Luiz Pinto, Matthias Sigrist, Daniel Packard

Decrease SIM portfolio by 43 basis points to come in line with S&P 500

Reallocate funds within the Telecommunication SIM Sector

Sector S&P 500 SIM Portfolio DifferenceConsumer Discretionary 9.11% 7.51% -1.60%Consumer Staples 11.94% 12.23% 0.29%Energy 12.35% 12.80% 0.45%Financials 14.66% 6.59% -8.07%Health Care 12.65% 13.13% 0.48%Industrial 10.09% 11.97% 1.88%Information Technology 19.04% 21.97% 2.92%Materials 3.39% 4.52% 1.13%Telecommunications 3.09% 3.51% 0.43%Utilities 3.68% 3.19% -0.49%

Sell AT&T (219 basis points) Buy Verizon (117 basis points) Increase stake in NII Holdings (59 basis

points to 200 points)

Total Sector Holdings – 317 basis points (43 basis point decrease)

Largest US-based telecom company.◦ 2008 Revenues: $124 Billion

Two major business lines: Wireless: Cell Phones, data and voice services.

◦ Acquisitions of BellSouth and Cingular◦ Limited to the Domestic Market

Wireline: Landline communication, Internet, TV, ◦ Cable and satellite internet provider◦ IT products and IT communications to businesses◦ TV Competitors: Time Warner, Verizon, Comcast, Directv

Wireless Currently experiencing high growth.

◦ Revenues: Increased 12% from 2007 to 2008◦ Customers: Increased 9%

49% of total sales/ 78% Total Profit

Wireline Revenues are slightly decreasing.

◦ 1.7% from 2007 to 2008◦ Customers shifted from Wireline to Wireless◦ FiOS product sales increasing

Wireless

I-phone main revenue growth driver◦ Exclusive contract with Apple expected to run out in 2010◦ Verizon’s Droid brings heavy competition◦ Bad network reputation

3G Network◦ Under heavy criticism◦ Sold Made fun of by Verizon

Wireline Landline

◦ According to AT&T: customers simply switch to wireless TV and Internet

◦ Increased competition◦ Not main focus of management

Current Stock Price: $27.10 Dividend Yield: 6.10% Market Cap: $ 160 Billion

Beta: 0.65 Price in line w/Industry Undervalued vs. S&P 500

Relative to Industry High Low Median CurrentP/Forward E 1.0 0.9 1.0 1.0P/B 1.4 1.4 1.0 0.8P/S 0.9 1.1 1.4 1.6P/CF 0.9 1.1 1.2 1.1

Relative to S&P 500 High Low Median CurrentP/Trailing E 1.1 0.5 0.8 0.5P/B 1.7 0.6 0.8 0.7P/S 2.2 1.0 1.4 1.5P/CF 0.9 0.4 0.6 0.4

Stock Price (Nov. 25): $27.10

Target Price Calculation:◦ Discount Rate: 10%◦ Terminal FCF Growth: 3%◦ Revenue Growth: Around 2.8 - 3%

Discounted Cash Flow: $32.77 Price forward/E: $25.43 Dividend Discount: $23.32

Final Target Price: $30 (60% DCF, 40% P/E)◦ Assuming a conservative outlook.◦ Potential upside: 10.7%

Normal

Analyst: Matthias Sigrist Terminal Discount Rate = 10.0%

10/20/2009 Terminal FCF Growth = 3.0%

Year 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E

Revenue 123,008 126,452 129,992 133,632 137,373 141,220 145,174 149,529 154,015 158,636 163,395

% Growth 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 3.0% 3.0% 3.0% 3.0%

EBT 20,203 21,497 22,099$ 22,049 22,667 23,301 23,954 23,925 24,642 25,382 26,143

EBT Margin 16.4% 17.0% 17.0% 16.5% 16.5% 16.5% 16.5% 16.0% 16.0% 16.0% 16.0%

Interest - - - - - - - - - - -

Interest % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Taxes 6,970 7,416 7,624 7,607 7,820 8,039 8,264 8,254 8,502 8,757 9,019

Tax Rate 34.5% 34.5% 34.5% 34.5% 34.5% 34.5% 34.5% 34.5% 34.5% 34.5% 34.5%

Net Income 13,233 14,080 14,475 14,442 14,847 15,262 15,690 15,671 16,141 16,625 17,124

% Growth 6.4% 2.8% -0.2% 2.8% 2.8% 2.8% -0.1% 3.0% 3.0% 3.0%

Add Depreciation/Amort 19,661 20,232 20,799$ 21,381 21,980 22,595 23,228 23,925 24,642 25,382 26,143

% of Sales 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0%

Plus/(minus) Changes WC 3,961 162 166 2,539 2,473 2,542 2,613 2,692 2,772 2,855 2,941

% of Sales 3.2% 0.1% 0.1% 1.9% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8%

Subtract Cap Ex 20,296$ 21,497 22,099 23,386 24,040 24,713 25,405 26,168 26,953 27,761 28,594

Capex % of sales 16.5% 17.0% 17.0% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5%

Free Cash Flow 16,560 12,978 13,341 14,977 15,259 15,686 16,125 16,119 16,603 17,101 17,614

% Growth -21.6% 2.8% 12.3% 1.9% 2.8% 2.8% 0.0% 3.0% 3.0% 3.0%

NPV of Cash Flows 93,400 48%

NPV of terminal value 99,924 52% Normal Terminal Value 259,177

Projected Equity Value 193,324 100% Current Price 26.02$

Free Cash Flow Yield 10.79% Implied equity value/share 32.77$ Free Cash Yield 6.80%

Upside/(Downside) to DCF 25.9%

Current P/E 11.6 10.9 10.6 Terminal P/E 15.1

Projected P/E 14.6 13.7 13.4

Current EV/EBITDA 5.4 5.1 5.0 Terminal EV/EBITDA 6.1

Projected EV/EBITDA 6.4 6.1 5.9

Shares Outstanding 5,900

Diluted Shares Outstanding 5,923

32.77$ 8.5% 9.0% 9.5% 10.0% 10.5% 11.0% 11.5%1.5% 36.11$ 33.64$ 31.48$ 29.57$ 27.88$ 26.37$ 25.01$ 2.0% 37.69$ 34.95$ 32.58$ 30.51$ 28.68$ 27.05$ 25.60$ 2.5% 39.52$ 36.46$ 33.84$ 31.56$ 29.57$ 27.82$ 26.26$ 3.0% 41.69$ 38.22$ 35.28$ 32.77$ 30.58$ 28.67$ 26.99$

3.5% 44.30$ 40.30$ 36.98$ 34.16$ 31.74$ 29.65$ 27.81$ 4.0% 47.48$ 42.80$ 38.97$ 35.78$ 33.08$ 30.76$ 28.75$ 4.5% 51.46$ 45.86$ 41.37$ 37.70$ 34.64$ 32.04$ 29.81$

Second largest US-based telecom company.◦ 2008 Revenues: $98 Billion

Two major business lines: Wireless: Cell Phones, data and voice services.

◦ Joint Venture with British operator, Vodafone◦ Limited to the Domestic Market

Wireline/Business: Recently merged.◦ Cable Internet provider◦ IT products and IT communications to businesses◦ Recently expanded to the International Market

Wireless Currently experiencing high growth.

◦ Revenues: Increased 12% from 2007 to 2008◦ Customers: Increased 9%

49% of total sales/ 78% Total Profit

Wireline Revenues are slightly decreasing.

◦ 1.7% from 2007 to 2008◦ Customers shifted from Wireline to Wireless◦ FiOS product sales increasing

Wireless 4G Technology Motorola Droid

◦ Recently launched. Competitor to AT&T’s iPhone◦ Sold 100,000 units in the first weekend◦ Expected to have a positive impact on earnings

Wireline Fios Technology

◦ Fiber optic communications network, with TV, cable, and phone◦ Launched in 2007, is now being expanded all across the country

International Operations ◦ Recently started with the acquisition of MCI◦ High capacity for growth◦ Focused on Business Customers

Current Stock Price: $31.78 Dividend Yield: 6.20% Market Cap: $ 90.20 Billion

Relative to Industry

High Low Median Current

P/Trailing E 1.2 .71 .90 1.1

P/Forward E 1.2 .71 .91 .99

P/B 2.4 .7 1.3 1.1

P/S 1.2 .6 .9 .8

P/CF 1.1 .7 .9 .9

Beta: 0.65 Price in line w/Industry Undervalued vs. S&P 500

Stock Price on 10/1: $28.80 Current Stock Price: $31.78

Target Price Calculation:◦ Discount Rate: 10%◦ Terminal FCF Growth: 4%◦ Revenue Growth: Around 3.5%

Discounted Cash Flow: $35.78 Multiples: From $36 to $42

Final Target Price: $36◦ Assuming a conservative outlook.◦ Potential upside: 13%

Normal Aggressive ConservativeAnalyst: Luiz Pinto Terminal Discount Rate = 10.0% 9.0% 11.0%10/20/2010 Terminal FCF Growth = 4.0% 5.0% 3.0%

Year 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E

Revenue 103,970 107,260 110,586 114,125 118,119 122,253 126,532 130,961 135,544 140,966 146,605 % Growth 3.2% 3.1% 3.2% 3.5% 3.5% 3.5% 3.5% 3.5% 4.0% 4.0%

EBT 10,433 10,975 11,525 12,097 12,757 13,448 13,919 14,406 14,910 15,506 16,126 EBT Margin 10.0% 10.2% 10.4% 10.6% 10.8% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0%

Interest - - - - - - - - - - - Interest % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Taxes 3,547 3,732 3,918 4,113 4,337 4,572 4,732 4,898 5,069 5,272 5,483 Tax Rate 34.0% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0%

Net Income 6,886 7,244 7,606 7,984 8,420 8,876 9,186 9,508 9,841 10,234 10,643 % Growth 5.2% 5.0% 5.0% 5.5% 5.4% 3.5% 3.5% 3.5% 4.0% 4.0%

Add Depreciation/Amort 15,596 16,089 16,588 17,119 17,245 17,849 17,714 18,334 18,976 19,735 20,525 % of Sales 15.0% 15.0% 15.0% 15.0% 14.6% 14.6% 14.0% 14.0% 14.0% 14.0% 14.0%

Plus/(minus) Changes WC 2,469 79 80 1,027 945 978 633 655 678 705 733 % of Sales 2.4% 0.1% 0.1% 0.9% 0.8% 0.8% 0.5% 0.5% 0.5% 0.5% 0.5%

Subtract Cap Ex 17,400 17,500 17,694 18,260 18,899 19,560 20,245 20,954 21,687 22,555 23,457 Capex % of sales 16.7% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0%

Free Cash Flow 7,550 5,911 6,580 7,870 7,711 8,142 7,288 7,543 7,807 8,120 8,444 % Growth -21.7% 11.3% 19.6% -2.0% 5.6% -10.5% 3.5% 3.5% 4.0% 4.0%

Normal Aggressive ConservativeNPV of Cash Flows 45,373 45% 47,489 43% 43,398 43% Normal Aggressive ConservativeNPV of terminal value 56,432 55% 61,828 57% 51,549 57% Terminal Value 146370 221666 108722Projected Equity Value 101,805 100% 109,317 100% 94,947 100%Free Cash Flow Yield 9.21% Free Cash Yield 5.77% 3.81% 7.77%

Normal Aggressive Conservative Terminal P/E 13.8 20.8 10.2 Current P/E 11.9 11.9 11.9 Projected P/E 14.8 15.9 13.8 Terminal EV/EBITDA 4.1 6.2 3.1 Current EV/EBITDA 3.3 3.3 3.3 Projected EV/EBITDA 4.1 4.4 3.8

Shares Outstanding 2845Normal Aggressive Conservative

Current Price 28.80$ 28.80$ 28.80$ Implied equity value/share 35.78$ 38.42$ 33.37$ Upside/(Downside) to DCF 24.2% 33.4% 15.9%

Comaprison AT&T VerizonCurrent Ratio 0.5 1.0Debt to Equity Ratio 1.8 1.6Average Collection Period 47 44Times Interest Coverage 6.9 6.1EPS 2.17$ 2.23$ Dividend/Share 1.61$ 1.78$ Working Capital (19,734)$ 169$ CF operation 33,656$ 26,620$ Net Cash Flow (178)$ 8,629$ CF Operation/Share 5.68$ 9.34$ Net CF/Share (0.03)$ 3.03$ Cash/Share 0.30$ 3.43$

Latin American Wireless Company◦ 2008 Revenues: $4.2 Billion

Offers four types of services: Nextel Direct Connect Wireless Data Solutions and Mobile Internet

Access Handsets International Roaming Services

50%

31%

13% 6%

0%

Revenue By Region

Nextel Mexico

Nextel Brazil

Nextel Argentina

Nextel Peru

Corporate and other

50%

24%

11%

3%-12%

Core Earnings By Region

Nextel Mexico

Nextel Brazil

Nextel Argentina

Nextel Peru

Corporate and other

Performance Drivers 2009 2008ARPU 46 59CPGA 268 318Churn Rate (%) 1.93 1.87

FX Rate Fluctuation Actual NormalizedOperating Revenues -3.0% 17.0%Operating Income -9.0% 30.0%ARPU -22.0% -5.0%

Ratios 2008 2007 2006 2005 2004Profitability

ROA 7.25% 6.96% 8.93% 6.67% 3.78%ROIC 8.63% 8.08% 10.79% 8.20% 5.02%

LiquidityCurrent Ratio 2.69 3.17 2.12 2.62 1.69

LeverageDebt To Assets 0.65 0.60 0.59 0.69 0.72Debt To Equity 1.85 1.51 1.45 2.23 2.53

Allowance to AR 5.78% 4.41% 5.07% 5.03% 4.82%

RATIO NIHD AMX TI MICC AVERAGEEarning Power 2008 2008 2008 2008 2008

Asset Turnover 0.81 0.79 0.34 0.71 0.6625Pretax ROE 26.5% 52.6% 10.9% 39.9% 32.5%Pretax ROA 10.0% 18.3% 3.3% 12.3% 11.0%

LiquidityQuick Ratio 2.19 0.51 0.78 0.55 1.0075Current Ratio 2.69 0.77 0.8 0.78 1.26Avg Days Collect 38 55 103 30 56.5Inventory Turnover 12.1 4.6 36.6 12.7 16.5Times Interest Earned 4.2 9.9 1.5 5 5.15

MarginsGross Margin 60.5% 57.8% 54.0% 78.3% 62.7%Operating Margin 18.0% 27.6% 14.8% 25.4% 21.5%Earnings After Taxes 8.6% 17.2% 7.4% 9.2% 10.6%

-200

-100

0

100

200

300

400

500

NIHD

TI

AMX

MICC

Wireless Spectrum Acquisition 3G Network Economic Upturn Reduced cost per customer

Current Stock Price: $30.95 Dividend Yield: N/A Market Cap: $ 4.8 Billion

Beta: 2.23 Industry Undervalue Undervalued vs. S&P 500

Valuation Measure Sector S&P 500

Wireless Integrated NIHDP/Trailing E -33% -33% 209% -34% -28%P/Forward E -11% -16% NM -18% -58%P/B -19% 14% -33% -22% -71%P/S -33% -18% -59% -33% -64%P/CF -36% -20% -60% -29% -55%

Stock Price (Nov. 23): $30.95

Target Price Calculation:◦ Discount Rate: 10.5%◦ Terminal FCF Growth: 5%◦ Revenue Growth: Around 4.5 to 5%

Discounted Cash Flow: $41.67 Price forward/E: $41.67

Final Target Price: $41.67 (100% DCF)◦ Assuming a conservative outlook.◦ Potential upside: 34.6%

Absolute Valuation High Low Median Current Target Multiple

Target Value

Target Price

P/Forward E 34.3 6.7 19.2 13.8 18.2 $2.29 41.67P/S 109.6 0.5 3.8 1.6 2.2 $25.76 56.67P/B 16.9 1.2 8 2.3 3.8 $14.10 53.58P/EBITDA 213.98 1.48 13.42 4.84 8.1 $6.70 54.27P/CF 36.5 2.8 15.1 6.8 11.2 $4.77 53.42

NII Holdings Inc.Normal Aggressive Conservative

Analyst: Daniel Packard Terminal Discount Rate = 10.5% 10.0% 11.0%11/23/2009 Terminal FCF Growth = 5.0% 5.5% 4.5%

Year 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E

Revenue 4,302,000 5,021,000 5,573,000 6,074,570 6,560,536 7,052,576 7,546,256 8,036,763 8,518,968 8,944,917 9,392,163 % Growth 16.7% 11.0% 9.0% 8.0% 7.5% 7.0% 6.5% 6.0% 5.0% 5.0%

EBT 542,394 607,625 703,198 735,023 793,825 853,362 913,097 972,448 1,030,795 1,082,335 1,136,452 EBT Margin 12.6% 12.1% 12.6% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1%

Interest - - - - - - - - - - - Interest % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Taxes 160,006 176,211 203,927 213,157 230,209 247,475 264,798 282,010 298,931 313,877 329,571 Tax Rate 29.5% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0%

Net Income 382,388 431,414 499,271 521,866 563,616 605,887 648,299 690,438 731,865 768,458 806,881 % Growth 12.8% 15.7% 4.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.0% 5.0%

Add Depreciation/Amort 382,878 456,911 512,716 516,338 557,646 599,469 641,432 642,941 681,517 715,593 751,373 % of Sales 8.9% 9.1% 9.2% 8.5% 8.5% 8.5% 8.5% 8.0% 8.0% 8.0% 8.0%

Plus/(minus) Changes WC (52,263) (89,875) (57,854) (30,373) (19,682) (21,158) (22,639) (24,110) (25,557) (26,835) (28,176) % of Sales -1.2% -1.8% -1.0% -0.5% -0.3% -0.3% -0.3% -0.3% -0.3% -0.3% -0.3%

Subtract Cap Ex 860,400 1,054,410 1,003,140 911,186 984,080 916,835 830,088 723,309 681,517 715,593 751,373 Capex % of sales 20.0% 21.0% 18.0% 15.0% 15.0% 13.0% 11.0% 9.0% 8.0% 8.0% 8.0%

Free Cash Flow (147,397) (255,960) (49,007) 96,646 117,499 267,363 437,004 585,960 706,308 741,623 778,704 % Growth 73.7% -80.9% -297.2% 21.6% 127.5% 63.4% 34.1% 20.5% 5.0% 5.0%

Normal Aggressive Conservative Normal Normal Aggressive ConservativeNPV of Cash Flows 1,478,918 1,537,294 1,422,889 21% Terminal Value 14,866,171 18,256,288 12,519,168 NPV of terminal value 5,477,424 7,038,589 4,409,057 79%Projected Equity Value 6,956,342 8,575,883 5,831,945 100% Free Cash Yield 5.24% 4.27% 6.22%Free Cash Flow Yield -2.85%

Debt 3,301,233 Terminal P/E 18.4 22.6 15.5 2009E 2010E 2011E Cash 1,243,251

Current P/E 13.5 12.0 10.3 Cash/share 7.45 Terminal EV/EBITDA 9.0 10.8 7.7 Projected P/E 18.2 16.1 13.9 Current EV/EBITDA 7.8 6.8 5.9 Projected EV/EBITDA 9.7 8.5 7.4

Shares Outstanding 166,927.0 166,927.0 166,927.0 Normal Aggressive Conservative

Current Price 30.95$ 30.95$ 30.95$

Implied equity value/share 41.67$ 51.38$ 34.94$ Upside/(Downside) to DCF 34.6% 66.0% 12.9%

41.67$ 9.0% 9.5% 10.0% 10.5% 11.0% 11.5% 12.0%4.0% 50.94$ 45.17$ 40.38$ 36.36$ 32.93$ 29.98$ 27.42$ 4.5% 55.71$ 48.92$ 43.38$ 38.80$ 34.94$ 31.65$ 28.82$

5.0% 61.68$ 53.50$ 46.98$ 41.67$ 37.28$ 33.57$ 30.42$

5.5% 69.35$ 59.22$ 51.38$ 45.13$ 40.04$ 35.82$ 32.27$ 6.0% 79.58$ 66.58$ 56.87$ 49.35$ 43.35$ 38.47$ 34.43$

Below is a brief summary of NII Holdings BUY rating:◦ NII’s discounted cash flows and valuation analysis - 34%

undervalued.◦ NII’s return on assets and sustained capital expenditures

despite economic slowdown. ◦ Acquire additional telecom spectrum in selective emerging

markets.◦ NII has successfully differentiated themselves.◦ NII’s cyclical nature indicates growth as domestic and

international economic conditions improve. Risks related to this recommendation include:

◦ Reduced demand for services resulting from economic downturn causing reduced discretionary spending.

◦ Increased levels of competition among the other wireless providers.

◦ Increased levels of voluntary and involuntary customer turnover.

◦ Available spectrum limitations and government regulation.

Below is a summary of Verizon Communications BUY rating:◦ According to the DCF and the multiples valuation, there is a

conservative upside of 13%. Might be higher.◦ High growth in the wireless sector, with the highest level of

network coverage in the country.◦ Now has a comparable product to the iPhone, the Droid,

expected to boost sales.◦ Has a chance of leading in new 4G technology, increasing its

value.◦ Has recently expanded to international markets, reducing its

exposure to the American market.Risks related to this recommendation include:

◦ Shrinking Wireline segment might affect the long-term profitability of the company.

◦ Droid sales can hurt stock price, if below expectations.◦ Capital intensive nature. Demands a huge continuous

investment.

Sell AT&T (219 basis points) Buy Verizon (117 basis points) Increase stake in NII Holdings (59 basis

points to 200 points)

Total Sector Holdings – 317 basis points (42 basis point decrease)