TCRLA_Public/050221.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

                    L A T I N   A M E R I C A

           Monday, February 21, 2005, Vol. 6, Issue 36



ACINDAR: Income Tax Charge Dents 2004 Net Profit
BANCO HIPOTECARIO: Ratings Unaffected By BNL Plan, Says S&P
CASA IAN: Court Favors Creditor's Bankruptcy Petition
COEXA S.A.: Enters Bankruptcy on Court Orders
FRIGOFRUIT S.A.: Reorganization Request Approved

MERCOVENTA S.A.: Begins Liquidation Process on Court Orders
SHIRLY S.A.: Reports Submission Deadline Set
SUDAMERICANA ARO: Court OKs Creditor's Bankruptcy Call


FOSTER WHEELER: Changes Legal Team


CEMIG: To Kick Off Small-Scale Plant Overhaul by End of 1H05
CEMIG: To Name "Light For All" Contract Winners By End-February
EMBRATEL: Capital Increase Temporarily Suspended
NET SERVICOS: Moody's Assigns (P)B3 Rating to Proposed Notes

UNIBANCO: Cost Reduction Efforts Result in Higher Net Income


EDT: Makes Severance Payments Using Batelsa Resources

C O S T A   R I C A

BICSA: S&P Releases Ratings Report


* ECUADOR: Wins IMF Praise for Economic Performance in `04


AEROMEXICO: Beefs Up Fleet With B777-200 Purchase
GRUPO ELEKTRA: Analysts Concerned About Costs of Rapid Growth
SATMEX: Industry Upheavals Affect Financial Status, Says Anatel
TV AZTECA: Merrill Lynch Downgrades Stock Rating to Sell


CANTV: Revenues Increase 13% Year-on-Year in 4th Quarter

     -  -  -  -  -  -  -  -


ACINDAR: Income Tax Charge Dents 2004 Net Profit
Flat steelmaker Acindar (ACIN.BA) reported a lower net profit of
ARS545.8 million in 2004, versus a year-earlier profit of
ARS599.9 million.

Dow Jones Newswires reports that Acindar booked a financial
results loss of ARS31.2 million in 2004, whereas it had posted a
gain of ARS102.4 million in the previous year.

The Company also took on an ARS301.3 million income tax charge,
compared with a ARS41.4 million tax gain in 2003. This is the
main reason for the decline in the Company's net profit in 2004.

Meanwhile, sales revenues and volumes grow in 2004, a record
production year for Argentina's iron and steel sector. Acindar
churned out 1.24 million tons for the year, up from 1.16 million
tons a year earlier. Domestic demand drove the increase, with
internal volume rising to 962,253 tons from 855,884 tons a year
earlier. Export volume shrank for the year, falling to 278,929
tons from 303,470 tons.

Net sales revenue came in at ARS2.119 billion, up from 1.347
billion in 2003. Gross profit totaled ARS1.037 billion, well up
from ARS592.1 million a year earlier.

As of the end of 2004, Acindar's net assets stood at ARS2.431
billion, compared with net assets of ARS1.59 billion a year
earlier. The Company completed a US$230-million debt
restructuring in August 2004.

Belgo Mineira owns 73% of Acindar.

          2739 Estanislao Zeballos Beccar
          Buenos Aires
          Argentina B1643AGY
          Phone: +54 11 4719 8500
          Fax: +54 11 4719 8501
          Web Site:

BANCO HIPOTECARIO: Ratings Unaffected By BNL Plan, Says S&P
Standard & Poor's Ratings Services said Thursday that its
ratings on Banco Hipotecario S.A. will not be affected by the
recent announcement that it is in advanced discussions to
acquire Banca Nazionale del Lavoro SpA's (BNL) operations in

The acquisition will give Banco Hipotecario a leading position
in the Argentine financial system, as the merged institution
would rank first in terms of equity and lending to the private
sector, and fourth in terms of total assets among private
financial institutions.

Given its retail-oriented business profile, BNL's operations
effectively complement those of Banco Hipotecario, with little
overlapping of networks and businesses. The acquisition plans
fit into Banco Hipotecario's strategy of diversifying its
business (currently concentrated in mortgage loans), and gaining
access to an extensive sales platform and a considerable source
of funding through deposits.

Following its successful debt restructuring more than one year
ago, Banco Hipotecario improved its financial flexibility and
managed to accumulate a high level of liquidity. Additionally,
through active asset-liability management, the institution
reduced to reasonable levels its interest rate and currency
mismatch-which contrasts with the still-unbalanced position of
most major banks in the Argentine financial system. Because of
the terms of the planed transaction, Banco Hipotecario's
liquidity would remain at very comfortable levels after the
acquisition (cash equivalents of 32% of the merged institution's
deposits), and the reported capital ratio would remain among the
highest in the system (equity over assets at 12.1%). The
potential acquisition will present the bank with the significant
challenges typically stemming from any merger process.

The 'CCC+' rating on the bank indicates that the institution's
creditworthiness is still constrained by its relatively high
exposure to direct credit risk of the Republic of Argentina
('SD'), as well as indirect risk arising from the country's
operating environment. An upgrade of the sovereign credit rating
to 'B-', which is expected to take place once the government
debt rescheduling closes, is likely to trigger a similar rating
action on Banco Hipotecario.

Primary Credit Analyst: Carina Lopez, Buenos Aires
(54) 11-4891-2118;

Secondary Credit Analyst: Ursula M Wilhelm, Mexico City
(52) 55-5081-4407;

CASA IAN: Court Favors Creditor's Bankruptcy Petition
All Company Lingerie successfully sought the bankruptcy of
textile Company Casa Ian S.A. after Court No. 4 of Buenos Aires'
civil and commercial tribunal declared the Company "Quiebra,"
reports Clarin.

The creditor sought for the Company's bankruptcy after the
latter failed to pay debts amounting to US$7,200.00. Clerk No. 7
assists the court on the case that will close with the
liquidation of all of its assets.

CONTACT: Casa Ian S.A.
         Castelli 276
         Buenos Aires

COEXA S.A.: Enters Bankruptcy on Court Orders
Court No. 24 of Buenos Aires' civil and commercial tribunal
declared Coexa S.A. bankrupt after the Company defaulted on its
debt payments. The order effectively places the Company's
affairs as well as its assets under the control of court-
appointed trustee Miguel Angel Lostau.

As trustee, Mr. Lostau is tasked with verifying the authenticity
of claims presented by the Company's creditors. The verification
phase is ongoing until April 8.

Following claims verification, the trustee will submit the
individual reports based on the forwarded claims for final
approval by the court on May 20. A general report will also be
submitted July 1.

Infobae reports that Clerk No. 47 assists the court on this case
that will end with the disposal of the Company's assets in favor
of its creditors.

CONTACT: Mr. Miguel Angel Lostau, Trustee
         Viamonte 993
         Buenos Aires

FRIGOFRUIT S.A.: Reorganization Request Approved
Court No. 7 of Buenos Aires' civil and commercial tribunal
approved the "Concurso Preventivo" petition filed by Frigofruit
S.A., reports local news source Clarin. The Company listed
liabilities of US$4,251,109.11 in its filing.

Clerk No. 13 assists the court on the case.

CONTACT: Frigofruit S.A.
         Av. San Martin 5830
         Buenos Aires

MERCOVENTA S.A.: Begins Liquidation Process on Court Orders
Mercoventa S.A. of Buenos Aires will begin liquidating its
assets after Court No. 24 of the city's civil and commercial
tribunal declared the Company bankrupt. Infobae reveals that the
bankruptcy process will commence under the supervision of court-
appointed trustee Raul Alberto Rodriguez.

Mr. Rodriguez will review claims forwarded by the Company's
creditors until May 12. After claims verification, the trustee
will submit the individual reports for court approval on June
27. The general report will follow on August 23.

Clerk No. 48 assists the court on this case.

CONTACT: Mr. Raul Alberto Rodriguez, Trustee
         Avda Cordoba 652
         Buenos Aires

SHIRLY S.A.: Reports Submission Deadline Set
Mr. Roberto Mazzarella, the trustee assigned to supervise the
liquidation of Shirly S.A., will submit validated individual
claims for court approval on May 20. These reports explain the
basis for the accepted and rejected claims. He will also submit
a general case report July 1.

Infobae reports that Court No. 24 of Buenos Aires' civil and
commercial tribunal has jurisdiction over this bankruptcy case.
The city's Clerk No. 47 assists the court with the proceedings.

CONTACT: Mr. Roberto Mazzarella, Trustee
         Laprida 1411
         Buenos Aires

SUDAMERICANA ARO: Court OKs Creditor's Bankruptcy Call
Sudamericana Aro S.A. entered bankruptcy after Court No. 7 of
Buenos Aires' civil and commercial tribunal approved a
bankruptcy motion filed by Juan Carlos Fernandez, reports La
Nacion. The Company's failure to pay US$ 92,445.40 in debt
prompted the creditor to file the petition.

The Company's assets will be liquidated at the end of the
bankruptcy process to repay creditors. Payments will be based on
the results of the verification process.

CONTACT: Sudamericana Aro S.A.
         Av. Segurola 181
         Buenos Aires


FOSTER WHEELER: Changes Legal Team
Foster Wheeler Ltd. (OTCBB: FWHLF) announced Thursday certain
changes in its legal organization. The changes result primarily
from the successful progress Foster Wheeler has made in its
restructuring. Specifically, the law firm of Heller Ehrman White
& McAuliffe LLP will no longer serve as the Company's general
counsel, and the functions previously performed by Heller Ehrman
will now instead be performed by Thomas A. Kowalczyk and Timothy
J. Langan, each of whom is being promoted to deputy general
counsel of the Company.

"Heller Ehrman, and its senior partner, Vic Hebert, have played
a major role in our successful restructuring," said Raymond J.
Milchovich, chairman, president and chief executive officer of
Foster Wheeler. "We truly appreciate their considerable
contributions. However, as planned, we have reached a point in
the restructuring where we no longer need the specialist
restructuring skills and experience that they provide. Instead,
we believe we can most effectively arrange for the legal
services we will need in the future by appointing two long-time,
highly experienced Foster Wheeler attorneys as our deputies
general counsel."

Mr. Langan has served as Foster Wheeler's chief litigation
counsel since joining Foster Wheeler in that capacity in 1991.
Prior to joining Foster Wheeler, he was a litigator with Martin
Clearwater & Bell in New York, and Francis & Berry and Graham,
Curtin & Sheridan in New Jersey. Mr. Langan also served as
corporate counsel to Citibank. He holds a B.A. from Colgate
University and a J.D. from St. John's University.

Mr. Kowalczyk most recently was an assistant general counsel for
the Company, having served in positions of increasing
responsibility with Foster Wheeler since 1996. Prior to joining
Foster Wheeler, he was a litigator with Wolff & Samson, a deputy
attorney general of the state of New Jersey, and an
environmental counsel with Public Service Electric and Gas
Company. Mr. Kowalczyk holds a B.A. and a J.D. from Rutgers

About Foster Wheeler

Foster Wheeler Ltd. is a global Company offering, through its
subsidiaries, a broad range of design, engineering,
construction, manufacturing, project development and management,
research and plant operation services. Foster Wheeler serves the
refining, upstream oil and gas, LNG and gas-to-liquids,
petrochemicals, chemicals, power, pharmaceuticals, biotechnology
and healthcare industries. The corporation is based in Hamilton,
Bermuda, and its operational headquarters are in Clinton, New
Jersey, USA.

CONTACT: Foster Wheeler Ltd.
         Media Contact
         Ms. Maureen Bingert
         Phone: 908-730-4444
         Investor Contact:
         Mr. John Doyle
         Phone: 908-730-4270

         Web site:


Moody's Investors Service upgraded the bank financial strength
rating of Banco Votorantim (BV) to D, from D minus (D-) and
placed a positive outlook on the rating. Moody's also assigned a
Global Local Currency deposit rating of Ba1 and an rating
on the Brazilian National Scale to Banco Votorantim S.A. In
addition, Moody's assigned a Not Prime short- term Global Local
Currency deposit rating and a BR-1 Brazilian National Scale
short-term deposit rating to Banco Votorantim. The outlook on
those ratings is stable.

Moody's also affirmed the long-term foreign currency bond rating
of Ba3 and the long-term foreign currency deposit rating of B2
assigned to Banco Votorantim. The outlook on those ratings is

Moody's D bank financial strength rating reflects Votorantim's
consistent track record of profitability and the growth of its
franchise both in size and business diversification, which
reflect in a more balanced and diversified earnings profile over

The rating agency pointed out that the bank has grown from a
niche operation within the Votorantim Conglomerate to become an
important revenue generator, contributing nearly 20% to the
group's profits in June 2004, and ranking as the 9th largest
private institution in the Brazilian banking system.

Both the evolution of BV's franchise and the level of business
diversification that have been achieved so far are positive
developments, Moody's says. They should ultimately benefit the
bank's ability to generate recurring earnings in a consistent
manner, as consumer and commercial initiatives take hold. Such a
potential advantage supports the positive outlook on Moody's D
BFSR for Banco Votorantim.

Moody's adds that the bank's core focus on the wholesale banking
business has resulted in large, good quality loan exposures to
individual borrowers and earnings that have been predominantly
transaction and treasury-related.

The fast expansion into the consumer finance segment, on the
other hand, has yielded BV a lucrative 12% market share of the
pre-owned car financing business. Moody's notes, however, that
this expansion challenges management in preserving asset quality
of its consumer-related portfolio, and in sustaining the
business contribution, which has been positive thus far.

The rating agency explained that Ba1 deposit rating on Moody's
Global Local Currency Scale compares the issuer with all other
issuers in the world, and incorporates all Brazil- related
risks, including the volatility of the Brazilian economy, but
excluding convertibility risk. By way of comparison, Moody's
Global Local Currency Scale rating for domestic debt issued by
the Brazilian government is Ba3.

National Scale Ratings rank Brazilian issuers relative to each
other and not relative to absolute default risks. National
ratings isolate systemic risks: they do not address loss
expectation associated with systemic events that could affect
all issuers, even those that receive the highest ratings on the
national scale. An rating on Moody's Brazil National
Scale indicates an issuer or issue with very strong
creditworthiness and low likelihood of credit loss relative to
other domestic issuers.

The bank is headquartered in Sao Paulo and as of June 30, 2004,
had total assets of R$34.9 billion (approximately US$11

Moody's upgraded the following rating:

Bank financial strength rating to D, from D-, positive outlook

Moody's assigned the following new ratings to Banco Votorantim

Global Local Currency Rating -- Ba1 long-term local currency
deposit rating (Global Scale) and Not Prime short-term local
currency deposit rating (Global Scale), stable outlook

National Scale Deposit Rating -- long-term deposit rating
and BR-1 short-term deposit rating, stable outlook

Moody's affirmed the following ratings:

Long-term foreign currency bond rating of Ba3, positive outlook

Long-term foreign currency deposit rating of B2, positive

CEMIG: To Kick Off Small-Scale Plant Overhaul by End of 1H05
Power Company Companhia Energetica de Minas Gerais (CEMIG) said
Wednesday it will start overhauling 12 small-scale hydroelectric
plants that will have combined capacity of 173MW by the end of
the first half of 2005.

The move, according to Business News Americas, is part of a
project that aims to study the feasibility of overhauling as
many as 252 small-scale hydro plants in Minas Gerais state where
CEMIG operates.

The 252 plants each have installed capacity up to 30MW and have
combined installed capacity of 400MW, which could increase with
this new program.

CEMIG expects to lure investments of up to BRL1 billion
(US$388mn) with this program.

CONTACT: Companhia Energetica de Minas Gerais
         Av.Barbacena, 1200
         Santo Agostinho - CEP 30190-131
         Belo Horizonte - MG - Brasil
         Phone: (0XX31)349-211COMPANHIA

CEMIG: To Name "Light For All" Contract Winners By End-February
The winners of a BRL1.28-billion tender to expand CEMIG's power
distribution network in four regions of Minas Gerais state will
be revealed by month's end, Business News Americas reports,
citing a CEMIG spokesman.

The tender is part of the federal government's "Light for All"
program, which aims to expand power supply to 12 million people
living in poor rural areas through 2008.

This is CEMIG's second tender attempt.

In the first attempt earlier this year, six firms submitted
bids, which CEMIG considered too high, coming in at over 15% of
the reference price of BRL1.28 billion. The bids came from
Brazilian engineering firms CBPO Engenharia (Odebrecht), Camargo
Correa, Andrade Gutierrez, Queiroz Galvao, Selt Engenharia and
Unicoba Importacao.

All but Camargo Correa have submitted bids in the second tender.

The companies with the lowest bids in the second tender were
CBPO, Andarde Gutierrez and Queroz Galvao, but bids were still
some 4.7% above the reference price.

"The tender commission will study the bids over the next two
weeks," the spokesperson said.

If the Minas Gerais state government grants ICMS tax exemption,
prices could fall another 5%, he added.

EMBRATEL: Capital Increase Temporarily Suspended
Embratel Participacoes S.A. (NYSE: EMT) ("Embratel"), announced
Thursday that the Brazilian Securities and Exchange Commission
(CVM) has required the filing in Brazil of additional
information about its proposed capital increase, most of which
was previously filed in the United States. Accordingly, Embratel
has temporarily suspended its capital increase pending
resolution of the CVM 's request.

Embratel expects to announce a new timetable for the offering as
soon as the CVM is satisfied that Embratel has provided the
information requested. At that time, Embratel's U.S.
registration statement on Form F-3 will be amended to include a
revised offering schedule.

About Embratel:

Embratel is one of Brazil's largest telecommunications services
providers, operating in domestic and international long
distance, data communications and local services. Service
offerings include telephony, advanced voice, high-speed data
communication services, Internet, satellite data communications,
corporate networks and local voice services for corporate
clients. The Company's network has countrywide coverage with
28,868 km of fiber cables comprising 1,068,657 km of optic

CONTACT: Ms. Silvia M.R. Pereira
         Investor Relations
         Phone: (55 21) 2121-9662
         Fax: (55 21) 2121-6388

NET SERVICOS: Moody's Assigns (P)B3 Rating to Proposed Notes
Moody's Investors Service assigned a (P)B3 rating to the
proposed US$ 76,593,068 7% Senior Guaranteed Notes due 2009 to
be issued by Net Servicos de Comunicacao S.A. ("Net"), as part
of its financial restructuring program. The rating outlook is

The prospective rating is supported by Net's leading position in
pay-TV in Brazil and improved pro-forma (i.e. post financial
restructuring) credit metrics as it emerges from default as well
as the limited growth prospects for the Company's main business,
that appear likely to constrain cash flow with which to meet the
aggressive amortization schedule of the restructured debt.

Net is Brazil's largest pay-TV Company with 38% market share
nationwide, operating in six of the country's most important
metropolitan areas (Sao Paulo, Rio de Janeiro, Belo Horizonte,
Brasilia, Curitiba and Porto Alegre), with favorable
demographics. The rating recognizes that Net has successfully
managed to lower its operating costs by reducing staff,
renegotiating with suppliers to change programming costs to
local currency instead of US$ to avoid revenues/cost currency
mismatch, and focusing on client satisfaction with consequently
sharply reduced (but still high) churn rates. As a result,
EBITDA margin improved and has remained fairly stable at about
25% since 1Q03, from 15% in fiscal year 2002. Moody's, however,
expects EBITDA margin to decline moderately over time as
competition intensifies.

Net's ratings incorporate the strengthened capital structure
subsequent to the issuance of shares in the total amount of
about R$ 640 mln, which proceeds will be used to pay down around
40% of Net's existing consolidated indebtedness. As a
consequence, Moody's expects Total Debt to drop from 4.4x LTM
9/30/2004 EBITDA to about 2.5x as of 2004 fiscal year-end, pro-
forma for the restructuring. Similarly, Total Debt is expected
to decline from 127% of Capitalization at 9/30/2004 to about 70%
as of 2004 fiscal year-end, on a pro-forma basis.

Moody's regards as positive that Telefonos de Mexico SA de CV
(Telmex) will take significant ownership of Net. Moody's
believes that Net's cable network will provide important support
to the Brazilian telecommunication operations of Telmex..

The positive growth potential for Net's broadband internet
business is outpaced by Moody's forecasts of modest growth in
pay-TV, which represents over 90% of the Company's revenues. In
addition, Moody's believes the fierce competition from ILECs
providing ADSL services, the limited disposable income of the
mass of the Brazilian households to afford pay-TV services, and
the nationwide coverage of the Brazilian broadcast networks will
continue to pressure prices and constrain cash flow
improvements. Accordingly, Moody's deems the refinancing risk of
Net to be considerable, as cash flow may not grow as fast as
needed in order for Net to meet the substantial financial
obligations in the period 2007 to 2009, when 90% of the
restructured debt matures.

Net's rating is also constrained by the considerable devaluation
and interest risks arising from the fact that some 40% of the
restructured debt will remain US$-denominated, with limited
hedge protection, and the cost of the R$-denominated debt will
be based on the CDI floating rate. In addition, Net is involved
in substantial lawsuits mainly related to federal taxes and
municipal fees. Although the unpredictable outcome of those
disputes places significant uncertainties on the Company,
Moody's recognizes the long-term nature of the litigation.

What could change the ratings UP

Net's ratings could be under upward pressure if sales grow at
double-digit rates, and free cash flow to revenues shows a
sustainable improvement to about 10% by 2006 year-end, and
further up to around 15% thereafter.

What could change the ratings DOWN

Net's ratings could be under downward pressure if the Company's
market share declines consistently, if litigation in significant
amounts result against Net, and if there is any change in the
local regulatory framework affecting Net's operations.

Net Servicos de Comunicacao S.A. is the largest pay television
service provider in Brazil with approximately 1.4 million
subscribers. The Company maintains its headquarters in Sao
Paulo, Brazil.

UNIBANCO: Cost Reduction Efforts Result in Higher Net Income
Uniao de Bancos Brasileiros SA (UNIBANCO), Brazil's third-
biggest non-state bank, saw a 29% increase in net income, to
BRL375 million (US$144.8 million) in the fourth quarter of 2004
from BRL291 million in the same year-ago period.

The increase in profits is partly due to cost reductions
obtained from an ongoing restructuring of operations, Unibanco

The bank reported financial services costs for the quarter of
BRL1.522 billion, down from BRL1.777 billion for the fourth
quarter of 2003.

Financial services revenues for the fourth quarter dropped
slightly to BRL2.887 billion from BRL3.026 billion in the year-
ago period. However, the slight decline in revenues was more
than compensated for by the fall in the cost of providing
financial services.

Fourth quarter operating profit rose to BRL533 million from
BRL456 million in the same quarter of 2003.

For the full 2004, the bank posted net profits of BRL1.283
billion, up from BRL1.052 billion for 2003. Operating profits
rose slightly, to BRL1.961 billion from BRL1.907 billion in

Financial services costs for all of 2004 rose to BRL7.175
billion from BRL7.007 billion in 2003. The bank said cost
savings from restructuring only kicked in during the fourth
quarter of 2004.

However, total financial services revenues rose in 2004 to
BRL12.287 billion from BRL11.574 billion.

CONTACT:  Unibanco
          Av. Eusebio Matoso, 891-15§ andar
          Sao Paulo, SP 05423-901
          Tel.: (55 11) 3097- 1980
          Fax: (55 11) 3813-6182 / 3097-4830

          CONTACT PERSONS: Geraldo Travaglia
                           Marcelo Rosenhek
                           Regina Sanchez
                           Leandro Alves
                           Leticia Wrege


EDT: Makes Severance Payments Using Batelsa Resources
Defunct telco EDT has used the resources it received monthly
from its successor Barranquilla Telecomunicaciones (Batelsa) to
pay COP43 billion in severance payments to its workers, Business
News Americas reports, citing liquidation manager, Gizsela

Public services regulator Superservicios decided to liquidate
EDT in May 2004 due to the Company's poor financial state and
transferred its operations to Batelsa. Batelsa inherited 125,000
clients, but has capacity for 152,000. Batelsa pays COP2.7
billion per month for renting EDT infrastructure.

According to Superservicios head, Evamaria Uribe, Batelsa is
looking for a strategic partner that will provide resources to
buy EDT assets.

"Simultaneously, Batelsa will be capitalized and EDT will sell
its assets to give Batelsa new resources so it can expand and
offer a good quality of service. Assets will be sold in a public
process with maximization of revenues," said Uribe.

Superservicios has commissioned local consortium Corfivalle-
Duran & Osorio to set the price for EDT assets and
infrastructure, and put them to auction in the next 6-8 months.

The first obligation after the process is to raise enough
resources to finance EDT's severance debts. Superservicios is
evaluating the exact number of former employees that have the
right to receive the payment according to the law.

EDT's debts at the time when Superservicios decided on the
liquidation were COP417 billion but its assets were only worth
COP172 billion. Severance debts were estimated at COP230

C O S T A   R I C A

BICSA: S&P Releases Ratings Report
  Foreign currency                              BB/Negative/B

Outstanding Rating(s)
  Counterparty Credit
    Foreign currency                            BB/Negative/B
  Certificate of deposit
    Foreign currency                            BB/B

Major Rating Factors

    * Short-term nature of its loan portfolio given its trade
finance business
    * Improving efficiency

    * Modest profitability and growth prospects for Banco
Internacional de Costa Rica S.A.'s (Bicsa) main business
    * Lower capitalization than years before
    * Despite adequate reported asset quality, there have been
credit events that have affected asset quality


The ratings assigned consider Bicsa's low profitability and the
weak growth of its loan portfolio, along with lower
capitalization than one year ago. The ratings are supported by
the short-term nature of its loan portfolio, the current refocus
of the operations in its core business of trade finance, and the
reorganization that should improve the future efficiency of the
bank. Although the ratings are assigned to Bicsa Panama,
Standard & Poor's Ratings Services monitors the bank on a
consolidated basis. The negative outlook indicates that despite
the efforts taken to improve the overall business, both loan
growth and profits could remain weak given the strong
competition in the bank's core business as well as moderate
growth in the Central American region, the bank's core market.

In the past two years, there have been credit events that have
affected the bank's bottom line and asset quality, as credit
underwriting diverged somewhat from Bicsa's core business, which
is trade finance. Some of the nontrade finance operations were
originated to compensate overall low loan growth and to improve
margins. In our view, some of those loans do not fully match
Bicsa's core business and have a higher degree of risk than do
trade finance operations. Even though an aggressive write-off
policy has improved asset quality, should new problems arise,
asset quality could deteriorate again.

Strong competition in Bicsa's main line of business has hindered
adequate loan growth, and we expect this trend to continue.
Profitability has been low as a consequence of lack of growth
and high cost structure and as provisions for credit problems
depressed profits. Profitability improved in 2004 compared to
2003, given that about 50% of net income came from a
nonrecurring capital gain. In the future, thanks to the
reorganization and cost reduction implied, profits should
improve, but could remain below those of other financial
institutions in the same rating category.

As Bicsa's profitability has not been high enough to increase
capital organically, and its main shareholders approved a $41
million dividend payment, Bicsa's adjusted total equity ratio
was reduced to 11.8% as of September 2004 from 17% in December
2003. This ratio allows Bicsa to continue growing in the future,
but softens its financial profile compared to 2003. As capital
represents a less important source of funding, Bicsa will have
to replace it with other funding sources.

The short-term nature of its loan portfolio gives Bicsa more
flexibility than other banks to adapt to changing market
conditions. In addition, after September 2004, the bank has
refocused in trade finance and has reorganized its loan
origination group. It also transferred its credit card business
and loans denominated in Colones to Banco Nacional de Costa
Rica, its shareholder. This action will bring Bicsa back to its
core business and lower loan-portfolio risk. The reorganization
should also lower administrative costs and improve efficiency as
the number of employees was cut in half.


Although Bicsa's core business was refocused and operating costs
were reduced, we still believe that management faces important
challenges. There is significant competition in the trade
finance business, which is driving margins to very low levels.
In addition, economic growth in the Central American region is
expected to remain moderate. Therefore, we do not expect Bicsa's
future performance to change dramatically. Should the bank's
financial performance deteriorate further, the ratings could be
lowered. Nevertheless, if financial performance improves
significantly, the outlook could be revised to stable, and if
this becomes a consistent trend, the ratings could be raised.


BICSA is a wholesale bank specializing in short-term trade
finance and corporate loans. BICSA operates mainly through BICSA
Panama, and an agency in Miami. BICSA maintained consolidated
assets of $641 million at September 2004. Consolidated figures
until September 2004 refer to BICSA Corporaci¢n Financiera S.A.,
and its 100% owned subsidiaries, BICSA (Costa Rica);
Inmobiliaria BICSA; and BICSA S.A. (Panama) with its Agency in
Miami (BICSA Miami).

The bank provides trade finance services to corporate and
institutional clients that represent 70% of loans, to financial
institutions with 21% of total loans, and to a lesser extent, to
individuals with 3%. Bicsa's main business is to support
companies that are directly or indirectly dedicated to export-
import activities. The bank's activities are concentrated with
clients in Central America. Although operations currently
include more than 10 countries, the majority of loans are to
customers in Costa Rica, Panama, and Guatemala. Activities
beyond Central America are basically correspondent bank
services. Short-term loans account for almost 70% of total

A restructuring process was initiated in May 2004 when Bicsa's
main shareholders decided to refocus its core business on trade
finance. The process was further deepened when Banco Nacional de
Costa Rica and Banco de Costa Rica decided to decree an
extraordinary dividend payment from its subsidiary. To comply
with the dividend requirement in September 2004, Bicsa Card,
which was a subsidiary of Bicsa (Panama), was transferred to
Banco Nacional de Costa Rica along with Inmobiliaria Bicsa,
which was a subsidiary of Bicsa Corporacion Financiera. In
addition, by October 2004, Banco Internacional de Costa Rica
S.A.'s (Costa Rica) operations were closed and the assets and
liabilities were transferred either to Bicsa (Panama), Bicsa
(Miami), or Banco Nacional de Costa Rica. Besides the transfers,
a cash dividend payment was made, which brought the total
dividend payment made by year-end 2004 to $41.2 million. The
most important effect of Bicsa's reorganization was felt in
capital, which decreased 33%, and in the adjusted common equity-
to-adjusted asset ratio, which fell to 11.7% at September 2004.
In addition, with the reorganization, a sharp adjustment was
felt in operating expenses, as almost 50% of the total personnel
of Bicsa group, mostly in Costa Rica, were laid-off. After the
restructuring, Bicsa Corporacion Financiera S.A. will have Banco
Internacional de Costa Rica S.A. (Panama) as its only

Ownership and Legal Status

The BICSA group was incorporated in 1976. The holding Company
was registered in the Bahamas in 1989, but in first-quarter
2003, the headquarters and registration were transferred to
Panama, forming the new holding entity Bicsa Corporaci¢n
Financiera S.A. The main shareholders of Bicsa are the two
largest banks in Costa Rica that are state-owned banks, Banco
Nacional de Costa Rica with an 80% stake, and Banco de Costa
Rica with the remaining 20%. Banco Nacional increased its
participation in Bicsa to 80% from 55% more than five years ago.
The interest of these banks in establishing Bicsa was to
diversify their operations and take advantage of Bicsa's
international experience and infrastructure. There are mutual
benefits in this relationship; for example, while Bicsa
represents the international arm for its shareholders, the bank
takes advantage of its shareholders' infrastructure to diversify
its client base, basically in Costa Rica.


Bicsa's core business is to provide international trade
financing and products related to trade to companies and
financial institutions. Increasingly, Bicsa started to offer
medium- and long-term corporate loans to industries. In
addition, there was a business unit in Costa Rica that managed a
credit card division. As a consequence of that, the loan
portfolio increased its duration and risk profile. Nevertheless,
loans with more than one year of maturity represented less than
30% of the total loan portfolio.

In June 2004, after a strategic planning process to refocus its
core business and to comply with the large dividend payment
decreed by shareholders, Bicsa's administration transferred the
credit card unit to Banco Nacional, along with the loans
denominated in Colones. In addition, the Costa Rican operation
was closed. Bicsa plans to retake its original strategic intent
and expects to redirect operations toward trade finance activity
in Central America. The opening of representative offices in the
major Central American markets should support loan origination.
With the current refocus, Bicsa will increasingly come back to
its core business and lower overall portfolio risk.
Nevertheless, high competition, low expected growth, and margins
will pose a major challenge for Bicsa's administration in the

Asset Quality

Loan growth has been weak as the loan portfolio has remained
fairly stable in the past four years, around $420 million. Low
demand for trade-related loans and strong competition from other
financial institutions have been the main reasons for this
trend. In the past, risk from the loan portfolio was modest as
most of the loans were short term and trade related. The credit
portfolio has diverged from Bicsa's core business, as medium-
term, nontrade-related loans have gained participation in the
overall portfolio to 30% at September 2004. In our view, the
majority of those loans does not fully match Bicsa's core
business, and has a higher degree of risk than do trade finance

Although asset quality indicators seem adequate, with a
nonperforming asset (NPA) ratio of 4.2%, recurrent credit
problems have increased the NPA ratio from a low 1% held two
years ago. In addition, an aggressive charge-off policy has
helped to reduce the ratio in the same period. There is a
concentration risk still coming from the loan portfolio by
country and by client. For example, at September 2004, country
exposure to Costa Rica represented 52% of the loan portfolio,
followed by Panama with 22%, and Guatemala with 10%. Concerning
concentration by client, Bicsa serves companies and financial
institutions, and credit lines are usually large and represent
an important portion of loans and equity. Although new
underwriting policies are geared toward decreasing the average
amount per credit and country, it will take some time to smooth
out credit concentrations. In our view, credit underwriting in
nontrade loans has been opportunistic and has negatively
affected the overall asset quality of the bank, as was
demonstrated by some large credit events in the past two years.
In addition, as NPAs have grown more rapidly than have
provisions, the level of loan-loss provisions is at 51%, which
is low compared to that of peers. Past-due loans are expected to
decrease during the first half of 2005 with the solution of a
delinquent loan that represents a significant part of
problematic assets. Nevertheless, there are other concerns in
the portfolio that could fall due in the meantime, but the
overall effect will be a decrease in the NPAs in 2005.

With the reorganization in which Bicsa will transfer the Colon-
denominated loan portfolio and credit card business to Banco
Nacional, the loan portfolio is expected to decrease 7% by year-
end 2004. With the reorganization, Bicsa will have its loan
portfolio 100% dollar-denominated and will begin to return to
its core business. After the reorganization, concentration in
Costa Rica will decrease to 48%, but will continue to be very
important. Nevertheless, the short-term nature of its loan
portfolio gives Bicsa more flexibility than other banks to adapt
to changing market conditions. Asset quality is expected to
improve in the future, because of changes in policies to
decrease concentration, to diversify risk and charge-offs, and
to refocus its strategy. Nevertheless, additional steps have to
be taken to fine tune credit underwriting and surveillance to
avoid additional credit issues. We will follow Bicsa's asset
quality performance as concentration by country and by client
continue to be important, and a client-specific problem would
have an immediate impact on asset quality.

Going forward, Bicsa's main challenge is to increase its trade-
related loan portfolio in a very competitive market and to avoid
additional credit issues. However, in our view, the trade
finance market will maintain the low growth of recent years,
therefore restraining Bicsa's future loan portfolio growth.


Bicsa has shown low profitability ratios in the past three
years, with ROAs of less than 0.3%, as a result of high
allocations to loan-loss provisions to cover for asset quality
problems, high operative costs, and thin margins. During 2004,
profitability showed an improving trend, driven by noncore
revenues and lower allocations to reserves. At September 2004,
reported net income was $3.4 million, compared to $0.6 million
in 2003.

In the past two years, more than 60% of net operating income had
to be allocated to loan-loss provisions to cover NPAs. As there
were important credit events in the past three years, loan-loss
provisions have represented a high 1.5% of total loans. The main
change in the profits and losses in 2004 was that loan-loss
reserves were lower than those of 2003. In our view, as loan-
loss reserves represented a weak 47% of NPAs at September 2004,
Bicsa has to make additional effort to increase provisions in
the future to fully cover NPAs. Until September 2004, the bank
maintained a significantly high operating expenses-to-revenues
ratio of 66%, which burdened its bottom line, and negatively
compares to peers' ratios. With the reorganization, BICSA
expects to generate savings in the neighborhood of $2 million
per year, which should bring the efficiency ratio to around 56%.
The sharp cost adjustments and its consequent lighter structure
will provide Bicsa the first step to improve profitability in
the future.

Slow loan growth, along with slightly lower lending rates, has
generated a downward trend in interest income in the past two
years. This is due to high liquidity and competition. As funding
rates were maintained at a similar rate, there was margin
compression that translated into lower net interest income.
Similar behavior was exhibited by fee income that had almost no
growth between 2003 and 2004. In the future, the transfer of the
credit card business and the closure of Costa Rican operations
will have a negative effect on fee structure and interest income
that has to be compensated with other sources of revenue. All in
all, cost reduction was more important than the income lost, and
there is a net positive effect. In 2004, there were important
nonrecurrent capital gains that partially compensated low growth
in interest income and fees.

In our view, the main challenge for Bicsa is to grow its loan
portfolio in a competitive environment and to generate more fees
to increase recurrent revenues. Profitability is expected to
improve in 2005, mainly due to the sharp decrease in costs held
in 2004. Nevertheless, we expect profitability to continue lower
than that of financial institutions in the same rating category.

Asset-Liability Management

In line with its wholesale corporate profile, Bicsa's main
source of funds is time deposits, which represented 41% of total
liabilities at September 2004; followed by bank credit lines.
Deposits are usually large and show significant single-name
concentration, as an important portion is represented by time
deposits from the Central Bank of Costa Rica and other financial
institutions. Compared to previous years, deposits have
decreased as a result of a substantial reduction in short-term
placements by the Central Bank of Costa Rica. In terms of
geographic distribution, around 60% of deposits come from Costa
Rica entities, followed by Panama with 22%. In our view, funding
could be partially affected in the future from the change to a
representative office from full service in Costa Rica, as the
majority of resources come from that country.

Bank credit lines are the second more important source and are
represented mainly by multilateral lending institutions, export-
import banks, and private banks, and also exhibit concentration.
It is important to mention that most credit lines assigned to
Bicsa (Costa Rica) are either in analysis to be transferred to
Bicsa (Panama) or have been already assigned to that entity. In
general, credit lines were maintained after Bicsa's
reorganization, and Standard & Poor's does not expect a major
change in those sources, but it will follow the general
evolution of liabilities.

As the loan portfolio has not exhibited large growth in past
years, Bicsa has not required its deposit base to grow fast
either, but as capital represents a less important source of
funding, Bicsa will have to replace it with other funding
sources. Bicsa's liquidity is adequate, with cash and money-
market instruments representing 30% of total assets, a ratio
comparable to those of peers. Nevertheless, the average loans-
to-deposits ratio increased to 103% as of September 2004, from
95% in past years. As an important portion of the liabilities is
represented by demand deposits and overnight liabilities, Bicsa
exhibits a negative tenor GAP. A good point is that market risk
is lower than in previous years, as the securities portfolio has
been reduced and investment procedures were tightened to invest
in high-quality issuers after a credit event in the investment
portfolio two years ago.


Bicsa's capitalization after the reorganization is substantially
lower than one year before, and the important dividend payment
is a major change of its main shareholder behavior compared with
previous years. Banco Nacional, Bicsa's main shareholder,
required a dividend payment of $41.2 million to decrease its
participation in subsidiaries and to comply with local
regulations. As a consequence of the dividend payment, the
adjusted common equity-to-adjusted assets ratio fell to 11.7% at
September 2004 compared to 17.21% in 2003. When the bank was
focused exclusively on trade finance operations, the capital
base was larger. Currently, there is a mix between trade finance
and other types of loans with higher intrinsic risks, and the
capital base is smaller. The quality of the bank's capital base
is good, composed basically of core elements, including paid-in
capital, reserves, and retained earnings.

Before June 2004, no dividends were taken from the subsidiary
and exhibited shareholders' commitment with the bank. Earnings
retention was the main driver of capital accretion, even though
profits were not important in the past three years. The dividend
payment that represented one-third of Bicsa's capital and the
equivalent of the net profits of the past eight years is
interpreted by Standard & Poor's as a lower level of compromise
by its main shareholder, although another dividend of this
nature is not expected in the future. In our view, current
capital allows Bicsa to continue growing in the future, but
softens its financial profile compared to that of previous

Primary Credit Analyst: Leonardo Bravo, Mexico City

Secondary Credit Analyst: Ursula M Wilhelm, Mexico City
(52) 55-5081-4407;


* ECUADOR: Wins IMF Praise for Economic Performance in `04
Mr. Rodrigo de Rato, Managing Director of the International
Monetary Fund (IMF) stated Thursday in Quito, at the conclusion
of his visit to Ecuador:

"During my visit to Ecuador, which is part of my travel to a
group of Andean countries, I have had the privilege to meet His
Excellency President Lucio Gutierrez. I also met President of
Congress Omar Quintana, Minister of Economy and Finance Maurico
Yepez, President of the Central Bank Angel Polibio Cordova, and
other government officials, and had a fruitful meeting with the
leaders of party blocs in Congress. I was pleased to spend some
moments with the children of Centro Panita.

"I congratulated President Gutierrez and the authorities for
Ecuador's strong macroeconomic performance in 2004, which
combined high growth with reducing inflation to international
levels, at the same time as strengthening the fiscal stance and
continuing to reduce public debt. These results, if sustained,
would help to further reduce poverty in Ecuador. I commended the
authorities for their commitment to continue this performance in
2005 with a program that aims at maintaining solid real economic
growth and low inflation, while preserving fiscal discipline and
making progress toward fiscal sustainability. The authorities
expressed confidence that they will be able to achieve the
objectives of their macroeconomic program, while moving forward
on their structural reform agenda and taking advantage of the
current favorable economic environment.

"I am pleased that, through the intensified surveillance of the
authorities' 2005 program, we will continue to have a close
relationship with Ecuador. In my discussions with the
authorities, we agreed on the importance of adhering to the
fiscal responsibility law for achieving fiscal sustainability
and supporting the dollarization regime, which are needed to lay
the basis for greater stability and prosperity for the Ecuadoran
people. We also agreed on the need to improve the quality of
spending, so as to provide increased space for public investment
and spending on social priorities.

"In addition to macroeconomic stability and a business-friendly
environment, sustaining solid economic growth and supporting the
dollarization regime in Ecuador would require economic
diversification and increased competitiveness through the
implementation of structural reforms in a number of areas. We
also agreed that efficient management of the country's oil
resources was crucial and that this would require important
reforms to PetroEcuador and adherence to the rules regarding the
use of the FEIREP. President Gutierrez explained his plans for
reform in the oil, electricity and financial sectors, and on
social security and civil service. It is very important that the
various political parties and social groups forge the consensus
that will be necessary to move ahead with these reforms, so as
to build a stronger economy for the benefit of all Ecuadorans.

"In our discussions, we emphasized that achieving a substantial
reduction in the incidence of poverty and continued improvement
in social indicators to meet the Millennium Development Goals
(MDGs) was a major challenge. I was very encouraged by President
Gutierrez's recent commitment to designing and implementing a
Poverty Reduction Strategy to bring down poverty levels and to
achieve the MDGs. I was also pleased to learn about the
authorities' efforts to strengthen Ecuador's social safety net,
particularly through improved targeting of existing social
programs such as the bono de desarrollo humano. I wish the
authorities success in all these efforts."

CONTACT: IMF - International Monetary Fund
         External Relations Department
         700 19th Street, NW
         Washington, D.C. 20431 USA

         Public Affairs
         Phone: 202-623-7300
         Fax: 202-623-6278

         Media Relations
         Phone: 202-623-7100
         Fax: 202-623-6772


AEROMEXICO: Beefs Up Fleet With B777-200 Purchase
Aeromexico is making headway in its fleet modernization program
with the entry of two B777-200 jumbo jets into service, reports

The aircrafts, purchased to replace the aging B767-200ER planes
in its stable, will make Aeromexico the first and only Mexican
carrier to offer B777 jets.

Aeromexico expects to use the jets first quarter next year for
the Mexico City-Madrid and Mexico City-Paris routes. The planes
are custom made to the carrier's specifications. Its 275-seat
capacity will allow 49 Premier Class passengers and 226 Economy
class passengers.

GRUPO ELEKTRA: Analysts Concerned About Costs of Rapid Growth
Mexican retailer and consumer banking firm Grupo Elektra SA's
recent announcement of a MXN671 million profit for the fourth
quarter of 2004, up 57% from a year ago, did not keep the
Company's shares from dropping Thursday.

According to Reuters, shares of Elektra were down 2.88% in
Thursday trade, to MXN93.50 amid concerns about the costs of its
rapid growth.

Elektra carved its niche selling electronic goods from
refrigerators to hair dryers in working-class neighborhoods and
now has stores as far away as Peru.

Mr. Esteban Galindez, director of finances at Elektra, predicted
2005 revenue growth in the "low teens" and the same level of
growth in core earnings before interest, taxes, depreciation and
amortization, or EBITDA, for the year.

Same-store sales, or those at stores open at least year, are
seen rising in the "mid-single digits," he said.

But analysts are worried about high depreciation and other costs
and falling gross margins.

Mr. Galindez said both aggressive pricing at its electronics
stores and the launch of new financial products such as used car
and mortgage loans and new pension and insurance services
contributed to costs. But he predicted margins would likely
stabilize at current levels.

CONTACT: Grupo Elektra S.A. de C.V.
         Colonia Tlalpan La Joya
         D.F. 1400
         Phone: 525-629-9000


SATMEX: Industry Upheavals Affect Financial Status, Says Anatel
Satelites Mexicanos' (Satmex) current woes are a consequence of
changes that have affected the global satellite industry in
recent times.

Mr. Raul Lucido, president of the National Telecommunications
Association (Anatel), told Notimex that many companies have been
absorbed by others or have quit the market because of the
industry's restructure at the global level.

In the same interview, Mr. Lucido however refused to comment on
the resignation of Satmex's executive president Lauro Gonzalez
because the Company is not a member of Anatel.

Satmex is the leading satellite telecommunications provider in
Latin America, operating the Solidaridad II, Satmex 5 and
Morelos II Mexican satellites. Its satellite fleet offers
regional and continental coverage in C and Ku Bands spanning
from Canada to Argentina.

CONTACT: Satelites Mexicanos
         Blvd. Manuel Avila Camacho 40
         Piso 24 Col. Lomas de Chapultepec
         Mexico, D.F. 11000
         Phone: 5201-0898(In Mexico)
                01-800-800-7286 (Toll-Free)

TV AZTECA: Merrill Lynch Downgrades Stock Rating to Sell
TV Azteca SA, Mexico's second-largest broadcaster, which
revealed recently that sales grew to MXN2.43 billion from
MXN2.42 billion in the fourth quarter, had its stock rating
downgraded by Merrill Lynch.

According to Dow Jones Newswires, the investment house cut the
Company's stock rating to "sell" from "neutral," saying the
Company's "fundamentals are deteriorating."

Merrill Lynch noted that TV Azteca's higher costs in 2004 cut
into a "meager" top-line growth. While TV Azteca's up-front
deposits for 2005 are up 7%, it is "concerned about burgeoning
programming costs and other costs associated with the ongoing
SEC investigation," the investment house said in a research

Last month, the U.S. Securities and Exchange Commission, or SEC,
accused Chairman Ricardo Salinas and other top TV Azteca
executives of taking part in a scheme to conceal Salinas' role
in a series of transactions through which he made a big profit.

"Layering the firm's weaker operating trends over continued
governance concerns, we can no longer justify a neutral rating
on the stock," said Merrill Lynch. "While the prosecution of
Azteca could lead to improved corporate governance, we believe
this is an unlikely outcome."

Merrill Lynch also said the Company's share price could drop if
TV Azteca forces a delisting from the New York Stock Exchange so
as to avoid future SEC oversight.

CONTACT: Mr. Bruno Rangel
         Phone: 5255 1720 9167

         Mr. Omar Avila
         Phone: 5255 1720 0041

         Media Relations:
         Mr. Tristan Canales
         Phone: 5255 1720 5786

         Mr. Daniel McCosh
         Phone: 5255 1720 0059


CANTV: Revenues Increase 13% Year-on-Year in 4th Quarter

- Fourth quarter net additions of 360 thousand customers
increased our mobile subscriber base to 3.1 million

- Fourth quarter net additions of 117 thousand fixed access
lines represented the sixth consecutive quarter of fixed
telephony growth

- Our fourth quarter ABA (ADSL) customer base reflected a 25.1%
sequential and 106.9% year-over-year growth

- Internet service posted its highest net additions in the last
two years and ended the year with 363 thousand total subscribers

- Fourth quarter 2004 revenue increased 13% compared to fourth
quarter 2003, driven by strong mobile revenue growth partially
offset by a 13.6% decline in local service revenue due to the
absence of residential tariff increase

- Free cash flow totaled Bs. 984.3 billion during 2004, 13.5%
lower than in 2003, due to higher investment levels consistent
with current market opportunities


In December 2004, the Company changed the way it presents
commissions paid to authorized agents, discounts granted to
Telecommunication Centers, incentives on line activations and
card distributors commissions. Those charges are now reflected
as a reduction of revenue in the corresponding caption in the
statement of operations. Previously, commissions, discounts and
incentives were presented as operations, repairs, maintenance,
and administrative expenses. This change was made following
current industry practice for recognition of cash incentives.

Income and expense data for 2003 have been reclassified for
comparison purposes. Quarterly income statements for 2004 have
been reclassified to present Telecommunication Centers discounts
net of revenue instead of as part of operating expenses. Total
commissions, discounts and incentives for years 2003 and 2004
were Bs. 55.2 billion and Bs. 93.6 billion, respectively.

The potential acquisition of Corporacion Digitel, C.A. (Digitel)
had no effect in Cantv's 2004 financial results, except for
expenses incurred in connection with the negotiation process.
Guidance figures for 2005 presented in this document do not
include the potential acquisition of Digitel.


- Overall, Cantv registered growth in a number of key
performance indicators. Revenue grew 9.6% driven by significant
increases in fixed lines, mobile subscribers and traffic.

- Our fixed telephony business turned in strong operational
performance with fixed lines increasing 11.9%, local traffic
growing 6.1% and long distance traffic slightly decreasing 0.4%.
However, most tariff and prices suffered because of the absence
of regulator approval for the increase of our residential
tariffs as well as competitive pressures in the long distance
market. Fixed telephony 2004 revenue reflected a 0.6% decrease
from 2003. Total fixed telephony revenue for the year totaled
Bs. 2,707.3 billion, which represents 65.9% of our total 2004

- Broadband stands out as an important high growth opportunity.
During 2004, ABA (ADSL) subscribers more than doubled, fueled by
higher investment in ports installation, enhanced sales
channels, and special promotions.

- Mobile business became the primary driver of Cantv's revenue
growth. In 2004, mobile revenue increased 42.9% compared to
2003, and represented 30.6% of the Company's total revenue.
Mobile subscribers posted strong growth of 15.9% for the year
and ended 2004 with 3.1 million subscribers. Notably, the strong
subscriber growth was achieved with a 10.8% increase in blended
ARPU to Bs. 41,812.

- The decrease in Free Cash Flow was due to increased capital
expenditures targeted at growth opportunities within our
wireless and broadband businesses as well as integration and
transformation of information systems.

- The Company paid Bs. 620 billion in dividends to its
shareholders during 2004 as a result of a Bs. 550 and Bs 120
dividends per share declared in March and December 2004,

Conversion of dividends paid to foreign investors and ADS
holders into US$ must be approved by CADIVI, the Venezuelan
foreign exchange board. Conversion of the December 2004 dividend
is pending approval.

- On November 21st, Cantv signed a stock purchase agreement to
acquire 100% of the common stock of Corporacion Digitel, C.A.
(Digitel), a wholly-owned subsidiary of Telecom Italia Mobile
S.p.A., for approximately US$450 million corresponding to
enterprise value. The closing of the transaction is subject to
regulatory approvals by CONATEL, Pro-Competencia (the anti-trust
agency), and CADIVI.


Mobile revenue growth drove consolidated fourth quarter and
total year operating revenue growth of Bs. 130.3 billion (13.0%)
and Bs. 358.3 billion (9.6%), respectively. Operating revenue
totaled Bs. 1,130.6 billion during the fourth quarter of 2004
and Bs. 4,106.6 billion for the full year.

The 13.0% year-over-year fourth quarter revenue growth was the
result of 35.9%, 27.9% and 3.4% respective increases in mobile,
Internet and fixed telephony revenue.

As a percentage of total revenue, fourth quarter mobile revenue
increased from 27.0% to 32.5% as compared to fourth quarter
2003. Mobile revenue increased 42.9% and Internet revenue grew
18.3% in 2004. Fixed revenue declined 0.6% for the year.

Fixed Access Lines:

Total lines in service increased by 11.9% on a year-over-year
basis totaling approximately 3.1 million as of December 31,
2004. Nearly 117 thousand net additions were posted during the
fourth quarter, representing the sixth consecutive quarter of
subscriber growth (see Figure 3). Fourth quarter net additions
were comprised of 64.9% residential, 27.3% ADSL, and 6.0%
nonresidential lines.

Our fixed line prepaid product continues to drive our
residential line growth with fourth quarter net additions of
87,978 lines. These gains were partially offset by a 12,106
decline in postpaid lines. Approximately 25.5% of the prepaid
lines additions were generated by the Company's fixed wireless
telephony service, "Cantv Listo", our primary initiative for
capturing customers in underserved areas. By the end of December
2004, the fixed wireless service customer base totaled 158,597
customers, of which 135,494 were prepaid.

ADSL lines also experienced strong growth during 2004, with a
106.9% year-over-year increase. As of December 2004, our ADSL
customer base totaled 159,003 lines. The 31,898 ADSL fourth
quarter 2004 net additions more than tripled the net additions
posted during the fourth quarter of 2003. Our continued
investment and commercial efforts maintained the strong ADSL
sales momentum.

Local Service Revenue:

Fourth quarter 2004 Local service revenue of Bs. 233.3 billion
were Bs. 36.7 billion lower (13.6%) than those reported during
the same period of 2003. The Bs. 957.7 billion 2004 local
service revenue were 9.2% lower than those of 2003.

Local service revenue continues to reflect the decrease in
residential tariffs in real terms. The failure by CONATEL to
approve residential tariff increases since 2003 has resulted in
19.3% and 15.1% year-over-year real term reductions in the
weighted average usage tariffs and monthly recurring charge,
respectively. Residential revenue accounted for 51.9% of total
2004 local services revenue compared to the 55.5% posted in
2003. Public telephony reflected a 17.2% increase in the revenue
per minute rate, due to improved controls on traffic billed.

The monthly recurring charge component of local service revenue
reflected a 15.0% drop when compared to the fourth quarter of
2003 (see Figure 4). This decline was driven by the respective
10.8% and 8.6% weighted average rate reductions in residential
and non-residential postpaid tariffs as well as a 4.9% decrease
in residential postpaid lines. These declines were partially
offset by a 3.6% increase in non-residential postpaid lines. The
37.3% decrease in installation revenue from the fourth quarter
of 2003 was primarily attributable to a decrease in the number
of installations and an average installation real price decline
of 5.8%. Local usage revenue decreased 8.6% due to a 15.6%
decrease in the weighted average tariff, partially offset by a
10.6% increase in unbundled (billed) minutes traffic.

Unbundled (billed) minutes, which accounted for 71.9% of total
local traffic, increased 10.6% and 6.1%, respectively during
fourth quarter 2004 and full year as compared to the same
periods in 2003. The 20.5% and 2.6% increases in residential and
non-residential traffic, respectively, were partially offset by
the 17.9% decrease in public telephony traffic. The 20.5%
increase in residential unbundled minutes was due to a 10.8%
increase in new lines as well as an 8.8% increase in minutes of
use per line. The increased usage was driven by new prepaid
subscribers with higher usage patterns, the impact from our
dial-up Internet offer called "Cantv Familiar" introduced in
late May 2004 and our new residential plan, "Habla por
Llamadas", which offers 100 calls for a fixed rate, regardless
of the length of the calls. Total unbundled minutes for the non-
residential segment increased by 21 million, while minutes of
use per line were 1.8% lower.

Public telephony continues to experience intense competition,
mobile substitution and the informal rental of fixed wireless
phones and mobile handsets. The Company has implemented a number
of market initiatives through our Telecommunication Centers and
the Company's "UN1CA" prepaid calling card, which will produce
substantial cost savings, enhance our ability to introduce new
products and promotions, and improve control over card usage. In
addition to these initiatives, Cantv is installing two-way
public phones, has opened 64 new telecommunication centers in
2004 (14% more than in 2003) and is offering discounts on fixed-
mobile calls from telecommunication centers.

Domestic Long Distance Revenue:

An 18.9% increase in total unbundled Domestic Long Distance
(DLD) traffic (see Figure 6), partially offset by a decrease in
the average tariff, drove the Bs. 3.9 billion (5.3%) increase in
the fourth quarter 2004 DLD revenue as compared to the fourth
quarter of 2003.

Compared to the same period in 2003, fourth quarter 2004
residential DLD revenue grew 18.7% to Bs. 33.1 billion. The Bs.
13.1 billion (21.6%) increase in the billed (unbundled) portion
of residential revenue was attributable to a 37.1% increase in
unbundled minutes partially offset by a 16.3% reduction in the
weighted average tariff. An important component of the unbundled
traffic increase is our new DLD plan, "Plan Nacional 3000",
which was launched in July 2004. This plan includes 3,000
seconds for a monthly fixed payment of Bs. 5,900 and a special
rate of Bs. 26 for each additional second. The plan had 23.6
thousand subscribers as of December 2004. Bundled DLD
residential revenue generated by the Company's "Noches y Fines
de Semana Libres" plan increased 16.8% on a year-over-year basis
to Bs. 19.9 billion. A 29% increase in the weighted average real
tariff was partially offset by a 37,826 (21.1%) decrease in
subscribers from December 2003. For 2004, DLD residential
revenue increased 9.8% when compared to 2003. A 24.2% increase
in total traffic for the year was the key growth driver.

The Bs. 28.3 billion (11.0%) decrease in unbundled non-
residential revenue was driven by a 16.2% reduction in the
weighted average tariff partially offset by an 18.4% increase in
unbundled nonresidential total minutes. The same dynamic was
responsible for the 7.1% decline in full year 2004 non-
residential revenue.

The 1.3% fourth quarter decrease in public telephony traffic
over the same prior year period reflects a significant
improvement on the previous quarters' sequential trend that
resulted in a 17.2% usage decrease for the full year. A 10.3%
increase in the public telephony weighted average real tariff,
partially offset by the decline in usage, contributed to a 15.8%
revenue increase in the fourth quarter of 2004. Full year 2004
revenue, however, declined 2.9% due to reduced traffic.

International Long Distance Revenue:

Fourth quarter 2004 total International Long Distance (ILD)
revenue of Bs. 30.5 billion (2.7% of total revenue) was 4.5%
higher on a year-over-year basis. Full year 2004 results
reflected a 14.7% drop in ILD revenue, driven by a Bs. 16.2
billion decrease in net settlements. The ILD outgoing revenue's
fourth quarter increase of Bs. 0.6 billion (2.2%) reflected an
18.5% increase in traffic partially offset by a 9.8% reduction
in the weighted average tariff. Full year 2004 ILD outgoing
revenue decreased 2.6% despite a 19.5% growth in traffic.
Discounted prepaid cards offered by third parties continued to
pose a competitive challenge to Cantv. Our reduced ILD weighted
average prices reflect our discounted offers that are designed
to respond to these competitive pressures.

Fourth quarter net settlement revenue increased Bs. 0.7 billion
on a year-over-year basis. The growth in incoming traffic versus
outgoing traffic produced the change in the net balance. This
resulted in a positive 5 million minutes for fourth quarter 2004
as compared to a negative 4 million minutes posted in fourth
quarter 2003.

Full year net settlement revenue decreased Bs. 16.2 billion as a
result of an 11.8% increase in outbound traffic at an average
rate that has remained at similar levels throughout the year,
combined with a 12.0% increase in incoming traffic at rates that
have decreased significantly as a response to increased
competition between ILD operators terminating traffic in

Interconnection Revenue (Outgoing Fixed to Mobile and Incoming):

The full year 2004 2.5% decline in interconnection revenue was
primarily attributable to a 3.0% decline in outgoing fixed to
mobile interconnection revenue. The 2004 fourth quarter 2.1%
decline was driven by a 24.7% decline in incoming revenue.

Traffic increases in Local F-M outgoing of 24.9%, partially
offset by real rates reduction of 17.2% drove a revenue increase
of 2.3% when compared to fourth quarter 2003. DLD F-M outgoing
and incoming revenue declined due to respective real rate
reductions of 17.8% and 26.5% partially offset by traffic
increases of 21.4% and 35.0%, respectively.

The higher outgoing traffic is a consequence of a larger mobile
market. Growth in incoming traffic was generated by an increase
in other operators' fixed subscriber base, international long
distance calls received by other local operators terminating in
our network, and growth in mobile to fixed traffic.

In September 2004, a new promotional F-M tariff was introduced
for public telephony, with the objective of increasing traffic
and revenue in this segment. Public telephony F-M traffic
increased 68.6% for the fourth quarter of 2004 when compared to
the same period of 2003.

Data Revenue:

Data transmission revenue totaled Bs. 118.5 billion (10.5% of
total revenue) for the quarter, an increase of Bs. 26.2 billion
(28.4%) on a year-over-year basis, due to a Bs. 11.6 billion
(85.5%) increase in ABA (ADSL) revenue and a 9% increase in the
weighted average price for private circuits. For the year, Data
revenue grew 20.4% (Bs. 69.8 billion) compared to 2003.

ABA (ADSL) subscribers totaled 159 thousand at the end of 2004,
a 106.9% increase on a year-over-year basis. Fourth quarter 2004
net subscriber additions were the highest posted since the
service was launched in 2000. Cantv launched in December 2004 an
offer for new dial-up customers that provided interest free
financing of personal computers called "Internet Equipado".

Mobile business continues to be the major revenue growth driver
for the Company. Fourth quarter mobile revenue totaled Bs. 367.4
billion (32.5% of total revenue), a 35.9% increase over fourth
quarter 2003 revenue. This increase was driven by a larger
subscriber base, higher average revenue per user (ARPU), and
equipment sales.


As of December 2004, Movilnet's subscriber base passed 3.1
million, representing a 15.9% increase on a year-over-year
basis. The subscriber base is composed of 222 thousand (7.1%)
postpaid and 2.9 million (92.9%) prepaid customers. These
positive results are net of a loss of more than 106 thousand
subscribers between May and September 2004, caused by the active
TDMA to CDMA migration campaign initiated in May 2004. As a
result of this successful effort, Movilnet's subscribers on the
CDMA-1X platform surpassed 1 million subscribers in December,
nearly 34.4% of our customer base.

A vibrant Christmas season, positive results from our strategy
to promote CDMA network use, as well as the move to attract
higher value customers generated 360 thousand additional net
subscribers during the fourth quarter of 2004, the highest net
adds posted in a single quarter since 2001.

A new prepaid plan, "Pegate con mas 600", was launched during
October. The plan offers 600 free minutes for Movilnet-to-
Movilnet and Movilnet-to-Cantv calls for a flat rate of Bs.
89,000. Movilnet launched a new brand image with a new motto
"Mas Movilnet, Mas Vida" and a new co-branding logo emphasizing
the relationship between Cantv and Movilnet. This repositioning
effort aims to increase the Company's appeal to the youngster
and high value segments while highlighting the quality of our
cellular network.

Usage and ARPUs:

Total fourth quarter 2004 minutes of use (outgoing and incoming)
reached 790 million, a 19.7% increase compared to the fourth
quarter of 2003 (see Figure 10). Within the outgoing minutes,
total fourth quarter 2004 postpaid minutes increased 24.6% to
284 million minutes when compared to previous year's fourth
quarter and increased 33.9% to 1,054 million minutes for the
entire year. Bundled postpaid traffic is the main growth
variable as it increased 43.3% in fourth quarter 2004 on a year-
over-year basis. For the full year, bundled postpaid traffic
increased 69.6%. Prepaid traffic also increased for the quarter
(13.7%) when compared to the same period in 2003. 1,475 million
prepaid minutes were used for the full year which represented a
51.7% year-over-year growth rate. Much of the growth is
attributable to the new prepaid bundled plans that were
introduced during second quarter 2004.

Nominal weighted average mobile list prices increased 35.9%
during 2004, a 13.6% increase in real terms. During fourth
quarter 2004, higher ARPU was achieved in both subscriber
segments. Postpaid and prepaid ARPU reached Bs. 140,919 and Bs.
36,363, respectively, compared to Bs. 147,685 and Bs. 31,921 in
the fourth quarter 2003. Blended ARPU grew 8.7%, reaching Bs.
44,515 compared to the Bs. 40,937 fourth quarter 2003 average.

During the fourth quarter 2004, SMS revenue totaled Bs. 45.6
billion, a 6.6% growth over the fourth quarter of 2003.
Approximately 1.1 million messages (a 3.1% increase) were sent
by our customers during the fourth quarter. In July 2004,
Movilnet launched a new innovative service that allows our
mobile subscribers to send SMS messages to Cantv's fixed line
customers. SMS represented 12.4% of the Company's total fourth
quarter mobile revenue. SMS revenue increased 30.9% when
comparing the full year 2004 to the previous year.

Cantv's increased role in the sale of terminal equipment
continues to be reflected in mobile revenue. Handset sales were
an important component of wireless revenue growth during 2004.
Movilnet sold over 482 thousand handsets for Bs. 94.7 billion
during the fourth quarter of 2004 representing 133.7% year over
year growth in revenue. For the full year, equipment sales
totaled Bs. 204.9 billion, a 225.3% increase over 2003.

Internet and Other

Fourth quarter Internet revenue totaled Bs. 30.8 billion (2.7%
of total revenue), 27.9% higher than the previous year's fourth
quarter results. This increase was driven by the 56.3% growth in
our subscriber base. Internet service posted 37,503 net
additions in the fourth quarter of 2004. This represents the
highest quarterly net additions experienced over the last two
years and brings our customer base to approximately 363
thousand. The fourth quarter momentum was attributable to the
Company's continuing market expansion programs, most notably our
alliances with educational centers that promote Internet usage.

In December, Cantv completed the second phase of the
"Super@ulas" program, which installed Internet facilities in 49
elementary schools during 2004. During the program's third phase
in 2005, the Company intends to install 25 Internet facilities
at 25 additional elementary schools. The Bs. 2.7 billion fourth
quarter increase in other services' compared to fourth quarter
2003 is attributable to an increase in the average price for
advertising space in our directory business. For 2004, other
telecommunications related services increased by Bs. 19.8
billion driven by higher directories revenue and a change in the
classification of certain other services that are now recorded
as data revenue.


Fourth quarter 2004 total operating expenses increased by Bs.
183.3 billion or 20.3%, to Bs. 1,088.0 billion compared to the
fourth quarter 2003, reflecting a Bs. 256.3 billion or 42.2%
increase in cash operating expenses, partially offset by a Bs.
73.0 billion or 24.5% reduction in depreciation and amortization

The increase in operating expenses resulted mainly from a Bs.
83.5 billion increase in cost of sales, driven by higher
cellular handset sales and fixed wireless equipment. Also,
contributing to the increase were concession and other taxes
increase of Bs. 10.9 billion and interconnection costs increase
of Bs. 33.1 billion driven by the higher revenue and volume, an
increase of Bs. 47.2 billion in contractor expenses for the
regional elections contract, consulting fees related to sales
initiatives, and contractors supporting our customer service
activities, as well as an increase miscellaneous expenses mainly
driven by additional legal and tax contingencies.

The decrease in depreciation and amortization expenses resulted
from certain wireline network assets reaching the end of their
useful lives, as well as reduced 2003 capital expenditures.

Total operating expenses for the full year 2004 increased by Bs.
143.7 billion or 4.0% to Bs. 3,748.5 billion compared to 2003.
Cash operating expenses increased 17.4% to Bs. 2,785.2 billion
due to an increase of Bs. 121.2 billion in cost of cellular
handsets and fixed wireless equipment and higher contractor and
miscellaneous expenses, partially offset by lower labor and
benefit expenses and interconnection costs. Excluding cost of
sales, cash operating expenses increased 6.1%.

Miscellaneous expenses include legal and tax contingencies of
Bs. 109.3 billion, an increase of Bs. 77.9 billion over 2003.
This increase includes a provision related to a potential
adjustment on pension benefits, as a result of a ruling issued
by the Constitutional Chamber of the Supreme Court in January
2005. For additional comments please refer to the Other
Developments section.

EBITDA, EBITDA margin and Net Income

Fourth quarter EBITDA decreased 32.1% to Bs. 267.0 billion from
Bs. 392.9 billion in the prior year. As a percentage of revenue,
this reflected a 1,500 basis points margin decrease. The decline
resulted from cash operating expenses increasing 42.2% while
revenue increased at a lower rate of 13.0% (for EBITDA details,
please refer to the section on Reconciliation of Non-GAAP
financial measures).

Despite healthy growth in lines, subscribers and general
traffic, total revenue growth was curbed by the absence of
residential tariff adjustment that drove a Bs. 36.7 billion
reduction in local service revenue.

The main drivers of the 42.2% increase in cash operating
expenses were stronger commercial efforts in a more intense
competitive environment that translated into increased equipment
sales at a subsidized level, and higher contractor expenses
related to the regional elections, sales initiatives and
customer service; and an increase in legal and tax

In addition to the decline in EBITDA, EBITDA margin was also
adversely affected by the primary role Cantv had to assume in
the distribution of mobile handsets and other terminal
equipment, due to the difficulties experienced by distributors
in accessing foreign exchange. While this does not have an
impact on EBITDA, the EBITDA margin is reduced when registering
the full equipment sales revenue and cost instead of registering
the net subsidy.

The net terminal equipment subsidy increased Bs. 25.8 billion
(39.5%), from Bs. 18.5 billion in the fourth quarter of 2003 to
Bs. 44.3 billion for the fourth quarter of 2004. The additional
dilution of the EBITDA margin resulting from Cantv's
distribution role was 286 basis points for the quarter.

For the year 2004, EBITDA was Bs. 1,321.4 billion and EBITDA
margin 32%, compared to a 2003 EBITDA of Bs. 1,375.3 billion and
an EBITDA margin of 37%. This represented a decrease of 3.9% and
500 basis points, respectively. Responding to similar trends as
the ones described for the three-month period, a revenue
reduction of Bs. 97 billion driven by lack of adjustment of
residential tariffs, and a Bs. 64.8 billion increased net
equipment subsidy were the main reasons for the reduction in
EBITDA and EBITDA margin drop.

Fourth quarter net income decreased 54.9% to Bs. 36.6 billion
when compared to the fourth quarter of 2003. Full year 2004 net
income increased Bs. 271.2 billion to Bs. 306.7 billion. This
significant increase was the result of a Bs. 268.5 (21.8%)
decrease in depreciation expense as well as a positive swing
from other expense of Bs. 65 billion in 2003 to other income of
Bs. 41.6 billion in 2004.

Other Income (Expense), net and Taxes

Other income, net of Bs. 41.9 billion was recorded in the fourth
quarter 2004 compared to other expense, net of Bs. 4.2 billion
in the fourth quarter 2003. Interest income decreased by 9.5%
due to lower average interest rates. Fourth quarter interest
expense decreased 47.9% due to a net debt reduction of Bs. 195.4
billion compared to the fourth quarter 2003. An exchange gain of
Bs. 6.0 billion was recorded in the fourth quarter 2004 compared
to an exchange loss of Bs. 7.5 billion during the same quarter
in 2003 mainly due to the exchange gain of Bs. 8.4 billion
recognized from the sale of the investment in New Skies
Satellite N.V, previously recorded as a separate account in
equity. The loss from net monetary position decreased 62.3%
resulting from lower inflation. Other income increased from Bs.
6.4 billion to Bs. 25.2 billion mainly as a result of the gain
from the sale of New Skies Satellite N.V. of Bs. 12.6 billion.

For the full year, other income, net of Bs. 41.6 billion
resulted from lower interest expense and an exchange gain
resulting from the sale of the investment in New Skies
Satellites N.V., including an exchange gain and other income
totaling Bs. 21.0 billion. In 2003, other expense, net of Bs.
65.0 billion resulted from the loss from the sale of US dollar
denominated bonds, an exchange loss and higher interest expense.

The income tax provision recorded in the fourth quarter 2004
increased by Bs. 36.8 billion to Bs. 47.2 billion compared to
the same period a year ago. For the full year 2004, the income
tax provision totaled Bs. 91.2 billion compared to Bs. 42.4
billion in 2003 due to higher taxable income and lower
investment tax credits. Effective tax rate for 2004 was 22.8%
compared to 54.0% in 2003, in which taxable income included the
non-deductibility of the loss from sale of US dollar denominated
bonds offset by the benefit from the contribution of Bs. 95.3
billion for the pension plan.


Free cash flow for the year ended December 31, 2004 totaled Bs.
984.3 billion, 13.5% lower than 2003. While cash earnings (net
income or loss adjusted for non cash items) increased by Bs.
58.6 billion, a Bs. 389.0 billion increase in Capital
expenditures combined with a Bs. 176.8 billion decrease in the
net balance of current and non-current assets and liabilities
resulted in the Bs. 153.6 billion year-over-year reduction in
FCF. (See Reconciliation of Non-GAAP financial measures).

Financing cash uses totaled Bs. 806.4 billion and reflect the
payment of Yankee Bonds and other debt as well as the payment of
Bs. 620.5 billion of dividends. The Company's net cash position
totaled Bs. 730.6 billion as of December 31, 2004, compared to
Bs. 472.8 billion as of December 31, 2003.

Capital Expenditures

2004 capital expenditures totaled Bs. 537.3 billion, a Bs. 389.0
billion increase over 2003. Capital investments during 2004
reflected the Company's decision to take advantage of favorable
investment conditions, and included: i) the expansion of our
CDMA-1X network footprint to support projected demand in mobile
and fixed wireless services; ii) deployment of backbone and data
networks to sustain the growth in our ABA (ADSL) and other data
product lines; and iii) the integration and transformation of
the Company's information systems. The latter will provide the
necessary system functionality to support the Company's
projected service offerings and improve operating performance.

2003 capital expenditures levels reflected our conservative
approach towards investment given Venezuela's then second year
of economic and market contractions.

Debt Payments

During 2004 Cantv made debt payments totaling Bs. 231.8 billion,
a Bs. 115.8 billion increase when compared to 2003. These
payments included Bs. 179.4 billion (US$100 million) for Yankee
Bonds, Bs. 27.2 billion (US$14.7 million) for the IFC loans, as
well as Bs. 19.0 billion (¯1,081 million) for Japan's Eximbank
and other local banks loans. Debt balances decreased to Bs.
262.4 billion as of December 31, 2004, a Bs. 195.4 billion
reduction when compared to debt balances seen at the end of the
previous year. As a percentage of Equity, total debt decreased
from 10.4% as of December 31, 2003 to 6.4% as of December 31,


During 2004, the Company declared dividends for Bs. 571.6
billion compared to Bs. 400.1 billion in 2003. The 2004 dividend
included a Bs. 550 ordinary dividend per share declared in March
2004 and a Bs. 120 dividend declared on December 7, 2004.
Conversion of dividends paid to foreign investors and ADS
holders into US$ must be approved by CADIVI, the Venezuelan
foreign exchange board. Conversion of the December 2004 dividend
into US$ is pending approval.


Exchange Controls

The exchange control regime that was established by the
Government on January 21, 2003, remains in effect. At its
outset, the exchange rate was fixed at Bs. 1,600 per US$1 and
then adjusted to its current rate of Bs. 1,920 per US$1 on
February 6, 2004.

The Company has received approvals from the Government's Foreign
Currency Administration Commission (CADIVI) to acquire US$433.5
million since the implementation of the exchange controls, for
payments of foreign goods and services (US$285.9 million) and
interest and debt payments (US$147.6 million). During the fourth
quarter 2004, the Company received approvals from CADIVI to
acquire US$89.3 million for payments of foreign goods and
services and US$1.7 million for interest and debt payments.

As of December 31, 2004, CADIVI had approved US$318.8 million
since the implementation of the exchange controls for the
conversion of Bolivars to US dollars for repatriation of

Issuance of Commercial Paper

On September 30, 2004, the Venezuelan Securities Commission
(CNV) approved the issuance of commercial paper by Cantv for up
to Bs. 80 billion that had been approved in a Shareholders
meeting held on March 31, 2004. As of December 31, 2004, Bs.
44.5 billion of this commercial paper had been issued. In
January 2005, the remaining Bs. 35.5 billion was issued
completing the first issuance of commercial paper approved by
the CNV. On December 22, 2004, the CNV approved a second
issuance of commercial paper by Cantv for up to Bs. 112 billion
that had been approved in a Shareholders meeting held on March
31, 2004. According to the Venezuelan Capital Markets Law, the
Company is required to issue at least 10% of the approved
maximum amount within 90 days following the Commission's

Sale of Investment in New Skies Satellites N.V. and Intelsat

The sale of the investment in New Skies Satellites N.V (NSK),
approved by Cantv's Board of Directors in July, became effective
in November 2004 and the sale of International Satellite
Telecommunications Organization (INTELSAT) to Zeus Holding Ltd
was closed on January 28, 2005.

Upon the effective sale of INTELSAT, the Company will recognize
a gain of Bs. 74.0 billion, including the realization as income
of the translation adjustments previously recorded.

Acquisition of Corporacion Digitel, C.A.

On November 21st, Cantv signed a stock purchase agreement to
acquire 100% of the common stock of Corporacion Digitel, C.A.
(Digitel), a wholly-owned subsidiary of Telecom Italia Mobile
S.p.A., for approximately US$450 million corresponding to
enterprise value. The closing of the transaction is subject to
regulatory approvals by CONATEL, Pro-Competencia (the anti-trust
agency) and CADIVI.

Digitel, located in Caracas, is the leading GSM operator in
Venezuela and operates in the Central Region since 1999. As of
September 2004, Digitel was servicing over 1.29 million

Supreme Court Decision

In September of 2004 the Social Chamber of the Supreme Court
ruled in favor of Cantv on a matter related to pension benefits
brought by the National Association of Retirees of Cantv. In
January of 2005 the Constitutional Chamber of the Supreme Court
requested the Social Chamber to issue a new pronouncement,
taking into consideration that pensions cannot be lower than the
minimum urban wage.

Cantv's management, based on the opinion of its legal advisors,
estimated a potential additional pension liability and recorded
a contingency expense in December of 2004. The determination of
the final outcome will have to wait until the new ruling by the
Social Chamber of the Supreme Court.

About CanTV:

Cantv, a Venezuelan corporation, is the leading Venezuelan
telecommunications services provider with approximately 3.1
million access lines in service, 3.1 million cellular
subscribers and 363 thousand Internet subscribers as of December
31, 2004. The Company's principal strategic shareholder is a
wholly owned subsidiary of Verizon Communications Inc. with
28.5% of the capital stock. Other major shareholders include the
Venezuelan Government with 6.6% of the capital stock (Class B
Shares), employees, retirees and employee trusts which own 7.1%
(Class C Shares) and Telefonica de Espana, S.A. with 6.9%.
Public shareholders hold the remaining 50.9% of the capital

To view financial statements:

CONTACT: Cantv - Investor Relations
         Phone: +011 58 212 500-1831 (Master)
                +011 58 212 500-1828 (Fax)

         The Global Consulting Group
         Ms. Lauren Puffer
         Phone: 646 284-9426 (US)


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