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Mexico City, August 26, 2005. Telefonos de Mexico, S.A. de C.V. (TELMEX) (BMV: TELMEX; NYSE: TMX; NASDAQ: TFONY; LATIBEX: XTMXL) announced today that it has completed a proposed memorandum of understanding with Colombia Telecomunicaciones S.A. E.S.P. (TELECOM) with the objective of providing telecommunications services in Colombia through the merger of Telmex Colombia S.A. into TELECOM.

• TELMEX will invest 350 million dollars in TELECOM. Part of its investment will be its shares of Telmex Colombia S.A., valued at approximately 90 million dollars, and the remainder will be cash.
• This investment will entitle TELMEX to 50% + 1 share of TELECOM's capital. TELECOM's current shareholders will hold the remaining interest.
• For so long as TELMEX is a shareholder of TELECOM, TELMEX will receive a management fee equal to 3% of TELECOM's net revenues.
• Beginning in 2006, TELECOM will pay its predecessor approximately 402 billion nominal Colombian pesos per year for 15 years, adjusted annually by the Colombian Consumer Price Index plus 4%. These payments are required under an operating agreement between TELECOM and its predecessor that gives TELECOM the right to use the assets of its predecessor, which the Colombian Government liquidated in 2003.
• All of the assets and other rights of TELECOM's predecessor will be transferred to TELECOM once the final annual payment is made.

The memorandum of understanding will be posted on the Colombian Government's web site for 5 days, after which it is expected to be signed. The memorandum of understanding provides an initial term of 45 days to formalize the transaction documents.

TELMEX is the leading telecommunications company in Mexico. TELMEX and its subsidiaries provide a wide range of telecommunications services, data and video transmission and Internet access, as well as integrated telecommunications solutions to its corporate customers. Additionally, it offers telecommunications services through its affiliates in Argentina, Brazil, Chile, Colombia and Peru. More information about TELMEX can be accessed on the Internet at www.telmex.com

Colombia Telecomunicaciones provides voice, data and Internet services in 742 communities in Colombia with 2.4 million lines in service. In 2004, its revenues totaled 800 million dollars and EBITDA was 409 million dollars.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.