ETB 1Q20: Revenue Stagnation Persists although Composition Evolves

We believe ETB's results are negative, due to the weakness in the numbers of new businesses, specifically mobile telephony and cable, which have failed to complement the fiber optic business to offset the drop in traditional businesses (copper line). For this reason, income remained stable compared to the previous year. There was also an impairment in the EBITDA margin vs. 1Q19, standing at 31.6% (-363 bps YoY). However, the composition of income stands out, as the fiber optic businesses (31%) and the corporate B2B business line (32%) already explain most of ETB’s total revenues and exceed the share of the copper line business (31%). It is also worth noting the positive behavior of the number of fiber optic connections that reached 395,000 customers (+14.8% YoY).

Table 1 – 1Q20’s ETB Results

COPmn 1Q20 1Q19 Var% (bps) 1Q20E Var% (pps)

Revenues 355,050 353,561 0.4% 426,629 -16.8% Operating profit 7,315 (11,203) 165.3% 7,654 -4.4% EBITDA 112,269 124,623 -9.9% 129,439 -13.3% Net Income (5,843) 1,097 -632.6% 12,887 -145.3%

Operating Margin 2.1% -3.2% 523 1.8% 27 EBITDA margin 31.6% 35.2% -363 30.3% 128 Net margin -1.6% 0.3% -196 3.0% -467

Source: ETB, Grupo .

From the 1Q20 results call we’d like to highlight:

New CEO: ETB’s board of directors appointed Sergio Gonzalez as CEO. The new executive is an economist of Universidad de Los Andes, with a specialization in financial legislation from the same institution and an MBA with emphasis in corporate finance and strategic management from the Business Institute in Madrid (Spain). In his extensive experience in the telecommunications sector, it stands out that he was CEO of Asomóvil between 2014 and 2017, financial VP of Uff Movil from 2010 to 2012, he was also part of Telecom as coordinator of Strategic and Corporate Planning between 2004 and 2007 and, later in Telefónica as manager of Sinergias FijoMóvil until 2009; before his return to ETB, he was VP of New Business Development for Latin America at ZTE, a global provider of telecommunications equipment. Sergio Gonzalez returns to the company after having served as VP of Strategy and Business Development, between 2012 and 2014, where he led the fiber optic network deployment project, the launch of Digital TV and the acquisition of the 4G license for mobile services.

Strategy: in the presentation of results, the objective of the new management to create value for ETB through 4 pillars was highlighted: strengthening existing services, excellence in service, development of fiber optics, and provide services as an ally of Bogota - Smart City. In this regard, we believe that it would be worthwhile for the company to provide some guidance on revenue and EBITDA growth, to assess the effectiveness of this strategy. Revenues have been stagnant for the last 5 years at ~COP1.5 tn, mainly due to the decline of traditional businesses and a highly competitive environment. The sale of the company was also ruled out and for now a share buyback program has not been considered, despite the low price of the stock market.

ANALYST CERTIFICATIONS AND REQUIRED DISCLOSURES BEGIN ON PAGE 2 Economic, Industry and Market Research Juan Pablo Espinosa Arango Chief Economist and Head of Economic, Industry and Market Research [email protected] +571 7463991 ext. 37313

Economic research Industry Research Equity Research Diego Fernando Zamora Díaz Jhon Fredy Escobar Posada Jairo Julián Agudelo Restrepo Head of Economic Research Head of Agroindustry Research Head of Equity Research [email protected] [email protected] [email protected] +571 7463997 ext. 37319 +574 4044649 ext 44649 +574 6047048 Arturo Yesid González Peña Nicolás Pineda Bernal Diego Alexander Buitrago Aguilar Quantitative Analyst Head of Commerce Research Energy Analyst [email protected] [email protected] [email protected] +571 7463980 ext 37385 +574 4042985 ext 42985 +571 7463984 Santiago Espitia Pinzón Juan Sebastián Neira Orozco Andrea Atuesta Meza Macroeconomic Analyst Commerce Industry Analyst Financial Sector Analyst [email protected] [email protected] [email protected] + 571 7463988 ext. 37315 +571 7464329 Paolo Betancur Montoya Bryan Hurtado Campuzano Agroindustry Analyst Juliana Aguilar Vargas, CFA International and Regional Analyst [email protected] Cement & Infrastructure Analyst [email protected] [email protected] +571 7463980 ext. 37303 Javier David Villegas +574 6047045 Juan Manuel Pacheco Perez Real Estate and Hotels Analyst Ricardo Andrés Sandoval Carrera International and Markets Analyst [email protected] Oil & Gas & Airlines Analyst [email protected] [email protected] +571 7464322 ext. 37380 +571 7464596 Research Assistant Juan Camilo Meneses Cortes Valentina Martínez Jaramillo Central Banking and Financial System Alejandro Quiceno Rendón Junior Analyst Analyst Research Editor [email protected] [email protected] [email protected] +574 6048906 +571 7463994 ext. 37316 +574 6048904 Lizeth Daniela Ortega Amaya Deiby Alejandro Rojas Cano Intern Interrn [email protected] [email protected] +571 7464318 ext. 37376 +571 7463988 ext. 37310 Terms of use This report has been prepared by Analysis Bancolombia a research and analysis department at Grupo Bancolombia. It shall not to be distributed, copied, sold, or altered in any way without the express permission of Grupo Bancolombia, nor be used for any purpose other than to serve as background material which does not constitute an offer, advice, recommendation, or suggestion by Grupo Bancolombia for making investment decisions or conducting any transactions or business. The use of the information provided is solely the responsibility of the recipient.

Before making an investment decision, you should assess multiple factors such as the risks of each instrument, your risk profile, your liquidity needs, among others. This report is only one of many elements that you should consider in making your investment decisions. In order to extend the content of this information, we ask you to contact your business manager. We recommend you not to make any investment decision until fully understanding all factors involved in such decisions. Fixed income and equity securities, interest rates, and other information found here are purely informational and are not an offer or firm demand to perform transactions. Also, according to the applicable regulations, our opinions or recommendations do not constitute a commitment or guarantee of return for the investor.

The information and opinions in this research report constitute a judgment as of the date indicated and are subject to change without notice. The information may therefore not be accurate or current. Future projections, estimates, and forecasts are subject to several risks and uncertainties that prevent us from ensuring that they will prove correct or accurate, or that the information, interpretations, and knowledge on which they are based will be valid. In that sense, actual results may substantially differ from the forward-looking statements contained here. You should be aware of the fact that investments in securities or other financial instruments involve risks. Past results do not guarantee future performance.

The entities that are part of Grupo Bancolombia may have acquired and maintain at the time of preparation, delivery or publication of this report, for their own position or that of their clients, the securities or financial assets to which the reports refers. Grupo Bancolombia has risk policies to avoid a concentration in their own positions and those of their clients, which contributes to avoid conflicts of interest.

As regards to conflicts of interest, we declare that (i) Valores Bancolombia S.A. Comisionista de Bolsa and/or Banca de Inversión Bancolombia S.A. Corporación Financiera have participated in structuring or underwriting/placing equity securities for Bancolombia S.A., (ii) Grupo Bancolombia is the beneficial owner of 10% or more of the shares issued by Valores Simesa S.A., and Proteccion S.A., (iii) Bancolombia is one of the biggest shareholders of Fondo Inmobiliario – FIC, and (iv) Valores Bancolombia S.A. Comisionista de Bolsa is a wholly owned subsidiary of Bancolombia S.A. Nevertheless, it has been prepared by our Analysis Bancolombia department team based on strict internal policies that require from us objectivity and neutrality, as well as independence from our areas of brokerage and investment banking.

The information contained in this report is not based, does not include nor has been structured based on privileged or confidential information. Any opinions or projections contained herein are solely attributable to the author and have been prepared independently and autonomously in the light of the information available at the time.

The content of this message does not constitute a professional recommendation to make investments according to the terms of article 2.39.1.1.2 of the Decree 2555 of 2010 or the regulations that modify, replace or complement it.

NOTICE TO US INVESTORS

This report was prepared, approved, published and distributed by Valores Bancolombia company located outside of the United States (a “non-US Group Company”). This report is distributed in the U.S. by LXM LLP USA, a U.S. registered broker dealer, on behalf of Valores Bancolombia only to major U.S. institutional investors (as defined in Rule 15a-6 under the U.S. Securities Exchange Act of 1934 (the “Exchange Act”)) pursuant to the exemption in Rule 15a-6 and any transaction effected by a U.S. customer in the securities described in this report must be effected through LXM LLP USA.

Neither the report nor any analyst who prepared or approved the report is subject to U.S. legal requirements or the Financial Industry Regulatory Authority, Inc. (“FINRA”) or other regulatory requirements pertaining to research reports or research analysts. No non-US Group Company is registered as a broker- dealer under the Exchange Act or is a member of the Financial Industry Regulatory Authority, Inc. or any other U.S. self-regulatory organization.

Analyst Certification. Each of the analysts identified in this report certifies, with respect to the companies or securities that the individual analyses, that (1) the views expressed in this report reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report. Please bear in mind that (i) Valores Bancolombia is the employer of the research analyst(s) responsible for the content of this report and (ii) research analysts preparing this report are resident outside the United States and are not associated persons of any US regulated broker-dealer and that therefore the analyst(s) is/are not subject to supervision by a US broker-dealer, and are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with US rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

Important US Regulatory Disclosures on Subject Companies. This material was produced by Analysis Bancolombia solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by LXM LLP USA and elsewhere in the world by Valores Bancolombia or an authorized affiliate of Valores Bancolombia. This document does not constitute an offer of, or an invitation by or on behalf of Valores Bancolombia or its affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which Valores Bancolombia or its Affiliates consider to be reliable. None of Valores Bancolombia accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions. LXM LLP USA assumes responsibility for the research reports content in regards to research distributed in the U.S. LXM LLP USA or its affiliates has not managed or co-managed a public offering of securities for the subject company in the past 12 months, has not received compensation for investment banking services from the subject company in the past 12 months, does not expect to receive and does not intend to seek compensation for investment banking services from the subject company in the next 3 months. LXM LLP USA has never owned any class of equity securities of the subject company. There are not any other actual, material conflicts of interest of LXM LLP USA at the time of the publication of this research report. As of the publication of this report LXM LLP USA, does not make a market in the subject securities.

Rating System The investment recommendation on the issuers under coverage by Analysis Bancolombia is governed by the rating system presented below, subject to the following criteria:

The upside potential is the percentage difference between the target price of securities issued by a particular issuer and their market price. The target price is not a forecast of the price of a stock, but a fundamental independent valuation made by Analysis Bancolombia, which seeks to reflect the fair price the market should pay for the shares on a given date.

Based on an analysis of the relative upside potential amongst the securities of companies under coverage and the COLCAP index, the ratings of the assets are determined as follows:

Overweight: when the upside potential of a stock exceeds by 5% or more the return potential of the COLCAP index. Market Weight: when the upside potential of a stock does not differ by more than 5% from the return potential of the COLCAP index. Underweight: when the upside potential of a stock is 5% or more below the return potential of the COLCAP index. Under Review: the company’s coverage is under review and therefore there’s no rating or target price.

Additionally, at the discretion of the analyst, the speculative qualification that complements the recommendation will continue to be used, taking into account the risks seen in the performance of the asset, its future development and the volatility the movement of the stock may show.

The fundamental potential of the index is determined based on the methodology established by the BVC for the calculation of the COLCAP index, considering the target prices published by Analysis Bancolombia. This will be made with the Colcap basket on the dates of calculation May and November of every year. For the companies part of the index but not covered, the consensus of market analysts will be used.

Currently, Analysis Bancolombia has 19 companies under coverage, distributed as follows:

Overweight Market Weight Underweight Under Review Number of issuers with ratings of: 0 0 0 19 Percentage of issuers with ratings of: 0% 0% 0% 100%