TELMEX PRESS RELEASE: THIRD QUARTER 2005 OCTOBER 26, 2005

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 2005

Commission File Number: 333-13580

Teléfonos de México, S.A. 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-

 

 

 

 

(4) Net debt defined as short-term liabilities plus long-term debt, less cash and equivalents.

 

 

Highlights

Incorporation of TELMEX do Brasil and Participation in Net into Embratel: On September 30, Embratel's board of directors approved the acquisition of 100% of TELMEX do Brasil Ltda. and 37.1% of Net Serviços de Comunicaçao S.A. capital stock. On October 24, 2005 the transaction was approved at Embratel's Shareholders Meeting. Embratel will settle this acquisition through the issuance of common shares and TELMEX's participation in this company will increase from 63.4% to 72.3% of the total capital.

Syndicated Bank Loan: On October 20, 2005, TELMEX signed an agreement to restructure the syndicated bank loan issued on July 15, 2004 for 2.425 billion dollars to improve the credit conditions and increase the total amount to 2.5 billion dollars in two tranches, the first one for 1.5 billion dollars due in four years and the second one for 1 billion dollars due in six years.

Consolidated Income Statements

Revenues: In the third quarter, revenues from Teléfonos de México and its subsidiaries in Mexico and Latin America rose to 41,125 million pesos, an increase of 8.7% compared with the same period of 2004, which included Embratel's revenues in August and September. Of total consolidated revenues, voice revenues represented 77.9% and data transmission revenues represented 18.2%. For the nine months, consolidated revenues totaled 121,706 million pesos, an increase of 20.8% compared with the same period of last year.

Costs and expenses: Costs and expenses in the third quarter totaled 28,755 million pesos, 9.1% higher than the same period of the previous year, which included two months of results at Embratel. For the nine months, costs and expenses increased 25% totaling 86,088 million pesos.

EBITDA and operating income: EBITDA (1) rose to 18,463 million pesos in the third quarter, 4.5% higher than the same period of 2004, producing an EBITDA margin of 44.9%. Operating income totaled 12,370 million pesos, an increase of 7.8% compared with the previous year, and the margin was 30.1% in the quarter. For the nine months, EBITDA (1) and operating income were 54,465 and 35,618 million pesos, producing margins of 44.8% and 29.3%, respectively.

Comprehensive financing cost: Comprehensive financing cost was 1,602 million pesos in the quarter. This result was mainly due to hedges that resulted in a charge of 935 million pesos, to net interest from interest rate swaps and paid interest totaling 1,059 million pesos, and to a gain of 392 million pesos in the monetary position due to a lower inflation rate. For the nine months, comprehensive financing cost was 3,297 million pesos.

Majority net income: Majority net income totaled 6,828 million pesos in the third quarter, 1.7% lower than the same period of the previous year mainly due to higher comprehensive financing cost. Earnings per share for the third quarter, based on the number of shares outstanding at period end, were 0.30 pesos compared with 0.29 pesos per share in the same period a year ago, and earnings per ADR were 0.56 dollars compared with 0.49 dollars per ADR in last year's third quarter.

Investments: During the nine months, consolidated investments totaled 1.331 billion dollars. In Mexico, 866 million dollars were invested, of which 46.4% was used to develop and expand the platform for new generation services and services for access to the public data network, 46.8% for the expansion and maintenance of the telephone plant and 6.8% for social telephony. In Embratel, investments totaled 385 million dollars, of which 25% were used for access infrastructure and local services, 22.6% in data and Internet services, 4.2% in network infrastructure, 30.3% in new satellites to replace the equipment scheduled to be removed from service in 2006 and 2007 and 17.9% on other items. In the rest of the operations in Latin America, 80 million dollars were used for the expansion of the infrastructure of the various companies.

Repurchase of shares

During the quarter, the company used 4,309 million pesos to repurchase 411,694,480 of its own shares. For comparison purposes, it is important to consider the 2 for 1 stock split that was carried out on May 25, 2005.

Debt: Total debt rose to the equivalent of 8.491 billion dollars compared with 7.751 billion dollars at September 30, 2004. The increase of 740 million dollars or 9.6% primarily relates to the placement of bonds for 1.750 billion dollars, the repurchase of 337 million dollars of the 1.5 billion dollars bond due 2006 and prepayments of approximately 700 million dollars of Embratel's debt. Of total debt, 17.6% is short-term, 90.8% is in foreign currency (15.6% considering hedges) and 52.4% carries a fixed rate (69.7% considering swaps). At September 30, TELMEX carried out interest rate swaps for 15,900 million pesos, producing a new fixed rate of 9%, and currency hedges for 6.388 billion dollars, of which 94% is related to hedges of pesos to dollars and the rest to hedges of reais to dollars. At September 30, 2005, the company's consolidated net debt (4) increased the equivalent of 404 million dollars to a total of 5.960 billion dollars.

 

Mexico Operating Results

We continue to adapt our commercial strategy for each market segment by integrating offerings that include packages of local calls, preferred domestic and international long distance rates and services related to broadband connectivity. Recently introduced packages with these features include Línea Negocio and Paquete TELMEX.

 

Lines in service

From July to September, net line gain was 284 thousand lines, as a result of 458 thousand connections and 174 thousand disconnections. At September 30, TELMEX had 18 million 135 thousand lines in service, an annual increase of 7.8%. For the nine months, 963 thousand lines were added, reflecting 1 million 444 thousand connections and 481 thousand disconnections.

Local traffic

During the quarter, 6,778 million local calls were made, an increase of 0.6% compared with the same period of the previous year. For the nine months, local calls totaled 20,042 million, 0.8% lower than the same period of last year, primarily due to higher wireless and Internet competition.

Long distance traffic

In the third quarter, domestic long distance (DLD) traffic totaled 4,577 million minutes, 5.9% higher than the same period of 2004. For the nine months, DLD traffic rose to 13,375 million minutes, an increase of 6.9%. International long distance (ILD) outgoing minutes increased 7.4%, totaling 461 million minutes. Incoming ILD minutes totaled 1,354 million minutes, 7.1% higher than the same period of 2004. The incoming-outgoing ratio was 2.9 in the third quarter. For the nine months, ILD outgoing minutes totaled 1,342 million minutes and ILD incoming minutes were 3,778 million minutes, an increase of 6.3% and 11%, respectively.

Interconnection

Interconnection traffic totaled 8,804 million minutes during the quarter, 12.6% more than in the same period of the previous year. Traffic originated by the cellular system and terminated on TELMEX's network increased 19.4%. Interconnection traffic generated by local and long distance operators increased 14.4% and calling party pays interconnection traffic increased 2.3%.

Corporate networks

The corporate market of data transmission added 70 thousand 64 Kbps billed line equivalents during the third quarter. At September 30, TELMEX had 1 million 738 thousand billed line equivalents, 26.5% more than the same period of 2004. Port equivalents related to the corporate networks market totaled 567 thousand units, an annual increase of 92%. In the quarter, 84 thousand services were added.

Internet

At September 30, there were more than 2 million Internet access accounts, an annual increase of 26.2%. During the quarter, 98 thousand accounts were added and in the nine months, 284 thousand. ADSL accounts totaled 904 thousand at the end of September, an annual increase of 98.3%. Contributing to that total, 132 thousand Infinitum (ADSL) accounts were added in the third quarter and 344 thousand in the nine months.

 

 

 

 

 

 

 

Mexico Financial Results

The third quarter 2005 analysis presented here includes the results of the subsidiaries in Latin America, including Embratel. Results for the third quarter of 2004 recognize the accounts of the assets acquired from AT&T Latin America and Embratel since August.

Revenues: In the third quarter, total revenues from operations in Mexico totaled 30,973 million pesos, 3.2% lower than the same period of the previous year. For the nine months, the company's revenues decreased 2.8% totaling 91,462 million pesos.

Costs and expenses: In the third quarter, costs and expenses from the operations in Mexico totaled 19,560 million pesos, a decrease of 4.7% compared with the same period of 2004. This decrease was due to lower commercial, administrative and general expenses, lower interconnection costs related to the reduction of the calling party pays rate, and lower depreciation and amortization.

 

EBITDA and operating income: EBITDA (1) totaled 15,993 million pesos in the third quarter. The EBITDA margin was 51.6%; an increase of 0.3 percentage points compared with last year's third quarter. Operating income totaled 11,413 million pesos and the operating margin was 36.8% in the quarter, an increase of one percentage point compared with the same period of the previous year.

For the nine months, EBITDA (1) totaled 47,216 million pesos, producing a margin of 51.6%. The operating margin for the nine months was 36%, reflecting operating income of 32,967 million pesos.

Investments: In Mexico total investments were 866 million dollars, of which 46.4% was used for the development and expansion of new generation services platforms and services related to transport and access the public data network. Additionally, 46.8% was invested in expansion and maintenance of the telephone plant and 6.8% in social telephony.

Debt: Debt rose to the equivalent of 7.907 billion dollars. Of the debt, 17.3% is short-term, 90.8% is in foreign currency (14.8% considering hedges), and 51.8% carries a fixed rate (70.3% considering interest rate swaps).

Net indebtedness (4) in Mexico increased 23% to 5.695 billion dollars, related to new debt of 1.750 billion dollars offset by the repurchase of 337 million dollars of Senior Notes due January 2006.

 

 

Latin America Financial Results

The financial information presented here is calculated in the currency of the country in which each Latin America subsidiary operates, according to that country's generally accepted accounting principles, and is based on continuing operations.

Brazil

Revenues from the operations in Brazil during the third quarter totaled 1,907 million reais, 5.3% higher than the same period of 2004. The increase in revenues was mainly due to the domestic long distance business. Data services represented 24.8% of total revenues and increased 5%. Costs and expenses in the quarter totaled 1,690 million reais, 9% lower than in 2004. Costs of sales and services increased 3.2% and totaled 189 million reais. Transport and interconnection costs decreased 1.4% and represented 48.8% of total costs and expenses. Commercial, administrative and general expenses decreased 23.5% in the quarter. Operating income in the quarter rose to 217 million reais compared with a loss of 45 million reais in 2004. The operating margin was 11.4%. EBITDA (1) totaled 481 million reais, producing a margin of 25.2%, compared with EBITDA (1) of 253 million reais and a margin of 14% in 2004.

Chile

Revenues from the operations in Chile during the third quarter totaled 16,083 million Chilean pesos, 5.5% higher than the previous year. The corporate networks and Internet businesses represented 31.6% of total revenues and increased 4.1% mainly due to the increase of 21.8% in revenues from corporate networks. The voice business, representing 63.6% of total revenues, benefited from higher traffic levels and local rates. Costs and expenses were 15,004 million Chilean pesos in the quarter, 1.3% lower than in 2004. Transport and interconnection decreased 5.6%, and commercial, administrative and general expenses increased 7.8%. Operating income totaled 1,079 million Chilean pesos compared with operating income of 35 million Chilean pesos in the same period of 2004. The operating margin for the quarter was 6.7% compared with 0.2% in the same period of 2004. EBITDA (1) totaled 3,658 million Chilean pesos compared with 2,558 million Chilean pesos in 2004, producing EBITDA margins of 22.7% and 16.8%, respectively.

Argentina

Revenues from the operations in Argentina during the third quarter totaled 82 million Argentinean pesos, 37.4% higher than in 2004. The corporate networks and Internet businesses, which represented 48.4% of total revenues, increased 58.8% due to the addition of several corporate customers as well as monitoring regional managed networks of the TELMEX Group. The voice business, which produced 51.1% of total revenues, increased 21.1% due to higher interconnection revenues. Operating costs and expenses increased 24.4% and totaled 80 million Argentinean pesos in the quarter. Transport and interconnection cost had the highest rate of increase, at 24.8%, and represented 47.5% of total costs and expenses. In the quarter, operating income totaled 2 million Argentinean pesos compared with an operating loss of 4 million Argentinean pesos in last year's third quarter. The operating margin was 2.9%. EBITDA (1) totaled 11 million Argentinean pesos, compared with 7 million Argentinean pesos in the same period of 2004.

Colombia

Revenues from these operations during the third quarter totaled 30,333 million Colombian pesos, 51.4% higher than in 2004. Most of the revenues in Colombia are comprised of services related to data transmission; therefore the increase in revenues was due to the higher number of line equivalents for data transmission. Costs and expenses increased 25.2%. Among total costs and expenses, 32.8% related to transport and interconnection and reflected an increase of 68.4%. Commercial, administrative and general expenses increased 31% and represented 20% of total costs and expenses. Depreciation in the quarter decreased 14.5%. Operating income for the quarter totaled 6,245 million Colombian pesos compared with operating income of 802 million Colombian pesos in the same period of last year. The operating margin was 20.6% compared with the year-earlier 4%. EBITDA (1) totaled 11,885 million Colombian pesos in the quarter and produced a margin of 39.2%, compared with EBITDA (1) of 7,399 million Colombian pesos and a margin of 36.9% in the same period of 2004.

Peru

Revenues from operations in Peru during the third quarter totaled 46 million New Soles, 19.4% higher than the previous year. The voice business, which represented 65.3% of total revenues, increased 26.5% due to growth in local telephone traffic, mainly from the increase in digital trunks serving the corporate market, as well as interconnection traffic growth. Costs and expenses in the quarter increased 11.8% due to the increase of 30.7% in transport and interconnection costs, which represented 43.1% of total costs and expenses. Depreciation increased 9.4% due to the restatement in the value of the fixed assets that was carried out in the fourth quarter of 2004. These items were partially offset by cost control initiatives that produced an 11.2% decrease in commercial, administrative and general expenses and by a 6.7% increase in cost of sales and services. Operating income for the quarter totaled 0.6 million New Soles compared with an operating loss of 2 million New Soles in the same period of last year. The operating margin for the quarter was 1.4% compared with an operating loss in the same period of 2004. EBITDA (1) rose to 12 million New Soles compared with EBITDA (1) of 8 million New Soles, producing margins of 26.6% and 21.9%, respectively, in the third quarters of 2005 and 2004.

 

 

Consolidated Relevant Figures

The third quarter 2005 analysis presented here includes the results of the subsidiaries in Latin

America, including Embratel. Results for the third quarter of 2004 recognize the accounts of

the assets acquired from AT&T Latin America and Embratel since August.

(millions of Mexican constant pesos as of September 2005 unless otherwise indicated)

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2004

Inc.

Revenues

Ps.

41,125

Ps.

37,825

8.7

Ps.

121,706

Ps.

100,721

20.8

EBITDA (1)

18,463

17,666

4.5

54,465

49,080

11.0

EBITDA margin (%)

44.9

46.7

(1.8)

44.8

48.7

(3.9)

Operating income

12,370

11,473

7.8

35,618

31,857

11.8

Operating margin (%)

30.1

30.3

(0.2)

29.3

31.6

(2.3)

Net income

6,828

6,948

(1.7)

19,835

17,380

14.1

Earnings per share (pesos) (2)

0.30

0.29

3.4

0.88

0.73

20.5

Earnings per ADR (dollars) (3)

0.56

0.49

14.3

1.62

1.23

31.7

Outstanding shares (millions) (2)

22,541

23,862

(5.5)

22,541

23,862

(5.5)

Equivalent ADRs (millions) (3)

1,127

1,193

(5.5)

1,127

1,193

(5.5)

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

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

(2) Considers in retroactive form, the effect of the stock split of 2 new shares per each previous share

approved since May 25, 2005.

(3) One ADR represents 20 shares.

 

 

Mexico Financial Results

[ millions of Mexican constant pesos as of September 2005]

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2004

Inc.

Revenues

Ps.

30,973

Ps.

31,987

(3.2)

Ps.

91,462

Ps.

94,119

(2.8)

EBITDA

15,993

16,603

(3.7)

47,216

47,919

(1.5)

EBITDA margin (%)

51.6

51.9

(0.3)

51.6

50.9

0.7

Operating income

11,413

11,460

(0.4)

32,967

31,980

3.1

Operating margin (%)

36.8

35.8

1.0

36.0

34.0

2.0

Latin America Financial Results

The financial information presented here is calculated in the currency of the country in

which each Latin America subsidiary operates, according to that country's generally

accepted accounting principles, and is based on continuing operations.

Brazil

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2004

Inc.

(millions of Brazilian reais of each period)

Revenues

$

1,906.8

$

1,811.5

5.3

$

5,741.3

$

5,590.9

2.7

EBITDA

480.7

253.2

89.8

1,371.0

1,061.2

29.2

EBITDA margin (%)

25.2

14.0

11.2

23.9

19.0

4.9

Operating Income

217.1

(45.0)

NA

553.2

152.4

263.0

Operating margin (%)

11.4

(2.5)

13.9

9.6

2.7

6.9

Chile

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2004

Inc.

(millions of Chilean constant pesos as of September 2005)

Revenues

$

16,082.5

$

15,237.1

5.5

$

48,194.8

$

42,929.0

12.3

EBITDA

3,657.6

2,558.1

43.0

9,899.2

4,045.4

144.7

EBITDA margin (%)

22.7

16.8

5.9

20.5

9.4

11.1

Operating Income

1,078.7

34.6

(*)

2,093.9

(3,544.5)

NA

Operating margin (%)

6.7

0.2

6.5

4.3

(8.3)

12.6

(*) Percentage higher than 1,000%.

Argentina

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2004

Inc.

(millions of Argentinean pesos of each period)

Revenues

$

82.0

$

59.7

37.4

$

216.3

$

161.5

33.9

EBITDA

11.4

6.9

65.2

31.9

8.3

284.3

EBITDA margin (%)

13.8

11.6

2.2

14.8

5.2

9.6

Operating Income

2.3

(4.2)

NA

7.3

(21.5)

NA

Operating margin (%)

2.9

(7.1)

10.0

3.4

(13.3)

16.7

Colombia

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2004

Inc.

(millions of Colombian pesos of each period)

Revenues

$

30,332.6

$

20,040.7

51.4

$

77,073.1

$

60,470.0

27.5

EBITDA

11,885.0

7,398.9

60.6

28,805.0

19,551.1

47.3

EBITDA margin (%)

39.2

36.9

2.3

37.4

32.3

5.1

Operating Income

6,244.5

802.2

678.4

12,343.3

229.2

(*)

Operating margin (%)

20.6

4.0

16.6

16.0

0.4

15.6

Peru

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2004

Inc.

(millions of New Soles of each period)

Revenues

$

46.1

$

38.6

19.4

$

133.5

$

118.6

12.6

EBITDA

12.3

8.4

46.4

31.4

20.4

53.9

EBITDA margin (%)

26.6

21.9

4.7

23.5

17.2

6.3

Operating Income

0.6

(2.1)

NA

(2.9)

(12.3)

NA

Operating margin (%)

1.4

(5.5)

6.9

(2.1)

(10.4)

8.3

(*) Percentage higher than 1,000%.

 

 

 

Consolidated Income Statements

The third quarter 2005 analysis presented here includes the results of the subsidiaries in Latin

America, including Embratel. Results for the third quarter of 2004 recognize the accounts of

the assets acquired from AT&T Latin America and Embratel since August.

Consolidated Balance Sheets

[ millions of Mexican constant pesos as of September 2005 ]

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2004

Inc.

Revenues

Local

Ps.

14,600

Ps.

14,825

(1.5)

Ps.

43,386

Ps.

43,632

(0.6)

Domestic long distance

9,299

7,357

26.4

27,158

16,249

67.1

International long distance

3,238

3,180

1.8

10,006

8,214

21.8

Interconnection

4,896

5,050

(3.0)

15,171

14,508

4.6

Corporate networks

4,593

3,604

27.4

13,918

8,754

59.0

Internet

2,872

2,121

35.4

8,107

5,483

47.9

Others

1,627

1,688

(3.6)

3,960

3,881

2.0

Total

41,125

37,825

8.7

121,706

100,721

20.8

Costs and Expenses

Cost of sales and services

8,674

8,122

6.8

24,960

23,212

7.5

Commercial, administrative and general

6,808

6,133

11.0

20,499

15,544

31.9

Transport and interconnection

7,180

5,904

21.6

21,782

12,885

69.0

Depreciation and amortization

6,093

6,193

(1.6)

18,847

17,223

9.4

Total

28,755

26,352

9.1

86,088

68,864

25.0

Operating income

12,370

11,473

7.8

35,618

31,857

11.8

Comprehensive financing cost

Net interest

1,059

986

7.4

2,669

2,808

(5.0)

Exchange loss, net

935

(266)

(451.5)

1,733

444

290.3

Monetary gain, net

(392)

(773)

(49.3)

(1,105)

(1,530)

(27.8)

Total

1,602

(53)

(*)

3,297

1,722

91.5

Income before tax and employee profit sharing

10,768

11,526

(6.6)

32,321

30,135

7.3

Provisions for income tax and employee profit sharing

3,624

4,519

(19.8)

11,686

12,653

(7.6)

Income before equity in results of affiliates and

7,144

7,007

2.0

20,635

17,482

18.0

minority interest

Equity in results of affiliates

(16)

(35)

(54.3)

(60)

(78)

(23.1)

Minority interest

(300)

(24)

(*)

(740)

(24)

(*)

Majority net income

Ps.

6,828

Ps.

6,948

(1.7)

Ps.

19,835

Ps.

17,380

14.1

EBITDA (1)

Ps.

18,463

Ps.

17,666

4.5

Ps.

54,465

Ps.

49,080

11.0

EBITDA margin (%)

44.9

46.7

(1.8)

44.8

48.7

(3.9)

Operating margin (%)

30.1

30.3

(0.2)

29.3

31.6

(2.3)

(*) Percentage higher than 1,000%.

 

 

International Operations

% of

Acquisition

Consolidation

Local exchange

Inflation

Company

Country

ownership

date

date

rate to US dollar

3rd quarter

TELMEX Argentina

Argentina

100.0

February 24,2004

March 1, 2004

2.910

2.68%

Techtel

Argentina

93.3

April 19, 2004

May 1, 2004

2.910

2.68%

Metrored

Argentina

93.3

June 30, 2004

July 1, 2004

2.910

2.68%

TELMEX do Brasil

Brazil

100.0

February 24, 2004

March 1, 2004

2.222

(1.52%)

Embratel

Brazil

63.9

July 23, 2004

August 1, 2004

2.222

(1.52%)

TELMEX Chile

Chile

100.0

February 24,2004

March 1, 2004

529.200

0.91%

TELMEX Corp. (Chilesat)

Chile

99.5

June 8, 2004

July 1, 2004

529.200

0.91%

TELMEX Colombia

Colombia

100.0

February 24, 2004

March 1, 2004

2,293.290

0.47%

TELMEX Peru

Peru

100.0

February 24, 2004

March 1, 2004

3.350

1.25%

Net

Brazil

37.1

January 31, 2005

NA

2.222

(1.52%)

The results of international operations were converted from local currency to US dollars and for

consolidation to Mexican pesos. The exchange rate used from pesos to US dollars was 10.8495

Mexican pesos per US dollar.

 

 

The third quarter 2005 analysis presented here includes the results of the subsidiaries

in Latin America, including Embratel. Results for the third quarter of 2004 recognize

the accounts of the assets acquired from AT&T Latin America and Embratel since

August.

Consolidated Balance Sheets

[ milions of Mexican constant pesos as of September 2005]

September

September

2005

2004

Assets

Cash and short-term investments

Ps.

27,408

Ps.

20,030

Other current assets

34,904

45,118

Plant, property and equipment, net

150,586

152,251

Other assets

7,870

4,998

Goodwill

7,258

4,061

Projected net asset

22,991

25,644

Deferred taxes

5,854

4,653

Total assets

Ps.

256,871

Ps.

256,755

Liabilities and stockholders' equity

Current portion of long-term debt

Ps.

16,187

Ps.

11,676

Other current liabilities

32,150

43,609

Long-term debt

75,940

79,974

Labor obligations

1,989

1,609

Deferred taxes

15,651

21,422

Total liabilities

141,917

158,290

Stockholders' equity

Majority sotckholders' equity

102,628

89,579

Minority interest

12,326

8,886

Total stockholders' equity

114,954

98,465

Total liabilities and stockholders' equity

Ps.

256,871

Ps.

256,755

 

 

Consolidated Free (5) and Net Cash Flow

(millions of Mexican constant pesos as of September 2005)

January-September 2005

Net Income Majority

Ps.

19,835

+ Depreciation and amortization

18,847

+ Items not requiring the use of resources

(4,224)

Resources provided by operating activities

34,458

- Working capital

4,550

- Investment in the telephone plant

14,514

- Inventories for the operation

330

Free cash flow

15,064

Resources used:

- Share repurchase

11,257

- Dividend payments

6,359

- Acquisition of companies

3,394

- Financing amortizations

16,230

Resources provided:

+ New financing

20,980

+ Embratel capital increase

955

+ Sale of MCI shares

7,150

Net cash flow

Ps.

6,909

(5) Free cash flow is calculated by resources provided by operating activities

resulting from variations in working capital, investment in the telephone plant

and inventories for the operation.

 

 

Mexico Financial Results

Mexico Income Statements

[ millions of Mexican constant pesos as of September 2005]

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2004

Inc.

Revenues

Local

Ps.

13,877

Ps.

14,457

(4.0)

Ps.

41,399

Ps.

43,211

(4.2)

Domestic long distance

4,423

4,428

(0.1)

12,967

13,228

(2.0)

International long distance

2,451

2,613

(6.2)

7,269

7,545

(3.7)

Interconection

4,319

4,918

(12.2)

13,062

14,327

(8.8)

Corporate networks

2,443

2,337

4.5

7,435

7,167

3.7

Internet

2,079

1,762

18.0

5,902

5,030

17.3

Others

1,381

1,472

(6.2)

3,428

3,611

(5.1)

Total

30,973

31,987

(3.2)

91,462

94,119

(2.8)

Costs and Expenses

Cost of sales and services

7,543

7,429

1.5

21,674

22,409

(3.3)

Commercial, administrative and general

4,503

4,569

(1.4)

13,556

13,705

(1.1)

Transport and interconnection

2,934

3,386

(13.4)

9,016

10,086

(10.6)

Depreciation and amortization

4,580

5,143

(10.9)

14,249

15,939

(10.6)

Total

19,560

20,527

(4.7)

58,495

62,139

(5.9)

Operating income

Ps.

11,413

Ps.

11,460

(0.4)

Ps.

32,967

Ps.

31,980

3.1

EBITDA (1)

Ps.

15,993

Ps.

16,603

(3.7)

Ps.

47,216

Ps.

47,919

(1.5)

EBITDA margin (%)

51.6

51.9

(0.3)

51.6

50.9

0.7

Operating margin (%)

36.8

35.8

1.0

36.0

34.0

2.0

Mexico Balance Sheets

[ milions of Mexican constant pesos as of September 2005]

September

September

2005

2004

Assets

Cash and short-term investments

Ps.

23,945

Ps.

16,383

Other current assets

23,642

31,076

Investment in non-consolidated subsidiaries (6)

30,441

9,478

Plant, property and equipment, net

119,563

124,945

Other assets

3,928

3,544

Projected net asset

22,991

25,644

Total assets

Ps.

224,510

Ps.

211,070

Liabilities and stockholders' equity

Current portion of long-term debt

Ps.

14,881

Ps.

6,011

Other current liabilities

20,448

23,027

Long-term debt

70,902

71,031

Deferred taxes

15,651

21,422

Total liabilities

121,882

121,491

Total stockholders' equity

102,628

89,579

Total liabilities and stockholders' equity

Ps.

224,510

Ps.

211,070

(6) Corresponds to subsidiaries in Latin America.

 

 

 

 

Mexico Operating Results

% Inc. vs.

3Q 2005

2Q 2005

1Q 2005

4Q 2004

3Q 2004

3Q 2004

Lines in service (thousand units)

18,135

17,852

17,536

17,172

16,816

7.8

Connections

458

485

501

590

547

(16.3)

Disconnections

174

169

138

235

197

(11.7)

Gain

284

316

364

356

351

(19.1)

Multifon Hogar + Kit

1,676

1,541

1,372

1,188

1,015

65.1

Penetration (%)

Digital services

40.9

40.1

39.2

38.2

37.4

3.5

Free voice mail (Buzón TELMEX)

47.9

46.1

43.7

42.2

40.9

7.0

Local Traffic

[ million units ]

Local calls

6,778

6,622

6,642

6,583

6,736

0.6

Interconnection minutes

8,804

8,812

8,373

8,089

7,817

12.6

Long Distance Traffic

[ million minutes]

Domestic long distance

4,577

4,501

4,297

4,190

4,322

5.9

International long distance

(incoming and outgoing)

1,815

1,627

1,677

1,628

1,694

7.1

Billed line equivalents 64kbps (thousands)

1,738

1,668

1,604

1,517

1,374

26.5

Internet (thousands)

2,025

1,927

1,855

1,741

1,604

26.2

Prodigy (Dial-up)

1,121

1,146

1,176

1,167

1,134

(1.2)

Infinitum (ADSL)

904

772

665

560

456

98.3

Penetration (%)

13.3

12.8

12.4

11.8

11.0

2.3

 

 

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 2005 and 2004.

Mexico Local Service Business

Income Statements

[ millions of Mexican constant pesos as of September 2005 ]

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2005

Inc.

Revenues

Access, rent and measured service

Ps.

13,783

Ps.

14,402

(4.3)

Ps.

41,249

Ps.

43,069

(4.2)

Recovery of LADA

special projects

-

564

NA

-

1,748

NA

LADA interconnection

1,050

1,068

(1.7)

3,118

3,308

(5.7)

Interconnection with operators

335

434

(22.8)

1,161

1,104

5.2

Interconnection with cellular

3,952

4,466

(11.5)

11,855

13,206

(10.2)

Other

1,992

2,109

(5.5)

6,276

6,791

(7.6)

Total

21,112

23,043

(8.4)

63,659

69,226

(8.0)

Costs and expenses

Cost of sales and services

5,637

5,227

7.8

16,188

15,665

3.3

Commercial, administrative and general

3,735

3,848

(2.9)

11,332

11,715

(3.3)

Interconnection

2,869

3,347

(14.3)

8,834

9,951

(11.2)

Depreciation and amortization

3,101

3,432

(9.6)

9,450

10,671

(11.4)

Total

15,342

15,854

(3.2)

45,804

48,002

(4.6)

Operating income

Ps.

5,770

Ps.

7,189

(19.7)

Ps.

17,855

Ps.

21,224

(15.9)

EBITDA (1)

Ps.

8,871

Ps.

10,621

(16.5)

Ps.

27,305

Ps.

31,895

(14.4)

EBITDA margin (%)

42.0

46.1

(4.1)

42.9

46.1

(3.2)

Operating margin (%)

27.3

31.2

(3.9)

28.0

30.7

(2.7)

Mexico Long Distance Service Business

Income Statements

[ millions of Mexican constant pesos as of September 2005 ]

%

9 months

9 months

%

3Q 2005

3Q 2004

Inc.

2005

2005

Inc.

Revenues

Domestic long distance

Ps.

4,202

Ps.

4,202

0.0

Ps.

12,335

Ps.

12,552

(1.7)

International long distance

2,137

2,321

(7.9)

6,361

6,696

(5.0)

Total

6,339

6,523

(2.8)

18,696

19,248

(2.9)

Costs and expenses

Cost of sales and services

1,304

1,505

(13.4)

4,016

4,450

(9.8)

Commercial, administrative and general

1,228

1,076

14.1

3,753

3,598

4.3

Interconnection to the local network

925

950

(2.6)

2,748

2,985

(7.9)

Cost of LADA special projects

-

497

NA

-

1,562

NA

Depreciation and amortization

647

712

(9.1)

1,924

2,220

(13.3)

Total

4,104

4,740

(13.4)

12,441

14,815

(16.0)

Operating income

Ps.

2,235

Ps.

1,783

25.4

Ps.

6,255

Ps.

4,433

41.1

EBITDA (1)

Ps.

2,882

Ps.

2,495

15.5

Ps.

8,179

Ps.

6,653

22.9

EBITDA margin (%)

45.5

38.2

7.3

43.7

34.6

9.1

Operating margin (%)

35.3

27.3

8.0

33.5

23.0

10.5

 

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.

Date: October 26, 2005.

TELÉFONOS DE MÉXICO, S.A. DE C.V.

By: __________________          

Name: Adolfo Cerezo Pérez
Title: Chief Financial Officer

 

Ref: Teléfonos de México, S.A. de C.V. - Press Release Third Quarter 2005.