GOWEX coverage analysis by AFI - Oct 2012

Analyst
Pablo Mañueco Galindo
Analistas Financieros Internacionales

 GOWEX is a company which operates in the telecommunications sector, and BASIC LISTING DATA
which has a position as a leading company in the Spanish market in installing and (22nd October 2012)
TICKER GOW
managing networks for WiFi access points. GOWEX is listed on the Alternative PRICE (EUR) 11.23
Stock Market (Mercado Alternativo Bursátil, MAB) of the Spanish Stock Market. SECTOR TELECOMMUNICATIONS
No. OF SHARES ISSUED
The company has focused its business model towards the Wireless division, which 12,934,268
(No. SHARES)
accounts for 86% of the company's gross margin, as against the MARKET CAP. (EUR) 143,823,609
telecommunications market, which was the company's original core business. FREE FLOAT (%) 25.3%
AVERAGE DAILY VOLUME 2012
11,047
(No. SHARES)
 GOWEX is a pioneering company, which so far does not face significant
MAX / MIN PRICE 12 MONTHS
competition in Spain, and whose international presence is reporting gradual 11.30 / 4.33
(EUR)
growth. The main threat to the company is the possibility of major operators COMPARATIVE PERFORMANCE
(GOWEX vs. IBEX 35)
entering the market.
3M 6M 12M YTD

 Since 2008, the company has reported recurrent and growing profits at all levels of ABSOLUTE 88.0% 84.0% 129.2% 135.9%
RELATIVE 68.7% 69.5% 139.3% 144.7%
the Income Statement, and reported important growth in 2011 (+34% in revenue,
+76% in EBITDA and +41% in net profit). Business margins and profit indicators GOWEX vs. IBEX 35 since start of trading
are high.

 This positive trend has continued in the first half of 2012, with heavy growth in Gowex vs. IBEX 35 since start of
both revenue (+60% against the first half of 2011) and in profits (+62% in EBITDA trading
and +70% in net profit).

 GOWEX commands a healthy financial position, with low debt (€12.0 million) and
high liquidity (€31.4 million), so that the net cash position stands at €19.4 million.

 AFI has carried out a valuation of GOWEX which shows a value of €12.55/ share, KEY FINANCIAL FIGURES (EUR)
2008 2009 2010 2011
meaning that the target price has risen 22% compared to our report in May
SALES 24,191,422 35,179,613 49,640,989 66,697,902
2012, offering upside potential of 12% from the current share price. However, EBITDA 2,307,690 5,518,174 9,371,277 16,517,015
our outlook is less favourable than that published by the company. The implicit NET PROFIT 862,191 2,876,561 5,130,355 7,220,340
ROE 9.1% 23.0% 22.4% 20.5%
ratios in the valuation (EV/ EBITDA 2012e x6.3 and PER 2012e x10.1) are
DATA PER SHARE (EUR)
compelling, in our opinion, for a company with GOWEX's growth potential. 2009 2010 2011
DIVIDEND PER SHARE 0.0000 0.0784 0.0783
 In short, we believe that GOWEX is an attractive investment opportunity, EARNINGS PER SHARE 0.29 0.45 0.57
given its appropriate strategic positioning, its recurrent capacity to generate cash VALUATION RATIOS (x / %)
2010 2011 2012e
and the liquidity available to finance its growth process at international level.
PER (PRICE/ EARNINGS) 13.5 x 10.1 x 10.1 x
EV/ EBITDA (MARKET CAP. +
 The valuation of €12.55/ share is the central scenario of a broad range of NET DEBT/ EBITDA)
3.1 x 2.6 x 6.3 x

prices, considering the volatility which could affect GOWEX's results due to PRICE/ BOOK VALUE 3.0 x 2.1 x 3.2 x
DIVIDEND YIELD 1.54% 3.31% 0.70%
the nature of its business. Over the next few months, the share price could
Source: Factset
be affected by M&A transactions, relating to the rights issue under way and
its positioning in the American market through the issue of ADRs.

OCTOBER 2012 - ANALYSIS OF GOWEX 1

Analyst

CONTENTS

Description of the company ..................................................................................................................................................... 3
Analysis of GOWEX business ................................................................................................................................................. 4
Gowex Wireless .......................................................................................................................................................................... 4
Gowex Telecom .......................................................................................................................................................................... 7
SWOT ................................................................................................................................................................................... 10
Economic-financial analysis .................................................................................................................................................. 11
Profit and loss account ............................................................................................................................................................. 11
Profit and loss account 2008 - 1H 2012 ................................................................................................................................ 11
Balance sheet ........................................................................................................................................................................... 14
Balance sheet 2010- 1H 2012 ............................................................................................................................................... 14
Valuation ............................................................................................................................................................................... 17
Valuation assumption ............................................................................................................................................................... 17
Result of valuation .................................................................................................................................................................... 21
VALUATION .......................................................................................................................................................................... 21


Analyst

DESCRIPTION OF THE COMPANY
GOWEX is a company which operates in the telecommunications sector, which
specialises in the neutral management of infrastructures and offering carrier
interconnection services, and which has taken up a position as a leading company in SHAREHOLDERS
the Spanish market in the installation and management of WiFi access points. Gowex SHAREHOLDER No. SHARES %
JENARO GARCÍA MARTÍN 7,718,285 59.7%
also manages a wireless Roaming platform, and exploits the geolocalised advertising REST OF MANAGEMENT
1,377,176 10.6%
business over Wireless networks, which consists of sending each client advertising TEAM
corresponding to the location where he/she is to be found. SHIN HEE CHO 572,649 4.4%
FREE-FLOAT 3,266,158 2.,3%
12,934,268 100.0%
The company was incorporated in 1999 under the name of Iber Band Exchange, S.A,
Source: Factset
and changed its name to its current one in 2007. GOWEX's shareholders consist
mainly of Jenaro García (CEO) and the rest of the management team, who control
70.3% of the group, with a market free-float of 25.3%. The 12.3% free-float
corresponds to institutional investors.
REVENUE AND EBITDA 2006-2011
Jenaro García began his career in the financial institution FA Smith Barney. His Amounts in € Mn
enterprising spirit has led him to work in the telecommunications sector.

On 12 March 2010, the company joined the Alternative Stock Market (MaB), through
Revenue EBITDA
an Initial Public Offering in which it secured funds of € 6.0 million, with a floatation
price of €3.5 / share. On 15 June 2010, it also joined Alternext, the alternative French
market, which belongs to NYSE Euronext. In January 2012, GOWEX began trading
Revenue
continuously on the MaB.

In 2011, the company posted consolidated revenue of € 66.7 million, and in the first
six months of 2012 it has reported €41.0 million. Gross operating profit (EBITDA)
Source: GOWEX
amounted to €16.5 million in 2011, and at 30 June the figure stood at €10.6 million. In
2011, net profit amounted to €7.2 million, and at 30 June it stood at €5.5 million.

At 30 June 2012, the shareholders' equity of GOWEX amounts to €40.1 million. Gross
financial debt stands at €12.0 million, and cash and liquid assets at €31.4 million,
which means the company has a positive net financial position of €19.4 million. BREAKDOWN OF GROSS MARGIN Jun-12
Amounts in %
The company operates in two core businesses:

 GOWEX Wireless specialises in offering wireless telecommunications services. Gross Margin
Specifically, it consists of Wifi network management and operation services, the Wireless
wireless Roaming and 3G platform and 3G Offloading, and electronic advertising
and geolocalised e-commerce of Wireless networks.
 GOWEX Telecom is responsible for managing and operating a commercial
exchange platform of products and services of the B2B telecommunications
market, and also for offering accessory services to companies. Gross Margin
Telecom

Source: GOWEX
Gross Margin Telecom


Analyst

ANALYSIS OF GOWEX BUSINESS
Initially, the company focused its activity on the Telecom business line. In recent years, in light of the growth potential in the Wireless
sector, the company has refocused its business, and reported significant growth in this division. At June 2012, 86% of gross margin
was produced by GOWEX Wireless and 14% by GOWEX Telecom.

GOWEX WIRELESS
This division contains the three businesses which provide the company with the greatest growth: the Roaming platform and 3G
Offloading, WiFi networks engineering and consulting services, and GOWEX Media and Mobile. As of June 2012, this division accounts
for 78% of consolidated revenue and 86% of gross margin.

GOWEX's growth in this business will largely be leveraged through its alliance with a major carrier in the media sector with which they
hope to move into 300 large cities all over the world, within a timeframe of 3 years.

Currently Google, in partnership with Boingo, has begun to develop the same business model as GOWEX Wireless in the city of San
Francisco and in New York Airport, thus confirming the strength of GOWEX Wireless's business model.

Roaming Platform and 3G Offloading

Due to the exponential growth occurring in the wireless telecommunications market, GOWEX decided to refocus the company's
strategy, and reinforced this business line from 2004 on.

The Roaming platform allows the different fixed, mobile and wireless operators to interconnect, sharing their infrastructures and access
points, and thus increasing the Internet cover area for their customers, both nationally and internationally. GOWEX charges f or
connections to the platform and for each of the transactions made.

This is a low capital intensive model, with strong margins, as it is carried out through Internet and does not require physical
interconnected circuits, reducing the investments required. The platform acts transparently and in a neutral way, without competing with
carriers, because it does not require a license and does not contact the final users or their customers.

The platform has a similar structure which it offers wireless Internet service providers (WISPs). 106 carriers from different countries
currently use the platform, creating a network with over 450,000 access points. This means that all the customers of these carriers are
potential consumers of the Roaming service supplied by GOWEX.

The platform is also operated in 3G Offloading mode. 3G is one of the most commonly used technologies by mobile
telecommunications companies. Because of its intensive use for data connection by smartphone users, 3G networks are increasingly
saturated. Carriers are currently deploying a new generation technology, 4G, which increases the capacity of data transmission. This is
a temporary solution, but does not resolve the problem in the mid and long term. The solution to the problem consists of using WiFi
networks, with two purposes: to relieve mobile networks so that they can continue to offer the voice service for which they were
designed, and to permit the traffic of faster and higher quality data than the saturated 3G networks. Therefore, because the GOMEX
WiFi network is a non-exclusive neutral network, the company is considering the possibility of other carriers using its network, charging
a fee to use it, instead of deploying antennas on a massive scale (one for each carrier in each traffic light or lamppost).


Analyst

By this means all participants will benefit:

 Carriers can avert the collapse of their 3G networks and increase the depreciation periods of the costly investments they made to
deploy 3G networks, delaying the rollout of the new 4G networks. They also give their users a higher quality service, by allowing
them to connect to a network which is not saturated.
 Town councils prefer a single neutral network to be deployed which can be accessed by all carriers, thus preventing the
environmental and visual impacts which would be caused by each carrier installing their own antenna network.
 GOWEX would increase its revenue by acting as an intermediary and charging an intermediation fee.

GOWEX also allows users who are not customers of a member carrier to access the network, for which purpose it needs to open an
account with GOWEX, with two options: free service, with limited connection speed, restriction to certain contents and publicity, and the
Premium or payment service, allowing all the bandwidth to be used without advertising. The company has over 950,000 registered
users under the two types of service.

Revenues from the Roaming platform and 3G Offloading stem from:

 A one-off installation fee (not recurrent): charged to new customers who connect to the platform.
 Monthly subscription fees (recurrent): carriers make a variable monthly payment in accordance with their size, to maintain their
connection to the platform and take advantage of the support services offered.
 Roaming fees (recurrent): for each Roaming transaction made between different carriers, GOWEX charges a fee.
 3G Offloading fees (recurrent): fees for use of the network by carriers, to prevent saturation of their 3G networks.

This business line accounts for 32% of revenue in the Wireless division.

Engineering and consulting

GOWEX offers consulting, installation and maintenance services for access points to WiFi networks. This line of business is geared
towards all kinds of agents interested in developing a WiFi access point network, such as public authorities, public transpor t
companies, universities or private companies.

The company divides the process into three different parts: project design (consulting), development supervision (installation) and
network maintenance (management). In this regard, the company focuses on high value added activities, completely carrying out the
consulting phase, outsourcing the installation and management. For installation, the company has agreements with companies such as
Indra or the Chinese company CRSCS, while physical maintenance is subcontracted to specialised companies.

Engineering and consulting revenues stem from:

 Consulting and study fee following network installation (non-recurrent): the amount of these transactions depends on the size and
complexity of the project in question.
 Revenue from execution of installation (non recurrent), the amount of which depends on the number of accesses and their term of
development. These revenues are mainly billed by companies responsible for the physical installation; and GOWEX receives a
small part for the technical project management.
 Network maintenance fees (recurrent): GOWEX receives an annual fee for network maintenance; the fee is estimated as a
percentage of the initial installation payment. Remote maintenance via Internet is carried out by GOWEX, and repairs of physical
facilities are subcontracted.

GOWEX currently manages 32,000 access points, over 450,000 of which comprise its global network. In our opinion, the number of
access points is one of the key business variables. These access points are used by almost one million users.

The company has positioned itself as a leader in consulting and management of WiFi municipal networks. Particularly important
projects have been “La Vida WiFi” or “Mantente WiFi Ciudad” developed in Madrid, Malaga, Burgos, Avilés and Ávila, for creating
municipal WiFi networks.


Analyst


The patents which Gomex has registered for its technology and trade secret are the main forms of protection of industrial property. The
network effect also gives the company a certain competitive advantage, but the fact that there are networks of networks which can be
interconnected, limits the impact of this kind of defence.

GOWEX Media and GOWEX Mobile

GOWEX Media is a publicity content and geolocalised ecommerce platform, which allows GOWEX to take advantage of the number of
final users which use its network access points. This platform is used to make adverts according to the location of the final user, helping
companies to engage in geomarketing. This business line generates recurrent revenue.

The geolocalised advertising platform currently operates 32,000 connection points managed by GOWEX, although the company is
negotiating that it be introduced in all members of the Roaming platform, sharing the benefits produced.

This area of the company also carries out street-marketing events combined with virtual marketing over the platform.

GOWEX Mobile is the subsidiary of GOWEX created to offer innovative services using mobile devices, such as smartphones or tablets.
The services provided include the following:

 Development of mobile applications: GOWEX can develop tailor-made applications for all operating systems for any client.
 Mobile ticketing: the user can acquire and receive tickets for an event in his/her mobile, storing them in a digital portfolio (e-
wallet), and presenting them in the entrance to the event, without having to print them out on paper.
 Mobile couponing: sending electronic coupons with customised discounts, which are stored in a special section for these titles,
without needing to print them.
 Mobile loyalty cards: GOWEX offers the possibility of making loyalty or club membership cards without needing to carry the plastic
card, using the e-wallet.
 Segmented communication to mobiles: a "push" channel with messages segmented in accordance with preferences and
behaviour patterns. Communication is established based on the client's geolocalisation.


Although the WiFi global platform has the equivalent of 450,000 access points, GOWEX manages only 32,000; the rest are managed
by carriers associated with GOMEX, significantly reducing the cost of creating a new network, but also making the company dependent
on these associations.

Due to the rapid development of WiFi networks in Spanish municipalities, GOWEX has been able to reach a critical volume in Spain,
allowing it to generate a network effect. Cities with WiFi networks managed by GOWEX worldwide represent over 70 million inhabitants
thereby making them potential users of its different platforms. This makes GOWEX sufficiently attractive from a commercial standpoint
for new carriers to join its WiFi networks, and for its geolocalised advertising network to enough reach for companies to consider
advertising in it.

National and international municipal concessions for operation of WiFi networks developed by GOWEX last 3-5 years in the major cities
and between 5-10 years for smaller-sized cities. Therefore, although GOWEX has reached the critical mass of users in Spain to be
able to create a sufficiently attractive network effect, the ability to maintain this effect will largely depend on renewing the management
contracts these municipalities have once they are completed. The company does not disclose the exact dates on when each contract
with public authorities expires, so it is not possible to accurately estimate until when the company has this recurrent source of income.

Part of GOWEX's revenue stems from Spanish town councils. According to the information provided by the company, there have been
no defaults, but it is important to note that this is a risk that the company could face in the future, due to the limited solvency of many of
these councils.


Analyst

GOMEX's international expansion is being helped by the large amount of experience gained with developing WiFi networks in Spanish
municipalities and the associated positive impact on its reputation. The company is developing projects in the South American market,
where it has obtained particularly important contracts for installing WiFi access points in Buenos Aires, Costa Rica and Panama. The
company has also signed a strategic alliance with CRSCS, the Chinese company, for developing joint projects in China. The first
project arising from the agreement has been the installation of WiFi in the high speed railway lines between Shanghai and Peking.
GOWEX is in the process of deploying its network in the city of Nanjing, the first Chinese city in its portfolio, where it is working with
local carriers.

Furthermore, in the first half of 2012, GOWEX secured the concession to install the free WiFi network in Paris public transport system,
which will begin to operate next year, and it reached an agreement with SNCF (Sociedad Nacional de Ferrocarriles Franceses) t o offer
free WiFi in its railway stations.

In the first six months of 2012, the company also concluded a contract with Skype, allowing Skype users to connect to Internet using
the WiFi networks provided by GOWEX.

GOWEX includes the aforementioned services in its wireless business within the GOWEX Wireless Smart Cities 2.0 strategic
concept

GOWEX offers cities the possibility of creating Wireless Smart Cities offering free wireless Internet to the general public, and improving
the services offered via Wireless connectivity. The Smart City is a tool which allows more efficient systems to be created for electronic
administration, better transport and good communication between members of the public, improved energy management systems,
more efficient security systems, better public and private transport infrastructures, and many other applications.

A Smart City provides the following benefits or improvements:

 The Wireless Roaming and 3G Offloading platform allowing municipal residents to access the dozens of WiFi cities in the
Wireless Smart Cities system free of charge, thereby promoting the city as a tourism destination and also public mobility. Citizens
will also be able to access the networks of the carriers who are interconnected to that platform, with access to countries in the five
continents.
 The proprietary content and publicity geolocalisation platform, enabling contents to be segmented in accordance with the different
WiFi zones (Smart Zones) where citizens can connect at any time. This provides a business model which generates recurrent
income through the sale of advertising services and geolocalised contents.
 The neutrality of the technological solution and GOWEX's positioning, in comparison with other carriers, means data transmission
networks on radio technologies in the city can be optimised. By this means, the use of antennas can be unified, dramatically
reducing the investment needed as well as visual and acoustic pollution of these infrastructures in public thoroughfares. The use
of only one antenna on each piece of street furniture by several carriers, given that GOWEX has the necessary technology and its
position is one of a neutral operator.
 Integration with different e-Goverment or e-Administration systems

The GOWEX Smart Cities 2.0 platform (patent pending) is a set of systems and sub-systems designed to facilitate implementation and
integration of all types of Smart Services within an innovative Smart City environment.

GOWEX TELECOM
GOWEX Telecom is the line of business on which the company focused its operations at the beginning. It consists of management and
operation of a platform or neutral pool of various products and services of the telecommunications market called “Iber-X”, as well as
offering complementary services.

The exchange takes place between different suppliers (operators, carriers) and sources of demand (other carriers, ISP, ASP and
companies in the telecommunications sector), which largely buy and sell Internet bandwidth, communications lines, voice services
(traditional and VoIP) or virtual private networks.


Analyst

The platform offers the following B2B connectivity solutions and services, inter alia:

 Bandwidth: allows operators to buy and sell bandwidth, with the possibility of selecting the quality of bandwidth to meet carriers’
specific requirements.
 Point-to-point circuits: allows data transmission circuits to be bought and sold, thus making it possible to exchange private data.
 Virtual private networks (VPN): offers a consulting service for creating optimum VPN networks, by aggregating and organising
different carriers' VPN components marketed through the Telecommunications Market. This type of VPN allows the local area
network of a company to be extended to a public network, such as Internet.
 Management and monitoring panels: provides a management and monitoring system called Telecom Service Manager (TSM),
which allows carriers to access a transaction prices index or to obtain information about the amount and quality of available
bandwidth, inter alia, also enabling multi-criteria searches to be made (origin of circuit, available distance, capacity or price).
 Remote access VPN network control panel: allows clients to manage their remote VPN network autonomously.
 Balancing and settlement of transactions: it has developed a transaction system between carriers so that all transactions can be
reserved and billed and for the payment to be made electronically.

GOWEX Telecom also offers complementary services to its clients, such as technical assistance, infrastructure (housing) or advisory
services in areas such as strategic planning, international growth or the regulatory environment.

On the Iber-X platform, Gowex is the only neutral carrier in the Spanish telecommunications market, acting as a hub between all the
interconnected agents and centralising transactions more efficiently. By this means, it enables members using Iber-X to carry out
transactions in real time, allowing them to save costs, resources and time compared with traditional bilateral agreements. The platform
also enables the company to obtain additional revenues from carriers through by selling its idle capacity in a flexible way.

Revenues of this division stem mainly from:

 Members' subscription fee (recurrent)): the platform clients pay a monthly subscription fee for access to the platform, and to be
able to benefit from the different services provided by the company.
 Fees on transactions between members (recurrent)): GOWEX receives a fee for each sale transaction carried out on the platform,
being defined as a percentage on the nominal amount of the transaction.


Analyst

 Installation of new members (non recurrent): the company charges new clients for installation and adjusting the connection to the
platform.

Some of the similar existing platforms in Europe were acquired by large telecommunications companies. For example, Trading Com
Europe, which was bought by Neuf Cegetel in 2007, or US Arbinet in the US, bought by Primus Telecom in 2010.

The company boasts a customer base of over 90 entities, including telecommunications carriers (Level3, Comcast, IPSA) and
companies such as Acciona, Telefónica, El Corte Inglés, Unión Fenosa and Suzuki.

In recent years, this company has gradually become less relevant within the company due to the significant growth in the Wireless
division. As of June 2012, GOMEX Telecom accounted for 22% of revenue and 14% of gross margin.

GOWEX's peers

GOMEX operates in a very particular way, and there are no peers which are perfectly comparable, although some of these competitors
are integrated in more diversified companies.

However, integrators offer one of the alternatives to the Roaming Wireless business: these companies aggregate carriers’ networks to
offer Wireless services. Boingo and iPass, which are both US companies, are examples.

 Boingo: a company founded in 2001 in the US, which manages 500,000 hotspots around the world, in leading airports, hotel
chains, cafés or conference centres, inter alia, through which clients can access Internet.
 iPass: A company founded in 1996 in the United States, providing mobile services to companies, with a WiFi network comprising
over 750,000 hotspots in 120 countries.


Analyst

SWOT

STRENGTHS WEAKNESSES

 Low-intensive capital growth  GOWEX only owns part of its network of access points

 Generation of recurrent profits at all levels of the income  Dependence on external suppliers for managing infrastructure
statement in new markets

 High business margins  Telecom Division with mature business

 Solid financial position  Part of revenue stems from Spanish Public Administration

 Leader in the Spanish and South American market

 Stable relations with local Administrations

 Management experience to reproduce the growth model at
international level

 65% of revenues are recurrent, and international revenue
accounts for 51% of the total at June 2012

OPPORTUNITIES THREATS

 It has high liquidity to be able to engage in new investments  Entry of new competitors on the market, particularly mobile

 Strong international development potential telephony carriers which might be able to develop WiFi access
point networks to offset the saturation in mobile networks
 Exponential growth in smart-phones implies an increase in the
volume of data exchange and to saturation in mobile networks  Need to negotiate migration to EAP-SIM cards with teleco
carriers to offer transparent WiFi-3GRoaming solutions
 Possibility of growth through business acquisitions

 The capital investment business model generates high returns
 Risk of losing municipal network management concessions
and the necessary volume to create a network effect
 Leveraging growth in new cities via alliances with carriers in
media sector
 New drastic reduction of prices in the online publicity market


Analyst

ECONOMIC-FINANCIAL ANALYSIS

PROFIT AND LOSS ACCOUNT

PROFIT AND LOSS ACCOUNT 2008 - 1H 2012
Amount in thousands of € 2008 2009 200 2011 Jun-12
Net turnover 24,191 35,180 49,641 66,698 40,985
% growth 2.6% 45.4% 41.1% 34.4% 59.8%
Capitalisation of expenses 70 876 999 667 0
Operating grants 231 22 255 479 0
Other operating income 49 0 40 113 158
Supplies (18,547) (24,478) (31,118) (36,943) (23,396)
Personnel expenses (902) (995) (1,549) (2,152) (1,367)
Other Operating Expenses (3,423) (5,337) (8,897) (12,344) (8,306)
EBITDA 2,308 5,518 9,371 16,517 8,074
% growth 107.4% 139.1% 69.8% 76.3% 61.8%
% EBITDA margin 9.5% 15.7% 18.9% 24.8% 19.7%
Depreciation (760) (1,035) (1,563) (3,419) (2,992)
Provisions (285) (901) (1,552) (3,594) 2,556
EBIT 1,262 3,582 6,256 9,504 7,638
% growth 530.0% 183.8% 74.7% 51.9% 67.8%
% EBIT margin 5.2% 10.2% 12.6% 14.2% 18.6%
Financial income (24) (80) 53 131 161
Extraordinary results (104) 2 0 0 0
Profit before tax 1,133 3,503 6,309 9,635 7,799
Corporation tax (270) (627) (1,179) (2,415) (2,342)
Post-tax profit 863 2,877 5,130 7,220 5,458
% growth -25690.8% 233.4% 78.4% 40.7% 69.9%
% net margin 3.6% 8.2% 10.3% 10.8% 13.3%
Source: GOWEX

There has been significant growth in GOWEX's revenue in recent years, largely WIRELESS VS. TELECOM 2008-2012
underpinned by the growth in the Wireless business. Amounts in € Mn

In 2011, consolidated revenue amounted to €66.7 million, 34% higher than 2010. At Wireless Revenues Telecom Revenues

30 June 2012, consolidated revenue amounted to €41.0 million, up 60% against the
first half of 2011. €31.9 million of this revenue stemmed from GOWEX Wireless (78%)
and €9.1 million from GOWEX Telecom (22%). Gross Margin Telecom Gross Margin Telecom

In the Wireless division, 59% of revenue stems from engineering and consulting
services, 32% from the Roaming platform and 3G Offloading, and the remaining 9%
from GOWEX Mobile and GOWEX Media. 51% of revenue for the first half of 2012 is
Source: GOWEX
from outside Spain and 65% of revenue is recurrent.


Analyst

Results reported by GOWEX in the first half of the year outstripped estimates. Revenue was higher than initially estimated, not because
more cities than expected were obtained (10 cities in the first half), but because it has made a greater return on each of them, due to
the network effect generated through having more users with each city, thereby creating a higher quality network. In this regard, we
have adjusted our revenue estimates for the 2012-2017 period, assuming a higher return for cities.

In the GOWEX Telecom division, since 2010 the company has been modifying the way revenue and expenses from mere
intermediation are registered; this process is expected to be completed in 2013.

GOWEX Telecom's activity basically corresponds to the intermediation business in the purchase and sale of wholesale
telecommunications services. Since 2010, they have ceased to record part of the expenses corresponding to the purchase of services
for sale, and revenue arising from the aforesaid sales, for the same amount, on the income statement. When the accounting treatment
has been fully modified (2013), only fees charged for intermediation services and revenue showing value added for the company, and
expenses corresponding to the cost of sale of these value added services shall be registered on the income statement.

The point of this measure is to adjust the company's accounting to the real situation of intermediation in the purchase and s ale of
wholesale telecommunications capacity services.

Consequently, the income statement has gradually begun to show a reduction in income from sales and a fall in expenses for th e same
amount, which will continue to be recorded until the modification process for the accounting treatment in this division is completed in
2012. However, gross margin, in absolute terms, has not been affected.

TELECOM REVENUE 2008-2011
Amounts in € Mn

Telecom Revenues if revenue and expenses had not stopped being registered

Telecom Revenues



Source: GOWEX

The proportion of procurement over income has gradually fallen in recent years, and in June 2012 gross margin stood at €17.6 million,
43% of revenue and tantamount to growth of 64% against the following year, above the increase recorded in revenue.

Personnel expenses represent a low weight of revenue (3.2% in 2011 and 3.3% at June 2012), although the company estimates that it
will increase in future years, due to the company's growth plan. The other operating expenses (R&D expenses, professional services,
advertising or maintenance, inter alia) account for 18%-20% of the company's revenue (18.5% in 2011 and 20.3% at June 2012).

Gross operating profit (EBITDA) has grown significantly in recent years, due to the increase in revenue and the improvement in
operating margins, and at 2011 year end it stood at €16.5 million (EBITDA/Sales margin of 24.8%) and at June 2012 at €8.1 million
(EBITDA/Sales margin of 19.7%). The growth in EBITDA margin in recent years has also been underpinned by the change in
accounting of Telecom sales.


Analyst

The level of depreciation of the company has increased insofar as the new investments have come into operation, amounting to €3.4
million in 2011 and to €3.0 million at June 2012. In the first half of the year, investment in fixed assets has been higher than estimated,
and thus the estimates for the 2012-2017 period have been revised upward.

Since 2008, the company has allocated a provision for the impairment of commercial loans; in 2012, this provision was reversed by
€2.6 million.

Net operating profit (EBIT) grew strongly since 2008, reaching €9.5 million in 2011, 14.2% of sales. At June 2012, EBIT stood at €7.6
million, 18.6% of revenues.

EBITDA 2008-2012 EBIT 2008-2012
Amounts in € Mn Amounts in € Mn

Source: GOWEX Source: GOWEX

The company has a net cash position, and thus obtains a positive financial income, which at June 2012 amounted to €160,998.

In 2011, pre-tax profit amounted to €9.6 million, and net profit to €7.2 million, tantamount to an effective tax rate of 25%. In 2011, net
margin amounted to 10.8%. As of June 2012, pre-tax profit amounted to €7.8 million, up 70% against the figure reported in the first half
of 2011.


Analyst

BALANCE SHEET

BALANCE SHEET 2010- 1H 2012
Amount in thousands of € 2010 2011 Jun12 2010 2011 Jun12

Shareholders' equity 22,918 35,141 40,084
Parent company shareholders' equity 22,918 35,141 40,067
Equity 22,111 34,600 39,661
Share capital 57 64 647
Non-current assets 8,332 15,998 22,897 Reserves 16,883 27,829 34,631
Intangible fixed assets 2,041 2,001 1,676 Treasury stock (478) (1,095) (1,045)
Tangible fixed assets 5,769 13,285 20,804 Result of the financial year 5,130 7,220 5,428
Long term financial investments 59 349 414 Adjustments from change of value 0 4 (2)
Assets from deferred tax 463 363 3 Subsidies 807 536 408
Minority interests 0 0 17

Non-current liabilities 4,804 8,980 11,243
Long-term debts 3,346 6,216 8,875
Long term debts with credit entities 2,977 2,075 5,042
Long term creditors, financial leasing 91 0 0
Current assets 41,173 41,294 42,351 Other long-term financial liabilities 277 4,141 3,833
Stocks 0 53 66 Liabilities from deferred tax 1,458 2,764 2,369
Trade debtors and other accounts
25,932 9,893 10,757
receivable
Short-term financial investments 11,076 28,342 26,277 Current liabilities 21,784 13,171 13,922
Current prepayments/accrued income 2 34 58 Short-term debts 2,628 2,948 3,170
Cash and other liquid assets 4,163 2,971 5,192 Short term debts with credit entities 1,102 807 553
Short term creditors, financial leasing 109 91 36
Other short-term financial liabilities 1,417 2,050 2,580
Trade creditors and other accounts
19,156 10,190 10,717
payable
Current prepayment/accrued income 0 33 35

ASSETS 49,505 57,292 65,248 LIABILITIES 49,505 57,292 65,248
Source: GOWEX

GOMEX's total assets at June 2012 amounted to €65.2 million, SHORT TERM FINANCIAL INVESTMENTS AND CASH
65% of which corresponds to current assets (€42.4 million) and Amount in thousands of € Jun-12
35% to non-current assets (€22.9 million). Fixed-term deposits 24,853
Guarantees and Deposits 940
The main item of non-current assets is tangible assets, which
Mutual funds 300
amounted to €20.8 million at June 2012. This basically refers to
Other financial assets 149
technical installations and IT equipment.
CAM participating shares 34
Cash 5,192
The main items of current assets are short term financial
Short-term financial investments and cash 31,470
investments and cash, which total €31.5 million, and which
Source: Gowex
jointly account for 74% of current assets.


Analyst

These liquid assets correspond to cash generated by the different projects and which has yet to be invested.

Another relatively important item of current assets is the trade debtors account, which amounts to €10.7 million and which ac counts for
25.4% of current assets.

At June 2012, the company had client accounts (mainly Public Authorities) amounting to €12.9 million, €4.6 million of which were
allocated to provisions for potential insolvencies. According to the company, GOWEX has not yet had any problem in collecting bills
from Spanish public authorities, and this is proved by the reversal of the provision of €2.6 million carried out in the first half of 2012 (the
provision was made in 2011).

The company also has other credits with the Public Administration for €2.2 million, including debts for VAT, inter alia.

TRADE DEBTORS AND OTHER ACCOUNTS RECEIVABLE
Amount in thousands of € Jun-12
Clients 12,855
Provision for bad debts (4,551)
Credits with Public Administrations 2,185
Sundry debtors 268
Commercial debtors and other accounts receivable 10,757
Source: GOWEX

GOWEX has a financial position with a low level of leverage, with equity representing approximately 60% of the balance sheet. The
company carried out two rights issues in 2010 and 2011, and secured €6.0 million and €6.9 million, respectively, used to finance the
company's organic and inorganic growth in future years. The company is still planning to invest a relevant part of the funds secured
(pending).

In 2011, the company paid €1.0 million in dividends, charged to the 2010 financial year. According to information provided by the
company, GOMEX expects to be able to maintain the dividend distribution policy.

In the order of the day of the Shareholders' Meeting to be held on 5 November 2012, the company will consider carrying out an
additional rights issue, through which the company expects to gather more funds to be able to carry out its business plan. The company
also plans to ask the SEC for it to issue ADR (American Depositary Receipts), in order to raise its profile in the United States.

GOWEX has 127,179 own shares in treasury stock, as a result of transactions used to provide liquidity. The company's suppliers of
liquidity are Bankia Bolsa (MaB) and Aurel BGC (Alternext).

The company has gross financial debt of €12.0 million. As it has cash and short term financial investments of €31.4 million, it has a net
cash position of €19.4 million.


Analyst

NET FINANCIAL POSITION
Amount in thousands of € Jun-12
Long-term debts 8,875
Short-term debts 3,170
Gross financial debt 12,044
Cash and other equivalent liquid assets + short term
31,435
financial investments
Net financial position 19,391
Source: GOWEX


Analyst

VALUATION

The valuation methodology used has been Discount Cash Flow (DFC), based on the estimates for operating free cash flow for the
2012-2017 period.

VALUATION ASSUMPTION
The Reduced Expansion Document (DAR) drawn up by the company in June 2011 contained estimates for the 2011 and 2012 financial
years, which have been fulfilled in 2011 and we have used as guidance for preparing estimates for 2012-2017.

Revenue

We have estimated GOMEX's revenues for the 2012-2017 period, differentiating by business lines:

 GOWEX Wireless: At June 2012, GOWEX operates its networks in 60 cities. We have estimated the revenues using the
assumption that the company will have reached 142 cities by 2017 and that the number of cities will be maintained from that point
on. Based on our estimates, the projected revenue figure for 2012 accounts for 70% of revenue projected by the company in the
DAR. These estimates are also more conservative than the company's current estimates, which indicate that it expects to reach
300 cities over a period of 3 years.
 GOWEX Telecom: We have estimated revenue by carrying out a straight-line annualisation of those obtained to June 2012 and
have assumed that they will remain stable during the projected period (zero growth).

GOWEX REVENUES 2011-2017
Amount in thousands of € 2011 2012e 2013e 2014e 2015e 2016e 2017e
Wireless Income 46,529 75,330 96,251 111,766 128,408 145,444 163,110
% growth 75.0% 61.9% 27.8% 16.1% 14.9% 13.3% 12.1%
Telecom Revenue 20,169 18,145 18,145 18,145 18,145 18,145 18,145
growth -12.4% -10.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total revenues 66,698 93,475 114,395 129,910 146,553 163,588 181,254
Source: AFI

We assume that all the projected revenues generate receivables, so we do not estimate provisions on potentially unpaid com mercial
loans.

Costs

We have estimated procurement costs for the 2012-2017 period, differentiating by business lines:

 GOWEX Wireless: The weight of procurement on revenue entered in the DAR has been maintained, as it has been fulfilled in
2011 and at June 2012.
 GOWEX Telecom: We have maintained the weight of average procurements on revenue, obtained between 2011 and June 2012.


Analyst

GOMEX PROCUREMENT 2011-2017
Wireless Procurement 22,633 39,213 50,103 58,179 66,842 75,710 84,906
% of Wireless Income 48.6% 52.1% 52.1% 52.1% 52.1% 52.1% 52.1%
Telecom Procurement 14,310 13,102 13,102 13,102 13,102 13,102 13,102
% Telecom revenue 71.0% 72.2% 72.2% 72.2% 72.2% 72.2% 72.2%
Source: AFI

For the rest of operating costs the weights of gross margin reported for the company in 2011 have been maintained, which implies
assuming that the company will have to reinforce its costs structure in line with the increase in gross margin.

GOWEX OPERATING EXPENSES 2011-2017
Personnel expenses 2,152 2,964 3,686 4,221 4,796 5,384 5,994
% of total gross margin 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2%
Other operating expenses 11,085 15,353 19,094 21,869 24,845 27,892 31,051
% of total gross margin 37.3% 37.3% 37.3% 37.3% 37.3% 37.3% 37.3%
Source: AFI

Investment in fixed assets (Capex)

We have estimated investment in fixed assets as a percentage of sales, assuming that the company will have to increase is
expenditure in order to meet its future revenue estimates. Estimated investments in fixed assets were as follows:

GOWEX CAPEX 2011-2017
Intangible fixed assets capex 883 1,869 2,288 2,598 2,931 3,272 3,625
Tangible assets capex 9,777 14,956 14,871 12,991 8,793 6,544 3,625
Total Capex 10,660 16,825 17,159 15,589 11,724 9,815 7,250
Source: AFI

Investments in tangible fixed assets correspond to growth in the platform and the expansion of WiFi networks. Investments in intangible
fixed assets correspond to capitalisations of research and development expenses.

We have assumed that these investments will be depreciated over a 10-year period, on a straight-line basis.

Investment in working capital

We have estimated investment in working capital, taking into account the items of Trade debtors in current assets and Trade creditors
in current liabilities, applying average collection and payment periods in accordance with those historically registered by t he company.
Estimated investments in working capital were as follows:


Analyst

GOMEX INVESTMENT IN WORKING CAPITAL 2011-2017
Trade debtors 17,001 23,826 29,158 33,113 37,355 41,697 46,200
Trade creditors 10,190 14,357 17,461 19,763 22,233 24,761 27,382
Working capital 6,810 9,469 11,697 13,349 15,122 16,936 18,818
Investment in Working capital 2,658 2,228 1,652 1,772 1,814 1,881
Source: AFI

Tax Rate

We have applied a 25% rate of tax during the explicit projection period, in line with that recorded in 2011, and reflecting the bonuses
from which the company benefits. To calculate perpetual growth, we have applied a tax rate of 30%.

We subtract the deferred tax liabilities existing at June 2012, for the sum of €2.4 million, as the lower value of the equity of GOMEX.

Cash flows projection

CASH FLOWS PROJECTION 2011-2017
Revenue 66,698 93,475 114,395 129,910 146,553 163,588 181,254
% growth 34.4% 40.1% 22.4% 13.6% 12.8% 11.6% 10.8%
Procurement (36,943) (52,315) (63,205) (71,281) (79,944) (88,812) (98,008)
% of revenue 55.4% 56.0% 55.3% 54.9% 54.5% 54.3% 54.1%
Gross margin 29,755 41,160 51,191 58,629 66,609 74,777 83,247
% growth 60.6% 38.3% 24.4% 14.5% 13.6% 12.3% 11.3%
Personnel expenses (2,152) (2,964) (3,686) (4,221) (4,796) (5,384) (5,994)
% of revenue 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2%
Other operating expenses (11,085) (15,353) (19,094) (21,869) (24,845) (27,892) (31,051)
% of revenue 37.3% 37.3% 37.3% 37.3% 37.3% 37.3% 37.3%
EBITDA 16,517 22,844 28,411 32,539 36,968 41,501 46,202
% growth 76.3% 38.3% 24.4% 14.5% 13.6% 12.3% 11.3%
% EBITDA margin 24.8% 24.4% 24.8% 25.0% 25.2% 25.4% 25.5%
Depreciation (3,419) (4,230) (5,946) (7,505) (8,678) (9,659) (10,384)
Provisions (3,594) 2,556 0 0 0 0 0
EBIT 9,504 21,170 22,465 25,034 28,290 31,842 35,818
% growth 51.9% 122.7% 6.1% 11.4% 13.0% 12.6% 12.5%
% EBIT margin 14.2% 22.6% 19.6% 19.3% 19.3% 19.5% 19.8%
Tax on EBIT (5,292) (5,616) (6,259) (7,073) (7,960) (8,954)
EBIT after tax 15,877 16,848 18,776 21,218 23,881 26,863
Depreciation 4,230 5,946 7,505 8,678 9,659 10,384
Provisions (2,556) 0 0 0 0 0
CAPEX (16,825) (17,159) (15,589) (11,724) (9,815) (7,250)
Investment in Working capital (2,658) (2,228) (1,652) (1,772) (1,814) (1,881)
Operating free cash flow (1,932) 3,407 9,039 16,399 21,911 28,116
Source: AFI


Analyst

Discount rate (WACC)

We have applied a WACC discount rate of 15.6%, based on the following parameters.

DISCOUNT RATE (WACC)
Cost of equity (Ke) 18.1%
Cost of debt 7.5%
Cost of capital net of tax (Kd) 5.6%
Shareholder's equity 80%
External funds 20%
Weighted average cost of capital (WACC) 15.6%
Source: AFI

Residual Value

We have estimated the residual value in 2017 as perpetual growth of the last estimated cash flow, normalised assuming a depreciation
level equivalent to investments (Capex) planned and an investment in working capital in accordance with estimated perpetual growth.

The "g" perpetual growth rate used was 2%, in line with the inflation trend scenario.


Analyst

RESULT OF VALUATION

VALUATION
Amount in thousands of € 2011 2012e 2013e 2014e 2015e 2016e 2017e Norm. F.
EBITDA 16,517 22,844 28,411 32,539 36,968 41,501 46,202 46,202
% growth 76.3% 38.3% 24.4% 14.5% 13.6% 12.3% 11.3%
% EBITDA margin 24.8% 24.4% 24.8% 25.0% 25.2% 25.4% 25.5%
Depreciation (3,419) (4,230) (5,946) (7,505) (8,678) (9,659) (10,384) (7,250)
Provisions (3,594) 2,556 0 0 0 0 0 0
EBIT 9,504 21,170 22,465 25,034 28,290 31,842 35,818 38,952
% growth 51.9% 122.7% 6.1% 11.4% 13.0% 12.6% 12.5%
% EBIT margin 14.2% 22.6% 19.6% 19.3% 19.3% 19.5% 19.8%
Tax on EBIT (5,616) (6,259) (7,073) (7,960) (8,954) (11,686)
EBIT after tax 16,848 18,776 21,218 23,881 26,863 27,266
Depreciation 5,946 7,505 8,678 9,659 10,384 7,250
Provisions 0 0 0 0 0 0
CAPEX (17,159) (15,589) (11,724) (9,815) (7,250) (7,250)
Investment in Working capital (2,228) (1,652) (1,772) (1,814) (1,881) (376)
Operating free cash flow 3,407 9,039 16,399 21,911 28,116 26,890
Residual Value 202,045
Flow to be discounted 3,407 9,039 16,399 21,911 230,161

Net Asset Value (VAN) of flows 144,230
(+) Long term financial investments 414
Enterprise Value 144,644
(+) Net financial position 1H12 19,391
(+) Operating free cash flow 2H12 (966)
(+) Net financial position close 2012e 18,425
(-) Deferred tax liabilities (2,366)
Equity Value 160,703
No. shares in circulation* (in shares) 12,807,089
Value per share (in €) 12.55
Source: AFI * Subtracting the number of treasury shares

According to the valuation carried out, the value of GOWEX's equity stands at €160.7 million. Estimated value per share is €12.55 /
share. The estimated valuation of GOWEX shares is above the company share price on the date this report was drawn up (22 October
2012), which is €11.23 / share, offering upside potential of 12%.

The estimated valuation of GOWEX at €12.55 / share implies an implicit EV/ EBITDA ratio of 6.3x and a PER of 10.1x, calculated on
the estimated 2012 results, which in our opinion is reasonable for a company with significant growth potential.

As far as peers are concerned, the implicit EV/ EBITDA ratio in the Boingo share price at 22 October 2012 amounts to 6.0x, in line with
that of GOWEX. iPass expects to report negative results in 2012, so we have not been able to calculate a valuation ratio.


Analyst

We have also carried out a sensitivity analysis to the Ke discount rate, and have increased it by and reduced it by 10% and 20%. The
share price would be in the range of €10.17-16.27 / share.

SENSITIVITY ANALYSIS TO Ke ( Amounts in thousands of €)
ke WACC EV EqV €/ share
21.7% 18.5% 114,166 130,226 10.17
19.9% 17.0% 127,876 143,935 11.24
18.1% 15.6% 144,644 160,703 12.55
16.3% 14.1% 165,572 181,632 14.18
14.5% 12.7% 192,362 208,421 16.27
Source: AFI


CREATED BY:

This report has been prepared by Pablo Mañueco Galindo, Partner of Analistas Financieros Internacionales (hereinafter, AFI).

In drawing up this report, the author has made use of information provided by Gowex, and public information concerning the corresponding
business sectors. AFI has not verified the accuracy of the information provided. Therefore, AFI shall not be held responsible for the
accuracy of the figures used or the consequences of this report.

The scope of our work does not include revising and assessing the company's fiscal, legal or labour situation, nor its accounting records.
Thus the risks, were they to exist, arising from the aforesaid situations, have not been taken into account in our valuation exercise.

The opinions and recommendations set out in this report cannot be considered to be an offer for the purchase or sale of shares. AFI does
not accept any liability whatsoever arising from the content of this document.

The Spanish Financial Analysts Institute (hereinafter “IEAF”) offers the IN RESEARCH service in collaboration with Bolsas y Mercados
Españoles Sistemas de Negociación S.A. (hereinafter, “BME”) . Neither BME nor IEAF have taken part in the creation of this report which
they acknowledge belongs to the issuer of the stock or financial instrument analysed and/or the analyst or company subscribing it.
Therefore, BME and IEAF shall not be held responsible in any way in relation to the investment decisions which might be adopted,
considering it and/or the direct damages which might be incurred by those persons who might arrange transactions based on the aforesaid
report.

The purpose of IN RESEARCH is to provide issuers of stocks included in the Companies under Expansion segment of the Alternative Stock
Market with access to independent analysts. The analysis reports are created by independent analysts, and therefore neither the Spanish
Financial Analysts Institute, nor BME, take part in preparing the aforesaid reports. The reports are paid for by the issuer of the analysed
stock, which has had access to its content before being published.

This report is not a recommendation to invest, nor an invitation, offer, request or obligation by BME or by the IEAF to carry out any
operation or transaction whatsoever in respect of the securities or financial instruments which are the object of the Report. Neither BME
nor IEAF are responsible for the content, accuracy or truthfulness of the report, nor any financial loss, or decision taken on the basis of the
information contained in the report. Neither BME nor IEAF, its administrators, representatives, associates, subsidiaries, directors,
shareholders, employees or advisors accept any responsibility whatsoever in relation to the information contained in the report, nor for
any use thereof.


GOWEX coverage analysis by AFI - Oct 2012

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GOWEX coverage analysis by AFI - Oct 2012