TELMEX - Webcast · 2014. 2. 1. · TELMEX´s strategiesintegrate market realities in the region...

Tuesday February 14, 2006

4Q 2005 ResultsTELMEX - Webcast

Forward-looking statements disclaimer

This document contains "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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.

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

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.

Mexico Operating Results

76.5%

23.5%

Consolidated revenues at December 31, 2005

(%)

Mexico

Others


Gain of Internet access accounts

Internet access accounts increased 22% to a total of 2 million

More than 1 million were broadband (Infinitum ADSL) customers

(thousand units)

30

53

137

72

98 90110 117

104

129114

105 106

132

2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05

90% of our lines are ready to offer ADSL services.

Total Infinitum


Billed line equivalents(million units)

1.3 1.41.5

1.7 1.72.0

1.6

2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05

Billed line equivalents were 2 million, an increase of 32%at the end of the year.


During 4Q’05, we carried out a clean up focused on prepaid linesthat 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

17.2 18.4

2004 2005

(million units)

Lines in Service

Total lines in service at December were 7% higher than a year ago, totaling 18.4 million.

Our commitment: Fund for Social Coverage & e-Mexico project


27 billion local calls for the 12M’05, about the same as ‘04.

26,782 26,680

2004 2005

(million units)

Local Calls


In Mexico, one of our main goals has been to increasethe 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.


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.


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.


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.


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

Consolidated Financial Results

Consolidated Revenues(millions of Mexican pesos as of December 2005)

Consolidated revenues increased 13% in ‘05 compared with the previous year.

Operations in Mexico generated 76% of total revenues.

144,677162,948

2004 2005


Consolidated Costs & Expenses(millions of Mexican pesos as of December 2005)

We continued to keep a tight rein on expenses during the year, although the total increased 14% over ‘04’s level.

In Mexico, by contrast, expenses declined 6%.

99,962114,254

2004 2005


Consolidated EBITDA(millions of Mexican pesos as of December 2005)

Consolidated EBITDAfor ‘05 totaled 73 billion pesos producing a margin of 45%.

In Mexico, EBITDAreached 64 billion pesos with a margin of almost 52%.

68,427 73,111

2004 2005

Consolidated EBITDA margin47.3% 44.9%


In 4Q’05, consolidated majority net income totaled 7.8 billion pesoscompared with 10.8 billion pesos last year.

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%.

Consolidated Majority Net Income(millions of Mexican pesos as of December 2005)

10,773

7,780

4T04 4T05


Consolidated DebtOur total consolidated debtwas 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

7,993 8,492

2004 2005

(million dollars)

Average cost of debt of 7.7% and maturity of approximately 7 years in the case of interest rate swaps

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.

Embratel performance full year ’05

A positive turn from the direction the company had been going in the past.

Revenues increased 3%EBITDA margin 22%NET income 174 MM reais

On February 8th, 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

Latin America performance in full year ’05 ChileRevenues (MM $US) 127EBITDA margin 20%EBIT margin 4%

Revenues (MM $US) 99EBITDA margin 10%EBIT margin 0.3%

Revenues (MM $US) 49EBITDA margin 40%EBIT margin 19%

Revenues (MM $US) 54EBITDA margin 24%

Argentina

Colombia

Peru

All of our subsidiaries turned in positive EBITDA margins and are set for growth in the coming years.

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


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 value-

added services in the managed network offerings


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.

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

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

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

CAPEX

CAPEX (billion dollars)2005 2006e

Mexico = $ 1.4 $ 1.4 Brazil = .593 .570LATAM = .134 .160Total = 2.127 2.130

Estimated CAPEX in ‘06 will also be focused on projects that relate directly to potential for growth and profitability.

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.

Tuesday February 14, 2006

4Q 2005 ResultsTELMEX - Webcast

TELMEX - Webcast · 2014. 2. 1. · TELMEX´s strategiesintegrate market realities in the region...

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