIN, NET             1,535,336        3,837,077           1,421 
                                     --------------   --------------   ------------- 
(LOSS) INCOME BEFORE INCOME TAX                                                      
 AND MINORITY INTEREST .............    (28,898,185)      (1,706,428)           (658)
INCOME TAX BENEFIT (EXPENSE) .......      2,833,029          625,693             241 
MINORITY INTEREST ..................      2,065,563        1,188,429             458 
                                     --------------   --------------   ------------- 
NET (LOSS) INCOME FOR THE YEAR ..... Ps (23,999,593)  Ps     107,694   $          41 
                                     ==============   ==============   ============= 
NET (LOSS) INCOME PER SHARE ........ Ps       (0.69)  Ps        0.00                 
                                     ==============   ==============                 
WEIGHTED AVG. NUMBER OF SHARE                                                        
 OUTSTANDING (in thousands) ........     34,611,748      286,312,369                 
                                     ==============   ==============                 



                                                NINE MONTHS ENDED                    
                                     ----------------------------------------------  
                                      SEPTEMBER 30,            SEPTEMBER 30,         
                                          2004                     2004              
                                     --------------   ------------------------------ 
                                       THOUSANDS OF COLOMBIAN PESOS    U.S. DOLLARS  
                                     PURCHASING POWER AS OF SEPTEMBER (IN THOUSANDS) 
                                      2004, EXCEPT PER SHARE AMOUNTS                 
                                              (NOTE 2)                    (NOTE 2)   
                                                                                     
REVENUES                                                                             
    Telecommunications Services:                                                     
  Service revenues ................. Ps 108,341,464   Ps  102,874,161  $      39,641 
                                     --------------   ---------------  ------------- 
Total Revenues .....................    108,341,464       102,874,161         39,641 
                                     --------------   ---------------  ------------- 
COST OF SERVICES                                                                     
  Cost of telecommunications                                                         
   services ........................     21,417,216        16,178,770          6,234 
  Depreciation and amortization ....     12,593,747        15,241,196          5,873 
                                     --------------   ---------------  ------------- 
Total Cost of Services .............     34,010,963        31,419,966         12,107 
                                     --------------   ---------------  ------------- 
GROSS PROFIT                             74,330,501        71,454,195         27,534 
                                     --------------   ---------------  ------------- 
OPERATING EXPENSES                                                                   
  Administrative ...................     12,943,882        13,147,726          5,066 
  Depreciation and amortization ....     12,456,182        23,085,122          8,895 
  Provision for write-down of                                                        
   assets ..........................      6,235,151         3,571,250          1,376 
                                     --------------   ---------------  ------------- 
Total Operating Expenses ...........     31,635,215        39,804,098         15,337 
                                     --------------   ---------------  ------------- 
OPERATING INCOME                         42,695,286        31,650,097         12,197 
                                     --------------   ---------------  ------------- 
OTHER INCOME (EXPENSE)                                                               
  Financing (expense) income, net ..    (95,475,295)      (51,419,014)       (19,813)
  Other income (expenses) ..........     (3,163,914)       10,168,616          3,918 
                                     --------------   ---------------  ------------- 
Total Other (Expense) ..............    (98,639,209)      (41,250,398)       (15,895)
                                     --------------   ---------------  ------------- 
LOSS BEFORE INCOME TAX AND                                                           
 NET MONETARY ADJUSTMENT GAIN ......    (55,943,923)      (9,600,301)         (3,699)
                                     --------------   ---------------  ------------- 
MONETARY ADJUSTMENT GAIN, NET            51,892,192        39,633,722         14,681 
                                     --------------   ---------------  ------------- 
(LOSS) INCOME BEFORE INCOME TAX                                                      
 AND MINORITY INTEREST .............     (4,051,731)       30,033,421         11,573 
INCOME TAX BENEFIT (EXPENSE) .......     (6,828,514)       (7,886,429)        (3,039)
MINORITY INTEREST ..................       (131,055)       (1,712,681)          (660)
                                     --------------   ---------------  ------------- 
NET (LOSS) INCOME FOR THE YEAR ..... Ps (11,011,300)  Ps   20,434,311  $       7,874 
                                     ==============   ===============  ============= 
NET (LOSS) INCOME PER SHARE ........ Ps       (0.32)  Ps         0.07                
                                     ==============   ===============                
WEIGHTED AVG. NUMBER OF SHARE                                                        
 OUTSTANDING (in thousands) ........     34,611,748       286,312,369                
                                     ==============   ===============                

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TRANSTEL S.A. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
THOUSANDS OF COLOMBIAN PESOS OF PURCHASING POWER
AS OF SEPTEMBER 30, 2004

                                                        [Enlarge/Download Table]

                                                                                REVALUATION      RETAINED            NET       
                                      COMMON         LEGAL         OTHER       SHAREHOLDERS'     EARNINGS           INCOME     
                                       STOCK        RESERVES      RESERVES        EQUITY         (DEFICIT)          (LOSS)     
                                  --------------  ------------  -------------  -------------  ---------------  --------------- 
                                                                                                                               
Balance, at January 1, 2003 ..... Ps  34,611,748  Ps 2,101,372  Ps 18,912,351  Ps 40,623,041  Ps  (10,610,241) Ps  (205,401,91)
  Revaluation ...................              -             -              -                               -                - 
  Movement during the period ....              -             -              -              -     (183,748,378)     183,804,851 
  Effects of constant peso                                                                                                     
   restatement ..................              -             -              -     (5,139,447)     (20,301,063)      21,597,070 
  Foreign exchange loss                                                                                                        
   adjustment ...................                                                                 (63,950,302)                 
  Net loss ......................              -             -              -              -                -       62,969,316 
                                  --------------  ------------  -------------  -------------  ---------------  --------------- 
Balance, at December 31, 2003 ...     34,611,748     2,101,372     18,912,351     35,483,594     (278,609,984)      62,969,316 
  Issue of shares ...............    314,625,777             -              -              -                -                - 
  Movement during the period ....              -             -              -              -       57,425,647      (59,799,920)
  Effects of constant peso                                                                                                     
   restatement ..................              -             -              -      2,782,695        8,395,513       (3,169,396)
  Net income ....................              -             -              -              -                -       20,434,311 
                                  --------------  ------------  -------------  -------------  ---------------  --------------- 
Balance, at September 30, 2004 .. Ps 349,237,525  Ps 2,101,372  Ps 18,912,351  Ps 38,266,289  Ps (212,788,824)  Ps  20,434,311 
                                  ==============  ============  =============  =============  ===============  =============== 


                                  APPRAISED VALUE      TOTAL                                                                   
                                   OVER NET BOOK    SHAREHOLDERS'                                                              
                                   VALUE OF FIXED      EQUITY                                                                  
                                      ASSETS         (DEFICIENCY)                                                              
                                  ---------------   --------------                                                             
                                                                                                                               
Balance, at January 1, 2003 ..... Ps  27,591,101    Ps (92,172,549)                                                            
  Revaluation ...................     (6,891,587)       (6,891,587)                                                            
  Movement during the period ....              -            56,473                                                             
  Effects of constant peso                                                                                                     
   restatement ..................              -        (3,843,440)                                                            
  Foreign exchange loss                                                                                                        
   adjustment ...................                      (63,950,302)                                                            
  Net loss ......................              -        62,969,316                                                             
                                  --------------    --------------                                                             
Balance, at December 31, 2003 ...     20,699,514      (103,832,089)                                                            
  Issue of shares ...............              -       314,625,777                                                             
  Movement during the period ....              -        (2,374,273)                                                            
  Effects of constant peso                                                                                                     
   restatement ..................              -         8,008,812                                                             
  Net income ....................              -        20,434,311                                                             
                                  --------------    --------------                                                             
Balance, at September 30, 2004 .. Ps  20,699,514    Ps 236,862,538                                                             
                                  ==============    ==============                                                             

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 TRANSTEL S.A. AND SUB SIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                                                                   For the Nine monts ended September 30,        
                                                                           ----------------------------------------------------- 
                                                                                 2003                       2004                 
                                                                           ---------------    ---------------------------------- 
                                                                            Thousands of Colombian Pesos of       U.S. Dollars   
                                                                                  Purchasing Power as of         (In Thousands)  
                                                                                    September 30, 2                              
                                                                                                                    (Note 2)     
                                                                                                                                 
OPERATING ACTIVITIES:                                                                                                            
Net Income (loss) ........................................................ Ps (11,011,300)      Ps 20,434,311    $         7,874 
Adjustments to reconcile net loss to net cash                                                                                    
 provided by operating activities:                                                                                               
  Depreciation ...........................................................      15,525,679         19,041,662              7,337 
  Amortization of intangible, deferred charges and other assets ..........      10,045,355         19,113,680              7,365 
  (Gain) loss on sale of property, plant and equipment                                   -                  -                  - 
  Allowance for inventories ..............................................         190,854            180,000                 69 
  Deferred Income taxes ..................................................       4,107,544          5,510,207              2,123 
  Net monetary correction ................................................     (51,892,192)       (39,633,722)           (15,272)
  Unrealized foreign exchange loss .......................................      19,346,986            624,231                241 
  Allowance for doubtful investments .....................................               -                  -                  - 
  Allowance for doubtful accounts receivable .............................       5,941,905          3,566,767              1,374 
  Allowance for property, plant and equipment ............................         252,678            685,439                264 
  Minoritary Interest ....................................................         131,056          1,712,681                660 
  Accrued interest on bonds ..............................................      18,853,200          6,303,101              2,429 
  Addition of deferred charges ...........................................      (9,191,376)        (7,947,263)            (3,062)
 Changes in operating assets and liabilities: ............................               -                                       
  Accounts receivable ....................................................     (14,974,708)         4,689,429              1,807 
  Inventories ............................................................          29,649           (200,803)               (77)
  Prepaid expenses .......................................................        (307,380)           133,398                 51 
  Accounts payable .......................................................      51,143,224        (27,130,508)           (10,454)
  Tax liabilities ........................................................      (5,260,751)        (8,908,318)            (3,433)
  Accrued payroll liabilities ............................................        (332,343)           (19,349)                (7)
  Other liabilities and accrued pension obligations ......................      (4,848,779)        (8,039,209)            (3,098)
  Net cash provided by (Used in)operating activities .....................      27,749,301         (9,884,266)            (3,809)
FINANCING ACTIVITIES:                                                                                                            
  Increase (decrease) in short-term debt, net ............................     (12,783,138)        (5,412,378)            (2,085)
  Issuance of long-term debt .............................................         138,844                628                  - 
                                                                           ---------------    ---------------    --------------- 
  Net cash used in financing activities ..................................     (12,644,294)        (5,411,750)            (2,085)
                                                                           ---------------    ---------------    --------------- 
INVESTING ACTIVITIES:                                                                                                            
  Acquisition of property, plant and equipment ...........................      (2,385,380)        (2,827,689)            (1,090)
  Acquisition of intangibles .............................................         (11,610)           (31,907)               (12)
  Acquisition of investment ..............................................        (377,556)                 -                  - 
                                                                           ---------------    ---------------    --------------- 
  Net cash used in investing activities ..................................      (2,774,546)        (2,859,596)            (1,102)
                                                                           ---------------    ---------------    --------------- 
  Effect of constant peso restatement ....................................        (203,264)        (1,113,607)              (429)
                                                                           ---------------    ---------------    --------------- 
NET INCREASE (DECREASE) IN CASH AND CASH                                                                                         
 EQUIVALENTS .............................................................      12,127,197        (19,269,219)            (7,425)
CASH AND CASH EQUIVALENTS:                                                                                                       
 At the beginning of the year ............................................       3,974,402         22,125,086              8,525 
                                                                           ---------------    ---------------    --------------- 
 At the end of the year .................................................. Ps   16,101,599    Ps    2,855,867    $         1,100 
                                                                           ===============    ===============    =============== 

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TRANSTEL S.A. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

NOTE 1 - REPORTING ENTITY                                                       

   The term "Transtel" refers to Transtel S.A. and the term "Company" refers
to Transtel and its consolidated subsidiaries identified below. References to   
"Pesos" or "Ps" are to the Colombian peso and references to "Dollars" and "$"   
are to the United States dollar.                                                

 The Company maintains its accounting records and prepares its financial
statements in Pesos. As more fully explained in Note 2, the accompanying        
consolidated financial statements are restated to constant Pesos of purchasing  
power as of September 30, 2004. Accounting principles used in the preparation of
the consolidated financial statements of the Company follow generally accepted  
accounting principles in Colombia ("Colombian GAAP").                           

The following table shows Transtel's consolidated subsidiaries as of  
September 30, 2004 and Transtel's ownership percentage and other relevant       
information. The seven majority owned subsidiaries are referred to in these     
notes as the "Operating Subsidiaries".                                          

                                                        [Enlarge/Download Table]

                                                                        COLOMBIA                    COMMENCEMENT   TRANSTEL 
                                                                         REGION       DATE OF      OF COMMERCIAL   OWNERSHIP
                          LEGAL ENTITY                                   SERVED     INCORPORATION   OPERATIONS    PERCENTAGE
---------------------------------------------------------------------  -----------  -------------  -------------  ----------
                                                                                                                            
Empresa de Telefonos de Jamundi S.A., E.S.P. ("TeleJamundi") ........  Jamundi         9/29/93        6/1/97            99.9
Unitel S.A. E.S.P. ("Unitel") .......................................  Yumbo           3/11/94        6/1/97            98.5
                                                                       Palmira and                                          
Empresa de Telefonos de Palmira S.A., E.S.P. (Telepalmira) ..........  Candelaria      6/1/95         9/2/95            60.0
Telefonos de Cartago S.A., E.S.P. ("TeleCartago") ...................  Cartago         1/3/97         4/1/97            65.0
Caucatel S.A., E.S.P. ("Caucatel") ..................................  Popayan         4/30/97        5/1/97            51.0
Bugatel S.A., E.S.P. ("Bugatel") ....................................  Buga            6/16/97        7/1/97            60.0
Empresa de Telecomunicaciones de Girardot S.A.E.S.P. ("TeleGirardot")  Girardot        12/31/97       1/1/98            60.0
Suscripciones Audiovisuales E.U. ....................................  Cali            7/15/98        1/31/98          100.0
Cablevision E.U .....................................................  Cali            9/15/98        1/31/98          100.0

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TRANSTEL S.A. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

The Company is the largest private telephone company in Colombia. The 
Company owns and operates seven telephone systems and one cable system,         
providing voice, data and other media services to commercial and residential    
subscribers in Cali and nine other cities in southwestern Colombia. The Company 
began operations in 1995 with one system, TelePalmira. The Company has grown    
through acquisitions, internal growth and the implementation of its expansion   
plan, now complete, for the development, expansion and upgrade of the systems it
acquired. The Company has recently completed a financial restructuring, as      
described below.                                                                

THE RESTRUCTURING                                                     

  In 2000, as a result of an economic recession in Columbia, and technical
difficulties with its communication systems, the Company experienced a          
significant loss of revenues and cash flows due to a significant increase in its
subscriber turnover rate. At the same time, a severe devaluation of the Peso    
against the Dollar increased the effective cost of the Company's                
Dollar-denominated debt and lease obligations. As a result, the Company's cash  
flows from operations were insufficient to meet required payments on its        
financial obligations. On October 4, 2002, pursuant to the terms of a proposed  
restructuring agreement (the "Restructuring Agreement"), Transtel commenced a   
voluntary reorganization proceeding in Colombia under Colombia's Law 550 of 1999
("Law 550") seeking to restructure its then outstanding financial obligations   
(the "Restructuring").                                                          

     On November 25, 2003, creditors representing more than 99% of the financial
claims against the Company and all of Transtel's shareholders approved the      
Restructuring, which became binding on all creditors and shareholders, including
those creditors that did not vote for its approval. The Restructuring became    
legally binding on February 24, 2004 when the Restructuring Agreement was       
executed.                                                                       

     Pursuant to the Restructuring, Transtel restructured an aggregate amount of
Ps 803,464 million ($309.6 million) of eligible financial claims, of which      
Ps514,882 million ($198.4 million) were exchanged for restructured obligations  
and Ps 288,583 million ($111.2 million) were exchanged for shares of Transtel's 
equity. Except as described below, with respect to obligations owed to the      
Company's principal equipment vendor, Siemens AG and related entities           
("Siemens"), the Restructuring did not affect the obligations of the Operating  
Subsidiaries, including obligations to suppliers and vendors, local banks and,  
with respect to deferred value-added taxes and duties in connection with the    
purchase and importation of telecommunications equipment, the Direccion de      
Impuestos y Aduanas Nacionales ("DIAN"), the Colombian tax authority.           

   Pursuant to Colombian GAAP, the Restructuring was accounted for as of its
November 25, 2003 approval date. Accordingly, as of such date, the Company's    
liabilities are presented as having been restructured in accordance with the    
terms of the Restructuring Agreement, together with an obligation for           
"convertible liabilities" which reflects pre-restructuring liabilities which    
were converted to contingently convertible debt, convertible debt and equity    
(the "Convertible Debt and Equity Option") or floating rate notes, as described 
below, upon the date the Restructuring became legally binding, February 24,     
2004.                                                                           

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TRANSTEL S.A. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

RESTRUCTURING TERMS                                                   

  Under the Restructuring Agreement, Transtel's creditors were entitled to
elect either the Convertible Debt and Equity Option (formerly termed the        
"Capitalization Treatment") or an option which would exchange existing claims   
for new floating rate notes as described below (formerly termed "Base           
Treatment"). Creditors who did not vote or voted against the Restructuring      
received the floating rate notes. .                                             

     Creditors holding an aggregate $290.6 million of eligible claims, including
Siemens, elected to convert their claims under the Convertible Debt and Equity  
Option. As a consequence, Transtel issued in exchange for all claims the        
following:                                                                      

.    Contingently convertible senior notes with a principal amount of 
$152,086,000, as described below in Note 4.                 

    .    Convertible subordinated notes with a principal amount of $33,064,788
as described below in Note 4, and                           

.    96,570,047,420 shares representing 27.6% of the common stock of  
     Transtel totaling 96,570,047,420 shares representing 27.6% of the
total outstanding common stock, after giving effect to the  
        Restructuring. These shares are held by a share trust and are in the
   form of trust certificates (the "Trust Share Certificates"). On
         February 24, 2004, Transtel increased its authorized share capital to
   one billion, five hundred million Pesos ($1,500,000,000,000) in
connection with the issuance of such shares of common stock.

The claims subject to the Convertible Debt and Equity Option were exchanged in  
the following units:                                                            

.    $1,000 face amount of contingently convertible senior notes,     

.    $205 face amount of convertible notes, and                       

.    One trust share certificate representing 634,970 shares of common
stock of Transtel.                                          

    The indenture for the contingently convertible senior notes incorporates a
Mandatory Sale Process Agreement, which is intended to provide a process for the
orderly sale of the Company in the event of an acceleration of the senior notes 
or a failure to redeem the convertible notes (described below) at maturity. At  
the completion of any resulting sale, the senior notes are converted into shares
of Common Stock of Transtel and the net proceeds of such sale are distributed   
first to the holders of these shares up to the amount of the unpaid principal   
and interest on the senior notes at the time of conversion (subject to the      
election of the Founding Shareholders to receive, in certain circumstances, 10% 
of such proceeds otherwise distributable to the holders of senior notes). (The  
"Founding Shareholders" are (a) collectively, Guillermo O. Lopez and Marta      
Cecilia Dominguez A. and (b) collectively, Maria Eugenia Llano de Caicedo,      
Valentina Caicedo Llano and G.C.T.I., a company the sole beneficiary of which is
Gonzalo Caicedo Toro.) Any proceeds then remaining are distributed to Transtel's
other shareholders (excluding any Founding Shareholder who elected to receive a 
portion of the distribution to holders of senior notes).                        

The trust share certificates are subject to a shareholders' agreement,
which provides a procedure to maintain a five-member Board of Directors of      
Transtel through the date the contingently convertible senior notes are paid in 

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TRANSTEL S.A. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

full including two members designated by the holders of the trust share         
certificates. The shareholders agreement also gives the holders of the trust    
share certificates (a) tag-along rights to participate in issuances of common   
stock and (b) pre-emptive rights to subscribe to a pro rata share of any new    
issuance of common stock. Pursuant to the shareholders' agreement, the          
shareholders, other than shareholders by virtue of the Restructuring, have a    
drag along right which requires the holders of the trust share certificates to  
participate in any sale by such shareholders of all or substantially all of     
their common stock. Finally, the parties to the shareholders agreement have     
waived payment of mandatory dividends by Transtel during the period for which   
dividends are prohibited under the indenture for the contingently convertible   
senior notes.                                                                   

  Creditors who elected the Convertible Debt and Equity Option in exchange
for their claims, other than Siemens, also received an aggregate restructuring  
fee of $6,636,676 on February 24, 2004 and an additional amount of $2,174,530 on
October 29, 2004. In lieu of these payments, Siemens received at closing an     
additional 2,058 units of convertible debt and equity, as described above. The  
components of these additional units are included in the aggregate amounts of   
contingently convertible senior notes, convertible notes and shares of common   
stock of Transtel described above.                                              

    Siemens' claims against Transtel included claims in respect of obligations
of the Operating Subsidiaries for which Transtel was jointly and severally      
liable to Siemens (including, but not limited to, obligations under             
international lease agreements, local contracts and maintenance contracts). All 
of Siemens' contractual rights and obligations with Transtel and the Operating  
Subsidiaries were included and received due consideration in the Restructuring. 
As part of this settlement, Siemens transferred its equipment leases with the   
Operating Subsidiaries, together with title to the leased assets, to Morris     
Lease Asset I, Ltd. (MLA), which was formed for this purpose, and MLA pledged   
its rights under the assigned leases and its interest in the leased assets to   
secure payment of the contingently convertible senior notes.                    

Floating rate notes. Creditors holding an aggregate $18.6 million of  
eligible claims received the floating rate notes, described in detail in Note 4.

    Other claims. Other priority employee, pension and tax claims representing
less than 0.2% of the claims subject to the Restructuring were either paid in   
cash at the closing or will be paid over time in accordance with statutory      
requirements.                                                                   

Covenants                                                             

The contingently convertible senior notes indenture includes, in addition to    
other covenants customarily found in such indentures, limitations on the ability
of Transtel and its Subsidiaries to:                                            

 .    Pay dividends or repurchase outstanding shares of common stock, or
         issue additional common stock (or, at the subsidiary level, preferred
stock);                                                     

.    Make investments or create new subsidiaries;                     

.    Incur additional debt or grant liens on their assets;            

.    Dispose of assets; and                                           

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

.    Enter into transactions with shareholders and affiliates.        

As of September 30, 2004, management believes that the Company is in  
compliance with all such covenants.                                             

   In November 2003 the Company completed the restructuring of its financial
obligations pursuant to GAAP. The Company believes that the Restructuring will  
provide sufficient financial flexibility to permit the Company to meet all of   
its commitments.                                                                

The Company believes that its subscriber base has stabilized and is   
implementing new marketing programs designed to i) stimulate usage and ii)      
attract higher margin business accounts. The landline telephone business is very
cost competitive and the Company expects that as the Colombian economy improves,
additional subscribers, both residential and commercial, will be drawn to its   
products. Management will also continue to focus on cost control, acknowledging 
that it will still incur restructuring-related expenses and will be implementing
tariff increases permitted by the regulatory authorities. The Company believes  
that these efforts, in combination, have resulted and will continue to result in
an improvement in its financial position in 2004.                               

Siemens Obligations                                                             

  The Company's obligations to Siemens prior to the Restructuring included
amounts owing under international lease agreements, purchase agreements and     
service agreements entered in to in connection with the acquisition,            
installation and financing of the telecommunications in the expansion plan.     
Transtel was jointly and severally liable for the obligations of the Operating  
Subsidiaries under these contracts. Siemens elected the Debt and Equity Option  
under the Restructuring Agreement. All of Siemens' contractual rights and       
obligations with Transtel and the Operating Subsidiaries were included and      
received due consideration in the Restructuring. As part of this settlement,    
Siemens agreed to transfer its equipment leases with the Operating Subsidiaries,
together with title to the leased assets, to Transtel or Transtel's designee.   
The leases and leased assets were transferred as of the closing of the          
Restructuring to MLA, a wholly owned subsidiary of Transtel that was formed for 
this purpose, MLA pledged its rights under the assigned leases and its interest 
in the leased assets to secure payment of the contingently convertible senior   
notes issued in the Restructuring.                                              

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES                                        

The significant accounting policies utilized by the Company in the    
preparation and presentation of its consolidated financial statements are       
described below:                                                                

BASIS OF PRESENTATIONS                                                          

 The interim consolidated financial statements for the nine months ended
September 30, 2003 and 2004 are unaudited and have been prepared in accordance  
with accounting principles generally accepted in Colombia. In the opinion of    
management, such interim financial statements include all adjustments,          
consisting only of normal                                                       

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TRANSTEL S.A. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

recurring adjustments, necessary for the fair presentation of the results for   
the interim periods. The results of operations for the nine months ended        
September 30, 2004 are not necessarily an indication of the results to be       
expected for the full year. The financial information has been presented in     
constant Pesos of September 30, 2004 purchasing power. U.S. dollar ("Dollar" or 
"$") amounts are translated from Peso amounts at the Representative Market Rate 
on September 30, 2004, which was Ps 2,595.17 Pesos to one Dollar. (On December  
31, 2003, the ratio was Ps 2,778.21 to one Dollar.) No representation is made   
that the Peso or Dollar amounts could have been or could be converted into      
Dollars or Pesos, as the case may be, at any particular rate or at all.         

(a) Consolidation                                           

   Companies in Colombia are required to maintain their accounting
records and prepare their financial statements in conformity with Colombian     
GAAP. Colombian GAAP requires the consolidation of subsidiaries in which a      
company owns, directly or indirectly, more than 50% of the common stock. All of 
Transtel's subsidiaries are consolidated, and intercompany accounts and         
transactions are eliminated.                                                    

(b) Monetary unit                                           

 The Company maintains its accounting records and prepares its
financial statements in Pesos.                                                  

(c) Recognition of revenues, costs, and expenses            

         Revenues from telephone and pay television services are recognized in
the period in which services are rendered. Revenues for national and local long 
distance calls are recognized net of amounts due to long distance operators.    
Revenues for connection fees for telephone lines are recognized on payment in   
cash or the execution of a promissory note by the customer and the Company's    
assignment of a telephone number that is transferable to others by the customer.
Connection fees are refundable only if the customer cancels its service within  
nine months of installation.                                                    

Related costs and expenses are recorded on an accrual basis.

(d) Inflation adjustments                                   

     Certain financial statement items are adjusted for the effects of
inflation. Non-monetary assets and liabilities are adjusted on the basis of     
changes in the Colombian Middle-Income Consumer Price Index (MCPI), also known  
as the Colombian PAGG Index, applied on a lagging one month basis. Stockholders'
equity (except the valuation surplus) is adjusted to recognize the effects of   
inflation by using adjusting percentages determined based upon the consumer     
price index variation (5.39%, 6.12% and 5.30% for the nine months ended         

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

September 30, 2003, the year ended December 31, 2003, and the nine months ended 
September 30, 2004, respectively). The effect of inflation is reflected within  
the balance of each non-monetary item of the financial statements, except for   
the reappraisal adjustments related to fixed assets, which are presented        
separately as discussed below. The net gains or losses from the effects of      
inflation are reflected as a net monetary adjustment gain or loss in the        
statements of operations.                                                       

Unless expressly stated otherwise, the financial information included in the    
accompanying financial statements and notes thereto for all periods presented   
has been restated into constant Pesos as of September 30, 2004 in order to      
express all financial information in the purchasing power as of that date. The  
rate of inflation and the constant Peso factor as measured by the Colombian     
MCPI, applied to the Company's financial statement data for each period is as   
follows:                                                                        

                                                                [Download Table]

                                              RATE OF INFLATION  COLUMBIAN PAAG
                                                FOR THE YEAR         INDEX     
                                              -----------------  --------------
                                                                               
Nine months ended September 30, 2003.........              5.39          1.0603
Year ended December 31, 2003.................              6.12           1.053
Nine months ended September 30, 2004.........              5.30          1.0000

(e) Investments                                             

      Negotiable investments with a fixed rate of income are recorded at
cost plus accrued yields; investments in the common stock of non-publicly traded
companies, in which the Company does not exercise significant influence, are    
accounted for by the cost method adjusted for inflation; investments in the     
common stock of non-publicly traded companies, in which the Company exercises   
significant influence (20%-50% of voting shares) are accounted for by the equity
method.                                                                         

(f) Allowance for doubtful accounts                         

      This represents the amount estimated by management as necessary to
provide adequate protection against normal credit losses. The Company records a 
provision and/or charges doubtful receivables against earnings in the period    
when accounts are seven months past due, or earlier if circumstances indicate   
that a recovery of the receivable is doubtful.                                  

(g) Inventories                                             

       Inventories are recorded at cost. Cost is determined based upon the
average-cost method. A provision is recorded to reduce obsolete and slow-moving 
inventories to their net realizable value. Beginning January 1, 2003, in        
accordance with the issuance of Law 788 of 2002, the Company began recognizing  
the effects of inflation on inventories, such practice had been suspended by Law
488 of 2000.                                                                    

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(h) Deferred costs                                                    

..    Pre-paid expenses - Primarily insurance premiums that are amortized over  
time according to the terms of the policies.                          

..    Deferred charges - Includes organization costs and pre-operating expenses,
 studies and investigations, deferred foreign exchange losses on foreign
     currency denominated long-term debt, expenses incurred in the restructuring
     of foreign-currency debts, and bond issuance expenses. Deferred charges are
  adjusted for inflation with a credit to the monetary adjustment account.
     Expenses incurred in the Restructuring will be fully amortized during 2004.
  Bond issuance expenses are amortized on a straight - line basis over the
life of the related bonds.                                            

..    Deferred foreign exchange gains and (losses) - The exchange difference    
resulting from foreign currency long-term debt that is used to finance
    infrastructure projects is recorded as a deferred foreign exchange gain or
loss and is amortized to operations over the term of the debt. This   
    accounting treatment is based upon the Superintendent of Corporations (the
  Colombian Corporations Regulator) by resolution No. 620-3074 of July 10,
2001.                                                                 

..    Tax to preserve democratic security - This tax was enacted according to   
 Decree 1838 of August 11, 2002, and Decree 1885 of August 20, 2002. The
charge associated with this tax will be amortized according to the    
provisions of Resolution 012772 (issued by the Office of the          
Superintendency of Domiciliary Public Services) from the period of    
assessment until December 31, 2007.                                   

..    Deferred monetary adjustment - Assets related to the deferred monetary    
    adjustment represents the estimated inflationary effects on equity that is
  used to finance the construction of fixed assets. Liabilities related to
the deferred monetary adjustment represents the inflationary effects  
     recorded to construction-in-progress. The assets and liabilities related to
     the deferred monetary adjustments are amortized over a period corresponding
to the estimated useful lives of the related assets; the effect of the
     amortization is included in the net monetary adjustment gain or loss in the
statement of operations.                                              

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TRANSTEL S.A. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(i) Property, plant and equipment                                     

              Property, plant and equipment are recorded at cost, adjusted for
  inflation and are depreciated using the reverse- sum-of-the-years digits
method over their estimated useful lives, as follows:                 

                                                                USEFUL
                           ASSETS                              LIVES
                 ----------------------------------               --------
                 Building                                         30 years
                 Telecommunications equipment                     20 years
                 Telephone networks                               20 years
                 Machinery and equipment                          10 years
                 Office and computer equipment                     5 years
                 Fleet and transportation equipment                5 years

        The Company does not estimate any salvage value for its assets as it
considers that such value is immaterial. Sales and retirements of these assets  
are recorded at their net inflation-adjusted cost, and differences between sale 
proceeds and net inflation-adjusted cost are recorded as gains or losses in the 
statement of operations.                                                        

         Disbursements for additions to and substantial improvements of assets
are capitalized and adjusted for inflation. Interest costs incurred during the  
construction period on long-term debt that is used to finance construction are  
capitalized. Maintenance and repair expenditures are expensed as incurred.      

(j) Excess of appraised value over net book value of fixed assets     

             This amount corresponds to the differences between the net book
value of fixed assets and their replacement value, in the case of operating     
plants and communications networks, and the commercial value of buildings, such 
amounts are determined through appraisals conducted by independent appraisers   
over three year intervals. The most recent such appraisals were performed and   
the corresponding adjustments recorded during the year ended December 31, 2003. 

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TRANSTEL S.A. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

The effects of appraisals are recorded on an individual asset basis.  
Appraised values in excess of the corresponding book values are presented       
separately within non-current assets in the accompanying balance sheet and are  
not subject to amortization. The offsetting entry is recorded to valuation      
surplus included in shareholders' equity. Such valuation surplus may not be     
distributed to shareholders. A charge to operations is recorded when appraised  
values are lower than the net adjusted book value of property, plant and        
equipment.                                                                      

(k) Provision for income taxes                              

        The Company determines the provision for income taxes based upon the
taxable income estimated at rates specified in the tax law. Deferred income     
taxes are recorded for the effects of temporary differences between book and tax
amounts of assets and liabilities. A valuation allowance is recorded against the
deferred tax assets that management believes are more likely than not will not  
be realized.                                                                    

 (l) Translation of foreign currency transactions and balances

      Transactions and balances denominated in a currency other than the
Peso are translated into Pesos at market rates determined by the Colombian      
central bank. Foreign currency exchange gains and losses resulting from         
fluctuations in exchange rates between the date transactions are first recorded 
and the date of settlement or valuation and at the end of the period are charged
to other expense, except for exchange gains and losses related to liabilities   
incurred for purchases of equipment and inventory, which are capitalized as part
of the cost of such assets and long-term debts denominated in foreign           
currencies, for which exchange gains and losses are capitalized and amortized   
over the period of the loans.                                                   

        The exchange rate used to translate Dollar balances into Pesos as of
September 30, 2003, and 2004 was Ps 2,889.39, and Ps 2,595.17 per $ 1,          
respectively.                                                                   

(m) Convenience translation to Dollars                      

The Dollar amounts presented in the financial statements and
accompanying notes have been translated from the Peso amounts solely for the    
convenience of readers in the United States of America, at the exchange rate of 
Ps2,595.17 per $1, which approximates the exchange rate at September 30, 2004.  
Such translation should not be construed as representation that amounts shown   
could be converted into Dollars at such rate or any other rate.                 

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(n) Net income (loss) per share                             

Net income (loss) per share is computed by dividing net loss
applicable to common shares by the weighted average number of subscribed and    
paid shares outstanding for the nine months presented. The weighted average     
share used in the computation of income (loss) per share was 34,611,747,976 and 
286,312,369 in September 30, 2003, and 2004 respectively.                       

(o) Provision for income taxes                              

        The Company determines the provision for income taxes based upon the
taxable income estimated at rates specified in the tax law. Deferred income     
taxes are recorded for the effects of temporary differences between book and tax
amounts of assets and liabilities. A valuation allowance is recorded against the
deferred tax assets that management believes are more likely than not will not  
be realized.                                                                    

(p) Cash equivalents                                        

 For purposes of presentation in the statements of cash flows,
investments with maturity of three months or less from their initial issuance   
date are classified as cash equivalents.                                        

(q) Accounting estimates                                    

        The preparation of financial statements in conformity with Colombian
GAAP 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.                                                                      

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TRANSTEL S.A. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

NOTE 3- ACCOUNTS RECEIVABLE, NET                                      

Accounts receivable consists of the following:                        

                                         DECEMBER 31,    SEPTEMBER 30,
                                         2003             2004
                                         --------------   --------------
Subscribers ..............................   Ps  16,573,898   Ps  16,370,917    
Advances .................................        1,981,051          964,648    
Tax prepayment and other advances ........        5,573,915        5,090,374    
Subsidies and contributions (a) ..........       29,590,457       31,253,286    
Related parties ..........................        3,611,877        3,430,083    
Employees ................................           12,080           13,117    
Others ...................................        5,255,843        2,754,800    
                                         --------------   --------------
Sub-total ................................       62,599,121       59,877,225    
Less - valuation allowance for                                                  
doubtful accounts .......................         (753,712)      (4,063,203)  
                                         --------------   --------------
                                             61,845,409       55,814,022
Less-Non-current portion                                                        
Subsidies and contributions (a) ........       29,590,457       31,253,286  
Related parties ........................          147,654          140,222  
                                         --------------   --------------
                                             29,738,111       31,393,508
                                         --------------   --------------
Accounts receivable, net .................   Ps  32,107,298   Ps  24,420,514    
                                         ==============   ==============

   (a)  This amount represents the net value of subsidies and contributions,
       in accordance with Colombian Law 142, which has been recorded as an
        account receivable due from the Colombian Ministry of Communication,
        (Fondo de Telecomunicaciones). The Company estimates that the amount
          owed to the Company will be recovered in full on the terms provided in
Resolution 425 of the Ministry of Communication (2002).     

The activity in the valuation allowance for accounts receivable is as 
follows:                                                                        

                                         DECEMBER 31,    SEPTEMBER 30,
                                         2003             2004
                                         --------------   --------------
Balance at beginning of year .............   Ps  (2,887,879)  Ps    (753,712)   
Provision during year ....................       (9,824,995)      (3,391,250)   
Write-off of accounts receivable .........       11,792,616           43,824    
Effect of constant peso restatement ......          166,546           37,935    
                                         --------------   --------------
Balance at end of year ...................   Ps    (753,712)  Ps  (4,063,203)   
                                         ==============   ==============

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

NOTE 4 - BONDS PAYABLE                                                

             The amounts recorded by the Company as of December 31, 2003 and
September 30, 2004 for the Senior notes, Convertible subordinated notes and Base
notes are as follows:                                                           

                                         DECEMBER 31,    SEPTEMBER 30,
                                         2003             2004
                                         --------------   --------------
Senior 12.5 % notes ($152,086,000) .......   Ps 444,915,790   Ps 394,689,025    
Base international ($9,717,000) ..........       28,426,580       25,217,207    
Base national notes ......................       14,799,932       13,802,962    
Convertible notes ($33,064,788) ..........       89,823,005       85,808,746    
                                         --------------   --------------
Total ....................................      577,965,307      519,517,940    
Less: current portion ....................                -                -    
                                         --------------   --------------
                                         Ps 577,965,307   Ps 519,517,940
                                         ==============   ==============

OLD NOTES                                                                       

On October 28, 1997, Transtel issued $150 million principal amount of 
Senior 12 1/2% notes due in 2007 (the "Old Senior Notes") in connection with the
financing of its expansion plan.                                                

On December 31, 1998, Transtel issued $15 million principal amount of 
Senior 20.32% discount notes due 2008 (the "Old Discount Notes", and, together  
with the Old Senior Notes, the "Old Notes"). The Old Discount Notes accreted    
interest at the rate of 20.22% per annum, compounded semi-annually, and were to 
have an accreted face value at scheduled maturity of approximately $95.7        
million. Interest accrued on the accreted value of the Old Discount Notes at the
rate of 0.10% per annum and was payable on February 13 and August 13, until     
their scheduled maturity of August 13, 2008.                                    

The Old Discount Notes were unsecured obligations of Transtel. Each   
operating subsidiary that received proceeds from the issuance of the Old        
Discount Notes from Transtel was required under the indenture governing the Old 
Discount Notes to guarantee the Old Discount Notes.                             

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

    As of September 30, 2002, the date for determining the voting and eligible
amounts of claims in the Restructuring, the principal and accrued interest      
outstanding on the Old Senior Notes was $150,000,000 and $31,974,467            
respectively, and the principal and accrued interest outstanding on the Old     
Discount Notes was $30,918,528 and $3,572, respectively.                        

SENIOR NOTES                                                                    

     The senior notes consist of $152,086,000 principal amount of senior secured
12.5% notes due December 31, 2008. Interest has accrued on the senior notes from
February 24, 2004 at the rate of 12.5% per annum and is payable quarterly       
commencing on March 31, 2004. Required principal repayments under the notes     
begins on December 31, 2005, with Ps 19,723 million ($7.6 million) due December 
31, 2005, Ps 39,447 million ($15.2 million) due on December 31, 2006, Ps39,447  
million ($15.2 million) due on December 31, 2007 and Ps 296,109 million ($114.1 
million) due at maturity on December 31, 2008, in each case reduced in forward  
order of maturity by the amount of any prepayments from Excess Cash Flow, as    
defined in the note agreement. The unpaid principal balance of the notes matures
on December 31, 2008. The notes are jointly and severally guaranteed by the     
Operating Subsidiaries and MLA and are secured by, among other things,          
inter-company notes due to Transtel from the Operating Subsidiaries in an       
aggregate amount of $104,979,404, substantially all of the assets of the        
Operating Subsidiaries and MLA, and a pledge of the 72.4% of the Common Stock of
Transtel held by the shareholders other than shareholders resulting from the    
restructuring. Transtel has made required quarterly interest payments of $1.9   
million at March 31, 2004, $4.7 million at June 30 and $4,7 million at September
30, 2004.. The indenture for the senior notes incorporates a Mandatory Sale     
Process Agreement, which is intended to provide a process for the orderly sale  
of the Company in the event of an acceleration of the senior notes or a failure 
to redeem the convertible notes (described below) at maturity. At the completion
of any resulting sale, the senior notes are converted into shares of Common     
Stock of Transtel and the net proceeds of such sale are distributed first to the
holders of these shares up to the amount of the unpaid principal and interest on
the senior notes at the time of conversion (subject to the election of the      
Founding Shareholders to receive, in certain circumstances, 10% of such proceeds
otherwise distributable to the holders of senior notes). Any proceeds then      
remaining are distributed to Transtel's other shareholders (excluding any       
Founding Shareholder who elected to receive a portion of the distribution to    
holders of senior notes).                                                       

CONVERTIBLE SUBORDINATED NOTES                                                  

  The convertible notes consist of $33,064,788 of convertible subordinated
notes due December 31, 2008. Principal and accrued interest on the convertible  
subordinated notes is due in one lump-sum payment at maturity. The principal    
amount of the convertible subordinated notes accretes interest from February 24,
2004 quarterly commencing March 31, 2004. The accretion rate is as follows: i)  
2.5% until December 31, 2004, ii) 3.75% until December 31, 2006, iii) 4.25%     
until December 31, 2007 and iv) 5% until December 31, 2008. The convertible     
subordinated notes mature on December 31, 2008 and will have a fully accreted   
value of $65,321,467 on that date. The convertible subordinated notes will      
convert into shares of common stock of Transtel (the "Conversion Shares") on the
earliest of (a) maturity of the convertible subordinated notes, unless redeemed 
or otherwise paid in full on or before the redemption date, (b) a change of     
control under the indenture for the contingently convertible senior notes and   
(c) an acceleration of the contingently convertible senior notes following an   
event of default, as defined by agreement. The number of conversion shares is   
dependent on the date of conversion (December 31, 2008). The conversion shares  
would represent (i) if converted on September 30, 2004, 35.81% of the fully     
diluted common stock of Transtel and (ii) if converted at their maturity, 57.13%
of the fully diluted equity of Transtel.                                        

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

BASE NOTES                                                                      

  The floating rate notes collectively consist of (i) $9,718,000 principal
amount of floating rate senior unsecured notes due in 2014, (ii) $1,725,619     
principal amount of Dollar-denominated promissory notes, and (iii) Ps 20,306,736
($7,522,183) of the principal amount of Peso-denominated promissory notes. The  
floating rate notes are interest-free through February 24, 2007 and thereafter  
bear interest, in the case of dollar-denominated floating rate notes, at three  
month LIBOR, adjusted quarterly, and, in the case of Peso-denominated floating  
rate notes, at Colombian Unidad de Valor Real ("UVR"), a daily index issued by  
the Colombian Central Bank based on the average accreted inflation rate within a
three-month period applying a formula defined by agreement. No principal        
payments are required on the floating rate notes prior to maturity on February  
24, 2014.                                                                       

NOTE 5 - FINANCIAL OBLIGATIONS                                        

Financial obligations consists of the following:                      

                                                        [Enlarge/Download Table]

                                                DECEMBER 31,                    SEPTEMBER 30,       
                                      ------------------------------  ------------------------------
                                         Average                         Average                    
                                      interest rate        2003       interest rate        2004     
                                      -------------   --------------  -------------   --------------
                                                                                                    
Bank overdrafts ...................         DTF + 4   Ps     366,141        DTF + 4   Ps     527,926
Borrowings from financial entities:                                                                 
  Denominated in Pesos ............         DTF + 4        6,862,205        DTF + 4        6,745,850
  Denominated in Dollars ..........              13%       2,170,432             13%       1,925,390
  Other capital leases ............       Libor + 5          746,611      Libor + 5          332,149
  National leases agreements ......         DTF + 4        4,415,729        DTF + 4        3,503,069
                                                      --------------                  --------------
Total .............................                       14,561,118                      13,034,384
                                                      --------------                  --------------
Less: Long - term portion                                                                           

  Denominated in Pesos ..............                      2,206,215                       1,266,338
  Denominated in Dollars ............                      2,170,432                       1,925,390
  National leases agreements ........                      3,121,852                       2,098,063
                                                      --------------                  --------------
Total long term portion ...........                        7,498,499                       5,289,791
                                                      --------------                  --------------
Total short term portion ..........                   Ps   7,062,618                  Ps   7,744,593
                                                      ==============                  ==============

DTF = or "deposito a termino fijo" is the interest rate of fixed term deposits. 

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

NOTE 6 - ACCOUNTS PAYABLE                                             

Accounts payable consists of the following:                           

                                                        [Enlarge/Download Table]

                                                                   DECEMBER 31,    SEPTEMBER 30, 
                                                                       2003            2004      
                                                                  --------------  ---------------
                                                                                                 
Suppliers:                                                                                       
 National ....................................................... Ps   3,535,480  Ps    2,025,176
 International ..................................................     20,133,355        6,640,232
                                                                  --------------  ---------------
 Sub-total ......................................................     23,668,835        8,665,408
                                                                  --------------  ---------------
Accounts Payable:                                                                                
 Other costs and expenses .......................................        359,240          215,102
 Value added taxes payable ......................................      3,271,163        2,289,218
 Duties payable .................................................     41,891,685       37,162,066
 Commercial payables ............................................      1,231,573        2,893,769
 Payroll withholdings payable ...................................        229,220          231,251
 Accrued interest on the notes ..................................     21,611,251        7,115,545
 Other creditors ................................................      7,816,112        9,298,177
                                                                  --------------  ---------------
 Sub-total ......................................................     76,410,245       59,205,128
                                                                  --------------  ---------------
Total ...........................................................    100,079,080       67,870,536
                                                                  --------------  ---------------
Less: long term portion                                                                          

 Duties payable .................................................     18,108,562       16,064,097
 Suppliers ......................................................      6,228,688                -
                                                                  --------------  ---------------
Total long term portion .........................................     24,337,250       16,064,097
                                                                  --------------  ---------------
Total short term portion ........................................ Ps  75,741,830  Ps   51,806,439
                                                                  ==============  ===============

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

NOTE 7 - SHAREHOLDERS' EQUITY                                         

Authorized capital stock                                                        

          One trillion five hundred billion (1,500,000,000,000) shares of common
stock of Transtel were authorized as of September 30, 2004, of which            
349,237,524,712 shares were outstanding as of such date.                        

  As part of the Restructuring, Transtel's shareholders voted to
increase Transtel's authorized capital to one trillion five hundred billion     
Pesos (Ps 1,500,000,000,000), an amount which would allow for the subscription  
of shares related to the capitalization of debt pursuant to the Restructuring,  
in the amount of three hundred fourteen billion nine hundred twenty-five million
seven hundred seventy-six thousand seven hundred thirty six(314,625,776,736)    
shares of common stock of Transtel at a par value of one Peso each. As a result 
of the Restructuring, creditors who capitalized a portion of their debt pursuant
to the Capitalization Treatment acquired 27.6% of the total subscribed and      
paid-in capital of Transtel.                                                    

Legal reserve                                                                   

        Pursuant to Colombian law, 10% of the net profit of the Transtel and
its Colombian subsidiaries in each year must be appropriated with a credit to a 
"reserve fund" until the fund reaches an amount 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      
meetings. Such distributions are not permitted by the indenture for the Senior  
Notes and, pursuant to the Shareholders Agreement, which Transtel's shareholders
have entered into in connection with the Restructuring, Transtel's shareholders 
have agreed to waive all distributions while they are prohibited by such        
indenture.                                                                      

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TRANSTEL S.A. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

NOTE 8 - COMMITMENTS AND CONTINGENCIES                                          

Fiduvalle Arbitration                                                           

In December 2003, January 2004 and February 2004, the Operating Subsidiaries,   
Unitel, TeleJamundi and TeleCartago received notices of litigation claims filed 
by Fiduciaria del Valle S.A. ("Fiduvalle"). The three litigation claims were    
brought by Fiduvalle before different arbitration boards at the arbitration and 
reconciliation center of the chamber of commerce of Cali, claiming, among other 
things, that the defendants had collected but failed to remit to Fiduvalle      
certain receivables that the defendants had previously assigned to Fiduvalle.   
The aggregate amount claimed by Fiduvalle is Ps 6,228 million ($2.3 million).   
The arbitration is currently pending. Management believes that the resolution of
this matter will not have a material effect on the Company's financial position,
results of operations or cash flows.                                            

Proceedings Relating to Interconnection Agreements                    

At the request of certain long distance carriers, the "Comision de    
Regulacion de Telecomunicaciones" ("CRT") has issued resolutions that require   
the Company, prior to the termination of its current long distance carrier      
agreements, to provide carriers with the option of paying access charges either 
(i) on the basis of actual minutes used, as the interconnection agreements      
currently provide, or (ii) on a fixed-fee basis, determined by reference to the 
capacity allocated to the carriers. The Company believes that the CRT has       
exceeded its authority in issuing such resolutions, and that the terms of the   
current agreements cannot be superseded in this manner. Accordingly, the Company
has brought an action before a Colombian public law court, the Tribunal         
Administrativo de Cundinamarca, seeking to have the resolutions of the CRT      
declared invalid. That action is currently pending. If the Company does not     
prevail in this action, and is required to comply with the resolutions of the   
CRT, revenues from access charges could be adversely affected.                  

NOTE 9 - DIFFERENCES BETWEEN COLOMBIAN GAAP AND U.S. GAAP                       

The Company's financial statements are prepared in accordance with    
accounting principles generally accepted in Colombia, which differ, in certain  
significant respects from those applicable in the United States of America      
("U.S. GAAP"). This note presents reconciliation to U.S. GAAP of net income     
(loss) for the nine months ended September 30, 2003 and 2004 and shareholders'  
equity (deficiency) at December 31, 2003 and for the nine months ended September
30, 2004.                                                                       

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(a) RECONCILIATION OF NET INCOME (LOSS):                                        

The following summarizes the principal differences between accounting 
principles under Colombian GAAP and U.S. GAAP and the effects on net income     
(loss) for the nine months ended September 30, 2003, and 2004:                  

                                                        [Enlarge/Download Table]

                                                             NINE MONTHS ENDED SEPTEMBER 30,    
                                                           ------------------------------------ 
                                                                 2003               2004        
                                                           ----------------    ---------------- 
                                                                                                
Consolidated net income (loss) under Colombian GAAP ...... Ps   (11,011,300)   Ps    20,434,311 

(i)    Depreciation ......................................      (19,640,658)        (13,928,558)
(ii)   Capitalized interest ..............................         (838,878)         (1,041,784)
(iii)  Amortization of deferred costs ....................       (4,864,398)          6,953,980 
(iv)   Deferred foreign exchange (losses) gains ..........       21,343,864          43,492,869 
(v)    Capital leases ....................................        2,597,822             401,863 
(vi)   Revenue recognition ...............................        2,023,188           3,599,439 
(vii)  Reversal of deferred monetary adjustment ..........         (986,865)           (585,982)
(viii) Capitalized foreign exchange gains and losses on                                         
 fixed assets ............................................          331,928             468,801 
(ix)   Writte off accounts receivables ...................        2,599,635                   - 
(x)    Distributions to shareholder ......................           65,992                   - 
(xi)   Reduction in project cost from claim proceeds .....          278,706             457,528 
(xii)  Adjustments revaluation equity ....................        8,245,006                     
(xiii) Effect of financial restructuring .................                -          52,192,307 
(xiv)  Discount on subsidies receivable ..................                -             (26,139)
                                                           ----------------    ---------------- 
Total US GAAP adjustments before income taxes and                                               
 minority interests and cumulative effect of change in                                          
 accounting principle ....................................          144,042         112,418,635 
(xvi)  Deferred income tax effects of the above US GAAP                                         
 adjustments .............................................       (1,018,617)        (29,903,754)
(xvii) Minority interest effects on the above US GAAP                                           
 adjustments .............................................          743,928          (5,613,184)
                                                           ----------------    ---------------- 
Consolidated net (loss) income according to US GAAP ...... Ps      (130,647)   Ps    76,901,697 
                                                           ================    ================ 

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(b) RECONCILIATION OF SHAREHOLDERS' EQUITY (DEFICIENCY):                        

The following summarizes the principal differences between accounting 
practices under Colombian GAAP and U.S. GAAP and the effects on shareholders'   
equity at December 31, 2003 and for the nine months ended September 30, 2004,   
respectively:                                                                   

                                                        [Enlarge/Download Table]

                                                                                          NINE MONTHS   
                                                                                             ENDED      
                                                                       DECEMBER 31,       SEPTEMBER 30, 
                                                                           2003               2004      
                                                                     ----------------   --------------- 
                                                                                                        
Consolidated shareholders' equity (deficiency) according                                                
 to Colombian GAAP ................................................. Ps  (103,832,089)  Ps  236,862,538 

(i)    Depreciation ................................................     (147,814,023)     (161,742,581)
(ii)   Capitalized interest ........................................       22,990,200        21,948,416 
(iii)  Amortization of deferred costs ..............................      (19,075,311)      (12,121,331)
(iv)   Deferred foreign exchange losses ............................      (83,434,377)      (39,941,508)
(v)    Capital leases ..............................................          621,812         1,023,675 
(vi)   Revenue recognition .........................................       (6,480,099)       (2,880,660)
(vii)  Reversal of deferred monetary adjustment ....................       11,200,187        10,614,205 
(viii) Capitalized foreign exchange gains and losses on fixed.......                                    
 assets.............................................................      (36,092,846)      (35,624,045)
(xi)   Reduction in project cost from claim proceeds ...............       (3,547,306)       (3,089,778)
(xiii) Effect of financial restructuring ...........................      (52,192,307)                - 
(xiv)  Discount on subsidies receivable ............................       (6,367,945)       (6,394,084)
(xv)   Appraised value over net book value of fixed assets .........      (21,796,588)      (20,699,514)
                                                                     ----------------   --------------- 
Total US GAAP adjustments before income taxes, minority                                                 
 interests and cumulative effect of change in accounting principle .     (445,820,692)      (12,044,667)
(xvi) Deferred income tax effects of the above US GAAP                                                  
 adjustments .......................................................      138,300,923       108,397,170 
(xvii) Minority interests effect on the above US GAAP                                                   
 adjustments .......................................................       34,024,287        28,411,103 
                                                                     ----------------   --------------- 
Consolidated shareholder's deficiency according to US GAAP ......... Ps  (273,495,482)  Ps  124,763,606 
                                                                     ================   =============== 

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(c) CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY):                               

   The following summarizes the changes in shareholders' equity (deficiency)
in accordance with U.S. GAAP for the two years in the period ended December 31, 
2002, 2003 and the nine months ended September 30, 2004:                        

STATEMENTS OF SHAREHOLDERS' DEFICIENCY UNDER U.S. GAAP
 Thousand of Columbian pesos of purchasing power
as of September 30, 2004

                                                        [Enlarge/Download Table]

                                                                                 ACCUMULATED                                     
                                           COMMON               RETAINED            OTHER           TOTAL              TOTAL     
                                ---------------------------     EARNINGS        COMPREHENSIVE    SHAREHOLDERS'    COMPREHENSIVE  
                                   SHARES        AMOUNT         (DEFICIT)       INCOME (LOSS)     DEFICIENCY      INCOME (LOSS)  
                                -----------  --------------  ---------------  ----------------  ---------------  --------------- 
                                                                                                                                 
Balance, at January 1, 2002 ...  34,611,748  Ps  34,611,748  Ps (155,732,629) Ps             -  Ps (121,120,881) Ps            - 
                                ===========  ==============  ===============  ================  ===============  =============== 
 Net loss .....................                           -     (218,522,624)                -     (218,522,624)    (218,522,624)
 Effects of constant peso                                                                                                        
  restatement .................                           -       35,763,719                 -       35,763,719                  
                                -----------  --------------  ---------------  ----------------  ---------------  --------------- 
Balance, at December 31, 2002    34,611,748  Ps  34,611,748     (338,491,534) Ps             -  Ps (303,879,786) Ps (218,522,624)
                                -----------  --------------  ---------------  ----------------  ---------------  --------------- 
 Net loss .....................                           -       27,186,984                 -       27,186,984       27,186,984 
 Effects of constant peso                                                                                                        
  restatement .................                           -        3,197,320                 -        3,197,320                  
                                -----------  --------------  ---------------  ----------------  ---------------  --------------- 
Balance, at December 31, 2003    34,611,748  Ps  34,611,748     (308,107,230) Ps             -  Ps (273,495,482) Ps   27,186,984 
                                -----------  --------------  ---------------  ----------------  ---------------  --------------- 
 Movement during the period ... 314,625,777     314,625,777                -                 -      314,625,777                  
 Net Income ...................                           -       76,901,697                 -       76,901,697       76,901,697 
 Effects of constant peso                                                                                                        
  restatement .................                           -        6,731,614                 -        6,731,614                  
                                -----------  --------------  ---------------  ----------------  ---------------  --------------- 
Balance, at September 30, 2004  349,237,525  Ps 349,237,525  Ps (224,473,919) Ps             -  Ps  124,763,606  Ps   76,901,697 
                                ===========  ==============  ===============  ================  ===============  =============== 

The Company has no items of other comprehensive income according to U.S. GAAP.  

(d) SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN COLOMBIAN AND U.S. GAAP:         

(i)  Depreciation                                                     

Since January 1, 1996, the Company has used the             
reverse-sum-of-the-years digits method of depreciation for Colombian GAAP       
purposes. The Company used the straight-line method prior to 1996 for Colombian 
GAAP purposes. The straight-line method of depreciation is the method applied   
for purposes of U.S. GAAP. As a result, additional depreciation expense of Ps   
19,640,658 and Ps 13,928,558 is recorded under U.S. GAAP in the nine months     
ended September 30, 2003 and 2004, respectively.                                

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(ii) Capitalized interest                                             

        Under Colombian GAAP, the Company does not capitalize interest costs
on projects under construction, which is required under US GAAP. Under US GAAP  
the following adjustments to interest and depreciation expense are required in  
order to reflect the increase in the U.S. GAAP cost basis of qualifying assets: 

                                                        [Enlarge/Download Table]

                                                                DECEMBER 31,     SEPTEMBER 30, 
                                                                    2003             2004      
                                                               --------------   -------------- 
                                                                                               
Capitalized interest.......................................... Ps  23,293,590   Ps  22,990,200 
                                                               --------------   -------------- 
Reduction in interest expense for amounts capitalized                                          
 to cost of properties, plant and equipment...................              -                - 
Less - Additional depreciation expense                                                         
 on capitalized interest......................................       (303,390)      (1,041,784)
                                                               --------------   -------------- 
Net effect on reconciliation of net (loss) income.............       (303,390)      (1,041,784)
                                                               --------------   -------------- 
Net effect on reconciliation of shareholders' deficiency...... Ps  22,990,200   Ps  21,948,416 
                                                               ==============   ============== 

(iii) Amortization of deferred costs                                  

             For Colombian GAAP, the Company has deferred certain cost which
are expensed as incurred under US GAAP. Under US GAAP the following costs, which
are deferred for Colombian GAAP are expensed for U.S. GAAP                      

                                                        [Enlarge/Download Table]

                                                                DECEMBER 31,     SEPTEMBER 30, 
                                                                    2003             2004      
                                                               --------------   -------------- 
                                                                                               
Organization costs and preoperating expenses.................. Ps   5,124,968   Ps   4,867,016 
Other deferred charges........................................        997,429          919,908 
Tax to preserve democratic security...........................      2,835,661        2,692,935 
Debt restructuring cost.......................................     25,118,303       32,587,825 
                                                               --------------   -------------- 
Increase in expenses..........................................     34,076,361       41,067,684 
Less - Amortization recorded under Colombian GAAP.............    (15,001,050)     (28,946,353)
                                                               --------------   -------------- 
Net effect on reconciliation of shareholders' deficiency...... Ps  19,075,311   Ps  12,121,331 
                                                               ==============   ============== 
Effect on reconciliation of net income........................ Ps  (2,028,414)  Ps  (6,953,980)
                                                               ==============   ============== 

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

        The remaining deferred costs in accordance with U.S. GAAP consist of
the amounts in the following table. The periods of amortization are the same    
under Colombian and U.S. GAAP.                                                  

                                                        [Enlarge/Download Table]

                                                     LIFE IN   DECEMBER 31,     SEPTEMBER 30, 
                                                      YEARS        2001             2004      
                                                     -------  --------------   -------------- 
                                                                                              
Software............................................    5     Ps     452,032   Ps     429,280 
Others..............................................    5            197,330          158,926 
Bond issuance expenses..............................   10         51,176,878       49,648,994 
                                                              --------------   -------------- 
                                                                  51,826,240       50,237,200 
Accumulated amortization............................             (29,995,931)     (31,865,396)
                                                              --------------   -------------- 
Deferred costs, net.................................          Ps  21,830,309   Ps  18,371,804 
                                                              ==============   ============== 

(iv) Deferred foreign exchange loss                                             

      Based on Accounting Concept # 3074 issued by the Superintendent of
Corporations on July 10, 2001, the Company adopted the accounting policy        
recording a deferred credit or charge related to foreign exchange gains and     
losses arising from foreign currency denominated long-term debt that was issued 
to finance the construction of the Company's previously constructed fixed asset 
infrastructure and telephone communication systems. The deferred amount is being
amortized over the remaining term of the debt. The net carrying amount of the   
deferred asset was Ps 83,434,377 and Ps 39,941,508 as of December 31, 2003 and  
nine months ended September 30, 2004, respectively. According to US GAAP,       
exchange gains and losses on debt denominated in foreign currencies are period  
costs and must be credited or charged directly to earnings. .                   

(v) Capital leases                                                              

       According to Colombian GAAP, lease contracts, entered into prior to
January 1, 1996 and which would now be considered capital leases are not        
capitalized but recorded as a period cost when paid. The total liability under  
all operating lease contracts and capital type leases, entered into prior to    
December 31, 1995 are disclosed in memorandum accounts. The cost of these leased
assets are recorded only when a purchase option is exercised. Under US GAAP     
certain of these leases would be required to be classified as capital leases.   

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

The additional amounts and categories of such capital leases are as follows:    

                                                        [Enlarge/Download Table]

                                                                DECEMBER 31,     SEPTEMBER 30, 
                                                                    2003             2004      
                                                               --------------   -------------- 
                                                                                               
Assets:                                                                                        
Telephone networks............................................ Ps   4,728,512   Ps   4,728,704 
                                                               --------------   -------------- 
Total.........................................................      4,728,512        4,728,704 
Less - Accumulated depreciation...............................     (1,911,107)      (2,088,511)
                                                               --------------   -------------- 
Assets under capital lease under US GAAP, net.................      2,817,405        2,640,193 
                                                               --------------   -------------- 
Less - assets Colombian GAAP, net.............................        (77,398)         (76,799)
                                                               --------------   -------------- 
Effect net, under US GAAP assets..............................      2,740,007        2,563,394 
                                                               ==============   ============== 
Less:                                                                                          
Liabilities US GAAP, net......................................       (686,934)        (279,209)
Deferred income from sale leaseback...........................     (1,431,261)      (1,260,510)
                                                               --------------   -------------- 
Effect on reconciliation of shareholders'                                                      
 (deficiency) equity.......................................... Ps     621,812   Ps   1,023,675 
                                                               ==============   ============== 

                                                        [Enlarge/Download Table]

                                                                DECEMBER 31,     SEPTEMBER 30, 
                                                                    2003             2004      
                                                               --------------   -------------- 
                                                                                               
Total minimum lease payments.................................. Ps     744,894   Ps     290,730 
Less - imputed interest.......................................        (59,875)         (11,521)
                                                               --------------   -------------- 
Present value of minimum lease payments.......................        685,019          279,209 
Less - current portion........................................       (588,801)               - 
                                                               --------------   -------------- 
Long - term portion........................................... Ps      96,218   Ps     279,209 
                                                               ==============   ============== 

     The following income statement effects are recorded for the above
capital leases adjustments:                                                     

                                                 SEPTEMBER 30,
                                               -------------------------------
                                               2003             2004
                                               --------------   --------------
Increase in interest expense ................   Ps      60,911   Ps           - 
Increase in depreciation expense ............          177,049          173,684 
Amortization of gain from sale                                                  
of properties, plant and                                                      
 equipment on leaseback .....................              191          (98,712)
Increase in inflation adjustment                                                
of income on capital                                                          
 lease obligations ..........................       (1,599,892)        (137,911)
                                               --------------   --------------
Total .......................................       (1,361,741)         (62,939)
Less rent expenses recorded under                                               
 Colombian GAAP .............................       (1,236,081)        (338,924)
                                               --------------   --------------
Effect on reconciliation of                                                     
 net (loss) income ..........................   Ps  (2,597,822)  Ps    (401,863)
                                               ==============   ==============

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(vi) 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 US GAAP, revenues
from these connection fees are recorded on a deferred basis. Under this policy, 
connection fee income less direct installation costs and direct selling costs   
are deferred and amortized into income over five years using the straight-line  
method. The five-year period reflects management's best estimate of the term of 
the subscriber relationships.                                                   

Revenues under U.S. GAAP consists of the following:                   

                                                        [Enlarge/Download Table]

                                                                           SEPTEMBER 30,          
                                                               ---------------------------------- 
                                                                    2003                2004      
                                                               --------------      -------------- 
                                                                                                  
Connection fees............................................... Ps   2,799,184      Ps   4,288,298 
Local usage charges...........................................     40,904,625          39,027,224 
Basic charges.................................................     28,066,745          29,996,303 
Long distance charges.........................................     20,124,670          17,679,619 
Internet charges..............................................      3,587,875           3,858,855 
Pay television services.......................................      5,787,745           5,000,738 
Other operating income........................................      9,093,808           6,622,563 
                                                               --------------      -------------- 
Revenues under US GAAP........................................    110,364,652         106,473,600 
                                                               --------------      -------------- 
Difference....................................................     (2,023,188)         (3,599,439)
                                                               --------------      -------------- 
Revenues recorded under Colombian GAAP........................ Ps 108,341,464      Ps 102,874,161 
                                                               ==============      ============== 

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(vii) Deferred monetary adjustment                                              

    Under Colombian GAAP, the Company records a deferred asset and a
liability or a credit to equity for certain inflationary effects related to the 
cost of construction of fixed assets (see Note 2 (h)). The application of price 
level adjusted financial information as provided for by U.S. GAAP considers that
either historical cost / constant currency or current cost/ replacement cost    
approaches are appropriate methodologies for presenting price adjusted financial
information when reconciling to U.S. GAAP. Such described methodologies do not  
consider the deferred monetary adjustment as accounted for under Colombian GAAP.
Accordingly, the deferred monetary adjustments are reversed for U.S. GAAP       
purposes. The effects of the reversal on assets, liabilities, shareholders'     
equity and pretax income are as follows:                                        

                                                        [Enlarge/Download Table]

                                                                DECEMBER 31,     SEPTEMBER 30, 
                                                                    2003             2004      
                                                               --------------   -------------- 
                                                                                               
Reversal of deferred monetary adjustment recorded as:                                          
Liabilities .................................................  Ps  15,421,426   Ps  14,393,436 
Assets ......................................................      (4,221,239)      (3,779,231)
                                                               --------------   -------------- 
Effect on reconciliation to shareholders' (deficiency) equity      11,200,187       10,614,205 
Less: Prior year effect on shareholders' (deficiency) equity      (12,343,083)     (11,200,187)
                                                               --------------   -------------- 
Effect on reconciliation to net (loss) income ...............  Ps  (1,142,896)  Ps    (585,982)
                                                               ==============   ============== 

(viii) Capitalized foreign exchange gains and losses on fixed assets            

    According to Colombian GAAP, foreign currency exchange gains and
losses related to foreign currency denominated liabilities incurred for the     
purchase of property plant and equipment are capitalized as part of the cost of 
such assets until they are put into use or are available for sale. In accordance
with U.S. GAAP, foreign exchange losses are not subject to capitalization.      
Consequently, such capitalized amounts and the related amortization under       
Colombian GAAP have been reversed and treated as an expense for U.S. GAAP       
purposes in the period incurred. The additional amounts of capitalized foreign  
exchange gains and losses on fixed assets as follows:                           

                                                        [Enlarge/Download Table]

                                                                DECEMBER 31,     SEPTEMBER 30, 
TC                                                                    2003             2004    
                                                               --------------   -------------- 
                                                                                               
Assets........................................................ Ps (36,092,846)  Ps (35,624,045)
                                                               --------------   -------------- 
Effect on reconciliation to shareholders' (deficiency) equity     (36,092,846)     (35,624,045)
Less: Prior year effect on shareholders' (deficiency) equity       36,559,251       36,092,846 
                                                               --------------   -------------- 
Effect on reconciliation to net (loss) income................. Ps     466,405   Ps     468,801 
                                                               ==============   ============== 

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(x) Distribution to shareholder                                                 

          Transtel purchased land and a building from a principle shareholder at
fair value based upon the appraised value in August 1996. For purposes of U.S.  
GAAP, the difference between the amount paid and the shareholder's historical   
cost is treated as a cash distribution to the shareholder.                      

(xi) Reduction in project cost from claim proceeds                              

     Under Colombian GAAP, penalties received from a contractor due to
delayed performance were recorded as other income. Under U.S. GAAP, such        
liquidated damages are applied against project construction costs. During 2002, 
upon completion of the project, the project was transferred from work-in-process
to fixed assets and is being depreciated using the straight-line method over its
estimated useful life of 10 years.                                              

(xiii) Effects of financial restructuring according to U.S. GAAP                

      As discussed in Note 1, the effects of the Restructuring Agreement
were accounted for under Colombian GAAP based upon the date of agreement, which 
was November 24, 2003. According to U.S. GAAP, such effects are to be accounted 
for on the date the Company's debts were exchanged for convertible debt and     
equity, which is February 24, 2004. For purposes of U.S. GAAP, the Company's    
liabilities that are affected by the restructuring agreement are not considered 
extinguished as of December 31, 2003. The Company is currently evaluating the   
effects of the Restructuring on its 2004 U.S. GAAP financial statements.        

(xiv) Discount on subsidies receivable                                          

   The Company is eligible to collect certain subsidies related to
pricing of its services as allowed for under Colombian Law 142. Under Columbian 
GAAP, the net value of subsidies and contributions has been recorded as an      
account receivable that will be paid by "El Fondo de Telecomunicaciones " a     
division of the Colombian Ministry of Communications. Such receivables are      
generally paid without interest after several years delay.                      

     For purposes of U.S. GAAP, pursuant to Accounting Principle Board
Opinion No. 21, Interest on Receivables and Payables ("APB 21") long term       
receivables are required to be discounted based upon an imputed rate of         
interest. For purposes of US GAAP, the Company has adjusted the difference      
between the nominal value of the accounts receivable and the net present value  
of the receivables based upon the Company's credit terms for borrowings of      
similar duration. The discounted receivable amounts are being accreted to the   
nominal values periodically with an offsetting amount credited to, operations.  

 BLANK SPACE

F-31

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TRANSTEL S.A. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 (THOUSANDS OF PESOS OF PURCHASING POWER AS OF SEPTEMBER 30, 2004) (UNAUDITED)

(xv) Excess of appraised values over net book values of fixed assets            

          In accordance with Colombian GAAP, reappraisals of property, 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.             

(xvi) Deferred income taxes                                                     

        Under Colombian GAAP, deferred income taxes are generally recognized
for timing differences in a manner similar to the superceded Accounting         
Principles Board Opinion No. 11, Accounting for Income Taxes.                   

       Under U.S. GAAP, 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 accounting and tax basis of assets and        
liabilities. A valuation allowance is provided for deferred tax assets when it  
is considered more likely than not that some portion or all of the deferred tax 
asset will not be realized.                                                     

(xvii) Minority interests effect on the above US GAAP adjustments               

      The minority interests' share of the differences between Colombian
GAAP and U.S. GAAP are presented separately.                                    

(xviii) Effects of constant peso restatement                                    

 To give effect to the annual restatement to constant pesos of
purchasing power.                                                               

 (xix) Earnings (loss) 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.                            

          Under U.S. GAAP, earnings per share are calculated on the basis of the
weighted average number of common shares outstanding. For U.S. GAAP, the        
weighted average numbers of shares outstanding were 34,611,747,976 and          
286,312,369,000 in September 2003, and September 2004, respectively.            

       Basic and diluted earnings (loss) per share under U.S. GAAP are the
same and were (0.004) Pesos, and 0.27 Pesos for the nine months ended September 
30, 2003 and 2004, respectively.                                                

----------

F-32

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the        
registrant has duly caused this report to be signed on its behalf by the        
undersigned, thereunto duly authorized.                                         

             TRANSTEL S.A.
            (Registrant)

Dated, December 2, 2004.                                                        

                             By:    /s/ Guillermo O. Lopez
                                               ---------------------------------
                         Name:  Guillermo O. Lopez
                Title: President

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘6-K’ Filing	Date	First	Last	Other Filings

	2/24/14	11	32
	12/31/08	10	31
	8/13/08	30
	12/31/07	10	31
	2/24/07	11	32
	12/31/06	10	31
	12/31/05	10	31
	12/31/04	31
Filed on:	12/2/04	46
	10/29/04	10	21
For Period End:	9/30/04	1	45
	3/31/04	31		6-K
	2/24/04	3	44
	12/31/03	5	44	NT 20-F
	11/25/03	3	19
	11/24/03	44
	9/30/03	3	45
	1/1/03	16	24
	12/31/02	38
	10/4/02	19
	9/30/02	31
	8/20/02	25
	8/11/02	25
	1/1/02	38
	7/10/01	25	40
	12/31/98	30
	10/28/97	30
	1/1/96	38	40
	12/31/95	40
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Filing Submission 0001140437-04-000337 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Transtel SA – ‘6-K’ for 9/30/04

On: Thursday, 12/2/04, at 11:11am ET · For: 9/30/04 · Accession #: 1140437-4-337 · File #: 333-49871

Previous ‘6-K’: ‘6-K’ on 9/1/04 for 6/30/04 · Latest ‘6-K’: This Filing

Report of a Foreign Private Issuer — Form 6-KFiling Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

Report of a Foreign Private Issuer — Form 6-K
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