1. 1 Competition in the Telecommunications Sector in Mexico April 2008

2. 2 Coverage of Telecommunications services have still not reached its full potential. This Administration is promoting measures to increase penetration of telecommunications services. Fixed Telephony, 2006 (Lines / 100 inhabitants) Mobile Telephony, 2006 (Subscribers / 100 inhabitants) Broadband, 2006 (Subscribers / 100 inhabitants) Switzerland69.4UK116.4Korea29.3 Germany65.5Spain106.4Switzerland26.5 Canada64.1Switzerland102.1Canada23.6 UK57.6Germany101.9UK21.7 US57.2France85.1France20.9 France55.8Korea83.8US19.3 Korea56.0US77.4Germany18.1 Spain42.4Chile75.6Spain15.4 Brazil20.5Brazil52.9Chile5.9 Chile20.2Mexico52.6Mexico3.4 Mexico18.3Canada52.5Brazil3.1 Fuente: Unión Internacional de Telecomunicaciones

3. 3 Over the last year, there has been a dramatic fall in prices of close to 30% in mobile telephony, due mainly to an increase in competitive pressures. In other services more competition and faster reduction in rates are needed, particularly in Internet access. Source: OECD, Communications Outlook 2007. OECD Basket of Mobile Telecommunications, October 2006

4. 4 Household Expenditure in Telecommunications Services as percentage of Total Expenditure, by Population Deciles 1/ According to its monetary income 2/ Includes telephone installation and local calls. 3/ Includes initial payment, equipment acquisition, prepaid cards and mobile telephony service payment. Total communications expenditure includes public telephony and other services such as mail, telegraph, public fax, beeper and others not specified. Source: Own estimates based on Household Income and Expenditures National Survey 2006. ICTs have an important share in households expenditure, regardless of their income level.

5. 5 In order to reduce the income gap it is necessary that Telecommunications Services reach the entire population. Penetration of Telecommunications Services in Mexico, by Population Decile Source: INEGI, Household Income and Expenditure National Survey, 2006.

6. 6 Competition in the telecommunications sector has intensified, particularly in the mobile market. Fixed TelephonyMobile Telephony Broadband Access Market Share Distribution in Main Telecommunications Markets in Mexico Source: Pyramid, Communications Markets in Mexico 2007. Datos a diciembre 2006. Source: Merrill Lynch, Global Wireless Matrix. Datos a diciembre 2006. Source: Pyramid, CANITEC y Telmex. Datos a diciembre 2006.

7. 7 Spectrum Auction Program Frequency Band (MHz) Total Bandwidth BlocksGeographic Area 1850-1910/ 1930-1990 30 MHz 3 blocks of 10 MHz Cellular Regions 1710-1770/ 2110-2170 90 MHz 5 blocks of 10 MHz 2 blocks of 20 MHz Cellular Regions and Basic Service Areas 3400-3700150 MHz 2 blocks of 25 MHz 2 blocks of 50 MHz Cellular Regions and Municipalities / Groups of municipalities 71000-76000/ 81000-86000 10,000 MHz 1 blockBasic Service Areas Competition will be fostered by making more spectrum available.

8. 8 Auction Programs since 1996 Program YearServiceMHzAvailability 11996Mobile 3 Country wide 21997 Pay TV* 118 53% of the country Fixed 200 Country wide Links 6,270 Country wide Mobile 120 Country wide 31998 Links 2,271 Country wide Pay TV * 180 50% of the country Mobile 7 Country wide 42000Mobile0.025 Country wide 52004Mobile 20 30% del país** 30 22% del país** 40 Country wide 62008 Links 10,000 Country wide Fixed ***150 Country wide Mobile 90 Country wide 30 88% of the country Usos Program 1Program 2Program 3Program 4Program 5Program 6 199619971998 20042008 Links06,2702,2710010,000 Fixed3200000150*** Mobile0120620.02590**120 OtherNoYes* No * Pay TV auctions ** Mobile service auctions which include 30% of the country. ***The inmediate use is fixed service, however no restrictions existe forl delivering mobile services in the future.. This program is the most ambitious that has been published

9. 9 Indicators of tariffs, lines and traffic 1/ Pesos per minute 2/ Figures in millions of lines in service. 3/ Millions of minutes. 4/ Millions de Telmex calls. 5/ 2006 Figures correspond to estimates up until December. Source: Cofetel and Telmex In order to effectively increase competition it is important to set more efficient conditions in interconnection.

10. 10 Source: European Communities Commissions, “European Electronic Communications Regulation and Markets 2006, march 2007. Peak-hour rates, adjusted by 85% factor (Exchange rate 1.3 dollar/euro); FCC, “Intercarrier Compensation and Retail Rate Regulation in the US”; China and India: TRAI, Financial Analysis of Telecom Industry in India and China, june 2006. Fixed Local Termination Rates in Selected Countries (US cents per minute) Fixed local termination should be cost based and symmetric for all carriers.

11. 11 Competition of backbone services has been enhanced by the entrance of Electric companies in the Market. Telecommunications Service Offerings of Electric Companies in selected Countries Source: Internet web-pages of the companies *They are not related with electric companies, but with other utility companies such as railway in the case of Adif and the local government in the case of Stokab.

12. 12 OECD basket of national leased line charges 2 Mbps, August 2006 (000’ USD PPP) OECD basket of national leased line charges 34 Mbps, August 2006 (000’ USD PPP) Fuente: OCDE, Communications Outlook 2007. CFE entrance into the telecommunications market will lower prices, particularly for internet access services.

13. 13 CFE entrance into the provision of Internet access will help to lower the price disparity between rural and urban areas. Leased Lines Prices for Internet Access (2 Mbps) CityBackbone Provider Monthly Rent (MXN$) Toluca, Edo. Méx.Bestel, Maxcom, Alestra$ 3,300 León, Gto.Bestel, Maxcom, Alestra$ 3,300 Cd. Hidalgo, La Piedad, Zitácuaro, Mich. Telmex$ 6,000 Tenancingo, Edo. Méx.Telmex$ 6,000 Tapachula, Chis.Telmex$ 13,000 Salamanca, Gto.Telmex$ 18,200 Cd. Altamirano, Gro.Telmex$ 20,971 Huetamo, Gro.Telmex$ 35,108 El Grullo, Sayula, Jal.Telmex$ 40,000 San Miguel de Allende, Gto.Telmex$ 58,650

14. 14 Local Call Revenue of the incumbent when its costumers make Long Distance Calls and Calls to Mobiles (Millions of Pesos per year, 2005 prices ) Source: Own estimates based on information reported by the Company. Competition will be also impacted by empowering consumers- Practices such as double billing should be avoided.