MEXICAN STOCK EXCHANGE

Transcription

1 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE STATEMENT OF FINANCIAL POSITION QUARTER: 2 YEAR: 212 REF AT 3 JUNE 212 AND 31 DECEMBER 211 (Thousand Pesos) ACCOUNT / SUBACCOUNT CONSOLIDATED Final Printing ENDING CURRENT PREVIOUS YEAR END Amount Final Printing Amount 1 TOTAL ASSETS 155,855,884 16,76, TOTAL CURRENT ASSETS 29,249,98 36,231, CASH AND CASH EQUIVALENTS 1,194,74 1,795,4 112 SHORT-TERM INVESMENTS 1121 AVAILABLE-FOR-SALE INVESTMENTS 1122 TRADING INVESTMENTS 1123 HELD-TO-MATURITY INVESTMENTS 113 TRADE RECEIVABLES, NET 15,549,13 15,419, TRADE RECEIVABLES 21,175,382 2,926, ALLOWANCE FOR DOUBTFUL ACCOUNTS -5,626,279-5,57, OTHER RECEIVABLES, NET 5,777,66 6,68, OTHER RECEIVABLES 5,777,66 6,68, ALLOWANCE FOR DOUBTFUL ACCOUNTS 115 INVENTORIES 1,758,996 1,583, BIOLOGICAL CURRENT ASSETS 116 OTHER CURRENT ASSETS 4,968,599 1,825, PREPAYMENTS 3,264,558 2,57, DERIVATIVE FINANCIAL INSTRUMENTS 6,114, ASSETS AVAILABLE FOR SALE 1164 DISCONTINUED OPERATIONS 1165 RIGHTS AND LICENSES 1166 OTHER 1,74,41 2,14, TOTAL NON-CURRENT ASSETS 126,66, ,529, ACCOUNTS RECEIVABLE, NET 122 INVESTMENTS 1,66,939 1,585, INVESTMENTS IN ASSOCIATES AND JOINT VENTURES 1,54,87 1,464, HELD-TO-MATURITY INVESTMENTS 1223 AVAILABLE-FOR-SALE INVESTMENTS 1224 OTHER INVESTMENTS 12, , PROPERTY, PLANT AND EQUIPMENT, NET 97,677,358 98,448, LAND AND BUILDINGS 19,368,239 19,36, MACHINERY AND INDUSTRIAL EQUIPMENT 94,773,692 9,486, OTHER EQUIPMENT 22,867,89 21,355, ACCUMULATED DEPRECIATION -41,568,418-33,536, CONSTRUCTION IN PROGRESS 2,236,36 782, INVESTMENT PROPERTY 125 BIOLOGICAL NON- CURRENT ASSETS 126 INTANGIBLE ASSETS,NET 1,13,856 1,151, GOODWILL 13,823 13, TRADEMARKS 414,16 428, RIGHTS AND LICENSES 49, , CONCESSIONS 176, , OTHER INTANGIBLE ASSETS 127 DEFERRED TAX ASSETS 128 OTHER NON-CURRENT ASSETS 26,164,633 23,344, PREPAYMENTS 1281 DERIVATIVE FINANCIAL INSTRUMENTS 1282 EMPLOYEE BENEFITS 24,716,99 22,327, AVAILABLE FOR SALE ASSETS 1283 DISCONTINUED OPERATIONS 1284 DEFERRED CHARGES 1,447,643 1,16, OTHER 2 TOTAL LIABILITIES 13,376, ,647, TOTAL CURRENT LIABILITIES 28,799,166 35,785, BANK LOANS 4,236,719 7,875, STOCK MARKET LOANS 4,8, 213 OTHER LIABILITIES WITH COST 214 TRADE PAYABLES 7,649,161 8,95, TAXES PAYABLE 1,6,433 1,325, INCOME TAX PAYABLE

2 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE STATEMENT OF FINANCIAL POSITION QUARTER: 2 YEAR: 212 REF AT 3 JUNE 212 AND 31 DECEMBER 211 (Thousand Pesos) ACCOUNT / SUBACCOUNT CONSOLIDATED Final Printing ENDING CURRENT PREVIOUS YEAR END Amount Final Printing Amount 2152 OTHER TAXES PAYABLE 1,6,433 1,325, OTHER CURRENT LIABILITIES 15,96,853 12,878, INTEREST PAYABLE 78, , DERIVATIVE FINANCIAL INSTRUMENTS 1,737,245 1,496, DEFERRED REVENUE 1,11,243 1,279, EMPLOYEE BENEFITS 7,7,695 5,29, PROVISIONS CURRENT LIABILITIES RELATED TO AVAILABLE FOR SALE ASSETS 2167 DISCONTINUED OPERATIONS 2168 OTHER 4,65,51 4,439, TOTAL NON-CURRENT LIABILITIES 74,577,399 75,862, BANK LOANS 1,948,71 15,116, STOCK MARKET LOANS 33,827,395 34,131, OTHER LIABILITIES WITH COST 12,32, 9,87, 224 DEFERRED TAX LIABILITIES 15,694,384 15,616, OTHER NON-CURRENT LIABILITIES 1,786,919 1,128, DERIVATIVE FINANCIAL INSTRUMENTS 2252 DEFERRED REVENUE 1,786,919 1,128, EMPLOYEE BENEFITS 2255 PROVISIONS NON-CURRENT LIABILITIES RELATED TO AVAILABLE FOR SALE ASSETS 2256 DISCONTINUED OPERATIONS 2257 OTHER 3 TOTAL EQUITY 52,479,319 49,113,4 31 EQUITY ATTRIBUTABLE TO OWNERS OF PARENT 52,148,3 48,779, CAPITAL STOCK 5,441,295 5,441, SHARES REPURCHASED 35 PREMIUM ON ISSUANCE OF SHARES 36 CONTRIBUTIONS FOR FUTURE CAPITAL INCREASES 37 OTHER CONTRIBUTED CAPITAL 38 RETAINED EARNINGS (ACCUMULATED LOSSES) 46,74,184 43,435, LEGAL RESERVE 1,94,763 1,94, OTHER RESERVES 383 RETAINED EARNINGS 33,59,812 21,47, NET INCOME FOR THE PERIOD 5,747,524 14,581, OTHERS 6,352,85 6,352,85 39 ACCUMULATED OTHER COMPREHENSIVE INCOME (NET OF TAX) 2,524-97, GAIN ON REVALUATION OF PROPERTIES 392 ACTUARIAL GAINS (LOSSES) FROM LABOR OBLIGATIONS 393 FOREING CURRENCY TRANSLATION 148,86 162, CHANGES IN THE VALUATION OF FINANCIAL ASSETS AVAILABLE FOR SALE 395 CHANGES IN THE VALUATION OF DERIVATIVE FINANCIAL INSTRUMENTS -146,336-26, CHANGES IN FAIR VALUE OF OTHER ASSETS SHARE OF OTHER COMPREHENSIVE INCOME OF 397 ASSOCIATES AND JOINT VENTURES 398 OTHER COMPREHENSIVE INCOME 32 NON-CONTROLLING INTERESTS 331, ,162

3 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE STATEMENT OF FINANCIAL POSITION INFORMATIONAL DATA QUARTER: 2 YEAR: 212 REF AT 3 JUNE 212 AND 31 DECEMBER 211 (Thousand Pesos) ACCOUNT CONCEPTS / SUBACCOUNT CONSOLIDATED Final Printing ENDING CURRENT PREVIOUS YEAR END Amount Final Printing Amount 911 SHORT-TERM FOREIGN CURRENCY LIABILITIES 7,864,286 12,452, LONG TERM FOREIGN CURRENCY LIABILITIES 23,676,96 28,147, CAPITAL STOCK (NOMINAL) 77,843 77, RESTATEMENT OF CAPITAL STOCK 5,363,452 5,363, PLAN ASSETS FOR PENSIONS AND SENIORITY PREMIUMS 916 NUMBER OF EXECUTIVES (*) NUMBER OF EMPLOYEES (*) 9,629 9, NUMBER OF WORKERS (*) 4,539 41, OUTSTANDING SHARES (*) 18,29,5, 18,29,5, 911 REPURCHASED SHARES (*) 128,5, 9111 RESTRICTED CASH (1) 9112 GUARANTEED DEBT OF ASSOCIATED COMPANIES (1) THIS CONCEPT MUST BE FILLED WHEN THERE ARE GUARANTEES OR RESTRICTIONS THAT AFECCT CASH AND CASH EQUIVALENTS (*) DATA IN UNITS

4 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE STATEMENTS OF COMPREHENSIVE INCOME QUARTER: 2 YEAR 212 CONSOLIDATED REF FOR THE SIX AND THREE MONTHS ENDED 3 JUNE, 212 AND 211 ACCOUNT / SUBACCOUNT (Thousand Pesos) CURRENT YEAR Final Printing PREVIOUS YEAR ACCUMULATED QUARTER ACCUMULATED QUARTER 41 REVENUE 53,49,521 26,467,215 55,16,631 27,613, SERVICES 49,7,93 24,569,749 51,846,216 25,968, SALE OF GOODS 2,488,668 1,252,697 2,273,844 1,141, INTERESTS 414 ROYALTIES 415 DIVIDENDS 416 LEASES 4161 CONSTRUCTIONS 417 OTHER REVENUE 1,489, ,769 1,4,571 53,94 42 COST OF SALES 3,564,713 15,557,43 29,857,52 15,23, GROSS PROFIT 22,484,88 1,91,172 25,33,579 12,59,79 43 GENERAL EXPENSES 11,75,723 5,913,767 11,348,313 5,744, PROFIT (LOSS) BEFORE OTHER INCOME (EXPENSE), NET 1,734,85 4,996,45 13,955,266 6,846, OTHER INCOME (EXPENSE), NET -875, ,671-1,28, , OPERATING PROFIT (LOSS) (*) 9,858,86 4,474,734 12,926,649 6,267,89 47 FINANCE INCOME 1,689,58-1,76,19 1,99, , INTEREST INCOME 154,94 83,552 28,66 81, GAIN ON FOREIGN EXCHANGE, NET 1,535,414-1,843,571 1,781,773 33, GAIN ON DERIVATIVES, NET 474 GAIN ON CHANGE IN FAIR VALUE OF FINANCIAL INSTRUMENTS 475 OTHER FINANCE INCOME 48 FINANCE COSTS 2,949,846-76,471 4,445,83 1,889, INTEREST EXPENSE 1,675, ,946 1,537, , LOSS ON FOREIGN EXCHANGE, NET 483 LOSS ON DERIVATIVES, NET 1,274,298-1,545,417 2,569,314 1,152, LOSS ON CHANGE IN FAIR VALUE OF FINANCIAL INSTRUMENTS 486 OTHER FINANCE COSTS 338, FINANCE INCOME (COSTS), NET -1,26,338-1,53,548-2,455,424-1,478, SHARE OF PROFIT (LOSS) OF ASSOCIATES AND JOINT VENTURES 8,185 24,98 39,68 32, PROFIT (LOSS) BEFORE INCOME TAX 8,677,933 3,446,94 1,51,293 4,821, INCOME TAX EXPENSE 2,933,141 1,183,91 3,591,367 1,657, CURRENT TAX 2,899,254 1,191,394 2,761,99 1,192, DEFERRED TAX 33,887-8,33 829, , PROFIT (LOSS) FROM CONTINUING OPERATIONS 5,744,792 2,263,3 6,918,926 3,164, PROFIT (LOSS) FROM DISCONTINUED OPERATIONS 415 NET PROFIT (LOSS) 5,744,792 2,263,3 6,918,926 3,164, PROFIT (LOSS), ATTRIBUTABLE TO NON-CONTROLLING INTERESTS -2,732-2,17 12,996 16, PROFIT (LOSS), ATTRIBUTABLE TO OWNERS OF PARENT 5,747,524 2,265,11 6,95,93 3,147, BASIC EARNINGS (LOSS) PER SHARE DILUTED EARNINGS (LOSS) PER SHARE....

5 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE STATEMENTS OF COMPREHENSIVE INCOME OTHER COMPREHENSIVE INCOME (NET OF INCOME TAX) FOR THE SIX AND THREE MONTHS ENDED 3 JUNE, 212 AND 211 (Thousand Pesos) QUARTER: 2 YEAR 212 CONSOLIDATED Final Printing REF ACCOUNT / SUBACCOUNT CURRENT YEAR PREVIOUS YEAR ACCUMULATED QUARTER ACCUMULATED QUARTER 42 NET PROFIT (LOSS) 5,744,792 2,263,3 6,918,926 3,164,671 DISCLOSURES NOT BE RECLASSIFIED ON INCOME 421 PROPERTY REVALUATION GAINS 422 ACTUARIAL EARNINGS (LOSS) FROM LABOR OBLIGATIONS 4221 SHARE OF INCOME ON REVALUATION ON PROPERTIES OF ASSOCIATES AND JOINT VENTURES DISCLOSURES MAY BE RECLASSIFIED SUBSEQUENTLY TO INCOME 423 FOREING CURRENCY TRANSLATION -13,564 89,45-94,813-49,5 424 CHANGES IN THE VALUATION OF FINANCIAL ASSETS HELD-FOR-SALE 425 CHANGES IN THE VALUATION OF DERIVATIVE FINANCIAL INSTRUMENTS 113,747 11,15-467,84-146, CHANGES IN FAIR VALUE OF OTHER ASSETS 427 SHARE OF OTHER COMPREHENSIVE INCOME OF ASSOCIATES AND JOINT VENTURES 428 OTHER COMPREHENSIVE INCOME 429 TOTAL OTHER COMPREHENSIVE INCOME 1,183 1,6-561, , TOTAL COMPREHENSIVE INCOME 5,844,975 2,363,63 6,357,29 2,969, COMPREHENSIVE INCOME, ATTRIBUTABLE TO NON-CONTROLLING INTERESTS -2,846-1,292 12,996 16, COMPREHENSIVE INCOME, ATTRIBUTABLE TO OWNERS OF PARENT 5,847,821 2,364,355 6,344,33 2,952,315

6 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE STATEMENTS OF COMPREHENSIVE INCOME INFORMATIONAL DATA QUARTER: 2 YEAR 212 CONSOLIDATED REF FOR THE SIX AND THREE MONTHS ENDED 3 JUNE, 212 AND 211 ACCOUNT / SUBACCOUNT (Thousand Pesos) CURRENT YEAR Final Printing PREVIOUS YEAR ACCUMULATED QUARTER ACCUMULATED QUARTER 921 OPERATING DEPRECIATION AND AMORTIZATION 8,259,333 4,136,851 8,265,473 4,128, EMPLOYEES PROFIT SHARING EXPENSES 869,77 478,558 1,19, ,112

7 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE STATEMENTS OF COMPREHENSIVE INCOME INFORMATIONAL DATA (12 MONTHS) QUARTER: 2 YEAR 212 CONSOLIDATED FOR THE SIX AND THREE MONTHS ENDED 3 JUNE, 212 AND 211 (Thousand Pesos) Final Printing CURRENT YEAR YEAR PREVIOUS YEAR REF ACCOUNT / SUBACCOUNT ACCUMULATED CURRENTQUARTER ACCUMULATED PREVIOUSQUARTER 923 REVENUE NET (**) 19,954, ,72, OPERATING PROFIT (LOSS) (**) 23,513,525 26,796, PROFIT (LOSS), ATTRIBUTABLE TO OWNERS OF PARENT(**) 13,423,268 14,6, NET PROFIT (LOSS) (**) 13,428,433 14,4, OPERATING DEPRECIATION AND AMORTIZATION (**) 16,542,388 16,714,5 (*) TO BE DEFINED BY EACH COMPANY (**) INFORMATION LAST 12 MONTHS

8 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE STATEMENT OF CASH FLOWS QUARTER: 2 YEAR: 212 TO JUNE 3 OF 212 AND 211 (Thousand Pesos) CONSOLIDATED Final Printing REF OPERATING ACTIVITIES ACCOUNT/SUBACCOUNT CURREENT YEAR Amount Final Printing PREVIOUS YEAR 51 PROFIT (LOSS) BEFORE INCOME TAX 8,677,933 1,51, (-) ITEMS NOT REQUIRING CASH 4,465,678 3,784, ESTIMATE FOR THE PERIOD 31,265 46, PROVISION FOR THE PERIOD 4,434,413 3,737, (-) OTHER UNREALISED ITEMS 53 +(-) ITEMS RELATED TO INVESTING ACTIVITIES 8,347,265 8,426, DEPRECIATION AND AMORTISATION FOR THE PERIOD 8,427,45 8,465, (-)+ GAIN OR LOSS ON SALE OF PROPERTY, PLANT AND EQUIPMENT 533 +(-) LOSS (REVERSAL) IMPAIRMENT 534 (-)+ EQUITY IN RESULTS OF ASSOCIATES AND JOINT VENTURES -8,185-39, (-) DIVIDENDS RECEIVED 536 (-) INTEREST RECEIVED 537 (-) EXCHANGE FLUCTUATION 538 (-)+ OTHER INFLOWS (OUTFLOWS) OF CASH 54 +(-) ITEMS RELATED TO FINANCING ACTIVITIES 1,516,881 2,77, (+) ACCRUED INTEREST 1,675,548 1,537, (+) EXCHANGE FLUCTUATION -1,432,965-1,738, (+) DERIVATIVE TRANSACTIONS 1,274,298 2,569, (-)+ OTHER INFLOWS (OUTFLOWS) OF CASH 338, CASH FLOWS BEFORE INCOME TAX 23,7,757 25,428, CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES -6,745,431-1,52, (-) DECREASE (INCREASE) IN TRADE ACCOUNTS RECEIVABLE -129, , (-) DECREASE (INCREASE) IN INVENTORIES -175, , (-) DECREASE (INCREASE) IN OTHER ACCOUNTS RECEIVABLE -1,49,74-1,569, (-) INCREASE (DECREASE) IN TRADE ACCOUNTS PAYABLE 178,832 12, (-) INCREASE (DECREASE) IN OTHER LIABILITIES -3,86,771-2,651, (-) INCOME TAXES PAID OR RETURNED -1,347,925-5,54, NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 16,262,326 14,925,761 INVESTING ACTIVITIES 58 NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES -9,16,716-5,737, (-) PERMANENT INVESTMENTS DISPOSITION OF PERMANENT INVESTMENTS 583 (-) INVESTMENT IN PROPERTY, PLANT AND EQUIPMENT -9,96,296-5,735, SALE OF PROPERTY, PLANT AND EQUIPMENT 585 (-) TEMPORARY INVESTMENTS DISPOSITION OF TEMPORARY INVESTMENTS 587 (-) INVESTMENT IN INTANGIBLE ASSETS -9,886-2, DISPOSITION OF INTANGIBLE ASSETS 589 (-) ACQUISITIONS OF VENTURES DISPOSITIONS OF VENTURES DIVIDEND RECEIVED INTEREST RECEIVED (-) DECREASE (INCREASE) ADVANCES AND LOANS TO THIRD PARTS (+) OTHER INFLOWS (OUTFLOWS) OF CASH FINANCING ACTIVITIES 59 NET CASH FLOW FROM (USED IN) FINANCING ACTIVITIES -7,755,874-12,537, BANK FINANCING STOCK MARKET FINANCING 1,, OTHER FINANCING 17,6, 594 (-) BANK FINANCING AMORTISATION -6,683, , (-) STOCK MARKET FINANCING AMORTISATION -4,8, -5,43, (-) OTHER FINANCING AMORTISATION -15,15, 597 +(-) INCREASE (DECREASE) IN CAPITAL STOCK 598 (-) DIVIDENDS PAID -2,444,419-4,643, PREMIUM ON ISSUANCE OF SHARES CONTRIBUTIONS FOR FUTURE CAPITAL INCREASES 5911 (-) INTEREST EXPENSE -1,523,422-1,569, (-) REPURCHASE OF SHARES -1,339, (-)+ OTHER INFLOWS (OUTFLOWS) OF CASH 5,245,912 15,323 Amount

9 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE STATEMENT OF CASH FLOWS QUARTER: 2 YEAR: 212 TO JUNE 3 OF 212 AND 211 (Thousand Pesos) CONSOLIDATED Final Printing REF ACCOUNT/SUBACCOUNT CURREENT YEAR Amount Final Printing PREVIOUS YEAR 51 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS -6,264-3,349, EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 512 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,795,4 7,493, CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,194,74 4,143,975 Amount

10 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE STATEMENT OF CHANGES IN EQUITY (THOUSAND PESOS) QUARTER: 2 YEAR: 212 CONSOLIDATED Final Printing CONCEPTS CAPITAL STOCK SHARES REPURCHASED PREMIUM ON ISSUANCE OF SHARES CONTRIBUTIONS FOR FUTURE CAPITAL INCREASES OTHER CAPITAL CONTRIBUTED RETAINED EARNINGS (ACCUMULATED LOSSES) RESERVES UNAPPROPRIATE D EARNINGS (ACCUMULATED LOSSES) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) EQUITY ATTRIBUTABLE TO OWNERS OF PARENT NON- CONTROLLING INTERESTS TOTAL EQUITY BALANCE AT JANUARY 1, 211 5,467,35 1,94,763 38,79, ,881 45,465,622 39,357 45,774,979 RETROSPECTIVE ADJUSTMENTS APPLICATION OF COMPREHENSIVE INCOME TO RETAINED EARNINGS RESERVES DIVIDENDS -4,74,518-4,74,518-4,74,518 CAPITAL INCREASE (DECREASE) REPURCHASE OF SHARES -25,339-1,314,392-1,339,731-1,339,731 (DECREASE) INCREASE IN PREMIUM ON ISSUE OF SHARES (DECREASE) INCREASE IN NON-CONTROLLING INTERESTS OTHER CHANGES COMPREHENSIVE INCOME 6,95,93-561,897 6,344,33 12,996 6,357,29 BALANCE AT JUNE 3, 211 5,441,696 1,94,763 39,641, ,16 45,729,46 322,353 46,51,759 BALANCE AT JANUARY 1, 212 5,441,295 1,94,763 42,34,953-97,773 48,779, ,162 49,113,4 RETROSPECTIVE ADJUSTMENTS APPLICATION OF COMPREHENSIVE INCOME TO RETAINED EARNINGS RESERVES DIVIDENDS -2,479,56-2,479,56-2,479,56 CAPITAL INCREASE (DECREASE) REPURCHASE OF SHARES (DECREASE) INCREASE IN PREMIUM ON ISSUE OF SHARES (DECREASE) INCREASE IN NON-CONTROLLING INTERESTS OTHER CHANGES COMPREHENSIVE INCOME 5,747,524 1,297 5,847,821-2,846 5,844,975 BALANCE AT JUNE 3, 212 5,441,295 1,94,763 45,69,421 2,524 52,148,3 331,316 52,479,319

11 MEXICAN STOCK EXCHANGE STOCK EXCHANGE CODE: TELMEX QUARTER: 2 YEAR: 212 TELEFONOS DE MEXICO, S.A.B. DE DISCUSSION AND ANALYSIS OF THE C.V. ADMINISTRATION ON THE RESULTS OF PAGE 1 / 1 OPERATIONS AND FINANCIAL CONDITION OF THE COMPANY CONSOLIDATED Final Printing RELEVANT EVENT ON JULY 16, 212, TELMEX FILED FORM 15F WITH THE SEC IN ORDER TO TERMINATE THE REGISTRATION OF ITS SECURITIES UNDER THE SECURITIES EXCHANGE ACT AND ITS REPORTING OBLIGATIONS. AS A RESULT OF THIS FILING, TELMEX S REPORTING OBLIGATIONS WITH THE SEC, INCLUDING ITS OBLIGATIONS TO FILE ANNUAL REPORTS ON FORM 2-F AND REPORTS ON FORM 6-K, ARE IMMEDIATELY SUSPENDED. COMMENTS TO FINANCIAL RESULTS IN THE SECOND QUARTER OF 212, REVENUES TOTALED BILLION PESOS, A DECREASE OF 4.2% COMPARED WITH THE SAME PERIOD OF 211, MAINLY DUE TO INCREASES OF 1.9% IN DATA (TOTALING 8.2 MILLION BROADBAND INTERNET-ACCESS AT JUNE 3, 212) AND 11.8% IN INTERNATIONAL LONG DISTANCE REVENUES, OFFSET BY THE 37.2% DECREASE IN INTERCONNECTION REVENUES (DUE TO THE CALLING PARTY PAYS RATE REDUCTION) AND LOWER REVENUES FROM DOMESTIC LONG DISTANCE AND LOCAL SERVICES (GENERATED BY 14.6 MILLION BILLED LINES), WHICH DECLINED 1.4% AND 2.8%, RESPECTIVELY. IN THE SECOND QUARTER OF 212, TOTAL COSTS AND EXPENSES WERE BILLION PESOS, 3.8% HIGHER THAN IN THE SAME QUARTER OF THE PREVIOUS YEAR, DUE TO HIGHER LABOR EXPENSES AND THE COST OF LONG DISTANCE TERMINATION TRAFFIC PARTIALLY OFFSET BY LOWER INTERCONNECTION COSTS. IN THE SECOND QUARTER, FINANCING COST PRODUCED A CHARGE OF 1.54 BILLION PESOS. THIS WAS A RESULT OF THE FOLLOWING: I) A NET INTEREST CHARGE OF 1.9 BILLION PESOS, 26.7% LOWER THAN THE SAME QUARTER OF LAST YEAR, AMONG OTHER FACTORS DUE TO DEBT REDUCTION, AND II) A NET EXCHANGE GAIN OF 36 MILLION PESOS. IN THE SECOND QUARTER, NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST WAS BILLION PESOS. TOTAL DEBT, AT JUNE 3, 212, WAS THE EQUIVALENT OF BILLION DOLLARS. INDEPENDENT ANALYST GIVEN THAT THE EXTRAORDINARY SHAREHOLDERS MEETING HELD ON APRIL 25, 212, APPROVED THE DELISTING OF TELMEX S SHARES FROM THE MEXICAN STOCK EXCHANGE (BOLSA MEXICANA DE VALORES, S.A.B. DE C.V.), TELMEX HAS NOT CONSIDERED TO HIRE AN INDEPENDENT ANALYST FOR THE COVERAGE OF ITS SHARES.

12 MEXICAN STOCK EXCHANGE STOCK EXCHANGE CODE: TELMEX QUARTER: 2 YEAR: 212 TELEFONOS DE MEXICO, S.A.B. FINANCIAL STATEMENT NOTES DE C.V. PAGE 1 / 1 CONSOLIDATED Final Printing FOR FINANCIAL STATEMENT NOTES SEE IFRSTRIM.PDF

13 MEXICAN STOCK EXCHANGE STOCK EXCHANGE CODE: TELMEX QUARTER: 2 YEAR: 212 TELEFONOS DE MEXICO, S.A.B. DE C.V. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (THOUSAND PESOS) CONSOLIDATED Final Printing COMPANY NAME PRICIPAL ACTIVITY NUMBER OF SHARES % OWNER SHIP TOTAL AMOUNT ACQUISITION COST CURRENT VALUE Grupo Telvista, S.A. de C.V. Telemarketing in Mexico and U.S.A. 51,138, ,138 93,851 Centro Histórico de la Ciudad de México, SA de CV Real State Services 16,4, ,2 14,192 TM and MS, LLC Internet portal (ProdigyMSN) , ,539 Hildebrando, S.A. de C.V. Information Technology Services 462, ,423 26,55 TOTAL INVESTMENT IN ASSOCIATES 786,22 1,54,87 NOTES

14 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE BREAKDOWN OF CREDITS (THOUSAND PESOS) QUARTER: 2 YEAR: 212 CONSOLIDATED Final Printing MATURITY OR AMORTIZATION OF CREDITS IN NATIONAL CURRENCY MATURITY OR AMORTIZATION OF CREDITS IN FOREIGN CURRENCY CREDIT TYPE / INSTITUTION FOREIGN INSTITUTION (YES/NO) CONTRACT SIGNING DATE EXPIRATION DATE INTEREST RATE TIME INTERVAL TIME INTERVAL CURRENT YEAR UNTIL 1YEAR UNTIL 2 YEAR UNTIL 3 YEAR UNTIL 4 YEAR UNTIL 5 YEAR OR MORE CURRENT YEAR UNTIL 1YEAR UNTIL 2 YEAR UNTIL 3 YEAR UNTIL 4 YEAR UNTIL 5 YEAR OR MORE BANKS FOREIGN TRADE EXPORT DEVELOPMENT C. (1) YES 16/3/26 22/7/ ,233 74,233 15,993 17,387 MIZUHO CORPORATE BANK LTD (1 YES 15/1/27 1/3/ , ,35 864, , , ,98 NATIXIS (3) YES 28/2/ /3/ ,84 12,85 25,69 25,69 25,69 53,619 SECURED COMMERCIAL BANKS BANAMEX (4) NOT 28/6/21 26/6/ , BANK OF AMERICA, N.A. (2) YES 13/6/28 13/6/ ,6 49,59 BBVA BANCOMER, S.A. (6) NOT 12/2/28 18/2/ ,413,33 CITIBANK, N.A. (2) YES 11/8/26 11/8/ ,162,945 3,185,7 OTHER TOTAL BANKS 35, 519,386 3,682,333 7,868,391 1,317,285 89,38 872,717

15 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE BREAKDOWN OF CREDITS (THOUSAND PESOS) QUARTER: 2 YEAR: 212 CONSOLIDATED Final Printing MATURITY OR AMORTIZATION OF CREDITS IN NATIONAL CURRENCY MATURITY OR AMORTIZATION OF CREDITS IN FOREIGN CURRENCY CREDIT TYPE / INSTITUTION FOREIGN INSTITUTION (YES/NO) CONTRACT SIGNING DATE EXPIRATION DATE INTEREST RATE TIME INTERVAL TIME INTERVAL CURRENT YEAR UNTIL 1YEAR UNTIL 2 YEAR UNTIL 3 YEAR UNTIL 4 YEAR UNTIL 5 YEAR OR MORE CURRENT YEAR UNTIL 1YEAR UNTIL 2 YEAR UNTIL 3 YEAR UNTIL 4 YEAR UNTIL 5 YEAR OR MORE STOCK MARKET LISTED STOCK EXCHANGE UNSECURED CERT. BURSAT TELMEX 7 (3) NOT 23/4/27 16/3/ ,, CERT. BURSAT TELMEX 8 (3) NOT 21/4/28 5/4/ ,6, CERT. BURSAT TELMEX 9-2 (4) NOT 1/7/29 4/7/ ,, CERT. BURSAT TELMEX 9-3 (4) NOT 3/11/29 3/1/ ,, CERT. BURSAT TELMEX 9-4 (4) NOT 3/11/29 27/1/ ,, 8 3/4 SENIOR NOTES PESOS (3) YES 31/1/26 31/1/ ,5, 5 1/2 SENIOR NOTES (3) YES 27/1/25 27/1/ ,574, /2 SENIOR NOTES (3) YES 12/11/29 15/11/ ,152,397 SECURED PRIVATE PLACEMENTS UNSECURED SECURED TOTAL STOCK MARKET LISTED IN STOCK EXCHANGE AND PRIVATE PLACEMENT 4,, 4,, 4,5, 8,6, 7,574,998 5,152,397

16 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE BREAKDOWN OF CREDITS (THOUSAND PESOS) QUARTER: 2 YEAR: 212 CONSOLIDATED Final Printing MATURITY OR AMORTIZATION OF CREDITS IN NATIONAL CURRENCY MATURITY OR AMORTIZATION OF CREDITS IN FOREIGN CURRENCY CREDIT TYPE / INSTITUTION FOREIGN INSTITUTION (YES/NO) DATE OF AGREEMENT EXPIRATION DATE TIME INTERVAL TIME INTERVAL CURRENT YEAR UNTIL 1YEAR UNTIL 2 YEAR UNTIL 3 YEAR UNTIL 4 YEAR UNTIL 5 YEAR OR MORE CURRENT YEAR UNTIL 1YEAR UNTIL 2 YEAR UNTIL 3 YEAR UNTIL 4 YEAR UNTIL 5 YEAR OR MORE OTHER CURRENT AND NON- CURRENT LIABILITIES WITH COST OT. CRED CON COSTO L.P (5)MN NOT 5/7/211 3/7/215 12,32, TOTAL OTHER CURRENT AND NON- CURRENT LIABILITIES WITH COST 12,32, SUPPLIERS PROVEEDORES M.N. NOT 4,249,527 PROVEEDORES M.E. YES 3,399,634 TOTAL SUPPLIERS 4,249,527 3,399,634 OTHER CURRENT AND NON- CURRENT LIABILITIES OT.PAS. CIRC Y NO CIRC. M.N. NOT 13,773,765 1,87, ,95 229, ,724 1,91,566 OT. PAS. CIRC Y NO CIRC. M.E YES 262,933 TOTAL OTHER CURRENT AND NON- CURRENT LIABILITIES 13,773,765 1,87, ,95 229, ,724 1,91, ,933 GENERAL TOTAL 18,58,292 1,87,155 4,235,95 4,229,724 17,49,724 9,691,566 4,181,953 3,682,333 7,868,391 8,892,283 89,38 6,25,114 NOTES A)INTEREST RATES: THE CREDITS BREAKDOWN IS PRESENTED WITH AN INTEGRATED RATE AS FOLLOWS: (1)6 MONTHS USD LIBOR RATE PLUS MARGIN (2)3 MONTHS USD LIBOR RATE PLUS MARGIN (3)FIXED RATE (4)28 DAYS TIIE RATE PLUS MARGIN (5)91 DAYS TIIE RATE PLUS MARGIN (6)3 MONTHS JPY LIBOR PLUS MARGIN B)THE FOLLOWING RATES WERE CONSIDERED:

17 NOTES - LIBOR AT 6 MONTHS IN US DOLLARS IS EQUIVALENT TO.7344 AT JUNE 3, LIBOR AT 3 MONTHS IN US DOLLARS IS EQUIVALENT TO.466 AT JUNE 3, TIIE AT 28 DAYS IS EQUIVALENT TO AT JUNE 3, TIIE AT 91 DAYS IS EQUIVALENT TO AT JUNE 3, LIBOR AT 3 MONTHS IN JPY IS EQUIVALENT TO.1957 AT JUNE 3, 212. C)THE SUPPLIERS' CREDITS ARE RECLASSIFIED TO BANK LOANS BECAUSE IN THE EMISNET LAYOUT, LONG-TERM SUPPLIERS DO NOT EXIST. D)LIABILITIES IN FOREIGN CURRENCY WERE TRANSLATED TO MEXICAN PESOS AT THE PREVAILING EXCHANGE RATE AT THE END OF THE REPORTING PERIOD, WHICH AT JUNE 3, 212, WERE AS FOLLOWS: CURRENCY AMOUNT E.R. DOLLAR (USD) 1,78, EURO (EUR) 9, JAPANESE YEN (JPY) 19,891,2.17

18 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE MONETARY FOREIGN CURRENCY POSITION (THOUSAND PESOS) QUARTER: 2 YEAR: 212 CONSOLIDATED Final Printing FOREIGN CURRENCY POSITION (THOUSANDS OF PESOS) THOUSANDS OF DOLLARS DOLLARS THOUSAND PESOS OTHER CURRENCIES THOUSANDS OF DOLLARS THOUSAND PESOS THOUSAND PESOS TOTAL MONETARY ASSETS 167,86 2,281,229 2,281,229 CURRENT 167,86 2,281,229 2,281,229 NON CURRENT LIABILITIES POSITION 2,48,295 27,965, ,847 3,575,8 31,54,382 CURRENT 573,724 7,833,55 2,287 31,231 7,864,286 NON CURRENT 1,474,571 2,132, ,56 3,543,777 23,676,96 NET BALANCE -1,881,29-25,684, ,847-3,575,8-29,259,153 NOTES FOREIGN CURRENCY USED: ASSETS AND LIABILITIES IN FOREIGN CURRENCY WERE TRANSLATED TO MEXICAN PESOS AT THE PREVAILING EXCHANGE RATE AT THE END OF THE REPORTING PERIOD. AT THE END OF THE QUARTER THE EXCHANGE RATES WERE AS FOLLOWS: CURRENCY E.R. DOLLAR (USD) EURO 17.3 JAPANESE YEN.17

19 MEXICAN STOCK EXCHANGE STOCK EXCHANGE CODE: TELMEX QUARTER: 2 YEAR: 212 TELEFONOS DE MEXICO, S.A.B. DE C.V. DEBT INSTRUMENTS PAGE 1 / 2 CONSOLIDATED Final Printing FINANCIAL LIMITATIONS IN CONTRACT, ISSUED DEED AND / OR TITLE A PORTION OF THE DEBT IS SUBJECT TO CERTAIN RESTRICTIVE COVENANTS WITH RESPECT TO MAINTAINING CERTAIN FINANCIAL RATIOS AND THE SALE OF ASSETS, AMONG OTHERS. A PORTION OF THE DEBT IS ALSO SUBJECT TO EARLY MATURITY OR REPURCHASE AT THE OPTION OF THE HOLDERS IN THE EVENT OF CHANGE OF CONTROL OF THE COMPANY, AS DEFINED IN THE RELATED INSTRUMENTS. THE DEFINITION OF CHANGE OF CONTROL VARIES FROM INSTRUMENT TO INSTRUMENT; HOWEVER, NO CHANGE IN CONTROL SHALL BE CONSIDERED TO HAVE OCCURRED AS LONG AS CARSO GLOBAL TELECOM, S.A. DE C.V. (TELMEX'S CONTROLLING COMPANY) OR ITS CURRENT STOCKHOLDERS CONTINUE TO HOLD THE MAJORITY OF THE COMPANY'S VOTING SHARES.

20 MEXICAN STOCK EXCHANGE STOCK EXCHANGE CODE: TELMEX QUARTER: 2 YEAR: 212 TELEFONOS DE MEXICO, S.A.B. DE C.V. DEBT INSTRUMENTS PAGE 2 / 2 CONSOLIDATED Final Printing ACTUAL SITUATION OF FINANCIAL LIMITED AT JUNE 3, 212, THE COMPANY HAS COMPLIED WITH SUCH RESTRICTIVE COVENANTS.

21 MEXICAN STOCK EXCHANGE STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. DISTRIBUTION OF REVENUE BY PRODUCT TOTAL INCOME (THOUSAND PESOS) QUARTER: 2 YEAR: 212 CONSOLIDATED Final Printing MAIN PRODUCTS OR PRODUCT LINE VOLUME NET SALES AMOUNT MARKET SHARE (%) TRADEMARKS MAIN CUSTOMERS NATIONAL INCOME LOCAL SERVICE 18,864,25. LONG DISTANCE 6,574,31. INTERCONNECTION 3,776,953. DATA 17,675,15. OTHERS 3,95,616. EXPORT INCOME INCOMING TRAFFIC 1,699,653. DATA 91,749. OTHERS 8,217. INCOME OF SUBSIDIARIES ABROAD LONG DISTANCE 388,919. OTHERS 19,758. TOTAL 53,49,521 NOTES

22 STOCK EXCHANGE CODE: TELMEX TELEFONOS DE MEXICO, S.A.B. DE C.V. MEXICAN STOCK EXCHANGE ANALYSIS OF PAID CAPITAL STOCK CHARACTERISTICS OF THE SHARES QUARTER: 2 YEAR: 212 CONSOLIDATED Final Printing SERIES NOMINAL VALUE VALID COUPON FIXED PORTION NUMBER OF SHARES CAPITAL STOCK FREE SUBSCRIPTION VARIABLE PORTION MEXICAN FIXED VARIABLE A ,245,12 36,245,12 1,555 AA.432 7,839,596,82 7,839,596,82 33,848 L.432 9,829,658,798 9,829,658,798 42,44 TOTAL 18,29,5, 7,839,596,82 1,189,93,918 77,843 TOTAL NUMBER OF SHARES REPRESENTING THE PAID IN CAPITALSTOCK ON THE DATE OF SENDING THE INFORMATION 18,29,5, NOTES

23 STOCK EXCHANGE CODE: TELMEX MEXICAN STOCK EXCHANGE QUARTER: 2 YEAR: 212 TELEFONOS DE MEXICO, S.A.B. DE DERIVATIVE FINANCIAL INSTRUMENTS C.V. PAGE 1 / 1 CONSOLIDATED Final Printing FOR DERIVATIVE FINANCIAL INSTRUMENTS SEE IFRSTRIM.PDF

24 IFRSTRIM.PDF

25 TELÉFONOS DE MÉXICO, S.A.B. DE C.V. AND SUBSIDIARIES Notes to unaudited condensed consolidated financial statements June 3, 212 and December 31, 211 (In thousands of Mexican pesos) 1. Description of the Business and Significant Events I. Description of the Business Teléfonos de México, S.A.B. de C.V. and its subsidiaries (collectively the Company or TELMEX ) provide telecommunications services, primarily in Mexico, including domestic and international long distance and local telephone services, data services, the connection of customers with cellular networks (calling party pays), as well as the interconnection of domestic long distance carriers cellular telephone companies and local service carriers networks with the TELMEX local network. TELMEX also obtains revenues from the sale of telephone equipment and personal computers. The amended Mexican government concession under which TELMEX operates was signed on August 1, 199. The concession runs through the year 226, but it may be renewed for an additional period of fifteen years. Among other significant aspects, the concession stipulates the requirements for providing telephony services and establishes the basis for regulating prices. The prices to be charged for basic telephone services are subject to a cap determined by the Federal Telecommunications Commission (COFETEL). During the last twelve years, TELMEX management decided not to raise its prices for basic services. TELMEX has concessions in Mexico to operate radio spectrum wave frequency bands to provide fixed wireless telephone services and to operate radio spectrum wave frequency bands for point-to-point and point-to-multipoint microwave communications. The foreign subsidiary has licenses for use of point-to-point and point-to-multipoint links in the U.S.A. The Corporate offices of the Company are located at Parque Vía 19, Colonia Cuauhtémoc, C.P. 6599, Mexico City, Mexico and its corporate website is On July 16, 212, TELMEX s Audit and Corporate Practices Committee and management authorized the issuance of these consolidated financial statements and related notes. 1

26 II. Significant Events a) Public Exchange Offers On May 11, 21, América Móvil, S.A.B. de C.V. (América Móvil) launched two concurrent public exchange offers to acquire the outstanding shares of Carso Global Telecom, S.A.B. de C.V. (Carso Global Telecom), which was TELMEX s controlling shareholder, and Telmex Internacional, S.A.B de C.V.. Carso Global Telecom was the direct holder of 59.4% of the outstanding shares of TELMEX. On June 16, 21, América Móvil completed the acquisition of 99.4% of the outstanding shares of Carso Global Telecom, by means of a first public exchange offer. As a result, América Móvil indirectly owned 59.1% of the outstanding shares of TELMEX. Upon completion of this transaction, TELMEX became a subsidiary of América Móvil. On October 11, 211, América Móvil launched two concurrent public exchange offers to acquire the outstanding shares of TELMEX, of which it was not already the direct or indirect holder. On November 11, 211, América Móvil concluded the public exchange offer to acquire the shares, and as a result of that offer, its direct and indirect ownership of the outstanding shares of TELMEX increased to 92.99%. On its 211 Annual Report and Form 2-F, América Móvil disclosed that as of March 31, 212 it owned, directly and indirectly through its subsidiary Carso Global Telecom, 97.2% of the total equity of TELMEX. b) On December 19, 211, at the Extraordinary General Meeting, the shareholders approved to proceed to delist and/ or cancel the registry or inscription of TELMEX s shares or American Depositary Shares ( ADSs ), from the New York Stock Exchange ( NYSE ) and the NASDAQ Capital Market ( NASDAQ ) and its L Shares from the Mercado de Valores Latinoamericano en Euros in Madrid, Spain ( Latibex ), and to terminate its American Depositary Receipt ( ADRs ) programs. On January 31, 212, TELMEX filed Form 25 with the U.S. Securities and Exchange Commission ( the SEC ), after which TELMEX s ADSs ended trading on the NYSE and NASDAQ. On the same date, TELMEX ended trading its L shares on Latibex. However, TELMEX shares will continue to be traded on the Bolsa Mexicana de Valores (Mexican Stock Exchange). On April 25, 212, at the Extraordinary Shareholders Meeting the shareholders approved the deregistration of the Company s securities from the National Securities Registry (Registro Nacional de Valores) and the delisting from the Mexican Stock Exchange. It is expected that TELMEX s shares will cease trading on the Mexican Stock Exchange during the second half of 212. On July 16, 212, TELMEX filed Form 15F with the SEC in order to terminate the registration of its securities under the Securities Exchange Act and its reporting obligations. As a result of this filing, TELMEX s reporting obligations with the SEC, including its obligations to file annual reports on Form 2-F and reports on Form 6-K, are immediately suspended. 2

27 2. Adoption of International Financial Reporting Standards (IFRS) The Company, with the respective authorization of its Board of Directors, Audit Committee, the Mexican Stock Exchange and the Mexican National Banking and Securities Commission, decided to adopt IFRS as issued by the International Accounting Standards Board ( IASB ) as of December 31, 211, using a transition date as of January 1, Significant Accounting Policies and Practices The accounting policies applied by the Company in these consolidated interim financial statements are the same as applied in its financial statements at December 31, 211. a) Basis of preparation These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, issued by the International Accounting Standards Board (IASB). These condensed consolidated interim financial statements do not include all of the information required for full annual financial statements. In preparing these condensed consolidated interim financial statements the Company has applied IFRS and current interpretations, which are subject to changes issued by the IASB. Therefore, until the Company prepares its complete set of financial statements under IFRS at December 31, 212, there is the possibility that comparative consolidated financial statements be adjusted. The preparation of these financial statements under IFRS requires the use of critical estimates and assumptions that affect the amounts reported for certain assets and liabilities, as well as certain income and expenses. It also requires that management exercise judgment in the application of the Company s accounting policies. The Mexican peso is the functional currency and reporting currency of these financial statements. b) Consolidation and basis of translation of financial statements of foreign subsidiaries i) Consolidation and equity method The consolidated financial statements include the accounts of Teléfonos de México, S.A.B. de C.V and those of the subsidiaries over which the Company exercises control. All of the companies operate in the telecommunications field or provide services to companies relating to this activity. Subsidiaries are fully consolidated from the acquisition date, which is the date when TELMEX obtains control, and continue to be consolidated until the date when TELMEX no longer has such control. The financial statements of the subsidiaries are prepared for the same reporting period as TELMEX, using consistent accounting policies. All intercompany balances and transactions have been eliminated in the consolidated financial statements. 3

28 Non-controlling interest refers to certain subsidiaries in which the Company does not hold 1% of the shares. Non-controlling interest is presented as a separate caption of equity in the consolidated statements of financial position, and in the consolidated statements of income and statements of comprehensive income. The investments in associated companies in which the Company exercises significant influence are accounted for using the equity method, whereby TELMEX recognizes its share in the net income and equity of the associates. The results of operations of the subsidiaries and associates were incorporated in the Company s consolidated financial statements as of the month following their acquisition. TELMEX s equity interest in its principal subsidiaries and associated companies is as follows: % equity interest at June 3, December 31, Company Country Subsidiaries: Integración de Servicios TMX, S.A. de C.V. México 1% 1% Alquiladora de Casas, S.A. de C.V. México 1% 1% Cía. de Teléfonos y Bienes Raíces, S.A. de C.V. México 1% 1% Consorcio Red Uno, S.A. de C.V. México 1% 1% Teléfonos del Noroeste, S.A. de C.V. México 1% 1% Uninet, S.A. de C.V. México 1% 1% Telmex USA, L.L.C. E.U.A. 1% 1% Associated companies: Grupo Telvista, S.A. de C.V. México 45% 45% ii) Basis of translation of financial statements of foreign subsidiaries The financial statements of foreign subsidiaries are consolidated after they are converted to IFRS in the functional currency, and then converted to the reporting currency. The assets and liabilities in the financial statements of subsidiaries were translated to Mexican pesos at the prevailing exchange rate at the end of the year, equity accounts were translated at the prevailing exchange rate at the time capital contributions were made and earnings were generated. Revenues, costs and expenses were translated at the historical exchange rate. Translation differences are recorded in equity in the caption Effect of translation of foreign entities, under Accumulated other comprehensive income items. c) Revenue recognition Revenues are recognized at the time services are rendered. Local service revenues are related to new-line installation charges, monthly service fees, measured usage charges based on the number of calls made, and other service charges to subscribers. Local service revenues also include measured usage charges for prepayment plans, based on the number of minutes. Revenues from the sale of prepaid telephone service cards are recognized based on an estimate of the usage of time covered by the prepaid card. Revenues from the sale of equipment are recorded when the product is delivered to the customer 4

29 Revenues from domestic and international long distance telephone services are determined on the basis of the duration of the calls and the type of service used, which are billed monthly based on the authorized prices. International long distance and interconnection service revenues also include the revenues earned under agreements with foreign carriers for the use of the Company s facilities in interconnecting international calls. These services are regulated by agreements with these operators, in which the prices to be paid are defined. Data revenues include revenues from services related to data transmission through private and managed networks and revenues from Internet access. d) Use of estimates The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions in certain areas. Actual results could differ from these estimates. TELMEX based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of TELMEX. Such changes are reflected in the estimates and assumptions and the related effect in the financial statements when they occur. These estimates refere principally to the following: Estimate for useful lives of property, plant and equipment. Liability and assets for pension and seniority premium benefits due to employees. Allowance for doubtful accounts receivable. Impairment in the value of long-lived assets, intangibles and goodwill. Fair value of derivative financial instruments. e) Financial assets and liabilities Financial assets and liabilities within the scope of IAS 39 generally include investments in financial instruments, debt and equity instruments, accounts receivable and other accounts receivable, loans and financing, accounts payable and accrued liabilities and derivative financial instruments. Financial assets and liabilities are initially recognized at fair value, plus directly attributable transactions costs, except for those designated upon initial recognition at fair value through profit or loss. The subsequent measurement of financial assets and liabilities depends on how they are classified as either financial assets and liabilities measured at fair value, financial assets and liabilities held to maturity and available for sale, loans and accounts receivable. The financial assets of TELMEX include cash and cash equivalents, trade accounts receivable and other accounts receivable, listed and unlisted financial instruments and derivative financial instruments. Financial liabilities are classified into the following categories based on the nature of the financial instruments contracted or issued: financial liabilities measured at fair value and financial liabilities measured at their amortized cost. 5

30 The Company s financial liabilities include accounts payable to suppliers, deferred revenues, other accounts payable, loans and derivative financial instruments. Derivative financial instruments are recognized at fair value and short-and long-term debt, as well as accounts payable, are accounted for as financial liabilities measured at their amortized cost. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statement of financial position if, and only if (i) there is currently a legally enforceable right to compensate the recognized amounts, and (ii) there is the intention to either settle them on a net basis, or to realize the assets and settle the liabilities simultaneously. Financial instruments fair value At each financial statement reporting date, the fair value of financial instruments traded in active markets is determined based on market prices, or prices quoted by financial intermediaries (purchase price for asset positions and sales price for liability positions), without any deduction for transaction costs. For financial instruments that are not traded in an active market, the fair value is determined using generally accepted valuation techniques. Such techniques may include using recent arm s length market transactions, references to the current fair value of another financial instrument that is substantially similar, a discounted cash flow analysis or other valuation models. Fair values are determined based on the following hierarchy: Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2. Variables other than quoted prices in Level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices) and; Level 3. Variables used for the asset or liability that are not based on any observable market data (nonobservable variables). f) Cash and cash equivalents Cash at banks earn interest at floating rates based on daily bank deposit rates. Cash equivalents are represented by short-term deposits made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the respective shortterm deposit rates. Such investments are stated at acquisition cost plus accrued interest, which is similar to their market value. g) Allowance for doubtful accounts The allowance for doubtful accounts is determined based on the Company s historical experience, past due balances and economics trends, as well as the evaluation of accounts receivable in litigation seeking recovery. The allowance for doubtful accounts primarily covers the balances of accounts receivable greater than 9 days old. 6

31 The risk of uncollectibilitty from related parties receivables is evaluated annually based on an examination of each related party s financial situation and the markets in which they operate. h) Derivative financial instruments and hedging activities The Company is exposed to interest rate and foreign currency risks, which are mitigated through a controlled risk management program that includes the use of derivative financial instruments. When considered necessary, the Company uses primarily cross-currency swaps, and eventually foreign currency forwards, to offset the short-term risk of exchange rate fluctuations. In order to reduce the risks due to fluctuations in interest rates, the Company utilizes interest-rate swaps, through which it either pays or receives the difference between the net cash amount resulting from paying or receiving a fixed interest rate, and from receiving or paying a variable interest rate, on notional amounts denominated in Mexican pesos or U.S. dollars. Most of these derivative financial instruments qualify and have been designated as cash flow hedges. The Company s policy includes: (i) formal documentation of all hedging relationships between the hedging instruments and the hedged positions; (ii) the objectives of risk management, and (iii) the strategy for conducting hedging transactions. This process takes into account the relationship between the cash flows of the derivatives with the cash flows of the corresponding Company s assets and liabilities recognized in the statement of financial position. The effectiveness of the Company s derivatives used for hedging purposes is evaluated prior to their designation as hedges, as well as during the hedging period, which is performed at least quarterly based on recognized statistical techniques. Whenever it is determined that a derivative is not highly effective as a hedge or that the derivative ceases to be a highly effective hedge, the Company ceases to apply hedge accounting for the derivative on a prospective basis. In the six-month periods ended June 3, 212 and 211, there were no gains or losses recognized due to changes in the accounting treatment of hedges. Derivative financial instruments are recognized in the statement of financial position at their fair values, which are obtained from the financial institutions with which the Company has entered into the related agreements. The Company s policy is to verify such fair values against valuations provided by an independent valuation agent contracted by the Company. The effective portion of the cash flow hedge s gain or loss is in equity under the caption Accumulated other comprehensive income items, while the ineffective portion is recognized in current year earnings. Changes in the fair value of derivatives that do not qualify as hedging instruments are recognized immediately in earnings. Cumulative gains or losses on the unwounded cross currency swaps that have been recognized in Accumulated other comprehensive income items from the period when the hedge was effective, are reclassified from equity to income in the same periods during which the hedged forecast cash flows affect income. The change in fair value recognized in earnings related to derivatives that are accounted for as hedges is presented in the same income statement caption as the gain or loss on valuation of the primary position. 7

32 i) Inventories Inventories are valued using the average cost method. The balance of inventories presented in the statement of financial position does not exceed their net realizable value. The net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. The estimate of the net realizable value of inventories is determined based on their age and turnover. j) Property, plant and equipment Property, plant and equipment acquired after the transition date are recorded at acquisition cost. Amounts are recorded net of accumulated depreciation less any impairment losses. The acquisition cost includes, in addition to the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation is computed using the straight line method, based on the estimated useful lives of the related assets, beginning the month after they become available for use. Land is not depreciated. The asset s residual values, useful lives and depreciation methods are reviewed at each financial year end and adjusted prospectively, if appropriate. In the three-month periods ending March 31, 212 and 211, the Company did not capitalize any financing costs since it does not have significant qualifying assets with prolonged acquisition periods. Inventories for the operation of the telephone plant are valued based on the average cost method. The net book value of any component of property, plant and equipment or any other significant item is removed from the balance sheet at the time of the asset s disposition or when no future economic benefits are expected from its use or sale. Any gains or losses on the disposition of property, plant and equipment represent the difference between net proceeds of the disposition, if any, and the net book value of the item at the time of disposition. These gains or losses are recognized in earnings upon disposition. The carrying value of property, plant and equipment is reviewed whenever there are indicators of impairment in such assets. Whenever an asset s recovery value, which is the greater of the asset s selling price and its value in use (the present value of future cash flows), is less than the asset s net carrying value, the difference is recognized as an impairment loss. In the six-month periods ended June 3, 212 and 211, there were no indicators of impairment in these long-lived assets. k) Leases When the risks and benefits inherent to the ownership of the leased asset remain mostly with the lessor, they are classified as operating leases and rent expense is charged to results of operations when incurred. 8