How To Spinoff From Telmex To Am\U00E9Rica M\U00F3Vil

Transcription

1 21492 LTR 1 Telmex Info Statement p23 ps 15 SEP 00 15:58 R. R. DONNELLEY ( ) 12016/ BA/BBLAN (212) B 15 SEP 00 13:33 Teléfonos de México, S.A. de C.V. Parque Vía 190 Colonia de Cuauhtémoc, México D.F., México September 15, 2000 Dear Shareholders: The board of directors of Teléfonos de México, S.A. de C.V. ( Telmex ) decided on September 6, 2000, to propose to shareholders to divide Telmex, establishing a new independent company called América Móvil, S.A. de C.V. ( América Móvil ). We refer to this transaction as the Spin-off. América Móvil will focus on the Mexican wireless business and on international opportunities in wireless and other telecommunications businesses. Telmex will focus on the domestic Mexican fixed-line business, including Internet access and data transmission, and related international initiatives. The Spin-off is described in the Information Statement that accompanies this letter. It will be implemented using a procedure under Mexican corporate law called escisión, in which: América Móvil will be established as a new company; specified assets of Telmex (including shares of specified subsidiaries) will be transferred to América Móvil; and each holder of any class of Telmex shares will receive the same number of América Móvil shares of the corresponding class. If you own L Shares or A Shares of Telmex, you will receive L Shares or A Shares of América Móvil, with rights that are generally similar to the Telmex shares. If you own L Share ADSs of Telmex, you will receive L Share ADSs of América Móvil. You will continue to own the same Telmex shares and ADSs after the Spin-off as before. On September 25, 2000, an extraordinary meeting of Telmex shareholders will be held to approve the Spin-off and for related purposes. Approval requires the affirmative vote of a majority of the aggregate voting power of the outstanding AA and A Shares. Carso Global Telecom, S.A. de C.V. and SBC International, Inc., as beneficial owners, intend to vote their shares in favor of the Spin-off, so approval of the Spin-off at the extraordinary meeting is assured without the affirmative vote of any other shareholder. You are not being asked for a proxy and are requested not to send one. In accordance with Mexican law, no proxy solicitation will be conducted, and as a foreign private issuer, Telmex is exempt from the requirements of U.S. law concerning proxy solicitations and information statements. The accompanying Information Statement has been prepared to explain the Spin-off to Telmex shareholders. We are grateful for the loyalty and support of Telmex shareholders and look forward to welcoming them as shareholders of América Móvil. Sincerely, Carlos Slim Helú Chairman of the Board

2 21492 TX 1 Telmex Info Statement p23 ps 15 SEP 00 17:18 R. R. DONNELLEY ( ) 12016/57989 (21492balan04) (212) B 15 SEP 00 13:33 Information Statement dated September 15, 2000 Teléfonos de México, S.A. de C.V. This Information Statement relates to a spin-off (the Spin-off ) in which Teléfonos de México, S.A. de C.V. ( Telmex ) will establish a new Mexican corporation called América Móvil, S.A. de C.V. ( América Móvil ). The Spin-off will be implemented using a procedure under Mexican corporate law called escisión. The Spin-off is expected to be approved by a majority of holders of Telmex AA Shares and Telmex A Shares at an extraordinary shareholders meeting scheduled for September 25, 2000 (the Approval Date ). On the Approval Date, each holder of Telmex shares will become the owner of an equal number of América Móvil shares of the corresponding class, but the América Móvil shares will not initially be delivered to shareholders. From the Approval Date until a distribution date to be announced (the Share Distribution Date ), Telmex shares and América Móvil shares may only be owned and transferred together, and each Telmex L Share ADS will represent the right to receive 20 América Móvil L Shares in addition to 20 Telmex L Shares. On the Share Distribution Date, which will occur at least 45 days after the Approval Date, América Móvil shares will be delivered to Telmex shareholders as of a specified record date. As soon as practicable following the Share Distribution Date, América Móvil ADSs, each representing 20 América Móvil L Shares, will be delivered to holders of Telmex L Share ADSs as of a specified record date. Telmex currently expects that the Share Distribution Date will occur in November No consideration will be paid to Telmex or América Móvil for the América Móvil shares and América Móvil ADSs issued as a consequence of the Spin-off. Beginning on or about the Share Distribution Date, Telmex expects that (i) the América Móvil L Shares will trade on the Mexican Stock Exchange and the Mercado de Valores Latinoamericano ( Latibex ) in Madrid; (ii) the América Móvil L Share ADSs will trade on the New York Stock Exchange, subject to official notice of distribution, and the Frankfurt Stock Exchange, and will be quoted on the International Stock Exchange of the United Kingdom and the Republic of Ireland, Ltd. ( SEAQ International ); and (iii) the América Móvil A Shares will trade on the Mexican Stock Exchange. In each case, admission to listing and trading will be subject to approval. TELMEX IS NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND TELMEX A PROXY. Telmex is furnishing this Information Statement solely to provide information to shareholders of Telmex, who will receive shares of América Móvil in the Spin-off. It is not, and should not be construed as, an inducement or encouragement to buy or sell any securities of Telmex or América Móvil. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Spin-off of the América Móvil shares or passed upon the accuracy or adequacy of this Information Statement or any document referred to herein. Any representation to the contrary is a criminal offense.

3 21492 TX 2 Telmex Info Statement p55 AOG ps 13 SEP 00 01:37 R. R. DONNELLEY ( ) 53312/57989 (212) B 15 SEP 00 13:33 Telmex has prepared this Information Statement to explain the Spin-off to its shareholders, who will receive shares of América Móvil in the Spin-off. In accordance with Mexican law, Telmex will not conduct any proxy solicitation for the extraordinary shareholders meeting called to approve the Spin-off. As a foreign private issuer, Telmex is exempt from the requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act ) concerning proxy solicitations and information statements. TABLE OF CONTENTS Additional Information... 2 Incorporation by Reference... 3 Shareholder Inquiries... 3 Summary... 4 The Spin-off... 8 América Móvil Certain Information Concerning Telmex Pro Forma Financial Information Controlling Shareholders and Certain Beneficial Owners Market Information Forward-Looking Statements Page ADDITIONAL INFORMATION América Móvil will file with the Securities and Exchange Commission (the Commission ) a Registration Statement on Form 20-F (the América Móvil Registration Statement ) to register the América Móvil L Shares under Section 12(b) of the Exchange Act and the América Móvil A Shares under Section 12(g) of the Exchange Act. As of the date of this Information Statement, the América Móvil Registration Statement has not yet been filed with the Commission. When it is filed, Telmex expects that it will remain subject to amendment before it is declared effective by the Commission. This Information Statement contains limited information with respect to Telmex and América Móvil, which is qualified in its entirety by reference to the América Móvil Registration Statement and the filings and reports made by Telmex incorporated by reference in this Information Statement. Telmex files reports, including annual reports on Form 20-F, and other information with the Commission pursuant to the rules and regulations of the Commission that apply to foreign private issuers. Upon effectiveness of the América Móvil Registration Statement, América Móvil will also be subject to these rules and regulations and, in accordance therewith, will be required to file reports, including annual reports on Form 20-F, and other information with the Commission. You may read and copy any materials Telmex or América Móvil file with the Commission at its Public Reference Room at 450 Fifth Street, NW, Washington, D.C You may obtain information on the operation of the Public Reference Room by calling the Commission at (800) SEC You may also read and copy any materials Telmex files with the Commission at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois

4 21492 TX 3 Telmex Info Statement p23 ps 14 SEP 00 22:36 R. R. DONNELLEY ( ) 97005/57989 (212) B 15 SEP 00 13:33 INCORPORATION BY REFERENCE This Information Statement incorporates by reference documents that Telmex and América Móvil file with the Commission, which means that important information is disclosed to you by referring you to those documents. The information incorporated by reference herein is considered to be part of this Information Statement, and certain later information that Telmex or América Móvil file with the Commission will automatically update and supersede this information. The following documents are incorporated by reference: Telmex s annual report on Form 20-F for the fiscal year ended December 31, 1999 (the Telmex 20-F ), filed with the Commission on May 19, 2000; Telmex s reports on Form 6-K, filed with the Commission on April 28, 2000, June 9, 2000 and July 21, 2000, respectively; the América Móvil Registration Statement, to be filed with the Commission; and any future filings on Form 20-F made by Telmex or América Móvil with the Commission under the Exchange Act after the date of this Information Statement and prior to the Share Distribution Date, and any future filings by Telmex or América Móvil on Form 6-K during such period that are identified in such forms as being incorporated by reference into this Information Statement. You may request a copy of any and all of the information that has been incorporated by reference in this Information Statement and that has not been delivered with this Information Statement, at no cost, by writing or telephoning Telmex at Parque Vía , Colonia Cuauhtémoc, Mexico, D.F., Mexico, attention: Investor Relations, telephone (525) SHAREHOLDER INQUIRIES Shareholders of Telmex with questions relating to the Spin-off and distribution of the América Móvil shares and the América Móvil ADSs should contact Telmex at Parque Vía , Colonia Cuauhtémoc, Mexico, D.F., Mexico, attention: Investor Relations, telephone (525)

5 21492 TX 4 Telmex Info Statement p30 ps 14 SEP 00 06:53 R. R. DONNELLEY ( ) 48588/57989 (212) B 15 SEP 00 13:33 SUMMARY The following is a brief summary of certain information contained elsewhere in this Information Statement. This summary is qualified in its entirety by the more detailed information set forth in this Information Statement. Amé rica Móvil... Capital Structure of América Móvil... América Móvil, S.A. de C.V., a new Mexican corporation, will be established by Telmex in a spin-off (the Spin-off ) of Telmex s Mexican wireless business and, with limited exceptions, Telmex s international operations. América Móvil will be Mexico s leading provider of wireless telecommunications services, with 10.1 million customers and a 70.6% share of the Mexican market as of June 30, It will also build on the strength of its Mexican business with strategic acquisitions and investments in the telecommunications sector in Latin America, the United States and Europe. From its inception, América Móvil will have businesses in Argentina, Brazil, Ecuador, Guatemala, Puerto Rico and the United States. It will continue growing its Mexican business and seeking opportunities presented by growth, consolidation and technological change in the industry. América Móvil will have three classes of shares. The AA Shares and A Shares will have full voting rights. The L Shares will be entitled to vote only on certain limited matters and will have limited preferential rights, as described below. The number of shares of each class will initially be the same as the number of Telmex shares of the corresponding class outstanding on the Approval Date. If the Spin-off had occurred on June 30, 2000, the capital structure of América Móvil would have been as follows: Class Number of Shares Outstanding Percentage of Capital Percentage of Voting(1) (millions) L Shares(2)... 11, % AA Shares... 3, % A Shares Total... 14, % 100.0% (1) Except on limited matters for which L Shares will have voting rights. (2) Excluding L Shares that will be held by América Móvil in treasury. 4

6 21492 TX 5 Telmex Info Statement p11 ps 13 SEP 00 13:48 R. R. DONNELLEY ( ) 34135/57989 (212) B 15 SEP 00 13:33 The Spin-off... TheSpin-off will be conducted by means of the procedure under Mexican corporate law called escisión or split-up. Effective upon approval by a majority of holders of Telmex AA Shares and Telmex A Shares at an extraordinary shareholders meeting scheduled for September 25, 2000 (the Approval Date ): América Móvil will be established as a new company, and specified assets of Telmex (including shares of specified subsidiaries) will be transferred to América Móvil. Each owner of Telmex AA Shares will become the owner of the same number of América Móvil AA Shares. Each owner of Telmex L Shares will become the owner of the same number of América Móvil L Shares. Each owner of Telmex A Shares will become the owner of the same number of América Móvil A Shares. Telmex shareholders will also continue to own their Telmex shares. Distribution of the América Móvil Shares... Distribution of América Móvil L Share ADSs... For an initial period after the Approval Date, América Móvil shares will not be separated from Telmex shares and may only be owned or traded together with the Telmex shares. Following the Approval Date, Telmex will announce the date on which América Móvil shares may be held and traded separately from Telmex shares (the Share Distribution Date ) and the date for determining the right to receive América Móvil shares (the Share Record Date ). These dates will follow a statutory period of at least 45 days from the Approval Date and are expected to occur in November Each Telmex L Share ADS represents 20 Telmex L Shares. Beginning on the Approval Date, each Telmex L Share ADS will also represent the right to receive 20 América Móvil L Shares. América Móvil will arrange with a U.S. depositary bank to issue new ADSs, each representing 20 América Móvil L Shares. On a date (the ADS Distribution Date ) as close as practicable to the Share Distribution Date, each record holder of Telmex L Share ADSs will receive an equal number of América Móvil L Share ADSs. Morgan Guaranty Trust Company of New York, the depositary for the Telmex L Share ADSs, will announce the ADS Distribution Date and the date for determining the right to receive América Móvil L Share ADSs (the ADS Record Date ). 5

7 21492 TX 6 Telmex Info Statement p55 AOG ps 12 SEP 00 17:20 R. R. DONNELLEY ( ) 93381/57989 (212) B 15 SEP 00 13:33 Listing and Trading of América Móvil Shares and ADSs... Conversion Rights of América Móvil Shares.. Preferential Rights of América Móvil L Shares... Shareholder Approval of the Spin-off... TheAmérica Móvil shares will not trade separately from Telmex shares prior to the Share Distribution Date. Beginning on the Share Distribution Date, Telmex expects that the América Móvil shares will trade as follows: L Shares will trade on the Mexican Stock Exchange and on Latibex in Madrid. L Share ADSs will trade on the New York Stock Exchange and the Frankfurt Stock Exchange, and will be quoted on SEAQ International. A Shares will trade on the Mexican Stock Exchange. In each case, admission to listing and trading will be subject to approval. The AA Shares will not be listed or traded on any market. Each América Móvil AA Share or A Share may be exchanged at the option of the holder for one L Share, provided that the AA Shares may never represent less than 20% of the outstanding capital stock or less than 51% of the combined AA Shares and A Shares. Beginning on January 2, 2001 and concluding on January 31, 2001, each América Móvil L Share may be exchanged at the option of the holder for one AA Share, subject to limitations on non-mexican ownership of AA Shares, and provided that the AA Shares and A Shares together may never represent more than 51% of the outstanding capital stock. TheAmérica Móvil L Shares will be entitled to a cumulative preferred annual dividend before any dividends are payable on the AA Shares and A Shares. If América Móvil pays dividends in addition to the L Share preferred dividend, it will be required to pay in respect of the AA Shares and A Shares first, until they have received the same amount per share as the L Shares, and then to pay the same amount per share to all three classes. The L Shares will also be entitled to certain preferences in the event of liquidation of América Móvil. The Spin-off requires the affirmative vote of a majority of holders of Telmex AA Shares and Telmex A Shares. An extraordinary shareholders meeting for this purpose is scheduled for September 25, Carso Global Telecom, S.A. de C.V. and SBC International, Inc., as beneficial owners, intend to vote their AA Shares in favor of the Spin-off, so approval of the Spin-off at the extraordinary meeting is assured without the affirmative vote of any 6

8 21492 TX 7 Telmex Info Statement p23 ps 14 SEP 00 21:50 R. R. DONNELLEY ( ) 97005/57989 (212) B 15 SEP 00 13:33 other shareholder. No proxy solicitation will be conducted, and holders of Telmex L Shares are not entitled to vote on the Spin-off. Certain Rights of Shareholders and Creditors... Certain U.S. and Mexican Tax Consequences... Under limited circumstances, holders of Telmex A Shares and Telmex AA Shares may have the right to dissent and demand cash payment for their shares. In addition, during the 45-day statutory period following the Approval Date, the Spin-off may be challenged in Mexican courts by any creditor of Telmex or by any shareholder or group of shareholders representing at least 20% of the capital stock of Telmex. In connection with such a challenge, a court may temporarily suspend the Spin-off in certain circumstances. Telmex cannot anticipate the consequences of any such challenge. The Spin-off is not a taxable event for Mexican federal income tax purposes. U.S. tax counsel is expected to provide Telmex with its opinion that the transaction should be treated as a tax-free distribution to U.S. shareholders under section 355 of the U.S. Internal Revenue Code of 1986, as amended. 7

9 21492 TX 8 Telmex Info Statement p55 AOG ps 13 SEP 00 01:35 R. R. DONNELLEY ( ) 90115/57989 (212) B 15 SEP 00 13:33 THE SPIN-OFF Overview The Spin-off will establish América Móvil as a new Mexican corporation, independent of Telmex, engaged in the Mexican wireless business and a variety of other businesses outside Mexico. Neither Telmex nor América Móvil will own any capital stock of the other. The relationships between the two companies will be limited to (a) agreements relating to the implementation of the Spin-off, (b) ordinary course commercial relationships of the kind that normally occur between a major fixed-line network operator and a major wireless network operator, such as interconnection and co-location of facilities, and (c) certain transitional arrangements that will continue while América Móvil develops independent capabilities. See Certain Relationships between Telmex and América Móvil. Telmex and América Móvil will initially have the same shareholders, and they will continue to be controlled by the same group of shareholders. See Controlling Shareholders and Certain Beneficial Owners. In the Spin-off, each shareholder of Telmex will become a shareholder of América Móvil. However, there will be a statutory period of at least 45 days between the Approval Date, which is the date América Móvil will be established at a Telmex shareholders meeting, and the Share Distribution Date, which is the date each shareholder will receive shares of América Móvil that can be held or transferred separately from Telmex shares. The purpose of the Spin-off is to improve the ability of each of Telmex and América Móvil to address the distinct challenges and opportunities it faces. The Mexican wireless business and the related investments outside Mexico that will be transferred to América Móvil face very different business and regulatory environments from the Mexican fixed-line telecommunications business, including Internet access and data transmission, that will remain with Telmex. The differences are already reflected in separate corporate and management structures, fixed assets, operations, marketing and billing. Establishing two separate, publiclytraded companies through the Spin-off is expected to provide benefits for both Telmex and América Móvil. In particular: Management energies and corporate strategy will focus more closely on the specific circumstances of each business. Separate management will be able to pursue objectives more appropriate to the profile of each specific business than is possible in the current combined structure. Each company s financial strategy will reflect its own risks and potential returns on investment. This should permit each company to access financing more efficiently and to adapt its leverage, dividend policies, capital resources and other financial practices to its specific circumstances. Each company will also be in a better position to use equity securities to acquire other companies, or to establish equity-based and other incentive compensation for employees based on the performance of a more narrowly focused company. Each company will be freed from constraints that arise from being part of the same group as the other. These include regulatory restrictions in Mexico and abroad, such as limitations on access to licenses important to each company s business. They also include limitations arising under agreements with creditors or with partners in particular investments. Shareholder Approval The board of directors of Telmex decided on September 6, 2000 to propose the Spin-off to the Telmex shareholders. On September 25, 2000, Telmex will hold an extraordinary meeting of its shareholders to approve the Spin-off. Carso Global Telecom, S.A. de C.V. and SBC Communications Inc. beneficially own AA Shares in excess of the requisite two-thirds majority required to approve the Spin-off, and they intend to vote all their shares in favor of the Spin-off. Accordingly, the approval of the Spin-off is assured without the affirmative vote of any other shareholder. 8

10 21492 TX 9 Telmex Info Statement p23 ps 14 SEP 00 21:50 R. R. DONNELLEY ( ) 97005/57989 (212) B 15 SEP 00 13:33 Telmex is not asking you for a proxy, and you are requested not to send Telmex a proxy. In accordance with Mexican law, notice of the extraordinary meeting will be given by publication in Mexican newspapers, and Telmex will not conduct any proxy solicitation for the meeting. Only the holders of A Shares and AA Shares are entitled to be present or to vote at the extraordinary meeting. Description of the Spin-off The Spin-off will be implemented 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. 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 will be approved on the Approval Date by a single action of the shareholders at the extraordinary meeting establishing América Móvil and allocating certain assets and liabilities of Telmex to América Móvil. Prior to the Approval Date, Telmex will reorganize certain of the intermediate holding companies through which it holds various assets and subsidiaries, so as to facilitate the implementation of the Spin-off. Effective immediately on the Approval Date: América Móvil will be established as a separate company, with a fully independent legal existence and full capacity to own and dispose of its assets. Its initial board of directors will be elected at the same extraordinary meeting that approves the Spin-off. Specified assets of Telmex, including the shares of specified subsidiaries, will be transferred to América Móvil. All the businesses to be conveyed to América Móvil are conducted by separate corporations, and the continuity of existence of those corporations will be undisturbed by the Spin-off. All the shares of América Móvil will be owned by the shareholders that own Telmex shares as of the Approval Date. Certain agreements between Telmex and América Móvil will take effect. Promptly following the Approval Date, the shareholders resolution from the extraordinary meeting will be notarized, registered in the Mexican Public Registry of Commerce and published in the Diario Oficial (Official Gazette). Following the registration and publication of the resolution, Mexican law provides for a period of 45 days during which the Spin-off may be challenged by certain parties, as described below. América Móvil shares will not be delivered or held separately from Telmex shares before the end of this statutory period. On the Approval Date, the Spin-off will affect Telmex shareholders as follows: Each owner of Telmex L Shares will become the owner of the same number of América Móvil L Shares. Each owner of Telmex A Shares will become the owner of the same number of América Móvil A Shares. Each owner of Telmex AA Shares will become the owner of the same number of América Móvil AA Shares. Each Telmex shareholder will continue to own the same number of Telmex shares. Prior to the Share Distribution Date, however, there will be no separate certificates for América Móvil shares, and the right to receive América Móvil shares will be transferred together with Telmex shares. Investors will not be able to buy or otherwise acquire, or sell or otherwise transfer or deliver, Telmex shares or América Móvil shares separately. 9

11 21492 TX 10 Telmex Info Statement p55 AOG ps 13 SEP 00 01:36 R. R. DONNELLEY ( ) 90115/57989 (212) B 15 SEP 00 13:33 The Share Distribution Date The shares of Telmex and América Móvil will be separated following the expiration of the period during which the Spin-off may be challenged under Mexican corporate law. See Judicial Proceedings to Challenge the Spin-off. Telmex currently expects to be able to announce the Share Record Date and the Share Distribution Date no later than November 30, 2000, although no assurances can be given that such an announcement will be made by such date. Distribution will generally be made by book entry annotation in the shareholder list maintained by S.D. Indeval, S.A. de C.V., Institución para Depósito de Valores ( Indeval ), which is the clearing system for securities traded on the Mexican Stock Exchange. Beginning on the Share Distribution Date, it is expected that: América Móvil A Shares and L Shares will commence trading on the Mexican Stock Exchange. Telmex A Shares and L Shares will trade on the Mexican Stock Exchange without the América Móvil Shares. Shareholders will be able to deliver Telmex shares and América Móvil shares separately. Effects of the Spin-off on Holders of Telmex L Share ADSs As of the Approval Date, each Telmex L Share ADS will represent, in addition to 20 Telmex L Shares, the right to receive 20 América Móvil L Shares to be distributed on the Share Distribution Date. América Móvil will arrange with a U.S. depositary bank to issue ADSs, each representing 20 América Móvil L Shares. On the ADS Distribution Date, América Móvil L Share ADSs will be issued and distributed to each record holder of Telmex L Share ADSs at the close of business (New York time) on the ADS Record Date. Trading of América Móvil L Share ADSs on the New York Stock Exchange will begin on the ADS Distribution Date. Telmex currently expects that Morgan Guaranty Trust Company of New York, the depositary of the Telmex L Share ADSs, will announce the ADS Record Date and the ADS Distribution Date on or about the same date on which Telmex announces the Share Record Date and the Share Distribution Date, although no assurances can be given that such an announcement will be made by such date. Persons holding Telmex L Share ADSs through the facilities of The Depository Trust Company ( DTC ) will receive the distribution of América Móvil L Share ADSs by book entry only, through the facilities of DTC. Persons holding Telmex L Share ADSs directly will receive the distribution of América Móvil L Share ADSs in the form of certificated American Depositary Receipts ( ADRs ) representing América Móvil L Share ADSs. These ADRs will be mailed to direct holders of Telmex L Share ADSs on or as soon as practicable after the ADS Distribution Date. Persons holding Telmex L Share ADSs through a broker or other securities intermediary should consult such broker or other securities intermediary concerning distribution of the América Móvil L Share ADSs. Effects of the Spin-off on Holders of Telmex A Share ADSs Several depositary banks have issued ADSs representing Telmex A Shares. These ADSs are unsponsored by Telmex, meaning that Telmex is not a party to the deposit agreements and has not approved or participated in the establishment of these ADS programs. The effect of the Spin-off on holders of Telmex A Share ADSs will depend on the actions taken by the depositary banks and the provisions of the deposit agreements. Telmex has not yet determined whether a sponsored ADS program will be established for the América Móvil A Shares. Effects of the Spin-off on Holders of Telmex Convertible Debentures In 1999, Telmex issued U.S.$1,000,000,000 aggregate principal amount of 4.25% Convertible Senior Debentures due 2004 (the Debentures ), which are convertible into Telmex L Share ADSs. The conversion rate is currently ADSs per U.S.$1,000 principal amount of Debentures, which corresponds to an effective 10