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Original Source: FD (FAIR DISCLOSURE) WIRE
. Ruy Echavarria Ayuso, Telefonos de Mexico, IR Officer . Adolfo Cerezo Perezv, Telefonos de Mexico, CFO . Hector Slim, Telefonos de Mexico, CEO . Oscar Von Hauske, Telefonos de Mexico, President, TELMEX International . Patrick Grenham, Citigroup, Analyst . Rizwan Ali, Bear Stearns, Analyst . Miguel Garcia, Bear Stearns, Analyst . Jose Ramirez, Deutsche Bank, Analyst . Angel Hernandez, Banamex, Analyst
The Co. reported 3Q06 net income of 6b pesos.
A. Key Data From Call 1. 3Q06 net income = 6b pesos.
S1. Introductory Comments (A.C.) 1. Management Change: 1. Hector Slim Seade has been appointed CEO of TMX. 2. Oscar Von Hauske Sols has been appointed President of International Operations.
S2. Business Overview (H.S.) 1. Strategies: 1. To meet customers' demands, TMX involves technology and a means to deliver it.
2. Organizes its network so that it provides access to available
technologies. 3. Must improve and tailor service delivery channels. 4. Objectives reflect this market realities. 5. Put a stop to the decline in bulk revenues while at the same time accelerating broadband and data revenue growth. 6. Strengthen position in Mexico by evolving residential revenues from single voice and data services to multimedia package services. 7. Grow and develop revenues from small and medium-sized businesses.
8. Expand partnerships with corporate customers both domestically
and regionally as they increasingly outsource the telecommunications and information technology. 9. Put more emphasis on revenues generated outside Mexico. 2. Mexican Market: 1. At Sept. 30, market share was 25% of fixed and mobile services, based in the Co.'s 18.6m lines compared with the nation-wide total of more than 74m.
2. During 3Q06, TMX continued to clean up prepaid lines that do
not have usage reducing their total by 129,000 in addition to
202,000 disconnections of lines that pay rent. 3. Connections totaled 379,000 for a net gain of 48,000 lines in 3Q06. 4. During Oct. TMX expects to disconnect 233,000 prepaid lines as
part of the clean-up program which it will continue for the
rest of the year. 1. Estimates that at the end of the year, there will be approx. 1.7m prepaid lines in service. 2. These lines operate in economic segments that increasingly are served by mobile telephony. 5. In the fixed line business in Mexico, TMX competes with nine operators that are mainly focused on high income market segments A, B and C Plus. 1. In these competitive segments, TMX has a market share of approx. 70%. 6. TMX is the only fixed line operator in Mexico that has a presence in homes in the C Minus, D, E and prepaid segments.
S3. Operational Review (O.V.) 1. Operations Outside Mexico: 1. In the five Latin American countries where TMX currently has presence, the population is 312m. 1. There are 84m homes and the GDP is approx. $1.3t. 2. Estimated that market value of fixed telephony data and Internet is approx. $36.5b. 3. From Feb. 2004 to date, TMX has invested $2.6b in the markets where it operates. 1. This investment is evidence of the long-term commitment in this country. 2. In each market, TMX had to revise the financial operating structures of the acquired companies. 3. Guiding principal in each case has been to better integrate operations, incorporate best practice and most important, expand the services and products offering for customers, with high quality and appropriate pricing for each market. 4. The Latin American companies generate 27% of TMX revenues. 5. Compound annual growth rates for revenues over the last three years has been 24% a year. 1. An important contributor to the healthy growth has been emphasis on increasing revenues generated from data, Internet and local voice services.
2. Not only does it help increase revenues but it also reduces
dependencies on long distance. 6. Profitability measured by EBITDA margin has improved to 22% from 19% in the last three years.
7. Growth strategy is mainly focused on maintaining investments
in network to serve the corporate market in an integrated
manner and explore different alternatives in cable companies
or wireless to enhance the access infrastructure.
S4. 3Q06 Financials (A.C.) 1. Highlights: 1. EBITDA from Mexican operations improved 1.1% due to further control on optimization of operational efficiencies, and three major commercial achievements.
1. Further strengthened the broadband position with the highest
quarterly gain of ADSL services. 2. Sustained …