TELMEX - Webcast 4Q 2005 Results

Transcription

1 TELMEX - Webcast 4Q 2005 Results Tuesday February 14, 2006

2 Forward-looking statements disclaimer This document contains "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements may be identified by words such as "believe," "anticipate," "plan," "expect," "intend," "target," "estimate," "project," "predict," "forecast," "guideline," "should" and include, but are not limited to, statements about the expected future business and financial performance of TELMEX. Forward-looking statements are based on management's current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstance that are difficult to predict. Actual outcomes and results may differ materially from these expectations and assumptions due to political, economic, business, competitive, market, regulatory and other factors. Additional detailed information concerning these factors is readily available in TELMEX s Form 20-F and other filings with the Securities and Exchange Commission. These documents are available on both the SEC's and TELMEX's web sites. We undertake no obligation to update publicly or review any forward-looking information, whether as the result of new information, future developments or otherwise.

3 Introduction Our top priorities during 05. Expand our broadband and data network penetration Expand integrated service offerings Control operating costs to protect EBITDA and EBIT margins Maintain a solid financial position and protect our costs and debt profiles Restructure and integration of our subsidiaries in Latin America

4 Mexico Operating Results With these initiatives in mind, I will briefly discuss the results of each one of them starting with Mexico where 76 percent of our revenues are generated. Consolidated revenues at December 31, 2005 (%) 23.5% 76.5% Mexico Others

5 Mexico Operating Results 90% of our lines are ready to offer ADSL services. Internet access accounts increased 22% to a total of 2 million More than 1 million were broadband (Infinitum ADSL) customers Gain of Internet access accounts (thousand units) Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 Total Infinitum

6 Mexico Operating Results Billed line equivalents Billed line equivalents were 2 million, an increase of 32% at the end of the year (million units) Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05

7 Mexico Operating Results Total lines in service at December were 7% higher than a year ago, totaling 18.4 million. Lines in Service (million units) During 4Q 05, we carried out a clean up focused on prepaid lines that did not show traffic usage This year, TELMEX will continue with line growth in areas where there is demand Increasing social telephony programs to provide voice and data infrastructure in rural Mexico Our commitment: Fund for Social Coverage & e-mexico project

8 Mexico Operating Results 27 billion local calls for the 12M 05, about the same as 04. Local Calls (million units) 26,782 26,

9 Mexico Operating Results In Mexico, one of our main goals has been to increase the ARPU through service packages, particularly those that combine voice and data services. Paquete TELMEX includes: ADSL service 100 additional local calls Competitive LD rates This package was well received in the market since it was introduced in the third quarter, ended the year with 156 thousand customers.

10 Mexico Operating Results Also, to further expand broadband penetration, we have moved away from increasing the bandwidth to our customers for the same price to the integration of other products to their broadband connectivity for example, wireless as well as areas of remote access. This strategy has enabled TELMEX to grow its ADSL customer base by 84 percent.

11 Mexico Operating Results Last year, we successfully introduced calling programs... where customers subscribed to monthly bundles of minutes for local and long distance at preferential rates and today,... there are 1.5 million customers that have signed up for these products. Also, in November we launched video-calling service. This represents another step in the evolution of our video platform. This service was well received in the market and is seen as a way in which we added value to our customers.

12 Mexico Operating Results During 05, We successfully continued to transition our revenue composition in an environment of increased competition in the voice business. Today, our tariffs are very competitive and will continue to require small adjustments to reflect the new business environment. Our investments in infrastructure and systems continue to provide a competitive advantage in the roll out of new value-added services, which will come about with the expansion of our IP platform. Mexico shows a decline in real terms in revenues of 3 percent with a slight increase in EBITDA and EBIT margins.

13 Mexico Operating Results In 06, We will continue expanding our product offering and adapting them to our different market segments, particularly in the residential and small and medium-sized business sectors

14 Consolidated Financial Results Consolidated Revenues Consolidated revenues increased 13% in 05 compared with the previous year. (millions of Mexican pesos as of December 2005) 144, ,948 Operations in Mexico generated 76% of total revenues

15 Consolidated Financial Results Consolidated Costs & Expenses We continued to keep a tight rein on expenses during the year, although the total increased 14% over 04 s level. (millions of Mexican pesos as of December 2005) 99, ,254 In Mexico, by contrast, expenses declined 6%

16 Consolidated Financial Results Consolidated EBITDA Consolidated EBITDA for 05 totaled 73 billion pesos producing a margin of 45%. (millions of Mexican pesos as of December 2005) 68,427 73,111 In Mexico, EBITDA reached 64 billion pesos with a margin of almost 52% Consolidated EBITDA margin 47.3% 44.9%

17 Consolidated Financial Results In 4Q 05, consolidated majority net income totaled 7.8 billion pesos compared with 10.8 billion pesos last year. Consolidated Majority Net Income (millions of Mexican pesos as of December 2005) 10,773 However, it is important to remind you that that this last figure included deferred taxes that resulted from the effect of anticipating the reduction of the Mexican income tax rate from 32% to 28%. 4T04 7,780 4T05

18 Consolidated Financial Results Our total consolidated debt was US$8.5 billion, 6% above the year-earlier total We have executed foreign exchange hedges and interest rate swaps which increased our comprehensive financing cost for the year Consolidated Debt (million dollars) 7,993 8, Average cost of debt of 7.7% and maturity of approximately 7 years in the case of interest rate swaps

19 Operations in Latin America We made progress by implementing the TELMEX operating environment in the new properties: Quality service for customers Reliable networks and Well-managed operations The realignment of the assets in Brazil gave us a solid foundation for continued growth there, in spite of ongoing market challenges.

20 Embratel performance full year 05 Revenues increased 3% EBITDA margin 22% NET income 174 MM reais A positive turn from the direction the company had been going in the past. On February 8 th, Embratel announced the MOU with Net where they will both join forces to execute a triple-play offer. Positive for both companies Embratel will be able to efficiently expand its activity in the residential market and Net will add to its broadband expansion program. * Source: Embratel 4Q 05 Earnings Release

21 Latin America performance in full year 05 Chile Revenues (MM $US) 127 EBITDA margin 20% EBIT margin 4% Argentina Revenues (MM $US) 99 EBITDA margin 10% EBIT margin 0.3% Colombia Revenues (MM $US) 49 EBITDA margin 40% EBIT margin 19% Peru Revenues (MM $US) 54 EBITDA margin 24% All of our subsidiaries turned in positive EBITDA margins and are set for growth in the coming years.

22 2006 Strategies Mexico Residential market strategy is focused on: Increasing penetration of ADSL services Retaining customers with offerings that integrate basic services with the new value-added services Offset voice business rate reductions with higher data revenues and value-added services Seek profitable growth in low-income segments by complementing the development of social telephony

23 2006 Strategies Mexico Small and medium-sized businesses: We will emphasize on increasing the ARPU through higher bandwidth penetration and integrated service offerings that provide value to our customers and create loyalty in our customer base Corporate market, Increase revenue growth by incorporating new valueadded services in the managed network offerings

24 2006 Strategies Mexico Our strategies also call for us to keep focused on our improved cost efficiencies and continue along the path we have established in the last few years of real cost reductions. Investments in Mexico are focused on expanding and modernizing our infrastructure with careful introductions of new technologies that allow us to speed-up the launch of new services, as well as to create operating efficiencies.

25 2006 Strategies Brazil Continue strengthening the operating capabilities of Embratel to grow in new market segments Execute a better growth strategy between Net and Embratel for the residential market Expand integrated voice and data offerings to their commercial customers Increase market share in the corporate market by taking advantage of all the new acquisitions of TELMEX do Brasil, Prymesis and the group s international network

26 2006 Strategies Other Latin American Assets Chile, Argentina and Peru Concentrate on maintaining revenues by ensuring profitability in the residential long distance market For SME s, the goal is to improve the current offer to long distance customers with local voice and data services by complementing the existing network with last-mile wireless access In the corporate market, we will take advantage of the New Generation Networks we have installed to offer integrated telecommunications services and extend service to multi-national customers through TELMEX s international network

27 2006 Strategies Other Latin American Assets Colombia Focused on penetrating the SME market by offering integrated services of local voice and data In the corporate market, integrate telecommunications services along with data and local voice services including multi-national customers

28 CAPEX CAPEX (billion dollars) e Mexico = $ 1.4 $ 1.4 Brazil = LATAM = Total = Estimated CAPEX in 06 will also be focused on projects that relate directly to potential for growth and profitability.

29 Closing Remarks TELMEX s strategies integrate market realities in the region based on organic growth and with investments that will complement our operations with a better offer of products and services to customers in each country where we have presence. We will continue to look for synergies that allow us to increase the value of the company and deliver an appropriate return to shareholders.

30 TELMEX - Webcast 4Q 2005 Results Tuesday February 14, 2006