Mexico's Telmex may reduce telephone investments

MEXICO CITY - Telefonos de Mexico SA is considering cutting its capital expenditures this year by $280 million, its chief financial officer said Tuesday.

Telmex chief financial officer Adolfo Cerezo said the company is monitoring Mexico's regulatory and economic conditions and may cut its planned investments of 12 billion pesos ($839 million) by a third.

Mexico sends 80 percent of its exports to the United States and is expected to head into a recession.

Cerezo also criticized recently published rules governing telephone interconnection, which have required Telmex to make investments that would benefit other companies, a situation he called "expropriatory in nature."

"Now what we have to take into account is how the economic outlook is, how the regulatory environment is, and based on that we have to be conservative, and we'll probably have to reduce" capital expenditures by one third, Cerezo said in a conference call.

Telmex also has been pressing for regulatory approval for so-called convergence services that would allow it to venture beyond voice and data transmission into television.

Telmex CEO Hector Slim said there has been no progress on that front, and said "this situation is delaying the technological development of the country."

Disagreements with President Felipe Calderon's administration have come to a head recently.

On Monday, Telmex tycoon Carlos Slim warned that Mexico would see unprecedented unemployment this year as businesses collapse due to the global economic crisis. The billionaire said falling oil prices and faltering exports will undoubtedly lead to an economic contraction this year.

Hours later, Labor Secretary Javier Lozano accused Slim of charging excessive service rates and not doing enough to help the country in troubled times. Lozano kept up the criticism Tuesday, saying Slim's predictions were exaggerated.

"He's says we'll have the worst unemployment in 80 years, the most powerful man in our country says that. And then he says he's not a doomsayer — well, he's hiding it well," Lozano said in an interview with Televisa station. "I think it's alarmist."

While the company reported it was in good financial shape regarding debt and currency positions, but reported a 55 percent plunge in fourth quarter profits Monday.

Profits were 2.98 billion pesos ($218 million) in the fourth quarter of 2008, down from 6.6 billion pesos from the same period of 2007, the company said in an earnings report. Profits per common share fell 53 percent to 0.16 pesos and 59 percent to $0.26 per ADR.

Telmex lost 83,000 subscribers to rival companies during the fourth quarter and ended the year with 17.5 million lines, the report said.

The company gained broadband Internet clients to reach 5 million subscribers in 2008, 175 percent more than in 2007.

Revenue fell 2.7 percent to 31 billion pesos, as both local and long distance sales dropped and Internet access costs increased.

Earnings before interest, taxes, depreciation and amortization fell 2.7 percent to 13.8 billion pesos.

The company said it planned to lower service rates for the ninth year in a row in 2009.

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