Edgar Filing: AMERICA MOVIL SAB DE CV/

Form 20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F

Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

for the fiscal year ended December 31, 2010

Commission file number: 1-16269

AMÉRICA MÓVIL, S.A.B. DE C.V.

(exact name of registrant as specified in its charter)

America Mobile

(translation of registrant’s name into English)

United Mexican States

(jurisdiction of incorporation)

Lago Zurich 245, Plaza Carso / Edificio Telcel, Colonia Granada Ampliación, 11529, México, D.F., México

(address of principal executive offices)

Daniela Lecuona Torras, Telephone: (5255) 2581-4449, E-mail: daniela.lecuona@americamovil.com,

Facsimile: (5255) 2581-4422, Lago Zurich 245, Plaza Carso / Edificio Telcel, Piso 16, Colonia Granada Ampliación, 11529,

México, D.F., México

(name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:		Name of each exchange on which registered:
American Depositary Shares, each representing 20 L Shares, without par value		New York Stock Exchange
L Shares, without par value		New York Stock Exchange (for listing purposes only)
American Depositary Shares, each representing 20 A Shares, without par value		NASDAQ National Market
A Shares, without par value		NASDAQ National Market (for listing purposes only)

Securities registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

The number of outstanding shares of each of the registrant’s classes of capital or common stock as of December 31, 2010:


11,712 million		AA Shares
393 million		A Shares
28,068 million		L Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes ¨ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨ Yes x No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). N/A

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer x		Accelerated filer ¨		Non-accelerated filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ¨		International Financial Reporting Standards as issued by the International Accounting Standards Board x		Other ¨

If “other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 ¨ N/A

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

TABLE OF CONTENTS


Items 1-2	Not Applicable	1
Item 3.	Key Information	1
	Selected Financial Data	1
	Exchange Rates	3
	Forward-Looking Statements	4
	Risk Factors	5

Item 4.	Information on the Company	15

Item 5.	Operating and Financial Review and Prospects	59

Item 6.	Directors, Senior Management and Employees	78
	Management	78
	Employees	87

Item 7.	Major Shareholders and Related Party Transactions	88
	Major Shareholders	88
	Related Party Transactions	90

Item 8.	Financial Information	91
	Dividends	91
	Legal Proceedings	92

Item 9.	The Offer and Listing	93
	Trading Markets	93
	Trading on the Mexican Stock Exchange	95

Item 10.	Additional Information	95
	Bylaws	95
	Certain Contracts	101
	Exchange Controls	102
	Taxation	102
	Documents on Display	107

Item 11.	Quantitative and Qualitative Disclosures about Market Risk	107

Item 12.	Description of Securities Other than Equity Securities	107

Item 12D.	American Depositary Shares	107

Item 13.	Defaults, Dividend Arrearages and Delinquencies	107

Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	108

Item 15.	Controls and Procedures	108

Item 16A.	Audit Committee Financial Expert	110

Item 16B.	Code of Ethics	110

Item 16C.	Principal Accountant Fees and Services	110

Item 16D.	Exemptions from the Listing Standards for Audit Committees	111

Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	111

Item 16F.	Change in Registrant’s Certifying Accountant	112

Item 16G.	Corporate Governance	112

Item 17.	Not Applicable	116

Item 18.	Financial Statements	116

Item 19.	Exhibits	117

PART I

Items 1-2.

Not Applicable.

Item 3.

Key Information

SELECTED FINANCIAL DATA

We prepared our consolidated financial statements included in this annual report in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Our date of transition to IFRS was January 1, 2009. These consolidated annual financial statements are our first financial statements prepared in accordance with IFRS. IFRS 1—“First-time Adoption of International Financial Reporting Standards” has been applied in preparing these financial statements. Note 1(II)(b) to our audited consolidated financial statements contains an analysis of the valuation, presentation and disclosure effects of adopting IFRS and a reconciliation between Mexican Financial Reporting Standards (Normas de Información Financiera Mexicanas, or “Mexican FRS”) and IFRS as of January 1 and December 31, 2009 and for the year ended December 31, 2009.

We present our financial statements in Mexican pesos. This annual report contains translations of various peso amounts into U.S. dollars at specified rates solely for your convenience. You should not construe these translations as representations by us that the nominal peso or constant peso amounts actually represent the U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, we have translated U.S. dollar amounts from constant pesos at the exchange rate of Ps. 12.3817 to U.S.$1.00, which was the rate reported by Banco de México for December 31, 2010, as published in the Official Gazette of the Federation (Diario Oficial de la Federación, or “Official Gazette”).

The selected financial information set forth below has been derived in part from our audited consolidated financial statements, which have been reported on by Mancera S.C., a member practice of Ernst & Young Global, an independent registered public accounting firm. The selected financial information should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements. The selected financial information for 2009 differs from the information we previously published for 2009, because it is presented in accordance with IFRS and because the May 2010 acquisition of a controlling interest in Carso Global Telecom, S.A.B. de C.V. (“CGT”) is accounted for as a transaction between entities under common control and accordingly given effect for all dates and periods presented.


	For the year ended December 31,
	2009		2010		2010
	(in millions of pesos)⁽¹⁾				(millions of U.S. dollars)⁽¹⁾
Income Statement Data:
IFRS
Operating revenues		Ps.561,254		Ps.607,856	U.S.$	49,191
Operating costs and expenses		412,443		455,534		36,864
Depreciation and amortization		79,904		91,071		7,370
Operating income		148,811		152,321		12,327
Net income		106,901		98,905		8,004
Distribution of the net income:
Majority interest		92,968		91,123		7,374
Non-controlling interest		14,203		7,782		630

Net income		106,901		98,905		8,004


	For the year ended December 31,
	2009		2010		2010
	(in millions of pesos)⁽¹⁾				(millions of U.S. dollars)⁽¹⁾
Earnings per share:
Basic⁽²⁾		2.38		2.31		0.18
Diluted⁽²⁾		2.38		2.31		0.18
Dividends declared per share⁽³⁾		0.80		0.32		0.03
Dividends paid per share⁽⁴⁾		0.80		0.32		0.03
Weighted average number of shares outstanding (millions):
Basic		38,965		39,510
Diluted		38,965		39,510

	As of December 31,
	2009		2010		2010
	(in millions of pesos)⁽¹⁾				(millions of U.S. dollars)⁽¹⁾
Balance Sheet Data:
IFRS
Property, plant and equipment, net		Ps.418,733		Ps.411,820	U.S.$	33,327
Total assets		807,334		876,695		70,948
Short-term debt and current portion of long-term debt		44,967		9,039		731
Long-term debt		232,274		294,060		23,797
Total equity⁽⁵⁾		313,798		336,037		27,194
Capital stock		30,116		96,433		7,804
Number of outstanding shares (millions):
AA Shares		11,712		11,712
A Shares		451		393
L Shares		20,121		28,068
Ratio of Earnings to Fixed Charges:
IFRS⁽⁶⁾		9.2		7.6

(1)	Except per share and share capital.

(2)	We have not included earnings or dividends on a per ADS basis. Each L Share ADS represents 20 L Shares and each A Share ADS represents 20 A Shares.

(3)	Figures provided represent the annual dividend declared at the general shareholders’ meeting and for 2009 include a special dividend of Ps. 0.50 per share.

(4)	For more information on dividends paid per share translated into U.S. dollars, see “Financial Information—Dividends” under Item 8. Amount in U.S. dollars translated at the exchange rate on each of the respective payment dates.

(5)	Includes non-controlling interest.

(6)	Earnings, for this purpose, consist of profit before income tax, plus interest expense and interest implicit in operating leases, minus equity interest in net income of affiliates, during the period.

EXCHANGE RATES

Mexico has a free market for foreign exchange, and the Mexican government allows the peso to float freely against the U.S. dollar. There can be no assurance that the Mexican government will maintain its current policies with regard to the peso or that the peso will not depreciate or appreciate significantly in the future.

The following table sets forth, for the periods indicated, the high, low, average and period-end noon buying rate in New York City for cable transfers in pesos published by the Federal Reserve Bank of New York, expressed in pesos per U.S. dollar. The rates have not been restated in constant currency units and therefore represent nominal historical figures.


Period	High		Low		Average⁽¹⁾		Period End
2006		11.4600		10.4315		10.9023		10.7995
2007		11.2692		10.6670		10.9253		10.9169
2008		13.9350		9.9166		11.2124		13.8320
2009		15.4060		12.6318		13.5777		13.0576
2010		13.1940		12.1556		12.6352		12.3825
November		12.5668		12.2121
December		12.4725		12.3311
2011
January		12.2545		12.0390
February		12.1824		11.9700
March		12.1114		11.9170
April		11.8552		11.5237

(1)	Average of month-end rates.

On May 6, 2011, the noon buying rate was Ps. 11.5831 to U.S.$1.00.

We will pay any cash dividends in pesos, and exchange rate fluctuations will affect the U.S. dollar amounts received by holders of American Depositary Shares (“ADSs”) on conversion by the depositary of cash dividends on the shares represented by such ADSs. Fluctuations in the exchange rate between the peso and the U.S. dollar affect the U.S. dollar equivalent of the peso price of our shares on the Mexican Stock Exchange (Bolsa Mexicana de Valores, S.A.B. de C.V., or the “Mexican Stock Exchange”) and, as a result, can also affect the market price of the ADSs.

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements. We may from time to time make forward-looking statements in our periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), on Forms 20-F and 6-K, in our annual report to shareholders, in offering circulars and prospectuses, in press releases and other written materials, and in oral statements made by our officers, directors or employees to analysts, institutional investors, representatives of the media and others. Examples of such forward-looking statements include:

•

projections of operating revenues, net income (loss), net income (loss) per share, capital expenditures, indebtedness levels, dividends, capital structure or other financial items or ratios;

•

statements of our plans, objectives or goals, including those relating to acquisitions, competition, regulation and rates;

•

statements about our future economic performance or that of Mexico or other countries in which we currently operate;

•

competitive developments in the telecommunications sector in each of the markets where we currently operate or into which we may expand;

•

other factors and trends affecting the telecommunications industry generally and our financial condition in particular; and

•

statements of assumptions underlying the foregoing statements.

We use words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and other similar expressions to identify forward-looking statements, but they are not the only way we identify such statements.

Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors, some of which are discussed under “Risk Factors,” include economic and political conditions and government policies in Mexico, Brazil or elsewhere, inflation rates, exchange rates, regulatory developments, technological improvements, customer demand and competition. We caution you that the foregoing list of factors is not exclusive and that other risks and uncertainties may cause actual results to differ materially from those in forward-looking statements.

Forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or for any other reason.

You should evaluate any statements made by us in light of these important factors.

RISK FACTORS

Risks Relating to Our Businesses

Competition in the telecommunications industry is intense and could adversely affect the revenues and profitability of our businesses

Our businesses face substantial competition from other wireless providers, fixed-line telephone companies and, increasingly, other telecommunications providers such as cable, paging, trunking and Internet companies.

Competition in our markets has intensified in recent periods, and we expect that it will continue to intensify in the future as a result of the entry of new competitors, the development of new technologies, products and services, and the auction of additional spectrum. We also expect the current consolidation trend in the wireless industry to continue, as companies respond to the need for cost reduction and additional spectrum. This trend may result in larger competitors with greater financial, technical, promotional and other resources to compete with our businesses. Telefónica, S.A. (“Telefónica”), which has important operations in Mexico and Brazil, as well as other of our markets, is our largest regional competitor through several acquisitions.

Among other things, our competitors could:

•

provide increased handset subsidies;

•

offer higher commissions to retailers;

•

provide free airtime or other services (such as Internet access);

•

expand their networks faster; or

•

develop and deploy improved technologies faster.

Competition can lead us to increase advertising and promotional spending and to reduce prices for services and handsets. These developments may lead to smaller operating margins, greater choices for customers, possible consumer confusion and increasing movement of customers among competitors, which may make it difficult for us to retain customers or add new customers. The cost of adding new customers may also continue to increase, reducing profitability even if customer growth continues.

Our ability to compete successfully will depend on our coverage, the quality of our network and service, our rates, customer service, marketing and our ability to anticipate and respond to various competitive factors affecting the telecommunications industry, including new services and technologies, changes in consumer preferences, demographic trends, economic conditions and discount pricing strategies by competitors. If we are unable to respond to competition and compensate for declining prices by adding new customers, increasing usage and offering new services, our revenues and profitability could decline.

Changes in government regulation could hurt our businesses

Our businesses are subject to extensive government regulation and can be adversely affected by changes in law, regulation or regulatory policy. The licensing, construction, operation, sale, resale and interconnection arrangements of telecommunications systems in Latin America and elsewhere are regulated to varying degrees by government or regulatory authorities. Any of these authorities having jurisdiction over our businesses could adopt or change regulations or take other actions that could adversely affect our operations. In particular, the regulation of prices that operators may charge for their services could have a material adverse effect on us by reducing our profit margins.

These risks are significant in all of the markets in which we operate. See “Regulation” under Item 4, “Legal Proceedings” under Item 8 and Note 17 to our audited consolidated financial statements included in this annual report. The risks in our largest markets, for example, include the following.

•

In Mexico, the businesses of Radiomóvil Dipsa, S.A. de C.V. (“Telcel”) and Teléfonos de México, S.A.B. de C.V. (“Telmex”) are subject to extensive government regulation, principally by the Mexican Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes, or “SCT”), the Federal Telecommunications Commission (Comisión Federal de Telecomunicaciones, or “Cofetel”), the Federal Antitrust Commission (Comisión Federal de Competencia, or “Cofeco”) and the Federal Consumer Bureau (Procuraduría Federal del Consumidor, or “Profeco”), and may be adversely affected by changes in law or by actions of Mexican regulatory authorities. In Mexico, we face government regulation and are the subject of investigations, including with respect to the mobile termination fees payable by local and long-distance operators to mobile operators and investigations into market power and monopolistic practices in the telecommunications sector. We may also face additional regulatory restrictions and scrutiny other than those we have been subject to thus far as a result of our provision of combined services, including triple play services, following the acquisitions of CGT and Telmex Internacional, S.A.B. de C.V. (“Telmex Internacional”). Findings adverse to us in any regulatory proceedings may lead to the imposition of additional regulations, prohibitions or monetary penalties, which in turn could have an adverse effect on its business and results of operations. In April 2011, Cofeco notified Telcel of a resolution imposing a fine of Ps. 11,989 million for alleged monopolistic practices. We and Telcel are evaluating the scope and legal grounds of the resolution and will exercise any and all legal actions or remedies to challenge it.

•

In Brazil, our businesses are regulated principally by the Brazilian National Telecommunications Agency (Agência Nacional de Telecomunicações, or “Anatel”) and may be adversely affected by its actions or changes in its regulations. In Brazil, we also face government regulation and are the subject of investigations, including with respect to the interconnection fees charged by operators belonging to an economic group with significant market power and provisions in the concessions granted to Empresa Brasileira de Telecomunicações S.A. (“Embratel”), which limit its ability to set tariffs for its services. We may also face additional regulatory restrictions and scrutiny other than those we have been subject to thus far as a result of our provision of combined services, including triple play services, following the acquisitions of CGT and Telmex Internacional. If these issues are resolved against us, the consequences for our business could be material.

•

In Colombia, the Colombian Ministry of Information and Communications (Ministerio de Tecnologías de la Información y las Comunicaciones, or “Ministry of Communications”) and the Colombian Communications Regulation Commission (Comisión de Regulación de Comunicaciones, or “CRC”) are responsible for regulating and overseeing the telecommunications sector, including cellular operations. In September 2009, the CRC issued a series of resolutions stating that Comunicación Celular, S.A. (“Comcel”), our Colombian subsidiary, has a dominant position in Colombia’s market for outgoing mobile services. Under Colombian law, a market participant is considered to have a dominant position in a specified market if there is a substantial difference between that market participant’s traffic, revenues and subscriber base and its competitors’ traffic, revenues and subscriber base. The resolutions also included regulations that would require Comcel to charge rates (excluding access fees) for mobile-to-mobile calls outside the Comcel network (“off net”) that are no higher than the fees charged for mobile-to-mobile calls within the Comcel network (“on net”) plus access fees. The regulations, which limit Comcel’s flexibility in offering pricing plans to its customers, were first implemented on December 4, 2009. As of the date of this annual report, the CRC is evaluating whether to broaden or suspend the regulations. If the regulations are broadened, they could have an adverse impact on our operations, but we cannot predict the effects on Comcel’s financial performance.

In addition, changes in political administrations could lead to the adoption of policies concerning competition and taxation of communications services that may be detrimental to our operations throughout

Latin America and the Caribbean. These restrictions, which may take the form of preferences for local over foreign ownership of communications licenses and assets, or for government over private ownership, may make it impossible for us to continue to develop our businesses. These restrictions could result in our incurring losses of revenues and require capital investments, all of which could materially adversely affect our businesses and results of operations.

Dominant carrier regulations could hurt our business by limiting our ability to pursue competitive and profitable strategies

Our regulators are authorized to impose specific requirements as to rates (including mobile termination rates), service quality and information on operators that are determined to have substantial market power in a specific market. For example, in Mexico, Cofeco has issued resolutions concluding that Telcel has substantial market power in the national mobile telephone services relevant market. Under the Antitrust Law (Ley Federal de Competencia Económica) and the Telecommunications Law (Ley Federal de Telecomunicaciones), if Cofeco makes a final finding of substantial market power concerning an operator, Cofetel can impose on that operator specific regulations with respect to tariffs, quality of service and information in the specific market in which that operator was found to have substantial market power. We cannot predict what regulatory steps Cofetel might take in response to determinations by Cofeco. In addition, Cofeco is conducting investigations into whether Telcel or Telmex have engaged in monopolistic practices. Adverse determinations against Telcel or Telmex in any of the ongoing investigations could also result in material fines, penalties or restrictions on our Mexican operations.

We may face additional regulatory restrictions and scrutiny than those we have been subject to thus far as a result of our provision of combined services, including triple play services, following the acquisitions of CGT and Telmex Internacional.

We believe that if dominant carrier regulations are imposed on our business in the future, they will likely reduce our flexibility to adopt competitive market policies and impose specific tariff requirements or other special regulations on us, such as additional requirements regarding disclosure of information or quality of service. Any such new regulation could have a material adverse effect on our operations.

We will, in the future, have to acquire additional radio spectrum capacity in order to expand our customer base and maintain the quality of our services

Licensed radio spectrum is essential to our growth and the quality of our services, particularly for global system for mobile communications (“GSM”) and universal mobile telecommunications systems (“UMTS”) services and increased deployment of third generation (“3G”) networks to offer value-added services. Our inability to acquire additional radio spectrum capacity could affect our ability to compete successfully because it could result in, among other things, a decrease in the quality of our network and service and in our ability to meet the needs of our customers.

Participation in spectrum auctions in most of our markets requires prior governmental authorization. In 2005, for example, we bid and won the auction for an additional 10 MHz of capacity in three principal regions in Mexico, but were subsequently prohibited from acquiring this additional spectrum based on restrictions imposed by Cofeco.

In the event we are unable to acquire additional radio spectrum capacity, we can increase the density of our network by building more cell and switch sites, but such measures are costly and would be subject to local restrictions and approvals, and they will not fully meet our needs.

Our concessions and licenses are for fixed terms, and conditions may be imposed on their renewal

Our concessions and licenses have specified terms, ranging typically from 10 to 30 years, and are generally subject to renewal upon payment of a fee, but renewal is not assured. The loss of, or failure to renew, any one

concession could have a material adverse effect on our business and results of operations. Our ability to renew concessions and the terms of renewal are subject to a number of factors beyond our control, including the prevalent regulatory and political environment at the time of renewal. Fees are typically established at the time of renewal. As a condition for renewal, we may be required to agree to new and stricter terms and service requirements. If our concessions are not renewed, we are required to transfer the assets covered by the concession to the government, generally at fair market value, although certain jurisdictions provide for other valuation methodologies.

In addition, the regulatory regimes and laws of the jurisdictions in which we operate permit the government to revoke our concessions under certain circumstances. In Mexico, for example, the Mexican Telecommunications Law gives the government the right to expropriate our concessions or to take over the management of our networks, facilities and personnel in cases of imminent danger to national security, internal peace or the national economy, natural disasters and public unrest.

We continue to look for acquisition opportunities, and any future acquisitions and related financings could have a material effect on our business, results of operations and financial condition

We continue to look for other investment opportunities in telecommunications companies worldwide, including in markets where we are already present, and we often have several possible acquisitions under consideration. Any future acquisitions and related financings could have a material effect on our business, results of operations and financial condition, but we cannot give any assurances that we will complete any of them. In addition, we may incur significant costs and expenses as we integrate these companies in our systems, controls and networks.

We are subject to significant litigation

Some of our subsidiaries are subject to significant litigation, which if determined adversely to our interests may have a material adverse effect on our business, results of operations, financial condition or prospects. In Mexico, for example, there are pending administrative investigations and legal proceedings concerning whether Telcel or Telmex have substantial market power and whether they have engaged in monopolistic practices, and there are legal proceedings regarding rates for mobile termination with other operators. In Brazil, there are pending regulatory proceedings regarding the calculation of inflation-related adjustments due under our concessions with Anatel, and Embratel is involved in various legal proceedings, including several tax disputes with the Brazilian tax authorities alleging underpayments by Embratel and social security administrative and civil lawsuits for aggregate claims that are substantial. In Colombia, there are administrative proceedings against Comcel regarding alleged anti-competitive behavior. Our significant litigation is described in “Legal Proceedings” under Item 8 and in Note 17 to our audited consolidated financial statements included in this annual report.

A system failure could cause delays or interruptions of service, which could cause us to lose customers and revenues

We will need to continue to provide our subscribers with reliable service over our network. Some of the risks to our network and infrastructure include the following:

•

physical damage to access lines;

•

power surges or outages;

•

limitations on the use of our radiobases;

•

software defects;

•

natural disasters; and

•

disruptions beyond our control.

Disruptions may cause interruptions in service or reduced capacity for customers, either of which could cause us to lose subscribers and incur additional expenses.

If our churn rate increases, our business could be negatively affected

The cost of acquiring a new subscriber is much higher than the cost of maintaining an existing subscriber. Accordingly, subscriber deactivations, or “churn,” could have a material negative impact on our operating income, even if we are able to obtain one new subscriber for each lost subscriber. A substantial majority of our subscribers are prepaid, and we do not have long-term contracts with those subscribers. Our weighted monthly average churn rate on a consolidated basis was 3.0% for the year ended December 31, 2009 and 3.2% for the year ended December 31, 2010. If we experience an increase in our churn rate, our ability to achieve revenue growth could be materially impaired. In addition, a decline in general economic conditions could lead to an increase in churn, particularly among our prepaid subscribers.

We depend on key suppliers and vendors to provide equipment that we need to operate our business

We depend upon various key suppliers and vendors, including Apple, Nokia, Research in Motion, Sony-Ericsson, Motorola, LG, Samsung, Cisco, Nokia-Siemens, Huawei, Alcatel-Lucent and Hispamar to provide us with handsets, network equipment or services, which we need to expand and operate our business. If these suppliers or vendors fail to provide equipment or service to us on a timely basis, we could experience disruptions, which could have an adverse effect on our revenues and results of operations. In addition, we might be unable to satisfy the requirements contained on our concessions.

Our ability to pay dividends and repay debt depends on our subsidiaries’ ability to transfer income and dividends to us

We are a holding company with no significant assets other than the shares of our subsidiaries and our holdings of cash and cash equivalents. Our ability to pay dividends and repay debt depends on the continued transfer to us of dividends and other income from our subsidiaries. The ability of our subsidiaries to pay dividends and make other transfers to us may be limited by various regulatory, contractual and legal constraints that affect our subsidiaries.

We may fail to realize the business growth opportunities, revenue benefits, cost savings and other benefits anticipated from, or may incur unanticipated costs associated with, acquisitions we make from time to time, our results of operations and financial condition may suffer

The business growth opportunities, revenue benefits, cost savings and other benefits we anticipated to result from our acquisitions may not be achieved as expected, or at all, or may be delayed. For example, we expect the acquisition of CGT and Telmex Internacional to produce benefits from combining our operations with those of Telmex Internacional. However, these benefits may not be realized and other assumptions upon which the consideration paid for the acquisition of CGT and Telmex Internacional was determined may prove to be incorrect. Similar considerations apply to other acquisitions, including our 2011 agreement to acquire Digicel’s operations in Honduras and El Salvador. For example, we may be unable to fully implement our business plans and strategies for the combined businesses due to regulatory limitations and we may face regulatory restrictions in our provision of combined services in some of the countries in which we operate. To the extent that we incur higher integration costs or achieve lower revenue benefits or fewer cost savings than expected, our results of operations and financial condition may suffer.

Risks Relating to the Telecommunications Industry Generally

Changes in the telecommunications industry could affect our future financial performance

The telecommunications industry continues to experience significant changes as new technologies are developed that offer subscribers an array of choices for their communications needs. These changes include, among others, regulatory changes, evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new products, and changes in end-user needs and preferences. In Mexico and in the other countries in which we conduct business, there is uncertainty as to the pace and extent of growth in subscriber demand, and as to the extent to which prices for airtime and line rental may continue to decline. If we are unable to meet future advances in competing technologies on a timely basis or at an acceptable cost, we could lose subscribers to our competitors. In general, the development of new services in our industry requires us to anticipate and respond to the varied and continually changing demands of our subscribers. We may not be able to accurately predict technological trends or the success of new services in the market. In addition, there could be legal or regulatory restraints to our introduction of new services. If these services fail to gain acceptance in the marketplace, or if costs associated with implementation and completion of the introduction of these services materially increase, our ability to retain and attract subscribers could be adversely affected.

In the wireless industry in particular there are four existing digital technologies, none of which is compatible with the others except for long term evolution (“LTE”), which is compatible with GSM. In the past, Telcel and certain of our international businesses used time division multiple access (“TDMA”) technology for their digital networks, while certain of our other international businesses used code division multiple access (“CDMA”) as their digital wireless technology. We introduced GSM technology in all of our markets (excluding the United States). Also, Telcel and some of our international businesses launched new networks using the UMTS and high-speed downlink packet access protocol (“HSDPA”) 3G technology between 2007 and 2010. We expect to complete the deployment of the 3G technology in the following years.

However, if the technologies that gain widespread acceptance in the future are not compatible with the technologies we use, we may be required to make capital expenditures in excess of our current forecasts in order to upgrade and replace our technology and infrastructure.

The intellectual property rights utilized by us, our suppliers or service providers may infringe on intellectual property rights owned by others

Some of our products and services use intellectual property that we own or license from others. We also provide content services we receive from content distributors, such as ring tones, text games, video games, wallpapers or screensavers, and outsource services to service providers, including billing and customer care functions, that incorporate or utilize intellectual property. We and some of our suppliers, content distributors and service providers have received, and may receive in the future, assertions and claims from third parties that the products or software utilized by us or our suppliers, content distributors and service providers infringe on the patents or other intellectual property rights of these third parties. These claims could require us or an infringing supplier, content distributor or service provider to cease engaging in certain activities, including selling, offering and providing the relevant products and services. Such claims and assertions also could subject us to costly litigation and significant liabilities for damages or royalty payments, or require us to cease certain activities or to cease selling certain products and services.

Concerns about health risks relating to the use of wireless handsets and base stations may adversely affect our business

Portable communications devices have been alleged to pose health risks, including cancer, due to radio frequency emissions from these devices. Lawsuits have been filed in the United States against certain participants in the wireless industry alleging various adverse health consequences as a result of wireless phone usage, and our

businesses may be subject to similar litigation in the future. Research and studies are ongoing, and there can be no assurance that further research and studies will not demonstrate a link between radio frequency emissions and health concerns. Any negative findings in these studies could adversely affect the use of wireless handsets and, as a result, our future financial performance.

Developments in the telecommunications sector have resulted, and may in the future result, in substantial write-downs of the carrying value of certain of our assets

We review on an annual basis, or more frequently where the circumstances require, the value of each of our assets and subsidiaries, to assess whether those carrying values can be supported by the future cash flows expected to be derived from such assets. Whenever we consider that due to changes in the economic, regulatory, business or political environment, our goodwill, intangible assets or fixed assets may be impaired, we consider the necessity of performing certain valuation tests, which may result in impairment charges. The recognition of impairments of tangible, intangible and financial assets could adversely affect our results of operations.

We are exposed to special risks in connection with our international call services

Revenues from international service in part reflect payments under bilateral agreements between us and foreign carriers, which are influenced by the international tariff and trade regulations and cover virtually all international calls to and from the countries in which we operate. Various factors, including unauthorized international traffic (commonly known as bypass), increases in the proportion of outgoing to incoming calls and the levels of settlement prices could affect the amount of net settlement payments from U.S. or other international carriers to us in future years.

Risks Relating to Our Controlling Shareholders, Capital Structure and Transactions with Affiliates

Members of one family may be deemed to control us

According to reports of beneficial ownership of our shares filed with the SEC, Carlos Slim Helú, together with his sons and daughters (together, the “Slim Family”), including his two sons who are co-chairs of our board of directors, Patrick Slim Domit and Carlos Slim Domit, may be deemed to control us. The Slim Family may be able to elect a majority of the members of our board of directors and to determine the outcome of other actions requiring a vote of our shareholders, except in very limited cases that require a vote of the holders of L Shares. We cannot assure you that the Slim Family will not take actions that are inconsistent with your interests.

We have significant transactions with affiliates

We engage in transactions with certain subsidiaries of Grupo Carso, S.A.B. de C.V. and Grupo Financiero Inbursa, S.A.B. de C.V., which are affiliates of América Móvil, and of our shareholder AT&T, Inc. Many of these transactions occur in the ordinary course of business. Transactions with affiliates may create the potential for conflicts of interest.

We also make investments together with affiliated companies, sell our investments to related parties and buy investments from related parties. For more information about our transactions with affiliates see “Related Party Transactions” under Item 7.

Our bylaws restrict transfers of shares in some circumstances

Our bylaws provide that any acquisition or transfer of more than 10% of our capital stock by any person or group of persons acting together requires the approval of our Board of Directors. If you acquire or transfer more than 10% of our capital stock, you will not be able to do so without the approval of our Board of Directors.

The protections afforded to minority shareholders in Mexico are different from those in the United States

Under Mexican law, the protections afforded to minority shareholders are different from those in the United States. In particular, the law concerning fiduciary duties of directors is not as fully developed as in other jurisdictions, there is no procedure for class actions, and there are different procedural requirements for bringing shareholder lawsuits. As a result, in practice it may be more difficult for minority shareholders of América Móvil to enforce their rights against us or our directors or controlling shareholder than it would be for shareholders of a company incorporated in another jurisdiction, such as the United States.

Holders of L Shares and L Share ADSs have limited voting rights

Our bylaws provide that holders of L Shares are not permitted to vote except on such limited matters as, among others, the transformation or merger of América Móvil or the cancellation of registration of the L Shares with the National Securities Registry (Registro Nacional de Valores, or “RNV”) maintained by CNBV or any stock exchange on which they are listed. If you hold L Shares or L Share ADSs, you will not be able to vote on most matters, including the declaration of dividends that are subject to a shareholder vote in accordance with our bylaws.

Holders of ADSs are not entitled to attend shareholders’ meetings, and they may only vote through the depositary

Under our bylaws, a shareholder is required to deposit its shares with a custodian in order to attend a shareholders’ meeting. A holder of ADSs will not be able to meet this requirement, and accordingly is not entitled to attend shareholders’ meetings. A holder of ADSs is entitled to instruct the depositary as to how to vote the shares represented by ADSs, in accordance with procedures provided for in the deposit agreements, but a holder of ADSs will not be able to vote its shares directly at a shareholders’ meeting or to appoint a proxy to do so.

Mexican law and our bylaws restrict the ability of non-Mexican shareholders to invoke the protection of their governments with respect to their rights as shareholders

As required by Mexican law, our bylaws provide that non-Mexican shareholders shall be considered as Mexicans in respect of their ownership interests in América Móvil and shall be deemed to have agreed not to invoke the protection of their governments in certain circumstances. Under this provision, a non-Mexican shareholder is deemed to have agreed not to invoke the protection of his own government by asking such government to interpose a diplomatic claim against the Mexican government with respect to the shareholder’s rights as a shareholder, but is not deemed to have waived any other rights it may have, including any rights under the U.S. securities laws, with respect to its investment in América Móvil. If you invoke such governmental protection in violation of this provision, your shares could be forfeited to the Mexican government.

Our bylaws may only be enforced in Mexico

Our bylaws provide that legal actions relating to the execution, interpretation or performance of the bylaws may be brought only in Mexican courts. As a result, it may be difficult for non-Mexican shareholders to enforce their shareholder rights pursuant to the bylaws.

It may be difficult to enforce civil liabilities against us or our directors, officers and controlling persons

América Móvil is a sociedad anónima bursátil de capital variable organized under the laws of Mexico, with its principal place of business (domicilio social) in Mexico City, and most of our directors, officers and controlling persons reside outside the United States. In addition, all or a substantial portion of our assets and their assets are located outside of the United States. As a result, it may be difficult for investors to effect service of

process within the United States on such persons or to enforce judgments against them, including in any action based on civil liabilities under the U.S. federal securities laws. There is doubt as to the enforceability against such persons in Mexico, whether in original actions or in actions to enforce judgments of U.S. courts, of liabilities based solely on the U.S. federal securities laws.

You may not be entitled to participate in future preemptive rights offerings

Under Mexican law, if we issue new shares for cash as part of certain capital increases, we must grant our shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage in América Móvil. Rights to purchase shares in these circumstances are known as preemptive rights. Our shareholders do not have preemptive rights in certain circumstances such as mergers, convertible debentures, public offers and placement of repurchased shares. We may not legally be permitted to allow holders of ADSs or holders of L Shares or A Shares in the United States to exercise any preemptive rights in any future capital increase unless we file a registration statement with the SEC, with respect to that future issuance of shares. At the time of any future capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement with the SEC and any other factors that we consider important to determine whether we will file such a registration statement.

We cannot assure you that we will file a registration statement with the SEC to allow holders of ADSs or U.S. holders of L Shares or A Shares to participate in a preemptive rights offering. As a result, the equity interest of such holders in América Móvil may be diluted proportionately. In addition, under current Mexican law, it is not practicable for the depositary to sell preemptive rights and distribute the proceeds from such sales to ADS holders.

Risks Relating to Developments in Mexico and Other Countries

Latin American and Caribbean economic, political and social conditions may adversely affect our business

Our financial performance may be significantly affected by general economic, political and social conditions in the markets where we operate, particularly in Mexico, Brazil, Colombia and Central America. Many countries in Latin America and the Caribbean, including Mexico, Brazil and Argentina have suffered significant economic, political and social crises in the past, and these events may occur again in the future. We cannot predict whether changes in political administrations will result in changes in governmental policy and whether such changes will affect our business. Factors related to economic, political and social conditions that could affect our performance include:

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significant governmental influence over local economies;

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substantial fluctuations in economic growth;

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high levels of inflation;

•

changes in currency values;

•

exchange controls or restrictions on expatriation of earnings;

•

high domestic interest rates;

•

wage and price controls;

•

changes in governmental economic or tax policies;

•

imposition of trade barriers;

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unexpected changes in regulation; and

•

overall political, social and economic instability.

Adverse economic, political and social conditions in Latin America may inhibit demand for telecommunication services and create uncertainty regarding our operating environment, which could have a material adverse effect on our company.

Our business may be especially affected by conditions in Mexico and Brazil, our two principal markets. Mexico experienced a period of slow growth in 2009, primarily as a result of the downturn in the U.S. economy. According to preliminary data, during 2010, Mexico’s gross domestic product (“GDP”) increased by an estimated 5.5%, compared to a decrease of 6.1% in 2009. The annual rate of inflation, as measured by changes in the National Consumer Price Index published by Banco de México, was 4.4% for 2010 and 3.6% in 2009.

According to preliminary data, during 2010, Brazil’s GDP increased by an estimated 7.5% in 2010, compared to a decrease of 0.6% in 2009. The annual rate of inflation, as measured by changes in the Brazilian National Consumer Price Index, was 5.9% for 2010 and 4.3% in 2009.

Our business may be affected by political developments in Latin America and the Caribbean. We cannot predict whether these recent events will affect our business or our ability to renew our licenses and concessions, to maintain or increase our market share or profitability or will have an impact on future strategic acquisition efforts.

Depreciation or fluctuation of the currencies in which we conduct operations relative to the U.S. dollar could adversely affect our financial condition and results of operations

We are affected by fluctuations in the value of the currencies in which we conduct operations compared to the U.S. dollar, in which a substantial portion of our indebtedness is denominated. Changes in the value of the various currencies in which we conduct operations against the Mexican peso, which we use as our reporting currency in our financial statements, and against the U.S. dollar may result in exchange losses or gains on our net U.S. dollar-denominated indebtedness and accounts payable. In 2009, changes in currency exchange rates led us to report net foreign exchange gains of Ps. 13,419 million. In 2010, we reported net foreign exchange gains of Ps. 5,581 million. In addition, currency fluctuations between the Mexican peso and the currencies of our non-Mexican subsidiaries affect our results as reported in Mexican pesos. Currency fluctuations are expected to continue to affect our financial income and expense.

Major devaluation or depreciation of any such currencies may also result in disruption of the international foreign exchange markets and may limit our ability to transfer or to convert such currencies into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on our indebtedness. For example, although the Mexican government does not currently restrict, and for many years has not restricted, the right or ability of Mexican or foreign persons or entities to convert pesos into U.S. dollars or to transfer other currencies out of Mexico, it could, however, institute restrictive exchange rate policies in the future. Similarly, the Brazilian government may impose temporary restrictions on the conversion of Brazilian reais into foreign currencies and on the remittance to foreign investors of proceeds from investments in Brazil whenever there is a serious imbalance in Brazil’s balance of payments or a reason to foresee a serious imbalance.

Item 4.

Information on the Company

GENERAL

We provide telecommunications services in 18 countries. We are the largest provider of wireless communications services in Latin America, based on the number of subscribers, with the largest market share in Mexico and the third-largest in Brazil. We also have major fixed-line operations in Mexico, Brazil and twelve other countries. The table below provides a summary of the principal businesses we conduct and the principal brand names we use in each country where we operate.


Country	Principal Brands	Principal Businesses
Mexico	Telcel	Wireless
	Telmex	Fixed line
Argentina	Claro	Wireless, fixed line
Brazil	Claro	Wireless
	Embratel	Fixed line, satellite, Pay TV
	Net	Pay TV
Chile	Claro	Wireless, fixed line, Pay TV
Colombia	Comcel	Wireless
	Telmex	Fixed line, Pay TV
Dominican Republic	Claro	Wireless, fixed line, Pay TV
Ecuador	Claro	Wireless, fixed line, Pay TV
El Salvador	Claro	Wireless, fixed line, Pay TV
Guatemala	Claro	Wireless, fixed line, Pay TV
Honduras	Claro	Wireless, fixed line, Pay TV
Jamaica	Claro	Wireless
Nicaragua	Claro	Wireless, fixed line, Pay TV
Panama	Claro	Wireless, Pay TV
Paraguay	Claro	Wireless
Peru	Claro	Wireless, fixed line, Pay TV
Puerto Rico	Claro	Wireless, fixed line, Pay TV
Uruguay	Claro	Wireless, fixed line
United States	Tracfone	Wireless

We intend to build on our position as the leader in integrated telecommunications services in Latin America and the Caribbean by continuing to expand our subscriber base, both by developing our existing businesses and by making strategic acquisitions when opportunities arise. We are offering our customers new services and new packages that integrate multiple services, and we continue investing in our networks to optimize coverage and implement new technologies. We strongly believe in profitably creating value for our customers. Consistent with this objective, our corporate strategy is based on the three pillars of growth, integration and optimization, which we intend to solidify through:

•

proximity to our clients and ability to take advantage of opportunities to penetrate new markets with a greater variety of telecommunications products and services with more and enhanced features;

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continuing to deliver on growth in revenues and profits, controlling costs through operational integration among our subsidiaries, reducing churn and replicating best practices throughout the region; and

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offering convergence services, ensuring quality to our clients and optimizing customer care with the best service.

The following table sets forth, for the dates indicated, the number of our wireless subscribers and our revenue generating units (“RGUs”), which include fixed lines, broadband accesses and cable or direct-to-home (“DTH”) Pay TV units, in the countries where we operate. It includes total subscribers and RGUs of all consolidated subsidiaries and affiliates, without adjusting where our equity interest is less than 100%. The table reflects the geographic segments we use in our consolidated financial statements, and in particular: (a) Southern Cone refers to Argentina, Chile, Paraguay and Uruguay; (b) Andean Region refers to Ecuador and Peru; (c) Central America refers to El Salvador, Guatemala, Honduras and Nicaragua; and (d) Caribbean refers to Dominican Republic, Jamaica and Puerto Rico.


	December 31,
	2009		2010
	(in thousands)
Wireless subscribers:
Mexico		59,167		64,138
Brazil		44,401		51,638
Southern Cone		21,833		24,508
Colombia and Panama		27,797		29,413
Andean Region		17,760		20,310
Central America		9,535		10,775
United States		14,427		17,749
Caribbean		6,043		6,494

Total wireless subscribers		200,963		225,024


RGUs:
Mexico		22,406		22,951
Brazil		14,514		18,588
Southern Cone⁽¹⁾		834		1,067
Colombia and Panama		2,753		2,988
Andean Region		338		544
Central America		2,929		3,231
Caribbean		2,019		2,144

Total RGUs		45,794		51,511

(1)	Argentina, Chile and Uruguay only. We do not have fixed line operations in Paraguay.

Our principal operations are:

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Mexico Wireless. Our subsidiary Radiomóvil Dipsa, S.A. de C.V., which operates under the name Telcel, is the largest provider of wireless service in Mexico, based on the number of subscribers.

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Mexico Fixed. Our subsidiary Telmex is the only nationwide provider of fixed-line telephony services in Mexico.

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Brazil. Several of our subsidiaries operating under the unified brand name Claro together constitute one of the three largest providers of wireless telecommunications services in Brazil, based on the number of subscribers. Our subsidiary Embratel Participações S.A. (“Embrapar”), together with its subsidiaries, is one of the leading providers of telecommunications services in Brazil, and our affiliate Net Serviços de Comunicação, S.A. (“Net Serviços”) is the largest cable television operator in Brazil. Together they offer triple-play services in Brazil, with a cable television network that passes 11.7 million homes.

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Southern Cone. We provide wireless services in Argentina, Paraguay, Uruguay and Chile, operating under the Claro brand. We also provide fixed-line services in Argentina, Chile and Uruguay under the Claro brand. In Chile, we offer nationwide Pay TV services under the Claro brand.

•

Colombia and Panama. We provide wireless services under the Comcel brand in Colombia, where we are the largest wireless provider. We also provide fixed-line telecommunications and Pay TV services in Colombia under the Telmex brand, where our network passes 5.5 million homes. We also provide wireless telecommunications and Pay TV services in Panama under the Claro brand.

•

Andean Region. We provide wireless services in Peru and Ecuador under the Claro brand. We also provide fixed-line telecommunications and Pay TV services in Peru, where our network passes 668 thousand homes, and Ecuador, where our network passes 406 thousand homes.

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Central America. We provide fixed-line, wireless and Pay TV services in Guatemala, El Salvador, Honduras and Nicaragua. Our Central American subsidiaries provide all services under the Claro brand.

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United States. Our subsidiary TracFone Wireless Inc. (“TracFone”) is engaged in the sale and distribution of prepaid wireless services and wireless phones throughout the United States, Puerto Rico and the U.S. Virgin Islands.

•

Caribbean. We provide fixed-line, wireless and Pay TV services in the Dominican Republic and Puerto Rico, where we are the largest telecommunications services providers. In addition, we provide wireless services in Jamaica. Our Caribbean subsidiaries provide all services under the Claro brand.

All the companies that conduct our operations are fully consolidated and wholly owned, with these exceptions:

•

Telmex. Our subsidiary CGT directly and indirectly, owns 59.89% of the total equity of Telmex, which conducts fixed-line telecommunications business in Mexico. We own 99.96% of the total equity of CGT. Telmex is fully consolidated in our financial statements. Telmex is listed on the Mexican Stock Exchange, the New York Stock Exchange (“NYSE”), NASDAQ and the Mercado de Valores Latinoamericanos en Euros (“Latibex”).

•

Net Serviços. Our Brazilian subsidiaries own a total of 91.9% of the total equity of Net Serviços, which provides Pay TV services in Brazil. However, we do not control a majority of the voting equity. We account for Net Serviços on the equity method. Net Serviços is listed on the Brazilian stock exchange BM&FBOVESPA and on NASDAQ.

•

Other minority interest. For some of our other operating subsidiaries, we own less than 100% of the equity, but in each case we own more than 95% and the subsidiaries are fully consolidated. A detailed list of our subsidiaries and affiliates is provided in Exhibit 8.1 to this annual report; see also Note 2(b)(i) to our consolidated financial statements.

América Móvil, S.A.B. de C.V. is a sociedad anónima bursátil de capital variable organized under the laws of Mexico with its principal executive offices at Lago Zurich 245, Plaza Carso / Edificio Telcel, Colonia Granada Ampliación, Delegación Miguel Hidalgo, 11529, México D.F., México. Our telephone number at this location is (5255) 2581-4449.

History

We were established in September 2000 in a spin-off from Telmex, a leading provider of telecommunications services in Mexico. The spin-off was implemented using a procedure under the Mexican General Corporations Law (Ley General de Sociedades Mercantiles) called escisión.

In 1999, we began acquiring our international subsidiaries and investing in our Brazilian operations and our other international affiliates. We made significant acquisitions in Latin America and the Caribbean during the past 12 years, including the acquisitions of Telmex Internacional and CGT, which owns a controlling interest in Telmex.

We continue to look for other investment opportunities in telecommunication companies worldwide, including in markets where we are already present, and we often have several possible acquisitions under consideration.

Recent Developments

Acquisitions of CGT and Telmex Internacional

In June 2010, we completed two separate but concurrent offers to acquire outstanding shares of Telmex Internacional and CGT. Giving effect to the acquisition of additional shares of each in subsequent offer periods, we currently own 99.96% of the outstanding shares of CGT and 97.13% of the outstanding shares of Telmex Internacional. The total consideration we paid upon closing the offers was approximately 8,438 million of our Series L Shares (including Series L Shares represented by ADSs) and approximately Ps. 26,784 million in cash.

Embratel Tender Offer for Preferred Shares of Net Serviços

On October 13, 2010, our subsidiary, Embratel, purchased 143,853,436 preferred shares, no par value, of Net Serviços. A sufficient number of preferred shares were tendered into the offer to give rise to a shareholder put right at the offer price adjusted for inflation through settlement of the put. The period for exercising the shareholder put right expired on January 13, 2011. A total of 49,847,863 preferred shares, equivalent to 21.81% of outstanding preferred shares as of October 13, 2010, were tendered during the shareholder put right period, bringing the final number of preferred shares tendered into the offer to 193,701,299. The total purchase price of all preferred shares acquired pursuant to the tender offer was approximately R$4.4 billion Brazilian reais (U.S.$2.6 billion based on the exchange rate as of January 13, 2011 of R$1.6701 per U.S.$1.00), paid in cash. As a result of the offer, our ownership of preferred shares through the combined holdings of Embratel and its parent, Embrapar, increased to 210,838,097 preferred shares, equivalent to 92.3% of the outstanding preferred shares. Accordingly, our indirect ownership in Net Serviços’ total capital stock increased to 91.9%.

License to Operate in Costa Rica

In a public auction in January 2011, we obtained a license to operate in Costa Rica for a total purchase price of approximately U.S.$75 million. We were granted the use of 70 MHz of spectrum in the 1.8 MHz and 2.1 MHz bands for a period of 15 years. We expect to begin operations in Costa Rica later in 2011.

Acquisition of Digicel Operations in Honduras and El Salvador and Divestiture of Our Operations in Jamaica

In March 2011, we entered into an agreement with Digicel Group Limited and its affiliates (“Digicel”) to acquire 100% of Digicel’s operations in Honduras and El Salvador. As part of this transaction, we are selling our operations in Jamaica to Digicel. The completion of the transaction is subject to governmental and regulatory approvals in Honduras, El Salvador and Jamaica, among other conditions, and is expected to occur during the second quarter of 2011.

Acquisition of 20% Interest in Star One

In April 2011, we entered into a stock purchase agreement with GE Satellite Holdings LLC and its affiliates to acquire a 20% interest in Star One S.A. (“Star One”). Star One is a Brazilian company that provides satellite services in Brazil. Our subsidiary Embratel currently owns the remaining 80% interest in Star One. The transaction is subject to regulatory approvals in Brazil, and is expected to close during the third quarter of 2011.

MEXICO WIRELESS OPERATIONS

We offer wireless services and products in Mexico through our subsidiary Telcel and Telcel’s subsidiaries and affiliates in Mexico. Telcel is the leading provider of wireless communications services in Mexico. We also offer yellow pages directory services in Mexico through Anuncios en Directorios, S.A. de C.V.

As of December 31, 2010, we had approximately 64.1 million cellular subscribers, approximately 90.1% of which were prepaid customers, which represented a market share of 70.5%.

In 2010, our Mexico Wireless segment had revenues of Ps. 146,095 million, representing 26.0% of our consolidated revenues for such period. As of December 31, 2010, our Mexico Wireless operations represented approximately 28.5% of our total wireless subscribers, as compared to 29.4% at December 31, 2009.

The following table sets forth information regarding our Mexico Wireless segment’s subscriber base, market share and operating measures at the dates and for the periods indicated.


	December 31,
	2009			2010
ARPU (year ended)		Ps. 162			Ps. 165
Subscribers (thousands):
Prepaid		53,938			57,778
Postpaid		5,229			6,359

Total		59,167			64,138

Market share		71.2	%		70.5	%
MOUs (year ended)		194			210
Wireless churn rate (year ended)		3.2	%		3.2	%

Services and Products

Voice Services and Products

Telcel offers wireless voice and data services under a variety of plans to meet the needs of different user segments. The plans are either “postpaid,” where the customer is billed monthly for the previous month and may terminate the plan at any time, subject to certain exceptions, or “prepaid,” where the customer pays in advance for a specified volume of use over a specified period. Although prepaid customers typically generate lower levels of usage and are often unwilling to make a fixed financial commitment or do not have the credit profile to purchase postpaid plans, we believe the prepaid market represents a large and growing under-penetrated market in Mexico because, compared to the average postpaid plan, prepaid plans involve higher average per minute airtime charges, lower customer acquisition costs and billing expenses, and low credit or payment risk.

Rates for postpaid plans have not increased since April 1999 and rates for prepaid plans have not increased since 2002. Rates for both types of plans are expected to remain stable as long as the Mexican economic environment remains stable. In addition, in recent periods Telcel has offered certain discounts and promotions that reduce the effective rates that its postpaid and prepaid customers pay.

Telcel offers international roaming services to its subscribers through the networks of cellular service providers with which Telcel has entered into international roaming agreements around the world. In Mexico, Telcel also provides GSM and 3G roaming services to customers of Telcel’s international roaming partners.

In connection with the provision of its voice services, Telcel earns mobile termination revenues from calls to any of its subscribers that originate with another service provider. Telcel charges the service provider from whose network the call originates a mobile termination charge for the time Telcel’s network is used in connection with the call. Similarly, Telcel must pay mobile termination fees in respect of calls made by its

subscribers to customers of other service providers. There has been extensive controversy, and legal and administrative proceedings, concerning the terms of interconnection in Mexico. See “Regulation—Mexican Regulatory Proceedings—Mobile Termination Rates” under this Item 4 and Note 17 to our audited consolidated financial statements included in this annual report.

Data Services

Telcel offers data services, including Short Message Services (“SMS”), Multimedia Messaging Service (“MMS”), Premium SMS and Premium MMS, Mobile Entertainment Services, Data Transmission, Internet Browsing and E-mail Services.

Handsets and Accessories

Telcel offers a variety of products as complements to its wireless service, including handsets and smart phones and accessories such as chargers, headsets, belt clips, batteries, broadband cards and netbooks.

Other Services and Products

In addition, Telcel offers other wireless services, such as Push-to-Talk Services, Oficina Móvil Telcel, a services suite designed to provide companies productivity-enhancing applications, mobile banking, Ideas TV—Ideas Radio, which permit customers to access TV and radio content and videoconferencing.

Marketing

Telcel develops customer and brand awareness through its marketing and promotion efforts and high-quality customer care. Telcel builds upon the strength of its well-recognized brand name to increase consumer awareness and customer loyalty, employing continuous advertising efforts through print, radio, television, sponsorship of sports events and other outdoor advertising campaigns. Telcel also has a loyalty rewards program, “Círculo Azul”, that offers postpaid customers points that can be redeemed for handsets and other goods or services provided by third parties. In 2010, our marketing efforts were mainly focused on communicating that we have one of the best 3G networks in the world and showing the advantages such network has through value-added services.

Sales and Distribution

Telcel markets its wireless services and products primarily through exclusive distributors located throughout Mexico, who sell Telcel’s services and products, including handsets, postpaid plans and prepaid cards, through approximately 40,794 points of sale and receive commissions. In addition, Telcel’s company-owned retail stores offer one-stop shopping for a variety of wireless services and products. Walk-in customers can subscribe for postpaid plans, purchase prepaid cards and purchase handsets and accessories. As of December 31, 2010, Telcel owned and operated 266 customer sales and service centers throughout Mexico and will continue to open new sales and service centers as necessary in order to offer its products directly to subscribers in more effective ways. In addition, Telcel has a dedicated corporate sales group to service the needs of its large corporate and other high-usage customers. In the year ended December 31, 2010, approximately 77% of Telcel’s sales of handsets were generated by cellular distributors, 20% from sales in company-owned stores and 3% from direct sales to corporate accounts.

Billing and Collection

Telcel bills its postpaid customers through monthly invoices, which detail itemized charges. Customers may pay their bills through pre-authorized debit or credit charges, in person at banks, Telcel’s and other designated retail stores, and electronically through the Internet websites of Telcel and of banks.

If a postpaid customer’s payment is overdue, service may be suspended temporarily until full payment for all outstanding charges is received. If the subscriber’s payment is more than 60 days past due, service may be discontinued permanently. Accounts that are more than 90 days past due are considered doubtful accounts.

A prepaid customer who purchases airtime credit has between 7 to 60 days, depending on the amount purchased, to use the airtime. After 30 or 60 days, the customer can no longer use that airtime for outgoing calls unless the customer purchases additional airtime credit. After 180 days, unless the customer has purchased additional airtime credit, the service is discontinued and the balance, if any, is recognized as revenue.

Customer Service

Telcel places a high priority on providing its customers with quality customer care and support, with approximately 59% of Telcel’s employees dedicated to customer service. Customers may call a toll-free telephone number, go to one of the customer sales and service centers located throughout Mexico or access Telcel’s website to answer any inquiries.

Our Networks and Technology

Telcel’s wireless networks, which cover approximately 93% of the population, use digital technologies both in the 850 MHz frequency spectrum and in the 1900 MHz frequency spectrum. As of December 31, 2010, Telcel has networks using:

•

TDMA technology in the 850 MHz frequency spectrum.

•

GSM technology in the 1900 and 850 MHz frequency spectrums;

•

Enhanced data rates for GSM evolution (“EDGE”) technologies in the 850 MHz frequency spectrum; and

•

UMTS/HSDPA 3G technologies in the 850 MHz frequency spectrum.

TDMA network

Telcel has a nationwide TDMA network that permits the use of advanced dual-band handsets that allow for roaming across analog and digital systems using the 850 MHz spectrum. This network is currently used by subscribers who have not yet migrated to a newer network, especially in rural areas. Telcel’s TDMA subscriber base represented approximately 1.9% of Telcel’s total subscribers.

GSM/EDGE network

Currently, Telcel’s GSM network offers service in all nine regions in Mexico, having built and installed a GSM network in the 1900 MHz frequency spectrum in those regions. In addition, Telcel has continued with the expansion of its GSM network by using the 850 and 1900 MHz spectrum since 2006. As of December 31, 2010, Telcel’s GSM subscriber base represented approximately 85.5% of Telcel’s total subscribers.

In addition, Telcel upgraded the GSM network with EDGE technology in 2005. It has implemented EDGE technology in all localities with GSM coverage (approximately 179,000 localities), including all the major cities and roads in Mexico.

3G network

Telcel, which began offering 3G services in February 2008, is deploying a UMTS 3G network in Mexico using the existing 850 MHz spectrum using HSDPA, a mobile telephony communications protocol that allows networks based on UMTS to have higher data transfer speeds and capacity.

Telcel is the first operator to deploy UMTS/HSDPA technologies in Mexico. As of December 31, 2010, Telcel’s UMTS/HSDPA network covered approximately 112,000 localities, including all of Mexico’s principal cities. Telcel plans to continue expanding its 3G coverage in Mexico throughout 2011 for urban as well as rural areas. As of December 31, 2010, Telcel’s UMTS/HSDPA subscriber base represented approximately 12.6% of Telcel’s total subscribers.

4G network

In 2010, Telcel obtained additional spectrum in the 1.7/2.1 GHz Band (usually known as AWSAdvanced Wireless Services) for each of the nine regions (three of them with 30 MHz and six with 20 MHz), for which it paid Ps. 3.8 billion. The planned use for this spectrum is to deploy a 4th Generation network based on the international standard LTE.

Competition

Telcel faces competition from other wireless providers using the 850 MHz spectrum and from providers with Personal Communications Service (“PCS”) licenses that provide wireless service on the 1900 MHz spectrum. Telcel’s principal competitors in Mexico are Iusacell and Telefónica. Telcel also competes with Nextel in certain regions.

The effects of competition on Telcel depend, in part, on the business strategies of its competitors, on regulatory developments, and on the general economic and business climate in Mexico, including demand growth, interest rates, inflation and exchange rates. The effects could include loss of market share and pressure to reduce rates. Telcel believes that its strategies to meet competition will continue to help limit its loss of market share and that any loss of market share will be partly offset by increasing demand.

Directory Services and Products

Print Directories

We offer two types of printed yellow pages directories: a complete yellow pages book and a community directory. We also publish and distribute white pages directories. Basic listing in our yellow pages directories is provided at no charge and includes the name, address and telephone number of the business according to its classification. In addition, we sell paid advertising space on an annual basis in our yellow pages directories and offer various advertising options to our clients.

Internet Directory

We provide electronic directory services through the Sección Amarilla website on the Internet, which can be accessed at www.seccionamarilla.com or www.paginastelmex.com. The webpages provide access to the information published in the print yellow pages directories by geographic location, classification or business name. Maps accompany search results showing where a business is located. We also sell advertising on the website.

We are the main provider of yellow pages directories in Mexico, where we compete with other types of media, including television broadcasting, newspaper, radio, direct mail, search engines and other Internet yellow pages.

MEXICO FIXED OPERATIONS

We offer fixed-line services and products in Mexico through our subsidiary Telmex and its subsidiaries and affiliates in Mexico. Telmex is the leading provider of fixed-line voice and broadband services in Mexico. As of December 31, 2010, we had approximately 15.6 million fixed line voice subscribers and 7.4 million broadband subscribers in Mexico.

In 2010, our Mexico Fixed segment had revenues of Ps. 114,080 million, representing 18.8% of our consolidated revenues for such period. As of December 31, 2010, our Mexico Fixed operations represented approximately 44.6% of our total RGUs, as compared to 48.9% at December 31, 2009.

The following table sets forth information regarding our Mexico Fixed segment’s subscriber base, traffic and operating measures at the dates and for the periods indicated:


	December 31,
	2009			2010
RGUs (thousands):
Fixed voice		15,882			15,591
Broadband		6,524			7,359

Total		22,406			22,950

Traffic (year ended) (millions):
Long distance minutes		25,222			25,636
Interconnection minutes		38,155			37,868

Total minutes		63,377			63,504

Churn rate (year ended):
Fixed voice		1.4	%		0.9	%
Broadband		1.6	%		1.6	%

Services and Products

Voice Services and Products

Telmex offers a variety of fixed-line voice services and products, including local service, domestic and international long-distance service and public telephony services, under a variety of plans to meet the needs of different user segments.

Telmex charges for fixed-line local telephone service include (a) installation charges, (b) monthly line rental charges, (c) monthly measured service charges, (d) digital services and (e) charges for other services, such as the transfer of a line to another address and reconnection. Residential customers pay a fixed charge per local call in excess of a monthly allowance of 100 local calls, and commercial customers pay for every local call at the same fixed rate per call. The concession Telmex holds to operate a public network for basic telephone services permits but does not require Telmex to base its charges on the duration of each call, with a monthly allowance of free calls or call minutes for residential customers. Telmex does not currently charge by duration of invoiced calls in any region, except in the case of prepaid services. In 2010, Telmex did not increase rates for local telephone service. Telmex has had lower rates in real terms for every year since 2001.

Telmex’s rates for domestic long-distance service are based on call duration and type of service (direct-dial or operator-assisted) once customers exceed the number of minutes included in their service packages. In 2010 Telmex did not increase its rates for domestic long-distance calls. This continues Telmex’s trend of offering lower rates in real terms every year since 1999.

Charges for international long-distance calls are based on call duration, type of service (direct-dial or operator-assisted) and the destination of the call once customers exceed the number of minutes included in their

plan. Customers can choose from a variety of discount rate plans. In 2010, Telmex did not increase its rates for international long-distance calls, continuing its trend of offering lower rates in real terms every year since 1999.

In addition, Telmex provides interconnection services pursuant to which (a) long-distance, local and mobile phone carriers operating in Mexico establish points of interconnection between their networks and Telmex’s network and (b) Telmex carries calls between the points of interconnection and its customers. When a customer of another carrier calls a local service customer of Telmex, Telmex completes the call by carrying the call from the point of interconnection to the particular customer, and when a local service customer of Telmex who has preselected a competing long-distance carrier makes a long-distance call, Telmex carries the call from the customer to the point of interconnection with that other long-distance carrier’s network. Excluding the “calling party pays” service, Telmex only has one rate for interconnecting all categories of carriers and all types of calls. As a result of Mexico’s “bill and keep” system, under which local carriers and cable television providers do not pay interconnection fees to other local carriers, Telmex does not receive an interconnection fee from these calls.

Telmex also had more than 661 thousand fixed-line public telephones in operation at December 31, 2010.

Data Services and Products

Telmex’s data service business is comprised of corporate network services and Internet access service.

Corporate networks consist of the transmission of voice, video and data between two or more end points using private circuits. Telmex’s principal product offerings for corporate networks are Ladaenlaces (Ladalinks) and multi-service virtual private networks (“VPNs”), which allows Telmex to provide different levels of service for voice, data and video applications. Telmex also provides specialized assistance and technical support for these applications. Telmex also provides network outsourcing services that include maintenance, support and integration of communication networks and information systems.

Telmex’s broadband service, which it provides under the Infinitum brand, allows its customers to use its high-capacity connectivity services with applications such as video-conferencing, file transfer, terminals and email. Infinitum operates over Asymmetric Digital Subscriber Line (“ADSL”) technology. In October 2010, Telmex began the marketing of 20 Mbps Internet access for residential customers.

Multi-Service Offers

Telmex has introduced a number of multi-service offers designed to meet the needs of its customers. For example, in order to promote local service among Telmex’s customers, Telmex has introduced multi-service offers that include unlimited local and domestic long-distance calls. Telmex has also introduced packages of telecommunications services that include a certain number of local calls and/or minutes for domestic long-distance.

In addition, consistent with Telmex’s strategy of retaining its current customers and maximizing the value of residential and business Internet accounts, in 2010 Telmex continued to offer flexible plans permitting Infinitum customers to create their own individualized packages of additional voice services, including a combination of local and long-distance calls.

Other Services and Products

In addition, Telmex provides various telecommunications and telecommunications-related products and services that include sales of computers, telecommunications equipment and accessories.

In November 2008, Telmex entered into several agreements with Dish México and its affiliates, which operate a DTH Pay TV system in Mexico pursuant to which Telmex is currently providing customary billing and collection services, customer equipment and access to the Telmex retail distribution network. Subject to obtaining specified authorizations, Telmex could invest directly in a joint venture with Dish.

Sales and Distribution

Telmex uses its network of 388 Telmex stores (Tiendas Telmex) to offer its products and services throughout Mexico. In addition to their function as customer service centers, the Telmex stores offer a wide range of computer and telecommunications equipment and accessories, which may be purchased outright or through installment payment plans.

Billing and Collection

Telmex’s invoices detail the number and destination of local and long-distance calls made, and charges for other services. On Telmex’s website (www.telmex.com), Telmex customers can view their statements in detail: “SI@NA” for corporate customers and “Mi Telmex” for residential and commercial customers. Telmex’s website provides information about its services, corporate information and access to online transactions such as order services and the payment of invoices.

Telmex also offers billing and collection services to other companies through its phone bill. Telmex currently provides billing and collection services to companies such as Medicalhome, Socio Águila, Teletón, Telecomunicaciones de México and Dish México.

Customer Service

Telmex provides support to its customers through its customer service centers, call centers and its website. Telmex services its corporate clients through its integrated service plans that can be customized to meet the specific needs of individual clients. Telmex assigns specialized staff to service large corporate clients.

Our Networks and Technology

Telmex’s local and long-distance fiber optic network consists of 115,750 kilometers, reaches more than 90% of Mexico’s population, connects the major cities in Mexico, connects Mexico via submarine cables with 28 other countries and includes secondary branches and additional transmission rings throughout Mexico designed to avoid network congestion. In addition, Telmex’s international long-distance traffic may also be carried by microwave transmission and satellite systems.

Competition

Telmex faces competition from other holders of long-distance licenses, holders of local service licenses, Pay TV operators with licenses to provide telephone and Internet service and wireless telecommunications providers. Telmex’s principal competitors in Mexico are Axtel, Maxcom, Megacable, Cablevisión, Cablemás and Movistar.

BRAZILIAN OPERATIONS

We offer wireless, fixed line voice, broadband, Pay TV and directory services and products in our Brazil segment through our subsidiaries Americel S.A. (“Americel”), Claro S.A. (“Claro”), Embratel and Star One. We offer wireless services under the Claro brand and fixed line services under the Embratel brand. In addition, Embratel owns a non-controlling interest in Net Serviços, the largest cable television operator in Brazil. In addition to broadband and cable television services, Net Serviços also offers the NET Fone fixed line voice service as part of the triple play package provided jointly with our subsidiary Embratel. We are the third largest wireless telecommunications services provider in Brazil, measured by number of subscribers.

As of December 31, 2010, we had approximately 51.6 million wireless subscribers, approximately 80.2% of which were prepaid customers, which represented a market share of 25.4%. As of December 31, 2010, we also had approximately 7.9 million fixed line subscribers, 3.8 million broadband subscribers and 6.9 million Pay TV subscribers.

In 2010, our Brazil segment had revenues of Ps. 154,309 million, representing 25.4% of our consolidated revenues for such period. As of December 31, 2010, our Brazil segment operations represented approximately 22.9% of our total wireless subscribers, as compared to 22.1% at December 31, 2009, and approximately 36.1% of our total RGUs, as compared to 31.7% at December 31, 2009.

The following table sets forth information regarding our Brazil segment’s subscriber base, traffic, market share and operating measures at the dates and for the periods indicated:


	December 31,
	2009			2010
Wireless Operations:
ARPU (year ended)		Ps. 147			Ps. 140
Subscribers (thousands):
Prepaid		35,731			41,394
Postpaid		8,670			10,243

Total		44,401			51,638

Market share		25.5	%		25.4	%
MOUs (year ended)		84			95
Wireless churn rate (year ended)		2.8	%		3.0	%

Fixed Operations:
RGUs (thousands)⁽¹⁾:
Fixed voice		6,452			7,918
Broadband		3,104			3,770
Pay TV		4,959			6,901

Total		14,514			18,588

Traffic (year ended) (millions):
Long distance minutes		15,600			15,491
Interconnection minutes		6,048			7,409

Total minutes		21,648			22,900

Churn rate (year ended)⁽¹⁾:
Fixed voice		5.6	%		5.2	%
Broadband		1.6	%		1.5	%
Pay TV		1.2	%		1.3	%

(1)	Includes Net Serviços.

Services and Products

Wireless Voice Services and Products

Claro offers wireless voice services under a variety of rate plans to meet the needs of different user segments. The rate plans are either “postpaid,” where the customer is billed monthly for the previous month, or “prepaid,” where the customer pays in advance for a specified volume of use over a specified period.

Fixed Line Voice Services and Products

Embratel is one of Brazil’s major domestic long-distance service providers, offering inter-regional, intra-regional and intra-sectorial long-distance services to corporate, residential and cellular customers throughout Brazil. Embratel also provides international long-distance services. The majority of Embratel’s long-distance voice services customers are not “pre-subscribed,” meaning that customers do not register with Embratel before it begins providing services to them. Instead, each time a customer initiates a long-distance domestic or international call from either a fixed or a mobile terminal, the customer chooses whether to use Embratel’s services by dialing the “21” selection code or to use the services of another service provider by dialing a different code. In addition, Embratel is one of two local service providers present in all Brazilian states, marketing its wireless local services to residential customers under the Livre and NET Fone brand and to our large- and medium-sized business customers under the VipLine and Rede Vip brands.

In addition, other telecommunications companies that wish to interconnect with and use Embratel’s network must pay certain fees, including a network usage fee. The network usage fee is subject to a price cap set by Anatel. The price cap for the network usage fee varies from operator to operator based on the underlying cost characteristics of each company’s network. The fee is charged on a per distance and/or per minute of use basis that represents an average charge for a basket of network elements and services.

Broadband and Data Services

Embratel is also one of Brazil’s leading providers of data communication services, serving a client base that includes a substantial majority of Brazil’s top 500 corporations. Embratel’s data transmission services include the renting of high-speed data lines to businesses and to other telecommunications providers, satellite data transmission, Internet services, packet-switched data transmission, frame relay and message-handling systems. In March 2010, Embratel launched a new broadband Internet service over its hybrid fiber coaxial (“HFC”) network.

DTH Pay TV

Embratel also offers Pay TV services through DTH technology. Monthly subscription fees range in price from R$54.90 to R$159.90, including taxes.

Other services

Embratel is Brazil’s leading provider of satellite solutions, including space segment provision, broadband and data network services. Embratel’s satellite fleet has also permitted it to significantly expand the telecommunications services it offers to its customers, reaching areas not covered by terrestrial networks with services such as television, data, Internet, distance education, telephony and other special services projects. Embratel also provides text, telex, sound and image transmission and maritime communications services, as well as call center services through BrasilCenter to related third parties, including Claro and Net Serviços.

Net Serviços

Embratel owns a non-controlling interest in Net Serviços, the largest cable television operator in Brazil. As of December 31, 2010, Net Serviços had approximately 4.2 million pay television subscribers (3.7 million at the end of 2009) and 3.5 million Internet broadband subscribers (2.9 million at the end of 2009). During the year ended December 31, 2010, Net Serviços had revenues of R$5,405.7 million and net income of R$307.2 million.

The NET Fone local telephony service, which uses Voice over Internet Protocol (“VoIP”) technology, had approximately 3.2 million subscribers as of December 31, 2010, compared to 2.6 million as of December 31, 2009, and is available in 92 cities.

As of the date of this annual report, Embratel’s total direct and indirect interest in Net Serviços is 91.9%. Embratel originally acquired the interest in Net Serviços from Globo Comunicações e Participações S.A. and two related entities (collectively, “Globo”) in 2005 and increased its interest in successive transactions with Globo in 2006 and 2007. Embratel’s interest was subsequently diluted in 2007 when Net Serviços issued shares to acquire Vivax. Embratel increased its participation in Net Serviços through the purchase of 193,701,299 preferred shares of Net Serviços for R$4,457 million in cash, pursuant to a tender offer that expired on January 13, 2011.

A majority of the voting shares of Net Serviços is owned by GB Empreendimentos e Participações S.A. (“GB”). Globo owns a majority of the voting interests in GB. Globo also owns Net Serviços Brasil S.A., a company with which Net Serviços has a long-term agreement to purchase Brazilian source programming and a licensing agreement for the right to use the “Net” brand name through 2015.

Under current Brazilian law governing cable operators, Embratel is not permitted to control Net Serviços because Embratel is not under the control of Brazilian citizens. If Brazilian law changes to allow Embratel to own a controlling interest in Net Serviços, Embratel (which currently owns 49% of the voting interests and all of the non-voting interests in GB) has the right to purchase an additional interest in GB to give it control of 51% of the voting shares of Net Serviços, and Globo has the right to cause Embratel to purchase such interest.

Marketing

Claro has developed a variety of promotional programs and products tailored to meet its clients’ mobility needs while increasing its market share. Claro considers these promotional programs and products as one of its most significant competitive advantages. Claro also aggressively targets corporate customers by offering customized products and services and negotiating discounts on a case-by-case basy. Additionally, Claro has innovative customer loyalty programs that help it retain clients.

Embratel has developed a variety of promotional and customer retention programs that offer discounts and are designed to increase Embratel’s market share and promote usage of the “21” carrier selection code assigned to Embratel. In addition, Embratel negotiates discounts with corporate customers on a case-by-case basis. Embratel also employs campaigns that target specific groups of its corporate customers, such as small- and medium-sized businesses or regional groups.

Sales and Distribution

Claro markets its services primarily through retail chains, which amount to approximately 8,894 points of sale, exclusive distributors, which represent approximately 2,755 points of sale and its approximately 190 company-owned stores, which offer one-stop shopping for a variety of cellular services and products. Claro also sells and distributes its products and services over the Internet. Claro’s stores also serve as customer service centers, and Claro expects to continue to open new service centers as necessary in order to offer its products directly to subscribers in more effective ways. Claro also has a corporate sales group to service the needs of its large corporate and other high-usage customers. In the year ended December 31, 2010, approximately 54% of Claro’s sales of handsets were generated by retail chains, 32% by exclusive distributors and approximately 13% from sales in company-owned stores.

Embratel’s Livre local fixed telephony service is marketed in person through exclusive distributors, through its call center subsidiary BrasilCenter and through the internet. Embratel’s other local fixed telephony service, NET Fone, is marketed through Net Serviços’ sales and distributions channels. Embratel’s pay-TV service, Via

Embratel, is marketed in person through exclusive dealers and its company-owned stores, by phone through call centers and by the internet through Via Embratel’s website. In addition, Embratel has a corporate sales group dedicated to the needs of its large corporate and other high-usage customers.

Billing and Collection

Wireless Operations

Claro bills its postpaid customers through monthly invoices that detail itemized charges, services, in addition to applicable taxes. Customers may pay their bills with a credit card, through online banking, or in person at post offices or federal lottery houses (Casas Lotéricas).

If a Claro postpaid customer’s payment is overdue, service may be suspended temporarily until payment is received. If the subscriber’s payment is more than 60 days past due, service may be discontinued permanently. Accounts that are more than 180 days past due are categorized as doubtful accounts, as are all other accounts related to the same client.

A Claro prepaid customer who purchases a card has between 90 and 180 days from the date of activation of the card to use the airtime. After such time, the customer can no longer use that airtime for outgoing calls unless the customer activates a new card. Sixty days after the card expires, the balance on the card, if any, is recognized as revenue, unless the customer activates a new card.

Fixed Line Operations

Embratel directly bills a portion of its customers for their fixed line telecommunications and related services, including collect-calling and standard voice services. However, due to the risk of bad debts resulting from direct billing, Embratel has taken a number of measures designed to reduce such risk, including implementing co-billing arrangements with other local operators that allow them to bill their local customers for Embratel’s long-distance fees, using call centers, implementing an automated collections system, employing an anti-fraud system, using third-party collection firms and implementing a customer data system that allows for faster updating of information, flexibility in customer account structure, quality improvement and improved payment of taxes across the different Brazilian states.

Our Networks and Technology

Wireless Networks

Claro owns and operates wireless networks using GSM and 3G technologies. As of December 31, 2010, Claro’s GSM network, which Claro continues rolling out, covered more than 3,496 cities and was used by 84.1% of its wireless subscribers. In addition, Claro’s 3G network, which was the first in Brazil and which Claro continues rolling out, covers 416 cities where approximately 55.2% of Brazil’s population resides.

Fixed Line Networks

We believe that Embratel owns the largest long-distance network in Latin America and the largest data transmission network in Brazil. Embratel’s long-distance and data transmission networks use fiber optic, digital microwave, satellite and copper wireline technologies. Embratel’s networks use a 100% digital switching system for voice and data services and the latest generation Internet Protocol (“IP”) routers to support IP-based services, Internet access and VPNs through Multiprotocol Label Switching (“MPLS”) technology. Embratel’s Internet backbone is the largest in Latin America with 1,100 Gbps capacity distributed through 1,401 points of presence and 52 routing centers, and its network also connects to the international Internet backbone. Embratel also has approximately 49,506 kilometers of cable in a mesh network that has three or more outlets with a capacity of 7.1 Tbps. Embratel has local metropolitan digital fiber networks with approximately 8,504 kilometers of cable in the

major Brazilian cities. Embratel is attaching fiber extensions to commercial buildings connected to metropolitan rings, providing high quality direct connections. Embratel’s submarine cable network reaches all continents through 11 different cable systems in which it has various ownership interests.

Embratel’s networks have also been modified to use Net Serviços’ coaxial cable networks to provide telephony services to Net Serviços’ broadband customers through NET Fone. In December 2009, Net Serviços granted Embratel an indefeasible right to use its HFC network to provide local fixed telephone service.

To supplement its network, Embratel uses long-distance microwave systems, with a total range of 16,254 kilometers, in areas where installation of fiber cables is difficult and five satellites to provide services to remote locations within the country, and it leases satellite capacity from international satellite systems and submarine capacity in other private cable systems. Embratel also offers local telephony services to its Livre residential customers using CDMA digital wireless technology.

Satellite Network

Embratel has the most extensive satellite system in Latin America with a fleet covering the entire territory of South America, Mexico, part of Central America and part of Florida. Embratel currently has five satellites in full operation, i.e. in geostationary orbit, including one which it owns jointly with SES World Skies and it also owns 11 transponders on board of another satellite operated by SES World Skies. Star One also currently operates three earth stations, the principal of which is certified by the International Organization for Standardization and controls the operations of its satellites.

Embratel has a program to replace satellites that are nearing or have reached the end of their contractual lives, thereby ensuring the continuity and quality of its communication services to most of South America. In accordance with that program, Embratel signed a contract with Orbital Sciences Corporation in December 2009 for the in-orbit delivery of a new generation satellite that can provide expanded coverage. This satellite is intended to replace one of its satellites that is expected to run out of propellant by February 2013. The new satellite is currently being manufactured and is expected to become operational in June 2012.

Competition

Claro’s principal wireless competitors are Vivo, TIM, Oi, CTBC, Sercomtel and Nextel; and Embratel’s principal fixed-line competitors are Oi, CTBC, Intelig, Telefónica and Global Village Telecom.

SOUTHERN CONE OPERATIONS

We offer wireless, fixed line voice, broadband and Pay TV services and products in our Southern Cone segment under the Claro brand through our subsidiaries AMX Argentina S.A. (“AMX Argentina”), Telmex Argentina S.A. (“Telmex Argentina”), Claro Chile S.A (“Claro Chile”), Claro Comunicaciones S.A. (“Claro Comunicaciones”), Claro Servicios Empresariales S.A. (“Claro Servicios Empresariales”), AMX Paraguay, S.A. (“AMX Paraguay”), AM Wireless Uruguay, S.A. (“AM Wireless Uruguay”) and Telstar, S.A. We are the largest wireless telecommunications services provider in Argentina and the third largest in Chile, Paraguay and Uruguay, measured by number of subscribers.

As of December 31, 2010, we had approximately 24.5 million wireless subscribers, approximately 68.5% of which were prepaid customers, which represented a market share of 29.1%. As of December 31, 2010, we also had approximately 0.4 million fixed line subscribers, 0.2 million broadband subscribers and 0.5 million Pay TV subscribers.

In 2010, our Southern Cone segment had revenues of Ps. 43,466 million, representing 7.2% of our consolidated revenues for such period. As of December 31, 2010, our Southern Cone segment operations represented approximately 10.9% of our total wireless subscribers, the same percentage they represented at December 31, 2009, and approximately 2.1% of our total RGUs, compared to 1.8% at December 31, 2009.

The following table sets forth information regarding our Southern Cone segment’s subscriber base, traffic, market share and operating measures at the dates and for the periods indicated:


	December 31,
	2009			2010
Wireless Operations:
ARPU (year ended)		Ps. 119			Ps. 117
Subscribers (thousands):
Prepaid		15,115			16,791
Postpaid		6,718			7,717

Total		21,833			24,508

Market share		28.7	%		29.1	%
MOUs (year ended)		142			145
Wireless churn rate (year ended)		2.6	%		2.6	%

Fixed Operations:
RGUs (thousands):
Fixed voice		293			354
Broadband		151			217
Pay TV		390			496

Total		834			1,067

Traffic (year ended) (millions):
Long distance minutes		2,647			2,472
Interconnection minutes		1,074			1,243

Total minutes		3,721			3,715

Churn rate (year ended):
Fixed voice		1.7	%		2.0	%
Broadband		2.8	%		2.8	%
Pay TV		4.4	%		3.9	%

Services and Products

Wireless Services and Products

We offer wireless voice and data services under a variety of plans to meet the needs of different user segments. The plans are either “postpaid,” where the customer is billed monthly for the previous month and may terminate the plan at any time, subject to certain exceptions, or “prepaid,” where the customer pays in advance for a specified volume of use over a specified period.

We also offer international roaming services to our subscribers through the networks of cellular service providers with which we have entered into international roaming agreements around the world, and we provide GSM and 3G roaming services to customers of our international roaming partners.

In connection with the provision of our voice services, we earn interconnection revenues from calls to any of our subscribers that originate with another service provider. We charge the service provider from whose network the call originates an interconnection charge for the time our network is used in connection with the call. Similarly, we must pay interconnection fees in respect of calls made by our subscribers to customers of other service providers.

We offer data services, including SMS, MMS, Premium SMS and Premium MMS, Mobile Entertainment Services, Data Transmission, Internet Browsing and E-mail Services.

We also offer a variety of products as complements to our wireless service, including handsets and smart phones and accessories such as chargers, headsets, belt clips, batteries, broadband cards and netbooks. In addition, we offer other wireless services, such as Push-to-Talk Services.

Fixed Line Services and Products

We offer fixed line voice services, including local and long-distance services, data services, including data administration and hosting services, broadband services and Pay TV services to both corporate and residential customers under a variety of plans to meet the needs of different user segments.

Our Networks and Technology

In Argentina, our wireless networks, which cover approximately 100% of the population, use GSM and 3G technologies. In Chile, our wireless networks, which cover approximately 99% of the population, use CDMA, GSM and 3G technologies. In Paraguay, our wireless networks, which cover approximately 64% of the population, use GSM and 3G technologies. In Uruguay, our wireless networks, which cover approximately 90% of the population, use GSM and 3G technologies. In Argentina, our fixed-line networks use pre-WiMax, Wireless Local Loop (“WLL”), WiMax, local point-multipoint distribution service (“LMDS”) and HFC technologies. In Chile, our fixed-line networks use satellite and HFC technologies. In Uruguay, our fixed-line networks use LMDS and HFC technologies.

Competition

In Argentina, our principal wireless competitors are Telecom Personal and Movistar; and our principal fixed-line competitors are Teléfonica de Argentina, Telecom Argentina, Global Crossing, Comsat and NSS. In Chile, our principal wireless competitors are Entel, Movistar and VTR; and our principal fixed-line competitors are Movistar, DirecTV and GTD. In Paraguay, our principal competitors are Telecel, Nucleo and Hola Paraguay. In Uruguay, our principal wireless competitors are Movistar and Ancel; and our principal fixed-line competitors are Antel, Telefónica and Dedicado Telecomunicaciones.

COLOMBIA AND PANAMA OPERATIONS

We offer wireless, fixed line voice, broadband, Pay TV and directory services and products in our Colombia and Panama segment through our subsidiaries Comcel, Telmex Colombia S.A. (“Telmex Colombia”) and Claro Panamá, S.A. (“Claro Panamá”). In Colombia, we offer our wireless services under the Comcel brand and our fixed line services under the Telmex brand. In Panama, we offer our services under the Claro brand. We are the largest wireless telecommunications services provider in Colombia and the fourth largest in Panama, measured by number of subscribers.

As of December 31, 2010, we had approximately 29.4 million wireless subscribers, approximately 85.6% of which were prepaid customers, which represented market share of 60.7%. As of December 31, 2010, we also had approximately 0.6 million fixed line subscribers, 0.6 million broadband subscribers and 1.8 million Pay TV subscribers.

In 2010, our Colombia and Panama segment had revenues of Ps. 48,893 million, representing 8.0% of our consolidated revenues for such period. As of December 31, 2010, our Colombia and Panama segment operations represented approximately 13.1% of our total wireless subscribers, as compared to 13.8% at December 31, 2009, and approximately 5.8% of our total RGUs, as compared to 6.0% at December 31, 2009.

The following table sets forth information regarding our Colombia and Panama segment’s subscriber base, traffic, market share and operating measures at the dates and for the periods indicated:


	December 31,
	2009			2010
Wireless Operations:
ARPU (year ended)		Ps. 99			Ps. 106
Subscribers (thousands):
Prepaid		23,830			25,171
Postpaid		3,967			4,242

Total		27,797			29,413

Market share		62.3	%		60.7	%
MOUs (year ended)		173			198
Wireless churn rate (year ended)		3.5	%		3.5	%

Fixed Operations:
RGUs (thousands):
Fixed voice		481			571
Broadband		505			614
Pay TV		1,767			1,802

Total		2,753			2,988

Traffic (year ended) (millions):
Long distance minutes		18			32
Interconnection minutes		340			441

Total minutes		358			473

Churn rate (year ended):
Fixed voice		2.5	%		2.4	%
Broadband		2.3	%		2.3	%
Pay TV		3.3	%		2.4	%

Services and Products

Wireless Services and Products

We offer data services, including SMS, MMS, Premium SMS and Premium MMS, Mobile Entertainment Services, Data Transmission, Internet Browsing and E-mail Services.

Fixed Line Services and Products

Our Networks and Technology

In Colombia, our wireless networks, which cover approximately 69% of the population, use 3G technologies, while in Panama, our wireless networks cover approximately 83.3% of the population and use GSM technology. In Colombia, our fixed-line networks use HFC technologies.

Competition

In Colombia, our principal wireless competitors are Telefónica Móviles and Colombia Móvil; and our principal fixed-line competitors are Telefónica Telecom, Empresa de Telecomunicaciones de Bogotá and EPM Telecomunicaciones. In Panama, our principal wireless and Pay TV competitors are Telefónica Móviles, Cable & Wireless and Digicel.

ANDEAN REGION OPERATIONS

We offer wireless, fixed line voice, broadband, Pay TV and directory services and products in our Andean Region segment under the Claro brand through our subsidiaries Consorcio Ecuatoriano de Telecomunicaciones, S.A. (“Conecel”), Ecuador Telecom S.A. (“Ecuador Telecom”), América Móvil Perú, S.A.C. and Telmex Perú, S.A. (“Telmex Perú”). We are the largest wireless telecommunications services provider in Ecuador and the second largest in Peru, measured by number of subscribers.

As of December 31, 2010, we had approximately 20.3 million wireless subscribers, approximately 87.3% of which were prepaid customers, which represented a market share of 52.8%. As of December 31, 2010, we also had approximately 0.2 million fixed line subscribers, 0.1 million broadband subscribers and 0.2 million Pay TV subscribers.

In 2010, our Andean Region segment had revenues of Ps. 29,484 million, representing 4.9% of our consolidated revenues for such period. As of December 31, 2010, our Andean Region segment operations represented approximately 9.0% of our total wireless subscribers, as compared to 8.8% at December 31, 2009, and approximately 1.1% of our total RGUs, as compared to 0.7% at December 31, 2009.

The following table sets forth information regarding our Andean Region segment’s subscriber base, traffic, market share and operating measures at the dates and for the periods indicated:


	December 31,
	2009			2010
Wireless Operations:
ARPU (year ended)		Ps. 105			Ps. 102
Subscribers (thousands):
Prepaid		15,781			17,738
Postpaid		1,978			2,572

Total		17,760			20,310

Market share		52.1	%		52.8	%
MOUs (year ended)		100			109
Wireless churn rate (year ended)		2.2	%		2.4	%

Fixed Operations:
RGUs (thousands):
Fixed voice		120			171
Broadband		69			124
Pay TV		150			249

Total		338			544

Traffic (year ended) (millions):
Long distance minutes		374			345
Interconnection minutes		1,017			1,003

Total minutes		1,391			1,348

Churn rate (year ended):
Fixed voice		4.0	%		2.3	%
Broadband		5.4	%		2.5	%
Pay TV		4.9	%		3.9	%

Services and Products

Wireless Services and Products

In connection with the provision of voice services, we earn interconnection revenues from calls to any of our subscribers that originate with another service provider. We charge the service provider from whose network the call originates an interconnection charge for the time our network is used in connection with the call. Similarly, we must pay interconnection fees in respect of calls made by our subscribers to customers of other service providers.

We offer data services, including SMS, MMS, Premium SMS and Premium MMS, Mobile Entertainment Services, Data Transmission, Internet Browsing and E-mail Services.

Fixed Line Services and Products

Our Networks and Technology

In Ecuador, our wireless networks, which cover approximately 76% of the population, use GSM and 3G technologies, while in Peru, our wireless networks cover approximately 86% of the population and use GSM and 3G technologies. In Ecuador, our fixed-line networks use HFC technologies, while in Peru our fixed-line networks use CDMA, HFC and WiMax technologies.

Competition

In Ecuador, our principal wireless competitor is Otecel Móviles; and our principal fixed-line competitors are Grupo TV Cable and Corporación Nacional de Telecomunicaciones. In Peru, our principal wireless competitor is Movistar Perú; and our principal fixed-line competitors are Telefónica del Perú, Americatel Perú and Telefónica Multimedia.

CENTRAL AMERICA OPERATIONS

We offer wireless, fixed line voice, broadband, Pay TV and directory services and products in our Central America segment under the Claro brand through our subsidiaries Compañía de Telecomunicaciones de El Salvador (CTE), S.A. de C.V. (“CTE”), Telecom Personal, S.A. de C.V., Telecomunicaciones de Guatemala, S.A. (“Telgua”), Empresa Nicaragüense de Telecomunicaciones, S.A. (“Enitel”) and Servicios de Comunicaciones de Honduras, S.A. de C.V. (“Sercom Honduras”). We are the largest wireless telecommunications services provider in Nicaragua and second largest in El Salvador, Guatemala and Honduras, measured by number of subscribers.

As of December 31, 2010, we had approximately 10.8 million wireless subscribers, approximately 93.9% of which were prepaid customers, which represented a market share of 33.8%. As of December 31, 2010, we also had approximately 2.3 million fixed line subscribers, 0.4 million broadband subscribers and 0.6 million Pay TV subscribers.

In 2010, our Central America segment had revenues of Ps. 17,154 million, representing 2.8% of our consolidated revenues for such period. As of December 31, 2010, our Central America segment operations represented approximately 4.8% of our total wireless subscribers, as compared to 4.7% at December 31, 2009 and approximately 6.3% of our total RGUs, as compared to 6.4% at December 31, 2009.

The following table sets forth information regarding our Central America segment’s subscriber base, traffic, market share and operating measures at the dates and for the periods indicated:


	December 31,
	2009			2010
Wireless Operations:
ARPU (year ended)		Ps. 77			Ps. 69
Subscribers (thousands):
Prepaid		9,085			10,122
Postpaid		449			653

Total		9,535			10,775

Market share		32.7	%		33.8	%
MOUs (year ended)		109			116
Wireless churn rate (year ended)		2.2	%		2.5	%

Fixed Operations:
RGUs (thousands):
Fixed voice		2,259			2,305
Broadband		311			376
Pay TV		359			550

Total		2,929			3,231

Traffic (year ended) (millions):
Long distance minutes		2,378			2,101
Interconnection minutes		1,017			868

Total minutes		3,395			2,969

Churn rate (year ended):
Fixed voice		0.7	%		1.0	%
Broadband		1.8	%		1.8	%
Pay TV		1.6	%		2.6	%

Services and Products

Wireless Services and Products

We offer data services, including SMS, MMS, Premium SMS and Premium MMS, Mobile Entertainment Services, Data Transmission, Internet Browsing and E-mail Services.

Fixed Line Services and Products

Our Networks and Technology

In El Salvador, our wireless networks, which cover approximately 91% of the population, use GSM technologies. In Guatemala, our wireless networks, which cover approximately 84% of the population, use CDMA and GSM technologies. In Honduras, our wireless networks, which cover approximately 64% of the population, use GSM technologies. In Nicaragua, our wireless networks, which cover approximately 76% of the population, use GSM technologies. Our Central America fixed line networks use HFC, VoIP and plain old telephone service (“POTS”) technologies.

Competition

In El Salvador, our principal wireless competitors are Tigo, Telefónica de El Salvador, Digicel and Intelfon; and our principal fixed-line competitor is Amnet. In Guatemala, our principal wireless competitors are Tigo and Movistar. In Honduras, our principal wireless competitors are Celtel, Digicel and Honducel; and our principal fixed-line competitor is Hondutel. In Nicaragua, our principal wireless competitor is Movistar. In March 2011, we entered into an agreement with Digicel to acquire 100% of Digicel’s operations in Honduras and El Salvador. Once the transaction closes, which is expected to occur during the second quarter of 2011, Digicel will no longer be our competitor in those countries.

UNITED STATES OPERATIONS

We offer wireless services and products in our United States segment through our subsidiary TracFone under the TracFone, Net10, Straight Talk and SafeLink brands. We are the largest prepaid wireless telecommunications services provider in the U.S, measured by number of subscribers.

As of December 31, 2010, we had approximately 17.7 million wireless subscribers, all of which were prepaid customers, which represented a 39.7% share of the prepaid wireless market. In 2010, our United States segment had revenues of Ps. 35,562 million, representing 5.9% of our consolidated revenues for such period. As of December 31, 2010, our United States segment operations represented approximately 7.9% of our total wireless subscribers, as compared to 7.2% at December 31, 2009.

The following table sets forth information regarding our United States segment’s subscriber base, market share and operating measures at the dates and for the periods indicated:


	December 31,
	2009			2010
ARPU (year ended)		Ps. 135			Ps. 161
Subscribers (thousands):
Prepaid		14,427			17,749
Market share		31.7	%		39.7	%
MOUs (year ended)		81			234
Wireless churn rate (year ended)		4.0	%		4.0	%

Services and Products

We offer prepaid wireless debit card services, as well as prepaid wireless handsets through an extensive distribution network of independent retailers.

Networks and Technology

We do not own any wireless telecommunications facilities or hold any wireless spectrum licenses in the United States. Instead, we purchases airtime through agreements with approximately 10 wireless service providers and resell airtime to customers. Through these agreements, we have a nationwide “virtual” network covering almost all areas in which wireless services are available.

Competition

We compete with the major U.S. wireless operators and other mobile virtual network operators.

CARIBBEAN OPERATIONS

We offer wireless, fixed line voice, broadband and Pay TV services and products in our Caribbean segment under the Claro brand through our subsidiaries Compañía Dominicana de Teléfonos, C. por A. (“Codetel”), Oceanic Digital Jamaica Limited (“Oceanic”) and Telecomunicaciones de Puerto Rico, Inc. (“Telpri”). In March 2011, we entered into an agreement with Digicel to acquire 100% of Digicel’s operations in Honduras and El Salvador. As part of this transaction, we are selling our operations in Jamaica to Digicel. Once the transaction closes, which is expected to occur during the second quarter of 2011, we will no longer operate in Jamaica. We are the largest wireless telecommunications services provider in the Dominican Republic and the second largest in Jamaica and Puerto Rico, measured by number of subscribers.

As of December 31, 2010, we had approximately 6.5 million wireless subscribers, approximately 78.6% of which were prepaid customers, which represented a market share of 41.6%. As of December 31, 2010, we also had approximately 1.5 million fixed line subscribers, 0.6 million broadband subscribers and 0.1 million Pay TV subscribers.

In 2010, our Caribbean segment had revenues of Ps. 26,993 million, representing 4.4% of our consolidated revenues for such period. As of December 31, 2010, our Caribbean segment operations represented approximately 2.9% of our total wireless subscribers, as compared to 3.0% at December 31, 2009, and approximately 4.2% of our total RGUs, as compared to 4.4% at December 31, 2009.

The following table sets forth information regarding our Caribbean segment’s subscriber base, traffic, market share and operating measures at the dates and for the periods indicated:


	December 31,
	2009			2010
Wireless Operations:
ARPU (year ended)		Ps. 162			Ps. 154
Subscribers (thousands):
Prepaid		4,810			5,102
Postpaid		1,233			1,392

Total		6,043			6,494

Market share		41.3	%		41.6	%
MOUs (year ended)		249			303
Wireless churn rate (year ended)		4.3	%		4.9	%

Fixed Operations:
RGUs (thousands):
Fixed voice		1,531			1,483
Broadband		451			559
Pay TV		38			102

Total		2,020			2,144

Traffic (year ended) (millions):
Long distance minutes		5,760			5,495
Interconnection minutes		5,386			4,439

Total minutes		11,147			9,934

Churn rate (year ended):
Fixed voice		1.7	%		1.6	%
Broadband		3.0	%		3.0	%
Pay TV		2.3	%		2.0	%

Services and Products

Wireless Services and Products

We offer data services, including SMS, MMS, Premium SMS and Premium MMS, Mobile Entertainment Services, Data Transmission, Internet Browsing and E-mail Services. We also offer a variety of products as complements to our wireless service, including handsets and smart phones and accessories such as chargers, headsets, belt clips, batteries, broadband cards and netbooks. In addition, we offer other wireless services, such as Push-to-Talk Services.

Fixed Line Services and Products

Our Networks and Technology

In the Dominican Republic, our wireless networks, which cover approximately 96% of the population, use CDMA, GSM and 3G technologies. In Jamaica, our wireless networks, which cover approximately 90% of the population, use CDMA technologies, and we are currently deploying GSM and 3G technologies. In Puerto Rico, our wireless networks, which cover approximately 97% of the population, use CDMA, GSM and 3G technologies, and we are currently migrating our wireless customers from the CDMA network to newer networks. In the Caribbean, our networks use POTS and Internet Protocol television (“IPTV”) technologies.

Competition

In the Dominican Republic, our principal wireless competitor is France Telecom (Orange); and Tricom is our principal fixed-line competitor. Digicel and LIME Wireless are our principal Jamaican competitors. The Puerto Rican wireless market is highly competitive with AT&T, Sprint, T-Mobile and Open Mobile as our principal competitors. AT&T is the largest wireless operator in Puerto Rico, where we hold a close second position. In the fixed-line business, our principal competitors in Puerto Rico are Centennial AT&T, Worldnet Communications and other competitive local exchange carriers that resell our services. In March 2011, we entered into an agreement with Digicel to sell our operations in Jamaica to Digicel. Once the transaction closes, which is expected to occur during the second quarter of 2011, we will not compete with Digicel in Jamaica.

REGULATION

Mexico

Applicable Legislation

The General Communications Law, the Federal Telecommunications Law and regulations adopted under those statutes provide the general legal framework for the regulation of telecommunications services in Mexico. The main objectives of the Federal Telecommunications Law are to promote the efficient development of the telecommunications industry, to encourage fair competition in the provision of quality, low-priced services and to assure satisfactory breadth of coverage of the Mexican population.

Under the Federal Telecommunications Law, an operator of public telecommunications networks, such as Telcel or Telmex, must operate under a concession granted by the SCT. Such a concession may only be granted to a Mexican citizen or corporation and may not be transferred or assigned without the approval of the SCT. A concession to provide wireless services that utilize electro-magnetic frequencies generally has a term of up to twenty years and may be extended for additional terms of equal duration. A concession to provide public fixed-line local and long-distance services generally has a term of up to 30 years and may be extended for additional 30-year terms. Operators of private networks that do not use electro-magnetic frequencies are not required to obtain a concession to provide private telecommunications services but are required to obtain approval from the SCT.

The Federal Telecommunications Law requires public telecommunications concessionaires to establish open network architecture that permits interconnection and interoperability. Operators of private networks that do not use electro-magnetic frequencies or provide services to the public are not required to obtain a concession, permit or registration.

Principal Regulatory Authorities

The SCT, through Cofetel, is the government agency principally responsible for regulating telecommunications services. The SCT’s approval is required for any change in the bylaws of a concessionaire. It also has broad powers to monitor compliance with concessions, and it can require a concessionaire to supply the SCT with such technical, administrative and financial information as it may request. Telcel is required to publish its annual network expansion program and must advise the SCT of the progress of its expansion and modernization program on a quarterly basis.

Cofetel is an independent agency within the SCT, with five commissioners appointed by the President of Mexico, one of whom is appointed as chairman. Cofetel’s mandate is to regulate the Mexican telecommunications sector. Many of the powers and obligations of SCT under the Telecommunications Law and the telecommunications regulations have been delegated to Cofetel.

The Telecommunications Law gives certain rights to the Mexican government in its relations with concessionaires, including the right to take over the management of an operator’s networks, facilities and personnel in cases of imminent danger to national security, internal peace or the national economy, natural disasters and public unrest. The Telecommunications Law also provides that at the expiration of a concession, the Mexican government has a right of first refusal to acquire the assets used directly in the exploitation of the concession. See “Regulation—Termination of Concessions” under this Item 4.

Telecommunications operators are also subject to regulation by Profeco under the Federal Consumer Protection Law. This law regulates publicity, the quality of services and information required to be provided to consumers and provides a mechanism to address consumer complaints. Profeco has the authority to impose fines, which can be significant.

Telcel Rates

The Telecommunications Law provides that wireless services concessionaires may freely determine the rates for telecommunications services, including interconnection. Mobile rates are not subject to a price cap or any other form of price regulation. However, Telcel and other mobile carriers operating in Mexico are required to register their rates for mobile service with Cofetel prior to implementing such rates. Cofetel is authorized to impose specific rate requirements on any operator that is determined to have substantial market power under the Federal Antitrust Law. Although Cofeco has determined that Telcel has substantial market power in the nationwide market for voice services, we cannot predict what regulatory measures might be taken in response to Cofeco’s determination.

Telmex Rates

Under Telmex’s concession, Telmex’s rates in any period for basic telephone services, including installation, monthly rent, measured local service and long-distance service, are subject to a ceiling on the price of a “basket” of such services weighted to reflect the volume of each service provided by Telmex during the preceding period. There is also a price floor based on Telmex’s average long-run incremental cost. Within this aggregate price range, Telmex is free to determine the structure of its own rates. Telmex must get permission from Cofetel before its rates can take effect.

The price cap varies directly with the Mexican National Consumer Price Index, permitting Telmex to raise nominal rates to keep pace with inflation (minus a productivity factor set for the telecommunications industry), subject to consultation with the Communications Ministry. Telmex has not raised its nominal rates since March 2001 for local service and since March 1999 for long-distance service. Under the concession, the price cap is also adjusted downward periodically to pass on the benefits of Telmex’s increased productivity to its customers. The SCT sets a new periodic adjustment for every four-year period to permit Telmex to maintain an internal rate of return equal to its weighted average cost of capital. The SCT fixed the adjustment per quarter in nominal terms at 0.74% for 2003-2006 and 0.84% for 2007-2010. For services extending beyond basic telephone service, the Telecommunications Law and the Telmex concession permits Telmex, under certain conditions and subject to registration with Cofetel, to set Telmex’s prices free of rate regulation. These services include data transmission, directory services and services based on digital technology, such as caller ID, call waiting, speed dialing, automatic redialing, voice mail, as well as three-way conference and call transfer.

Calling Party Pays

In Mexico, calls to and from Telcel’s mobile subscribers are subject to the “calling party pays” system, under which subscribers only pay for outgoing calls. Subscribers have the option of retaining the “mobile party pays” system. Mobile operators do not charge airtime fees to customers receiving calls, except for roaming fees applicable when subscribers receive calls outside their local areas. Two long-distance carriers, Axtel and Avantel, have challenged the validity of the long distance calling party pays system through judicial proceedings and are operating under a court order obtained in those proceedings that temporarily suspends the application to them of the calling party pays system.

Telcel Concessions

Telcel operates under several different concessions covering particular frequencies and regions, holding an average of 72.8 MHz of capacity in Mexico’s nine regions in the 850 MHz, 1900 MHz and 1.7/2.1 GHz spectrum. The following tables summarize Telcel’s concessions.

Regions in
Mexico

Band A (1900 MHz)

Band B (850 MHz)

Cel

PCS

Concession

Date

Termination
Date

Fee Structure

Concession

Date

Termination

Date

Fee Structure

Sept. 1999

Sept. 2019

Upfront fee

Aug. 1991

Aug. 2011

Semiannual fees⁽¹⁾

Sept. 1999

Sept. 2019

Upfront fee

Aug. 1991

Aug. 2011

Semiannual fees⁽¹⁾

III

Sept. 1999

Sept. 2019

Upfront fee

Aug. 1991

Aug. 2011

Semiannual fees⁽¹⁾

Sept. 1999

Sept. 2019

Upfront fee

Aug. 1990

Aug. 2010

Annual fees⁽²⁾

VIII

Sept. 1999

Sept. 2019

Upfront fee

Aug. 1990

Aug. 2010

Annual fees⁽²⁾

Sept. 1999

Sept. 2019

Upfront fee

Oct. 1991

Oct. 2011

Semiannual fees⁽¹⁾

VII

Sept. 1999

Sept. 2019

Upfront fee

Oct. 1991

Oct. 2011

Semiannual fees⁽¹⁾

VII

VIII

Sept. 1999

Sept. 2019

Upfront fee

Oct. 1991

Oct. 2011

Semiannual fees⁽¹⁾

Sept. 1999

Sept. 2019

Upfront fee

Oct. 2000

Oct. 2015

Upfront fee

(1)	The semi-annual fees, or aprovechamientos, are determined as a percentage of gross revenues corresponding to the concession.

(2)	The annual fees, are amounts payable set forth by the Ley Federal de Derechos and vary depending on the relevant region and radio spectrum band

Regions in
Mexico

Band D (1900MHz)

Band F (1900 MHz)

PCS

Concession
Date

Termination

Date

Fee Structure

Concession

Date

Termination

Date

Fee Structure

Oct. 1998

Oct. 2018

Upfront fee

April 2005

April 2025

Annual fees⁽¹⁾

Oct. 1998

Oct. 2018

Upfront fee

April 2005

April 2025

Annual fees⁽¹⁾

III

Oct. 1998

Oct. 2018

Upfront fee

April 2005

April 2025

Annual fees⁽¹⁾

Oct. 1998

Oct. 2018

Upfront fee

April 2005

April 2025

Annual fees⁽¹⁾

Oct. 1998

Oct. 2018

Upfront fee

April 2005

April 2025

Annual fees⁽¹⁾

Oct. 1998

Oct. 2018

Upfront fee

April 2005

April 2025

Annual fees⁽¹⁾

VII

Oct. 1998

Oct. 2018

Upfront fee

April 2005

April 2025

Annual fees⁽¹⁾

VIII

Oct. 1998

Oct. 2018

Upfront fee

April 2005

April 2025

Annual fees⁽¹⁾

Oct. 1998

Oct. 2018

Upfront fee

April 2005

April 2025

Annual fees⁽¹⁾

(1)	The annual fees, are amounts payable set forth by the Ley Federal de Derechos and vary depending on the relevant region and radio spectrum band.

Regions in
Mexico

1.7/2.1 GHz Bands B2, C (nationwide) and D
(only in PCS Regions 1, 5 and 8)

PCS

Concession
Date

Termination
Date

Fee Structure

Oct. 2010

Oct. 2030

Annual fees

⁽¹⁾

Oct. 2010

Oct. 2030

Annual fees

⁽¹⁾

III

Oct. 2010

Oct. 2030

Annual fees

⁽¹⁾

Oct. 2010

Oct. 2030

Annual fees

⁽¹⁾

Oct. 2010

Oct. 2030

Annual fees

⁽¹⁾

Oct. 2010

Oct. 2030

Annual fees

⁽¹⁾

VII

Oct. 2010

Oct. 2030

Annual fees

⁽¹⁾

VIII

Oct. 2010

Oct. 2030

Annual fees

⁽¹⁾

Oct. 2010

Oct. 2030

Annual fees

⁽¹⁾

(1)	The annual fees, are amounts payable set forth by the Ley Federal de Derechos and vary depending on the relevant region and radio spectrum band. The payment of these fees will start in June 2012.

In addition to the 850 MHz, 1900 MHz and 1.7/2.1 GHz concessions detailed in the tables above, in December 2002, the SCT granted Telcel a concession to install and operate a telecommunications network to provide national and international long distance services, as well as data transmission services. The concession was granted for an initial term of 15 years, and it is subject to extension for an additional 15-year period. The concession limited Telcel’s ability to provide these services, permitting it to provide them only to its wireless subscribers until December 2005. In 2006, Telcel completed the build out of its long distance network, which allows Telcel to carry all the national long distance traffic originated from Telcel’s customers to other customers. Also, since May 2007, Telcel opened its interconnection with the local network of Telmex in Mexico City and with the long distance network of AT&T.

Concession Fees

Notwithstanding the upfront payment applicable to all the 1900 MHz concessions, 1.7/2.1 GHz concessions and for the renewal of the eight 850 MHz concessions, there are two different types of fees that we may be required to pay in connection with Telcel’s concessions.

Aprovechamientos. Some of Telcel’s 850 MHz concessions (cellular regions I, II, III, VI, VII and VIII) require Telcel to pay semi-annual fees (aprovechamientos) equal to a percentage of gross revenues derived from the concessioned services. The percentage ranges between 6% and 8%. These fees are payable through 2011, at which time the renewal of the concessions will become effective and payment of any further semi-annual fees will cease and payment of annual fees (derechos) will commence. For the Region IX Band B concession, these semi-annual fees were eliminated pursuant to a court decision.

Derechos. Owners of concessions granted or renewed on or after January 1, 2003 are required to pay annual fees (derechos) for the use and exploitation of radio spectrum bands. The amounts payable are set forth by the Ley Federal de Derechos and vary depending on the relevant region and radio spectrum band. These annual fees apply to all spectrum bands, including those that are already subject to the payment of fees (aprovechamientos) based on gross revenues. Currently, Telcel is not required to pay these fees in respect of its Bands A, B and D concessions since they were awarded prior to 2003, but it is required to pay them in respect of additional 10 MHz of capacity in the 1900 MHz spectrum (Band F) acquired in 2005.

Fees of this type do not apply to the 1900 MHz (Band D) concessions, which Telcel purchased for a fixed amount in 1998, and the 1900 MHz (Band A) concessions, which Telcel acquired from Unefon.

Expansion, Modernization and Service Quality Requirements

Telcel’s concessions impose a number of requirements for expansion and modernization of its network. The concessions establish certain minimum network capacities that Telcel must achieve, to extend service coverage to a targeted percentage of population. Telcel is in compliance with these requirements.

The concessions also set forth extensive requirements for the quality and continuity of Telcel’s service, including, in some cases, maximum rates of incomplete and dropped calls and connection time. In May 2003, Cofetel issued the Fundamental Technical Plan for Quality of Local Mobile Services Networks, applicable to all operators, including Telcel, which imposes additional service quality requirements. We are in compliance with the service quality requirements of our concessions and the Technical Plan.

Renewal

The eight Band B concessions covering regions other than the Mexico City area were granted for initial terms of twenty years. Concessions covering regions 4 and 5 expired in 2010, whereas concessions covering regions 1,2,3,6,7 and 8 will expire in 2011. During the first quarter of 2010, the SCT recognized Telcel’s right to renew, for additional 15-year terms, its 8 Band B concessions, covering all regions other than the Mexico City area and requested Telcel accept terms and conditions of the concessions, including the payment of annual fees (derechos) during the term of the concession, and pay an upfront fee of Ps. 74.8 million. Telcel has accepted the terms and conditions determined by SCT and paid the upfront fee.

The Band B concession covering the Mexico City area (Region 9) was renewed effective October 2000 for a term of fifteen years that will expire in October 2015. On April 20, 2010, Telcel requested renewal of the Band B concession covering the Mexico City area (Region 9). The Band D concessions will expire in 2018, the Band A concessions in 2019 and the Band F concessions in 2025. All of these concessions are subject to renewal for additional 20-year terms. In October 2010, Mexican regulation entities granted Telcel a nationwide 1.7/2.1 GHz concession for a 20 year term.

Telmex Concessions

Under the Telecommunications Law and the telecommunications regulations, Telmex’s concession was granted in 1976 and amended in August 1990. Currently set to expire in 2026, Telmex’s concession may be extended for an additional 15-year term subject to additional requirements that the SCT may impose. Thereafter, it may be renewed for successive 30-year terms as provided under the Telecommunications Law. Telmex’s subsidiary, Teléfonos del Noroeste, S.A. de C.V. (“Telnor”), holds a separate concession in a region located in two states in northwestern Mexico, which will also expire in 2026 and may be extended for an additional 15-year term thereafter. The material terms of the Telnor concession are essentially the same as the terms of the Telmex concession.

In addition, Telmex currently holds concessions for the use of frequencies to provide wireless local access and point-to-point and point-to-multipoint transmission, which Telmex obtained from Cofetel through a competitive bidding process. These concessions are granted for a term of up to 20 years and may be extended for additional 20-year terms.

The General Communications Law provides that upon the expiration of the Telmex concession the Mexican government is entitled to purchase its telecommunications assets at a price determined on the basis of an appraisal by a public official, and the telecommunications regulations provide that upon expiration of the concession, the Mexican government has a right of first refusal to acquire Telmex’s telecommunications assets. However, the General Communications Law also provides that in certain cases, upon expiration of the concession Telmex’s telecommunications assets will revert to the Mexican government free of charge. There is substantial doubt as to how these provisions of the General Communications Law and the telecommunications regulations would be applied, and accordingly there can be no assurance that upon expiration of the concession Telmex’s telecommunications assets would not revert to the Mexican government free of charge.

Termination of Concessions

The General Communications Law, the Telecommunications Law and the concessions include various provisions under which the concessions may be terminated before their scheduled expiration dates. Under the Telecommunications Law, the SCT may cause early termination of any of the concessions in certain cases, including:

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failure to exercise rights under a concession during the 180 days after that concession is granted;

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failure to expand telephone services at the rate specified in the concession;

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interruption of all or a material part of the services provided by the concessionaire;

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acts by the concessionaire with the effect of impeding the operations of other concessionaires;

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refusing interconnection arrangements with other concessionaires;

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change of jurisdiction by the concessionaire;

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transfer, assignment of, or grant of liens to, the concessions or any asset used to provide service without SCT’s approval;

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failure to pay certain government fees;

•

violation of the prohibition against ownership of shares of the concessionaire by foreign states;

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any material modification of the nature of the concessionaire’s services without prior SCT’s approval; and

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breach of certain other obligations under the General Communications Law.

In addition, the concessions provide for early termination by the SCT following administrative proceedings in the event of:

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a material and continuing violation of any of the conditions set forth in the concessions;

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material failure to meet any of the service expansion requirements under the concessions;

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material failure to meet any of the requirements under the concession for improvement in the quality of service;

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engagement in any telecommunications business not authorized under the concession and requiring prior approval of the SCT;

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following notice and a cure period, failure without just cause to allow other concessionaires to interconnect; or

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bankruptcy of the concessionaire.

The General Communications Law and all but one of Telcel’s 850 MHz concessions provide that in the event of early termination of our concessions, all assets that are the subject of such concession would revert to the Mexican government without compensation. In the event of early termination of any of Telcel’s PCS concessions, the Mexican government would have the option to purchase the equipment, installations and other assets used directly for the exploitation of the frequencies which are the subject of such concession. The latter regime also applies to one of Telcel’s 850 MHz concessions.

Competition

The telecommunications regulations and the concessions contain various provisions designed to introduce competition in the provision of communications services. In general, the SCT is authorized to grant concessions to other parties for the provision of any of the services provided by Telcel and Telmex under the concessions.

Of particular importance for Telmex is the fact that Mexican authorities have adopted regulations to permit cable television providers to provide voice-transmission services to local fixed-line telecommunications operators and data and broadband Internet access services to the Mexican public. As of December 31, 2010, 32 cable television providers, through more than 300 concessions, have been authorized to provide local fixed-line voice-transmission service in various cities in Mexico. Regulations have also been adopted to allow other local telephone service providers to provide paid television and audio services, but to date Telmex has been unable to obtain authorization to do so.

Mexican Regulatory Proceedings

Telcel Antitrust Investigations

The Telecommunications Law authorizes Cofetel to impose specific requirements as to rates, quality of service and information on any wireless operator that is determined by Cofeco to have substantial power in a specific market according to the Federal Antitrust Law. Pursuant to the Telecommunications Law, Cofetel has the power to adopt specific regulations on rates, quality of service, disclosure of information or other special regulations.

Following Cofeco investigations into monopolistic practices in the telecommunications sector, Cofeco notified Telcel of a resolution imposing a fine of Ps. 11,989 million for alleged monopolistic practices in April

2011. We and Telcel are evaluating the scope and legal grounds of the resolution and will exercise any and all legal actions or remedies to challenge it. Cofeco is conducting additional investigations into the market power of Telcel in the telecommunications sector. Depending on the resolution of these investigations, they may result in new regulations applicable to Telcel. See Note 17 to our audited consolidated financial statements included in this annual report.

Telmex Antitrust Investigations

Beginning 2007, the Cofeco began eight industry-wide investigations into market power and monopolistic practices in certain segments of the Mexican telecommunications market in which Telmex operates. In four of these investigations, final resolutions have concluded that Telmex and its subsidiary, Telnor, have substantial power in the relevant markets investigated. Based on these final resolutions, Cofetel could impose specific tariff requirements or other special regulations such as additional requirements regarding disclosure of information or quality of service. Telmex has filed petitions for constitutional protection (amparo) to challenge these resolutions, all of which are pending.

Of the four remaining cases relating to monopolistic practices, two remain under investigation and in the other two Cofeco has issued a notice of probable fault (Oficio de Probable Responsabildad), to which Telmex has objected. Findings adverse to Telmex in any of the Competition Commission proceedings may lead to the imposition of additional regulations, prohibitions or monetary penalties. See Note 17 to our audited consolidated financial statements included in this annual report.

Mobile Termination Rates

Under the calling party pays system, when the customer of one operator (local or long-distance) places a call to a customer of another operator, the first operator pays the second a fee, which is referred to as an interconnection fee. Under Mexican law, interconnection fees are negotiated between operators. For some periods, we have been unable to reach agreement on fees with some operators, and operators that are unable to agree have sought the intervention of Cofetel to establish interconnection fees. Our interconnection agreements with each operator require us to offer that operator the best rates we offer to other similar operators, and as a result if a single operator obtains a more favorable rate through a final, non-appealable resolution or decision from Cofetel, the SCT or the courts, we may be required to offer that rate to other operators even though we have previously agreed with them on rates. There has been extensive controversy in Mexico concerning the mobile termination rates payable to mobile operators for periods beginning with 2005. See Note 17 to our audited consolidated financial statements included in this annual report.

We expect that mobile termination rates will continue to be the subject of litigation and administrative proceedings. We cannot predict when or how these matters will be resolved. The competitive and financial effects of any resolution could be complex and difficult to predict. Although the matters in dispute primarily concern certain operators, if those matters are resolved adversely to us through a final, non-appealable resolution or decision from Cofetel, SCT or the courts, the impact could be material because Telcel would be required to offer to the other operators any more favorable fees it is required to provide to these operators as of the date of such final, non-appealable resolution or decision. This could materially reduce Telcel’s mobile termination revenues in future periods. Also, depending on how the disputes are resolved, there could be contractual claims among dissenting operators and Telcel for reimbursement or payment, as the case may be, of amounts paid or owed between Telcel and such dissenting operator, in respect of time periods from 2005 to 2011. Recently the Mexican Supreme Court of Justice ruled that lower courts may not grant temporary injunctive relief suspending the application of interconnection tariffs set by Cofetel. The ruling will eliminate the ability of an operator to obtain judicial suspensions against interconnection rulings issued by Cofetel. Operators will continue to have the ability to challenge interconnection resolutions issued by Cofetel, but such resolutions will not be stayed pending final resolution by the courts. All proceedings initiated by Telcel in the past against interconnection rulings issued by Cofetel will continue their course. We expect that mobile termination rates will continue to be the

subject of litigation and administrative proceedings. We cannot predict when or how these matters will be resolved. Although the matters in dispute primarily concern certain operators, pending a final resolution from the courts and given the inability to suspend Cofetel’s interconnection resolution, operators interconnected to Telcel’s network may elect to pay Telcel the reduced fees resolved by Cofetel. Each operator will make its own determination on how to allocate risks associated with such legal proceedings.

Mobile Telephone National User Registry

In February 2009, the Federal Telecommunications Law was amended in order to create the Mobile Telephone National User Registry (Registro Nacional de Usuarios de Telefónia Móvil, or “RENAUT”). Under the amendment, operators must maintain a registry including the identity of all their subscribers and a ledger of all communications made by each user’s line as well as provide to the relevant authorities information obtained. Among other provisions, the amendment establishes that users who purchased a mobile line after April 10, 2009 (date when the amendment became effective), could not use it until they register their line with the RENAUT. Likewise, the amendment establishes that existing users as of the date on which the amendment became effective had a one-year term to register the mobile telephone line. Consequently, lines that were not registered as of April 10, 2010 were to be suspended without a reactivation right by operators. Pursuant to regulations issued by Cofetel, Telcel has complied with the line and communication registry as well as the information provision processes.

Notwithstanding the foregoing and solely for purposes of protecting its subscribers from the suspension ordered by the amendment, Telcel began a judicial proceeding (juicio de amparo) against certain provisions of the Federal Telecommunications Law. The enforceability of the relevant provisions of the amendment has been stayed by a court order. In February 2011, the trial court dismissed Telcel’s claim for lack of subject matter. In March 2011, Telcel filed an appeal (recurso de revisión) before the appellate court that preserves the stay (suspensión) previously granted. We expect final resolution of the challenge during 2011.

Telcel continues to fulfill all actions required in connection with the registry of its subscribers (both new and preexisting) and of their communications as well as the information provision process in compliance with the rules issued by Cofetel to comply with the Federal Telecommunications Law.

On April 29, 2011, the Mexican Congress approved a law under which the amendments to the Federal Telecommunications Law which created the RENAUT were annuled. This law will only become effective upon its publication in the Official Gazette, which we expect to occur during the second quarter of 2011.

Brazil

Legislation and Principal Regulatory Authorities

The Brazilian Telecommunications Law (Lei Geral das Telecomunicações Brasileiras) provides a framework for telecommunications regulation. The primary regulator of our Brazilian subsidiaries is Anatel. Anatel also has the authority to grant concessions and licenses for all telecommunications services, except for broadcasting services. Anatel has the authority to propose and issue regulations that are legally binding on telecommunications services providers. Any proposed regulation of Anatel is subject to a period of public comment, which may include public hearings. Anatel’s actions may ultimately be challenged in Brazilian courts.

Taxes and duties on telecommunications services

The principal tax imposed on telecommunications services is a state-level value-added tax, the Imposto sobre Circulação de Mercadorias e Serviços (“ICMS”). Each Brazilian state imposes its own tax rate on gross revenues derived from telecommunications services, which varies from state to state and averages 26%.

The principal federal taxes collected on gross revenues include:

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Programa de Integração Social (“PIS”).PIS contributions are applied at a rate of 0.65% on gross revenues derived from telecommunications services.

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Contribuição para Financiamento da Seguridade Social (“COFINS”).COFINS contributions are applied at a rate of 3.0% on gross revenues derived from telecommunications services.

The principal taxes collected on net revenues include:

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Fundo de Universalização dos Serviços de Telecomunicações (“FUST”) and Fundo para o Desenvolvimento Tecnologico das Telecomunicações (“FUNTTEL”) taxes. These taxes are applied at a rate of 1% and 0.5% of net revenues, respectively.

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Concession fee. Embratel is required to pay a fee every two years during the term of concessions equal to 2% of the revenues from switched fixed telephone services, net of taxes and social contributions, for the year preceding the payment.

Rates

Anatel regulates rates for telecommunications services.

PCS Licenses Rates

In general, PCS licensees are authorized to increase basic plan rates only for inflation (less a factor determined by Anatel based on the productivity of each operator during the year) and on an annual basis. However, operators are allowed to create non-basic plans (known as alternative plans) and modify them without prior Anatel approval. Discounts from existing service plans, both basic and non-basic, are allowed without Anatel approval.

Fixed-Line Services Rates

Embratel’s concession for both domestic long-distance and international long-distance service permits it to set its own rates in accordance with an annual rate adjustment mechanism established by Anatel. The rate adjustment is determined based on inflation and productivity across the Brazilian telecommunications industry and sets the average percentage increase or decrease for the basket of all basic long-distance rates.

The tariff structure for domestic long-distance calls is established by Anatel and is uniform throughout Brazil. There are currently 16 domestic long-distance tariffs, based on combinations of four distance categories and four day/time categories. Embratel sets its basic domestic long-distance rates each year based primarily on the rate adjustment mechanism Anatel imposes on all operators. Rates charged for outgoing international calls vary depending on the time of the day and the day of the week when a call is made, the duration of the call, the country of destination and whether special services, such as operator assistance, are used.While these long-distance rates apply to basic plan customers, Embratel has a variety of promotional and customer retention programs that enable many of its customers to obtain long-distance packages that may include lower rates and/or subscription fees.

The majority of Embratel’s long-distance voice services customers are not “pre-subscribed.” In other words, customers do not register with Embratel before it begins providing services to them. Instead, each time a customer initiates a long-distance domestic or international call from either a fixed or a mobile terminal, the customer chooses whether to use Embratel’s services by dialing the “21” selection code or to use the services of another service provider by dialing a different code.

Embratel also provides local telephony services. Rates charged for local calls vary by product and can be created by Embratel without prior Anatel approval. Discounts from existing service plans, both basic and non-basic, are allowed without Anatel previous approval.

Data Services Rates

Data transmission rates are not regulated.

Co-location

Co-location allows a party requesting interconnection to place its switching equipment in or near the local exchange of the network operator whose network the requesting party wishes to use and may connect to the network at this point of presence. Co-location arrangements are currently negotiated directly by the parties. Current regulations require operators to permit co-location of network elements and services, but do not specify which network elements and services are to be co-located or how co-location should occur.

General Regulatory Plan

Anatel approved the General Regulatory Plan (Plano Geral de Atualização da Regulamentação, or “PGR”) in October 2008 to serve as a framework to develop public telecommunications policies for a period of ten years. The PGR included Anatel’s plans to regulate Mobile Virtual Network Operators (“MVNO”) practices, expand broadband services to rural and low-income areas and implement rules related to fixed incumbents infrastructure usage within the next two years and implement a revision of the rules related to the size of the areas where the service is considered to be local. Anatel published the regulation of MVNO in November 2010. The primary goal of MVNO regulation is to increase competition in the mobile industry by allowing existing operators and new companies to target more efficiently specific market segments or geographical regions.

General Plan of Awards

A General Plan of Awards (Plano Geral de Outorgas, or “PGO”) was adopted in November 2008. The new PGO established rules concerning the geographic division of the country and the acquisition of new licenses to enhance competition in the fixed switch telephony service market. The new PGO rules also loosened restrictions on the transfer of concessions for long-distance and local services.

Concessions

Our Brazilian wireless subsidiaries hold authorizations to provide services under the PCS (Serviço Móvel Pessoal) regime in the 850 Mhz, 900 MHz, 1,800 MHz, 1,900 MHz and 2,100 MHz spectrum. These authorizations are valid for 15 years and may be extended for additional 15-year terms, upon the payment of a biannual fee equal to 2% of net revenue, except for the final year of the 15-year term, in which the fee equals 1% of net revenue. Our Brazilian subsidiaries expect to continue to acquire spectrum so as new Anatel conducts additional auctions.

The following table sets forth the regions in Brazil in which our Brazilian subsidiaries hold authorizations to provide wireless services, as well as the termination dates of such authorizations:


Regions in Brazil	Termination Dates
	850 MHz	900 MHz	1800 e 1900 MHz	3G
Bahia	—	December 2017	December 2017	April 2023
Sergipe	—	December 2017	December 2017	April 2023
Alagoas	August 2012	August 2012	August 2012	April 2023
Ceara	August 2012	August 2012	August 2012	April 2023
Piauí	August 2012	August 2012	August 2012	April 2023
Pernambuco	August 2012	August 2012	August 2012	April 2023
Rio Grande do Norte	August 2012	August 2012	August 2012	April 2023
Paraná	—	December 2017	December 2017	April 2023
Paraná (Norte)	—	December 2022	December 2022	April 2023
Santa Catarina	—	December 2017	December 2017	April 2023
Rio de Janeiro	April 2013	April 2013	April 2013	April 2023
Espírito Santo	April 2013	April 2013	April 2013	April 2023
Rio Grande do Sul	April 2013	April 2013	April 2013	April 2023
São Paulo - Capital	August 2012	August 2012	July 2012	April 2023
São Paulo - Interior	March 2013	March 2013	March 2013	April 2023
Minas Gerais	—	April 2020	April 2020	April 2023
Minas Gerais (Triângulo Mineiro)	—	—	—	April 2023
Amazonas	—	—	December 2022	April 2023
Maranhão	—	—	December 2022	April 2023
Roraima	—	—	December 2022	April 2023
Amapá	—	—	December 2022	April 2023
Pará	—	—	December 2022	April 2023
Distrito Federal	July 2012	July 2012	July 2012	April 2023
Mato Grosso do Sul	July 2012	July 2012	July 2012	April 2023
Goiás	July 2012	July 2012	July 2012	April 2023
Tocantins	July 2012	July 2012	July 2012	April 2023
Mato Grosso	July 2012	July 2012	July 2012	April 2023
Rondônia	July 2012	July 2012	July 2012	April 2023
Acre	July 2012	July 2012	July 2012	April 2023

Other Licenses

Embratel holds a domestic long-distance concession and an international long-distance concession, which were granted on December 22, 2005 and will expire on December 31, 2025. Anatel´s regulation establishes a possible revision every five years to take into account new conditions and the reconsideration of service obligation and quality targets. It also holds authorizations to provide local service for an indefinite term. Its authorization to provide DTH satellite television services was granted by Anatel in May 2008 for Embratel TV SAT and will expire in 2023, though it can be renewed for additional 15 year terms.

Our Brazilian satellite subsidiary Star One holds authorizations for C-band frequencies for satellites C-1, C-2, B-2 and B-4, which were renewed for 15-year terms in December 2005. Star One’s authorizations to operate in the Ku-band frequencies for satellites C-1 and C-2 were granted in 2003, and each has a 15-year term. Anatel also granted Star One 15-year authorizations for operation in both the Ku-band and C-band frequencies for satellites B-1 and B-3 in 2007.

Embratel also holds a data services license to operate Multimedia Communication Service domestically and internationally for an indefinite term throughout the country.

Concession Fees

Embratel is required to pay a fee every two years during the term of its concession equal to 2% of the revenues from switched fixed telephone services, net of taxes and social contributions, for the year preceding the payment.

Expansion, modernization and service quality requirements

Telecommunications providers are subject to universal service requirements and quality targets under their concessions and the General Plan of Quality Goals (“PGMQ”) and General Plan of Telephony Universalization Goals (“PGMU”). The PGMQ sets forth a series of service quality obligations that are incorporated into the concessions. Failure to fulfill quality of service obligations can lead to the imposition of fines and penalties by Anatel. There are a variety of external factors that may impede our ability to fulfill those obligations. Because our network connects with those of regional fixed-line operators, regional cellular operators and foreign operators, the quality of service we provide may also be significantly affected by the quality of the networks on which calls originate or terminate. Anatel’s regulations provide for possible revision every five years to take into account changed conditions and to reconsider universal service obligations and quality targets. Anatel began a process of public comment in 2009 to revise the terms of Embratel’s long distance services concessions, as well as the PGMQ and the PGMU.

Wireless Interconnection Fees

Currently, wireless operators determine interconnection fees by agreement, subject to Anatel intervention only in case of disputes. On February 2005, Anatel commenced an arbitration proceeding against all mobile and fixed line operators in Brazil regarding the inflation adjustment applied by operators on the interconnection fees. The operators agreed on an interim price adjustment of 4.5% on mobile interconnection fees, which Anatel confirmed in 2009. From 2007 to 2008, Claro entered into agreements with major mobile and some fixed operators in Brazil establishing interconnection fees.

In 2009, interconnection fees were submitted to investigation by the Economic Defense Department under the allegation of price squeeze.

In the auction rules for 3G licenses published in 2007, it was established that, by October 2009, all service authorizations terms should be unified under three major areas. In 2010, pursuant to a negotiation process ordered byAnatel, Claro came to an agreement with most of fixed and mobile operators to use an average interconnection rate. However, Claro was unable to reach an agreement with other operators, which has resulted in an ongoing arbitration process before Anatel. If the rates determined in that arbitration process are different from the one Claro has agreed to with most operators, Claro may suffer a financial impact.

In 2005, Anatel defined a series of cost-based methods, including the fully allocated cost methodology, for determining interconnection fees charged by operators belonging to an economic group with significant market power. Anatel has proposed that an economic group with more than 20% of market share will be considered to have significant market power for this purpose. Under this proposal, Claro would be an economic group with significant market power.Anatel has not published all of the applicable regulations, but in 2010 the International Telecommunications Union and Anatel commenced the auction process to select the consulting firm that is going to analyze and implement the cost-based methodology that expected to take effect in 2011. When these methods are ultimately implemented and if Claro is deemed to be an economic group with significant market power, the revenues and results of operations of our Brazilian operations may be affected.

Fixed Line Interconnection Fees

Fixed line operators may freely negotiate interconnection rates, subject to a price cap established by Anatel. However, if an operator offers an interconnection tariff below the price cap to another operator, it must offer that price to any other operator that requests it.

Southern Cone

Argentina

The main telecommunications regulatory authorities in Argentina are the Communications Ministry (Secretaría de Comunicaciones) and the National Communications Commission (Comisión Nacional de Comunicaciones), both of which are under the authority of the Ministry of Federal Planning, Public Investment and Services of the National Government.

AMX Argentina holds licenses covering the entire Argentine territory. These licenses contain coverage, reporting and service requirements, but do not have a fixed expiration date. The Communications Ministry is in charge of supervising the telecommunications industry in Argentina. It is authorized to foreclose and sell the shares of a licensee in case of specified breaches of the terms of a license.

During 2010, the Communications Ministry issued Resolution 98/2010 setting rules for the implementation of number portability, which is expected to begin in December 2011.

In the second half of 2006, Telmex Argentina began renegotiating the conditions of its interconnection contracts with the incumbent operators in Argentina, Telefónica de Argentina S.A. and Telecom Argentina S.A. These contracts regulate the terms and conditions of interconnection for local and domestic and international long-distance telephony between telecommunications operators. Telmex Argentina has made a request to the Communications Ministry to make a determination as to interconnection rates. However, Telmex Argentina has separately been negotiating with other operators to resolve this issue. In the event an agreement is reached, Telmex Argentina and the operators it is negotiating with will voluntarily terminate all pending interconnection regulatory proceedings.

Pursuant to Decree 558/08 all telecommunications providers, including AMX Argentina and Telmex Argentina must contribute 1% of their monthly revenues, determined after certain deductions, to the Universal Fund (Fondo Fiduciario del Servicio Universal) to finance the provision of telecommunication services in underserved areas and to underserved persons.

Chile

The General Telecommunications Law of 1982, as amended, established the legal framework for the provision of telecommunications services in Chile. The law established the rules for granting concessions and permits to provide telecommunications services and for the regulation of rates and interconnection. The main regulatory agency of the Chilean telecommunications sector is the Chilean Transportation and Communications Ministry (Ministerio de Transportes y Telecomunicaciones), which acts primarily through the Undersecretary of Telecommunications.

Claro Chile holds a concession covering the entire Chilean territory. The concession was awarded in June 1997 and covers a 30-year period. The concession contains coverage, reporting and service requirements. The Chilean Transportation and Communications Ministry is authorized to foreclose and sell the shares of a concessionaire in case of specified breaches of the terms of the concession.

In May 2006, Claro Chile acquired from Telefónica Móviles a concession for the use of 25 MHz within the 850 MHz frequency, which permits Claro Chile to increase the wireless services it provides. The term of this concession is for a 25-year period for the Metropolitan area and Region V and for an indefinite period for the rest of Chile.

Our subsidiaries have the right to use licenses to provide local fixed and wireless service through the 50 MHz of the 3.4 to 3.6 GHz frequency band throughout the country, domestic and international long-distance service, data services, Internet access, pay television services and value-added services.

Mobile and fixed number portability regulation is being currently enacted and is expected to be implemented in 2011.

Paraguay

The National Telecommunications Commission of Paraguay (Comisión Nacional de Telecomunicaciones de Paraguay) is in charge of supervising the telecommunications industry in Paraguay. It is authorized to cancel licenses in case of specified breaches of the terms of a license.

AMX Paraguay holds a nationwide PCS 1900 spectrum license for a five-year term starting on January 26, 2009. AMX Paraguay also holds an Internet Access license covering the entire territory for a 5-year period starting on December 19, 2007. In November 2010, AMX Paraguay received license for a five year term to provide residential TV services. The licenses are renewable, subject to regulatory approval, and contain coverage, reporting and service requirements. In December 2010, the National Telecommunications Commission of Paraguay approved the regulation for number portability, which is expected to be implemented in December 2011.

Uruguay

The Regulatory Unit of Communications Services (Unidad Reguladorada de Servicios de Comunicaciónes) is in charge of supervising the telecommunications industry in Uruguay. In June 2004, we acquired a 20-year license to operate three broad-band PCS frequencies in Uruguay.

Colombia and Panama

Colombia

The Ministry of Communications and the CRC are responsible for regulating and overseeing the telecommunications sector, including cellular operations. In addition, the main telecommunications regulatory authority in Colombia with respect to cable and broadcast television is the National Television Commission (Comisión Nacional de Televisión). The Ministry of Communications, which granted the cellular concessions in 1994, supervises and audits the performances of the concessionaires’ legal and contractual obligations. The activities of Comcel are also supervised by the Colombian Superintendency of Industry and Commerce (Superintendencia de Industria y Comercio), which enforces antitrust regulations, promotes free competition in the marketplace and protects consumer rights.

In September 2009, the CRC issued a series of resolutions stating that Comcel has a dominant position in Colombia’s market for outgoing mobile services. Under Colombian law, a market participant is considered to have a dominant position in a specified market if there is a substantial difference between that market participant’s traffic, revenues and subscriber base and its competitors’ traffic, revenues and subscriber base. The resolutions also included regulations that would require Comcel to charge rates (excluding access fees) for mobile-to-mobile calls outside the Comcel network (“off net”) that are no higher than the fees charged for mobile-to-mobile calls within the Comcel network (“on net”) plus access fees. The regulations, which limit Comcel’s flexibility in offering pricing plans to its customers, were first implemented on December 4, 2009. As of the date of this annual report, the CRC is evaluating whether to broaden or suspend the regulations. If the regulations are broadened, they could have an adverse impact on our operations, but we cannot predict the effects on Comcel’s financial performance. See Note 17 to our audited consolidated financial statements included in this annual report.

Comcel holds ten-year concessions, acquired in 1994, to provide wireless telecommunications services in the eastern, western and Caribbean regions of Colombia. Under the terms of the concessions, Comcel is required to make quarterly royalty payments to the Ministry of Communications based on its revenues. Under the terms of an agreement entered into in March 2004, the Ministry of Communications agreed to renew Comcel’s concessions through 2014.

Panama

Claro Panamá’s business is subject to comprehensive regulation and oversight by the National Authority of Public Services (Autoridad Nacional de Servicios Públicos).

Claro Panamá has a license for the provision of mobile voice, data and video services in Panama. The license grants the right for use of 30 MHz in the 1900 MHz band for a 20-year period.

Andean Region

Ecuador

Our wireless and fixed line operations are subject to regulation by:

•

the National Telecommunications Counsel (Consejo Nacional de Telecomunicaciones), which is responsible for policy-making in the telecommunications area;

•

the National Telecommunications Secretariat (Secretaría Nacional de Telecomunicaciones, or “Senatel”), which is responsible for executing the National Telecommunications Counsel’s resolutions;

•

the Telecommunications Agency (Superintendencia de Telecomunicaciones), which monitors the use of authorized frequencies and compliance with concession provisions; and

•

Telecommunications and Information Society Ministry (Ministerio de Telecomunicaciones y Sociedad de la Información), which was created in August 2009 and is responsible for the telecommunications industry’s development.

In 2006, Conecel obtained a concession to operate 10 MHz on the 1900 MHz (Sub Band E-E) radio spectrum. This included a concession for PCS services granted in August 2008 that expires in August 2023, and concessions for data transmission and Internet services granted in May 2002 that expire in May 2017. The new PCS concession allows us to provide 3G services and contains stricter quality of service requirements regarding issues such as number of successful call completions, average delivery time of SMS services, area coverage and service.

Ecuador Telecom holds a concession to offer fixed-line telephony (including long-distance), public telephony and data transmission services as well as a license to use the 3.5 GHz frequency band that expires in May 2023.

Peru

The main telecommunications regulatory authorities in Peru are the Supervising Entity of Private Investment in Telecommunications of Peru (Organismo Supervisor de Inversión Privada en Telecomunicaciones del Perú) and the Ministry of Transportation and Communications (Ministerio de Transportación y Comunicaciones).

América Móvil Perú holds concessions to provide mobile, PCS, fixed, long-distance and value added services covering all departments in Peru. The concessions were awarded by the Ministry of Transportation and Communications in May 2000, March 2001 and December 2002, respectively, and each covers a 20-year period. The concessions contain coverage, reporting and service requirements. The Ministry of Transportation and Communications is authorized to cancel the concessions in case of specified breaches of the terms of a concession. In 2006, Telmex Perú acquired concessions to provide wireless access services in the 3.5 GHz band in Lima and eight provinces in Peru.

Mobile number portability was implemented in January 2010, and during 2010, requests transferring to América Móvil Perú amounted to 72.9% of total portability requests.

Central America

El Salvador

CTE’s business is subject to comprehensive regulation and oversight by the Electricity and Telecommunications Agency (Superintendencia General de Electricidad y Telecomunicaciones). CTE holds a concession from the Salvadorean government to operate its nationwide fixed-line network and a nationwide PCS 1900 MHz concession to operate its cellular network.

Guatemala

Telgua’s business is subject to comprehensive regulation and oversight by the Guatemalan Telecommunications Agency (Superintendencia de Telecomunicaciones) under the General Telecommunications Law (Ley General de Telecomunicaciones). Beginning in May 2006, Telgua’s business is subject to regulation under certain dispositions of the free trade agreement among the Dominican Republic, Central American countries, including Guatemala, and the United States. Telgua holds a license from the Guatemalan government to operate its nationwide fixed-line network and numerous licenses to operate its cellular network on different frequencies and in all the national territory.

Nicaragua

Enitel’s business is subject to comprehensive regulation and oversight by the Nicaraguan Telecommunications Institute (Instituto Nicaragüense de Telecomunicaciones y Correos) under the General Telecommunications and Postal Services Law (Ley General de Telecomunicaciones y Servicios Postales).

Honduras

Sercom Honduras’ business is subject to comprehensive regulation and oversight by the Honduran Telecommunications Agency (Comisión Nacional de Telecomunicaciones) under the Telecommunications Law (Ley Marco del Sector de Telecomunicaciones).

United States

TracFone is subject to the jurisdiction of the U.S. Federal Communications Commission (“FCC”) and to certain U.S. telecommunications laws and regulations. TracFone is not required to hold wireless licenses to carry out its business.

Caribbean

Dominican Republic

The Dominican Institute of Telecommunications (Instituto Dominicano de las Telecomunicaciones, or “Indotel”) is in charge of supervising the telecommunications industry in the Dominican Republic. Codetel holds concessions to provide telecommunication services in the Dominican Republic. The concessions do not contain coverage, reporting or service requirements. Indotel is authorized to cancel the concessions in the event of specified breaches of their terms.

Jamaica

The Office of Utilities Regulator (“OUR”) is in charge of supervising the telecommunications industry in Jamaica. Oceanic holds concessions to provide wireless services in Jamaica that contain coverage, reporting and service requirements. The OUR has the authority to cancel the concessions in the event of specified breaches of their terms.

Puerto Rico

The FCC and the Telecommunications Regulatory Board of Puerto Rico oversee and regulate the telecommunications industry in Puerto Rico. Telpri holds concessions to provide PCS and long-distance services in Puerto Rico that contain coverage, reporting and service requirements. The FCC has the authority to cancel the concessions in the event of specified breaches of their terms.

CAPITAL EXPENDITURES

The following table sets forth our consolidated capital expenditures by segment for each year in the two-year period ended December 31, 2010. The table below includes capital expenditures on property, plant and equipment and on acquisitions or renewals of licenses. See “Liquidity and Capital Resources—Funding Requirements” under Item 5.


	Year ended December 31,⁽¹⁾
	2009		2010
	(millions of Mexican pesos)
Mexico Wireless	Ps.	8,254	Ps.	8,179
Mexico Fixed		9,676		9,460
Brazil		25,039		30,890
Southern Cone		7,312		9,709
Colombia and Panama		11,469		7,522
Andean Region		4,672		3,709
Central America		6,120		6,195
United States		462		435
Caribbean		6,826		5,841

Total capital expenditures	Ps.	79,830	Ps.	81,942

(1)	Figures reflect amounts accrued for each period.

We have budgeted capital expenditures of approximately U.S.$8.4 billion for the year ending December 31, 2011, but this budgeted amount could change as we re-evaluate our expenditure needs during the year. We expect to spend approximately one-third of our budgeted capital expenditures in Brazil and approximately one-fifth in Mexico. Our capital expenditures could increase if we obtain regulatory authorization to offer television and audio services in Mexico, or as a result of any business acquisitions. Our historical and budgeted capital expenditures discussed above do not include expenditures on acquisitions.

Item 5.

Operating and Financial Review and Prospects

Introduction

Presentation in IFRS

The following discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto included in this annual report. Our financial statements have been prepared in accordance with IFRS as issued by the IASB. We began reporting under IFRS for the year ending December 31, 2010, with an IFRS adoption date of December 31, 2010 and a transition date to IFRS of January 1, 2009. Note 1(II)(b) to our audited consolidated financial statements contains an analysis of the valuation, presentation and disclosure effects of adopting IFRS and a reconciliation between Mexican FRS and IFRS as of January 1 and December 31, 2009 and for the year ended December 31, 2009.

In connection with our adoption of IFRS, we relied on certain exceptions from IFRS that are required or permitted in connection with the initial adoption of IFRS. The mandatory exceptions on which we relied are those relating to (1) the determination of estimates at the date of transition; (2) the prospective application of certain requirements of IAS 27 (as amended in 2008), Consolidated and Separate Financial Statements, applicable to non-controlling interests at the date of transition; and (3) the prospective application of derecognition of financial assets and liabilities. The mandatory exception regarding hedge accounting is not applicable to our derivative financial instruments.

Below we describe the optional exceptions on which we relied, together with a discussion of the impact that the treatment specified by IFRS would have had absent our election to rely on the relevant exemption. See Note 1(II)(b)(7) to our audited consolidated financial statements.

•

Deemed Cost. We used as the deemed costs at the date of transition the revalued cost of property, plant and equipment under Mexican FRS at December 31, 2008. Had we adopted the historical cost methodology under IFRS, the cost of our property, plant and equipment would have been recognized based on their historical cost and we would have reversed inflation adjustments. Had we adopted the fair value methodology under IFRS, the cost of our property, plant and equipment would have been determined based on an appraisal as of the date of transition and following periods.

•

Business Combinations. We reflect business combinations prior to the date of transition as they were recognized using the purchase method under Mexican FRS. Had we not exercised this exemption, we would have applied IFRS 3 to all our acquisitions prior to the date of transition to IFRS. IFRS differs from Mexican FRS particularly with respect to recognition and valuation of employment obligations, property, plant and equipment and other liabilities. As a result, the assignment of net values would have been different under IFRS.

•

Cumulative Translation Differences. We reclassified the cumulative translation effect from all foreign subsidiaries determined under Mexican FRS to retained earnings at the date of transition. Had we not applied this exemption, we would have been able to reclassify the translation effect only for subsidiaries in countries experiencing hyperinflation as defined under IFRS.

Note 3 to our audited consolidated financial statements discusses new accounting pronouncements under IFRS that will become effective in 2011. We do not currently expect that any of these will have a significant impact on the presentation of our financial statements.

Acquisitions of CGT and Telmex Internacional

During 2010, we acquired a controlling interest in CGT, which owns controlling interests in Telmex Internacional and in Telmex. The acquisition occurred in an initial exchange offer that closed in June 2010 and a series of subsequent exchange offers. We issued new shares of América Móvil in exchange for the shares of CGT we acquired. The acquisition of the controlling interest in CGT was accounted for as a transaction between entities under common control, and accordingly our audited consolidated financial statements include CGT, Telmex Internacional and Telmex as consolidated subsidiaries for all dates and periods presented. The acquisition of the non-controlling interest in CGT was accounted for as purchases of non-controlling interests in a consolidated subsidiary as of the respective dates of acquisition.

We also acquired shares of Telmex Internacional from unrelated parties. The acquisition occurred in an initial offer that also closed in June 2010, concurrently with the initial CGT offer, and a series of subsequent offers that continued in 2011. Shareholders of Telmex Internacional elected whether to receive cash or new shares of América Móvil in exchange for their shares of Telmex Internacional. These transactions have been accounted for as purchases of non-controlling interests in a consolidated subsidiary as of the respective dates of acquisition.

Investment in Net Serviços

We account for our investment in Net Serviços on the equity method, because we do not have a controlling interest in its voting shares. In a series of cash tender offers beginning in 2010 and concluding in January 2011, we substantially increased our interest in the preferred shares of Net Serviços. Following such transactions, we own 91.9% of the total equity of Net Serviços, including 92.3% of its preferred shares (which do not have voting rights), 49.0% of its voting common shares that we own directly, and a non-controlling interest in a company that owns the remaining 51.0% of its voting common shares.

Use of Certain Operating Measures

In analyzing our financial performance, we use certain operating measures that are not included in our financial statements. These measures may not be comparable with similarly titled measures and disclosures by other companies. The principal such measures are:

ARPU—average revenues per subscriber per month. This measure analyzes revenues from wireless data and voice services. We calculate ARPU for a given period by dividing service revenues for such period by the average number of wireless subscribers for such period. The figure includes both prepaid and postpaid customers.

MOUs—average minutes of use per subscriber per month. This measure analyzes usage of wireless services. We calculate MOUs by dividing total wireless traffic in a given period by the average number of wireless subscribers for such period.

Churn—This measure analyzes the rate at which customers disconnect our services (wireless or fixed). We calculate churn rate as the total number of customer disconnections for a period divided by total subscribers at the beginning of such period. For wireless customers, postpaid subscribers are considered disconnected at the expiration of their contracts or earlier if they voluntarily discontinue service, and prepaid customers are considered disconnected following a specified period of time after they become delinquent, or four months after they cease using our service, so long as they have not activated a calling card or received traffic.

Market share—We calculate our subscriber market share by dividing our own subscriber figures into the total market subscriber figures periodically reported by the regulatory authorities in the markets in which we operate. We understand that these regulatory authorities compile total market subscriber figures based on subscriber figures provided to them by market participants, and we do not independently verify these figures.

Segments

We have operations in 18 countries, which are grouped for financial reporting purposes in 9 segments. Our operations in Mexico are presented in two segments—Mexico Wireless, which comprises principally Telcel, and Mexico Fixed, which consists of Telmex and its subsidiaries providing fixed-line services. Our headquarters operations are allocated to the Mexico Wireless segment. Segment information is presented in Note 21 to our audited consolidated financial statements.

Factors that drive financial performance differ for our different geographical segments, depending on subscriber acquisition costs, the competitive situation, the regulatory environment, economic factors, interconnection rates, capital expenditure requirements and many other factors. Accordingly, our results of operations in each period reflect a combination of different effects in the different segments.

Effects of Exchange Rates

Our results of operations are affected by changes in currency exchange rates. As discussed above, currency variations between the Mexican peso and the currencies of our non-Mexican subsidiaries, especially the Brazilian real, may affect our results of operations as reported in Mexican pesos.

Changes in the value of the various operating currencies of our subsidiaries against the U.S. dollar also result in exchange losses or gains on our net U.S. dollar-denominated indebtedness and accounts payable. Appreciation of these currencies against the U.S. dollar generally results in foreign exchange gains, while depreciation of these currencies against the U.S. dollar generally results in foreign exchange losses. We recorded net foreign exchange gains of Ps. 5.6 billion in 2010 and Ps. 13.4 billion in 2009. Changes in exchange rates also affect the fair value of derivative instruments that we use to manage our currency risk exposures. We recognized net fair value losses on derivatives of Ps. 9.1 billion in 2010 and Ps. 8.5 billion in 2009. See Note 2(o) to our audited consolidated financial statements.

Effects of Regulation

We operate in a regulated industry. Although currently we are free to set end prices to our wireless customers, our results of operations and financial condition have been, and will continue to be, affected by regulatory actions and changes. In recent periods, for example, regulators have imposed or promoted decreases to interconnection rates, and we expect further decreases in interconnection rates in Mexico, Chile and Colombia. Lower interconnection revenues have often been offset by increased traffic resulting from lower effective prices to customers, but this may change.

Composition of Operating Revenues

Our operating revenues consist of voice mobile revenues (44.1% of total operating revenues in 2010), voice fixed revenues (23.1% in 2010), data mobile revenues (12.7% in 2010), data fixed revenues (10.9% in 2010), Pay TV revenues (1.6% in 2010) and other services and discounts (7.8% in 2010). Other services include revenues from selling handsets and other equipment, as well as other miscellaneous revenue. Revenues from other services also reflect deductions for commissions paid to our distributors.

Voice revenues include primarily monthly subscription charges, airtime charges, charges for local and long-distance calls, and interconnection charges billed to other service providers for calls completed on our network. Revenues from monthly subscription charges are driven mainly by the number of subscribers and the pricing of subscription packages. The primary driver of usage charges (airtime and interconnection charges) is traffic, which, in turn, is driven by the number of customers and by their average usage. Postpaid wireless customers generally have an allotment of airtime each month for which they are not required to pay usage charges.

Revenues from wireless and fixed data services include primarily revenues from value-added services, corporate networks, data services and Internet access service. Revenues from corporate networks mainly consist of revenues from installing and leasing dedicated private lines, revenues from VPN services and revenues from the sale of value-added services to these customers.

Pay TV revenue consists primarily of subscription charges, charges for additional programming and advertising revenue.

We also have sales revenues from selling handsets and other equipment. Most of our new subscribers purchase a handset, and although we also sell new handsets to existing customers, changes in sales revenues are driven primarily by the number of new customers. The pricing of handsets is not geared primarily to making a profit from handset sales, because it also takes into account the service revenues that are expected to result when the handset is used.

Revenues from sales of prepaid services are deferred and recognized as airtime is used or when it expires, and are included under usage charges. Revenues are recognized at the time services are provided. Billed revenues for service not yet rendered are recognized as deferred revenues.

Seasonality of our Business

Our business has been subject to a certain degree of seasonality, characterized by a higher number of new clients during the fourth quarter of each year. We believe seasonality is mainly driven by the Christmas shopping season.

General Trends Affecting Operating Results

We have experienced continuing growth in our operating revenues in most of our markets, except for fixed voice services. The main drivers of increased revenues in 2010 were wireless subscriber growth, especially in postpaid wireless plans, and increased use of both wireless and fixed data services. This has been partly offset by

declining prices for many services under highly competitive market conditions and by declining interconnection rates. Subscriber acquisition costs, including advertising, handset subsidies and selling expenses, continue to increase. Operating costs have also increased as a result of many factors including the cost of content for wireless data services, increased advertising, customer care programs such as call centers, and the growing size and complexity of our networks. Our operating margin, which depends on the balance between subscriber growth, increasing usage, pricing and higher costs, decreased slightly in 2010.

Consolidated Results of Operations for 2010 and 2009

Operating Revenues

Operating revenues increased by 8.3% in 2010. The Ps. 46.6 billion total increase was attributable to increases in revenues from our mobile operations, pay TV and other services, slightly offset by a decrease in revenues from our fixed-line operations. Without taking into account other services and discounts, our operating revenues increased by 7.3% in 2010.

Voice Mobile—Voice mobile revenues increased by 7.0% in 2010. The Ps. 17.5 billion total increase was principally due to an increase in traffic, which resulted in increased airtime and monthly charges.

Voice Fixed—Voice fixed revenues decreased by 4.6% in 2010. The total decrease of Ps. 6.8 billion in voice fixed revenues was principally due to a decrease in long distance traffic and lower interconnection rates.

Data Mobile—Data mobile revenues increased by 39.3% in 2010. The total increase of Ps. 21.7 billion in data mobile revenues was principally due to increased use of value-added services, including SMS messaging and web browsing.

Data Fixed—Data fixed revenues increased by 8.8% in 2010. The total increase of Ps. 5.3 billion in data fixed revenues was principally due to residential and corporate subscriber growth.

Pay TV—Pay TV revenues increased by 59.2% in 2010. The total increase of Ps. 3.5 billion in Pay TV revenues was principally due to subscriber growth in our Brazilian operations.

Other services and discounts—Revenues from other services and discounts increased by 12.9% in 2010. The total increase of Ps. 5.4 billion primarily reflects sales of handsets, accessories and computers, partially offset by an increase of Ps. 1.7 billion in commissions paid to distributors.

Operating Costs and Expenses

Cost of sales and services—Cost of sales and services represented 41.7% of operating revenues in 2010 and 41.5% of operating revenues in 2009. In absolute terms, cost of sales and services increased by 8.9% in 2010. This increase was slightly greater than the 8.3% growth in operating revenues during the same period.

Cost of sales was Ps. 85.5 billion in 2010 and Ps. 80.9 billion in 2009 and primarily represents the cost of handsets, accessories and computers sold to costumers. Costs of handsets, accessories and computers increased by 5.7% in 2010.

Cost of services was Ps. 167.9 billion in 2010 and Ps. 151.7 billion in 2009. The 10.0% increase in 2010 was greater than the growth in service revenues, which increased by 8.3%. Cost of services increased faster than service revenues primarily due to increased royalty payments under our concessions and licenses, increased network maintenance costs and increased expenses related to rental of cell and switch sites.

Commercial, administrative and general—Commercial, administrative and general expenses represented 17.7% of operating revenues in 2010 and 17.2% of operating revenues in 2009. On an absolute basis, commercial administrative and general expenses increased by 11.3% in 2010. The increase in commercial, administrative and general expenses in 2010 principally reflects higher customer services expenses and profit sharing expenses in Mexico, Ecuador and Peru.

Telcel and Telmex, like other Mexican companies, are required by law to pay to their employees, in addition to their agreed compensation and benefits, profit sharing in an aggregate amount equal to 10% of each of their taxable income. Our subsidiaries in Ecuador and Peru are also required to pay employee profit sharing at a rate of 15% and 10%, respectively, of taxable income. We recognize these amounts under commercial, administrative and general expenses.

Other expense, net—In 2010, we recorded net other expense of Ps. 3.6 billion, compared to net other expense of Ps. 3.4 billion in 2009.

Depreciation and amortization—Depreciation and amortization increased by 14.0% (or Ps. 11.1 billion) in 2010. As a percentage of revenues, depreciation and amortization increased from 14.2% in 2009 to 15.0% in 2010. The increase in depreciation and amortization in 2010 reflects the high level of capital expenditures and the shortening of the useful lives of certain equipment in Brazil, Colombia and Paraguay and certain write-offs in Guatemala.

Operating Income

Operating income increased by 2.3% in 2010, reflecting the increase in our operating revenues. All of our segments reported operating income in 2010. Operating margin (operating income as a percentage of operating revenues) was 25.1% in 2010 and 26.5% in 2009. The decrease in our operating margin in 2010 is due principally to higher subscriber acquisition, network maintenance and customer service costs and royalty payments under our concessions and licenses.

Interest income

Interest income increased by 30.9% in 2010. The total increase of Ps. 1.1 billion in interest income is principally due to higher cash balances.

Interest expense

Interest expense increased by 18.4% in 2010. The total increase of Ps. 2.7 billion in interest expense is principally due to a higher average level of indebtedness.

Foreign exchange gain, net

Foreign exchange gain, net represented Ps. 5.6 billion in 2010, compared to Ps. 13.4 billion in 2009. The lower level of net foreign exchange gains was primarily attributable to a lower rate of depreciation of the U.S. dollar against the major currencies in which we operate, particularly the Brazilian real.

Valuation of derivatives and other financial items, net

Net fair value losses increased by 19.0% in 2010. The total increase of Ps. 1.9 billion is principally due to the effects of exchange rate movements on derivative financial instruments, commissions paid to financial institutions in respect of financing arrangements and debt offerings and brokerage commissions paid in respect of open market share repurchases.

Equity in results of associates

Our proportionate share of the net income of associates accounted for under the equity method was of Ps. 1.7 billion in 2010 and Ps. 2.0 billion in 2009. The income in 2010 and 2009 reflects principally our share of the income reported by Net Serviços.

Income Tax

Our effective rates of provisions for corporate income tax as a percentage of pretax income were 26.8% in 2010 and 25.3% in 2009. Our effective rate in 2010 and 2009 includes the recognition of the deferred tax benefits corresponding to tax losses in Brazil. The statutory rate of Mexican corporate income tax was 30% in 2010 and 28% in 2009.

Net Income

We had net income of Ps. 98.9 billion in 2010 and Ps. 106.9 billion in 2009. The decrease in net income in 2010 reflects principally lower levels of exchange gains in 2010.

Segment Results of Operations for 2010 and 2009

We discuss below the operating results of each operating segment. Note 2(b)(ii) to our audited consolidated financial statements describes how we translate the financial statements of our non-Mexican subsidiaries. Exchange rate changes between the Mexican peso and those currencies affect our reported results in Mexican pesos and the comparability of reported results between periods.

The following table sets forth the exchange rate used to translate the results of our significant non-Mexican operations, as expressed in Mexican pesos per foreign currency unit, and the change from the rate used in the prior year. The U.S. dollar is our functional currency in several countries in addition to the United States, including Ecuador and Puerto Rico.


	Mexican pesos per foreign currency unit
	2009		2010		%Change
Guatemalan quetzal		1.658		1.5680		(5.4	)%
U.S. dollar		13.5130		12.6371		(6.5	)
Brazilian real		6.8248		7.1828		5.2
Colombian peso		0.0063		0.0067		6.3
Argentine peso		3.6311		3.2309		(11.0	)
Dominican peso		0.3759		0.3426		(8.9	)

The tables below set forth operating revenues and operating income for each of our segments for the periods indicated.


	Year ended December 31, 2009
	Operating revenues						Operating income
	(in millions of Mexican Pesos)			(as a % of total operating revenues)			(in millions of Mexican Pesos)			(as a % of total operating income)
Mexico Wireless		Ps.146,095			26.0	%		Ps. 72,995			49.1	%
Mexico Fixed		118,348			21.1			32,505			21.8
Brazil		140,676			25.1			15,489			10.4
Southern Cone		39,822			7.1			4,917			3.3
Colombia and Panama		42,437			7.6			10,886			7.3
Andean Region		26,844			4.8			6,416			4.3
Central America		17,956			3.2			1,280			0.9
United States		22,655			4.0			797			0.5
Caribbean		28,210			5.0			4,085			2.7
Eliminations		(21,788	)		(3.9	)		(558	)		(0.3	)

Total		Ps.561,255			100.0	%		Ps.148,812			100.0	%


	Year ended December 31, 2010
	Operating revenues						Operating income
	(in millions of Mexican Pesos)			(as a % of total operating revenues)			(in millions of Mexican Pesos)			(as a % of total operating income)
Mexico Wireless		Ps.157,555			25.9	%		Ps. 76,090			50.0	%
Mexico Fixed		114,080			18.8			27,992			18.4
Brazil		154,309			25.4			13,843			9.1
Southern Cone		43,466			7.2			7,531			4.9
Colombia and Panama		48,893			8.0			12,513			8.2
Andean Region		29,484			4.9			9,077			6.0
Central America		17,154			2.8			783			0.5
United States		35,562			5.9			1,617			1.1
Caribbean		26,993			4.4			3,304			2.2
Eliminations		(19,640	)		(3.3	)		(429	)		(0.4	)

Total		Ps.607,856			100.0	%		Ps.152,321			100.0	%

Mexico Wireless

Segment operating revenues increased by 7.8% in 2010. Excluding revenues from other services and discounts, service revenues increased by 8.2% in 2010. This increase in service revenues was primarily driven by an increase in data revenues and voice revenues. Wireless voice revenues increased by 3.2% in 2010, reflecting growth in revenues from monthly charges and airtime, long distance and roaming services, partially offset by a decrease in interconnection revenues due to lower interconnection fees that were not compensated by volume. Wireless data revenues increased by 26.8% in 2010, principally due to increased revenue from SMS messaging, two-way messaging and e-commerce. In 2010, the components of service revenues were wireless voice (74.7%) and wireless data (25.3%).

In 2010, the number of prepaid wireless subscribers increased by 7.1%, and the number of postpaid wireless subscribers increased by 21.6%, resulting in an increase in the total number of wireless subscribers in Mexico of 8.4% to approximately 64.1 million as of December 31, 2010, which represented a net addition of 4.9 million wireless subscribers.

Average MOUs per subscriber increased by 8.2% in 2010. ARPU increased by 1.8% in 2010. During 2010, we lowered the price of some of our services in Mexico through new commercial plans and promotions, which

contributed to the increase in subscribers (primarily prepaid subscribers) and MOUs but dampened the increase in ARPU. Reductions in interconnection tariffs and a decline in long distance traffic resulted in lower interconnection revenues in 2010. The wireless churn rate for our Mexican Wireless operations remained stable at 3.2% in 2009 and 2010.

Segment operating income increased by 11.1% in 2010. Segment operating margin (operating income as a percentage of operating revenues) was 48.3% in 2010 and 50.0% in 2009. The increase in segment operating income and operating margin in 2010 is due principally to a slower rate of increase in interconnection and network maintenance costs than in our operating revenues.

The financial information for our Mexico Wireless segment set forth in Note 21 includes revenues and costs from group corporate activities, such as licensing fees and group overhead expenses. The discussion above refers to our operating results in our Mexico Wireless segment and excludes the results of our group corporate activities.

Mexico Fixed

Segment operating revenues decreased by 3.6% in 2010. Excluding revenues from other services and discounts, service revenues decreased by 5.6%. This decrease is principally due to decreases in voice revenues, partially offset by an increase in data revenues. Fixed voice revenues decreased by 10.3% in 2010, reflecting significant reductions in local and long distance traffic and lower interconnection fees. Revenues from broadband and corporate network services increased by 6.7% in 2010, principally due to corporate and residential subscriber growth. In 2010, the components of service revenues were fixed voice (69.2%) and broadband and corporate network services (30.8%).

In 2010, the number of fixed voice RGUs in Mexico decreased by 1.8%, and the number of broadband RGUs in Mexico increased by 12.8%, resulting in an increase in total RGUs in Mexico of 2.4% to approximately 23.0 million as of December 31, 2010. In 2010, long distance minutes increased by 1.6% and interconnection minutes decreased by 0.7%, resulting in an increase in total minutes in Mexico of 0.2%. The fixed voice churn rate decreased slightly from 1.4% in 2009 to 0.9% in 2010. The broadband churn rate remained stable at 1.6% in 2009 and 2010.

Segment operating income decreased by 13.9% in 2010. Segment operating margin was 24.5% in 2010 and 27.5% in 2009. The decrease in segment operating income and operating margin in 2010 is due principally to the decrease in operating revenues and increased costs of equipment, network maintenance costs and energy costs.

Brazil

Segment operating revenues increased by 9.7% in 2010. This increase partly reflects the appreciation of the Brazilian real against the Mexican peso. On a local-currency basis, segment operating revenues increased by 4.9% in 2010.

Excluding revenues from other services and discounts, service revenues on a local-currency basis increased by 5.6% in 2010. This increase in service revenues is due principally to increases in fixed and wireless data revenues. Wireless data revenues increased 31.3% in 2010 and fixed data revenues increased 3.7%, as a result of greater use of value-added services such as SMS messaging and web browsing. Pay TV revenues increased by nearly a factor of five in 2010 as a result of subscriber growth driven by new commercial packages of Embratel and Net Serviços. Wireless and fixed voice revenues remained flat in 2010 as compared to 2009. In 2010, the components of service revenues were wireless voice and wireless data services (48.7%) and fixed voice, broadband and pay TV services (51.3%).

In 2010, the number of prepaid wireless subscribers increased by 15.9%, and the number of postpaid wireless subscribers increased by 18.1%, resulting in an increase in the total number of wireless subscribers in

our Brazil segment of 16.3% to approximately 51.6 million as of December 31, 2010. In 2010, the number of fixed voice RGUs increased by 22.7%, the number of broadband RGUs increased by 21.5% and the number of pay TV RGUs increased by 39.2%, resulting in an increase in total RGUs in our Brazil segment of 28.1% to approximately 18.6 million as of December 31, 2010.

Average MOUs per subscriber increased by 13.1% in 2010. The increase in average MOUs during 2010 reflects increased traffic due to new commercial plans and promotional packages in Brazil. On a local-currency basis, ARPU decreased by 13.6% in 2010. This decrease during 2010 reflects a decrease in monthly, airtime and interconnection rates.

Segment operating income decreased by 10.6% in 2010. On a local-currency basis, operating income decreased by 15.2%. Segment operating margin was 9.0% in 2010 and 11.0% in 2009. On a local-currency basis, 2010 operating margin was 8.8% and 2009 operating margin was 10.7%. Segment operating income and operating margin in 2010 continued to be affected by a high level of depreciation and amortization expenses relative to revenues due to the significant costs incurred to deploy networks. In 2010, the depreciation expense resulting from the shortening of the useful lives of certain plant and equipment in Brazil was Ps. 3.4 billion. On a local-currency basis, depreciation and amortization expenses represented 22.0% of segment operating revenues in 2010 and 18.0% of segment operating revenues in 2009.

Southern Cone—Argentina, Chile, Paraguay and Uruguay

Segment operating revenues increased by 9.2% in 2010. This increase partly reflects the depreciation of the local currencies against the Mexican peso. On a local-currency basis, segment operating revenues increased by 16.8% in Argentina, Paraguay and Uruguay, and by 22.4% in Chile. For this purpose, we analyze results in Argentina, Paraguay and Uruguay in terms of the Argentine peso because Argentina accounts for the major portion of the operations in these three countries.

Excluding revenues from other services and discounts, service revenues on a local-currency basis increased by 18.9% in Argentina, Paraguay and Uruguay, and by 23.3% in Chile. These increases in service revenues were driven primarily by increased postpaid and prepaid rates. In 2010, wireless voice and data services reflected 93.7% of service revenues in Argentina, Paraguay and Uruguay and 64.1% in Chile.

Average MOUs per subscriber increased by 2.1% in 2010, primarily due to new promotional packages for prepaid and postpaid services. On a local-currency basis, ARPU increased by 9.1% in Argentina, Paraguay and Uruguay and decreased by 0.1% in Chile. ARPU was positively affected by higher prices and higher usage of data and adversely affected by lower usage by newly-added subscribers.

Segment operating income increased by 53.2% in 2010. On a local-currency basis, operating income increased by 46.4% in Argentina, Paraguay and Uruguay, and decreased by 31.7% in Chile. Segment operating margin was 17.3% in 2010 and 12.3% in 2009. On a local-currency basis, 2010 operating margin was 35.6% in Argentina, Paraguay and Uruguay, and 15.7% in Chile, and 2009 operating margin was 28.4% in Argentina, Paraguay and Uruguay, and 14.6% in Chile. Results in all countries in the segment reflect the increased leverage of our network and customer service infrastructure, which in Chile was more than offset by increases in subscriber acquisition costs.

Colombia and Panama

Segment operating revenues increased 15.2% in 2010. This increase partly reflects the appreciation of the local currencies against the Mexican peso. On a Colombian peso basis, segment operating revenues increased by 7.9%. For this purpose, we analyze segment results in terms of the Colombian peso because Colombian operations represent the great majority of our operations in this segment.

Excluding revenues from other services and discounts, service revenues on a Colombian peso basis increased by 5.6% in 2010. This increase reflected principally increases in fixed and wireless data revenues. Fixed and wireless data services increased by 42.0% in 2010, as a result of new promotional packages focused on SMS texting and web browsing. Fixed and wireless voice revenues decreased by 1.3% in 2010. Pay TV revenues decreased slightly by 0.5% in 2010. In 2010, wireless voice and wireless data services represented 82.6% of our segment service revenues.

Average MOUs per subscriber increased by 14.5% in 2010. On a Colombian peso basis, ARPU increased by 0.7% in 2010. The increases in average MOUs and ARPU in 2010 reflected primarily an increase in traffic resulting from the net increase in subscriber growth.

Segment operating income increased by 14.9% in 2010. On a Colombian peso basis, operating income increased by 5.5%. Segment operating margin was 25.6% in 2010 and 2009. On a Colombian peso basis, 2010 operating margin was 26.5%, and 2009 operating margin was 27.1%. The decrease in segment operating margin in 2010 is due principally to a Ps. 1.8 billion depreciation expense resulting from the shortening of the useful lives of certain plant and equipment in Colombia. Segment results also reflect increased costs for technical personnel and content for wireless data services.

Andean Region—Ecuador and Peru

Segment operating revenues increased by 9.8% in 2010. This increase partly reflects the depreciation of the local currencies against the Mexican peso. On a local-currency basis, segment operating revenues increased by 11.1% in Ecuador and by 17.2% in Peru.

Excluding revenues from other services and discounts, service revenues on a local-currency basis increased by 11.5% in Ecuador, and by 19.3% in Peru. These increases in service revenues were driven primarily by higher usage of all services, particularly wireless voice and wireless and fixed data services. In 2010, wireless voice and wireless data services represented 97.9% of service revenues in Ecuador and 86.9% in Peru.

Average MOUs per subscriber increased by 9% in 2010, reflecting principally increased usage by prepaid subscribers and higher utilization of minutes in postpaid plans. On a local-currency basis, ARPU decreased by 11.1% in Ecuador and increased by 4.8% in Peru. ARPU in both countries was affected by higher prices from data services and airtime and the elimination of national long distance charges. Revenues from interconnection rates decreased in Ecuador, but increased in Peru.

Segment operating income increased by 41.5% in 2010. On a local-currency basis, operating income increased by 18.3% in Ecuador and by 54.3% in Peru. Segment operating margin was 30.8% in 2010 and 23.9% in 2009. On a local-currency basis, 2010 operating margin was 35.9% in Ecuador, and 29.5% in Peru, and 2009 operating margin was 33.7% in Ecuador and 22.4% in Peru. The increase in segment operating income and operating margin in 2010 was driven by lower subscriber acquisition costs partially offset by increased concession fees, employee profit sharing and network maintenance costs.

Central America—Guatemala, El Salvador, Honduras and Nicaragua

Segment operating revenues decreased by 4.5% in 2010. Segment operating revenues partly reflect the depreciation of the local currencies against the Mexican peso. On a U.S. dollar basis, segment operating revenues increased by 2.4% in 2010. For this purpose, we analyze segment results in U.S. dollars because it is the functional currency in our operations in El Salvador (our headquarters for this segment) and the currencies in Guatemala, Honduras and Nicaragua are relatively stable against the U.S. dollar.

Excluding revenues from other services and discounts, service revenues on a U.S. dollar basis increased by 2.8%. These increases in service revenues were driven primarily by increases in wireless voice, data, broadband

and pay TV services, offset by decreases in fixed voice services. In 2010, the components of segment operating revenues were wireless voice and wireless data services (52.8%) and fixed voice, broadband and pay TV (47.2%).

Average MOUs per subscriber increased by 6.4% in 2010, primarily due to new commercial plans for voice and data services. On a U.S. dollar basis, ARPU decreased by 16.7%. This decrease was primarily attributable to lower interconnection and long distance rates and more aggressive pricing packages for monthly airtime and data services.

Segment operating income decreased by 38.8% in 2010. On a U.S. dollar basis, operating income was largely eliminated in 2010. Segment operating margin was 4.6% in 2010 and 7.1% in 2009. On a U.S. dollar basis, 2010 operating margin was 0.1%, and 2009 operating margin was 10.7%. In 2010, we replaced our network in Guatemala, resulting in a Ps. 645,930 million write-off of the book value of the old network. Excluding this depreciation expense in Guatemala, segment operating income would have decreased by 62.1% on a U.S. dollar basis.

United States

Segment operating revenues increased by 57.0% in 2010. This increase partly reflects the depreciation of the U.S. dollar against the Mexican peso. On a local-currency basis, segment operating revenues increased by 67.3% in 2010.

Excluding revenues from other services and discounts and excluding certain transactions with other segments, operating revenues on a local-currency basis increased by 61.5% in 2010. This increase in service revenues reflected principally new commercial plans and promotional packages such as Straight Talk and Safe Link that contributed to the increase in subscriber growth and usage. In 2010, the number of wireless subscribers, all of which are prepaid subscribers, increased by 23.0% to approximately 17.8 million as of December 31, 2010.

Average MOUs per subscriber increased by 188.9% in 2010. On a local-currency basis, ARPU increased by 30.0% in 2010. The increase in average MOUs and ARPU is primarily due to our new commercial plans and promotional packages.

Segment operating income increased 102.9% in 2010. On a local-currency basis, and excluding certain transactions with other segments, operating income increased 15.9% in 2010. This increase primarily reflects subscriber growth due to new commercial plans and promotional packages.

Segment operating margin was 4.5% in 2010 and 3.5% in 2009. On a local-currency basis, and excluding certain transactions with other segments, 2010 operating margin was 8.3% and 2009 operating margin was 12.0%. The decrease in operating margin in 2010 reflects principally higher subscriber acquisition costs, service costs, equipment costs.

Caribbean—Dominican Republic, Puerto Rico and Jamaica

Segment operating revenues increased by 4.3% in 2010. On a U.S. dollar basis, segment operating revenues increased by 2.7%. For this purpose, we analyze segment results in U.S. dollars because it is the functional currency in our operations in Puerto Rico and the currencies in the Dominican Republic and Jamaica are relatively stable against the U.S. dollar.

Excluding revenues from other services and discounts, service revenues on a U.S. dollar basis increased by 2.4%. These increases in service revenues were driven primarily by increases in data services, partially offset by lower voice revenues, in each case as a result of more aggressive pricing practices. In 2010, the components of segment operating revenues were wireless voice and wireless data services (48.6%) and fixed voice, broadband and pay TV services (51.4%).

Average MOUs per subscriber increased by 21.7% in 2010, primarily due to more competitive packages for wireless voice services. On a U.S. dollar basis, ARPU remained flat in 2010.

Segment operating income decreased by 19.1% in 2010. On a U.S. dollar basis, operating income decreased by 13.4% in 2010. Segment operating margin was 12.2% in 2010 and 14.5% in 2009. On a U.S. dollar basis, 2010 operating margin was 12.6%, and 2009 operating margin was 15.0%. The decreases in segment operating income and operating margin in 2010 were driven primarily by increases in network maintenance, administration and consumer services expenses.

Liquidity and Capital Resources

Funding Requirements

We generate substantial resources from our operations. On a consolidated basis, operating activities provided Ps. 201.6 billion in 2010 and Ps. 216.5 billion in 2009. Our cash and cash equivalents amounted to Ps. 95.9 billion at December 31, 2010, compared to Ps. 59.8 billion at December 31, 2009. We use the cash that we generate from our operations and from borrowings primarily for the following purposes:

•

We make substantial capital expenditures to continue expanding and improving our networks in each country in which we operate. Our capital expenditures on plant, property and equipment were Ps. 77.8 billion in 2010 and Ps. 77.4 billion in 2009. We have budgeted capital expenditures for 2011 to be approximately U.S.$ 8.4 billion. See “Capital Expenditures” under Item 4.

•

We make capital expenditures to acquire or renew licenses. Our capital expenditures to acquire or renew licenses were Ps. 4.1 billion in 2010 and Ps. 2.4 billion in 2009. The 2010 expenditures were primarily to acquire additional spectrum in Mexico and a new license in Costa Rica. The amount we spend on acquisitions and licenses varies significantly from year to year, depending on acquisition opportunities, concession renewal schedules and needs for more spectrum.

•

In some years, we make substantial expenditures on acquisitions. In 2010, we spent Ps. 34.0 billion acquiring shares of Telmex Internacional and Ps. 26.8 billion acquiring shares of Net Serviços.

•

We must pay interest on our indebtedness and repay principal when due. As of December 31, 2010, we had Ps. 9.0 billion of principal due in 2011.

•

We pay regular dividends. We paid Ps. 17.2 billion in dividends in 2010 and Ps. 33.1 billion in 2009. Dividends for 2009 included an extraordinary dividend of Ps. 0.50 per share at year end. Our shareholders have approved the payment of a Ps. 0.36 dividend per share in two installments in 2011.

•

We regularly repurchase our own shares. We also spent (including commissions and value-added taxes) Ps. 18.2 billion repurchasing our own shares in the open market in 2010 and Ps. 31.5 billion in 2009. Our shareholders have authorized additional repurchases, and we have continued repurchasing our shares in the open market in 2011, but whether we will continue to do so will depend on considerations including market prices and our other capital requirements.

The following table summarizes certain contractual obligations as of December 31, 2010. Many of our obligations are denominated in currencies other than Mexican pesos. Our purchase obligations and approximately 48.6% of our debt are denominated in U.S. dollars. The table does not include accounts payable or pension liabilities, and amounts set forth in the table do not include interest and do not give effect to hedging transactions.


	Payments Due by Period
	Total		Less than 1year		1-3 years		4-5 years		After 5 years
	(in millions)
Contractual obligations as of December 31, 2010:
Equipment leases	Ps.	735	Ps.	441	Ps.	294	Ps.	—	Ps.	—
Real estate leases		18,845		4,006		6,818		4,330		3,691
Short-term debt		9,039		9,039		—		—		—
Long-term debt		294,061		—		79,906		51,000		163,155
Purchase obligations		7,709		6,969		326		81		333

Total	Ps.	330,389	Ps.	20,455	Ps.	87,344	Ps.	55,411	Ps.	167,179

Other than the amounts described in the table above, we had no other outstanding material purchase commitments as of December 31, 2010. We enter into a number of supply, advertising and other contracts in the ordinary course of business, but we do not believe that those contracts are material to our liquidity.

Under many of our concessions and licenses, we are required to make annual royalty payments in order to continue using such concessions and licenses. These payments are typically calculated as a percentage of gross revenues generated under such concessions and licenses. In the case of the 1900 MHz spectrum (Band F) concessions in Mexico, however, we are required to pay Ps. 255 million (subject to adjustment for inflation) annually for 20 years in respect of the 10 MHz acquired during 2005.

We could have opportunities in the future to invest in other telecommunications companies worldwide, primarily in Latin America and the Caribbean, because we believe the telecommunications sector in Latin America will continue to undergo consolidation. We can give no assurance as to the extent, timing or cost of such investments. We may also pursue opportunities in other areas in the world. Some of the assets that we acquire may require significant funding for capital expenditures. See the discussion included earlier in this annual report under “Overview—Effects of Recent Acquisitions” under this Item 5 for more information about these transactions.

Borrowings

In addition to funds generated from operations, we have used borrowings to fund acquisitions and capital expenditures and refinance debt. We have relied on a combination of equipment financings, borrowings from international banks and borrowings in the Mexican and international capital markets. We have arranged several equipment financing facilities to further improve our liquidity position. As of the date of this report, we have an aggregate of U.S.$ 680 million in committed undrawn equipment financing facilities.

As of December 31, 2010, our total consolidated indebtedness was Ps. 303.1 billion, compared to Ps. 277.2 billion as of December 31, 2009. Our net debt (total debt minus cash and cash equivalents) at December 31, 2010 was Ps. 206.7 billion, a decrease of 5.0% as compared to December 31, 2009. This decrease reflects, among other things, our increased capacity for generating cash flow.

Without taking into account the effects of derivative financial instruments that we use to manage our interest rate and currency risk, approximately 74.1% of our indebtedness at December 31, 2010 was denominated in currencies other than Mexican pesos (approximately 65.7% of such non-Mexican peso debt in U.S. dollars and 34.3% in other currencies), and approximately 27.4% of our consolidated debt obligations bore interest at floating rates. After the effects of derivative transactions, approximately 25.3% of our total debt as of December 31, 2010 was denominated in U.S. dollars and approximately 25.0% was subject to floating rates.

The weighted average cost of all our third-party debt at December 31, 2010 (excluding commissions and reimbursement of certain lenders for Mexican taxes withheld) was approximately 5.2%.

Our major categories of indebtedness at December 31, 2010 are summarized in the table below.


	(millions of Mexican pesos)
Debt:
Denominated in U.S. dollars:
Export credit agency loans		Ps.19,540
Other bank loans		13,566
5.500% Notes due 2014		9,824
5.750% Notes due 2015		5,849
5.625% Notes due 2017		7,206
5.000% Senior Notes due 2019		9,268
5.500% Senior Notes due 2019		6,179
3.625% Senior Notes due 2015		9,268
5.500% Senior Notes due 2015		9,866
5.000% Senior Notes due 2020		24,714
6.125% Senior Notes due 2040		15,446
6.375% Notes due 2035		12,126
6.125% Notes due 2037		4,563

Total		147,415

Denominated in Mexican pesos:
Domestic senior notes (certificados bursátiles)		61,203
8.75% Senior Notes due 2016		4,500
9.00% Senior Notes due 2016		5,000
8.46% Senior Notes due 2036		7,872
Other bank loans		46

Total		78,621

Denominated in euro:
Export credit agency loans		186
3.75% Senior Notes due 2017		16,539
4.75% Senior Notes due 2022		12,404

Total		29,129

Denominated in pounds sterling:
5.75% Senior Notes due 2030		12,540

Total		12,540

Denominated in Colombian pesos		4,003

Denominated in Brazilian reais		2,960

Denominated in other currencies		28,432

Total debt		303,100
Less short-term debt and current portion of long-term debt		9,039

Total long-term debt		294,061

Additional information about certain categories of our indebtedness is provided below:

•

Dollar-denominated international notes. We and our subsidiary Telmex have outstanding debt securities in the international markets denominated in U.S. dollars. In March 2011, we issued additional América Móvil notes of two series (5.750% Notes due 2015 and 5.00% Notes due 2020) in exchange for outstanding Telmex notes of two series (5.50% Notes due 2015 and 5.50% Notes due 2019) and cancelled the exchanged Telmex notes.

•

Mexican peso-denominated international notes. Our 9.0% senior notes due January 2016 and our 8.46% senior notes due 2036 are denominated in Mexican pesos, but all amounts in respect of the notes are payable in U.S. dollars, unless a holder of notes elects to receive payment in Mexican pesos in accordance with certain specified procedures.

•

Mexican peso-denominated domestic notes. Our domestic senior notes (certificados bursátiles) sold in the Mexican capital markets have varying maturities, ranging from 2011 through 2037. Some bear interest at fixed rates, and others at variable rates based on CETES (a rate based on the cost of Mexican treasuries) or TIIE (a Mexican interbank rate).

•

Colombian peso-denominated notes. Comcel has issued notes in the Colombian capital markets denominated in Colombian pesos. One series bears interest at a variable rate based on the Colombian consumer price index rate (IPC) plus a spread, and mature in 2013. Another bears interest at a 7.59% fixed rate, and matures in 2016. Some series are guaranteed by América Móvil.

•

Bank loans. At December 31, 2010, we had approximately Ps. 33,373 million outstanding under a number of bank facilities bearing interest principally at fixed and variable rates. In May 2011, we entered into two revolving syndicated facilities – one for U.S.$2 billion and one for the Euro equivalent of U.S.$2 billion. They replaced a previous U.S.$2 billion credit facility that matured in April 2011. Loans under the facility bear interest at variable rates based on LIBOR and EURIBOR. The syndicated facilities limit our ability to incur secured debt, to effect a merger as a result of which the surviving entity would not be América Móvil or Telcel, to sell substantially all of our assets or to sell control of Telcel. The facility does not allow us to impose any restrictions on the ability of Telcel to pay dividends or make distributions to us. In addition, the bank facilities require us to maintain a consolidated ratio of debt to EBITDA not greater than 4.0 to 1.0 and a consolidated ratio of EBITDA to interest expense not less than 2.5 to 1.0.

•

Equipment financing facilities with support from export development agencies. We have a number of equipment financing facilities, under which export development agencies provide support for financing to purchase exports from their respective countries. These facilities are medium- to long-term, with periodic amortization. Some facilities bear interest at a fixed rate while others bear interest at a spread over LIBOR. They are extended to us or to operating subsidiaries, in some cases with the guarantee of Telcel.

All of the public securities issued by América Móvil in international and Mexican capital markets, and amounts due under our syndicated loan facility and export credit facilities, are guaranteed by Telcel. At December 31, 2010, Telcel had, on an unconsolidated basis, unsecured and unsubordinated obligations of approximately Ps. 202.4 billion (U.S.$16.4 billion), excluding debt owed to us or our other subsidiaries. This amount represents outstanding obligations of Telcel under guarantees of parent company and subsidiary indebtedness. In addition, at December 31, 2010, our subsidiaries other than Telcel had indebtedness of Ps. 100.7 billion (U.S.$8.2 billion).

Risk Management

We regularly assess our interest rate and currency exchange exposures in order to determine how to manage the risk associated with these exposures. In Mexico, we have indebtedness denominated in currencies, principally the U.S. dollar, other than the currency of the operating environment. We use derivative financial instruments to adjust the resulting exchange rate exposures. We do not use derivatives to hedge the exchange rate exposures that arise from having operations in different countries.

We also use derivative financial instruments from time to time to adjust our exposure to variable interest rates or to reduce our costs of financing. Our practices vary from time to time depending on our judgment of the level of risk, expectations as to exchange or interest rate movements and the costs of using derivative financial instruments. We may stop using derivative financial instruments or modify our practices at any time.

As of December 31, 2010, we had the following derivatives positions, with an aggregate fair value of Ps. 4.9 billion:

•

U.S. dollar-Mexican peso cross currency swaps with a notional amount of U.S.$3,592 million with respect to our total U.S. dollar-denominated debt. Under these swaps, we have replaced our obligation to make payment in U.S. dollars with an obligation to make payment in Mexican pesos.

•

U.S. dollar-Mexican peso forwards for a total notional amount of U.S.$1,673 million to hedge our exposure to our U.S. dollar denominated debt.

•

Euro-Mexican peso cross currency swap with a notional amount of EUR€ 244 million with respect to our total Euro-denominated debt. Under this swap we replaced our obligation to make payment in Euros with an obligation to make payment in Mexican pesos.

•

Euro-U.S. dollar cross currency swaps with a notional amount of EUR€ 123 million with respect to our total Euro-denominated debt. Under this swap we replaced our obligation to make payment in Euros with an obligation to make payment in U.S. dollars.

•

A Japanese Yen-U.S. dollar cross-currency swap with a notional amount of Yen¥ 13,000 million with respect to our total Japanese-Yen denominated debt. Under this swap, we replaced our obligation to make payment in Japanese Yen with an obligation to make payment in U.S. dollars.

•

A Japanese Yen-Mexican peso cross-currency swap with a notional amount of Yen¥ 19,891 million with respect to our total Japanese Yen-denominated debt. Under this swap, we replaced our obligation to make payment in Japanese Yen with an obligation to make payment in Mexican pesos.

•

Swiss Franc-Euro cross currency swap with a notional amount of CHF230 million with respect to our total Swiss Franc-denominated debt. Under this swap, we replaced our obligation to make payment in Swiss Franc with an obligation to make payment in Euros.

•

Mexican interest rate swaps with a notional amount of Ps.26.0 billion with respect to our total Mexican denominated debt. Under a portion of these swaps (Ps. 25.3 billion), we replaced our obligation to make floating rate payments with obligations to make fixed rate payments. The other portion of these swaps (Ps. 700 million) replaces our obligation to make fixed rate payments with an obligation to make floating rate payments.

Off-Balance Sheet Arrangements

As of December 31, 2010, we had no off-balance sheet arrangements that require disclosure under applicable SEC regulations.

Use of Estimates in Certain Accounting Policies

In preparing our financial statements, we make estimates concerning a variety of matters. Some of these matters are highly uncertain, and our estimates involve judgments we make based on the information available to us. In the discussion below, we have identified several of these matters for which our financial presentation would be materially affected if either (1) we used different estimates that we could reasonably have used or (2) in the future we change our estimates in response to changes that are reasonably likely to occur.

The discussion addresses only those estimates that we consider most important based on the degree of uncertainty and the likelihood of a material impact if we used a different estimate. There are many other areas in which we use estimates about uncertain matters, but the reasonably likely effect of changed or different estimates is not material to our financial presentation.

Estimated useful lives of plant, property and equipment

We estimate the useful lives of particular classes of plant, property and equipment in order to determine the amount of depreciation expense to be recorded in each period. Depreciation expense is a significant element of our costs and expenses, amounting in 2010 to Ps. 80.3 billion, or 17.6% of our operating costs and expenses. See Note 8 to our consolidated financial statements.

We currently depreciate most of our telephone plant and equipment based on an estimated useful life determined upon the expected particular conditions of operations and maintenance in each of the countries in which we operate. The estimates are based on our historical experience with similar assets, anticipated technological changes and other factors, taking into account the practices of other telecommunications companies. We review estimated useful lives each year to determine whether they should be changed, and at times, we have changed them for particular classes of assets. We may shorten the estimated useful life of an asset class in response to technological changes, changes in the market or other developments. This results in increased depreciation expense. In 2010, we recorded additional depreciation expense of Ps. 6.3 billion resulting from the shortening of the useful lives of certain fixed-line equipment in Brazil, Colombia, Paraguay and Guatemala. See Note 8 to our consolidated financial statements.

Impairment of Long-Lived Assets, Intangible Assets and Goodwill

We have large amounts of long-lived assets on our balance sheet. Under IFRS, we are required to test long-lived assets for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable for plant, property and equipment and intangible assets. Impairment testing for goodwill is required to be performed on an annual basis. To estimate the fair value of long-lived assets, we typically make various assumptions about the future prospects for the business to which the asset relates, consider market factors specific to that business and estimate future cash flows to be generated by that business. Based on these assumptions and estimates as well as guidance provided by IFRS relating to the impairment of long-lived assets, we determine whether we need to take an impairment charge to reduce the net carrying value of the asset as stated on our balance sheet to reflect its estimated fair value. Assumptions and estimates about future values and remaining useful lives are complex and often subjective. They can be affected by a variety of factors, including external factors, such as industry and economic trends, and internal factors, such as changes in our business strategy and our internal forecasts. Different assumptions and estimates could materially impact our reported financial results. More conservative assumptions of the anticipated future benefits from these businesses could result in impairment charges, which would decrease net income and result in lower asset values on our balance sheet. Conversely, less conservative assumptions could result in smaller or no impairment charges, higher net income and higher asset values.

Deferred Taxes

We are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves the jurisdiction-by-jurisdiction estimation of actual current tax exposure and the assessment of temporary differences resulting from the differing treatment of certain items, such as accruals and amortization, for tax and financial reporting purposes, as well as net operating loss carryforwards and other tax credits. These items result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. We must assess in the course of our tax planning procedures the fiscal year of the reversal of our deferred tax assets and liabilities, and if there will be future taxable profits in those periods to support the recognition of the deferred tax assets. Significant management judgment is required in determining our provisions for income taxes, deferred tax assets and liabilities. The analysis is based on estimates of taxable income in the jurisdictions in which the group operates and the period over which the deferred tax assets and liabilities will be recoverable or settled. If actual results differ from these estimates, or we adjust these estimates in future periods, our financial position and results of operations may be materially affected.

We record deferred tax assets based on the amount that we believe is more likely than not to be realized. In assessing the future realization of deferred tax assets, we consider future taxable income and ongoing tax

planning strategies. In the event that our estimates of projected future taxable income and benefits from tax planning strategies are lowered, or changes in current tax regulations are enacted that would impose restrictions on the timing or extent of our ability to utilize the tax benefits of net operating loss carry-forwards in the future, an adjustment to the recorded amount of deferred tax assets would be made, with a related charge to income.

Accruals

Accruals are recorded when, at the end of the period, we have a present obligation as a result of past events, whose settlement requires an outflow of resources that is considered probable and can be measured reliably. This obligation may be legal or constructive, arising from, but not limited to, regulation, contracts, common practice or public commitments, which have created a valid expectation for third parties that we will assume certain responsibilities. The amount recorded is the best estimation performed by our management in respect of the expenditure that will be required to settle the obligations, considering all the information available at the date of our financial statements, including the opinion of external experts, such as legal advisors or consultants. Accruals are adjusted to account for changes in circumstances for ongoing matters and the establishment of additional accruals for new matters.

If we are unable to reliably measure the obligation, no accrual is recorded and information is then presented in the notes to our consolidated financial statements.

Because of the inherent uncertainties in this estimation, actual expenditures may be different from the originally estimated amount recognized.

Labor Obligations

We recognize liabilities on our balance sheet and expenses in our income statement to reflect our obligations related to our post-retirement seniority premiums, pension and retirement plans in the countries in which we operate and offer defined contribution and benefit pension plans. The amounts we recognize are determined on an actuarial basis that involves many estimates and accounts for post-retirement and termination benefits in accordance with IFRS.

We use estimates in four specific areas that have a significant effect on these amounts: (a) the rate of return we assume our pension plan will achieve on its investments, (b) the rate of increase in salaries that we assume we will observe in future years, (c) the discount rates that we use to calculate the present value of our future obligations and (d) the expected rate of inflation. The assumptions we have applied are identified in Note 12 to our audited consolidated financial statements. These estimates are determined based on actuarial studies performed by independent experts using the projected unit-credit method. The latest actuarial computation was prepared as of December 2010. We review the estimates each year, and if we change them, our reported expense for pension costs may increase or decrease according to market conditions.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of our customers, distributors and cellular operators to make required payments. We base these estimates on the individual conditions of each of the markets in which we operate that may impact the collectability of accounts. In particular, in making these estimates we take into account (i) with respect to accounts with customers, the number of days since the calls were made, (ii) with respect to accounts with distributors, the number of days invoices are overdue and (iii) with respect to accounts with cellular operators, both the number of days since the calls were made and any disputes with respect to such calls. The amount of loss, if any, that we actually experience with respect to these accounts may differ from the amount of the allowance maintained in connection with them.

Item 6.

Directors, Senior Management and Employees

MANAGEMENT

Directors

Our Board of Directors has broad authority to manage our company. The Board of Directors is supported by our committees, especially by our Audit and Corporate Practices Committee, which is comprised by independent members. In particular, the Board of Directors must approve prior opinions of the competent committee, among others:

•

our non-ordinary course transactions with related parties;

•

the use and disposition of the company’s assets;

•

certain material transactions such as (a) transactions not in the ordinary course of business, (b) transactions representing an investment greater than 5% of the company’s assets on a consolidated basis and (c) transactions involving guarantees or the incurrence of financial obligations for more than 5% of the company’s assets on a consolidated basis;

•

executive and director compensation;

•

appoint and discharge our chief executive officer; and

•

waivers for board members, executives and other persons with influence on the company, to benefit from business opportunities pertaining to the company.

The company must publicly disclose any case in which the resolution of the board differs from the opinion of the committee regarding any of these matters.

Additionally, in the event that a person or group of persons intend to acquire an amount of shares equal or exceeding 10% of our voting stock, our Board of Directors’ authorization is required. In the event that our Board of Directors rejects the relevant authorization, it shall appoint a substitute acquirer.

Our bylaws provide for the Board of Directors to consist of between five and twenty one directors and allow for the appointment of an equal number of alternate directors. Directors need not be shareholders. A majority of our directors and a majority of the alternate directors must be Mexican citizens and elected by Mexican shareholders. A majority of the holders of the AA Shares and A Shares voting together elect a majority of the directors and alternate directors, provided that any holder or group of holders of at least 10% of the total AA Shares and A Shares is entitled to name one director and an alternate director. Two directors and two alternate directors, if any, are elected by a majority vote of the holders of L Shares. Each alternate director may attend meetings of the Board of Directors and vote in the absence of a corresponding director. Directors and alternate directors are elected or ratified at each annual general meeting of shareholders and each annual ordinary special meeting of holders of L Shares, and each serves until a successor is elected and takes office. In accordance with the Mexican Securities Market Law (Ley del Mercado de Valores, or the “Mexican Securities Market Law”), shareholders are required to make a determination as to the independence of our directors, though the CNBV may challenge this determination. Pursuant to our bylaws and the Mexican Securities Market Law, at least 25% of our directors must be independent. In order to have a quorum for a meeting of the Board of Directors, a majority of those present must be Mexican nationals.

All of the current members of the Board of Directors, the Executive Committee, the Audit and Corporate Practices Committee, and the Operations in Puerto Rico and the United States of America Committee, as well as the Corporate Secretary and the Corporate Pro-Secretary, were elected or ratified at the annual general shareholders’ meeting held on April 27, 2011, with twelve directors elected by the AA Shares and A Shares voting together and two directors elected by the L Shares. No alternate directors were appointed.

Our bylaws provide that the members of the Board of Directors are appointed for terms of one year. Pursuant to Mexican law, members of the Board continue in their positions after the expiration of their terms for up to an additional 30 day period if new members are not appointed. Furthermore, in certain circumstances provided under the Mexican Securities Law, the Board of Directors may appoint temporary directors who then may be ratified or substituted by the shareholders’ meetings. The names and positions of the members of the Board elected and ratified at the annual general shareholders’ meeting held on April 27, 2011, their year of birth, and information concerning their committee membership and principal business activities outside América Móvil are as follows:


Directors elected by holders of Series AA and Series A Shares:

Patrick Slim Domit	Born:	1969
Co-Chairman and Member of the Executive Committee and the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation: Other directorships:	2004 2012 Co-Chairman of our Board of Directors Director of Grupo Carso, S.A.B. de C.V., Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V. and Telmex Chief Executive Officer of Grupo Carso, S.A.B. de C.V. and Vice President of Commercial Markets of Telmex

	Business experience:	Commercial Markets of Telmex

Carlos Slim Domit	Born:	1967
Co-Chairman and Member of the Executive Committee and the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation:	2011 2012 Chairman of the Board of Directors of Grupo Carso, S.A.B. de C.V.

	Other directorships:	Director of Grupo Carso, S.A.B. de C.V. and Grupo Sanborns, S.A. de C.V. and Chairman of the Board of Directors of CGT, Telmex and Telmex Internacional

	Business experience:	Chief Executive Officer of Sanborn Hermanos, S.A. de C.V.

Daniel Hajj Aboumrad	Born:	1966
Director and Member of the Executive Committee and the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation: Other directorships:	2000 2012 Chief Executive Officer of América Móvil Director of Grupo Carso, S.A.B. de C.V., Telmex and CGT


	Business experience:	Chief Executive Officer of Hulera Euzkadi, S.A. de C.V.



Alejandro Soberón Kuri	Born:	1960
Director, Chairman of the Audit and Corporate Practices Committee and Member of the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation:	2000 2012 Chief Executive Officer of Corporación Interamericana de Entretenimiento, S.A.B. de C.V.
	Other directorships:	Chairman of Corporación Interamericana de Entretenimiento, S.A.B. de C.V. and Director of Banco Nacional de México, S.A.
	Business experience:	Various positions at Interamericana de Entretenimiento, S.A.B. de C.V.
Carlos Bremer Gutiérrez	Born:	1960
Director and Member of the Audit and Corporate Practices Committee and the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation:	2004 2012 Chief Executive Officer of Value, S.A. de C.V., Casa de Bolsa
	Other directorships:	Director of Value Grupo Financiero, S.A.B. de C.V. and Value S.A. de C.V., Casa de Bolsa
	Business experience:	Chief Operating Officer of Abaco Casa de Bolsa, S.A. de C.V.
Rayford Wilkins, Jr.	Born:	1951
Director and Member of the Executive Committee	First elected: Term expires: Principal occupation:	2005 2012 Chief Executive Officer of the AT&T Diversified Businesses Division
	Other directorships:	Director of Valero Energy Foundation, Tiger Woods Foundation and National Urban League
	Business experience:	Various positions in the wireless industry at SBC Group
Michael J. Viola	Born:	1954
Director	First elected: Term expires: Principal occupation:	2009 2012 Senior Vice President of Corporate Finance AT&T, Inc.
	Other directorships:	Director of Telmex
	Business experience:	Various positions in the wireless industry at AT&T
Ernesto Vega Velasco	Born:	1937
Director and Member of the Audit and Corporate Practices Committee and the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation	2007 2012 In retirement. Member of the board of directors and audit and corporate practices, planning and finance and evaluation and compensation committees of certain companies


	Other directorships:	Chairman of Wal-Mart de México, S.A.B. de C.V. and Director of Kuo, S.A.B. de C.V., Dine, S.A.B. de C.V., Inmuebles Carso S.A.B. de C.V., Impulsora de Desarrollo y el Empleo en América Latina, S.A.B. de C.V. and Grupo Aeroportuario del Pacífico, S.A.B. de C.V., and Alternate Director of Industrias Peñoles, S.A.B. de C.V.

	Business experience:	Since 1971, various positions in Desc Group, including Corporate Vice-president

Santiago Cosío Pando	Born:	1973
Director and Member of the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation:	2008 2012 President of Grupo Pando, S.A. de C.V.

	Business experience:	Various positions in Grupo Pando, S.A. de C.V.

Arturo Elías Ayub	Born:	1966
Director and Member of the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation:	2011 2012 Head of Strategic Alliances, Communications and Institutional Relations of Telmex; Chief Executive Officer of Fundación Telmex

	Other directorships:	Director of Grupo Sanborns, S.A.B. de C.V., Grupo Carso, S.A.B. de C.V., CGT, Sears Roebuck de México and TM & MS LLC Chief Executive Officer of Sociedad Comercial

	Business experience:	Cadena, President of Pastelería Francesa (El Globo) and President of Club Universidad Nacional, A.C.

Oscar Von Hauske Solís	Born:	1957
Director and Member of the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation:	2011 2012 Chief Fixed Line Operations Officer of América Móvil

	Other directorships:	Director of Telmex and Telmex Internacional

	Business experience:	Chief Executive Officer of Telmex Internacional, Chief Systems and Telecommunications Officer of Telmex and Head of Finance at Grupo Condumex, S.A. de C.V.

Louis C. Camilleri	Born:	1955
Director and Member of the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation:	2011 2012 Chief Executive Officer of Philip Morris International


	Other directorships:	Chairman of Philip Morris International

	Business experience:	Chairman and Chief Executive Officer of Altria and various positions in Philip Morris International.

Directors elected by holders of Series L Shares:

Pablo Roberto González Guajardo	Born:	1967
Director and Member of the Audit and Corporate Practices Committee and the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation:	2007 2012 Chief Executive Officer of Kimberly Clark de Mexico, S.A.B. de C.V.

	Other directorships:	Director of Kimberly Clark de Mexico, S.A.B. de C.V. and Acciones y Valores Banamex, S.A., Casa de Bolsa

	Business experience:	Various positions in the Kimberly Clark Corporation and Kimberly Clark de México, S.A.B. de C.V.

David Ibarra Muñoz	Born:	1930
Director and Member of the Operations in Puerto Rico and the United States of America Committee	First elected: Term expires: Principal occupation:	2000 2012 Retired

	Other directorships:	Director of Grupo Financiero Inbursa, S.A.B. de C.V., Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V. and Grupo Carso, S.A.B. de C.V.

	Business experience:	Chief Executive Officer of Nacional Financiera, S.N.C., served in the Mexican Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público)

Alejandro Cantú Jiménez, our General Counsel, serves as Corporate Secretary and Rafael Robles Miaja as Corporate Pro-Secretary.

Daniel Hajj Aboumrad and Arturo Elías Ayub are the sons-in-law of Carlos Slim Helú and brothers-in-law of Patrick Slim Domit and Carlos Slim Domit. Patrick Slim Domit and Carlos Slim Domit are sons of Carlos Slim Helú.

Executive Committee

Our bylaws provide that the Executive Committee may generally exercise the powers of the Board of Directors, with certain exceptions. In addition, the Board of Directors is required to consult the Executive Committee before deciding on certain matters set forth in the bylaws, and the Executive Committee must provide its views within ten calendar days following a request from the Board of Directors, the Chief Executive Officer or the Chairman of the Board of Directors. If the Executive Committee is unable to make a recommendation within ten calendar days or if a majority of the Board of Directors or any other corporate body duly acting within its mandate determines in good faith that action cannot be deferred until the Executive Committee makes a recommendation, the Board of Directors is authorized to act without such recommendation. The Executive Committee may not delegate its powers to special delegates or attorneys-in-fact.

The Executive Committee is elected from among the directors and alternate directors by a majority vote of the holders of common shares (AA Shares and A Shares). The Executive Committee is currently comprised of four members. The majority of its members must be Mexican citizens and elected by Mexican shareholders. Three members of the Executive Committee are named by our Mexican controlling shareholders and one member by AT&T, Inc. (formerly SBC International, Inc.). See “Major Shareholders” under Item 7. The current members of the Executive Committee are Messrs. Patrick Slim Domit, Carlos Slim Domit and Daniel Hajj Aboumrad, named by the Mexican controlling shareholders, and Mr. Rayford Wilkins, Jr., named by AT&T.

Audit and Corporate Practices Committee

The Audit and Corporate Practices Committee consists of Messrs. Alejandro Soberón Kuri, Chairman, Ernesto Vega Velasco, Pablo Roberto González Guajardo and Carlos Bremer Gutiérrez. The mandate of the Audit and Corporate Practices Committee is to assist our Board of Directors in overseeing our operations, establish and monitor procedures and controls in order to ensure that the financial information we distribute is useful, appropriate and reliable and accurately reflects our financial position. In particular, the Audit and Corporate Practices Committee is required to, among other things:

•

provide opinions to the Board of Directors on certain matters as provided by the Mexican Securities Market Law;

•

call shareholders meetings and recommend inclusion of matters it deems appropriate on the agenda;

•

inform the Board of Directors of our internal controls and their adequacy;

•

select our auditors, review the scope and terms of their engagement, and determine their compensation;

•

monitor the performance of our auditors and re-evaluate the terms of their engagement;

•

recommend procedures for preparing financial statements and internal controls;

•

monitor internal controls and accounting for specified types of matters;

•

propose procedures for the preparation of financial statements for internal use that are consistent with the published financial statements;

•

assist the Board of Directors in preparing reports provided by the Mexican Securities Market Law;

•

discuss with the auditors the annual financial statements and the accounting principles being applied in the annual and the interim financial statements and based on such discussions, recommend their approval to the Board of Directors;

•

resolve disagreements between our management and auditors relating to our financial statements;

•

request the opinion of independent experts, when deemed appropriate or when required by law;

•

approve services to be provided by our auditors, or establish policies and procedures for the pre-approval of services by our auditors;

•

obtain from our auditors a report that includes a discussion of critical accounting policies used by the Company, any alternative accounting treatments for material items that have been discussed by management with our auditor, and any other written communications between our auditors and management;

•

report to the Board of Directors on its activities;

•

develop procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters, including for the confidential submission of concerns regarding such matters by employees;

•

evaluate the performance of the external auditors;

•

review and discuss the financial statements of the company and advise the board of directors of the committee’s recommendations for approval of such financial statements;

•

receive and analyze recommendations and observations to its functions from shareholders, members of the board of directors and senior management, and the authority to act upon such recommendations and observations;

•

recommend to the Board of Directors procedures for the selection and succession of our chief executive officer and our principal executives;

•

propose criteria for evaluating executive performance;

•

analyze the proposals of the chief executive officer concerning the structure and amount of compensation for our senior executive and raise them with the Board of Directors;

•

review new executive compensation programs and the operations of existing programs;

•

establish contracting practices to avoid excessive payments to executives;

•

assist the Board of Directors in developing appropriate personnel policies;

•

participate with the Board of Directors in developing a plan for employees to invest in our L Shares and review the implementation of such plan; and

•

perform any other functions the Board of Directors may delegate to the Audit and Corporate Practices Committee.

In addition, pursuant to our bylaws, the Audit and Corporate Practices Committee is in charge of our corporate governance functions under the Mexican securities laws and regulations and is required to submit an annual report to the Board of Directors with respect to our corporate and audit practices. The Audit and Corporate Practices Committee shall request opinions of our executive officers for purposes of preparing the annual report. The Board of Directors must seek the opinion of the Audit and Corporate Practices Committee regarding any transaction with a related party that is outside the ordinary course of our business as defined under the Mexican Securities Market Law. Each member of the Audit and Corporate Practices Committee is independent, as independence is determined by our shareholders pursuant to the Mexican Securities Market Law and as defined under Rule 10A-3 under the U.S. Securities and Exchange Act of 1934.

Operations in Puerto Rico and the United States of America Committee

The Operations in Puerto Rico and the United States of America Committee consists of Messrs. Patrick Slim Domit, Carlos Slim Domit, Daniel Hajj Aboumrad, Arturo Elías Ayub, Oscar Von Hauske Solís, Ernesto Vega Velasco, Pablo Roberto Gonzalez Guajardo, David Ibarra Muñoz, Alejandro Soberón Kuri, Carlos Bremer Gutiérrez, Louis C. Camilleri and Santiago Cosío Pando. The mandate of the Operations in Puerto Rico and the United States of America Committee is to act in the name and on behalf of the Company’s Board of Directors in respect of the Company’s Puerto Rican subsidiary, Telpri (including its subsidiaries); and the Company’s U.S. subsidiary Tracfone (including its subsidiaries). To perform this function, the Committee may rely on the internal structures of the Company and its subsidiaries.

Senior Management

The names, responsibilities and prior business experience of our senior officers are as follows:


Daniel Hajj Aboumrad	Appointed:	2000
Chief Executive Officer	Business experience:	Director of Telmex’s Mexican subsidiaries, Chief Executive Officer of Companía Hulera Euzkadi, S.A. de C.V.

Carlos José García Moreno Elizondo	Appointed:	2001
Chief Financial Officer	Business experience:	General Director of Public Credit at the Secretaría de Hacienda y Crédito Público, Managing Director of UBS Warburg, Associate Director of financing at Petróleos Mexicanos (Pemex)

Carlos Cárdenas Blásquez	Appointed:	2000
Chief Wireless Operations Officer	Business experience:	Various positions at Telmex, including Operating Manager for the paging service company Buscatel, S.A. de C.V. and Vice-President of operations for Telmex USA, Manager at Grupo Financiero Inbursa, S.A.B. de C.V.

Oscar Von Hauske Solís	Appointed:	2010
Chief Fixed Line Operations Officer	Business experience:	Chief Executive Officer of Telmex Internacional, Chief Systems and Telecommunications Officer of Telmex and Head of Finance at Grupo Condumex, S.A. de C.V.

Alejandro Cantú Jiménez	Appointed:	2001
General Counsel	Business experience:	Mijares, Angoitia, Cortés y Fuentes, S.C.

Chief Executive Officer

Under our bylaws, the chief executive officer is entrusted with the performance, conduct and execution of our day-to-day business activities. The chief executive officer is responsible for recommending our internal control and internal audit guidelines and presenting business strategies for the approval of the Board of Directors. The chief executive officer is also required to present an annual report to the Board of Directors discussing, among other things:

•

the operations of the Company in the relevant year, as well as the policies followed and, if applicable, the principal pending projects;

•

the financial condition of the Company;

•

the recent results of the Company; and

•

the changes in the Company’s financial condition.

Compensation of Directors and Senior Management

The aggregate compensation paid to our directors (including compensation paid to members of our Audit and Corporate Practices Committee) and senior management in 2010 was approximately Ps. 3 million and Ps. 49.9 million, respectively. None of our directors is a party to any contract with us or any of our subsidiaries that provides for benefits upon termination of employment. We do not provide pension, retirement or similar benefits to our directors in their capacity as directors. Our executive officers are eligible for retirement and severance benefits required by Mexican law on the same terms as all other employees, and we do not separately set aside, accrue or determine the amount of our costs that is attributable to executive officers.

Share Ownership of Directors and Senior Management

The co-chairman of our Board of Directors, Patrick Slim Domit, holds 444 million (or 3.8%) of our AA Shares and 911 million (or 3.3%) of our L Shares directly. The co-chairman of our Board of Directors, Carlos Slim Domit, holds 444 million (or 3.8%) of our AA Shares and 783 million (or 2.8%) of our L Shares directly. In addition, according to beneficial ownership reports filed with the SEC, the Slim Family may be deemed to control us through their beneficial ownership held by a trust and another entity and their direct ownership of shares. See “Major Shareholders” under Item 7 and “Bylaws—Share Capital” under Item 10.

Except as described above, according to the ownership reports of shares or other securities or rights in our shares prepared by our directors and members of senior management and provided to us, none of our directors or executive officers is the beneficial owner of more than 1% of any class of our capital stock. We request our directors and members of senior management to provide ownership information of Company shares or other securities or rights in our shares on a yearly basis.

EMPLOYEES

The following table sets forth the number of employees and a breakdown of employees by main category of activity and geographic location as of the end of each year in the three-year period ended December 31, 2010:


	December 31,
	2008		2009		2010
Number of employees		52,879		53,661		148,058

Category of activity:
Wireless		41,365		42,968		46,117
Fixed		11,514		10,693		101,941

Geographic location:
Mexico		16,526		17,347		70,917
South America		20,360		21,133		60,688
Central America		7,869		7,384		8,102
Caribbean		7,530		7,163		7,676
United States		594		634		675

As of December 31, 2010, the Progressive Union of Communication and Transport Workers of the Mexican Republic (Sindicato Progresista de Comunicaciones y Transportes de la República Mexicana) represented approximately 87% of the employees of Telcel. All management positions at Telcel are held by non-union employees. Salaries and certain benefits are renegotiated every year. Under our labor agreements and Mexican labor law, we are obligated to pay seniority premiums to retiring Mexican employees and pension and death benefits to retired Mexican employees. Mexican retirees are entitled to receive pension increases whenever salary increases are granted to current employees.

Some of our foreign subsidiaries, including our Brazilian subsidiaries, Telgua, Enitel, CTE, Claro Chile, AMX Argentina, Telmex Colombia and Telpri, also have active employee unions.

We believe that we have good current relations with our workforce.

Item 7.

Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

The following table sets forth our capital structure as of April 30, 2011. The table does not give effect to a 2-for-1 stock split approved by our shareholders in April 2011, which will become effective on a date to be determined in the second half of 2011.


Series	Number of Shares (millions)		Percent of Capital			Combined A Shares and AA Shares^(*)
L Shares (no par value)		27,649		69.6	%		—
AA Shares (no par value)		11,712		29.5	%		96.8	%
A Shares (no par value)		387		0.9	%		3.2	%

Total		39,748		100.0	%		100.0	%

(*)	The AA Shares and A Shares of AMX are entitled to elect together a majority of our directors. Percentage figures for each shareholder are based on the number of shares outstanding as of the date of its most recently filed beneficial ownership report.

According to reports of beneficial ownership of our shares filed with the SEC on March 7, 2011, the Slim Family may be deemed to control us through their beneficial ownership held by a Mexican trust that holds AA Shares and L Shares for their benefit (the “Family Trust”) and Inmobiliaria Carso and their direct ownership of shares. See “Directors” and “Executive Committee” under Item 6 and “Related Party Transactions” under this Item 7.

The following table identifies each owner of more than 5% of any series of our shares as of April 30, 2011. Except as described in the table below and the accompanying notes, we are not aware of any holder of more than 5% of any series of our shares. Figures below do not include the total number of L Shares that would be held by each shareholder upon conversion of AA Shares or A Shares, as provided for under our bylaws. See “Bylaws—Share Capital” under Item 10. Holders of five percent or more of any class of our shares have the same voting rights with respect to their shares as do holders of less than five percent of the same class.


Shareholder	Shares Owned (millions)		Percent of Class
AA Shares:
Family Trust⁽¹⁾		5,447		46.5	%
AT&T Inc.⁽²⁾		2,870		24.5	%
Inmobiliaria Carso⁽³⁾		696		5.9	%

L Shares
Family Trust⁽¹⁾		2,999		10.7	%

(1)

Based on beneficial ownership reports filed with the SEC on March 7, 2011, the Family Trust is a Mexican trust which directly holds AA Shares and L Shares for the benefit of the members of the Slim Family. Members of the Slim Family, including Carlos Slim Helú, directly own an aggregate of 1,779 million AA Shares and 4,729 million L Shares representing 15.2% and 16.9%, respectively, of each series. According to such reports, none of these members of the Slim Family individually directly own more than 5% of any class of our shares. Percentage figures are based on the number of shares outstanding as of the date of the most recently filed beneficial ownership report.

(2)

Based on beneficial ownership reports filed with the SEC on March 1, 2011, AT&T also owned approximately 752 million L Shares. In accordance with Mexican law and our bylaws, AT&T holds its AA Shares and L Shares through a Mexican trust. See “Bylaws—Limitations on Share Ownership” under Item 10. Percentage figures are based on the number of shares outstanding as of the date of the most recently filed beneficial ownership report.

(3)

Inmobiliaria Carso, S.A. de C.V. is a sociedad anónima de capital variable organized under the laws of Mexico. Inmobiliaria Carso is a real estate holding company. The Slim Family beneficially owns, directly or indirectly, a majority of the outstanding voting equity securities of Inmobiliaria Carso. Percentage figures are based on the number of shares outstanding as of the date of the most recently filed beneficial ownership report.

The Family Trust is party to an agreement dated February 28, 2011 (the “Shareholders Agreement”) with AT&T International, Inc. (“AT&TI”), which is a subsidiary of AT&T, Inc. (“AT&T”) and the trust through which AT&TI owns AA Shares. The Shareholders Agreement governs the ownership and voting of any AA Shares owned from time to time by the Family Trust and AT&TI. Among other things, the Shareholders Agreement subjects certain transfers of AA Shares by either party to a right of first offer in favor of the other party and grants certain tag along and drag along rights, which, in the event the Family Trust sells a majority of its AA Shares to a third party permit (i) AT&TI to sell the same portion of its AA Shares to such third party in connection with the sale of such AA Shares of the Family Trust and (ii) the Family Trust to require AT&TI to sell the same portion of its AA Shares to such third party as the Family Trust is selling to such third party. However, the right of first offer and the tag along and drag along rights do not apply to the conversion of AA Shares to L Shares, as permitted by our bylaws, or the subsequent transfer of L Shares. The agreement also provides for the composition of the Board of Directors and the Executive Committee.

As of April 30, 2011, 38.7% of the outstanding L Shares were represented by L Share ADSs, each representing the right to receive 20 L Shares, and 99.3% of the L Share ADSs were held by 11,783 registered holders with addresses in the United States. As of such date, 33.7% of the A Shares were held in the form of A Share ADSs, each representing the right to receive 20 A Shares, and 99.5% of the A Share ADSs were held by 5,144 registered holders with addresses in the United States. Each A Share may be exchanged at the option of the holder for one L Share.

We have no information concerning holders with registered addresses in the United States that hold:

•

AA Shares;

•

A Shares not represented by ADSs; or

•

L Shares not represented by ADSs.

We may repurchase our shares on the Mexican Stock Exchange from time to time up to a specified maximum aggregate value authorized by the holders of AA Shares and A Shares. As of December 31, 2010, we had been authorized by our shareholders to repurchase shares with an aggregate value of up to Ps. 175,000 million, and to date during 2011 we have been authorized to repurchase an additional Ps. 50,000 million. As of April 30, 2011, we had repurchased 10,020 million L Shares and 36 million A Shares, with an aggregate value of approximately Ps. 146,105 million (not including applicable commissions and taxes).

RELATED PARTY TRANSACTIONS

We have an agreement to receive consulting services from AT&T. During 2011, we will pay U.S.$10.0 million to AT&T in compensation for its services. In 2010 and 2009 we paid U.S.$7.5 million annually to AT&T in compensation for its services. We have agreements with AT&T International and its affiliates that provide for the completion of calls in our respective countries of operation.

We have extensive transactions with Net Serviços, our equity method investee, all in the ordinary course of business.

Our subsidiaries purchase materials or services from a variety of companies that, according to beneficial ownership reports filed with the SEC, are under common control with us, including Grupo Carso and Grupo Financiero Inbursa and their respective subsidiaries. These services include insurance and banking services provided by Grupo Financiero Inbursa and its subsidiaries. In addition, we sell products in Mexico through the Sanborns and Sears store chains. Some of our subsidiaries also purchase network construction, services and materials from Grupo Carso. Our subsidiaries purchase these materials and services on terms no less favorable than it could obtain from unaffiliated parties, and would have access to other sources if our affiliates ceased to provide them on competitive terms.

In November 2010, we entered into a credit agreement with our affiliate Banco Inbursa, S.A., Institución de Banca Múltiple, Grupo Financiero Inbursa that provides for a line of credit of up to U.S.$400 million to us and/or any of our subsidiaries.

In April 2011, we made short-term loans in the aggregate amount of U.S.$800 million to our affiliate Minera Frisco, S.A.B. de C.V. and two of its subsidiaries. The interest rate on U.S.$600 million of the loans was 1.5% and on U.S.$200 million of the loans was 1.7%. The loans mature between July 2011 and September 2011. The U.S.$200 million of the loans with an interest rate of 1.7% was prepaid in May 2011.

Note 18 to our audited consolidated financial statements included in this annual report provides additional information about our related party transactions.

Item 8.

Financial Information

See “Financial Statements” under Item 18 and pages F-1 through F-103.

DIVIDENDS

We regularly pay cash dividends on our shares. The table below sets forth the nominal amount of dividends paid per share on each date indicated, in pesos and translated into U.S. dollars at the exchange rate on each of the respective payment dates.


Payment Date	Pesos per Share		Dollars per Share
November 19, 2010		Ps.0.16	U.S.$	0.0130
July 23, 2010		Ps.0.16	U.S.$	0.0126
December 10, 2009		Ps.0.50	U.S.$	0.0386
July 24, 2009		Ps.0.30	U.S.$	0.0227
July 25, 2008		Ps.0.26	U.S.$	0.0192

In April 2011, our shareholders approved a dividend of Ps. 0.36 per share, payable in two equal installments in July and November 2011. The declaration, amount and payment of dividends by América Móvil is determined by majority vote of the holders of AA Shares and A Shares, generally on the recommendation of the Board of Directors, and depends on our results of operations, financial condition, cash requirements, future prospects and other factors considered relevant by the holders of AA Shares and A Shares.

Our bylaws provide that holders of AA Shares, A Shares and L Shares participate equally on a per-share basis in dividend payments and other distributions, subject to certain preferential dividend rights of holders of L Shares. See “Bylaws—Dividend Rights” and “Bylaws—Preferential Rights of L Shares” under Item 10.

LEGAL PROCEEDINGS

In each of the countries in which we conduct operations, we are party to various legal proceedings in the ordinary course of business. These proceedings include tax, labor, antitrust, contractual matters and administrative and judicial proceedings concerning regulatory matters such as interconnection and tariffs.

Our concessions are generally subject to early termination for violations of their terms, including certain service, quality, coverage standards and certain interconnection obligations. We are also party to a number of proceedings regarding our compliance with administrative rules and regulations and concession standards. As of the date of this annual report, we believe that none of these proceedings is likely to result in the revocation of any of our material concessions.

Our material legal proceedings are described in Note 17 to our audited consolidated financial statements included in this annual report, and that description is incorporated by reference under this Item.

Item 9.

The Offer and Listing

TRADING MARKETS

Our shares and ADSs are listed or quoted on the following markets:


L Shares		Mexican Stock Exchange—Mexico City Mercado de Valores Latinoamericanos en Euros (Latibex)—Madrid

L Share ADSs		New York Stock Exchange—New York FWB Frankfurter Wertpapierbörse—Frankfurt

A Shares		Mexican Stock Exchange—Mexico City

A Share ADSs		NASDAQ National Market—New York

The following table sets forth, for the periods indicated, the reported high and low sales prices for the L Shares on the Mexican Stock Exchange and the reported high and low sales prices for the L Share ADSs on the NYSE.


	Mexican Stock Exchange				NYSE
	High		Low		High		Low
	(pesos per L Share)				(U.S. dollars per L Share ADS)
Annual highs and lows
2006		Ps.24.13		Ps.15.21	U.S.$	44.40	U.S.$	27.00
2007		36.09		22.85		66.93		40.89
2008		35.09