TELMEX - Webcast 1Q 07 Results. Thursday April 26, 2007

Transcription

1 TELMEX - Webcast 1Q 07 Results Thursday April 26, 2007

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 Overall Results In Mexico, 1Q 07 results reflect the execution of our core strategies: first, second, third, during the quarter, the broadband and data businesses continued to grow, which resulted in our largest quarterly gain. we continued promoting and introducing new packaged services. our profitable growth approach in the fixed lines business is an ongoing practice. We are in the process of adding strategic assets in Latin America in order to consolidate our position and build our triple play offering. Our 1Q 07 results illustrate that our strategies are working.

4 Overall Results Data Business in Mexico Expanding the broadband business is the future of telecom companies, and we certainly have made data growth a priority at TELMEX. During the quarter, we added more than 300 thousand Infinitum accounts, bringing the total to 2.1 million services, 75.3% ahead of a year ago Infinitum (ADSL) Customers (average customers per month in thousands) Q/Q= 68.3% Q06 1Q07

5 Overall Results Data Business in Mexico Currently, through our world-class network, we have the availability to provide broadband to around 94% of our customers Strategies to enhance market penetration 1st. TELMEX knows that one of the best ways to encourage use of the Internet is to make personal computers more accessible We offer customers attractive terms and up to three years to pay Over the last few years, this initiative has resulted in the sale of more than 1.1 million computers TELMEX also has donated more than 31 thousand computers

6 Overall Results Data Business in Mexico Currently, through our world-class network, we have the availability to provide broadband to around 94% of our customers Strategies to enhance market penetration 2nd. During the quarter, we further reduced the price of our broadband offer to $26 pesos per equivalent access of 100 Kbps, with the objective of increasing the value proposition for our customers We will further adapt the price of our offer as technological improvements allows us to do so

7 Overall Results In the Corporate Market Total Billed Line Equivalents Total billed line equivalents increased 11.1%, but Revenues decreased 1.6% since competition has driven prices down (thousands) Q/Q= 11.1% 2,113 2,347 1Q06 1Q07 We are working closely with our customers to deliver high levels of service and in turn to receive payment for the value we provide them.

8 Overall Results Transition to Fixed Revenue Flows While the packages represent good value for our customers, they also benefit TELMEX. These packages improve customer retention, and we benefit from fixed monthly revenue flows. Packages combine broadband with voice services at a price that represents an advantage over buying these services separately Service Packages (million units) Local packages LD packages Packages with ADSL 1Q

9 Overall Results Growth with Profitability In the fixed-line business in Mexico, TELMEX competes with operators that are mainly focused on high-income market segments A and B, where TELMEX has a market share of approximately 66%. Market share Specifically, around 50% in segment A 73% in segment B 100% in C-, D and E TELMEX s commitment for meeting demand has made us the only fixed-line operator in Mexico that has presence in homes of segments C-, D and E.

10 Overall Results Growth with Profitability Since the beginning of the year, we have continued to focus on growth with profitability. This strategy has allowed us to redirect capabilities while reducing the required investments. even when it is prudent to disconnect certain subscribers, we maintain our commitment to following our established customer care processes and to satisfying telecom needs. Connections / Disconnections (thousands) Q07 Connections Disconnections Net gain In 1Q 07, we had 18.3 million lines in service.

11 Overall Results Growth with Profitability In Mexico, our emphasis on CAPEX is on upgrading and adapting our network to provide all the current and future services required by our customers. Mexico CAPEX (%) Total CAPEX for the quarter was approximately 134 million dollars. Operating 11% needs and operational support 5% Social telephony 84% Growth and modernization

12 Overall Results Mexico s Financial Performance The increase in revenues was due to the 14% growth in Internet and 33% in interconnection, in addition to an increase of 41% in other revenues, mainly comprised of Tiendas TELMEX and Yellow Pages. Mexico Revenues (millions of Mexican pesos as of March 2007) Q/Q= 3.3% 31,543 32,574 The introduction of domestic and international CPP services generated additional revenuesof 1.6 billion pesos. 1Q06 1Q07

13 Overall Results Mexico s Financial Performance Costs increased 4.6% in the quarter due to an increase of 42% in interconnection costs related to the introduction of domestic and international CPP services. Mexico Costs & Expenses (millions of Mexican pesos as of March 2007) Q/Q= 4.6% 19,745 20,644 If we eliminate this effect, costs would have decreased approximately 2.6%. 1Q06 1Q07

14 Overall Results Mexico s Financial Performance Operating Income and Margins (%) EBITDA and Margins (%) (millions of Mexican pesos as of March 2007) and (%) Q/Q= 1.1% 11,799 11, % 36.6% Q/Q= (0.9)% 16,523 16, % 50.3% 1Q06 Mex 1Q07 Mex 1Q06 Mex 1Q07 Mex

15 Overall Results Our initiatives to face these challenges are: Focus on growth with profitability Evolve voice business Accelerate broadband and data revenues growth Develop personalized proposals Strengthen our relationship with corporate customers Continue to evolve the telecommunications platform in Mexico

16 Latin American Operations We continue to look for opportunities to expand our presence through two basic strategies: First, consolidating our existing assets. Second, acquiring companies to build our triple play offering.

17 Latin American Operations Our goal is to provide a complete array of products for our customers that will strengthen our position in the region. In Embratel, currently TELMEX holds 97.5% of this company, which confirms our commitment to further develop this market and to stay in the country for the long-term. Net Fone is one of our most promising services to provide stateof-the-art triple play services to our Brazilian customers, we currently have more than 257 thousand triple play subscribers served by Net Serviços which represented a 42% increase over the last quarter subscribers and we are adding customers at a rate of 25 thousand per month.

18 Latin American Operations Our first significant acquisitions in the Latin American market occurred just over three years ago. Through the acquisition of cable companies, our objective is to accelerate the deployment of triple play services and enhance our competitive position in Latin America. That is the case in Colombia, where this quarter we acquired Cablecentro and Satelcaribe, that along with Superview, TVcable and Cable Pacífico pass through almost 4 million homes.

19 Latin American Operations Additionally, in Chile, Peru and Argentina we are taking advantage of the 3.5 GHz frequency to serve the different markets in an integrated manner. In Chile, on March 20, we began to market broadband Internet access and telephony services through Chile first nationwide wireless network. We offer telecom services using WiMax technology at attractive prices and providing our customers with different choices through packaged services, which is a proven marketing strategy at TELMEX. Through this platform, small and medium-sized businesses will have access to wireless telephony and broadband Internet.

20 Latin American Operations Results In Brazil Local services and data continue to grow. Local customers Livre increased 32% Line equivalents increased 29% Revenues: Total revenues increased 3.8% Local increased 37% Data business increased 3% EBITDA margin reached 25% Operating margin was 11%

21 Latin American Operations Results Other Operations in Latam In the quarter, revenues from Chile, Argentina, Colombia and Peru. Revenues increased 12.3% to 104 million dollars. The primary contributors were growth from data and local services revenues. EBITDA margin of 23.4%

22 Consolidated Results Consolidated revenues increased 2.5% from a year ago, driven mainly by the increase of 13% on Internet access, long distance CPP interconnection and other revenues. Total costs increased 4% in the quarter, due to the growth of interconnection charges. Consolidated Revenues (millions of Mexican pesos as of March 2007) 44,024 45,143 1Q06 Q/Q= 2.5% Consolidated Costs & Expenses Q/Q= 4.2% 1Q07 Operating income and EBITDA had slight decreases of 1.2% and 2.2%, respectively. 30,465 31,747 1Q06 1Q07

23 Consolidated Results TELMEX s comprehensive financing cost generated a charge of 1.1 billion pesos, a decrease of 2.5% from last year s first quarter, mainly due to higher interest expense because of the growth of debt, a lower exchange loss and a higher gain in the monetary position. Net income (millions of Mexican pesos as of March 2007) Q/Q= 9.1% 8,044 8,780 1Q06 1Q07

24 Annual Meeting of Shareholders I would like to remind you that our Annual Meeting of Shareholders will be held tomorrow where in addition to submit TELMEX s financials for approval, our shareholders will consider two proposals: One is for a cash dividend payment of 45 Mexican cents per outstanding share in four equal payments of Mexican cents per share, that represents an increase of 9% in peso terms and Increasing by 15 billion pesos the balance for the share buy back.

25 Closing Remarks We continue to manage TELMEX for long-term shareholder value We are evaluating opportunities to increase our presence in profitable markets without taking away from our commitment to provide telecommunications services to all market segments in Mexico TELMEX is well positioned to compete successfully in the Mexican telecommunications market as well as in Latin American markets The building blocks to transform the company from a Mexican telephony company into a regional telecommunications service provider are in place In Mexico, we are focused on accelerating broadband penetration to increase the ARPU per line In Latin America, we are expanding our presence in a number of ways

26 Closing Remarks The implemented strategies confirm our commitment, to our customers which we demonstrate every day by offering more and better services at attractive prices and with the required quality to our shareholders operating our assets in an efficient way with a profitability approach but preserving our solid financial position We are well prepared to face the new challenges that our industry presents, and we are looking forward to continuing to thrive by turning those challenges into opportunities

27 TELMEX - Webcast 1Q 07 Results Thursday April 26, 2007