Telmex Press Release: HighlightsThird Quarter 2008 October 21,2008

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of October 2008

Commission File Number: 333-13580

TELÉFONOS DE MÉXICO, S.A.B. DE C.V.

(Exact Name of the Registrant as Specified in the Charter)

Telephones of Mexico

(Translation of Registrant's Name into English)

Parque Vía 190

Colonia Cuauhtémoc

México City 06599, México, D.F.

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F....Ö .....Form 40-F.........

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ..... No...Ö ..

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

-----------------------------------------------------------------------------------------------------------------------------------------------------

Highlights

Third Quarter 2008

 

 

 

 

(1) EBITDA: defined as operating income plus depreciation and amortization. Go to www.telmex.com in the Investor Relations section where you will find the reconciliation of EBITDA to operating income.

(2) One ADR represents 20 shares.

(3) Net debt is defined as total debt less cash and cash equivalents and marketable securities.

 

Operating Results

Lines in service and local traffic

At the end of the third quarter, including the effect of number portability that began in July 2008 the number of lines in service was 17.7 million, similar to the June 2008 level. The activation of new lines, recognizing growing demand for multi-service packages, was in part offset by disconnections related to more competition from both fixed and cellular lines.

Of our lines in service, approximately 10.4 million are in areas that interest competitors and where they also have presence. However, 7.3 million lines are in areas that hold no interest to competitors. For the nine months these lines generated revenues of approximately 14.8 billion pesos and an operating loss of 1.922 billion pesos.

During the third quarter, local traffic decreased 9.9% compared with the same period of 2007, with a total of 5.699 billion local calls. Local traffic volume continues to be affected mainly by competition from local and cellular telephony and by managed networks, a trend that strengthens the data business although it adversely affects local traffic.

Long distance

Form July to September, domestic long distance (DLD) traffic increased 6.8% compared with last year's third quarter, totaling 4.946 billion minutes, due to more package offerings that include DLD minutes and higher traffic from cellular operators, offset by the decrease in termination traffic with other long distance operators.

In the third quarter, outgoing international long distance (ILD) traffic decreased 1.4% compared with last year's third quarter, totaling 493 million minutes. Incoming international long distance traffic decreased 6.6% compared with the same period of the previous year, totaling 1.767 billion minutes. The incoming-outgoing ratio was 3.6x.

Interconnection

In the third quarter, interconnection traffic totaled 11.704 billion minutes, at a similar level of the third quarter of 2007. Calling party pays traffic decreased 6.2% because of the increase of cellular services. Interconnection traffic with local, long distance and cellular telephony operators increased 2.4%.

 

 

 

 

Internet access and corporate networks

During the third quarter, broadband Infinitum services (ADSL) continued their growth trends, reaching penetration of 24.7% of our lines in service. Growth in the number of customers maintains Mexico as one of the three countries with the highest broadband growth rates of the OECD (www.oecd.org/sti/ict/broadband). At the end of the third quarter, TELMEX had 4.6 million Internet access services, of which 94.8% are broadband Infinitum customers.

Growth of broadband Infinitum services has been supported by the sale of multi-service packages that offer access to broadband service along with various voice services at competitive prices. Multi-service packages increased 103.2% compared with last year's third quarter.

Additionally, our campaign offering computer sales in installments up to 48 months has contributed to the increased computer penetration in Mexican homes.

 

Financial Results

The following financial information for 2008 is presented in nominal pesos and the financial information for 2007 is expressed in constant pesos as of December 2007, according to Mexican Financial Reporting Standards.

Revenues: In the third quarter, revenues totaled 31.1 billion pesos, a decrease of 5.7% compared with the same period of the previous year. These results include decreases of 11.0% and 12.5% in local and long distance services, respectively, and 16.1% in interconnection revenues. The decrease in interconnection revenues reflected declines of 6.2% in traffic volume and 9.9% in the calling party pays rate. On the other hand, Internet access revenues were up 26.6%, corporate networks revenues increased 7.5%, and other revenues, which includes Tiendas TELMEX (TELMEX stores), were up 42.2%.

Local: Local revenues totaled 12.159 billion pesos in the third quarter; a decrease of 11.0% compared with the third quarter of 2007 due to the 8.9% reduction of revenue per local billed call and to the decrease in local traffic reflecting increased competition from both other fixed telephony and cellular telephony operators.

DLD: In the quarter DLD revenues totaled 3.853 billion pesos, 12.9% lower than the third quarter of 2007. The 6.8% increase in traffic was not enough to offset the 13.8% decrease in the average revenue per minute.

ILD: From July to September of 2008, ILD revenues totaled 2.187 billion pesos, a decrease of 11.7% compared with the third quarter of the previous year. Outgoing revenues declined 14.0% to 1.387 billion pesos compared with the third quarter of 2007 due to outgoing traffic declining 1.4% and the average revenue per minute decreasing 14.4%. Incoming international long distance revenues totaled 800 million pesos, a decrease of 7.3% compared with the third quarter of 2007, because of the 6.6% decrease in incoming traffic.

Interconnection: In the third quarter, interconnection revenues decreased 16.1% to 4.819 billion pesos compared with the same period of 2007, mainly due to the 6.2% decline in calling party pays traffic and the decrease of 9.9% in the calling party pays rate.

Corporate networks: In the third quarter, revenues from services related to data transmission through private and managed networks totaled 3.070 billion pesos, 7.5% higher than the same period of the previous year. The increase was due to the higher number of services and the sale of value-added services which offset the reduction in unit prices of these services.

Internet: Revenues from Internet access in the third quarter totaled 3.430 billion pesos, 26.6% higher than last year's third quarter due to the increase of 46.2% in Internet services, partially offset by lower average unit revenue for broadband Infinitum services.

Costs and expenses: In the quarter, total costs and expenses were 21.142 billion pesos, a decrease of 1.0% compared with the third quarter of 2007. This decrease was mainly due to initiatives carried out to optimize resource use and the 11.0% decrease in the amount paid to cellular operators for calling party pays services, offset by higher charges related to the sale of computers and equipment for customers, cost increases for goods and services, and the provision for uncollectables.

Cost of sales and services: In the third quarter, cost of sales and services increased 3.6% compared with the same period of 2007, totaling 8.171 billion pesos, due to higher computer and telecommunications equipment costs and to the increase in the prices of our goods and services.

Commercial, administrative and general: Commercial, administrative and general expenses totaled 4.938 billion pesos, 3.3% higher than last year's third quarter due to an increase in the provision for uncollectables related to services rendered to another telecommunications operator.

Interconnection: Interconnection costs totaled 3.625 billion pesos, a decrease of 13.1% compared with the third quarter of 2007 as a result of the 11.0% decrease in the amount paid to cellular telephony operators for calling party pays service and the decrease of 6.2% in calling party pays traffic.

Depreciation and amortization: In the quarter, depreciation and amortization decreased 2.7% to 4.408 billion pesos due to a lower level of investment in recent years.

EBITDA (1) and operating income: EBITDA (1) totaled 14.357 billion pesos in the third quarter, a decrease of 11.1% compared with the same period of last year. The EBITDA margin was 46.2%. Operating income totaled 9.949 billion pesos in the third quarter and the operating margin was 32.0%.

Comprehensive financing cost: In the third quarter, comprehensive financing cost produced a charge of 2.259 billion pesos. This resulted from: i) a net interest charge of 1.938 billion pesos, 664 million pesos more than the charge registered in the same period of 2007, due to recognition of the market value of interest rate swaps and lower interest due to declining rates, ii) a net exchange loss of 321 million pesos from the third-quarter exchange rate appreciation of 0.5078 pesos per dollar, offset by 6.371 billion dollars in dollar-peso hedges and iii) recognition of a decline in the monetary position of 1.030 billion pesos in 2007, an effect that is absent in 2008 under current accounting rules.

Majority income from continuing operations: In the third quarter majority income from continuing operations totaled 5.438 billion pesos, 28.0% lower than the same period of the previous year. Earnings per share were 29 Mexican cents, a year-over-year decrease of 25.6%, and earnings per ADR were 54 US cents, a decrease of 23.9% compared with the same period of 2007.

Investments: At September 2008, capital expenditures (capex) were the equivalent of 556 million dollars, of which 77.3% was used for growth projects in the voice, data and transport infrastructure and 22.7% for operational support projects and operating needs.

Debt: Total debt at September 30 was the equivalent of 9.045 billion dollars, of which 86.7% is long-term. Of the total debt, 77.8% is in foreign currency, equal to 7.042 billion dollars. To minimize risks from variation of the exchange rate, we have dollar-peso hedges for 6.371 billion dollars with a weighted average exchange rate of approximately 10.9154 pesos per dollar. Of total debt, 42.9% has fixed rates. If 23.752 billion pesos and 100 million dollars of interest rate swaps at average interest rates of 8.145% and 4.47%, respectively, are included, the proportion of debt with fixed rates is 68.3%.

Total net debt (3) increased during the last twelve months the equivalent of 903 million dollars, raising the total to 7.606 billion dollars. TELMEX has a solid and healthy financial structure that allows us to operate and grow the business.

Repurchase of shares: During the third quarter, the company used 2.516 billion pesos to repurchase 197 million 285 thousand of its own shares.

 

 

Relevant Figures

(2008 in million of nominal pesos, 2007 in millions of Mexican pesos with purchasing power at December 31,

2007 unless otherwise indicated)

%

%

3Q2008

3Q2007

Inc.

9 months 08

9 months 07

Inc.

Revenues

Ps.

31.091

Ps.

32.976

(5,7)

Ps.

93.138

Ps.

98.935

(5,9)

EBITDA (1)

14.357

16.144

(11,1)

43.932

48.145

(8,8)

EBITDA margin (%)

46,2

49,0

(2,8)

47,2

48,7

(1,5)

Operating income

9.949

11.612

(14.3)

30.491

34.447

(11.5)

Operating margin (%)

32,0

35,2

(3,2)

32,7

34,8

(2,1)

Majority income from continuing operations

5.438

7.557

(28,0)

17.199

22.272

(22,8)

Earnings per share (pesos)

0,29

0,39

(25,6)

0,92

1,14

(19,3)

Earnings per ADR (dollars) (2)

0,54

0,71

(23,9)

1,70

2,05

(17,1)

Outstanding shares (millions)

18.702

19.621

(4,7)

18.702

19.621

(4,7)

Equivalent ADRs (millions) (2)

935

981

(4,7)

935

981

(4,7)

(1) EBITDA: defined as operating income plus depreciation and amortization. Go to www.telmex.com in the Investor

Relations section where you will find the reconciliation of EBITDA to operating income.

(2) One ADR represents 20 shares.

 

 

 

 

Income Statements

[ 2008 in million of nominal pesos, 2007 in millions of Mexican pesos with purchasing power at December 31, 2007 ]

%

%

3Q2008

3Q2007

Inc.

9 months 08

9 months 07

Inc.

Revenues

Local

Ps.

12.159

Ps.

13.660

(11,0)

Ps.

37.179

Ps.

41.430

(10,3)

Domestic long distance

3.853

4.426

(12,9)

12.172

13.194

(7,7)

International long distance

2.187

2.477

(11,7)

6.386

7.430

(14,1)

Interconnection

4.819

5.742

(16,1)

14.384

17.226

(16,5)

Corporate networks

3.070

2.856

7,5

8.929

8.329

7,2

Internet

3.430

2.709

26,6

9.540

8.068

18,2

Others

1.573

1.106

42,2

4.548

3.258

39,6

Total

31.091

32.976

(5,7)

93.138

98.935

(5,9)

Costs and Expenses

Cost of sales and services

8.171

7.884

3,6

24.064

23.784

1,2

Commercial, administrative and general

4.938

4.778

3,3

14.643

14.249

2,8

Transport and interconnection

3.625

4.170

(13,1)

10.499

12.757

(17,7)

Depreciation and amortization

4.408

4.532

(2,7)

13.441

13.698

(1,9)

Total

21.142

21.364

(1,0)

62.647

64.488

(2,9)

Operating income

9.949

11.612

(14,3)

30.491

34.447

(11,5)

Employee profit sharing, net

301

724

(58,4)

1.326

2.329

(43,1)

Other revenues, net

(293)

(395)

(25,8)

(434)

(2.593)

(83,3)

Comprehensive financing cost

Interest, net

1.938

1.274

52,1

4.568

4.041

13,0

Exchange loss, net

321

185

73,5

856

539

58,8

Monetary gain, net

-

(1.030)

NA

-

(1.476)

NA

Total

2.259

429

426,6

5.424

3.104

74,7

Equity interest in net income (loss) of affiliates

47

(13)

NA

69

(14)

NA

Income before income tax

7.729

10.841

(28,7)

24.244

31.593

(23,3)

Income tax

2.292

3.286

(30,2)

7.047

9.324

(24,4)

Income before noncontrolling interest

5.437

7.555

(28,0)

17.197

22.269

(22,8)

Noncontrolling interest, net

1

2

(50,0)

2

3

(33,3)

Majority income from continuing operations

Ps.

5.438

Ps.

7.557

(28,0)

Ps.

17.199

22.272

(22,8)

Majority income from discontunued operations, net of income tax

0

1.950

NA

0

4.840

NA

Majority net income

Ps.

5.438

Ps.

9.507

(42,8)

Ps.

17.199

27.112

(36,6)

EBITDA (1)

Ps.

14.357

Ps.

16.144

(11,1)

Ps.

43.932

48.145

(8,8)

EBITDA margin (%)

46,2

49,0

(2,8)

47,2

48,7

(1,5)

Operating margin (%)

32,0

35,2

(3,2)

32,7

34,8

(2,1)

Exchange rate at September 30, 2008: 10.7919 pesos vs dollar

 

 

Balance Sheets

[ 2008 in million of nominal pesos, 2007 in millions of Mexican pesos with purchasing power at December 31, 2007 ]

Sep 30,

Sep 30,

2008

2007

Assets

Cash and cash equivalents

Ps.

15.523

Ps.

24.773

Other current assets

28.341

26.768

Current assets from discontinued operations

-

44.656

Plant, property and equipment, net

113.436

119.449

Other assets

5.910

4.599

Goodwill

439

448

Net prepaid benefit obligation

12.288

16.616

Non-current assets from discontinued operations

-

75.422

Total assets

Ps.

175.937

Ps.

312.731

Liabilities and stockholders' equity

Current portion of long-term debt

Ps.

12.981

Ps.

5.783

Other current liabilities

18.237

20.096

Current liabilities from discontinued operations

-

27.020

Long-term debt

84.633

94.142

Employee benefits

161

227

Deferred taxes

21.347

17.838

Deferred credits

428

296

Long-term liabilities from discontinued operations

-

16.076

Total liabilities

137.787

181.478

Stockholders' equity

Majority stockholders' equity

38.111

128.536

Noncontrolling interest

39

2.717

Total stockholders' equity

38.150

131.253

Total liabilities and stockholders' equity

Ps.

175.937

Ps.

312.731

Peso vs dollar exchange rate at September 30, 2008: 10.7919

 

 

 

 

Operating Results

% Inc. vs.

3Q 2008

2Q 2008

1Q 2008

4Q 2007

3Q 2007

3Q 2007

Lines in service (thousand units)

17.672

17.660

17.795

17.800

18.157

(2,7)

Local traffic (million units)

Local calls

5.699

5.644

5.820

5.995

6.324

(9,9)

Interconnection minutes (A) (B)

11.704

11.482

11.364

11.476

11.678

0,2

Long distance traffic (million minutes)

Domestic long distance (A)

4.946

5.119

4.702

4.574

4.632

6,8

International long distance

(incoming and outgoing) (B)

2.260

2.188

2.093

2.228

2.392

(5,5)

Billed line equivalents 64kbps (thousands)

3.552

3.388

3.093

2.715

2.598

36,7

Internet (thousands)

4.600

4.075

3.648

3.321

3.147

46,2

Prodigy (Dial-up)

238

271

332

396

470

(49,4)

Infinitum (ADSL)

4.362

3.804

3.316

2.925

2.677

63,0

(A) Includes domestic long distance calling party pays traffic

(B) Includes international long distance calling party pays traffic

 

 

 

 

 

 

 

Mexico Local and Long Distance Accounting Separation

Based on Condition 7-5 of the Amendments of the Concession Title of Teléfonos de México, the

commitment to present the accounting of the local and long distance services is presented

below for the third quarter of 2008 and 2007.

Mexico Local Service Business

Income Statements

[ 2008 in million of nominal pesos, 2007 in millions of Mexican pesos with purchasing power at December 31, 2007 ]

%

%

3Q2008

3Q2007

Inc.

9 months 08

9 months 07

Inc.

Revenues

Access, rent and measured service

Ps.

12.032

Ps.

13.413

(10,3)

Ps.

36.670

40.610

(9,7)

LADA interconnection

1.012

991

2,1

2.895

2.992

(3,2)

Interconnection with operators

376

415

(9,4)

1.123

1.211

(7,3)

Interconnection with cellular operators

3.126

3.731

(16,2)

9.375

11.067

(15,3)

Other

3.814

3.393

12,4

10.896

9.805

11,1

Total

20.360

21.943

(7,2)

60.959

65.685

(7,2)

Costs and expenses

Cost of sales and services

5.895

5.822

1,3

17.253

16.893

2,1

Commercial, administrative and general

4.809

4.793

0,3

13.665

13.267

3,0

Interconnection

2.204

2.561

(13,9)

6.561

7.912

(17,1)

Depreciation and amortization

2.787

2.950

(5,5)

8.520

8.962

(4,9)

Total

15.695

16.126

(2,7)

45.999

47.034

(2,2)

Operating income

Ps.

4.665

Ps.

5.817

(19,8)

Ps.

14.960

18.651

(19,8)

EBITDA (1)

Ps.

7.452

Ps.

8.767

(15,0)

Ps.

23.480

27.613

(15,0)

EBITDA margin (%)

36,6

40,0

(3,4)

38,5

42,0

(3,5)

Operating margin (%)

22,9

26,5

(3,6)

24,5

28,4

(3,9)

Mexico Long Distance Service Business

Income Statements

[ 2008 in million of nominal pesos, 2007 in millions of Mexican pesos with purchasing power at December 31, 2007 ]

%

%

3Q2008

3Q2007

Inc.

9 months 08

9 months 07

Inc.

Revenues

Domestic long distance

Ps.

4.485

Ps.

5.179

(13,4)

Ps.

14.155

Ps.

15.547

(9,0)

International long distance

2.294

Ps.

2.584

(11,2)

6.599

8.187

(19,4)

Total

6.779

Ps.

7.763

(12,7)

20.754

23.734

(12,6)

Costs and expenses

Cost of sales and services

1.203

1.196

0,6

3.926

3.972

(1,2)

Commercial, administrative and general

1.628

1.638

(0,6)

4.363

4.483

(2,7)

Interconnection to the local network

2.046

2.132

(4,0)

5.799

6.684

(13,2)

Depreciation and amortization

546

569

(4,0)

1.658

1.730

(4,2)

Total

5.423

5.535

(2,0)

15.746

16.869

(6,7)

Operating income

Ps.

1.356

Ps.

2.228

(39,1)

Ps.

5.008

Ps.

6.865

(27,1)

EBITDA (1)

Ps.

1.902

Ps.

2.797

(32,0)

Ps.

6.666

Ps.

8.595

(22,4)

EBITDA margin (%)

28,1

36,0

(8,0)

32,1

36,2

(4,1)

Operating margin (%)

20,0

28,7

(8,7)

24,1

28,9

(4,8)

 

 

 

 

 

 

Statement of cash flows

[ millions of nominal mexican pesos )

Nine months

ended

September 30, 2008

Operating activities

Income before activities:

Ps

24.244

Depreciation and amortization

13.441

Interest expense

5.238

Other items not requiring the use of cash

6.150

Total

49.073

Working capital

(14.143)

Net cash flows provided by by operating activities

34.930

Investing activities

investement in telephone plant

(5.794)

Other investments

(954)

Net cash flows used in investing activities

(6.748)

Excess of cash flows before financing activities

28.182

Financing activities

New loans

8.562

Repayment of loansAmortizaciones de financiamientos

(2.050)

Acquisition of own shares

(11.080)

Dividen paid

(5.790)

Interest paid

(3.629)

Other items

(3.393)

Net cash flows used in financing activities

(17.380)

Net increase in cash and cash equivalents

10.802

Exchange difference of cash and cash equivalents

23

Cash and cash equivalents at begining of periord

4.698

Cash and cash equivalents at end of periord

$

15.523

 

 

 

 

 

 

 

 

Financial Statements Mexico

Income Statements of Communities with and without Presence of the Competition at September 30, 2008.

[ million of nominal Mexican pesos ]

Communities

Communities

with presence of

without presence of

competition *

competition *

Total

Revenues

Local

$

27.078

$

10.101

$

37.179

Domestic long distance

10.988

1.184

12.172

International long distance

5.417

969

6.386

Interconnection

12.456

1.928

14.384

Corporate networks

8.929

0

8.929

Internet

9.101

439

9.540

Other

4.369

179

4.548

Total revenues

78.338

14.800

93.138

Costs and expenses

27.775

10.932

38.707

Interconnection

9.086

1.413

10.499

Depreciation and amortization

9.064

4.377

13.441

Total

45.925

16.722

62.647

Operating income

$

32.413

$

(1.922)

$

30.491

EBITDA (1)

$

41.477

$

2.455

$

43.932

EBITDA margin (%)

52,9

16,6

47,2

Operating margin (%)

41,4

(13,0)

32,7

* Figures are estimated

 

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.

Date: October 21, 2008.

TELÉFONOS DE MÉXICO, S.A.B. DE C.V.

By: /s/__________________          

Name: Adolfo Cerezo Pérez
Title: Chief Financial Officer

 

Ref: TELÉFONOS DE MÉXICO, S.A.B. DE C.V. - Telmex Press Release: Third Quarter 2008.