UPDATE 2-Mexico’s Telmex boosts net profit, dumps clients

* Telmex posts 68 pct jump in net, in line with forecasts

* Revenues continue to fall as competition grows

* Company ends quarter with 1.46 mln fewer lines
(Recasts with clients dropped, adds detail and background on
Telmex)

MEXICO CITY, Feb 3 (BestGrowthStock) – Telmex, Mexico’s leading
fixed-line phone operator, posted a 68 percent year-on-year
jump in quarterly net profit on Wednesday and said it axed the
lines of more than a million clients who had not paid bills.

Telmex (TMX.N: )(TELMEXL.MX: ), controlled by billionaire
Carlos Slim, said its net profit in the October-December period
was 5.0 billion pesos ($382 million), in line with
expectations.

A Reuters survey of analysts had predicted a net profit of
4.945 billion pesos at Telmex, which controls about 80 percent
of Mexico’s fixed telephone lines and is also the leading
broadband Internet provider.

Telmex’s bottom line was boosted by an exchange rate gain
in the fourth quarter compared with a loss in the year-ago
period. Financing costs were also lower in the fourth quarter
of 2009.

A former government monopoly, Telmex is scrambling to
quickly build its Internet business to make up for a decline in
its fixed-line and long-distance telephone revenues as clients
switch to cellphones and telephone services offered by cable
television companies.

But its Internet broadband service faces tougher
competition as well. Cable operators and even dominant Mexican
cellphone operator America Movil (AMXL.MX: ), which is also
controlled by Slim, are racing to stake out territory in the
fast-growing market.

Partly due to a campaign to get rid of clients who have not
paid their bills, Telmex ended the quarter with 15.88 million
lines, 1.46 million fewer lines than in the prior quarter.

Helping offset that loss, Telmex added 221,000 broadband
Internet customers in the quarter.

REVENUES DOWN

Reacting to tougher competition in the region, Slim
unveiled a $21 billion plan last month to shift control of his
Mexican fixed-line operator Telmex and regional fixed-line
group Telmex Internacional (TELINTL.MX: ) into his flagship
America Movil.

Slim plans to absorb Telmex Internacional into America
Movil, the largest cellphone operator in Latin America, and
delist the fixed-line operator from the stock exchange. The
minority of Telmex not controlled by Slim would continue to
trade on the stock market.

During the quarter, Telmex’s revenues dipped 4 percent to
29.7 billion pesos, in line with analysts’ expectations.

Earnings before interest, axes, depreciation and
amortization, known as EBITDA, dropped 11 percent to 12.2
billion pesos.

Revenues from local services fell 8.5 percent from the
year-earlier quarter, while interconnection fees were 16.4
percent lower.

Revenues from Telmex’s Internet access unit jumped 13.6
percent and corporate network sales rose 43.1 percent.
($1 = 13.10 pesos at end of Dec)

Investment

(Reporting by Noel Randewich; Editing by Gary Hill)

UPDATE 2-Mexico’s Telmex boosts net profit, dumps clients