In accordance with article 44 section XI of the Mexican Securities Market Act, in correlation with article 172 of the General Business Corporations Law, and in my capacity as Chief Executive Officer of Telesites, S.A.B. de C.V. (the “Company” or “Telesites”), I am pleased to present this report on the Company’s operations during the fiscal year ended December 31, 2020.

Economic Overview
2020 was marked by a global crisis brought on by the COVID-19 pandemic, with more than 100 million cases confirmed and millions dead. Mobility restrictions to stem the virus’s propagation and the lack of a definitive cure prompted temporary shutdowns of large portions of most of the world’s economies, especially in the first half of the year. This led to a decline of -8.93% in global GDP in the second quarter and -3.50% in 2020 as a whole, despite unprecedented fiscal stimulus measures.

The U.S. economy shrank by 3.50%, affected mainly by a 7.31% drop in aggregate demand in the services sector, as well as a 5.27% reduction in gross fixed investment. In this context, the US Federal Reserve dropped its benchmark interest rate twice to close the year at between 0.00% and 0.25%. Furthermore, budget stimulus payments totaling around 3.5 billion dollars were made in 2020, expanding the public debt from 108.68% to 131.18% of GDP.

In Mexico, GDP was down by 84.6% in the year, with secondary activities the hardest hit (-10.20%), heavily affected by construction (-17.42%) and manufacturing (-10.34%). Tertiary activities, which account for 64.05% of economic activity in this country, lost 7.85%, mostly because of retailing, which was off by 9.67%, and tourism.

The Mexican peso closed the year at 19.91 per dollar, a 5.22% devaluation, and was highly volatile as the pandemic began, topping out at 25.36 pesos per dollar and then recovering toward the end of the year because of a current account surplus of 26.57 billion dollars, 2.41% of GDP, and the interest rate spread between Mexico and the United States. Banco de Mexico dropped its reference rate seven times in 2020, ending the year at 4.25%, compared to 7.25% at the close of the preceding year.

Inflation in Mexico ended at 3.15%, and core inflation at 3.80%, offset by a more modest 1.18% increase in non-core components, benefitting from the decline in oil prices, particularly gasoline, which fell 8.90% in 2020.

The trade balance was a record surplus of USD 34.48 billion, compared to USD5.41 billion the year before. The oil balance was a deficit of USD 13.99 billion, USD 7.37 billion less than in 2019, and the non-oil surplus grew USD 21.70 billion to USD 48.47 billion in the year. Among Mexico’s exports, manufacturing, the largest component, declined by 8.92% but imports fell more sharply in all categories, led by consumer goods with -26.20% and capital goods by -16.87%, the latter because of a drop in investment in Mexico.

The federal budget balance was a deficit of -674.16 billion pesos (2.90% of GPD) compared to last year’s deficit of -393.61 billion pesos (1.60% of GDP). The rise in the deficit was due to lower revenues (-4.10% in real terms), affected primarily by the 38.70% reduction in oil revenues, which was offset only slightly by the 4.90% real reduction in expenditures.

Report on the Company’s operating and financial results
The following are some remarks on the key figures reported in our financial statements for the close of 2020, which are attached to this report, including the opinion of the Independent Auditor.

In 2020, Telesites created a Real-Estate Investment Trust (the equivalent of a US REIT, known in Mexico as a FIBRA), called Fideicomiso Opsimex 4594 (FSITES). Initially, our subsidiary Operadora de Sites Mexicanos, S.A. de C.V. (Opsimex) contributed 6,500 towers to the FIBRA in July, in exchange for trust securities certificates representing approximately 72.5% of FSITES’ capital.

The remaining 27.5% of the FIBRA’s capital was placed with the investing public, raising 12.04 billion pesos in capital that will be used primarily to finance the construction of new towers in Mexico in coming years. As of the date it was created, FSITES is the entity that will build new towers for Telesites in Mexico.

Subsequently, on December 29, 2020, FSITES carried out a capital increase in which Opsimex contributed an additional 480 sites, while the other Trust owners contributed 691.9 million pesos. These sites began generating revenues for FSITES in January 2021.

Telesites started out 2020 with a portfolio of 17,260 revenue-generating sites. During the year it added 922 new sites in Mexico and 5 new sites in Costa Rica, ending the year with 18,187 sites in total, a portfolio growth of 5.37% compared to the previous year. During the year, 603 new client co-locations were added to revenues, resulting in a consolidated tenancy ratio of 1,185 operators per tower at the close of 2020.

The company reported total revenues of 82 billion pesos, an 11.1% year-to-year growth, due mainly to an increase in the number of sites and new colocations during the year. EBITDA totaled 7.7 billion pesos, an 11.5% growth over the previous year, while our EBITDA margin was 95% at the close of 2020.

Excluding the towers that were contributed to FSITES, capital expenditures by Telesites in 2020 totaled 1.1 billion pesos.

Our company’s strategy continues to be focusing on the growth of its business, sustained by our clients’ demand for new sites, and the increased potential for colocations with the addition of each site to our portfolio. Although 2020 presented a particularly difficult climate, we achieved significant goals: the creation of FSITES and the investment of more than 12.7 billion pesos from the investing public in this vehicle. These funds will enable us to establish a pace of organic growth consistent with market demand put us on strong footing to take advantage of any potential investment opportunity that might arise in the Mexican telecommunications tower market.

Finally, Telesites reiterates its commitment to ensuring optimum use of our resources at all times. To this end we work tirelessly to strengthen relations with clients, suppliers and employees, all of which are pillars for our solid growth.

Fellow shareholders:
I am grateful for the trust you have placed in us, and I reiterate the commitment of the entire team that makes up Telesites to continue improving the performance of this company’s activities.

Gerardo Kuri Kaufmann
Chief Executive Officer
Telesites, S.A.B. de C.V.