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As filed with the Securities and Exchange Commission on May 30, 2008

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:             

TELMEX INTERNACIONAL, S.A.B. de C.V.

(Exact name of registrant as specified in its charter)

Telmex International

(Translation of registrant’s name into English)

United Mexican States

(Jurisdiction of incorporation or organization)

Avenida de los Insurgentes 3500

Colonia Peña Pobre

Delegación Tlalpan

14060 México, D.F., México

(Address of principal executive offices)

Juan Antonio Pérez Simón González

Avenida de los Insurgentes 3500, Oficina 2130

Colonia Peña Pobre

Delegación Tlalpan

14060 México, D.F., México

52 (55) 5223-3200

Fax: 52 (55) 5244-0367

(Name, telephone, e-mail and/or facsimile number and

address of company contact person)

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

Securities registered or to be 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 class of capital or common stock as of December 31, 2007 was:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨  Yes            x  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. N/A

¨  Yes            ¨  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. N/A

¨  Yes            ¨  No

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  ¨            Accelerated filer  ¨            Non-accelerated filer  x

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

U.S. GAAP  ¨            IFRS  ¨            Other  x

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            x  Item 18

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨  Yes            x   No

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PRESENTATION OF INFORMATION

In this registration statement, Telmex Internacional, S.A.B. de C.V., a sociedad anónima bursátil de capital variable organized under the laws of the United Mexican States, or Mexico, is referred to as the registrant and, unless the context otherwise requires, the registrant and its consolidated subsidiaries are referred to collectively as Telmex Internacional. Telmex Internacional was established on December 26, 2007 pursuant to a procedure under Mexican law called an escisión, or the Escisión, which split off the Latin American and yellow pages businesses of Teléfonos de México, S.A.B de C.V., or Telmex. See “The Escisión” under Item 4 and Note 1 to our audited consolidated financial statements. Telmex is a leading Mexican telecommunications provider with the most complete local and long-distance network in Mexico and also offers, among other services, connectivity, Internet access and interconnection services.

This registration statement includes under Item 18 our audited consolidated financial statements as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005. Our audited consolidated financial statements and the selected financial data provided below for the dates and periods prior to the Escisión have been prepared on a combined basis and include the historical operations of the entities transferred by Telmex to us in the Escisión. See “The Escisión” under Item 4 and Note 1 to our audited consolidated financial statements. You should read the selected financial data in conjunction with our financial statements and related notes included elsewhere in this registration statement.

Our financial statements have been prepared in accordance with Mexican Financial Reporting Standards, or Mexican FRS, which differ in certain respects from generally accepted accounting principles in the United States, or U.S. GAAP. Note 20 to our audited consolidated financial statements provides a description of the principal differences between Mexican FRS and U.S. GAAP, as they relate to us, a reconciliation to U.S. GAAP of net income and total stockholders’ equity, and condensed financial statements under U.S. GAAP.

For periods ending prior to January 1, 2008, Mexican FRS require re-expression of all financial statements in constant Mexican pesos as of the date of the most recent balance sheet presented. Accordingly, the financial statements and other financial information contained in this registration statement are presented in constant pesos with purchasing power as of December 31, 2007.

This registration statement also includes under Item 18 the financial statements of Net Serviços de Comunicação S.A., or Net, as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005, because of the significance of our investment in Net under applicable rules of the U.S. Securities and Exchange Commission, or SEC. The financial statements of Net are presented in accordance with U.S. GAAP and expressed in U.S. dollars.

References herein to “pesos” or “P.” are to Mexican pesos, references to “U.S. dollars” or “U.S.$” are to United States dollars and references to the “real” or “reais” are to Brazilian reales.

FORWARD-LOOKING STATEMENTS

This registration statement contains forward-looking statements. We may from time to time make forward-looking statements in our periodic reports to the SEC on Form 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, investors, representatives of the media and others. Examples of such forward-looking statements include:

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Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should,” “will” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying them.

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 “Item 3. Key Information—Risk Factors” beginning on page 9, include technological improvements, customer demand, competition, economic and political conditions and government policies in the countries in which we operate or elsewhere, inflation rates, exchange rates and regulatory developments. 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 do not undertake to update such statements in light of new information or new developments.

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PART I

Directors

The following table sets forth as of the date of this registration statement, the names, business addresses and functions of the members of our board of directors:

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Executive Officers

As of the date of this registration statement, the names and responsibilities of our executive officers are as follows:

The offices of Telmex Internacional, S.A.B. de C.V., or Telmex Internacional, are located at Avenida de los Insurgentes 3500, Colonia Peña Pobre, Delegación Tlalpan, C.P. 14060, México, D.F., México. The telephone number of Telmex Internacional at this location is 52 (55) 5223-3200.

Mexican Legal Advisers

Our external legal adviser in Mexico is Galicia y Robles, S.C., located at Torre del Bosque, Blvd. Manuel Ávila Camacho No. 24, Piso 7, Lomas de Chapultepec, C.P. 11000, México, D.F., México.

Auditors

Our independent registered public auditors are Mancera, S.C., a Member Practice of Ernst & Young Global, with offices at Antara Polanco, Avenida Ejercito Nacional, Torre Paseo, No. 843-B Piso 4, Colonia Granada, 11520, México, D.F., México. Mancera, S.C. is a member of the Mexican Institute of Public Accountants.

SELECTED FINANCIAL DATA

This registration statement includes under Item 18 our audited consolidated financial statements as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005. The audited consolidated financial statements and the selected financial data provided below for the dates and periods prior to the Escisión have been prepared on a combined basis and include the historical operations of the entities transferred by Telmex to us in the Escisión that established Telmex Internacional on December 26, 2007. See “The Escisión” under Item 4 and Note 1 to our audited consolidated financial statements. You should read the selected financial data in conjunction with our financial statements and related notes included elsewhere in this registration statement.

Our financial statements have been prepared in accordance with Mexican FRS, which differ in certain respects from U.S. GAAP. Note 20 to our audited consolidated financial statements provides a description of the principal differences between Mexican FRS and U.S. GAAP, as they relate to us, a reconciliation to U.S. GAAP of net income and total stockholders’ equity, and condensed financial statements under U.S. GAAP.

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Mexican FRS require that our financial statements for periods ending prior to January 1, 2008, recognize certain effects of inflation in Mexico and in the other countries in which we operate. Inflation accounting under Mexican FRS has extensive effects on the presentation of our financial statements. See “Effect of Inflation Accounting” under Item 5.

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EXCHANGE RATE INFORMATION

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 re-expressed in constant currency units.

On May 23, 2008, the noon buying rate was P.10.39 to U.S.$1.00.

In the future, any cash dividends we pay will be in pesos, and exchange rate fluctuations affect the U.S. dollar amounts received by holders of American Depositary Shares, or 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 will affect the U.S. dollar equivalent of the peso price of our shares on the Mexican Stock Exchange (Bolsa Mexicana de Valores, S.A. de C.V.) and, as a result, can also affect the market price of the ADSs.

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CAPITALIZATION

The following table sets forth our consolidated capitalization under Mexican FRS as of April 30, 2008. See “Presentation of Information.”

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RISK FACTORS

Risks Relating to Our Business

Increasing competition in the telecommunications industry could adversely affect our revenues and profitability

We face significant competition in Brazil and the other countries in which we operate, which could result in decreases in current and potential customers, revenues and profitability. Governmental authorities in many of these countries continue to grant new licenses and concessions to new market entrants, which results in increased competition. In addition, technological developments are increasing cross-competition in certain markets, such as between fixed-line operators and wireless providers and between cable television providers and telephony providers.

The effects of competition on our business are highly uncertain and will depend on a variety of factors, including economic conditions, regulatory developments, the behavior of our customers and competitors and the effectiveness of measures we take in response to the competition we face. Our ability to compete successfully will depend on customer service, on marketing and on 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.

Our industry is subject to rapid technological changes, which could adversely affect our ability to compete

The telecommunications industry is in a period of rapid technological change. Our future success depends, in part, on our ability to anticipate and adapt in a timely manner to technological changes. We expect that new products and technologies will emerge and that existing products and technologies will further develop. These new products and technologies may reduce the prices we can charge for our services or they may be superior to, and render obsolete, the products and services we offer and the technologies we use. They may consequently reduce the revenues generated by our products and services or require investment in new technology. As a result, our most significant competitors in the future may be new entrants to our markets that would not be burdened by an installed base of older equipment.

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.

Many Latin American countries have recently privatized, and in some cases, deregulated, the provision of communications services and many of the laws, regulations and licenses that regulate our businesses became effective only recently. Consequently, there is only a limited history that would allow us to predict the impact of these regulations on our future operations. In reviewing historical information and in evaluating our future financial and operating performance, you should consider carefully the extensive changes in the structure and regulation of our industry.

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For example, in Brazil, where increased regulation accompanied privatization, the Brazilian National Telecommunications Agency (Agência Nacional de Telecomunicações, or “Anatel”) in 2005 defined a series of cost-based methods, including the fully allocated cost methodology and long-run incremental cost methodology, for determining interconnection fees charged by operators belonging to an economic group with significant market power. Anatel has not published the applicable regulations regarding cost-based methods, although in 2006 it provided criteria for determining whether an operator belongs to a group with significant market power in four segments: rented lines, telephone services, fixed interconnection and mobile interconnection. Based on this criteria, Anatel concluded that Embratel is an economic group with significant market power in two of the segments: long distance rented lines and long distance telephone service. When the cost-based methods are ultimately implemented, the revenues and results of operations of our Brazilian operations may be affected.

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

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 Cisco, Nokia-Siemens, Huawei, Alcatel-Lucent, Motorola, Nortel and Nec to provide us network equipment, 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.

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 telecommunications authorities or private carriers, which are influenced by the guidelines of 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.

Developments in the telecommunications sector have resulted, and in the future may 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 our goodwill, intangible assets or fixed assets may be impaired due to changes in the economic, regulatory, business or political environment, 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 result in a non-cash charge on our income statement, which could adversely affect our results of operations.

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

We continue to look for other investment opportunities in telecommunication companies, primarily in Latin America, and we often have several possible acquisitions under consideration. Any new investment may involve risks to which we previously have not been exposed. We cannot assure you that these investments will be successful. Any future acquisitions and related financings also 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.

Our ability to pay dividends 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. Accordingly, our cash flows will be derived principally from dividends, interest and other distributions made to us by our subsidiaries. Our ability to pay dividends 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 are subject to regulatory limitations in Brazil on the prices we can charge for our domestic and international long distance services

Embratel’s basic domestic and international long distance tariffs are subject to final approval by Anatel, to which we submit requests for rate adjustments. Embratel’s concessions provide for a price cap mechanism to set and adjust rates on an annual basis. We are subject to comprehensive regulations that limit our ability to set tariffs for our services. These regulations may limit our ability to raise prices or may render some kinds of customer traffic unprofitable.

Tariff regulations are subject to challenge in the Brazilian courts, which may result in a loss of profits. We cannot assure you that our financial condition will not be affected by tariff rate challenges in the future.

We are at a disadvantage in Brazil relative to certain of our competitors that control local access networks

To complete long distance telephone calls, we typically must pay originating access charges to the local or the mobile telephone service provider of the caller and terminating access charges to the local or the mobile telephone service provider of the recipient of the call. The Brazilian Telecommunications Law and the concessions for local services oblige local service concessionaires to treat all long distance operators on an equal basis. This means that local service concessionaires should charge their own long distance service concessionaire the same interconnection rate charged to competitors like us. In addition, the Brazilian Telecommunications Law prohibits cross-subsidies between local and long distance concessions, so that if a local service concessionaire were to charge its own long distance concessionaire a lower interconnection rate than the one charged to us, it would be engaging in an anti-competitive practice under the law. However, since some companies own both local and long distance concessions, proving discriminatory pricing and cross-subsidies may be difficult and Anatel may not have sufficient

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means to audit and prove such practices. As a result, while we must pay access charges to the local service concessionaire, a local service concessionaire may allow its own long distance concessionaire to avoid payment of such charges. Although we have demanded and will continue to demand that Brazil’s competitive regulation be fully enforced to prevent local service concessionaires from allowing their long distance concessionaires to sell long distance services below cost, there can be no assurance that we will be successful in achieving such enforcement and we may suffer anti-competitive behavior in certain segments of the long distance market.

Since January 1, 2006, local access and long distance interconnection rates have been capped at a fixed percentage of the rates charged to customers, which may limit the ability of local service concessionaires to engage in the discriminatory pricing practices described above, but we cannot assure you that this measure or similar measures adopted in the future will be effective in counteracting these practices.

Most of our basic voice services in Brazil are sold on a per call basis. This makes it easier for customers to switch providers, which could lead us to lose business

Under Brazilian regulations, fixed-line and mobile telephone customers can select their basic domestic and international long distance carrier on a per call basis. Thus, we do not have contracts with most of our customers in our basic domestic and international long distance segment, and those customers can select a different provider at any time. We cannot assure you that our customers will remain loyal to us. If a significant number of our customers were to select another telecommunications service provider, it could have a material adverse impact on our business and financial condition.

If we are unable to successfully combat fraudulent use of our network in Brazil and successfully manage the collections process, our bad debt expense could increase, which would harm our results and our cash flow

Embratel has experienced high levels of bad debt expense, in part because it is required to provide access to our network to all fixed-line and cellular customers without prior assurance that they are creditworthy users. Brazilian telecommunications regulations allow operators to block fixed-line and cellular users only after the customer fails to pay the amount billed. Embratel’s bad debt expense was 5.3% of its net revenues for the year ended December 31, 2006 and 4.4% of its net revenues for the year ended December 31, 2007.

We cannot assure you that our strategies will be effective in combating the fraudulent use of our network or in enabling us to recover unpaid amounts billed for use of our networks, or that efforts that have proved effective in our traditional business will be equally effective in markets such as personal mobile service (SMP) mobile calls and local services. Embratel’s level of bad debt expense may increase in the future, which could harm our profitability and operating cash flow.

We are obligated to meet certain quality of service goals and maintain quality of service standards, and failure to meet such obligations can result in sanctions

Anatel requires Embratel to meet certain quality of service goals under its concessions, including, for example, minimum call completion rates, maximum busy circuit rates, operator availability and responsiveness to repair requests. Failure to meet quality of service obligations can result and has resulted in the imposition of fines by Anatel and other governmental entities. Our ability to meet these goals can be impeded by factors beyond our control and we cannot assure you that we will meet these goals in the future or that we will not be fined in the future.

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We are subject to large claims under tax disputes in Brazil

Embratel is party to various tax proceedings in Brazil, some of which involve significant monetary claims for which we have established no reserves. We cannot be certain that these claims will be resolved in our favor. In particular, 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. As of December 31, 2007, Embratel had recorded P.5,400 million in reserves for those disputes for which an unfavorable result is probable. There is an additional P.16,832 million claimed for which we believe the likelihood of an unfavorable outcome is possible but less than probable and, consequently, we have not provided for such amount in our financial statements. If all or a significant part of these actions were decided adversely to us, it could have a material impact on our business, financial condition and results of operations.

We will face increased costs if Star One is not able to launch the new Star One C-2 satellite prior to the end of the contractual life of the existing Brasilsat B-1, the satellite it was designed to replace

Our satellite subsidiary in Brazil, Star One S.A., or Star One, has five satellites in operation, which cover the entire territory of South America and part of Florida. Brasilsat B-1, which covers all of Brazil, reached the end of its contractual life in September 2006 and was replaced, on an interim basis, by Brasilsat B-4. We expect that Star One C-2 will permanently replace Brasilsat B-1 in the second quarter of 2008. If we are unable to replace Brasilsat B-1 or, if before Brasilsat B-1 is replaced, Brasilsat B-4 ceases to be a suitable interim replacement for Brasilsat B-1, we may be unable to properly serve our satellite customers and could experience an increase in our costs.

Latin American 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. Many countries in Latin America, including Mexico and Brazil, 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 administrations will result in changes in governmental policy and whether such changes will affect our business. In addition, governments in these countries have frequently intervened in their economies. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price and wage controls, currency devaluations, capital control and limits on export and imports.

Uncertainty in the region has been caused by many different factors, including:

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

Our financial condition and results of operations are affected by exchange rate variations

Changes in the value of the various currencies in which we conduct operations against the Mexican peso, and changes in the value of the Mexican peso or our other operating currencies against the U.S. dollar, affect our financial condition and results of operations. We report exchange gains or losses on our indebtedness and accounts payable, especially in U.S. dollars, and currency variations affect the results of our non-Mexican subsidiaries as reported in Mexican pesos.

Since 2004, we have acquired a number of companies in other countries in Latin America. During that period, the Mexican peso has been relatively stable against the U.S. dollar. However, currencies of certain other countries, specifically the Brazilian real and the Colombian peso, have appreciated relative to the U.S. dollar and the Mexican peso. Such appreciation amplifies the impact of operations in these countries on our revenues as well as costs. We cannot predict the behavior of the Mexican peso and other currencies against the U.S. dollar in the future and what effect they will have on our financial condition and results of operations.

Exchange rate variations also affect our debt. We use derivative instruments to manage our exposure to the risk associated with such variations. At December 31, 2007, our U.S. dollar-denominated indebtedness amounted to P.14,335 million. During 2007, 2006 and 2005, the Mexican peso and Brazilian real generally appreciated against the U.S. dollar. In all these periods, our foreign exchange gain was either offset (in 2007) or more than offset (in 2006 and 2005) by losses on derivatives we had entered into.

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 for the purpose of paying dividends or making timely payments of interest and principal on our indebtedness. The Mexican government or the Brazilian government could institute restrictive exchange rate policies in the future which could adversely affect us.

Risks Relating to Our Controlling Shareholder and Capital Structure

We are controlled by one shareholder

A majority of the voting shares of our company (71.3% as of March 6, 2008) is owned by Carso Global Telecom, S.A.B. de C.V., or Carso Global Telecom. Carso Global Telecom has the effective power to designate a majority of the members of our board of directors and to determine the outcome of other actions requiring a vote of the shareholders, except in very limited cases that require a vote of the holders of L Shares. Carso Global Telecom is controlled by Carlos Slim Helú and members of his immediate family, who, taken together, own a majority of the common stock of Carso Global Telecom.

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

Our bylaws provide that any dispute between us and our shareholders will be governed by Mexican law and that legal actions relating to the execution, interpretation or performance of the bylaws may be brought only in Mexican courts. Under Mexican law, the protections afforded to minority shareholders are different from those in the United States. In particular, the case law concerning fiduciary duties of directors is not well developed, there is no procedure for class actions, there are different procedural requirements for bringing shareholder lawsuits and there are different discovery rules. As a result, it may be more difficult in practice for minority shareholders of Telmex Internacional to enforce their rights against us or our directors or controlling shareholder than it would be for shareholders of an U.S. company.

We engage in transactions with related parties that may create the potential for conflicts of interest

We engage in transactions with entities that like us, are controlled, directly or indirectly, by Carlos Slim Helú and members of his immediate family. These entities include (a) Telmex and certain subsidiaries of Telmex, (b) Grupo Carso, S.A.B. de C.V., or Grupo Carso, and its subsidiaries, (c) Grupo Financiero Inbursa, S.A.B. de C.V., or Grupo Financiero Inbursa, and its subsidiaries, (d) América Móvil, S.A.B. de C.V., or América Móvil, and its subsidiaries, and (e) Carso Global Telecom. Our transactions with Telmex include the completion of the international traffic of Telmex in countries where we operate, the completion of our international traffic through Telmex’s facilities in Mexico, our publication and distribution of Telmex’s directories and access to Telmex’s customer database and Telmex’s billing and collection in connection with our directories’ business. Transactions with Grupo Carso include the purchase of network construction services and materials, and transactions with Grupo Financiero Inbursa include financial services and insurance. Our transactions with América Móvil include the mutual completion of long-distance traffic, transportation, renting of lines and call center services in Brazil.

With respect to our shareholders, Carso Global Telecom and AT&T International, we expect to begin paying fees for consulting and management services in 2009. For 2008, we have reimbursed Telmex U.S.$22.5 million of the amount Telmex paid Carso Global Telecom for such services. In addition, we have agreements with AT&T International that provide for the completion of calls in our respective countries of operation.

Our transactions with related parties may create the potential for conflicts of interest.

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 the transformation or merger of Telmex Internacional or the cancellation of registration of the L Shares with the National Securities Registry (Registro Nacional de Valores), managed by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) 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.

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

Under Mexican law, a shareholder is required to deposit its shares with a custodian in order to attend a shareholders’ meeting. As long as a shareholder holds shares in ADS form, the shareholder will not be able to satisfy this requirement. There can be no assurance that holders of ADSs will receive notice of shareholders’ meetings from our ADS depositary in sufficient time to enable such holders to return voting instructions to the ADS depositary in a timely manner. In the event that instructions are not received with respect to any shares underlying ADSs, the ADS depositary will, subject to certain limitations, grant a proxy to a person designated by us. In the event that this proxy is not granted, the ADS depositary will vote these shares in the same manner as the majority of the shares of each class for which voting instructions are received.

You may not be entitled to preemptive rights

Under Mexican law, if we issue new shares for cash as part of a capital increase, we generally must grant our shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage in Telmex Internacional. Rights to purchase shares in these circumstances are known as preemptive rights. Preemptive rights do not arise upon the sale of newly issued shares in a public offering or the resale of shares of capital stock previously repurchased by us.

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 Telmex Internacional may be diluted proportionately. In addition, under current Mexican law, it is not practicable for the ADS depositary to sell preemptive rights and distribute the proceeds from such sales to ADS holders.

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 wish to 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.

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 Telmex Internacional 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 he may have, including any rights under the U.S. securities laws, with respect to his investment in Telmex Internacional. If you invoke such governmental protection in violation of this agreement, your shares could be forfeited to the Mexican government.

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

Telmex Internacional is organized under the laws of Mexico, and most of our directors, officers and controlling persons reside outside the United States. In addition, a substantial portion of our assets and their assets are located in Brazil and Mexico. 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 or Brazil, 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.

Risks Relating to the Escisión

Our historical performance may not be representative of our performance as a separate company

Our audited consolidated financial statements and the selected financial data included herein for the dates and periods prior to the Escisión have been prepared on a combined basis and include the historical operations of the entities transferred by Telmex to us in the Escisión. Our historical performance might have been different if we had been a separate, consolidated entity during the periods presented.

The historical financial information included in this registration statement is not necessarily indicative of what our results of operations, financial position and cash flows will be in the future. There may be changes that will occur in our cost structure, funding and operations as a result of our separation from Telmex, including increased costs associated with reduced economies of scale, and increased costs associated with being a publicly traded, stand-alone company.

We are a new company and have never operated independently of Telmex

We are a new company and have never operated independently of Telmex. Our ability to function as a new company will suffer if we do not develop our own administrative infrastructure quickly and cost-effectively. Telmex is providing us with certain legal, financial, accounting, investor relations and other administrative services on an interim basis while we develop the personnel and systems necessary to provide these services ourselves. We expect to be dependent on Telmex for these services through 2008 and possibly longer.

After the expiration of these various arrangements, we may not be able to replace the transitional services in a timely manner or on terms and conditions as favorable as those we received from Telmex. In addition, in order to establish ourselves successfully as an independent company, we need to attract and retain a significant number of highly skilled employees. If we fail to do so, our business could suffer.

There may not be a liquid market for our shares

There is currently no public market for our shares. We intend to apply to list our shares on the Mexican Stock Exchange and our ADSs on a U.S. securities exchange. We cannot assure you as to the liquidity of any markets that may develop for the shares or ADSs or the price at which the shares or ADSs may be sold. Also, the liquidity and the market for our shares may be affected by a number of factors including variations in exchange and interest rates, the deterioration and volatility of the markets for similar securities and any changes in our liquidity, financial condition, creditworthiness, results and profitability. As a result, the initial trading prices of our shares and ADSs may not be indicative of future trading prices.

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We may face difficulty in financing our operations and capital expenditures following the Escisión, which could have an adverse impact on our business and results

We may need to incur debt or issue additional equity in order to fund working capital and capital expenditures or to make acquisitions and other investments following the Escisión. We cannot assure you that debt or equity financing will be available to us on acceptable terms, if at all. As a result of the Escisión, it may also become more expensive for us to raise funds through the issuance of debt than it was prior to the consummation of the Escisión. If we are not able to obtain sufficient financing on attractive terms, our business and results could suffer.

THE COMPANY

Overview

Telmex Internacional is a Mexican holding company providing through its subsidiaries in Brazil, Colombia, Argentina, Chile, Peru and Ecuador a wide range of telecommunications services, including voice, data and video transmission, Internet access and integrated telecommunications solutions; pay cable and satellite television; and print and Internet-based yellow pages directories in Mexico, the United States, Argentina and Peru.

Our principal business is in Brazil, which accounts for more than 80% of our total revenues. We operate in Brazil through Embratel Participações S.A. and its subsidiaries. Throughout this registration statement, we refer to Embratel Participações S.A. and, where the context requires, its consolidated subsidiaries, as Embratel.

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Telmex Internacional, 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 Avenida de los Insurgentes 3500, Colonia Peña Pobre, Delegación Tlalpan, 14060 México, D.F., México. The telephone number of Telmex Internacional at this location is 52 (55) 5223-3200.

Our strategy

As an integrated telecommunications company with service offerings across Latin America, our strategy consists of:

In particular, in Brazil we believe that our brand name, reputation for quality service and ownership of Brazil’s only nationwide network combined with our technical capabilities provide us with a strong platform for growth. We expect to continue to use all available technologies to create access solutions for reaching our target customers and to develop new service offerings, with a particular focus on local telephony, broadband Internet and data offerings. We also plan to explore acquisition opportunities, capitalize on local and broadband data opportunities and analyze ways to expand our last mile access network to broaden our existing services and to develop complementary ones. In 2006, together with our investee Net, we launched triple play service for residential customers over Net’s cable network, using our network to provide voice services.

The Brazilian domestic and international long distance markets are increasingly open to full competition. Competitors have gained market share at our expense and are placing pressure on our prices

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and competing with us for desirable customers in the long distance and data businesses. In response to these competitive pressures, we are pursuing a marketing strategy to retain and increase our customer base in Brazil, including our local services customers, and further develop our service offerings with a focus on price clarity and appealing pricing.

History

Telmex Internacional was established on December 26, 2007 by means of a procedure under Mexican corporate law called escisión, by which Telmex split off its Latin American and yellow pages directory businesses. See “—The Escisión.” Telmex is a leading Mexican telecommunications provider with the most complete local and long-distance network in Mexico and also offers, among other services, connectivity, Internet access and interconnection services.

Embratel

We acquired Embratel in a series of transactions beginning in July 2004. As of March 28, 2008, we owned 98.1% of the outstanding voting stock and 97.9% of the outstanding non-voting stock of Embratel (98.0% of the total outstanding capital stock) as a result of transactions undertaken by Telmex from 2004 through 2007:

Other Latin American Telecommunications and Cable Businesses

In addition to the acquisition of Embratel, we also made the following significant acquisitions to expand operations into Latin America beginning in 2004:

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For a description of our other acquisitions, see Note 5 to our audited consolidated financial statements.

Yellow Pages Business

Our yellow pages business in Mexico is conducted through our subsidiary Anuncios en Directorios, S.A. de C.V., or Anuncios, which traces its history to 1897 and is the owner of the registered trademark “Sección Amarilla” in Mexico. Our yellow pages business in the United States is conducted through our subsidiary Sección Amarilla USA, LLC, acquired in October 2006 by Telmex. Our yellow pages offerings in Argentina and Peru first began in 2007 through our subsidiaries in those countries.

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Significant subsidiaries

The following table sets forth our significant subsidiaries as of the date of this registration statement. Our subsidiary Embratel also owns a 35.1% interest in Net, a provider of cable television, local telephone services and broadband Internet access services in Brazil, which we account for under the equity method.

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Certain financial information by region

The following table sets forth selected financial information on our geographic segments for the year ended December 31, 2007, prepared in accordance with Mexican FRS and expressed in constant pesos as of December 31, 2007 and as a percentage of our total consolidated group.

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OPERATIONS IN BRAZIL

We operate in Brazil through Embratel and its subsidiaries, offering a full range of telecommunications services to customers throughout Brazil. Embratel was founded in 1965 and later became the long distance subsidiary of Telecomunicações Brasileiras S.A. – Telebrás, or Telebrás, the Brazilian government-owned telephone company. In 1998, Telebrás was broken up into 12 new holding companies, including Embratel, which were then privatized. Embratel was granted the concession for domestic and international long distance services. Embratel is a public company in Brazil and its shares are listed on the São Paulo Stock Exchange. After the opening up of the Brazilian local service market to competition, Embratel began providing local telephone services in 2002. We currently own 98.1% of the outstanding voting stock and 97.9% of the outstanding non-voting stock of Embratel (98.0% of the total outstanding capital stock).

Revenues from our Brazilian operations in 2007 amounted to P.55,457 million. Of our total Brazilian revenues in 2007, approximately 68.0% was attributable to voice services, approximately 26.4% was attributable to data services and the remainder was attributable to other services. Voice services include domestic and international long distance and local service. We generate most of our voice services revenue from domestic and international long distance services. Residential customers generate the majority of our long distance revenues. Data services include data and Internet access services. Other services include television and radio transmission, mobile satellite communications services and call center services. Of our total Brazilian revenues in 2007, 60.8% was attributable to corporate customers and the remainder to residential customers.

Domestic long distance services

Through Embratel, we are one of Brazil’s major domestic long distance service providers. We provide intra-sectorial, intra-regional and inter-regional long distance services to corporate, residential and cellular customers throughout Brazil. Domestic long distance services accounted for 47.4% of Embratel’s total net operating revenues in 2007, 51.3% in 2006 and 54.3% in 2005.

The domestic long distance services that we provide throughout Brazil include the following:

Domestic long distance rates

Rates for domestic long distance calls are based on the time of day and day of the week when a call is made, the call’s duration and the distance covered. The rates for domestic long distance calls are established by Anatel and are uniform throughout Brazil. There are currently 16 domestic long distance tariffs, based on combinations of four distance categories and four day/time categories.

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Embratel’s concession, effective as of January 1, 2006, establishes a mechanism of annual rate adjustment for local domestic long distance and international long distance services, which is based on rate baskets and adjustments for inflation and productivity. Any other adjustment to our domestic and international long distance switched fixed telephone services is subject to the approval of Anatel. See “—Regulation.”

Our rates are driven primarily by marketing and competitive considerations. In 2005, our strategy was to refrain from increasing domestic long distance rates so we did not implement a tariff increase or request an adjustment from Anatel. In 2006 and 2007, our strategy was to reduce some of the tariffs we charge. As a result, our average domestic long distance rate decreased by 1.3% in 2006 and 1.5% in 2007.

While these rates apply to basic plan customers, we have developed a variety of promotional and customer retention programs since 2000 that enable many of our customers to obtain long distance packages that may include lower rates and/or subscription fees. These programs offer discounts from Anatel-approved rates and are designed to increase our market share and promote usage of the “21” carrier selection code. In addition, we offer discounts to corporate customers on a case-by-case basis. Embratel also has specific campaigns that target specific groups of our corporate customers (e.g., small and medium sized businesses or regional groups). Our customer retention and discount programs are designed to allow us to build customer loyalty and to improve collections by identifying our customers before we bill them for our services.

The majority of our customers for long distance voice services are not “pre-subscribed.” In other words, customers do not register with us as customers before we begin 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 our services by dialing the “21” selection code or to use the services of another service provider by dialing a different code.

International long distance services

Through Embratel, we are one of the major providers of international long distance service in Brazil and we believe that we operate the largest long distance telecommunications network in Latin America. We also have ownership interests in several undersea cables between South America and the rest of the world through cable consortia. International long distance services generated 5.8% of Embratel’s total net operating revenues in 2007, 6.2% in 2006 and 8.6% in 2005.

Revenues generated by international long distance services are primarily derived from:

International long distance rates

Rates charged for outgoing international calls vary depending on the time of 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. Maximum rates for our international long distance service

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are established by Anatel under the price cap mechanism set forth in our concession and are tied to the rate baskets and the adjustments for inflation and for productivity described under “—Domestic long distance services—Domestic long distance rates.” See also “—Regulation—Rates.” In recent years, we have substantially reduced rates for outgoing international calls, partly due to the periodic application of productivity factors (resulting in a downward adjustment to the price caps established by Anatel in the concessions). We have also reduced rates in response to competition. In 2007, rates for outgoing international calls decreased by 1.5% on average. In 2006, rates for outgoing international calls decreased by 10.0% on average.

Net settlement payments

Revenues from international long distance services also reflect payments under bilateral agreements between Embratel and foreign state-owned or private telecommunications providers, which are influenced by the guidelines of the international tariff and trade regulations and cover virtually all international calls to and from Brazil. These agreements set forth the settlement rates of payment from Embratel to foreign carriers for the use of their facilities in connecting international calls originating in Brazil and from foreign carriers to Embratel for the use of its facilities in connecting international calls originating abroad. The settlement rates under these agreements are negotiated with each foreign carrier and are based on foreign currency. They are charged or paid on a net basis. Various factors could affect the amount of net settlement payments from foreign carriers to Embratel in future years. These factors include unauthorized international traffic (commonly known as bypass), increases in the proportion of outgoing as opposed to incoming calls, the volume of minutes included in the bilateral agreements, fluctuations of the Brazilian real versus the currencies involved, changes in market rates and modifications to the tax policies affecting the transfer of payments related to telecommunication payments abroad.

Data transmission and Internet access services

Through Embratel, we are Brazil’s leading provider of data and Internet services. Our data transmission network, which incorporates fiber optic, digital microwave, satellite and copper transmission technology, allows us to provide a range of value-added broadband data services to a client base that includes a substantial majority of Brazil’s top 500 corporations. Our 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 November 2005, Embratel bolstered its offerings of value-added services through the acquisition of PrimeSys, a leading provider of managed telecommunication network operations and data outsourcing, for approximately U.S.$100 million. Data transmission services accounted for 26.4% of Embratel’s total net operating revenues in 2007, 27.5% in 2006 and 24.3% in 2005.

Embratel also operates a free Internet service provider called Click21, which provides us with an easily accessible channel for the marketing and sale of voice services to residential customers and small businesses. At December 31, 2007, Click21 had approximately 2.5 million subscribers, compared to approximately 1.8 million subscribers at December 31, 2006.

Data transmission services and rates are not regulated, though a license is required. See “—Regulation” for more information concerning regulation of our other operations.

In recent years, we have reduced rates per 64 Kbps billed-line equivalent, partly due to new technologies enabling telecommunications companies to provide more bandwidth capacity at lower costs and also in response to more competition in this market. In 2007, rates for 64 Kbps billed-line equivalents decreased by 22.3% on average, and in 2006 our rates for 64 Kbps billed-line equivalents decreased by 8.5% on average.

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Local services

In the fourth quarter of 2002, Embratel began providing local telephony services, and in 2007 we served 415 Brazilian cities, including all major Brazilian metropolitan areas. We are the only local service provider present in all Brazilian states. Local services represented 14.9% of Embratel’s total net operating revenues in 2007, 11.1% in 2006, and 9.0% in 2005.

In December 2003, Embratel acquired Vésper S.A. and Vésper São Paulo S.A. and their subsidiaries, together Vésper, wireless local loop, local services and broadband data operators with operations in São Paulo and 16 other Brazilian states. This enabled us to further broaden and accelerate the rollout of our local service offerings. We market our local service to residential customers under the name Livre, which had 1.4 million users as of December 31, 2007, and our local service to business customers under the name VipLine.

We offer voice over Internet protocol, or VoIP services, to VipLine customers as well as under the name Net Fone via Embratel, in conjunction with Net. See “—Equity investment in Net Serviços de Comunicação S.A.”

Our local rates are affected by marketing and competition and vary by product. In 2005, we increased Livre local rates, on average, by approximately 39%. During 2006, we increased Livre rates, on average, by 4%, to remain competitive with other providers. During 2007, we increased Livre rates, on average, by 25%. Net Fone via Embratel rates have not changed since its launch in March 2006.

Satellite services

Through Embratel’s subsidiary Star One, we are Brazil’s leading provider of satellite solutions, including space segment provision, broadband and network services. Star One currently has five satellites in orbit. Star One’s fleet covers the entire territory of South America and part of Florida. We plan to launch an additional satellite during the second quarter of 2008. Star One also owns 11 transponders on board of NSS-10 (originally AMC-12, and referred to as Star One C-12) operated by SES New Skies. We own 80.0% of the capital stock of Star One; the remainder is owned by GE Satellites Holdings LLC. We include revenues from satellite services as revenues from corporate networks.

Star One’s principal customers include television broadcasters, cable operators, telecommunications service providers, and financial and governmental institutions. Star One also provides satellite services to the Brazilian military. A significant amount of Star One’s satellite capacity is leased directly to Embratel for its telecommunications services. Embratel’s telecommunications services use this capacity, together with equipment and software, to provide data, voice and other telecommunications services to our customers.

Other services

In addition to long distance, data transmission and local services, we provide other services including text, telex, sound and image transmission and maritime communications. We also provide call center services through BrasilCenter to related third parties, including the Brazilian subsidiaries of América Móvil that operate under the brand name Claro and our investee Net. The revenues from other services accounted for 3.6 % of Embratel’s total net operating revenues in 2007, 1.8% in 2006 and 1.8% in 2005.

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Equity investment in Net Serviços de Comunicação S.A.

Embratel owns a non-controlling interest in Net, the largest cable television operator in Brazil. Net has grown substantially as a result of an increase in subscribers as well as the acquisition of Vivax S.A., or Vivax, in two steps in December 2006 and June 2007. As of December 31, 2007, Net had approximately 2.5 million pay television subscribers (a 16% increase over year end 2006), 1.4 million Internet broadband subscribers (a 65% increase over year end 2006) and 567,000 voice service subscribers (a 212% increase over year end 2006). Net had revenues of P.15,498 million and net income of P.1,069 million in 2007.

In addition to cable television services, Net also offers the Net Fone via Embratel voice service, integrated with video and broadband data services, as part of the triple play package provided jointly with Embratel. This service had approximately 561,000 subscribers as of December 31, 2007. The product, which uses VoIP technology, works like a conventional phone line and allows the user to make local, long distance and international calls to any telephone or handset, which calls are charged per minute and not by pulse. In addition, subscribers can apply their minimum monthly fee to make any type of call, including local and long distance calls and calls to mobile phones. This service is primarily directed to the residential market, and is offered with a minimum monthly subscription fee of R$24.90 per month. As of December 31, 2007, the service is available in 68 cities, including São Paulo, Campinas, Santos, Rio de Janeiro, Porto Alegre, Curitiba, Florianópolis, Belo Horizonte and Brasília.

Embratel’s total direct and indirect interest in Net is 35.1%. We originally acquired the interest in Net from Globo Comunicações e Participações S.A. and two related entities (together, Globo) in 2005 and increased it in successive transactions with Globo in 2006 and 2007, for an aggregate purchase price of U.S.$492.2 million. Our interest was subsequently diluted when Net issued shares to acquire Vivax.

A majority of the voting shares of Net is owned by GB Empreendimentos e Participações S.A., or GB. Globo owns a majority of the voting interests in GB. Globo also owns Net Brasil S.A., a company with which Net has (a) a long-term agreement to purchase Brazilian source programming and (b) 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 because Embratel is not under Brazilian control. If Brazilian law changes to allow Embratel to own a controlling interest in Net, 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, and Globo has the right to cause Embratel to purchase such interest.

Direct billing and collections

We directly bill our telecommunications and related services, including collect-calling services and standard voice services, to a portion of our end-user customers. Direct billing results in the risk of bad debts. Since 2000, we have taken a number of measures to reduce our bad debt expense, including:

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Network and facilities

Embratel owns the largest long distance telecommunications network in Latin America and the largest network of broadband fiber optic transmission systems in Brazil. The network, which connects all of the regional fixed-line and cellular operators throughout Brazil, uses a 100% digital switching system for voice and data services, and packet-switched data transmissions in asynchronous transfer mode, or ATM, and frame relay networks for data and Internet access services. The domestic long distance and international transmission facilities extend to all 26 states and the Federal District of Brazil and include fiber optic, digital microwave, satellite and copper wireline networks.

Domestic long distance and local metropolitan network

We are the principal provider of high-speed data transmission and Internet service in Brazil, with the largest national network of fiber-optic transmission system. We have 36,000 kilometers of cable in a mesh network that has three or more outlets with a capacity of 963 Gbps. We use a 100% digital switching system for voice and data services, and we use packet-switched data transmissions in ATM, frame relay networks and Internet services. Our Internet backbone is the largest in Latin America with 65 Gbps capacity distributed in 1,200 POPs and 40 routing centers.

We have a local metropolitan digital fiber networks with 4,200 kilometers of cable in the main cities in Brazil and we offer direct wireline or wireless connections to businesses in those cities. We are implementing fiber extensions to commercial buildings connected to metropolitan rings, providing high quality direct connections. We have made the modifications necessary to enable our telephony networks to use Net’s coaxial cable networks to provide telephony services and we launched local telephony services for Net’s broadband customers.

We use long distance microwave systems, with a total range of 16,254 kilometers, in areas where installation of fiber cables is difficult. These long distance microwave links offer alternative routes to the fiber network. As a complement to the long distance microwave and fiber networks, we also use five satellites to provide services to remote locations within the country.

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We offer local telephony services to our residential customers using the Code Division Multiple Access (CDMA) digital wireless technology. We also provide wireless broadband services in selected areas in the city of São Paulo using CDMA 1xRTT technology.

We have licenses to use the 3.5 GHz frequency with nationwide coverage for the implementation of WiMax technology, which we plan to introduce in 2008 with the goal of providing new service options and access cost reductions via wireless broadband transmission to the homes and offices of our customers.

International network

Embratel’s submarine cable network reaches all continents through 18 different cable systems in which it has various ownership interests. Also, Embratel participates in the Telmex International Regional Network to offer seamless solutions for the most important countries of North and South America. To complement and diversify the international network and increase its global service capacity, Embratel leases satellite capacity from international satellite systems in a cost-effective manner. The International Internet Backbone has 6.9 Gbps of capacity with transmission diversity, providing highly reliable international Internet Protocol, or IP, services to our customers.

Satellite infrastructure

Star One currently operates an earth station in Guaratiba, located in the state of Rio de Janeiro. This station, activated in 1985, is ISO certified and controls the operations of its Brasilsat B-1, B-2, B-3 and B-4 satellites and its Star One C-1 satellite. Embratel has a back-up satellite earth station in Tanguá, also in the state of Rio de Janeiro. Both earth stations are used for satellite operations and control as well as for satellite communications. A third earth station, Mosqueiro, is located in the north of Brazil.

Satellites have a contractual life, based on the expected duration of the satellite’s fuel. We have a program to replace satellites that are nearing or have reached the end of their contractual lives. In November 2007, Star One launched the Star One C-1 satellite to replace the Brasilsat B-2 satellite. Star One C-1 is the first of the new generation of “C” satellites, providing coverage over South America and part of Florida. Brasilsat B-1, which covers all of Brazil, reached the end of its contractual life in September 2006 and was replaced, on an interim basis, by Brasilsat B-4. We expect Star One to launch Star One C-2 during the second quarter of 2008 in order to permanently replace Brasilsat B-1. Star One C-2 will provide coverage over Brazil, South America, Mexico, the west coast of the United States and part of Florida. In 2007, the Brasilsat B-1 was placed in inclined orbit mode and the Brasilsat B-2 is expected to be operating in inclined orbit during the second quarter of 2008. The contractual life of Brasilsat B-3 is until October 2010.

The overall cost of the Star One C-1 was U.S.$278.7 million, U.S.$185.2 million of which has been financed under a credit agreement supported by the French export credit agency (COFACE – French Foreign Trade Insurance Company). The cost of the Star One C-2 is estimated to be approximately U.S.$190.0 million, U.S.$136.5 million of which is being financed under a credit agreement also supported by COFACE.

Competition

The strongest operators in Brazil’s telecommunications market are the companies that were split off from Telebrás, the former government-owned telephone company, upon its privatization. These companies include Telefónica S.A., or Telefónica, Brasil Telecom S.A., or Brasil Telecom, and Oi Participações S.A., whose service in Brazil is under the brand name Oi, and Embratel. Following the

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breakup and privatization of Telebrás, three “mirror companies” were created by the auction of mirror licenses to provide local services over public switched networks in the same geographic areas served by the incumbent carriers. In 2003, Embratel acquired Vésper S.A. and Vésper São Paulo S.A., two of the three mirror companies. Global Village Telecom holds the third mirror license for local service. In the case of domestic and international long distance service, our competitor Intelig holds a mirror license.

Since 2002, the Brazilian federal government has authorized Anatel to grant an unlimited number of authorizations for the provision of any type of telecommunications service. Embratel was granted a nationwide license in August 2002 to provide local telephone service after it met certain universal service requirements.

Our principal competitors in Brazil vary by region and type of service. In northern and eastern Brazil, we compete primarily with Oi and CTBC Telecom for local services and Oi and Intelig for long distance services. In São Paulo, we compete primarily with Telefónica for local services and Telefónica and Intelig for long distance services. In southern and western Brazil, we compete primarily with Brasil Telecom and Global Village Telecom for local services and Brasil Telecom and Intelig for long distance services. There are no official statistics we can use to determine our market shares, but we prepare estimates based on public reports of revenues. In local service, market shares vary by area, but for the total nationwide market we estimate that in 2007 our share was between 5% and 6%, while Oi and Telefónica each had more than one-third of the total market for local service and Brasil Telecom had nearly one-quarter. In long-distance service, we estimate that in 2007 Embratel had (a) approximately 40% of the market in northern and eastern Brazil (with Oi having the balance); (b) approximately 38% of the market in São Paulo (with Telefónica having the balance) and (c) approximately 32% of the market in southern and western Brazil (with Brasil Telecom having the balance).

In addition, we have experienced competition for the provision of international long distance service from companies outside Brazil known as telephone service resellers. Telephone service resellers provide customers with lower international rates by offering international long distance voice services using data protocols in Brazil. Initially, these companies provided services without the required public telephony authorizations from Anatel. However, as licenses have become available, several of these companies have acquired them and become regulated providers.

Regulation

The Brazilian Telecommunications Law (Lei Geral das Telecomunicações Brasileiras) provides a framework for telecommunications regulation. Pursuant to Article 8 of the Telecommunications Law and Decree No. 2,338 of October 7, 1997, the primary regulator of Embratel is Anatel. 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.

Concessions and authorizations

Embratel holds a domestic long distance concession and an international long distance concession, as well as authorizations to provide local and satellite services. Embratel’s concession for the provision of domestic and international long distance service was renewed on December 22, 2005, and will expire on December 31, 2025. Anatel’s regulations provide for possible revision every five years to take into account changed conditions and reconsider universal service obligations and quality targets. The initial grant of the concession to Embratel did not require payment of a fee. Beginning January 1, 2006, however, Embratel is required to pay a fee every two years during the term of the concession equal to 2% of the annual net revenues from the provision of long distance services in the prior year (excluding taxes and social contributions).

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Under the terms of the concession agreements effective January 1, 2006:

Satellite services

Star One’s authorizations for satellites B-1, B-2, B-3 and B-4 were renewed for 15-year terms in December 2005. Star One’s authorizations for satellites C-1 and C-2 were granted in 2003, and each has a 15-year term. Anatel has also granted Star One 15-year authorizations for two new satellites in 2006 and 2007.

Obligations of telecommunications companies

Service and quality targets

Since the privatization of the Brazilian telecommunications system, concessionaires have been required to meet certain universal service and quality targets. Failure to meet these targets carries the possibility of fines and penalties from Anatel.

As provided for in the concession and the General Plan of Telephony Universalization Goals, Embratel installed 1,618 public pay telephones to promote universal service.

Telecommunications providers are subject to the quality targets set forth in the new General Plan on Quality. This plan sets forth a series of service quality obligations that are incorporated into the concessions.

Failure to fulfill our quality of service obligations could lead to the imposition of fines and penalties on Embratel by Anatel. There are a variety of external factors that may impede our ability to fulfill our obligations. Because Embratel’s network connects with those of regional fixed-line operators, regional cellular operators and foreign operators, the quality of service it provides may also be significantly affected by the quality of the networks on which calls originate or terminate.

Interconnection

All telecommunications networks are required to provide interconnection upon request. While the terms and conditions of interconnection are negotiated between the parties, interconnection tariffs are subject to a price cap established by Anatel. Rates below the cap may be freely negotiated between the parties. If a company offers an interconnection tariff below the price cap, it must offer that price to any other party requesting interconnection on a non-discriminatory basis.

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Co-location

Co-location means that a party requesting interconnection may 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. Anatel declared that co-location of network elements and services by operators that provide network elements and services is obligatory according to the regulation currently in place. However, the regulation does not determine which network elements and services are to be co-located or how co-location should occur.

Unbundling

In May 2004, Anatel issued an order establishing rules for unbundling of local telephone networks, which requires the three main incumbent telecommunications service providers (Oi, Brasil Telecom and Telefónica) to make their networks available to other providers, including Embratel. The unbundling order also establishes a time by when service providers must comply with the order to provide these services and addresses related matters such as co-location space requirements. However, Anatel has not yet set final unbundling rules or fixed rates for full unbundling.

Number portability

Number portability is the ability of a customer to move to a new home or office or switch service providers while retaining the same telephone number. Although full implementation will not occur until March 2009, operators have already started implementation activities.

Rates

Embratel’s concession establishes a mechanism of annual rate adjustment, based on rate baskets and an adjustment for inflation. Anatel defines rate baskets for local, domestic long distance and international long distance services. While Anatel caps the weighted percentage increase for the entire basket, tariffs for individual services within the basket may be increased at Embratel’s discretion. Rates for data transmission services are not regulated.

Under the concession contracts, the X Factor, which is applied to public rates, and is used to adjust downward the inflation-adjusted price cap to ensure productivity gains, will no longer be pre-set. Instead, Anatel will calculate productivity factors for each concessionaire. For Oi, Brasil Telecom and Telefonica, Anatel will derive an average after calculating these productivity factors. If the concessionaire’s productivity factor exceeds the sector average, then its own productivity factor will apply. If the concessionaire’s productivity factor is lower than the sector average, the average productivity factor will apply. Since Embratel’s business profile is different from that of the other concessionaires, its own productivity factor will apply to its rate increases. According to the current legislation, only half of the productivity adjustment will be transferred to the consumer while the rest remains with the concessionaire.

Network usage charges or interconnection rates

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.

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Taxes and duties on telecommunications services

In addition to the taxes described under “Item 5,” the cost of providing telecommunications services includes a variety of taxes and duties.

State taxes and duties

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%.

Federal taxes and duties

The principal taxes collected on gross revenues include:

The principal taxes collected on net revenues include:

OPERATIONS OUTSIDE BRAZIL

We provide telecommunications services in Colombia, Argentina, Chile, Peru and Ecuador. We offer cable or satellite television in Colombia, Chile, Peru and Ecuador. Our yellow pages operations are carried out in Mexico, the United States, Argentina and Peru.

Colombia

We operate in Colombia through Telmex Colombia, S.A., or Telmex Colombia, and several other subsidiaries that we have acquired beginning in 2006. Revenues from our Colombian operations in 2007 amounted to P.2,695 million, of which pay television services constituted 34%, data 28%, Internet access 27%, voice services 5%, other services 3% and value-added services 3%. Of our total Colombian revenues in 2007, 61% was generated by cable television subsidiaries.

The main telecommunications regulatory authority in Colombia with respect to cable and broadcast television is the National Television Commission; the main regulatory authorities with respect to other telecommunications services are the Communications Ministry and the Telecommunications Regulatory Commission. Our main competitors in Colombia are Telefónica Telecom (a subsidiary of

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Telefónica, S.A.) Empresa de Telecomunicaciones de Bogotá S.A. E.S.P. – ETB and EPM Telecomunicaciones S.A. E.S.P., all of which offer fixed-line telephone service, Internet access, data services and cable television.

Telecommunications

Through Telmex Colombia, we provide business and residential services to customers by means of a metropolitan and inter-city fiber optic network. We provide cable television services, data and Internet access services, local, domestic and international long distance service, value-added services and video conferencing. At the end of 2007, Telmex Colombia was the first company that was not an incumbent operator to obtain a concession to provide long distance services.

Telmex Colombia provides services to the corporate segment and to small and medium sized businesses. Data and Internet solutions represent 55% of our total revenues in Colombia. During 2007, we continued the expansion of the metropolitan fiber optic network to improve quality in Colombia and provide more comprehensive coverage for our business customers, reaching 22 major cities with 5,400 km of cable that permits outflow to submarine cables. Growth in our small and medium sized businesses segment has resulted from the sales of broadband Internet service packages as well as an increase in service, due to our expansion from two local interconnected cities in 2006 to six interconnected cities in 2007. At year-end 2007, Telmex Colombia had 12,843 local telephone lines, a 157% increase compared to 5,000 lines at year-end 2006.

Cable Operations

Through our newly acquired cable television subsidiaries, we offer pay television, broadband Internet access with speeds from 150 Kbps to 4 Mbps, voice services in local fixed telephony and value-added services associated with VoIP, such as three-way calling, voicemail and caller identification. As a result of these acquisitions, we have coverage in 188 cities and towns, including the country’s major population centers, such as Bogotá, Medellin, Cali, Barranquilla, Bucaramanga, Cúcuta, Cartagena, Ibagué, Manizales, Pereira and Armenian. We had 4.1 million homes passed with our network across the country in 2007, an increase of 456% as compared to 2006, due mainly to our acquisitions. We estimate that our operations account for approximately 52% of the pay television market, 23% of the broadband Internet market and 2% of the local fixed telephony market based on number of subscribers in Colombia.

Of our total network, 27.3% of the capacity is bidirectional, meaning that data flows to and from the customer, allowing us to provide triple play services. In the key cities of Bogotá, Medellin and Cali, which represent more than 39% of Colombia’s population, 36.7% of our network in these markets is bidirectional. At the end of 2007, we had 98,000 triple play customers in Colombia.

We entered the cable television business beginning in 2006, and made the following acquisitions:

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In October 2007, through our subsidiaries we acquired for U.S.$345 million (subject to adjustment) several Delaware companies which in turn owned 100% of the assets and a portion of the liabilities of:

In February 2008, after receiving approval of the Colombian competition authority, we acquired 100% of Cablecentro’s Internet subscribers.

In October 2007, we acquired for U.S.$51 million the subscribers, assets and a portion of the liabilities of Satelcaribe S.A. (now operating as Cablecaribe S.A.), a cable television services provider.

We plan to expand further, having agreed in February 2007, subject to regulatory approval, to acquire the subscribers, assets and a portion of the liabilities of Teledinámica S.A., Organización Dinámica, S.A. and Telebarraquilla S.A., cable television and Internet access providers in Barranquilla, for U.S.$31 million.

Argentina

In Argentina, we operate through Telmex Argentina S.A., or Telmex Argentina. As part of a corporate restructuring in 2007, Telmex Argentina absorbed our subsidiaries, Techtel LMDS Comunicaciones Interactivas S.A. and Metrored Telecomunicaciones S.R.L. In October 2007, we acquired 100% of Ertach S.A., or Ertach, for a purchase price of P.297.7 million (U.S.$28 million). This acquisition is subject to the authorization of Argentina’s competition commission.

In 2007, 42% of the company’s operational revenues in Argentina were attributable to voice services, 40% was related to data and Internet services, 10% was related to E-Business hosting and the remaining portion was related to other services.

Telmex Argentina provides data, Internet access and local and long-distance voice services to corporate and residential customers in Argentina, operates fiber optic rings in metropolitan areas, provides “last-mile” access to reach its customers and offers data administration and hosting through two data centers. We have also developed a new wireless network using pre-WiMax technology in the 3.3 GHz frequency band to provide wireless telecommunications services to small and medium-sized businesses. Telmex Argentina also provides a print and Internet yellow pages directory. See “—Yellow Pages Business.” Ertach provides Internet access and data and voice services through a wireless network integrating Wireless Local Loop (WLL) and WiMax technologies over the 3.5 GHz frequency band. Ertach’s network covers more than 160 cities and towns in Argentina.

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Telmex Argentina operates a local point-multipoint distribution service, or LMDS, and fiber optic network in Argentina, and provides voice, data, video and other telecommunications services. LMDS is a wireless service using radio signals to transmit voice, video signal transportation and data. Telmex Argentina also operates an international information center that monitors the services it provides to its international customers located throughout Latin America, which further improves service quality.

Telmex Argentina has a fiber optic network of over 8,500 km that covers many major cities in Argentina and reaches approximately 53% of the population. The voice network covers approximately 80 interconnected cities. During 2007, we built more than 800 km of fiber optic lines as part of a nearly 1,000 km project that will connect the major cities of the northeastern region of Argentina. Telmex Argentina also began laying fiber optic lines that will eventually connect operations in Argentina and Uruguay.

The main telecommunications regulatory authorities in Argentina are the Secretary of Communications (Secretaría de Comunicaciones) and the Communications Commission (Comisión de Comunicaciones), both under the authority of the Ministry of Federal Planning, Public Investment and Services of the National Government. Telefónica de Argentina S.A. and Telecom Argentina S.A. are Telmex Argentina’s main competitors. Several new entrants in the Argentine telecommunications market, such as Global Crossing S.A., Comsat S.A. and NSS S.A., also compete with Telmex Argentina in fixed-line telephones, public telephones and data and Internet access services.

In the second half of 2006, we began renegotiating the conditions of our 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. We have requested the Secretary of Communications to make a determination as to interconnection rates.

Since June of 2007, we are required to pay a fee to the Universal Fund (Fondo Fiduciario del Servicio Universal), which is used to give underserved persons access to telecommunications services. This requirement requires that all telecommunications operators pay 1% of their revenues, determined after certain deductions.

Chile

We started operations in Chile in February 2004, with the acquisition of all of the assets of AT&T Latin America Corp., including AT&T Chile Holding S.A., renamed Telmex Chile Holding S.A., or Telmex Chile, which was organized as Telmex’s holding corporation in Chile. Additional acquisitions include the following:

Of our revenues from Chilean operations in 2007, 63.9% was attributable to voice services, 33.8% to data and Internet access services and the remainder to other services. In 2007, we estimate Telmex Corp. and Telmex Chile together had a market share of 31.4% in the domestic long distance market and approximately 16.6% in the international long distance market in Chile, based on revenues.

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Telmex Chile is a provider of advanced telecommunications services. To business customers in Chile, we provide data transmission, long distance and local telephony, private telephony, virtual private and long distance networks, dedicated Internet access and high capacity media services. We also offer other advanced services, such as network administration, videoconferencing, virtual PABX, Internet hosting as well as data center and contact center services and electronic billing, among others. In March 2007, Telmex Chile began to provide service to the small and medium sized businesses market, offering packaged WiMax technology. By December 2007, we had more than 10,000 broadband and telephony clients in this market, presenting an opportunity to introduce a multi-service package that includes broadband and Internet access services and different voice service for small and medium sized business.

In the residential market, Telmex Chile has expanded its focus from long distance services (where we have more than a third of the market), to services based on connectivity that utilize the WiMax network, with broadband, local telephony and pay television via satellite (DTH). As of December 31, 2007, we served 67,000 clients, representing 6% of the pay television market in Chile.

Our fiber optic network covers more than 4,600 kilometers of continental Chile, from Arica to Santiago, Santiago to Valparaiso and Santiago to Valdivia. In the southern regions of Chile and Isla de Pascua, we use a satellite platform. We also own and operate metropolitan fiber networks covering Santiago and Chile’s other major cities. In 2005, we introduced the first commercial 10-gigabit Metro Ethernet network in Santiago, which enables our network to offer integrated Internet Protocol, or IP, services to the corporate market, including VoIP services. During 2007, we expanded our Metro Ethernet infrastructure to offer services supported by DWDM technology, which is able to reach a maximum capacity of 400 Gbps. In addition to services supported by these technologies, we offer services through WiMax, xDSL, VSAT and SCPC among others. Local telephony services are provided in the 24 primary population centers.

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 Ministry of Transportation and Telecommunications, which acts primarily through the Undersecretary of Telecommunications, or Subtel. We hold licenses to provide local fixed and wireless service in the 3.4 to 3.6 GHz frequency band throughout the country, domestic long distance and international long distance service, data services and value-added services.

We face competition in all of our business segments, and we compete with Telefónica CTC Chile (indirectly owned by Telefónica S.A.), Entel S.A. and five other carriers. This competition has been vigorous mainly in the corporate telecommunications market and in the international and domestic long distance markets since the implementation of the multicarrier system, which requires local telephone companies to provide facilities that allow long distance carriers to access the local telephone network on an equal basis. In pay television, we face a competition from VTR, Telefónica, Direct TV and other minor competitors.

Peru

Through Telmex Perú, S.A., we provide data, Internet access, fixed-line telephony (including domestic and international long distance), public telephony, and Internet hosting services. We serve corporate customers and residential customers in Lima and the interior of Peru through a fiber optic

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network and a last-mile wireless network in the 3.5 GHz band. In 2006, we extended our yellow pages directory operations to Peru. See “—Yellow Pages Business.” Of the revenues from our Peruvian operations in 2007, 48.5% was attributable to voice services, 34.4% to data and Internet access services, 5.6% to cable television and the remainder to other services.

In 2006, we acquired concessions to provide wireless access services in the 3.5 GHz band in Lima and eight provinces in Peru. We implemented 85% of the wireless access platform and began offering the services during the fourth quarter of 2006. In five provinces, the platform functions in the 10.5 GHz band, providing point-to-point access capabilities. This platform allows us to broaden our service offerings to small and medium-sized business customers and expand our metropolitan network coverage.

In 2006, we also completed our local Ethernet Metro Network installation plan, with 16 access nodes in Lima and eight outside of Lima, of which two are in the Amazon region, enabling us to offer higher data transport service quality as well as managed and value-added services to our customers. In addition, we completed the SDH Network for Metropolitan Transport in Lima, consisting of one main and five secondary rings.

In March 2007, we acquired 100% of Boga Comunicaciones S.A., or Boga, a cable television provider with operations in Lima and Chiclayo, for P.284.6 million (U.S.$25 million). In July 2007, we also acquired, through Boga, the assets of Virtecom S.A., a cable television company with a network that passes through residential areas in Lima, for U.S.$2 million. These combined networks are expected to pass 300,000 homes and will serve as the basis for providing double and triple play services in Peru.

We have completed the second expansion phase of our WiMax technology in Lima, which is similar to that in other provinces, using CDMA 450 MHz. We believe this will allow us to offer Internet packages and fixed telephony geared toward the small and medium sized businesses market.

The main telecommunications regulatory authorities in Peru are the Regulatory Body for Private Investment in Telecommunications (Organismo Regulador de la Inversión Privada en Telecomunicaciones, or OSIPTEL) and the Ministry of Transport and Communications (Ministerio de Transportes y Comunicaciones). Telefónica del Peru S.A., an affiliate of Telefónica, S.A., is our main competitor in fixed-line telephony, public telephony, data and Internet access services. Americatel Peru S.A., an affiliate of Telecom Italia, also competes with us in the fixed-line long distance market.

United States

Our yellow pages directory operations in the United States are described under “—Yellow Pages Business.”

Ecuador

In March 2007, we acquired 100% of Ecuadortelecom S.A., or Ecutel, for P.270.7 million (U.S.$24 million). Ecutel 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, which enables the deployment of WiMax technology. Our operations in Ecuador are substantially under development, though we plan to focus on offering our services to small and medium sized businesses as well as corporate customers.

We currently offer pre-WiMax, local and long distance telephony and Internet access in Guayaquil and Quito. In the fourth quarter of 2007, we began to construct an HFC network to provide triple play services, which will primarily be offered to small and medium sized businesses and residential customers.

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YELLOW PAGES BUSINESS

We offer yellow pages directory services in Mexico, the United States, Argentina and Peru. In Mexico, we operate our yellow pages business through Anuncios; in the United States, we operate through Sección Amarilla USA; in Argentina, Telmex Argentina provides services in Buenos Aires under the name Páginas Telmex; and in Peru, Telmex Perú provides services in the department of Lima y Callao under the name Páginas Telmex. In all of these markets, we provide print and digital products and services.

Print directories

We primarily provide yellow pages directories, and through an arrangement with Telmex, we also provide a white pages directory in Mexico.

Yellow pages

We offer two types of printed yellow pages directories: a complete yellow pages book and a two-column hand directory. The smaller edition is a complement to the larger book, and contains similar information. 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 directories and offer various advertising options to our clients. Directories are published on a 12-month cycle, with staggered publication times. We outsource the printing of our directories. In 2007, we produced approximately 18.3 million directories in Mexico (including white pages directories), 2.8 million in the United States, 800,000 in Argentina and 650,000 in Peru.

In Mexico, we have over 100 years of history of providing telephone directories under the brand name Sección Amarilla. In 2007, we published and distributed 127 directories covering different cities and regions within the country. In most cases, we combine yellow and white pages directories in the same book, and these are provided at no cost to fixed telephone line users. In Mexico’s three largest cities, Mexico City, Guadalajara and Monterrey, the yellow pages and white pages are provided in separate books.

In the United States, we began our directory business in October 2006 following our acquisition of an 80% interest in Cobalt Publishing LLC. Subsequent to the acquisition, Cobalt Publishing LLC was renamed Sección Amarilla USA LLC, or Sección Amarilla USA. Sección Amarilla USA publishes Sección Amarilla, a Spanish-language telephone directory with circulation in 19 states, of which our largest offerings are in California, Florida, New York and Texas, and through the Internet. Whereas Sección Amarilla offered 15 directories in 2006, most of which were published before we acquired Cobalt Publishing LLC, we offered 47 directories in 2007 and expect to offer 105 in 2008. In the United States, we identify Spanish-speaking zones and distribute our directories without charge to our advertisers and residents in these areas.

In Argentina and Peru, we began publishing yellow pages directories in 2007. Thus far, we have only offered one directory in each country.

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White pages

As a service to Telmex, we publish and distribute white pages directories in exchange for a fixed fee pursuant to our long-term contract with Telmex.

Internet yellow pages directory

In 1997, Anuncios began providing electronic directory services by establishing the Sección Amarilla website on the Internet (www.seccionamarilla.com). The web pages provide access to the information published in the print directories. The websites for Mexico, the United States, Argentina and Peru are similar and enable searches by geographic location, classification or business name. Maps accompany search results showing where a business is located. Beginning in 2001, we began selling advertising on our website.

In Mexico, our website had 17.6 million visits in 2007, an increase from the 16.3 million in 2006 and 15.0 million in 2005. Over the same period, page views of our website increased to 271.1 million in 2006 from 134.0 million in 2005, but decreased to 145.0 million pages views in 2007. The increase in page views from 2005 to 2006 resulted from a joint venture between Telmex and the Microsoft website (Prodigy MSN). Page view reduction in 2007 resulted from an improvement to our search engine, making searches more efficient.

SMS text-messaging services

We offer short text messaging (SMS) services to our customers. Through this service, potential clients of our advertisers can search for and access information through their mobile phones.

Advertising sales and marketing

We derive our revenues through the sale of print and electronic advertising. We sell a majority of our advertisements directly. Customers can advertise in a single directory, though some of our larger customers have national accounts in which they advertise throughout all directories in the territory. Print directory advertising remains the most important source of revenue, though increased access to the Internet might shift this result in the future.

Access to Telmex customer data base

We have a long-term, arm’s length arrangement with Telmex whereby we have access to the Telmex customer database for a fixed fee.

Competition

In Mexico, we are the main provider of yellow pages directories. In the United States, in many of our markets we are the only directory published in the Spanish language. Nevertheless, the U.S. directory advertising industry is highly competitive. We also compete with other types of media, including television broadcasting, newspaper, radio, direct mail, search engines and other Internet yellow pages.

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CAPITAL EXPENDITURES

The following table sets forth in constant pesos as of December 31, 2007, our capital expenditures for each year in the three-year period ended December 31, 2007.

Our capital expenditures increased by 45.2% in 2007, due primarily to our acquisition of cable operations in Colombia. In 2007, our consolidated capital expenditures totaled P.12.8 billion (U.S.$1.09 billion). Of our consolidated capital expenditures, our Brazilian operations represented 61.2% (P.7.8 billion or U.S.$721 million) and the remainder of our Latin American operations represented 38.3% (P.5.0 billion or U.S.$369 million).

We have budgeted capital expenditures in an amount equivalent to approximately P.12.5 billion (U.S.$1.1 billion) for the year 2008, including P.6.0 billion (U.S.$531 million) for Brazil, and P.6.5 billion (U.S.$572 million) for our other operations in Colombia, Argentina, Chile, Peru, Ecuador and the United States. Budgeted capital expenditures for 2008 exclude any other investments we may make to acquire other companies. For subsequent years, our capital expenditures will depend on economic and market conditions. Our budgeted capital expenditures are financed through operating cash flows and limited borrowing.

PLANT, PROPERTY AND EQUIPMENT

Our principal properties consist of the networks located in the South American countries in which our subsidiaries operate, including broadband fiber optic transmission systems, digital switching systems, cable television networks, a satellite network, submarine cables and related real estate. As of December 31, 2007, the net book value of our plant, property and equipment was P.50,494 million (U.S.$4,647 million).

Embratel’s properties comprise a majority of our plant, property and equipment and are located throughout Brazil, providing the necessary infrastructure to support local, nationwide long distance and international telecommunications. We conduct the majority of Embratel’s management functions from Rio de Janeiro, and Embratel owns and leases office space in other cities, including São Paulo, Porto Alegre, Belo Horizonte, Curitiba, Brasília, Salvador and Belém. Embratel’s network facilities are in good condition and are suitable to support the wide array of advanced communications services that we provide. Through Star One, Embratel also owns properties related to its space services, consisting primarily of satellites, along with miscellaneous administrative assets held by Star One.

Our properties located in Colombia, Argentina, Chile, Peru and Ecuador consist of transmission and switching networks with coverage in major cities, as well as administrative and customer service offices. Additionally, we have a cable television network in Colombia and Peru and a satellite television network in Chile. For our yellow pages business, we have administrative and customer service offices in Mexico and the United States.

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THE ESCISIÓN

The shareholders of Telmex decided to establish Telmex Internacional as a separate, publicly traded company to hold the shares of subsidiaries engaged in non-Mexican business and of subsidiaries engage in the yellow pages business. The primary purposes of the Escisión were:

The Escisión that established Telmex Internacional was conducted using a procedure under Mexican corporate law called escisión or “split-up.” In an escisión, an existing company is divided, creating a new company to which specified assets and liabilities are allocated. The shares of the new company are issued to the shareholders of the existing company, pro rata to their share ownerhip in the existing company. This procedure differs from the procedure by which a spin-off is typically conducted in the United States, where a parent company distributes to its shareholders shares of a subsidiary.

The Escisión was approved on December 21, 2007, by a single action of the shareholders of Telmex at an extraordinary meeting. The establishment of Telmex Internacional became effective on December 26, 2007 (the “Effective Date”), following certain corporate and administrative procedures relating to the shareholders’ resolution from the extraordinary meeting, including its registration with a Mexican notary public and in the Mexican Public Registry of Commerce as well as its publication in the Diario Oficial (Official Gazette).

In the Escisión, Telmex Internacional received the shares of an intermediate holding company called Controladora de Servicios de Telecomunicaciones , S.A. de C.V., or Consertel. Telmex Internacional itself did not receive any material assets other than the shares of Consertel, and it did not receive any liabilities. Consertel is the company through which Telmex previously held the shares of all its subsidiaries, and it underwent a separate escisión shortly before the Telmex Escisión, that left Consertel owning generally (a) the shares of Telmex’s subsidiaries operating outside of Mexico (directly or through intermediate holding companies), (b) the shares of the Telmex subsidiaries engaged in the Mexican yellow pages business (directly or through intermediate holding companies), and (c) liquid assets with a total value of approximately U.S.$2 billion (directly or through subsidiaries). All Consertel’s other assets and liabilities were conveyed to a new Telmex subsidiary. These consisted primarily of shares of subsidiaries and affiliate investees that were not transferred to Telmex Internacional, and certain related liabilities. All the businesses of Telmex Internacional are conducted by separate operating subsidiaries, and the continuity of existence of those entities was undisturbed by the Escisión.

Mexican law provides a mechanism for a judicial challenge to an escisión, but such a challenge must be brought within the period of 45 days following the registration of the new company created in the escisión. That period has now passed for both the Escisión and the earlier escisión of Consertel.

Mexican law also provides that if an obligation is assumed by the new company in an escisión, and the new company fails to perform, a claimant may make a claim against the old company for up to

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three years unless the claimant expressly consented to the escisión. Telmex Internacional received assets but no liabilities in the escisión, so Telmex Internacional itself does not have any obligations to which these provisions are applicable. Consertel, which is a subsidiary of Telmex Internacional, will be subject to the possibility that a claimant against the new Telmex subsidiary created in the Consertel split-up might seek to assert its claim against Consertel if that new Telmex subsidiary defaults. We consider the risk of such a claim to be remote, and Telmex has agreed to indemnify Telmex Internacional against any such claim.

The Escisión might have constituted or led to a default under some agreements of Telmex, Embratel and other subsidiaries that were transferred to us in the Escisión. Telmex and such subsidiaries obtained waivers or consents under all such agreements. The Escisión also required Telmex to obtain authorizations or approvals from, or otherwise to make submissions to, regulatory authorities in Mexico. All such proceedings have been completed.

Following the Escisión, there will be a variety of contractual relationships between Telmex Internacional and Telmex, both to accomplish the separation of the Escisión and to provide for ongoing commercial relationships. These include:

See “Related Party Transactions” under Item 7.

Delivery of Telmex Internacional Shares

As of the Effective Date, the capital stock of Telmex Internacional was issued and outstanding and each holder of Telmex shares became the owner of an equal number of Telmex Internacional shares of the corresponding class. On a date shortly following the effectiveness of this registration statement (the “Share Delivery Date”), each outstanding instrument representing shares of Telmex will be exchanged for separate instruments representing shares of Telmex and shares of Telmex Internacional, respectively.

During the period from the Effective Date until the Share Delivery Date, the Telmex shares and the Telmex Internacional shares trade together on the Mexican Stock Exchange and clear together through S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V., or Indeval, a privately owned securities depositary that acts as a clearinghouse for Mexican Stock Exchange transactions (through which most beneficial owners hold their interest in Telmex and Telmex Internacional shares).

Beginning on or about the Share Delivery Date, we also expect that:

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Delivery of Telmex Internacional ADSs

Beginning on the Effective Date, each Telmex L Share ADS has represented, in addition to 20 Telmex L Shares, 20 Telmex Internacional L Shares, and each Telmex A Share ADS has represented, in addition to 20 Telmex A Shares, 20 Telmex Internacional A Shares.

We will enter into deposit agreements with JPMorgan Chase Bank, N.A., as depositary, providing for L Share ADSs, each representing 20 Telmex Internacional L Shares, and A Share ADSs, each representing 20 Telmex Internacional A Shares. We will arrange with the depositary to deliver Telmex Internacional ADSs to each record holder of Telmex ADSs following the Share Delivery Date. We expect that the Telmex Internacional L Share ADSs and A Share ADSs will commence trading on the New York Stock Exchange shortly after the Share Delivery Date. See “Trading Markets” under Item 9.

Persons holding Telmex ADSs through the facilities of The Depository Trust Company, or DTC, will receive Telmex Internacional ADSs by book entry only, through the facilities of DTC. Persons holding Telmex ADSs directly will receive the delivery of Telmex Internacional ADSs in the form of certificated American Depositary Receipts, or ADRs, representing Telmex Internacional ADSs by mail shortly thereafter. Persons holding Telmex ADSs through a broker or other securities intermediary should consult such broker or other securities intermediary concerning distribution of the Telmex Internacional ADSs.

Adjustments Related to the Escisión

Since the Escisión, Telmex has carried out repurchases of its shares. These transactions will reduce the number of outstanding shares of Telmex Internacional. The amount of the reduction is expected to be approximately 398,000,000 L shares and approximately 951,000 A shares as of May 26, 2008 and may increase as a result of further repurchases before the Share Delivery Date. The repurchase transactions will not reduce the assets of Telmex Internacional because, as contemplated in the December 21, 2007 shareholder decisions, in May 2008 the Telmex board of directors approved the transfer to us of an additional amount of approximately P.3,600 million.

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Telmex Internacional is a Mexican holding company that was established in December 2007. Our operating subsidiaries were all owned by Telmex prior to our establishment, and they were transferred to us on December 26, 2007 in the split-up that we refer to as the Escisión. See “The Escisión” under Item 4. Telmex was engaged in the yellow pages business for many years prior to the Escisión, but all of our non-Mexican businesses that were previously conducted by Telmex were acquired by Telmex beginning in 2004. As a result, we are engaged through subsidiaries in telecommunications businesses in Brazil, Colombia, Argentina, Chile, Peru and Ecuador. Our subsidiaries are also engaged in the yellow pages business, primarily in Mexico with additional operations in the United States.

The following discussion should be read in conjunction with the financial statements and notes thereto included in this registration statement. Our financial statements for all dates and periods prior to our establishment have been prepared on a consolidated basis and include the historical operation of the subsidiaries transferred to us in the Escisión.

Our financial statements have been prepared in accordance with Mexican FRS, which differ in certain respects from U.S. GAAP. Note 20 to our audited consolidated financial statements provides a description of the principal differences between Mexican FRS and U.S. GAAP as they relate to us, a reconciliation to U.S. GAAP of net income and total stockholders’ equity, and condensed financial statements under U.S. GAAP.

This registration statement also includes the financial statements of Net as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005, because of the significance of our investment in Net under applicable rules of the SEC.

The presentation of our financial performance is extensively affected by the accounting effects of inflation and exchange rate variations. See “—Effects of Exchange Rate Variations” and “—Effect of Inflation Accounting” below.

Effects of the Escisión

As a result of the Escisión, we are now operating independently of Telmex for the first time. All our operating subsidiaries, however, were already separate prior to the Escisión. Our Mexican yellow pages business has operated separately from Telmex for many years, partly for Mexican regulatory reasons. Our non-Mexican businesses were all acquired since 2004 and, while they were extensively integrated with each other, they were not integrated with Telmex either operationally or administratively. Accordingly, we expect that in general our financial performance will not be materially affected by the separation from Telmex, and we believe that in general our historical combined financial statements for earlier dates and periods would not have been materially different if we had been separate from Telmex at those dates and in those periods.

In particular, we do not expect material differences in our cost structure to result from the Escisión. The costs and expenses we record at the level of the operating subsidiaries will not be affected by the separation from Telmex. At the holding company level, we will incur limited additional expenses to rent office space and for such administrative matters as the legal, accounting and finance functions, including paying fees to Telmex for administrative services during an initial period. We may also pay fees to Carso Global Telecom and AT&T for consulting and management services, as Telmex does, and in 2008 we have reimbursed Telmex U.S.$22.5 million of the amount it has paid Carso Global Telecom

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for such services in 2008. We do not, however, expect these expenses to be material to our commercial, administrative and general expenses, which were Ps.16,207 million in 2007. We did not allocate expenses of this kind to Telmex Internacional in preparing our audited consolidated financial statements.

Our costs of financing will also not be immediately affected by the separation from Telmex, because our indebtedness is at the subsidiary level and does not have credit support from Telmex. Similarly, we do not expect the separation to affect our liquidity. We cannot, however, be certain that in the future our subsidiaries, as part of a new and smaller group, will continue to have access to financing on equally favorable terms.

Effects of Exchange Rate Variations

Our financial statements are presented in Mexican pesos, but less than 10% of our revenues are from Mexico. In each jurisdiction in which we operate, we treat the local currency as the functional currency for accounting purposes because it is the currency of the primary operating environment for our segment in that jurisdiction. In Brazil in particular, the Brazilian real is the functional currency. As a result, under Mexican FRS, revenues originating in Brazil are first re-expressed for inflation in constant Brazilian reais at period-end, and then translated to pesos using the year-end exchange rate. If the Brazilian real appreciates against the peso from one year to the next, that will tend to increase our revenues as reported in pesos.

The movement of the Brazilian real against the peso has a significant effect on our financial performance, since the majority of our revenues (81.8% in 2007) are in Brazil and the real has appreciated substantially over the past several years. The value of one Brazilian real in Mexican pesos at the end of 2007 was 20.6% higher than at the end of 2006 and 11.2% higher than at the end of 2005. This tends to make our results, as reported in pesos, improve from year to year. However, the re-expression of financial statements from prior periods, as discussed below, tends to diminish this effect. In comparing our results for 2007 and 2006, the positive effect of the appreciation of the real was almost completely offset by the adverse effect of re-expressing 2006 results in 2007 constant pesos.

Exchange rate variations also affect our financial performance because of our U.S. dollar-denominated debt. We recognize an exchange gain or loss based on changes in the value of the U.S. dollar against the functional currencies of the primary operating environments of our subsidiaries that have debt denominated in U.S. dollars. Since most of our debt is in Brazil, the appreciation of the Brazilian real against the dollar has resulted in exchange gains, but these have been offset by fair value losses on the derivatives we enter into to convert our U.S. dollar exposure to Brazilian reais.

Effect of Inflation Accounting

Through the end of 2007, Mexican FRS required us to recognize certain effects of inflation in our financial statements. They also required us to re-express financial statements from prior periods in constant pesos as of the end of the most recent period presented. As discussed below, we do not expect that inflation accounting will be applicable in 2008.

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Recognition of effects of inflation

All our financial statements and other financial information included in this registration statement recognize effects of inflation in accordance with Mexican FRS. The main inflation adjustments are as follows:

Re-expression in constant pesos

Financial statements for all periods have been re-expressed in constant pesos as of December 31, 2007. The re-expression in constant pesos uses a factor that is determined using (a) the inflation rate in each country in which we operate, (b) the exchange rate between the Mexican peso and the currency of each country in which we operate and (c) the contribution to our consolidated revenues of our operations in each country in which we operate. The effect of this factor is to apply a weighted average rate of inflation relative to the Mexican peso. Because of the significance of our Brazilian operations, the most important elements in determining the re-expression factor are Brazilian inflation and the exchange rate between the Brazilian real and the Mexican peso.

The re-expression factor is 1.2607 for the financial statements of 2006 and 1.4297 for the financial statements of 2005. (This factor differs from the factor we used in the information statement dated December 6, 2007, describing the Escisión, which was weighted based on the composition of consolidated revenues of Telmex rather than Telmex Internacional).

The high value of the re-expression factor has a significant impact on the comparison between our results of operations for 2007 and for prior years. To illustrate the effects of the re-expression in constant pesos, if we provided a particular service for 100 nominal pesos of revenue in 2006 and again in 2007, the re-expression in constant pesos would result in a 20.7% decrease in revenue, from 126.1 constant pesos in 2006 to 100 constant pesos in 2007. However, our largest operations by far are in Brazil, and the Brazilian real has appreciated sharply against the Mexican peso during 2006 and 2007. The re-expression factor largely offsets the apparent growth in our reported results that would otherwise have resulted from translating our Brazilian results into Mexican pesos.

Cessation of inflation accounting under Mexican FRS

Mexican FRS have changed for periods beginning in 2008, and the inflation accounting methods summarized above will no longer apply, except if any economic environment in which we operate

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qualifies as “inflationary” for purposes of Mexican FRS. An environment is inflationary if the cumulative inflation rate equals or exceeds an aggregate of 26% over three consecutive years (equivalent to an average of 8% in each year). Based on current forecasts, we do not expect the economic environments in which we operate to qualify as inflationary in 2008 or 2009, but that could change depending on actual economic performance.

As a result, we expect to present financial statements without inflation accounting beginning in 2008. We will not re-express financial statements for prior periods to give retrospective effect to the cessation of inflation accounting. In this respect, our financial statements for 2008 will not be comparable to those for prior periods. In comparing our results for 2008 to results for prior periods, we expect that the most important effects of the cessation of inflation accounting, and of related changes in other accounting standards, will be as follows:

Effects of inflation accounting on U.S. GAAP reconciliation

U.S. GAAP does not ordinarily contemplate the recognition of effects of inflation or the re-expression of prior-period financial statements. However, in reconciling our net income and stockholders’ equity to U.S. GAAP, we have generally not reversed the effect of inflation accounting under Mexican FRS, pursuant to a long-established practice under which Mexican FRS inflation accounting is acceptable in financial statements filed with the SEC. There are two exceptions. The first is the special rule applicable to plant, property and equipment manufactured in a country other than the country in which they are located. Our reconciliation does reverse the effects of that special rule. Second, the re-expression of prior period financial statements under U.S. GAAP uses only Mexican inflation, rather than the weighted re-expression factor we use under Mexican FRS as described above. See Note 20 to our audited consolidated financial statements.

Changes in Mexican FRS

Note 2(x) to our audited consolidated financial statements discusses new accounting pronouncements under Mexican FRS that came into force in 2007. Some of these pronouncements have

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already been fully implemented in the financial statements included in this registration statement. Others will require us to change our financial presentation in 2008 in ways that we expect to have a material effect on our results of operations and our balance sheet. In particular, the cessation of inflation accounting, as described above, will also entail changes in accounting for foreign currency translation and for employee benefit obligations.

Effects of Acquisitions

Telmex was engaged in the Mexican yellow pages business for many years prior to the Escisión. All of our other businesses, however, were acquired by Telmex after January 1, 2004, starting with the purchase of AT&T Latin America in February 2004 and the purchase of a controlling interest in Embratel in July 2004. See “Item 4. Information on the Company—The Company—History.”

Our financial performance in 2007, 2006 and 2005 has been affected by the acquisitions made during those periods. The most significant acquisitions are listed below, together with the effective date as of which each has been reflected in our financial statements. These and other, less significant acquisitions are summarized in Note 5 to our audited consolidated financial statements.

In addition to these acquisitions, Telmex increased its percentage ownership of Embratel in two capital increases in 2005 and a cash tender offer that began in 2006. The principal closings under the tender offer occurred in November 2006 and resulted in the acquisition of an additional 24.6% of the shares of Embratel. In accordance with Brazilian law and the terms of the tender offer, Telmex continued to purchase shares at the tender offer price through June 2007, increasing its interest in Embratel by an additional 1.6%.

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We have accounted for acquisitions using the acquisition method of accounting, which has resulted in the recognition of a substantial amount of goodwill. At December 31, 2007, the balance of goodwill was P.16,298 million. We have also allocated substantial value to the licenses and trademarks of acquired entities, which has resulted in a net balance of P.5,721 million on our balance sheet at December 31, 2007.

We will continue to evaluate possible acquisitions, particularly in the Latin American telecommunications business, and we may acquire businesses when we are presented with opportunities that are strategically complementary and reasonably priced. In 2008, we have agreed to acquire the assets of Teledinámica, a cable television and Internet access provider in Barranquilla, Colombia, for U.S.$31 million, but the acquisition has not yet closed. Any acquisitions we may make will affect our financial performance in future periods. We may incur additional debt to finance acquisitions, and we may acquire companies with pre-existing debt. Increased debt would also affect our financial condition and our results of operations.

Agreements with Brazilian Operators

Transactions with other Brazilian telecommunications operators are an important part of Embratel’s business. These transactions regularly give rise to disagreements, particularly because the two parties to interconnection and co-billing arrangements reach different determinations about the amount of traffic and about the amounts due.

The disagreements are ordinarily settled by bilateral agreements. These agreements also establish certain understandings, guidelines and commitments governing the parties’ relationships in order to prevent similar disputes from arising in the future. Agreements of this kind between operators are common in the Brazilian telecommunications industry. Each agreement reflects the settlement of outstanding disputes between our subsidiary Embratel and the other party over a range of transactions between them in prior periods, primarily involving interconnection and co-billing arrangements.

In each of 2005, 2006 and 2007, Embratel reached agreements of this kind with other Brazilian fixed and mobile telecommunications operators that settled business disputes among the parties. Each such agreement related to past periods, and none related to the current period or to future periods. Based on the terms of the agreement with each operator, we recognized the difference between the agreed amounts and the amounts Embratel previously estimated and which were reflected on our balance sheets. The effects of these agreement in each period are set forth in Note 18 to our financial statements. We continue to negotiate settlements with operators and, while we cannot be certain, we do not expect any significant amount to be recognized as a result.

Summary of Operating Income and Net Income

The table below summarizes our statements of income for 2005, 2006 and 2007. Our results for 2006 and 2005 have been re-expressed in constant pesos as of December 31, 2007, and as discussed in more detail above, the re-expression factor reflects not only inflation but also exchange rate movements between the Mexican peso and the currencies of the other countries in which we operate, especially the Brazilian real. The high value of the re-expression factor has a significant impact on the comparison between our results of operations for 2007 and for prior years, generally eliminating the growth in peso terms that would otherwise have resulted from the appreciation of the Brazilian real against the peso.

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