Telmex reports profits hike on the back of flat returns

20 Oct 2003

Mexico’s leading telecoms operator Teléfonos de Mexico (Telmex) has reported net profits of MXP5.31 billion for the three months to the end of September 2003, a rise of 15% over the corresponding period of 2002, despite overall turnover remaining flat year-on-year. Revenues increased by less than 1% to MXP29.1 billion, whilst EBITDA fell by 0.4% to MXP14.9 billion. The company said the increased profitability was due to its handling of higher volumes of international calls, internet access accounts and interconnection requests. Analysts are predicting that Telmex will experience modest revenue growth over the next three months, with planned cost-cutting efforts expected to help the operator report modest growth in full year profits.

Telmex dominates Mexico’s domestic telecoms market despite the presence of numerous competitors. At the start of 2003 there were 15 other companies licensed to offer local telephony services, three operators with fixed wireless licences and 22 holders of long-distance and international telephony concessions. Nevertheless the incumbent still presides over nearly all the fixed line infrastructure with 15.3 million lines in service at the end of September 2003, up from 14.45 million at the end of 2002, giving it a market share of 96%. Though it maintains a stranglehold over the country’s last mile infrastructure, and therefore the local telephony market, it has suffered in the long-distance and international segments. It now controls just 70% of long-distance traffic, and around 60% of that for international call services.

The erosion of its long-distance and international market shares in recent years has seen Telmex concentrate on expanding its presence in Mexico’s internet and data markets. By the end of September 2003 it had 1.37 million internet customers, a rise of 25% over the year-earlier period, whilst the number of ADSL lines under its control more than doubled to 152,000. Prodigy Infinitum, as the service is known, offers optimum download speeds of 2Mbps and is available in 196 locations across the country. Telmex is owned by Carso Global Telecom (32.63%) and SBC Communications (7.61%), with the remainder being distributed share ownership.