EX-99.(A)(V) 3 d240031dex99av.htm SEPTEMBER 14, 2011 PRESENTATION TO THE BOARD OF DIRECTORS OF TELEFONOS DE MEXICO September 14, 2011 Presentation to the board of Directors of Telefonos de Mexico
Presentation to the Board of Directors
September 14, 2011
Exhibit (a)(v)


Table of Contents
2
Section 1
Executive Summary
Section 2
Mexican Telecom Industry Overview
Section 3
Valuation


3
Section 1
Executive Summary


Transaction Summary
Summary Overview
4
EXECUTIVE SUMMARY
Note
1.
Based on a USDMXN rate of 12.77 as of 9/12/11
On August 1, 2011, America Móvil, S.A.B. de C.V. (“AMX”) announced that its Board of Directors had
approved a cash tender offer for all of the outstanding shares of any and all classes of Teléfonos de México,
S.A.B de C.V. (“TMX”) that are not already owned, directly or indirectly by AMX
AMX currently owns 59.96% of the equity capital of TMX and shares representing 74.15% of the voting
power
The tender offer does not entail a change of control in TMX
If all shareholders were to tender, AMX would acquire 40.04% of the outstanding shares of TMX and would,
directly or indirectly, own 100% of the outstanding TMX capital stock upon completion of the offer
If AMX acquires a sufficient number of shares, it intends to delist TMX from the various stock markets on
which its shares are listed 
The purchase price offered is 10.50 Mexican Pesos per share payable in cash
  
The tender offer is subject to the authorization from Mexico’s National Banking and Securities Commission 
Morgan Stanley has been retained to render a financial opinion to the Board of Directors of TMX with respect to
the fairness from a financial point of view of the consideration to be received by TMX shareholders, other than
AMX, AT&T Inc. or any of their respective affiliates, pursuant to the proposed tender offer
We have not been provided with, and did not have access to, financial projections relating to TMX prepared by
the management of TMX. At the direction of the Company, for our analyses that required financial projections
for TMX we relied on certain publicly available research analysts’ financial forecasts relating to TMX as
adjusted and extrapolated per the guidance of the management of TMX (the “Publicly Available Adjusted
Projections”). We have been advised by TMX, and have assumed with the consent of TMX, that such Publicly
Available Adjusted Projections are consistent with the best currently available estimates and judgments of the
management of TMX with respect to the future financial performance of TMX. Furthermore, we have based our
opinion on other publicly available information on TMX as well as on discussions with TMX management
regarding competitive landscape, regulatory environment, business conditions, recent performance and outlook
for the business
We have performed certain other analyses and considered certain other factors as we have deemed appropriate in
rendering our financial opinion
We have assumed that there will be no changes to the regulatory environment under which TMX currently
operates and that TMX will not in the future receive permits and approvals to provide services that it is not
currently permitted to provide
The total transaction value if all non-AMX shareholders were to tender would be Mx$75.8Bn or US$5.9Bn
(1)


Transaction Key Metrics
EXECUTIVE SUMMARY
5
Source
Company Filings and Wall Street Research
Valuation Implied by Tender Offer and Indicative Timeline
The tender offer is for A, AA
and L shares at Mx$10.50 per
share
Holders of ADS will be entitled
to receive US$ from the
depository
Because AMX already has
control of TMX with 74% of
voting power, we have not
assigned any value premium to
the AA and A (voting) shares
subject to the tender vs. the
non-voting L shares
Implied
Valuation
(1)
Bn, except per Share and ADS data
Mx$
Offer Price per Share
10.50
% Premium to Prior Day (7/29/11)
10.6%
% Premium to Prior 4 Weeks (7/1/11)
9.4%
% Premium to Prior 90 Days Average (7/29/11-4/29/11)
4.9%
% Premium to Prior 180 Days Average (7/29/11-1/29/11)
1.5%
% Premium to Prior 365 Days Average (7/29/11-7/29/10)
5.1%
Implied Price per ADS (US$)
(2)
16.45
Implied Equity Value (Bn)
189.31
Plus: Net Debt as of 6/30/2011 (Bn)
(3)
66.43
Implied  Aggregate Value (Bn)
255.74
Implied AV / EBITDA LTM 2Q11
5.8x
Implied AV / EBITDA 2011E
5.9x
Implied AV / EBITDA 2012E
6.1x
Implied EV / 2011E LFCF
(4)
9.3x
Implied P / E 2011E
(5)
13.0x
Implied P / E 2012E
(5)
13.1x
Notes
1.
Calculation based on TMX Series L share prices
2.
One ADS represents 20 shares. Converted using an exchange rate of USDMXN of 12.77 as of 9/12/11
3.
Total debt of Mx$67,777MM + minority interest of Mx$322MM – cash and equivalents of Mx$4,144MM – cash required to pay the September 22,
2011 dividend of Mx$0.1375 per share
4.
LFCF defined as EBITDA less cash interest, cash taxes, capex and additions to working capital
5.
Net income based on median of selected Wall Street research analysts estimates


Valuation Methodology
EXECUTIVE SUMMARY
6
Key Methodologies Applied
We examined the value of TMX
using methodologies commonly
employed to value companies
in the telecommunications
sector
Trading Comparables
We
analyzed
trading
multiples
of
comparable
companies
in
Latin
America
and
North America, with a major focus on primarily wireline operations
We believe that the metrics that best capture TMX’s value are Aggregate
Value / EBITDA and Equity Value / Levered Free Cash Flow
Precedent
Transactions
We analyzed premiums paid globally since 2001 in non change-of-control cash
acquisitions for selected industries with an aggregate value greater than US$1Bn
and with a pre-transaction ownership of the target by the acquirer of 50%-95%
We analyzed transaction multiples in precedent merger and acquisition
transactions involving telecommunications companies which were entirely or
predominantly engaged in the wireline telecommunications business, during the
last 10 years
Nearly all of these precedent transaction multiples capture the value associated
with change of control, and therefore are presumed to include a premium typical
for change of control transactions
We note that the contemplated TMX transaction does not involve a
change of
control of TMX
Key metric evaluated was AV / LTM EBITDA
Discounted Cash
Flows
We determined the present value of unlevered free cash flows, based on the
Publicly Available Adjusted Projections
Cash
flows
were
discounted
using
a
range
of
WACCs
and
a
range
of
terminal
values calculated by applying terminal multiples to 2016E EBITDA, the last
projected period, with cross-reference to the implied free cash flow perpetuity
growth rates
Wall Street Research
Price Targets
We looked at Wall Street research analyst’s price targets, discounted to present
value based on price target dates at the cost of equity
TMX has at least 15 research analysts covering its stock


ADS Target Price (US$)
Summary Valuation
EXECUTIVE SUMMARY
7
Calculation and Rationale
Per
Share
/
ADS
Valuation
Range
(1)
Methodology
Source
Company Filings, Wall Street Research
ADS Price US$
Share Price Mx$
3.13
9.40
Offer Price:
Mx$10.50 per share
US$16.45 per ADS
Range of analyst share and ADS price targets
in Mx$ and US$, respectively, discounted at a
cost of equity of 8.5%. Dot represents median
of estimates
8.0x
10.2x
EV
/
2011E
LFCF
(2)
applied to 2011E LFCF of Mx$20.5Bn
4.8x –
5.9x AV / 2011E EBITDA
(2)
applied to 2011E EBITDA of Mx$43.3Bn
Trading
Comparables
Assuming 6.5
8.5% WACC
and
5.0 –
6.0x EBITDA
exit multiple
(mid-point implies perpetual nominal growth rate
of -1.0%)
Discounted Cash
Flows
Precedent
Transactions
Wall Street
Research Price
Targets
TMX’s Share Price
Non
Change-of-Control
Cash
Acquisitions
Median
Premium
to
Prior
Day
Non Change-of-Control
Cash
Acquisitions
Median
Premium
to
Prior
4
Weeks
Source
Wall Street Research
Analyst Target Price Distribution
ADS Price Discounted to 9/30/2011 at a Cost
of Equity of 8.4%
LatAm
(3)
:
4.5x
5.3x
AV
/
LTM
EBITDA
applied
to LTM EBITDA of Mx$44.4Bn
US
(3)
: 4.5x –
5.1x
AV / LTM EBITDA
applied to LTM EBITDA of Mx$44.4Bn
Median Premium of Non-Change of Control
Cash Acquisitions. Premium to Prior Day of
9.1% and Premium to Prior 4 Weeks of 13.6%
9.37
7.39
7.39
9.08
7.84
10.38
8.32
10.49
9.36
8.86
11.57
10.48
20.90
10.78
16.07
10.35
9.90
10.91
2.00
6.00
10.00
14.00
18.00
12.28
11.57
13.04
11.57
21.93
28.19
15.66
16.41
18.13
14.22
13.88
16.88
14.66
16.22
17.08
Notes
1.
Based on total debt of Mx$67,777MM + minority interest of Mx$322MM – cash and equivalents of Mx$4,144MM – cash required to pay the September 22, 2011 dividend
of Mx$0.1375 per share, converted to US$ at a USDMXN rate of 11.72 as of 6/30/11. ADS figures based on a USDMXN rate of 12.77 as of 9/12/2011
2.
Multiple range excludes the lowest and highest multiples among comparables
3.
US precedents based on CenturyLink/Qwest, Frontier/Verizon SpinCo and CenturyTel/Embarq and LatAm precedents based on AMX/CTE-El Salvador, AMX/Telec. de
Puerto Rico, AMX/Codetel, Telefonica/Colombia Telecom and Telemar/Brasil Telecom


8
Section 2
Mexican Telecom Industry Overview


General Overview of Mexican Telecom Industry
MEXICAN TELECOM INDUSTRY OVERVIEW
9
Wireless has overtaken wireline
as the most prevalent means of
telecommunications access in
Mexico, with the number of
wireless accesses (subscribers)
already representing 4.9x the
number of fixed lines in service
While wireline has been losing
share of total market, TMX has
also been losing share of fixed
telephony access lines to Axtel
and the cable-TV MSOs
Telmex has been able to
partially compensate for
revenue declines from wireline
telephony by increasing
broadband revenue
0
20
40
60
80
100
120
2007
2008
2009
2010
2011E
2012E
2013E
2014E
Wireless
Wireline
Wireline growth in Mexico is projected to be stagnant
Wireline
vs.
Wireless
Mexican
Market
MM Lines
Source
Global Insight
Source
Cofetel, TMX Filings
6%
5%
5%
28%
28%
28%
33%
62%
67%
66%
64%
8%
0%
20%
40%
60%
80%
100%
2007
2008
2009
2010
TMX
Megacable
Other
TMX has been able to partially offset this decline
with its stable position in broadband access…
% Share in Wireline Broadband
Source
Cofetel, TMX Filings
87%
66%
77%
87%
96%
102%
85%
81%
75%
64%
51%
37%
37%
51%
0%
20%
40%
60%
80%
100%
120%
2008
2009
2010
2011E
2012E
2013E
2014E
Wireline Broadband
Total Broadband
But wireline broadband penetration growth is
expected to slow down as it nears 90% of access lines
Broadband
Subscribers
as
%
of
Wirelines
Source
Global Insight, Business Monitor
CAGR ‘11E-’14E:1.4%
TMX’s market share has been steadily declining
TMX’s Market Share of Wireline Segment
% Share
7%
7%
9%
4%
7%
13%
78%
81%
86%
89%
8%
11%
0%
20%
40%
60%
80%
100%
2007
2008
2009
2010
TMX
Axtel
Other (Primarily cable-TV MSOs)


TMX –
Historical Quarterly Operating Performance
10
Access Lines in Service
(1)
MM
Broadband Subscribers
MM
Access Lines Decline Rate Y-o-Y
(1)
%
Broadband Penetration of Access Lines in Service
MEXICAN TELECOM INDUSTRY OVERVIEW
Source
Company Filings
Access lines in service have
been declining since 2Q07
This decline has been offset
by an increase in broadband
subscribers
However, the growth rate of
broadband subscribers has
decreased as penetration
approaches 50% of access
lines in service
Note
1.
Adjusted 1Q08–3Q09 access line count by 1.2MM less lines, which were at least 2 months behind on payments. TMX stopped reporting
these lines on 12/31/2009. Decline rates for 1Q08–3Q10 adjusted accordingly
16.15
15.8815.81
15.74
15.62
15.5915.56
15.25
16.6016.4616.47
16.39
16.31
16.22
0.00
4.00
8.00
12.00
16.00
20.00
6.52
6.77
6.95
7.17
7.36
7.57
7.68
6.30
5.90
5.52
5.01
4.36
3.80
3.32
0.00
2.00
4.00
6.00
8.00
10.00
(3.1)
(2.9)
(3.2)
(1.8)
(1.6)
(3.1)
(2.9)
(3.2)
(2.9)
(1.3)
(1.7)
(1.5)
(2.0)
(3.1)
(4.0)
(3.0)
(2.0)
(1.0)
0.0
41%
43%
44%
46%
47%
49%
50%
20%
23%
26%
31%
34%
36%
39%
0
20
40
60


6
7
8
9
10
11
12
12-Sep-10
23-Nov-10
3-Feb-11
18-Apr-11
29-Jun-11
12-Sep-11
0
25
50
75
100
125
150
Volume
Price
Tender Price
Series L Share Price Performance and Trading Volume
As of 12-Sep-11
Mx$
MM
TMX Series L —Share Price Performance
MEXICAN TELECOM INDUSTRY OVERVIEW
11
Source
CapIQ
Last Twelve Months
17-Nov-10
Pays down US$300MM
and refinances
US$700MM of debt
27-May-11
Regulators reject TMX’s application to
start offering TV services
7-Dec-10
Mexico
Senate
approves
antitrust
legislation
1-Aug-11
AMX announces
intention to
tender for
remaining 40%
of TMX for
Mx$10.50 per
share
3-May-11
Supreme court rules that the new 
mobile interconnection rates of 39¢
(previously 95¢) established by
COFETEL must apply
14-Jun-11
AMX cuts the fees
it charges to TMX
for phone calls to
its network from
95¢
to 39¢
to
match the rate set 
by the government
to all carriers
3-Feb-11
TMX reports FY10 results, net
income declined by 32%
7-Jun-11
COFETEL reduced rural interconnection
rates (for calls terminated on TMX’s
network) by 94% from 75¢ to 4.5¢ and
domestic long distance interconnection
rates from 11.5¢ to 3.95¢
12-May-11
Court rules TMX must receive an
answer in 15 days on its request
for government permission to
offer TV services


12
Section 3
Valuation


Comparable Companies Selection Criteria
VALUATION
13
Inclusion:
Incumbent
telecom only
Inclusion:  
More than 50% wireline
revenue mix
Inclusion:
Over 2MM Access Lines
Latin America
North America
Tele Norte Leste
TELESP
Windstream
Frontier
CenturyLink
Diversified Telecommunications Companies
Cable MSO’s
CLEC’s
AT&T
TDC
BT Group
Vodafone
Verizon
Telenor
Telecom
Italia
KPN
Portugal
Telecom
OTE
Consolidated
Belgacom
Deutsche
Telekom
France
Telecom
Telekom
Austria
Telefonica
Cincinnati Bell
Sprint
Brasil
Telecom
Telecom
Argentina
Entel
We determined the universe of
comparable listed companies
by examining the
telecommunications universe
and screening for business
characteristics similar to TMX
incumbent telecom
companies
with a preponderant
percentage of wireline
revenue
with significant size
The universe of comparable
listed companies was narrowed
to three North American and
two Latin American companies


Projected
Operating
and
Financial
Statistics
(1)
VALUATION
14
Revenue CAGR 2011E-2013E
EBITDA CAGR 2011E-2013E
Internet Accesses CAGR 2011E-2013E
Access Line Loss CAGR 2011E-2013E
As of September 12, 2011
Latin America
North America
Note
1.
TMX data based on the Publicly Available Adjusted Projections. Peers data based on median of selected Wall Street research analysts
estimates
TMX
(1.4%)
3.7%
0.2%
(2.2%)
(4.5%)
0.4%
(5%)
0%
5%
TMX
TELESP
Tele Norte
Leste
Windstream
Frontier
CenturyLink
(2.4%)
5.9%
2.2%
0.8%
(0.6%)
(0.6%)
-20%
0%
20%
TMX
TELESP
Tele Norte
Leste
Windstream
Frontier
CenturyLink
(1.5%)
(1.5%)
(3.1%)
(6.2%)
(7.3%)
(2.9%)
(10%)
(5%)
0%
TMX
TELESP
Tele Norte
Leste
Windstream
Frontier
CenturyLink
5.9%
10.2%
3.4%
3.2%
2.5%
7.5%
0.0%
5.0%
10.0%
15.0%
TMX
TELESP
Tele Norte
Leste
Windstream
Frontier
CenturyLink


Sector
Trading
Multiples
(1)
VALUATION
15
5.5x
4.1x
5.9x
5.0x
4.8x
6.9x
0
2
4
6
8
TMX
TELESP
Tele Norte
Leste
Windstream
Frontier
CenturyLink
Aggregate Value / 2011E EBITDA
8.4x
13.8x
9.0x
10.2x
8.0x
6.4x
0
4
8
12
16
TMX
TELESP
Tele Norte
Leste
Windstream
Frontier
CenturyLink
Equity
Value
/
2011E
LFCF
(2)
1.5x
0.3x
1.8x
3.7x
3.2x
2.4x
0
2
4
TMX
TELESP
Tele Norte
Leste
Windstream
Frontier
CenturyLink
Net Debt / 2011E EBITDA
Latin America
North America
As of September 12, 2011 for Comparables, as of July 29, 2011 for TMX
Notes
1.
TMX data based on the Publicly Available Adjusted Projections. Peers data based on median of selected Wall Street research analysts estimates
2.
LFCF
defined
as
EBITDA
less
cash
interest,
cash
taxes,
capex
and
additions
to
working
capital,
assumes
no
changes
in
working
capital
for
peers
Tender Price: 5.9x
Tender Price: 9.3x
Tender Price: 5.5%
TMX
6.1%
6.4%
4.3%
8.0%
10.8%
8.7%
0.0%
4.0%
8.0%
12.0%
16.0%
TMX
TELESP
Tele Norte
Leste
Windstream
Frontier
CenturyLink
Dividend Yield 2011E


We note that both, Latin American and North American transactions, were all change of control
transactions, while the Tender Offer does not involve a change of voting control of Telmex
VALUATION
16
Non-change of
Control Transactions
We analyzed premiums paid globally since 2001 in non change-of-control cash
acquisitions, for selected industries, with an aggregate value greater than $1Bn and
with a pre-transaction ownership of the target by the acquirer ranging 50%-95%
Median premium of 9.1% relative to share price 1-day prior to announcement
Median premium of 13.6% relative to share price 4-weeks prior to announcement
Latin American
Transactions
Few recent precedent transactions in Latin America of pure or predominantly
wireline incumbents
Average AV / LTM EBITDA multiple of 5.0x in five transactions
CTE-El Salvador                 
151k wireless subs out of 620k total access lines
PRT (Puerto Rico)              
485k wireless subs out of 1,110k total access lines
Codetel (Dominican Rep.)   800k wireless subs out of 752k total access lines
The most recent wireline-only transaction was Telefonica’s acquisition of Colombia
Telecom in 2006 with a 5.3x LTM EBITDA multiple
Wireless
/
wireline
industry
dynamics
have
changed
significantly
in
the
Latin
American telecom industry since then, with wireless becoming more dominant and
wireline growth stagnating
Recent North
American
Transactions
Recent valuations paid for large incumbent wireline-only companies in U.S. may be
most instructive
Embarq, Qwest and Verizon Spinco transactions all involved targets of meaningful
size, broad geographic scope, and mix of rural and urban exchanges,
characteristics similar to those of TMX
These
companies
were
experiencing
negative
access
line
growth
at
the
time
they
were acquired
Average AV / LTM EBITDA multiple of 4.7x in these three transactions
Precedent Transaction Overview
Median premium paid to 1-day
prior to announcement share
price on non change-of-control
transactions globally is 9.1%,
below the implied 10.6%
premium of AMX’s tender offer
for TMX
Relevant precedent
transactions in Latin America
and North America encompass
a change of control premium
AMX tender offer for TMX
does not entail a change of
control
3 of these 5 were America Movil’s purchases of incumbent telcos in El Salvador,
Puerto Rico and Dominican Republic; all were completed more than 5 years ago
Each target company included a wireless business representing a significant 
% of total subscriber base:


Premiums Paid in Non Change-of-Control Cash Acquisitions
Across Selected Industries
17
Source
Thomson
3
2
2
6
4
6
1
2
1
2
2
5
0
1
2
3
4
5
6
7
2.50%
2.5%-5%
5%-7.5%
7.5%-10%
10%-
12.5%
12.5%-
15%
15%-
17.5%
17.5%-
20%
20%-
22.5%
22.5%-
25%
25%-
27.5%
27.5%-
30%
30%
Premium Paid to 4 Weeks Prior to Announcement
# of Deals
Source
Thomson
Premium Paid to 1 Day Prior to Announcement
# of Deals
Median: 9.1%
Median: 13.6%
Premium implied by AMX
tender offer is higher than the
median premium paid to 1-day
prior to announcement share
price on non change-of-control
transactions globally:
10.6% to one day prior vs.
median 9.1%
Precedent transactions
universe in cash acquisitions
for proposed total consideration
amount of aggregate value
greater than $1Bn
Pre-transaction ownership of
target company by acquirer
between 50%–95%
Global deals since 1/1/2001
Excludes transactions in the
Financial Institutions and
Biotechnology sectors
VALUATION
0
2
4
6
8
10
2.5%
2.5%-5%
5%-7.5%
7.5%-
10%
10%-
12.5%
12.5%-
15%
15%-
17.5%
17.5%-
20%
20%-
22.5%
22.5%-
25%
25%-
27.5%
27.5%-
30%
30
%


Tender Offer Price vs. Market Movements Since Announcement
Indexed Daily Stock Price Evolution
VALUATION
18
80%
90%
100%
110%
120%
7/29/11
8/12/11
8/26/11
9/12/11
TMX
AMX
After announcement, TMX price has remained
stable while the price of AMX…
Indexed to July 29, 2011
Source
CapIQ
80%
90%
100%
110%
120%
7/29/11
8/12/11
8/26/11
9/12/11
TMX
TELEMAR
TELESP
…Latin American peers…
Indexed to July 29, 2011
Source
CapIQ
80%
90%
100%
110%
120%
7/29/11
8/12/11
8/26/11
9/12/11
TMX
CTL
WIN
FTR
North American peers…
Indexed to July 29, 2011
Source
CapIQ
80%
90%
100%
110%
120%
7/29/11
8/12/11
8/26/11
9/12/11
TMX
IPC
S&P500
…and major indices have declined with some
recent recovery
Indexed to July 29, 2011
Source
CapIQ
Tender offer price represents a
10.6% premium to TMX share
price one day prior to the
announcement
Given equity market
movements since August 2,
however, the tender offer price
looks more attractive relative to
equity valuations that have
declined for nearly all
comparable companies and the
relevant equity indices
TMX Tender Offer Price (Mx$ 10.50)


Multiples Paid in Change-of-Control Transactions
VALUATION
19
7.0x
8.4x
6.3x
10.3x
7.6x
4.5x
4.5x
5.2x
8.7x
5.1x
6.8x
7.4x
7.7x
4.9x
5.3x
4.5x
5.3x
5.2x
6.5x
6.9x
0.0
2.0
4.0
6.0
8.0
10.0
12.0
North America
Europe
Latin America
TMX Offer
Average of All Transactions
Historical Multiples Paid AV / LTM EBITDA
X
Wireline Telecom Sector
Notes
1.
Average of LatAm transactions includes AMX/CTE-El Salvador, AMX/Telec. de Puerto Rico, AMX/Codetel, Telefonica/Colombia Telecom
and Telemar/Brasil Telecom
2.
Average of US transactions includes CenturyLink/Qwest, Frontier/Verizon SpinCo and CenturyTel/Embarq, representative large
incumbent and wireline transactions for TMX
Global Average: 6.4x
LatAm
Average
(1)
:
5.0x
US
Average
(2)
:
4.7x
TMX Offer: 5.8x
In Dec 04, AMX
acquired an additional
41.5% stake from the
Government of El
Salvador for 2.5x AV /
LTM EBITDA


Publicly Available Adjusted Projections
VALUATION
20
We have not been provided with,
and did not have access to,
financial projections relating to
TMX prepared by the management
of TMX. At the direction of the
Company, for our analyses that
required financial projections for
TMX we relied on certain publicly
available research analysts’
financial forecasts relating to TMX
as adjusted and extrapolated per
the guidance of the management
of TMX (the “Publicly Available
Adjusted Projections”). We have
been advised by TMX, and have
assumed with the consent of TMX,
that such Publicly Available
Adjusted Projections are consistent
with the best currently available
estimates and judgments of the
management of TMX with respect
to the future financial performance
of TMX
90
100
110
120
2011E
2012E
2013E
2014E
2015E
2016E
Median
Mean
Max
Min
PAAP
Revenue
(1)
Mx$Bn
(10)
(8)
(6)
(4)
(2)
0
2
2011E
2012E
2013E
2014E
2015E
2016E
Median
Mean
Max
Min
PAAP
Revenue Growth
(1)
%
Source
Wall
Street
Research
Reports
and
the
Publicly
Available
Adjusted
Projections
Note
1.
Median,
Mean,
Max
and
Min
based
on
selected
Wall
Street
equity
research
analysts
estimates.
PAAP
stands
for
the
Publicly
Available
Adjusted
Projections


32
36
40
44
2011E
2012E
2013E
2014E
2015E
2016E
Median
Mean
Max
Min
PAAP
EBITDA
Margin
(1)
%
34
38
42
46
2011E
2012E
2013E
2014E
2015E
2016E
Median
Mean
Max
Min
PAAP
EBITDA
(1)
Mx$Bn
6
7
8
9
10
11
12
2011E
2012E
2013E
2014E
2015E
2016E
Median
Mean
Max
Min
PAAP
Capital
Expenditures
as
%
of
Revenues
(1)
Mx$Bn
12
14
16
18
2011E
2012E
2013E
2014E
2015E
2016E
Median
Mean
Max
Min
PAAP
Depreciation
and
Amortization
(1)
Mx$Bn
VALUATION
21
Publicly Available Adjusted Projections (cont’d)
Source
Wall
Street
Research
Reports
and
the
Publicly
Available
Adjusted
Projections
Note
1.
Median, Mean, Max and Min based on selected Wall Street equity research analysts estimates. PAAP stands for the Publicly Available Adjusted
Projections


TMX -
Historical and Projected Performance
VALUATION
22
14.6
14.5
14.3
16.4
15.9
15.6
15.2
15.0
14.7
0.0
5.0
10.0
15.0
20.0
Access Lines in Service
(1)
MM
9.5
9.9
10.3
9.2
8.7
8.2
7.4
6.7
5.2
0.0
3.0
6.0
9.0
12.0
Internet Accesses
MM
104.8
103.7
102.7
106.4
107.7
109.5
113.6
119.1
124.1
0.0
25.0
50.0
75.0
100.0
125.0
150.0
Revenue
Mx$Bn
(1.5)
(1.1)
(0.9)
(1.2)
(1.6)
(3.6)
(4.6)
(4.0)
(5.1)
(6.0)
(4.0)
(2.0)
0.0
Annual Revenue Growth
%
Source
2008A-2010A = Company Filings, 2011E-2016E = Publicly Available Adjusted Projections
Notes
1.
Access
lines
for
2008
adjusted
for
lines
that
were
excluded
from
TMX’s
access
line
calculation
in
2009
due
to
missed
payments
in
excess
of
2
months
(1.2MM
lines)
2.
Adjusted to reflect lines in service as of June 30, 2011
While Broadband accesses are 
expected to continue growing, it
is not expected to mitigate the
contraction of fixed lines
Therefore, overall revenues
are expected to continue
contracting
(2)


TMX -
Historical and Projected Performance (cont’d)
VALUATION
23
39.9
39.5
39.0
41.3
42.1
43.3
45.9
52.3
57.7
0.0
20.0
40.0
60.0
80.0
EBITDA
Mx$Bn
(3.2)
(1.0)
(1.2)
(2.0)
(2.7)
(5.8)
(12.2)
(9.3)
(7.4)
(15.0)
(12.0)
(9.0)
(6.0)
(3.0)
0.0
Annual EBITDA Growth
%
38.1
38.1
38.0
38.8
39.1
39.5
40.5
43.9
46.5
0.0
20.0
40.0
60.0
EBITDA Margin
%
28.7
28.7
29.5
29.0
29.6
29.5
32.3
36.7
36.8
0.0
10.0
20.0
30.0
40.0
50.0
EBITDA -
Capex Margin
%
As a consequence of falling
revenues, EBITDA is expected
to continue to contract, albeit at
a slower pace
TMX is expected to reduce
Capex on an absolute basis as
EBITDA decreases
Source
2008A-2010A = Company Filings, 2011E-2016E = Publicly Available Adjusted Projections


DCF Sensitivity Table
DCF Analysis
VALUATION
24
September 12, 2011
Peer
Unlevered
Beta
Brazil
Tele Norte Leste
0.50
Telesp
0.84
Average
0.67
USA
Windstream
0.57
Frontier Communications
0.51
CenturyLink
0.50
Average
0.53
Global Average
0.58
Beta Calculation
Free Cash Flow Calculation -
Based on The Publicly Available Adjusted Projections
Share Price Calculation
US$ WACC | As of  September 12, 2011
Component
Value
Risk Free Rate
3.0%
Country Premium (bps)
(4)
107
Market Risk Premium
6.0%
Unlevered Beta
0.58
Target Debt / (Debt + Equity)
25.0%
Tax Rate
28.0%
Levered Beta
0.72
Cost of Equity (Nominal US$)
8.4%
Cost of Debt, Pre-Tax
5.0%
WACC (Nominal US$)
7.2%
Cost of Capital Calculation
(4)
US$MM, unless otherwise stated
Present
Value
of
Free
Cash
Flows
(1)
8,013
Plus:
Present
Value
of
Terminal
Value
(1)
11,071
Aggregate Value
19,084
Minus:
Net
Debt
and
Minority
Interest
(3)
5,667
Equity Value
13,417
Total Shares Outstanding (MM)
18,029
Price per Share (US$)
0.74
Exchange Rate
12.77
Price per Share (Mx$)
9.50
Notes
1.
Discounted Cash Flows using midpoint of WACC and Exit Multiple ranges, of 7.5% and 5.5x, respectively
2.
FX rates using Morgan Stanley Research estimates for 2011E and 2012E, 2013E-2016E calculated using the Global Insight 2013E-2015E CPI inflation
differential between the U.S. and Mexico
3.
Total debt of Mx$67,777MM + minority interest of Mx$322MM – cash and equivalents of Mx$4,144MM – cash required to pay the September 22, 2011
dividend of Mx$0.1375 per share, converted to US$ at a USDMXN rate of 11.72 as of 6/30/11. Price per share in Mx$ converted at a USDMXN 
rate of 12.77 as of 9/12/2011
4.
Risk free rate calculated as one-year average yield of UST 10-Yr. Country premium calculated as one-year average spread between yields of UST 10-Yr and
UMS 2020 Bond
Price per Share, Mx$
WACC
6.5%
7.5%
8.5%
5.0x
9.28
8.79
8.32
5.5x
10.03
9.50
9.00
6.0x
10.78
10.21
9.68
Figures in Mx$ MM
2011-2016
2011E
2012E
2013E
2014E
2015E
2016E
T. Value
CAGR
Revenue
109,500
107,728
106,396
104,823
103,654
102,726
(1.3%)
Y-o-y revenue growth
(3.6%)
(1.6%)
(1.2%)
(1.5%)
(1.1%)
(0.9%)
EBITDA
43,278
42,112
41,255
39,914
39,508
39,038
(2.0%)
EBITDA margin
39.5%
39.1%
38.8%
38.1%
38.1%
38.0%
Tax-affected EBIT
17,805
17,979
18,066
17,719
17,546
17,513
(0.3%)
Plus:  depreciation and amortization
16,803
16,324
15,466
15,304
15,139
14,715
(2.6%)
Depreciation & amortization as % of revenues
15.3%
15.2%
14.5%
14.6%
14.6%
14.3%
Less:  capital expenditures
(11,000)
(10,248)
(10,408)
(9,853)
(9,716)
(8,732)
(4.5%)
Capital expenditures as % of revenues
10.0%
9.5%
9.8%
9.4%
9.4%
8.5%
Plus: Decrease in working capital
(336)
(567)
157
266
54
79
Unlevered free cash flow
23,273
23,487
23,281
23,436
23,023
23,575
214,710
0.3%
% of cash flow to discount
25%
100%
100%
100%
100%
100%
Unlevered free cash flow to discount (Mx$MM)
5,818
23,487
23,281
23,436
23,023
23,575
Average FX rate (Ps. per US$)
(2)
12.43
12.45
12.53
12.77
12.99
13.18
13.27
Unlevered free cash flow to discount (US$MM)
468
1,887
1,858
1,836
1,773
1,789
16,046
Discounted unlevered free cash flows (US$MM)
(1)
464
1,787
1,638
1,505
1,352
1,269
10,976


17.00
17.00
16.50
16.45
16.16
11.50
14.00
14.20
14.50
22.00
18.55
18.00
17.16
17.00
17.00
17.00
16.50
0.00
5.00
10.00
15.00
20.00
25.00
HSBC
UBS
CS
BTG
MS
Ixe
DB
Actinver
Itau
Citi
Santander
BAML
GS
Scotia
JPM
Offer
29-Jul-1
TMX ADS Price Target –
Undiscounted from Target Date to Current
US$
Rec.
% Offer to
Price Target:
Median: 17.00
7/19/11
Under-
weight
43.0%
7/20/11
Under-
perform
17.5%
7/19/11
Sell
15.8%
6/6/11
Sell
(0.3%)
3/28/11
Sell
(0.3%)
2/4/11
Under-
perform
(3.2%)
Neutral
7/19/11
(11.3%)
5/17/11
Sell
(3.2%)
6/27/11
Hold
(3.2%)
7/19/11
Sell
(3.2%)
7/19/11
Under-
weight
(3.2%)
7/20/11
Sell
(4.1%)
5/18/11
Over-
weight
(25.2%)
(1)
TMX -
Wall Street Research Price Targets
25
Note
1.
Offer price converted to US$ using the 20:1 shares to ADS conversion ratio and an exchange rates of 12.77 as of 9/12/11
TMX is covered by at least 15
brokerage firms
Analysts valuations are tightly
concentrated
9 analysts with price targets
between US$16.50 –
18.00 /
ADS
Only two analysts
above
US$18.00 and four below
US$15.00
73% of the research analysts had
a sell recommendation on Telmex
prior to the announcement of the
planned tender offer
Tender offer price is above
the
Wall Street research median price
targets for TMX shares and in line
with research median price targets
for ADSs
It represents a premium of 4.0%
vs. the median share price
target, of 10.6% vs. the 1-day
prior closing price of the Series L
share price and of 1.8% vs. the
1-day prior closing price of the
Series L ADS
9.49
10.70
10.50
10.10
10.00
9.75
10.50
8.50
9.00
9.50
10.00
10.50
11.00
Itau
Actinver
Santander
BTG
Ixe
Offer
29-Jul-11
TMX Share Price Target –
Undiscounted from Target Date to Current
Mx$
Median: 10.10
Rec.
% Offer to
Price Target:
2/4/11
Under-
perform
(1.9%)
5/17/11
Sell
0.0%
3/28/11
Sell
4.0%
7/19/11
Sell
5.0%
7/19/11
Sell
7.7%
Source
Bloomberg
Source
Bloomberg
VALUATION
Prior to AMX Tender Announcement on August 1, 2011
7/8/11
Under-
peform
13.4%
7/19/11
Neutral
(8.6%)


VALUATION
Disclaimer
26
We have prepared this document solely for informational purposes.  You should not definitively rely upon it or use it to form the definitive basis for any decision, contract, commitment or action
whatsoever, with respect to any proposed transaction or otherwise.  You and your directors, officers, employees, agents and affiliates must hold this document and any oral information provided in
connection with this document in strict confidence and may not communicate, reproduce, distribute or disclose it to any other person, or refer to it publicly, in whole or in part at any time except with
our prior written consent.  If you are not the intended recipient of this document, please delete and destroy all copies immediately.
We have prepared this document and the analyses contained in it based, in part, on certain assumptions and information obtained by us from the recipient, its directors, officers, employees, agents,
affiliates and/or from other sources.  Our use of such assumptions and information does not imply that we have independently verified or necessarily agree with any of such assumptions or information,
and we have assumed and relied upon the accuracy and completeness of such assumptions and information for purposes of this document.  Neither we nor any of our affiliates, or our or their respective
officers, employees or agents, make any representation or warranty, express or implied, in relation to the accuracy or completeness of the information contained in this document or any oral information
provided in connection herewith, or any data it generates and accept no responsibility, obligation or liability (whether direct or indirect, in contract, tort or otherwise) in relation to any of such
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omissions therefrom.  Neither we nor any of our affiliates, or our or their respective officers, employees or agents, make any representation or warranty, express or implied, that any transaction has been
or may be effected on the terms or in the manner stated in this document, or as to the achievement or reasonableness of future projections, management targets, estimates, prospects or returns, if any. 
Any views or terms contained herein are based on financial, economic, market and other conditions prevailing as of the date of this document and are therefore subject to change.  We undertake no
obligation or responsibility to update any of the information contained in this document.  Past performance does not guarantee or predict future performance.
We have (i) been advised by Teléfonos de México, S.A.B. de C.V. (the “Company”) that any forecasted financial information contained herein reflects the best available estimates of future financial
performance, and (ii) not made any independent valuation or appraisal of the assets or liabilities of any company involved in any proposed transaction, nor have we been furnished with any such
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