. Carlos Slim Helú .

TELMEX celebrated the 20th anniversary of its privatization in the new building housing the Soumaya Museum.
February 29, 2011. Mexico City.

Mr. Carlos Slim presided the celebrations marking the 20th Anniversary of the privatization of TELMEX’s, in the new building housing the Soumaya Museum.

Personalities attending the event included Mexico’s Secretary of Communications and Transports, Dionisio Pérez Jácome; TELMEX’s Chief Executive Officer, Carlos Slim Domit; former General Director and Chief Executive Officer of South Western Bell, Edward Whitacre; former Vice President for International Development of France Telecom, Christian Chauvin; General Director and President of AT&T, Randal Stephenson, as well as the Secretary General of the National Union of Workers of the Mexican Republic, Francisco Hernández Juárez, among other distinguished guests.

During the festivities, participants recalled TELMEX’s history of success since its privatization in December 1990, as well as the challenges it has had to confront and surpass. TELMEX’s development and modernization processes have helped it to convert itself from a telephone company to a telecommunication services conglomerate, specialized in digital transformations with great impact on all sectors of Mexican society.

During the event, the company underlined its social commitment and mission to remain the leading telecommunications company in the country. Its aim is to provide its clients with high value, integrated and world-class innovating solutions through human development and the application and management of state of the art technologies.

Mr. Slim thanked the presence of all attendees to the celebration and mentioned some of the landmark successes accomplished by the company in the past years. He acknowledged that the new challenge for TELMEX is to bring as soon as possible the benefits of the new digital era and knowledge society to all corners of our country, thus emphasizing TELMEX’s commitment with the development of Mexico.

Speech of Eng. Carlos Slim during the celebration of the XX Anniversary of TELMEX privatization in the Soumaya Museum, February 28, 2011.

Good afternoon to all, I am really very honor and happy, it’s a great pleasure to have you here. Also thanks to our friends that came for the inauguration of the museum tomorrow.

I will tell you only that TELMEX was a private company until 1973. In 73 the government bought 55 % of TELMEX to private investors. The government has the 51% was the bigger stock holder, and has the majority that’s why there were stocks in New York. It was in the stock exchange and the policy of TELMEX to finance them self was to give stocks mandatory stocks and bonds to the people that ask for their fond and that take 2 years to do that, and that was really a big problem.

I think the biggest change that was done, not only the modernity, was also the cultural change that was visible thanks to Francisco Hernández that believe in us. He believe that we were not going to make lay outs, because there were many people in the company, and we want that they will be in good conditions. And all that was very important, but also that telephone companies come to Mexico 12 or 14 telecommunications companies, we met with all of them, and our agreement was with France Telecom and South Western Bell, and we discuss a lot about how was going to be managed, it was a problem to decide, because they want to decide, we want to make the decisions, but the regulation was work well, because the mayority has to be of Mexicans.

During all this 20 years we had difficult times. At the beginning we make a 3 Year Plan to give some targets, the target for mobile was to arrive to 2 hundred thousand mobile cellular phones. Now we have 2 hundred thirty million, but this was 3 years to have 2 hundred thousand.

We have to change all the electromechanically equipment and switches for digital technology. The service was terrible because there were no antennas, there were no investment for grow, thats one of the reasons because the government decides to privatize the company. And we talk with the Union. The Union also look that was important the investments in the company. And when we arrive in this 3 Year Plan our target was to invest strongly, to address the 2 years delay in the supplier service. We have lots of important discussion. In the prepaid plan we have big differences, but excepting the prepaid, that they think that was not profitable, we make consensus always, we decide always for this 20 years and for a long time.

I´m grateful because each one of the people present here, work tu built Telmex, specially thanks tu Ed, because he trust in us and thaks to Randall, I say thanks to him for the confidence in us for this 20 years.

We are in 18 countries we are in all Latin America except in Bolivia and Venezuela. We are very happy what is happening, we are in all this countries now, not only with America Movil, but also with TELMEX International to have full service fixed lines, to have mobility, wired and wireless, to have multiplatforms, satellites, fiber optic, etc.

We think both of this companies are very strong, in this 20 years I was a witness of the development of this companies and there is also something interesting, both companies, especially TELMEX have a lot to do in this new civilization, we are the nervous system of this new civilization, we are basic fundamental for the development of our countries to the new society, to the society of knowledge, for the digital education and cultural of our countries and we think that we are ready and we are working to give this, and we have this responsibility and this compromise to go ahead in investments in the technology development, in the university, digital university and education, we are compromise to do that. And we are very happy to count with the support and friendship, and association with AT&T.

I also need to say thanks to the ones that went with us, we need to put together the Mexicans, and was difficult times, we have to put 8 hundred sixty million dollars to buy 10 % of TELMEX, and here are many friends that have confidence. It was very difficult times, 1990, because we were living still the problem of the deep of 1982. The good thing was that in 1989 the Mexican goverment renegotiate the external debt , and finished in 1990, when it was done, the country was ready and the world open, and that was so important for TELMEX because the company star to list on the stock market. TELMEX was the first company of the emerging markets that participate on the financial markets.

That was very important. I think was in December, and then in May the government selling a public offer, and collects big checks because the company was not very well, and the only concern that we have is that the friends of France Telecom left the society.

I hope we can continue this work that we have done in these 20 years, do it maybe little faster, because now the things happen faster.

Thank you to everyone.

Febrero 2011

20 YEARS OF TECHNOLOGICAL DEVELOPMENT

BACKGROUND

TELÉFONOS DE MÉXICO (TELMEX) is celebrating its 20th anniversary as a private company. During this period of time, we have modernized and updated ourselves and transformed our company from one that only offered telephone services to the leading telecommunications conglomerate in Mexico, in the context of a highly competitive market. Our commitment during these two decades has been to connect Mexico through the best technological platform. We aim to offer our clients the best services in universal access, fostering technological innovations as well as information and communication technologies in our country.

The auction that privatized TELMEX in December 1990 occurred 18 years after the Federal Government had acquired 51% of its shares and kept 49% in the hands of investors and clients. The later were forced to finance TELMEX in order to receive bad quality telephone services (deficient and with obsolete infrastructure), while they had to wait almost two years to contract a telephone line.

In 1990 when the auction to privatize TELMEX was held, the government controlled around 56% of its capital. It auctioned 25.4% of the company’s controlling shares, and opened an option for 5% of its limited voting shares. More than sixteen national and foreign companies participated in the bid, including five international telecommunications firms that joined those consortia presenting an offer. The winning bid came from a cluster composed of Southwestern Bell (now AT&T) with 10%, France Telecom with 5%, Grupo Carso with 5.78% and 34 Mexican investors that acquired the remaining 4.6%. The winners constituted a trust fund that imposed a restraint to sell to third parties for a 10-year period. The winning bid acquired 20.4% of the company’s worth, amounting to $US 8.6 billion dollars. This sum was 16.6% higher than the company’s value in the Mexican Stock Exchange quoted at $US 7.38 billion dollars on the date of the offer. The sum was also 4.1% higher than the second best bid offered by the consortium composed by Telefónica de España (Spain), GTE (General Telephone & Electronics Corporation) and Casa de Bolsa Acciones y Valores. One should note that this market price was 541% higher than TELMEX’s market price on December 31st, 1998, only two years before.

The privatization of TELMEX brought about significant foreign investments to Mexico, opening up the access to the international financial markets that had been closed to emerging economies since the 1982 external debt crisis.

TECHNOLOGICAL TRANSFORMATION

Twenty years ago, TELMEX had one of the most backward infrastructures in the world, with a growing incapacity to provide services demanded by the population and a lack of customer service culture. In order to transform this situation and build a modern company capable of communicating Mexico, as well as to provide the necessary telecommunications platform to foster the economic development of our country, between 1990 and 2010, TELMEX invested more than US$32 billion dollars in it’s expansion, modernization and transformation, thus renovating the company’s and the country’s digital culture. TELMEX can boast the following achievements, among others:

Fixed telephone lines increased from 5.4 million in 1990 to 15.6 million in 2010; traffic volume has also augmented significantly while the number of minutes in long distance calls has multiplied by 4.8

The number of Mexican localities receiving our services has increased and now covers more than 100 million persons.

Our fiber optic network grew from 360 kilometers to 112,570 kilometers and is now one of the most modern and reliable networks in the world.

We have also progressed in our 488 centers where customers contract and pay for our services, with modern commercial office-space offering client support and product retail.

In 2000, we attained 100% digitalization of our telephone platform, before the United States and Spain; this improved the quality of our services and further diversified our services.

In 1996 we launched our dial-up Internet services and in 2001 we started broad band Infinitum Internet, reaching 7.4 million connections in 2010, thus breaching the digital gap in Mexico.

The number of years of schooling per employee passed from 5.7 in 1990 to 15 in 2010, meaning greater productivity and a transformation of our company’s work culture. Most notably, we transformed our customer-service procedures, creating a new platform to exchange and learn about new technologies and innovation.

We have constructed 3,500 Digital Classrooms and Libraries; donated 275,000 Digital Grants, benefiting more than 2 million recipients; and we have installed more than 3,500 connectivity spots with free WiFi Infinitum Internet in public places.

In 2010, TELMEX’s Institute for Information Technologies (Inttelmex IT) trained more than one thousand professionals at no cost for them.

We have developed one of the most competitive portfolios for business solutions, offering a wide array of integrated services to foster the development of Mexican companies.

We have multiplied several times our company’s productivity, thus allowing a 76.8% reduction of costs and prices in all of our services. From 2000 to date, the price of Internet access by Kb dropped by 93.8%

Likewise, we have begun a process to consolidate our Local Service Areas (LSAs) by reducing them from 2,200 to only 397, thus decreasing by 82% the number of National Long Distance destinations. When compared to other countries, Mexico counts 7.5 times more inhabitants by LSA than Brazil, 3.5 more than Spain or 23.7 more than the United States. The surface covered by our LSAs (in square kilometers) is on average 5 times larger than in those countries. In addition, we launched the neighboring cities program that today provides services at very low cost to 32 million 785 thousand inhabitants in 168 cities.

TELMEX FOUNDATION

In 1995 we created the TELMEX Foundation with a commitment to support health, education, justice, culture and sports in Mexico. Among others, we have attained the following results: 585 thousand out-of-hospital surgeries have been performed; 6.7 thousand transplants of organs and tissues; 2.6 thousand specialized medical equipments for maternal and newborn care as well as early growth stimulation; 85 thousand social bail-outs; 255 thousand bicycles donated through our “Help me get to school” program; 29 thousand tons of humanitarian aid; 11 million bags of nutritional candies; 126,397 teams in the TELMEX Cup; early education manuals; cultural events, the Ring TELMEX program; the Cyclist Circuit and more than 750 institutions supported; among many other goals accomplished.

OUR COMMITMENT

As the leading telecommunications company in Mexico, TELMEX will continue to reduce the price of its services, thus permitting its clients to benefit from our large investments, innovation, more productivity and technological advancements.

We celebrate our 20 years with gratefulness for your preference. We promise to continue working with the same commitment that 20 years ago helped us to transform and develop Mexico’s telecommunication sector.

Héctor Slim Seade
General Director

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