TELÉFONOS DE MÉXICO, S.A.B. DE C.V.
(Exact Name of the Registrant as Specified in the Charter)
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Telephones of Mexico (Translation of Registrant's Name into English)
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Parque Vía 190 Colonia Cuauhtémoc
México City 06599, México, D.F.
(Address of principal executive offices)
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During the first quarter of 2010, revenues totaled 28.6 billion pesos, a decrease of 4.8% compared with the same period of the previous year. Net income totaled 4.7 billion pesos, 2.1% lower than the first quarter of 2009.
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At the end of March, we had 15.811 million lines, more than one-third are low-income lines, a decrease of 1.7 million lines compared with March 2009, (including lines that were at least 2 months behind on payments). TELMEX has 79.5% of fixed lines in Mexico, below the average of 85.3% for 35 countries worldwide included in the 2009 Bank of America/ Merrill Lynch Global Wireline Matrix.
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Based on the February 2010 report from Teligen, the OECD’s price consultant, TELMEX’s prices are ranked 4th, 4th and 10th in residential low, medium and high consumption, respectively, among countries with the lowest prices. This is the result of TELMEX’s commercial policy of reducing prices for close to 20 years in real terms, which in turn has provided our customers with economic benefits derived from the operating and technical improvements that have been implemented.
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The October 3, 2006, “Acuerdo de Convergencia,” (more than 3 years and 6 months ago) which was issued by the Federal Government through the Secretaría de Comunicaciones y Transportes, established the basis for the full convergence of telecommunications networks with the participation of all operators. Unfortunately, the lack of technological convergence prevents delivering to customers the benefits of developing the information society with its better prices, more packaged services and increase in investments for the country in order to reach all Mexicans. It is important to highlight that technological convergence has been implemented in nearly all countries worldwide.
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During the first quarter, broadband Infinitum (ADSL) had a gain of 247 thousand services, bringing the total to 6.8 million customers, making Mexico one of the countries with the highest growth rates in the world with an annual average rate of more than 70% in the last four years, considerably higher than the average of less than 20% for the member countries of the OECD.
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Additionally, the main limitation for higher broadband growth in the country is the lack of computers in homes, since 3 out of 4 homes do not have a computer. TELMEX, in spite of the lack of convergence and computer penetration in the Mexican market, continues to aggressively drive education and digital culture in Mexico, not only to contribute so the country does not fall behind in the era of knowledge, but also to incorporate state-of-the-art information technologies in our own operations.
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Therefore, TELMEX proposed to make 2010 the year of “Driving Technological Innovation” and a program was implemented with the following actions:
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Increase connectivity in the country. TELMEX will increase Infinitum´s access speed while maintaining the quality, continuity and speed consistency that characterize this service and double the number of sites with WiFi Móvil Infinitum to reach 3,000 nationwide this year including airports, restaurants, hospitals, public parks, educational centers and shopping malls, among others.
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Enhance information technologies. Inttelmex IT, the specialized Information Technologies Institute, has begun operations. For 2010 it has the objective of training more than 1,000 professionals in IT applications to innovate and produce solutions that help competitiveness for companies and domestic institutions.
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Support Education and Digital Culture through the operation of 3,300 Bibliotecas Digitales TELMEX (TELMEX Digital Libraries) and 1,000 Aulas Digitales TELMEX (TELMEX Digital Classrooms) at year-end 2010.
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Revenues in the first quarter totaled 28.6 billion pesos, a decrease of 4.8% compared with the same period of the previous year. Revenues related to data services increased 12.8%. Local, long distance and interconnection revenues decreased 9.4%, 20.6% and 9.9%, respectively.
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Operating income in the first quarter totaled 7.7 billion pesos, with a margin of 27.0%.
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Net income in the quarter totaled 4.7 billion pesos, down 2.1% from the first quarter of 2009. For the quarter, earnings per share were 26 Mexican cents, at the same level of the year-earlier period, and earnings per ADR (1) were 40 US cents, an increase of 11.1% compared with the first three months of 2009.
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At March 31, 2010, total debt was the equivalent of 6.731 billion dollars. During the first three months of the year, TELMEX amortized debt equal to approximately 1.266 billion dollars, which included a 950 million dollar bond and a 250 million dollar syndicated loan. Total net debt (2) was equivalent to 6.212 billion dollars, 536 million dollars less than March 31, 2009.
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Capital expenditures (Capex) were the equivalent of 159 million dollars in the first quarter. Of this investment, 65.3% was used for growth and infrastructure projects in the data business.
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(1)
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One ADR represents 20 shares.
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(2)
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Net debt is defined as total debt less cash and cash equivalents.
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Local: Local service revenues totaled 10.462 billion pesos in the quarter, a decrease of 9.4% compared with the first quarter of 2009, due to decreases of 8.7% in revenue per local billed call and 8.1% in local traffic volume.
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DLD: DLD revenues totaled 3.104 billion pesos, 16.5% lower than in January to March of 2009, due to the 9.3% decrease in traffic and the 7.9% decline in average revenue per minute, which in part was due to higher penetration of multi-service packages that include domestic long distance service.
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ILD: ILD revenues totaled 1.439 billion pesos in the quarter, a decrease of 28.4% compared with the same quarter of the previous year. Contributing factors included the 14.5% decrease in outgoing traffic and the 14.0% decrease in average revenue per minute. Incoming international long distance traffic revenues totaled 608 million pesos, a decrease of 30.8% compared with the first quarter of the previous year, due to the decline of 46.2% in average revenue per minute resulting from the revaluation of the Mexican peso and the increase of 28.6% in incoming traffic.
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Interconnection: In the quarter, interconnection revenues decreased 9.9% to 3.754 billion pesos compared with the first quarter of 2009, due to the 3.6% decline in calling party pays services and the decrease of 6.7% in average revenue of these services.
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Data: Data revenues are comprised mainly of Internet access services and services related to corporate customers’ Virtual Private Networks. Revenues from data services in the quarter were 8.019 billion pesos, 12.8% higher compared with the first quarter of 2009 due to the increase of 20.8% in Internet access services and the integration of value-added services to our portfolio of products and services for the corporate market.
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Cost of sales and services: In the quarter, cost of sales and services increased 7.9% compared with the same period of 2009, totaling 8.621 billion pesos, due to higher costs related to products and services for corporate customers and computer sales at Tiendas TELMEX (TELMEX Stores).
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Commercial, administrative and general: In the period from January to March 2010, commercial, administrative and general expenses totaled 5.251 billion pesos, 6.1% higher than the same period a year ago, mainly due to an increase in the reserve for uncollectables primarily from bad accounts from some telecommunications operators.
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Interconnection: Interconnection costs were 2.609 billion pesos, a decrease of 12.6% compared with the first quarter of 2009 due to the 8.3% decrease in the amount paid to cellular telephony operators for calling party pays services and the decrease in calling party pays traffic.
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Depreciation and amortization: In the quarter, depreciation and amortization decreased 2.2% compared with the same period of 2009, to 4.379 billion pesos, as a result of lower amounts of investments in recent years.
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(In millions of Mexican pesos, unless otherwise indicated)
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1Q2010 | 1Q2009 |
%
Inc.
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Revenues
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P. | 28,567 | P. | 30,017 | (4.8 | ) | |||||||||
Operating income
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7,707 | 9,617 | (19.9 | ) | |||||||||||
Operating margin (%)
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27.0 | 32.0 | (5.0 | ) | |||||||||||
Net income attributable to controlling interest
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4,661 | 4,759 | (2.1 | ) | |||||||||||
Earnings per share (pesos)
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0.26 | 0.26 | 0.0 | ||||||||||||
Earnings per ADR (dollars)(1)
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0.40 | 0.36 | 11.1 | ||||||||||||
Weighted average of outstanding shares (millions)
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18,191 | 18,519 | (1.8 | ) | |||||||||||
Equivalent ADRs (millions)(1)
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910 | 926 | (1.8 | ) |
Income Statements
(In millions of Mexican pesos)
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1Q2010 | 1Q2009 |
%
Inc.
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Revenues
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Local
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P. | 10,462 | P. | 11,546 | (9.4 | ) | |||||||
Domestic long distance
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3,104 | 3,716 | (16.5 | ) | |||||||||
International long distance
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1,439 | 2,009 | (28.4 | ) | |||||||||
Interconnection
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3,754 | 4,165 | (9.9 | ) | |||||||||
Data
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8,019 | 7,106 | 12.8 | ||||||||||
Other
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1,789 | 1,475 | 21.3 | ||||||||||
Total
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28,567 | 30,017 | (4.8 | ) | |||||||||
Costs and Expenses
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Cost of sales and services
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8,621 | 7,992 | 7.9 | ||||||||||
Commercial, administrative and general
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5,251 | 4,947 | 6.1 | ||||||||||
Interconnection
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2,609 | 2,985 | (12.6 | ) | |||||||||
Depreciation and amortization
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4,379 | 4,476 | (2.2 | ) | |||||||||
Total
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20,860 | 20,400 | 2.3 | ||||||||||
Operating income
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7,707 | 9,617 | (19.9 | ) | |||||||||
Other (revenues) expenses, net
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(152 | ) | 250 |
NA
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Financing cost
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Interest, net
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1,454 | 1,825 | (20.3 | ) | |||||||||
Exchange (gain) loss, net
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(296 | ) | 568 |
NA
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Total
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1,158 | 2,393 | (51.6 | ) | |||||||||
Equity interest in net income (loss) of affiliates
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20 | (1 | ) |
NA
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Income before income tax
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6,721 | 6,973 | (3.6 | ) | |||||||||
Income tax
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2,060 | 2,213 | (6.9 | ) | |||||||||
Net income
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4,661 | 4,760 | (2.1 | ) | |||||||||
Noncontrolling interest
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0 | (1 | ) |
NA
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Net income attributable to controlling interest
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P. | 4,661 | P. | 4,759 | (2.1 | ) | |||||||
Operating margin (%)
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27.0 | 32.0 | (5.0 | ) | |||||||||
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Exchange rate at March 31, 2010: 12.4640 pesos per dollar.
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NA: not applicable.
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Balance Sheets
(In millions of Mexican pesos)
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March 31,
2010
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March 31,
2009
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Assets
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Cash and cash equivalents
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P. | 6,468 | P. | 11,987 | ||||
Other current assets
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35,512 | 45,506 | ||||||
Plant, property and equipment, net
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102,096 | 111,688 | ||||||
Other assets
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5,783 | 6,515 | ||||||
Net projected asset
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15,084 | 14,214 | ||||||
Total assets
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P. | 164,943 | P. | 189,910 | ||||
Liabilities and stockholders’ equity
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Current portion of long-term debt
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P. 3,738 | P. 37,983 | ||||||
Other current liabilities
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21,943 | 21,812 | ||||||
Long-term debt
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80,155 | 70,718 | ||||||
Labor obligations
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3,751 | 4,420 | ||||||
Deferred taxes
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14,443 | 15,465 | ||||||
Deferred credits
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537 | 395 | ||||||
Total liabilities
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124,567 | 150,793 | ||||||
Stockholders’ equity
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40,376 | 39,117 | ||||||
Total liabilities and stockholders’ equity
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P. | 164,943 | P. | 189,910 |
Operating Results
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1Q 2010 | 4Q 2009 | 3Q 2009 | 2Q 2009 | 1Q 2009 |
% Inc. vs.
1Q 2009
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Internet (thousands)
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6,883 | 6,651 | 6,446 | 6,059 | 5,699 | 20.8) | ||||||||||||||||||
Prodigy (Dial-up)
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112 | 127 | 143 | 159 | 177 | (36.7) | ||||||||||||||||||
Infinitum (ADSL)
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6,771 | 6,524 | 6,303 | 5,900 | 5,522 | 22.6) | ||||||||||||||||||
Billed lines (thousand units)
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15,811 | 15,882 | 17,346 | * | 17,415 | * | 17,514 | * | (9.7) | |||||||||||||||
Local traffic (million units)
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Local calls
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4,821 | 5,000 | 5,333 | 5,257 | 5,245 | (8.1) | ||||||||||||||||||
Interconnection minutes (A) (B)
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10,596 | 10,678 | 11,137 | 10,882 | 10,670 | (0.7) | ||||||||||||||||||
Long distance traffic (million minutes)
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Domestic long distance (A)
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4,482 | 4,810 | 5,033 | 5,055 | 4,939 | (9.3) | ||||||||||||||||||
International long distance (incoming and outgoing) (B)
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2,206 | 2,067 | 1,891 | 1,726 | 1,841 | 19.8 |
Statement of cash flows
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(In millions of Mexican pesos)
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Three months
ended
March 31, 2010
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Operating activities
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Income before income tax:
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P. | 6,721 | ||
Depreciation and amortization
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4,379 | |||
Accrued interest expense
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1,565 | |||
Other items not requiring the use of cash
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1,182 | |||
Total
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13,847 | |||
Cash flows used in operating activities
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(734 | ) | ||
Net cash flows provided by operating activities
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13,113 | |||
Investing activities
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Acquisition of plant, property and equipment
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(2,728 | ) | ||
Other investments
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(44 | ) | ||
Net cash flows used in investing activities
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(2,772 | ) | ||
Cash surplus to be applied to financing activities
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10,341 | |||
Financing activities
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New loans
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1,500 | |||
Repayment of loans
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(17,747 | ) | ||
Acquisition of own shares
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(11 | ) | ||
Dividends paid
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(2,047 | ) | ||
Interest paid
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(1,195 | ) | ||
Derivative financial instruments
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1,247 | |||
Net cash flows used in financing activities
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(18,253 | ) | ||
Net decrease in cash and cash equivalents
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(7,912 | ) | ||
Cash and cash equivalents at begining of period
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14,380 | |||
Cash and cash equivalents at end of period
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P. | 6,468 | ||
Date: April 30, 2010.
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TELÉFONOS DE MÉXICO, S.A.B. DE C.V.
By: /s/ Adolfo Cerezo Pérez
Name: Adolfo Cerezo Pérez
Title: Chief Financial Officer
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