GOWEX (GOW-MAB, ALGOW-NYSE Euronext) it’s been 13 years operating in the Telecommunication sector and it’s currently leading the creation of WiFi Cities offering Free & Premium WiFi connectivity in streets and transportation. The company is now exporting the innovative business models in many cities in Europe, Latin America, Asia and in emerging countries. In 2010, it has become the first and only Spanish SMB to make a “dual listing”, publicly traded in the MAB (GOW) and the NYSE-Euronext (ALGOW). The company's total revenue in 2011 amounted to 66,7 million euros. On July 2011 GOWEX subscribed a 7 million € capital increase with a 100 % over-demand (doubling expectations). With offices in Madrid, Burgos, Buenos Aires, London, San José (Costa Rica), Paris and Shanghai, GOWEX develops a sustainable business model in their WiFi networks, based in efficient and technical quality of their patented platforms: The Roaming platform, which allows users to connect freely in all the cities, the Geolocalization Content and Advertisement platform, which provides a financing business through marketing and advertisement agreements. In 2011, GOWEX joined the Wireless Broadband Alliance and received a prize for the “Best Web Company” in the Internet Day In February 2012, Jenaro Garcia GOWEX CEO, received the “Entrepreneur of the Year Award” by Ernst & Young in the category of Innovation

1. GOWE
G EX
Spa Telecomm
ain/ munications C
Company update
Inv
vestment Research Re
eason: Estimat Revision
tes 5 Decem
mber 2012
Bu
uy Growth a
acceleratin seekin global s
ng: ng scale
Reco
ommendation un
nchanged
Sha price: EU
are UR 11.98 Despite the re
ecently good performance (+165% during the last 12m at current market
p ( g m),
closing price as of 04/12/2012
g 2 price, GOWE trades at EV/EBITDA’13e 4.3x and P/E’13e 9.1x, that in ou view
EX d ur
Tar
rget price: E
EUR 15.00 does not refl lect the comppany’s growth (CAGR’11-1 +33% in sales, +36% E
14e s EBITDA
from Target Price: EU
m UR 10.70 and +42% ne profit), its fin
et nancial health and positive ttrack-record. In our view, G
GOWEX
Reuter
rs/Bloomberg will continue generating vaalue thanks to its scalable business mo
o odel and its strategic
GOW.MC/GOW SQ
positioning, w
which allows capturing value generated in various points of the Wi-Fi
d e
Daily avg. no. trad. sh. 12 mth 11,203
sector’s value chain.
e
Daily avg. trad. vol. 12 m (m)
mth 0.08
Price high 12 mth (EUR) ) 12.70  The inteention behind the rights issue announ
d i nced (of up to EUR30m, 20% of
t
Price low 12 mth (EUR) 4.46 current s
shares) is douuble, in line with the operattions carried out in 2010-2011: 1)
w o
Abs. perf. 1 mth 2.0%
Acceleraation of orgaanic growth: capture funds to finance its expansion s
c s s strategy
Abs. perf. 3 mth 77.5%
(to 300 o the largest cities world-wide, via a strattegic agreeme with a part
of c ent tner); 2)
Abs. perf. 12 mth 165.6%
Increase the shareho
e older base and stock liqu uidity: Follow
wing the rights issue,
s
Market capitalisation (E
EURm) 155 the free float will inc
crease from current 30% to 41%. On nce the opera ation is
Curre N° of shares (m)
ent 13 complete GOWEX will request the SEC approva to issue ADRs (level 1 OT
ed, w e al TC).
Free float 30%
 Good re esults momentum and st trong financiial position. At 6m’12, re evenues
Key financials (EUR) 12/11 122/12e 12/13e increased 60%, EBIT
d TDA +62% an net profit 70% (to EUR
nd R5.5m). The relative
Sales (m) 67 100 122 weight of the internatio
f onal activity co
ontinues grow wing, at 1H’12 reaching 51% of the
%
EBITD (m)
DA 17 26 32
total sale (vs. 30% in 2011), as well as recurre revenues (65% of the to
es n ent ( otal). At
EBITD margin
DA 24.8% 266.2% 26.2%
EBIT ( (m) 10 20 23
June 20 012, GOWEX accumulates EUR19m n
s net cash (EU UR32m gross). Said
EBIT m margin 14.2% 200.2% 18.7% financial position is one of the com mpany’s stron points, as it can negotiate co-
ng
Net Pr (adj.)(m)
rofit 7 15 17 investme ent agreemen nts with mun nicipalities an transport companies i new
nd in
ROCE E 44.5% 57.8% 41.0%
countries (including exclusivity, lo
s e onger term co contracts etc.) and reinfor
) rces its
Net deebt/(cash) (m) (22) (19) (18)
Net De Equity
ebt -0.6 -0.4 -0.3 capacity to continue grrowing organic cally.
Net De ebt/EBITDA -1.3 -0.7 -0.6
Int. co
over(EBITDA/Fin.int) (125.8) (144.7) (213.3)
 Estimate revised up We have made some ad
es p: m djustments, no including the rights
ot e
EV/Sa ales 0.6 1.4 1.1 issue. In 2013-14e, our EBITDA rises 11%, with revenues accelerating fo
h a ollowing
EV/EB BITDA 2.4 5.2 4.3 the receently announcced contracts We estima
s. ate CAGR 20 011-14e of 333% in
EV/EB BITDA (adj.) 2.4 5.2 4.3
revenues 36% in EBITDA and 42% in net profi with wireless, internation and
s, % fit, nal
EV/EB BIT 4.2 6.7 6.0
P/E (adj.) 8.6 10.1 9.1 recurrent revenues pro
t creasing their weight on tota revenues.
ogressively inc al
P/BV 1.8 3.1 2.3
OpFC yield
CF 45.9% 1.3%
-1 0.9%
 Valuatio revised to EUR15.0/sh
on o hare (+40%), arising from the aforementioned
Divide yield
end 0.6% 1.4%
1 1.6% adjustme ents to our est
timates, the ro cember 2013, and applying a lower
oll-over to Dec
EPS (a adj.) 0.56 1.18 1.32 WACC ( (12.5% vs. 14 4.5%), accordding to the p positive track record, the greater
BVPS 2.72 3.90 5.21
liquidity aand financial strength. Our new fair valu discounts EV/EBITDA’13 5.5x
ue E 3e
DPS 0.08 0.17 0.20
and P/E’ 13e 11.5x, im mplying a potential of +26% over current price. Its mai peer,
% in
Boingo ( (US Wi-Fi agg gregator) trades at an EV//EBITDA’13e of 5.2x and P P/E’13e
24.4x, v vs. GOWEX’ EV/EBITDA’13e of 4.3x and P/E’13e of
x 9.1x Buy
x.
13
vvdsvdvsdy
12
recomm endation reit terated
11
10  We belie the succes
eve ssful execution of the exppansion plan (to 300 cities, details
,
9
8 not discl osed yet), in addition to the positive s
strategic impplications (to obtain
o
7
6
critical m
mass, occupyin a leading position world
ng elopment/exploitation
d-wide in deve
5
4
of Wi-Fi cities, defenssive move vs possible ne entrants), could add a
s. ew another
3
Nov 11 Dec
D 11 Jan 12 Feb 12 Mar 12 Apr 12
2 May 12 Jun 12 Jul 12 Aug 12 Se 12
ep Oct 12 Nov 12 Dec 12
EUR10-1 12/share to ou FV.
ur
GOWEX
G MAB (Rebased)
Source: Factse
et
eholders: Jenaro Ga
Share arcía 60%; Alvasebi 10%;
Analyst(s): Da
avid Cabeza Ja
areño +3 91 4367818
34 dcabeza@b
bankia.com
For co
ompany description ple
ease see summary tab footnote
ble
Produced by:
d All ESN re
esearch is availlable on Bloom
mberg (“ESNR””),
Thomson- -Reuters, Capit IQ, TheMark
tal kets.com, FactS
Set
Distribute by the Members of ESN
ed
(see last pag of this report)
ge

2. GOWEX
CO
ONTENTS
S
Grow accelerating ....... ..................
wth ....................................
........................ 3
Details of the rights issue 3
Good results momen
ntum and news flow. Estimate adjusted.
s es 4
Valu
uation.......................... .................. ........................ 5
....................................
DCF V
Valuation: EUR
R15.0/share 5
Multip comparison
ples n 6
Secto Wi-Fi & M&A
or 6
Poten value creat via the exp
ntial tion pansion plan 7
Risks & Threats 8
GOW
WEX. At a Glance ...... ..................
G ........................ 9
....................................
Wi-F sector. Complemen mobile networks ...................
Fi C nts ...................... 10
WEX’ Position ............ ..................
GOW ...................... 11
....................................
ESN Recomme
N endation Sy
ystem ....... ...................... 18
....................................
Pag 2
ge

3. GOWEX
Grow acce
wth elerating
g
The int
tention behin the rights issue announced (of up to EUR30m which is 20% above t
nd s p m, 2 the
current shares) is double: 1) accelerate the organic growth sp
t c peed and 2) increase tthe
shareholder base, in line wit the opera
th ations carried out in 20 10 and 2011. Despite t
the
recently good perfformance (+1165% during the last 12
g 2m), at curre market price, GOWEX
ent
trades at EV/EBIT TDA’13e 4.3 and P/E’13e 9.1x, th in our v
3x hat view does not reflect t
n the
compa any’s growth (CAGR’11 1-14e +33% in sales, +336% EBITDA and +42% net profit), its
A
financial health (n cash) and positive tr
net d rack-record.
In our vview, GOWE will contin generating value tha
EX nue anks to its sc
calable busin ness model aand
its stra
ategic positio
oning, which allows the company to capture v
h e value genera ated in varioous
points of the Wi-Fi sector’s valu chain. We have adjus
ue sted our estiimates and valuation up by
v
+40% to EUR15.0/ /share, whic discounts multiples of 5.5x EV/
ch s V/EBITDA’13e and P/E’1 13e
11.5x and implies a 26% up pside potential at curren market pr
nt rice. Buy re ecommendation
reiterat
ted, and we believe the successful execution of the expa
l ansion plan (to 300 cities,
n
details not disclose yet), in a
ed addition to th positive strategic imp
he s plications (to obtain critical
o
mass, occupying a leading po osition world
d-wide in de
evelopment/e exploitation of Wi-Fi cities,
defensive move vs. possible ne entrants), could add another EUR
. ew R10-12/share to our FV.
e
Details of the rights issue
s
GOWE is immersed in its third rights issue in three yea The first was due to its listing to t
EX d e ars. t the
MAB (SSpanish Alte
ernative Mark
ket, March 2010, at EUR
2 R3.5/share; oobtaining EU
UR6m); and t the
second in July 2011 (EUR6.9 at EUR4
d 9m 4.84/share). The current rights issue is for a to
e otal
maximum of EUR3 30m, at EURR11.6/share (2,586m sha ares) and im
mplies 20% over the curre
o ent
numbe of shares trading. There are two rea
er re asons behind this rights iissue:
d
1) Capture fund to financ its expansion strateg Said plan includes th deployme
C ds ce gy. n he ent
and implementation of its services (d
s design, deplo
oyment, explloitation and manageme
d ent
of Wi-Fi netw
works) in 300 of the larg
0 gest, referen cities w
nce world-wide, via a strateg gic
agreement with a partner which impl
r antial effort iin Capex. Th intention is
lies a substa he
ambitious, as it implies m
s multiplying th company's presence by 5x (curre
he ently 60 citie
es,
with
w a smaller average siz
r ze).
2) Endow its valuation w
E v with greater liquidity and increase its share
e eholder bas se.
Reference sh
R hareholders a not expe
are ected to subscribe the ne rights iss
ew sue. We reca all
th the exec
hat cutive team currently hoolds 59.6% (including 100.6% of Alvasebi, >70% %).
Following th rights iss
F he sue, free flo will incr
oat rease from current 29.7% to 41.4% %,
le
eaving 49.7% in the han
% nds of the executive tea and 8.9% in Alvaseb
e am % bi’s. Once th
he
operation is completed, G
c GOWEX will request the SEC appro
e oval to issue ADRs (lev vel
1 OTC). The schedule to begin trading in the US is 1Q’13 (cur
g rrently the co
ompany trade es
in the Spanish MAB and N
n h NYSE Alternext in Paris).
.
GOW
WEX. Shareho
older’s base (post operatio
on) GOW
WEX. Agenda for the rights issue
f s
Source: ESN Bankia Bolsa
a Source:: GOWEX
Page 3

4. GOWEX
Good results mo
omentum a news flow. Estima adjuste
and ates ed.
 Goood 6m’12 results, inc creasing int ternational exposure a and recurre results. At
ent
6mm’12, revenue increased 60%, EBIT
es d TDA +62% and net prof 70% (to EUR5.5m). T
a fit E The
rela
ative weight of the intern ational activity continues growing, at 1H’12 reach
s hing 51% of t
the
tota sales (vs. 30% in 2011 as well as recurrent re
al 1), s evenues (65% of the tota
% al).
 Poositive news flow conti
s inues: GOW WEX continues announc cing agreemeents with cit
ties
and transport companies. T most rec
d c The cent were: 1) in Dubai, in which GOW WEX has signned
an agreement with the ma public transport comp
ain pany (PTA) t provide free Wi-Fi in t
to the
cities’ busses. The agreem ment is strate
egically impo opens a door to the Middle
ortant as it o
East; 2) in Ma arseille, sign
ning an agreeement to pr rovide free W Wi-Fi to urb
ban buses. WWe
exppect announcements on new internat tional contrac to continu in upcoming months.
cts ue
 Str
rong financ cial position At June 2012, GOW
n: WEX accum mulates EUR R19m net ca ash
(EU
UR32m gros Said fina
ss). ancial positio is one of the compan
on ny’s strong points, as it c
can
neg
gotiate co-in
nvestment aggreements with municipa
w alities and tr mpanies in new
ransport com
cou
untries (inclu
uding exclus acts etc.) and reinforces its capacity to
sivity, longer term contra d y
ntinue growin organicallly.
con ng
 Estimates revised up: We have made some adjustments, not including th rights issu
e e t he ue.
In 2013-14e, our EBITDA rises 11%, with revenu accelera
o ues ating followin the recen
ng ntly
annnounced conntracts. We e estimate CAGR 2011-14 of 33% in revenues, 36% in EBITDA
4e 3
and 42% in ne profit, with wireless, international and recurre revenues progressiv
d et h i ent s vely
inc
creasing their respective w
r weight.
GOW
WEX. 1H’12 res
sults. 9m’12 f
forecasts GOWEX. Est
timates adjus
sted (2012-14e
e)
(EUR m) 9m12 3T12 1H 11 1H12 Var %
2 2011a 2012e 201
13e 2014e CAG 11-14e
AGR
Revenues 69.1 28.1 25.7 41.0 60%
0 Old 66.77 94.5 1177.0 145.0 30%
Telecom 6.6 9.1 38% Sales New 66.77 99.9 1222.4 155.3 33%
Wireless 19.1 31.9 67%
9 Dif.% 0.0%% 5.7% 4.6
6% 7.1%
Old 16.55 23.7 29
9.5 36.1 30%
Gross Margin 30.5 12.7 10.7 17.8 66%
8
EBITDAA New 16.55 26.1 32
2.0 41.2 36%
Gross Mg % 44% 45% 42% 43% 1.5pp
%
Dif.% 0.0%% 10.2% 8.5
5% 14.3%
EBITDA 15.7 7.6 5.0 8.1 62% Old 7.2 12.8 15
5.1 20.0 40%
EBITDA Mg %
E 22.7% 27.1% 19.5% 19.7% 0.2pp
% Net Proffit New 7.2 15.3 16
6.9 20.8 42%
EBIT 4.6 7.6 68% Dif.% 0.0%% 19.4% 12.2
2% 3.8%
EBIT Mg
E 17.8% 18.6% 0.9pp
% Old 10.77 16.1 17
7.5 18.8 21%
BAI 4.6 7.8 70% Cap ex New 10.77 18.0 22
2.0 27.9 38%
Net Profit 3.2 5.5 70% Dif.% 0.0%% 11.7% 25.9
9% 48.7%
GOW
WEX. EBITDA margin perfo
ormance GOWEX. ND/
/EBITDA
180
0 30%
Sales EBITDA mg 26.2% 26.6%
160
0 26.2% 155.3 0.00 0.00
09 10 11 12e 13e 14e
24.8% 25% -0.10 -0.20
140
0
122.4 -0.20
-0.40
120
0
18.9% 99.9 20% -0.30
-0.60
100
0 -0.80
15.7% -0.40
80
0 66.7 -1.00
49.6 15% -0.50
-1.20
60
0
35.2 -0.60
40
0 9.5% -1.40
10%
24.2 -0.70 -1.60
20
0
0 5% Gear
ring Debt/EBITDA (rhs)
2008 2009 2010 2011 2012e 2013e 2014e
Source: ESN Bankia Bolsa
a Source: ESN Bank Bolsa
kia
Page 4

5. GOWEX
Valu
uation
DCF V
Valuation: EUR15.0/sh
E hare
Valuation revised to EUR15.0 0/share (+40%), arising from the afor
rementioned adjustments to
s
our es
stimates, the roll-over to December 2013, and applying a lower WAC (12.5% vs.
e o r CC
14.5%) according to the positiv track reco the grea liquidity and financia strength. O
), ve ord, ater al Our
new fa value discounts EV/E
air EBITDA’13e 5.5x and P/
e /E’13e 11.5x
x.
We ha ave carried out a disco unted cash flow valua
o h ation on 20 013-1018e, applying 12.5
a 5%
WACC and 2.0% “g”. We a
C assume an EBITDA ma argin in 201 8e (23%) below the 26
b 6%
estimat for 2012-14e, and CA
ted APEX for 20
018e of 8% over sales, in line with the amortisatio
o n e ons
in said year.
GO
OWEX DCF VALUA
ATION TO 31-Dec-13
CA FLOW STATE
ASH EMENT FOR DCF
CA FLOW (EUR m
ASH m) 2011 2012e 2013e 2014e 2015e 2016e 2017e
2 20
018e
Net sales
t 66.7 99.9 122.4 155.3 191.3 217.4 250.9
2 2443.7
EBIT 9.5 20.2 22.9 28.1 31.2 32.5 35.4 37.7
3
OPLAT
NO 7.1 15.1 16.9 20.8 23.1 23.7 25.5 27.2
2
Dep
preciations and othe provisions
er -7.0 -5.9 -9.1 -13.2 -17.1 -20.9 -24.5 -1
19.5
Gro operating cas flow
oss sh 14.1 21.1 26.1 34.0 40.2 44.6 50.0 46.7
4
Cap expenditure
pital -10.7 -18.0 -22.0 -27.9 -26.8 -26.1 -25.1 -1
19.5
Cha
ange in net working capital
g 0.0 -5.2 -2.7 -4.5 -5.2 -3.0 -4.3 -0.2
-
Cas flow to be disc
sh counted 3.5 -2.1 1.3 1.5 8.3 15.5 20.7 26.9
2
DCF VALUATION (EU m) UR 2013e 2014e 2015e 2016e 2017e
2 Nominal year
WA
ACC 12.5% 12.5% 12.5% 12.5% 12.5%
1 12
2.5%
Discount Rate factor 1.00 0.89 0.79 0.70 0.62 0.55
0
Discounted cash flow 1.3 1.3 6.5 10.9 12.9
Cu mulated DCF 1.3 2.6 9.1 20.0 32.9
WA & DCF ANAL ISYS
ACC
Fre risk rate
ee 4.50% Cumulated DCF 32.9 - Ne financial debt (Cas (12e)
et sh) -18
Commpany risk factor 2.00 Perpetual growt h rate (g) 2.0% - Min
norities (estimated v
value) 0
Market risk premium 4.00% Normalised Annua CF
al 27 + As
ssociates 0
Cos of Equity (Ke)
st 12.50% Terminal Value at Nominal Year 257
Cos of debt (gross)
st 5.0% Disc.Rate of Term Value
minal 0.55
Norrmative tax rate 30.0% NPV Terminal Va alue 142.4 Equity Market Value (E m)
EUR 195
Cos of Debt Net (Kd
st d) 3.50% Num of shares (m)
mber 12.93
Tar gearing (D/E) % K
rget 0% Financial assets (t
treasury stock) 1.1 Fai r Value per share (EUR) 15.0
% Ke 100% Enterprise value (EUR m)
e 176.4 Price (EUR)
e 11.96
WA
ACC 12.5% Pote
ential upside (downs
side) 26%
Sou
urce: ESN Bankia Bollsa estimates
GO
OWEX. Multip
ples GOWE Sensitivit analysis
EX. ty
Ratios @ current Price 2010 2011 2012 2013e 201
2e 14e WAACC Perpet ual growth rate (g
g)
Price 4
3.4 4.8 12.0 12.0 12.0 15.03 1.0% 1.5% 2.0% 2.5%
2 3.0%
10
0.5% 17.5 18.3 19.1 20.0
2 21.1
EV / Sales 0.6xx 0.6x 1.4x 1.1x 9x
0.9
11
1.5% 15.6 16.2 16.8 17.6
1 18.4
EV / EBITDA 3.1xx 2.4x 5.2x 4.3x 3.3
3x 12
2.5% 14.1 14.5 15.0 15.6
1 16.2
EV / EBIT 4.7xx 4.2x 6.8x 6.0x 4.9
9x 13
3.5% 12.8 13.1 13.5 14.0
1 14.5
PER 7.5xx 8.6x 10.11x 9.1x 7.5
5x 15
5.5% 10.7 11.0 11.3 11.6
1 11.9
Sou
urce: ESN Bankia B
Bolsa estimates Source: ESN Bankia Bolsa estimates
Page 5

6. GOWEX
Multip compa
ples arison
Althouugh there is no purely comparab compan with GOW
s y, ble ny WEX (due to its particu
t ular
busines model, diversificatio etc), wit
ss on thin Wi-Fi/W
Wireless, theere are two listed Wi-Fi
o
companies in the United Stat tes that agg
gregate opeerators’ netw
work to offer roaming aand
interconnection ser
rvices.
- Booingo: >500.000 hotspots world-wide began trading in May 2
s e, 2011 in the Nasdaq. Boin
N ngo
ervice provider, offering retail clients (final users) and wholesale
is a international, Wi-Fi se
an r
clie
ents access service to W
s Wi-Fi points. In 2011, the company gen
n c nerated USD D95m revenuues
and USD28m in EBITDA.
d n
- iPa
ass: 750,00 hotspots in 120 co
00 ffers mobile connectivit services to
ountries. Of e ty
bus
sinesses. In 2011, iPa
n ass generated USD140 revenues (falling 9%) and sm
0m s 9 mall
ope
erating losse with EBIT
es, TDA of USD.0,2m.
Boingo trades at an EV/EB
o t BITDA’13e of 5.2x vs. GOWEX’ 4
o 4.3x. At our fair value of
EUR155/share (imp
plying 5.5x E
EV/EBITDA’113e), the dis GOWEX vs. Boingo would
scount on G
disappe in terms of EV/EBI
ear s ITDA (but not P/E). During the las 6 months, GOWEX h
n st has
accumulated 94%, much better than Boingo /iPass’ -30%
r o %.
Com
mpany Price Mkt. C
Cap. EV/EBITDA
A PER Mg EBITDDA Performance %
(EUR) (EUR m) 2012e 201
13e 2012e 20
013e 2012e 1m 6m 12m
Boin Wireless Inc. 5.32
ngo 1877 6.2x 5.2x 31.6x 244.4x 30.9% -6% -31% -16%
%
iPas Inc.
ss 84 20
0.0x -5% -30% 30%
%
Gow (Bankia)
wex 11.96 1866 5.2x 4.3x 10.1x 9.1x 26.2% 2% 94% 166%
%
Gow (Factset)
wex 11.96 1866 6.4x 4.5x 12.0x 100.5x 25.1% 2% 94% 166%
%
Sour Facset, Bankiia Bolsa
rce:
Sector Wi-Fi & M&A
M
Wi-Fi: counter-cyyclical charaacter and greater visib
g bility. In rec cent months a number of
s
operations has take place, inc
en creasing the Wi-Fi sector’s visibility:
W
1) A
Agreement between Goo
b ogle and Bo
oingo in San Francisco w
with a model similar to th
hat
used by GOW
u WEX.
2) A
Argiva (engin
neering firm) acquiring Spectrum Inte
) S eractive (one of the large hotspot W
e est Wi-
Fi
F suppliers in UK) for GB
i BP26m (with the intention of renting it to other operators).
h n t
3) E quiring Belair Networks (indoor and outdoor Wi-Fii equipment).
Ericsson acq r
4) L
Listing of Ruckus (Wi-Fi t
technology manufacturer on NYSE w high dem
m r) with mand.
M&A. Since its lis sting to the MAB, GOW WEX mention ned the pos ssible interes on behalf of
st f
engineering firms, although this has not bee reflected in acquisition The cash obtained fro
a s en ns. h om
the rights issues and cash ge
a eneration has been used to accelera the com
s d ate mpany’s orgaanic
growth (co-investm ment formulas with cities, demanding higher Cap
s g pEx, etc). On the contra
ary,
we see greater probabilities of GOWEX being a ta
e X arget (telecoommunicatio operators or
on
companies in other sectors inte
r erested in gr
rowing inorganically, dev
veloping its presence in t
p the
Wi-Fi ssector). In th recent br
he rochure on the rights is
ssue, GOWE mentions Google as a
EX s s
threat, but at the same time mention hav ving spoken to the com
n mpany to wo together in
ork r
differen geographic areas.
nt c
Page 6

7. GOWEX
Poten value creation via the expansion plan
ntial c a
GOWE is a valu generatin story, via a business model with high retu
EX ue ng a s h urn on capi ital
employyed (>20%). Independe ntly of the aforementioned revised e
. a estimates, we have carried
w
out an analysis on the pote
n o ential genera
ation of value proceed ing from ac ccelerating t
the
company’s growth during the fo
d ollowing year and the rig
rs ghts issue.
In our opinion, the successfu executio of the ex
e ul on xpansion p plan (to 300 cities, deta
0 ails
according to the company’s st
c trategy inclu
uding outdo advertisin company not disclos
oor ng y sed
yet), in addition to the posit
n t tive strategic implication (to obta in critical mass, GOWEX
c ns m
occupyying a leading position w
world-wide in developmen nt/exploitatio of Wi-Fi cities, defens
on sive
moves vs. possib peers/ne entrants) could ad another EUR10-12/
ble ew ), dd /share to o our
valuati (see tab below)
ion ble
Our hy ypothesis are: 1) develoopment of 300 cities in the next 5 ye
t 17e, exceeding
ears (2013-1
the 3 y
years targete by GOWE
ed EX); 2) EBIT margin from 17% in 20
T m 013e down to 12% in 20
t 018
(vs. EB mg of 20% in 2012
BIT 2 2e); 3) Capit expenditu of 16-18 o/sales in the years of
tal ure 8%
further expansion; 4) Rights is sue: EUR 30 M cash an issuance of 2.59 m shares (20% of
nd s %
current number of shares, tota shares afte capital inc
t al er crease of 15 .5m); 5) cap
pture of 50% of
%
revenues generated in geoloca lized advertis
d sing (50% caaptured by th strategic partner).
he p
GOWEX EXPANSI ON PLAN - DCF V
G VALUATION TO 31-
-Dec-13
CASH FLOW (EUR m)
C R 2013e
2 20014e 20115e 20166e 2017e 2018e e
New
N Cities 60 80
8 80 50
0 30 0
Cumulated Cities
C 60 140
1 2220 2700 300 300
Net
N sales 113.7
1 2116.0 3011.2 329.3 343.88 318.4
Network (Roaming access, offloadin maintenance)
g, ng, 53.7
5 1222.6 1888.7 226..8 246.88 241.9
Engineering, Cons sultancy & Maintenance 48.0
4 64.0
6 644.0 40.0
0 24.0 0.0
Media (Advertising aplications, servic
g, ices 12.0 29.4
2 488.5 62.5
5 72.9 76.6
EBIT
E 19.3 34.6
3 455.2 46.1 44.7
7 38.2
% EBIT mg 17% 16% 15
5% 14%% 13% 12%
NOPLAT
N 13.5 24.2
2 311.6 32.3 31.3
3 26.7
Depreciations and o
D other provisions -9.1 -117.3 -244.1 -26..3 -27.55 -25.5
Gross operating c
G cash flow 22.6 41.5
4 555.7 58.6 58.8
8 52.2
Capital expenditure
C -18.2
- -338.9 -544.2 -49..4 -44.77 -25.5
Cash flow to be d
C discounted 4.4 2.6
2 1.
.5 9.2
2 14.1 26.7
DCF
D VALUATION (EUR m) 2013e
2 20
014e 20115e 20166e 2017e Nominal y
year
WACC
W 12.5% 12
2.5% 12.5% 12.5
5% 12.5%% 12.5%
Discount Rate factor
D r 1.00 0.89
0 0.7
79 0.70 0.62
2 0.55
Discounted cash flow
D w 4.4 2.3
2 1..2 6.55 8.8
Cumulated DCF
C 4.4 6.7
6 7..9 14.4 2
23.2
WACC & DCF ANA
W ALISYS
Free
F risk rate 4.50% Cummulated DCF 23.2 - Net finan debt (Cash) ( 12e)
ncial -30
Company risk factor
C r 2.00 Perp
petual growth rate (g)
e 0.0%
Market risk premium
M m 4.00% Normmalised Annual CF 27
Cost of Equity (Ke)
C 12.50%% Term Value at Nomin Year
minal nal 214
Cost
C of debt (gross) ) 5.0% Disc.Rate of Terminal V
Value 0.55
Normative tax rate
N 30.0% NPV Terminal Value 118.7 Equity Ma
arket Value (EUR m
m) 172
Cost of Debt Net (Kd)
C 3.50% Number o shares (m)
of 15.5
Target gearing (D/E % K
T E) 0% Finan assets (treasury stock)
ncial Fair Val per share (E
lue EUR) 11.1
% Ke 100% Ente
erprise value (EUR m)
R 141.9
WACC
W 12.5%
Source: ESN Bankia Bolsa estimates
S
Page 7

8. GOWEX
Risks & Threats
We poi out the following risks
int s:
1) Execution of strategy plan (x5 vs. current citie not attain
y es), ning the critic mass.
cal
2) New entra ants: GOWE business model is un
EX’ nique (neutra positioning technological
al g,
apturing vari ous parts of the value ch
platform, ca hain), howeve it could be copied.
er e
3) Position of telecom o
f operators (t
that could become dire competito
b ect ors). Althouggh,
initially trad
ditional opera
ators see GO
OWEX as a threat, they can use the company as a s
partner to save operatin costs by extending the network/u
s ng e eir users, thus finally achieve a
e
complemen ntary charactter.
4) Position in cities/muunicipals: not renewing contracts. In our view said playe
w, ers
consider GOWEX a n
G neutral infrastructure manager that gives supp port to vario
ous
operators and as a way to reduce costs/maximise profits, ra
a y c ather than a threat.
t
5) Key personnel (depen
ndence on its CEO, Mr. Jenaro García
s a);
6) Risk of obsolescence technology network se
e y, ecurity.
Page 8