compañía anónima nacional teléfonos de venezuela - Cantv

COMPAÑÍA ANÓNIMA NACIONAL 

TELÉFONOS DE VENEZUELA (CANTV) 

AND SUBSIDIARIES 

FINANCIAL AND OPERATING ANNUAL REPORT 

FOR THE YEAR ENDED DECEMBER 31, 2007

TABLE OF CONTENTS 

Page 

INTRODUCTION .............................................................................................................................. 1 

SECTION I. INFORMATION ON THE COMPANY ........................................................................ 5 

SECTION II. CAPITAL STOCK AND CORPORATE GOVERNANCE.............................................. 17 

SECTION III. TELECOMMUNICATIONS REGULATORY FRAMEWORK.......................................... 32 

SECTION IV. FINANCIAL AND OPERATING INFORMATION ........................................................ 38 

SECTION V. LITIGATION ...................................................................................................... 52 

SECTION VI. TRADING INFORMATION.................................................................................... 57 

SECTION VII. ADDITIONAL INFORMATION................................................................................ 61 

SECTION VIII. EXHIBITS ......................................................................................................... 72

Introduction 

As used in this financial and operating report for the year ended December 31, 2007, 

unless the context otherwise requires, “we”, “us”, “our” and the “Company” means Compañía 

Anónima Nacional Teléfonos de Venezuela (CANTV) and its consolidated subsidiaries, and 

“CANTV” means Compañía Anónima Nacional Teléfonos de Venezuela (CANTV). Unless 

otherwise specified, all references in this report to “bolivars” or “Bs.” are to Venezuelan 

“bolívares”, the legal tender currency of the Bolivarian Republic of Venezuela (“Venezuela” or 

“the Republic”). 

CANTV has filed an annual report on Form 20-F with the United States Securities and 

Exchange Commission (“SEC”) since 1997. Its most recent annual report on Form 20-F was 

filed on May 18, 2007, for the year ended December 31, 2006. The annual report on Form 20-F 

for the year ended December 31, 2007 was not filed with the SEC because, on June 30, 2008, 

CANTV filed a request to deregister from the SEC and terminate its reporting obligations. The 

purpose of this report is to present certain financial and operating information which is similar to 

the information that would have been included in the Form 20-F for the year ended December 

31, 2007 if CANTV had been required to file it with the SEC. 

On June 30, 2008, CANTV filed a Form 15F with the SEC to deregister its Class D 

shares (including the Class D shares represented by its American Depositary Shares) from the 

SEC and terminate its reporting obligations under the U.S. Securities Exchange Act of 1934 (the 

“Exchange Act”) pursuant to Rule 12h-6 under the Exchange Act. Subject to a number of 

conditions, Rule 12h-6 permits deregistration of a class of registered securities if the average 

daily trading volume (“ADTV”) of a class in United States for a recent 12-month period has been 

no greater than 5% of the ADTV of the class on a worldwide basis for the same period. 

CANTV’s reporting obligations under the Exchange Act (including the obligation to file the 

annual report on Form 20-F that would have otherwise been due in June 30, 2008) were 

suspended immediately upon filing of the Form 15F. The deregistration and termination of 

reporting will become effective 90 days after the filing (unless the Form 15F is earlier withdrawn 

by CANTV). 

On January 8, 2007, the President of the Republic announced Venezuela’s intention to 

nationalize CANTV, in order to recover one of the companies with highest strategic value for the 

nation’s integral development. On February 12, 2007, the Republic entered into a 

“Memorandum of Understanding” with Verizon Communications Inc. (“Verizon”) and Verizon’s 

wholly-owned subsidiary GTE Venholdings B.V. (“GTE Venholdings”) to acquire Verizon’s 

equity stake CANTV, which represented approximately 28.51% of the outstanding equity share 

capital of CANTV. 

On April 8 and 9, 2007, respectively, the Republic commenced concurrent public tender 

offers (each an “Offer” and collectively the “Offers”) in Venezuela to purchase any and all shares 

of CANTV’s outstanding capital stock, other than those already owned by the Republic, and in 

the United States to purchase any and all of CANTV’s outstanding American Depositary Shares 

(“ADSs”), each representing seven Class D shares. The purchase price paid in the U.S. Offer 

was U.S.$14.84791 per ADS. The purchase price paid in the Venezuelan Offer was the bolivar 

equivalent of U.S.$2.12113 per share based on the official exchange rate for the sale of dollars 

established by the Banco Central de Venezuela (the “Central Bank of Venezuela”) as of the 

settlement date for the Venezuelan Offer on the Bolsa de Valores de Caracas (the “Caracas 

Stock Exchange”). The Offers expired on May 8, 2007. 

1

On May 16, 2007, the Republic announced that it had purchased, through the Ministerio 

del Poder Popular para las Telecomunicaciones y la Informática (the “Ministry of the Popular 

Power for Telecommunications and Information Technology”), 61,257,605 ADSs (representing 

an aggregate of 428,803,235 Class D shares) tendered in the U.S. Offer, and 197,949,721 

common shares tendered in the Venezuelan Offer. Payment for the common shares and ADSs 

was made on or about May 21, 2007. The common shares and ADSs acquired by the Republic 

pursuant to the Offers (which included all of the shares and ADSs previously owned by 

Verizon), together with the 51,900,000 Class B shares already held by the Banco de Desarrollo 

Económico y Social de Venezuela (“BANDES”) (the Venezuelan Bank for Economic and Social 

Development) and the Ministerio del Poder Popular para la Infraestructura (the “Ministry of the 

Popular Power for Infrastructure”), represented an aggregate of approximately 86.2% of the 

outstanding shares of CANTV’s capital stock owned by the Republic. 

On June 18, 2007, the New York Stock Exchange (the “NYSE”) filed a notification with 

the SEC to de-list the ADSs from the NYSE. The de-listing became effective on June 28, 2007. 

As described above, on June 30, 2008, CANTV filed a Form 15F with the SEC to deregister 

from the SEC and terminate its reporting obligations under the Exchange Act pursuant to Rule 

12h-6. 

On March 31, 2008, the Republic entered into a purchase agreement with Renaissance 

Technologies LLC (“Renaissance”) to acquire 3,613,996 ADSs (representing 25,297,972 Class 

D shares) of CANTV owned by Renaissance. The acquisition was consummated on April 4, 

2008. The consideration paid to Renaissance consisted of a purchase price U.S.$11.27 per 

ADS, plus and an amount equal to the ordinary and extraordinary dividends, aggregating 

U.S.$2.88 per ADS, declared by an Ordinary Shareholders’ Assembly on March 31, 2008. As a 

result of the consummation of the Renaissance transaction, the Republic acquired 25,297,972 

Class D shares which, together with 626,752,956 Class D shares owned by the Republic, 

through the Ministry of the Popular Power for Telecommunications and Information Technology, 

and the 51,900,000 Class B shares held by BANDES and the Ministry of the Popular Power for 

Infrastructure, represent an aggregate of 89.4% of the outstanding common shares of CANTV 

which are owned by the Republic. As of June 26, 2008, all Class D shares owned by the 

Republic were converted into Class B shares pursuant to a provision of CANTV’s by-laws. 

On March 31, 2008, the Republic announced that as a result of its acquisition of ADSs 

from Renaissance, Venezuelan law requires the Republic to offer to purchase any and all of the 

other outstanding ADSs and Class D shares of CANTV not already owned by the Republic on 

the date the offer commences (i) at a price, payable in U.S. dollars, of U.S.$11.27 per ADS for 

ADSs, and (ii) at a price, payable in bolivars, of the Bolivar equivalent of U.S.$1.61 per share, 

calculated at the official exchange rate in the Republic for the sale of U.S. dollars by the Central 

Bank of Venezuela, in effect on the date of the settlement of the offer in a special session on the 

Caracas Stock Exchange, for shares that are not represented by ADSs (being the U.S.$11.27 

per ADS price divided by seven to reflect that each ADS represents seven Class D shares). It is 

contemplated that holders of CANTV’s Class C shares will be able to participate in the offer by 

converting their Class C shares into Class D shares in accordance with the procedure 

established in CANTV’s by-laws. As of the date of this report, it is CANTV’s understanding that 

the Republic is continuing to consider an appropriate structure for the transaction, and that it will 

continue to make available updated information as it becomes available. 

2

The Company’s consolidated financial statements comply in full and have been prepared 

in accordance with International Financial Reporting Standards (“IFRS”), issued by the 

International Accounting Standards Board (“IASB”), which include: (i) IFRS, (ii) International 

Accounting Standards (“IAS”) and (iii) International Financial Reporting Interpretations 

Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) rules, and under 

the historical cost convention. 

Pursuant to Resolution No. 157-2004 published in the Official Gazette of Venezuela No. 

38,085 dated December 13, 2004, the Comisión Nacional de Valores (the “CNV”) (the 

Venezuelan National Securities Commission) resolved that companies offering securities to the 

public under the Venezuelan Capital Markets Law must prepare and present their financial 

statements in accordance with IFRS beginning January 1, 2006, with IFRS becoming effective 

on January 1, 2005. On December 8, 2005, the CNV issued Resolution No. 177-2005, which 

postponed the requirement to prepare financial statements under IFRS until the Federación 

Venezolana de Colegios de Contadores Públicos de Venezuela (“FCCPV”) (the Venezuelan 

Federation of Public Accountants) adopts IFRS as accounting principles generally accepted in 

Venezuela. However, early adoption of IFRS is permitted upon compliance with certain 

requirements. Accordingly, the Company adopted IFRS for the preparation of consolidated 

financial statements as of and for the year ended December 31, 2005 for the first time. 

In January 2004, the FCCPV decided to adopt IFRS and its interpretations, issued by 

the IASB. The FCCPV resolved that the initial adoption date of these standards for entities that 

offer securities to the public, will be established by the CNV, the regulatory body of public 

companies. The FCCPV established that the Venezuelan generally accepted accounting 

principles will be designated by the symbol “VEN-FRS”. During 2005, the Company adopted 

IFRS which are different from VEN-FRS; therefore, the Company is currently analyzing the 

possible effects that the VEN-FRS could have on the consolidated financial statements. 

However, until the CNV issues a statement regarding this adoption plan, it is not possible to 

determine the potential effects. 

On March 6, 2007, as published in the Official Gazette of Venezuela No. 38.638, the 

Decree with Status of Law regarding monetary conversion (“the Monetary Conversion Law”) 

was approved. Beginning January 1, 2008, the Monetary Conversion Law establishes a system 

whereby the current monetary unit, the “Bolivar” (“Bs.”), would replaced by a new unit, the 

“Bolivar Fuerte” (“Strong Bolivar”) (“Bs.F.”) which is the equivalent of Bs. 1,000.00. The Decree 

with Status of Law establishes that beginning on such date, all prices of goods and services, 

salaries, pensions, debt, payment obligations, taxes, stock quotes in exchange markets, 

exchange rates, rates and tariffs, amounts contained in financial statements or any other 

accounting documents and, in general, any or reference expressed in local currency would be 

expressed in the new currency. 

On June 6, 2007, the Central Bank of Venezuela issued Resolution No. 07-06-02 

relating to the Rules for Monetary Conversion and Rounding, published in the Official Gazette of 

Venezuela No. 38.711. This resolution establishes, among other matters, that financial 

statements that are for periods ended before January 1, 2008 but that will be approved after 

such date, must be prepared and presented in current Bs. as of December 31, 2007. For 

comparison with future periods, the amounts stated in such financial statements must be 

converted into Bs.F. using the equivalency established under the new law. 

3

On January, 24, 2008, the Central Bank of Venezuela issued Resolution No. 08-01-02 

which establishes that, beginning January 1, 2008, any comparison of statistical or accounting 

information with previous years must be made in the same monetary unit. Thus, financial 

information from year prior to 2008 which was originally expressed in Bs. must be converted into 

Bs.F. by dividing their amounts by 1,000.00, or alternatively, the financial information for 2008 

which is originally expressed in Bs.F. may be converted into Bs. by multiplying the amounts by 

1,000.00. Since the Company’s financial statements as of December 31, 2007 are expressed in 

Bs., solely for comparison purposes, any amounts in this report relating to 2008 originally 

expressed in Bs.F., have been converted into Bs. by multiplying such amounts by 1,000.00. 

All the information presented in this report with respect to business strategy, plans and 

trends, as well as the consolidated financial statements, have been prepared based on the 

Company’s current strategic business plan for the period 2008-2013 approved by the Board of 

Directors on February 12, 2008. 

The consolidated financial statements as of December 31, 2007 have been prepared 

based on events and facts known as of March 10, 2008, the date on which the Board of 

Directors approved their issuance. 

4

Introduction 

Section I. Information on the Company 

CANTV is the primary provider of telecommunications services in Venezuela, and the 

owner of a nationwide basic telecommunications network, through which it provides local, 

domestic and international wireline telephone services, as well as private network, data 

networks, public telephony and rural telephony services. In addition, CANTV provides other 

telecommunications services, including national wireless communications, Internet access and 

publication of telephone directories through its principal subsidiaries: Telecomunicaciones 

Movilnet, C.A. (“Movilnet”), CANTV.Net, C.A. (“CANTV.Net”) and C.A. Venezolana de Guías 

(“Caveguías”). 

The purpose of the Company is to administer, develop, establish and exploit 

telecommunication networks and render telecommunications and information technology 

services that include such service as: local fixed telephony and domestic and international long 

distance telephone services, radiotelephony, mobile cellular services, Internet, value-added, 

transportation, transmission of and access to data networks, distribution by subscription, radio 

messages, radio determination, land mobile radio communication, maritime radio 

communication, aeronautical radio communication, meteorological support, development of 

content and telephone directory; to acquire and market telecommunications and information 

technology media and equipment; to lease circuits, collection services, billing and other services 

to third parties; to adopt and provide new services established by technical advances in the 

telecommunications field; to issue bonds and obligations in accordance with legal requirements; 

to enter into agreements with foreign administrations or companies in all matters concerning 

Company activities in order to promote international integration; to participate in international 

associations, institutes or groups dedicated to perfecting telecommunications or to scientific and 

technological research; to participate in international organizations with expertise in 

telecommunications and to promote and create companies which it wholly or partly owns, in 

Venezuela or in other countries, to conduct activities related and connected to its corporate 

purpose, as well as to promote companies that are State-owned of whose production is for 

societal purposes, or cooperatives or any other type of entity associated with socially-oriented 

economy. 

CANTV is a “compañía anónima” incorporated in Venezuela as Compañía Anónima 

Nacional Teléfonos de Venezuela (CANTV) on June 20, 1930. CANTV is registered in the 

Registro Mercantil Primero del Distrito Federal y Estado Miranda (First Registry of Commerce of 

the Federal District and State of Miranda) under file number 405. CANTV’s registered office is 

located at Avenida Libertador, Centro Nacional de Telecomunicaciones, Nuevo Edificio 

Administrativo, Piso 1, Apartado Postal 1226, Caracas, Venezuela 1010 (Telephone: +58 212 

500 6800). CANTV’s Internet website address is http://www.cantv.com.ve. The information on 

CANTV’s website is not incorporated in this document. 

History 

CANTV was incorporated on June 20, 1930 by private investors to operate certain 

telecommunications services. In 1953, CANTV was nationalized and remained under control of 

the Republic until 1991. 

5

In December 1991, the Republic, through the Fondo de Inversiones de Venezuela 

(“FIV”) (the Venezuelan Investment Fund) (currently BANDES), sold 40% of the equity share 

capital of CANTV to VenWorld Telecom, C.A. (“VenWorld”), a company organized under the 

laws of Venezuela originally by consortium led by GTE Corporation (currently Verizon), for a 

purchase price of U.S.$1,885 million. 

In November 1996, the Republic sold 348,100,000 Class D shares representing 34.8% 

of the equity share capital of CANTV in an international public offering. 

On February 25, 2002, the shareholders of VenWorld approved a plan of liquidation 

pursuant to which Class A shares would be distributed to each of the VenWorld shareholders on 

March 4, 2002. 


nationalize several companies, including CANTV. On February 12, 2007, the Republic entered 

into the Memorandum of Understanding with Verizon and Verizon’s subsidiary GTE 

Venholdings to acquire Verizon’s equity stake in CANTV, which represented approximately 

28.51% of the outstanding equity share capital of CANTV. 


offers in Venezuela to purchase any and all shares of CANTV’s outstanding capital stock, other 

than those already owned by the Republic, and in the United States to purchase any and all of 

CANTV’s outstanding ADSs, each representing seven Class D shares. The purchase price paid 

in the U.S. Offer was U.S.$14.84791 per ADS. The purchase price paid in the Venezuelan 

Offer was the bolivar equivalent of U.S.$2.12113 per share based on the official exchange rate 

for the sale of dollars established by the Central Bank of Venezuela as of the settlement date for 

the Venezuelan Offer on the Caracas Stock Exchange. The Offers expired on May 8, 2007. 

On May 16, 2007, the Republic announced that it had purchased, through the Ministry of 

the Popular Power for Telecommunications and Information Technology, 61,257,605 ADSs 

(representing an aggregate of 428,803,235 Class D shares) tendered in the U.S. Offer, and 

197,949,721 common shares tendered in the Venezuelan Offer. Payment for the common 

shares and ADSs was made on or about May 21, 2007. The common shares and ADSs 

acquired by the Republic pursuant to the Offers (which included all of the shares and ADSs 

previously owned by Verizon), together with the 51,900,000 Class B shares already held by 

BANDES and the Ministry of the Popular Power for Infrastructure, represented an aggregate of 

approximately 86.2% of the outstanding shares of CANTV’s capital stock owned by the 

Republic. 


to acquire 3,613,996 ADSs (representing 25,297,972 Class D shares) of CANTV owned by 

Renaissance. The acquisition was consummated on April 4, 2008. The consideration paid to 

Renaissance consisted of a purchase price U.S.$11.27 per ADS, plus and an amount equal to 

the ordinary and extraordinary dividends, aggregating U.S.$2.88 per ADS, declared by an 

Ordinary Shareholders’ Assembly on March 31, 2008. As a result of the consummation of the 

Renaissance transaction, the Republic acquired 25,297,972 Class D shares which, together 

with 626,752,956 Class D shares owned by the Republic, through the Ministry of the Popular 

Power for Telecommunications and Information Technology, and the 51,900,000 Class B 

shares held by BANDES and the Ministry of the Popular Power for Infrastructure, represent an 

aggregate of 89.4% of the outstanding common shares of CANTV which are owned by the 

6

Republic. As of June 26, 2008, all Class D shares owned by the Republic were converted into 

Class B shares pursuant to a provision of CANTV’s by-laws. 















On June 18, 2007, the NYSE filed a notification with the SEC to de-list the ADSs from 

the NYSE. The de-listing became effective on June 28, 2007. 


shares (including the Class D shares represented by its ADSs) from the SEC and terminate its 

reporting obligations under the Exchange Act pursuant to Rule 12h-6 under the Exchange Act. 

Subject to a number of conditions, Rule 12h-6 permits deregistration of a class of registered 

securities if the ADTV of a class in United States for a recent 12-month period has been no 

greater than 5% of the ADTV of the class on a worldwide basis for the same period. CANTV’s 

reporting obligations under the Exchange Act (including the obligation to file the annual report 

on Form 20-F that would have otherwise been due in June 30, 2008) were suspended 

immediately upon filing of the Form 15F. The deregistration and termination of reporting will 

become effective 90 days after the filing (unless the Form 15F is earlier withdrawn by CANTV). 

Organizational Structure 

2007: 

The following table shows the principal subsidiaries of the Company as of December 31, 

Name of Subsidiary Registered office 

7 

% 

Ownership 

Telecomunicaciones Movilnet, C.A. Caracas, Venezuela 100% 

Compañía Anónima Venezolana de Guías 

(Caveguías) 

Caracas, Venezuela 80% 

CANTV.Net, C.A. Caracas, Venezuela 100% 

INVERCANTV, S.A. Caracas, Venezuela 100% 

CANTV Finance, LTD. Grand Cayman, Cayman 

Islands 

100% 

CANTV International, LTD. Grand Cayman, Cayman 

Islands 

100%

Movilnet was incorporated on March 24, 1992. Its mains purpose is to manage, provide, 

develop and exploit cellular services, transportation services, ground mobile radio 

communications and establishment and use of telecommunications networks. 

CANTV.Net was incorporated on January 26, 1994. Its main purpose is to offer valueadded 

telecommunications services, including Internet access and voice mail, among others. In 

addition, it provides consulting, engineering, and management of private and public networks. 

Caveguías was incorporated on November 12, 1975. Its main activity is the 

development and an sale of advertising space in the telephone directories that it publishes and 

distributes. 

CANTV as a State-Owned Company 

With the nationalization of CANTV, Venezuela recovered one of the companies with the 

highest strategic value to the integral development of the country. This initiative placed the 

leading provider of telecommunications services in the service of all Venezuelans. 

The Venezuelan Government ratified its commitment to the achievement of the Plena 

Soberanía y Autodeterminación de la Nación (“Full Sovereignty Plan and Self-Determination of 

the Nation”), to take telecommunications services to every corner of the country. 

The Company, as a Venezuelan State-owned entity, will contribute decisively to the 

process of inclusion and social transformation in Venezuela, in order to guarantee 

communication rights to the people, through the democratization of telecommunications and the 

use of information and communication technologies as tools to further that nation’s social, 

economic, political, territorial and cultural knowledge and development, as well as national 

security. 

The Company will contribute to achievement of the strategic objectives of the 

Venezuelan State, supporting its transformation through the use of technology. Likewise, it will 

tend to result in the expansion of national production capacity, promoting technological 

sovereignty, the organic connection of different economic entities and the participation of the 

Poder Popular (Popular Power or power of the people) in the Company’s activities. In addition, 

CANTV will further the involvement of all of its workers in the task of bringing about social 

inclusion and stimulate their commitment to and identification with the Company’s objectives. 

As a State-owned entity serving the Venezuelan people, the Company has set as its 

goal to offer basic telephony, Internet and other services to population centers which have until 

now been excluded, with significant investment programs to address the nation’s 

telecommunications needs. 

One of the first benefits of nationalization is the strengthening and expansion of our 

infrastructure as a result of the integration of all the fiber-optic networks of other State-owned 

entities with CANTV’s network, in order to dedicate them to providing nationwide 

telecommunications services. As a result of this alliance among institutions, the Company will 

operate in the first phase a total of 14,062 kilometers of fiber optics, almost double the 7,737 

kilometers that it had when it was a private company. With the integration of the State 

networks, 88% of the population will be covered, which will promote national integration. In 

8

addition, CANTV will operate the telecommunications capacity of the Simón Bolívar Satellite, 

which is to be launched in September 2008, allowing Venezuela to have its own satellite 

capacity fore the first time, which will facilitate the provision of telecommunications services in 

regions with difficult access. 

Through all of these initiatives, CANTV is leveraging the development and 

transformation of Venezuela and meeting its social commitment to the State, the community, its 

workers and its retirees, in the quest for the collective good and supreme social happiness. 

Company Strategy 

When the nationalization of CANTV was completed on May 21 2007, the new 

management began to define the Company’s new strategic orientation centered on the 

nonwaivable principle of access to telecommunications as a fundamental human right. The new 

strategic orientation will promote the creation of a social structure based on values of equality, 

solidarity, participation and coresponsibility and will take telecommunications and information 

technology services to every corner of the country. These objectives have been incorporated in 

the Company’s mission and vision statements, which are described below: 

Mission: “We are the strategic company of the Venezuelan state operating and 

supplying integral telecommunications and information technology solutions, coresponsible for 

the sovereignty and transformation of the nation, focused on strengthening the power of the 

people and the integration of the region, capable of serving with quality, efficiency and efficacy 

and with the participation of the people in a leading role, and contributing to the supreme social 

happiness”. 

Vision: “To be socialist company operating and supplying integral telecommunications 

and information technology solutions, recognized for its innovative capacity, enabler of 

sustainable development and national and regional integration, committed to the 

democratization of knowledge, the collective well-being, the efficiency of the State and national 

sovereignty.” 

Based on these concepts, CANTV has defined the following strategic objectives: 

Democratize service with social justice. Access to telecommunications is a 

fundamental human right. CANTV is rapidly expanding its geographic coverage to include all 

segments of the population. Pursuant to the National Plan, CANTV will take 

telecommunications and information technology to every citizen, where, how and when needed, 

relying on the robust interconnection of State networks with CANTV’s access and transportation 

network. CANTV favors participation and cooperation with other operators to work together to 

provide all sectors of the population with opportunities to access all services. CANTV also 

supports new socio-economic actors in the industry. Empresas de Producción Social (“Social 

Production Companies”), cooperatives and new types of organizations are being introduced into 

the supply chain, in order to pave the way toward building a socialist economy. CANTV will 

reinvest the majority of its profits to address the telecommunications needs of the Venezuelan 

people. 

9

Be a leader in service quality, product portfolio and client service. CANTV will 

focus on offering innovative products and services designed to meet the needs of individuals, 

homes, organized communities, enterprises and corporations, as well as the Venezuelan State. 

Our competitive advantage will reside in: 

• The capacity to effectively address the needs and expectations of the population; 

• The capacity to develop the necessary products and services to meet the different 

needs of the population and to improve their quality of life, taking advantage of 

innovative technologies in the industry; 

• A solid and efficient network of service channels; and 

• A distinctive dedication to customer service. 

Guarantee the capacity of the Company to be self- financed. The Company will 

optimize the benefits it provides to society by developing various corporate plans to ensure its 

economic profitability. A healthy cost structure combined with efficient procedures will produce 

advantages that can be transferred to society and will enable CANTV to maintain and expand its 

operations. By continually seeking operational efficiency and including organized communities 

in its management activities, the Company will ensure continual review of its internal procedures 

and reasonable management of its resources. 

Strengthen the power and participation of the people. Through the Mesas Técnicas 

de Telecomunicaciones (“Technical Telecommunications Tables”), CANTV will promote the 

growing leading role being played by organized communities in the identification, design, 

implementation and management of the most appropriate solutions to meet their needs. The 

Company will turn these communities into strategic allies for service supply. CANTV will work 

together with the Consejos Comunales (“Communal Councils”), the principal form of the 

community self-management model that the Venezuelan State is promoting to empower the 

people, in order to generate growth which is accompanied by a mutual commitment between 

CANTV and the people. CANTV supports the new Esquemas Asociativos Solidarios (“Mutually 

Binding Cooperative Production Models”) promoted by the Venezuela State and will leverage its 

extraordinary purchasing and hiring capacity to become one of the main developers of these 

production models, progressively delegating the business support activities to them. 

Become a socialist State-owned company. Honesty, efficiency, and an integral public 

service vocation are the foundation for the implementation of a model of socialist public servant 

that will do away with the traditional concept of a public official. As a State-owned company, 

CANTV is adjusting to the legal framework of the public sector, making room for Mutually 

Binding Cooperative Production Models, promoting the leading role increasingly played by its 

workers and furthering a socialist labor model. 

Advance toward technological sovereignty. CANTV will enable national development 

of human talent, technical solutions, technological innovation and products and services in the 

telecommunications and information technology sector that will contribute to the nation’s 

independence. In order to achieve this objective, specific actions will be carried out to promote 

the transfer of technological knowledge in the agreements for alliances and assistance that it 

enters into, which will plant the seeds for endogenous development of the Venezuelan 

telecommunications and information technology industry. Additionally, the implementation of 

Decree 3,390 for Free Software, relating to the free use of software in public administration, will 

promote technological sovereignty. 

10

Leverage the transformation of the State. CANTV will assist in the implementation of 

electronic Government by the use of technology in public management through the following 

contributions: 

• Optimizing the coordination and integration among public administration entities in all 

sectors and geographic regions, improving their response to social needs; 

• Participation of citizens in the design, implementation, execution and control of public 

policy; 

• Offering public servants the necessary tools to improve service to Venezuelans; and 

• Streamlining relationships with the suppliers and partners of public institutions to 

improve their operational efficiency and the effectiveness of their use of budgetary 

resources. 

Support national and international integration. With CANTV’s nationalization, the 

Venezuelan State can count on a telecommunications network of national reach that supports 

State security and defense functions. The Company will take the necessary steps to integrate 

the State-owned networks, creating a communications platform that will facilitate interaction 

between Venezuelan citizens and the State, in order to guarantee complete inclusion 

nationwide. By becoming a communications platform with and among Venezuela’s regional 

allies, CANTV is promoting development in a setting of international integration and 

cooperation. 

Property, Plant and Equipment, and Capital Expenditures 

The Company’s property consists principally of network facilities, land and structures 

required to provide telecommunications services. As of December 31, 2007, the Company’s 

property, plant and equipment, net of accumulated depreciation was comprised of network 

facilities (64.1%), buildings and facilities (17.6%), equipment and other assets (7.2%) and 

construction work in progress (11.1%). 

The Company provides telecommunications services in Venezuela through a full-service 

telecommunications network. As of December 31, 2007, the Company maintains 4,999,630 

access lines in service and 9,501,796 wireless subscribers. The percentage of digital access 

lines installed in the Company’s network is 93.6% as of December 31, 2007. All of the 

Company’s international and domestic long distance switches are digital. 

The Company made capital expenditures of approximately U.S.$456 million, U.S.$553 

million and U.S.$715 million in 2005, 2006 and 2007, respectively. The Company is planning 

capital expenditures of approximately U.S.$1,110 million in 2008, and are directed towards 

development and network expansion to support growth of the Company’s customer base (41%), 

administration (14%), overhead (2%), network and maintenance (36%) and systems (7%). The 

Company funded, through internally generated cash, its 2007 capital expenditures. Capital 

expenditures in the 2008 to 2013 planning period as approved in 2008 will depend on the 

economic environment and will continue to be directed towards network optimization, systems 

platforms and the launch of new services. The Company began the deployment of its Global 

System for Mobile Communications (“GSM”) network during 2007 and plans to continue to focus 

its capital investments on high growth wireless, broadband Internet and Evolution-Data 

Optimized (“EvDO”) services, data transmission, substitution of public telephones and 

modernization of analog switches. 

11

Capital investments during 2007 included: (i) the expansion of the Company’s Code 

Division Multiple Access (“CDMA-1X”) network footprint to support projected demand in mobile 

and fixed wireless services; (ii) deployment of the new mobile GSM network; (iii) deployment of 

backbone and data networks to sustain the growth in the Company’s Asymmetrical Digital 

Subscriber Lines (“ADSL”) and other data product lines; (iv) the integration and transformation 

of the Company’s information systems; (v) deployment of EvDO technology for wireless 

broadband services; and (iv) substitution of analog switches with multi-service access nodes to 

support service enhancements and increase operating efficiency. 

Business Overview 

Fixed Telephony 

Local and Domestic Long Distance Services 

The Company’s revenues from local and domestic long distance telephone services 

consist of installation charges and charges for new lines, basic monthly recurring charges, 

usage charges, public telephony usage, and equipment sales. All traffic is measured and billed 

based on duration and, in the case of domestic long distance calls different tariffs apply based 

on the time of day when the call is made. A local and international call impulse is generated 

every 60 seconds, while call impulses for domestic long distance calls is generated every 

second. Nighttime consumption is less expensive than daytime consumption. 

The Company offers Domestic Long Distance plans, Noches y Fines de Semana Libre 

(“Free Nights and Weekends”) and Plan Nacional 3000 (“National Plan 3000”). The Free Nights 

and Weekends plan offers special rates for calls placed between 8:00 p.m. and 7:59 a.m. from 

Monday through Thursday, and on weekends from Friday at 8:00 p.m. until Monday at 7:59 a.m. 

The National Plan 3000 includes 3,000 seconds for a monthly fixed payment and a special rate 

for each additional second for domestic long distance calls. 

Public Telephony 

As of December 31, 2007, the Company owned and operated 115,060 public telephone 

lines, located throughout Venezuela. Users of public telephones in Venezuela pay for calls 

based on the duration and destination of the call. CANTV bills all public telephone calls at a flat 

per minute charge. Domestic long distance calls from public telephones are charged based 

upon the time of day and the duration of the call at the non-residential rate. International long 

distance call rates are the same tariffs applied to non-residential international long distance 

calls. 

Telecommunication Centers 

The Company facilitates public access to telecommunications services via its 

Telecommunication Centers program. 

Telecommunication Centers are operated by third parties as franchises or strategic 

allies, with technical support from the Company. These Telecommunication Centers provide 

local, domestic long distance and international long distance telecommunications services, 

Internet access, equipment sales, sale of prepaid cards, mailing services and copying and 

12

faxing services. Telecommunication Center franchises have grown to 855 as of December 

2007, a 13.2% increase over December 2006. 

The Company is required to pay commissions as sales incentives established by type 

and volume of services rendered by the Telecommunication Centers in its own installations. 

Rural Service 

As of December 31, 2007, the Company had 292 satellite-based lines serving rural 

areas with satellite technology. The Company also provides rural services through wireless 

systems and by microwave radio-based stations. 

International Long Distance Services 

Revenues from international telephone services are primarily derived from (i) charges to 

subscribers in Venezuela for outgoing calls (a portion of which the Company must pay to other 

international operators for calls carried on their networks once outside Venezuela) and 

(ii) access charges paid by other international telecommunications operators for incoming calls 

originating outside Venezuela and carried through the Company’s network in Venezuela. The 

Company charges its customers for outgoing international long distance calls based on the 

destination country, duration and time of day of the call and whether the call is direct-dial or 

operator assisted. International long distance rates do not vary between residential and 

non-residential customers, except for Cuba, Japan, Greece, Hong Kong, Honduras and the U.S. 

State of Hawaii. 

The Company provides international services through submarine cables, satellite and 

microwave links. The Company has two international digital switches, both located in Caracas. 

The Company’s largest international traffic routes are between Venezuela and North 

America (the United States, Mexico and Canada) and South America (Colombia), which 

accounted for approximately 84% of 2007 international traffic. 

Wireless Services 

The Company, through its wholly-owned subsidiary Movilnet, provided wireless 

communication services in areas that covered approximately 87.8% of Venezuela’s population 

as of December 31, 2007. 

Wireless service is one of the Company’s fastest growing businesses. As of 

December 31, 2007, Movilnet reached 9,501,796 subscribers, which represented an estimated 

market share of 39.9%, according to figures published by the Comisión Nacional de 

Telecomunicaciones (“CONATEL”) (the Venezuelan National Telecommunications 

Commission). 

Usage charges are based on a “calling party pays” principle under which Movilnet’s 

customers are charged only for calls they originate, with the exception of international roaming 

charges derived from customers receiving calls when they are outside Venezuela. Wireless 

service customers are charged an activation fee, a basic monthly charge, special fees and 

usage fees on a per-minute basis and per-second basis. 

13

Movilnet provides a number of services and products, such as: voice mail, Short 

Message Service (“SMS”), Multimedia Messaging Service (“MMS”), call forwarding, call waiting, 

caller ID, conferencing, international long distance, international roaming, emergency number, 

video streaming, among others. In addition Movilnet provides Global Positioning System 

(“GPS”) satellite technology that provides vehicle tracking via the Internet, wireless broadband 

service through EvDO, Windows Mobile services, and BlackBerry service (a Research in Motion 

Ltd. trademarked product), which allows customers to stay connected with wireless access to 

email, corporate data, Internet and organizer features through the phone. 

Movilnet is continually developing applications to support its migration strategy into 

advanced data services. In November 2002, Movilnet launched a nationwide CDMA-1X 

technology platform which provides digital cellular services and broadband wireless data 

transmission and Internet access. CDMA-1X technology affords the Company the flexibility to 

combine both fixed and wireless services under the same platform and allows for a more 

efficient use of voice spectrum. Movilnet is the pioneer in offering EvDO mobile broadband in 

Venezuela and is the second carrier to provide this advanced service in Latin America. 

During 2007, the Company began the deployment of its GSM network, which will coexist 

with its current CDMA-1X. The Company believes it will be able to strengthen its market share 

position. The Company expects that this new technology will be in commercial operation at the 

end of 2008. 

The Company markets its wireless services through a network of authorized agents and 

the Company’s commercial offices. The Company has agreements with third parties to act as 

exclusive authorized agents to capture and provide wireless services and equipment to new 

customers. 

Other Telecommunications-Related Services 

Data Transmission 

The Company’s data transmission services are provided through high-capacity private 

links. The Company has implemented Virtual Private Network (“VPN”) technology and intends 

to encourage its use by private line customers. VPN technology should enable the Company to 

provide higher quality dedicated services while improving network efficiency. 

In 2000, CANTV introduced ADSL technology, which allows simultaneous voice and 

data traffic on the same line. As of December 31, 2007, the Company had 735,507 ADSL 

subscribers, which reflects a 63.6% increase as compared to 2006. 

Internet Access 

The Company provides Internet access service through its wholly-owned subsidiary, 

CANTV.Net. CANTV.Net provides broadband access through its product, Acceso a Banda 

Ancha (“ABA”) (Broadband Access) via ADSL and nationwide one-number dial-up Internet 

access as well as international Internet roaming capabilities. CANTV.Net is the largest Internet 

service provider in Venezuela, serving 848,917 subscribers as of December 31, 2007. In 

addition to Internet access, subscribers may choose from an array of products such as web 

14

hosting, Intranet development, VPN, e-commerce solutions, among others. In addition, 

CANTV.Net also provides Internet access through prepaid cards. 

In June 2006, the Company launched a wireless broadband Internet access offer 

exclusively for its ABA broadband subscribers, using Wireless Fidelity (“Wi-Fi”) technology, 

called Zona ABA Wi-Fi (“Wi-Fi ABA Zone”). The Company provides 62 wireless access points 

(“hotspots”) nationwide, including 40 hotspots in Caracas. 

Value-Added Services and Other Services 

The Company offers an array of value-added services and other services, including voice 

mail, call waiting, call forwarding, call blocking, caller ID, speed dialing, toll-free and 800-number 

services, video conferencing, audio text, 900 services, computer network management, 

outsourcing of telecommunications networks, and other intelligent network and data capabilities. 

Directory Information Services 

The Company provides telephone directory information services through its 80%-owned 

subsidiary Caveguías (the remaining 20% is owned by an affiliate of a major newspaper 

publisher in Venezuela). Caveguías publishes telephone directories (“White Pages”) and 

business directories (“Yellow Pages”). It also operates an Internet portal that provides on-line 

access to the Company’s directories. Other directory services offered include: (i) Travel Guide, 

which provides tourism information; (ii) Mobile Guide, which gives cellular users access to 

commercial information and local, regional and national services; (iii) specialized guides for 

shopping malls, entertainment and events, aesthetics and beauty; (iv) Oil Guide, which provides 

information on the oil industry; and (v) City Maps, which allows city map search to facilitate 

address searches. Caveguías derives revenues from sales of advertising space in its printed 

and electronic directories. Advertisers in the Company’s printed telephone directories are 

charged an annual fee, which varies depending on the size of the advertisement placed and the 

circulation of the edition of the directory in which such advertisement is published. 

Competition 

Competition in services provided by the Company may arise from a variety of existing 

competitors and new entrants, including telecommunications service providers from other 

countries. 

In January 1991, CONATEL granted the first cellular concession to Telcel, C.A. 

(“Movistar”). 

In December 1996, Infonet Redes de Información, C.A. (“Infonet”) was granted a rural 

concession to provide multiple services to population centers with 5,000 or fewer inhabitants in 

eight western states of Venezuela. In January 1998, two additional companies were granted 

multiple service concessions. Corporación Digitel C.A. (“Digitel”), was granted a concession to 

provide services in seven central states and Digicel, C.A. (“Digicel”) was granted a concession 

to provide services in six eastern states. 

15

On January 19, 2006, Telvenco S.A. (“Telvenco”), a subsidiary of Cisneros Group of 

Companies, agreed to acquire Venezuelan mobile operator Digitel from Telecom Italia Mobile 

International N.V. (“TIM International”). On May 18, 2006, CONATEL approved the transaction 

and also included the merger of the assets of two regional carriers, Infonet and Digicel. Digitel 

continues as the surviving entity after the merger. Digitel provides digital fixed wireless and 

cellular services, where it competes with services provided by the Company. 

On November 28, 2007, CONATEL granted Movilnet and Movistar with cellular 

concessions for the use of the radioelectric service in the 1900 MHz band which will allow these 

companies to provide new services, including third generation services under GSM. 

In May 2008, CONATEL granted Digitel a cellular concession for the use of the 

radioelectric service in the 900 MHz band to expand its services under GSM. Digitel’s network 

has been under GSM in the 900 MHz band since its beginnings. 

As of June 30, 2008, the Venezuelan telecommunications market is composed by: of 

fixed local telephone and public telephony service providers, such as CANTV, Movistar, Digitel, 

Veninfotel Comunicaciones Vitcom, C.A. (“Veninfotel”) and Corporación Telemic, C.A. 

(“Intercable”); domestic long distance service providers, such as CANTV, Movistar, Digitel, 

Veninfotel, Telecomunicaciones NGTV, S.A. (“New Global Telecom”), 123.com.ve, C.A. 

(“123.com.ve”), Multiphone Venezuela, C.A. (“Multiphone”) and Totalcom Venezuela C.A. 

(“Totalcom”); international long distance service providers, such as CANTV, Movistar, Digitel, 

Veninfotel, New Global Telecom, 123.com.ve, Multiphone, LD Telecom Comunicaciones C.A. 

(“LD Telecom”) and Convergia Venezuela, S.A. (“Convergia”); wireless service providers, such 

as Movilnet, Movistar, and Digitel; data transmission service providers, such as CANTV, 

Movistar, New Global Telecom, Totalcom, Global Crossing Venezuela B.V. (“Global Crossing”), 

Comsat Venezuela, C.A. (“Comsat”), Telecomunicaciones Bantel, C.A. (“Bantel”), NetUno, C.A. 

(“NetUno”), Procesamiento Electrónico de Datos, S.A. (“Procedatos”), Satélites y 

Telecomunicaciones, C.A. (“Satelca”), Genesis Telecom, C.A. (“Genesis Telecom”), E-Quant 

Venezuela, S.A. (“E-Quant”), Charter Communications International de Venezuela C.A. 

(“Charter International”), Zulia Electrónica, C.A. (“Zulia Electrónica”) and MCI de Venezuela, 

C.A. (“MCI Venezuela”); Internet service providers, such as CANTV.Net, Movistar, Etheron 

Servicios, C.A. (“Etheron”), Genesis Telecom, New Global Telecom, Totalcom, NetUno, 

Procedatos, E-Quant, Comsat, Charter International, Intercable, SuperCable ALK Internacional, 

S.A. (“SuperCable”), Centro Nacional de Tecnologías de Información (“CNTI”), IFX Networks 

Venezuela S.R.L. (“IFX Networks”), Dayco Telecom, C.A. (“Daycohost”); Global Crossing, 

World Tel-Fax Electronics, C.A. (“World Tel-Fax”), MCI Venezuela, Sprint International, S.R.L. 

(“Sprint International”), IP Net, C.A. (“IP Net”), Gold Data, C.A. (“Gold Data”), AT&T Global 

Network Services Venezuela, LLC (“AT&T Venezuela”), Atos Origin IT Servicios de Venezuela, 

S.A. (“Atos Origin Venezuela”) and Viptel Communications, C.A. (“Viptel”); satellite operator 

Globalstar de Venezuela (“Globalstar”); paging operators, such as Telemensajes 

Metropolitanos, C.A. (“Telemensajes Metropolitanos”) and Elca Telecomunicaciones, C.A. 

(“Elca Telecomunicaciones”); trunking service providers, such as Movistar, Procedatos, Satelca, 

Elca Telecomunicaciones, Americatel Sistemas de Comunicación, C.A. (“Americatel”), Radio 

Móvil Digital Venezuela, C.A. (“Radio Móvil Digital”), Comunicaciones Móviles EDC, C.A. 

(“Conmóvil”) and Evcon Telecomunicaciones, C.A. (“Evcon”); radiodetermination services 

providers, such as Movilnet, Sistemas Timetrak, C.A. (“Sistemas Timetrack”), Scada Com 

System, S.A. (“Scada Com System”) and Vehicle Security Resources de Venezuela, C.A. 

(“Vehicle Security Resources”); and cable TV operators, such as SuperCable, NetUno, 

Intercable, Vearco Telecom, C.A. (“Vearco”), Sistemas Cablevisión, C.A. (“Cablevisión”) and 

Galaxy Entertainment de Venezuela, C.A. (“DirecTV”). 

16

In 2004, the Venezuelan Government incorporated CVG Telecomunicaciones (currently 

“Telecom Venezuela”), a telephone company to provide data transmission and other services 

through fiber-optics and Internet protocol platforms in north-central Venezuela and the Guayana 

region, located in the southeast of Venezuela. On August 14, 2007, Telecom Venezuela 

became a company under the direction of the Ministry of the Popular Power for 

Telecommunications and Information Technology (the Republic, through the Ministry of the 

Popular Power for Telecommunications and Information Technology, is the principal 

shareholder of CANTV). 

The scope of increased competition and any corresponding adverse effect on the 

Company’s results will depend on a variety of factors, such as business strategies and financial 

and technical capabilities of potential competitors, prevailing market conditions, and the 

effectiveness of the Company’s efforts to prepare for increased competition. 

Corporate Image 

The Company promotes its image through advertisements based on nationwide mass 

campaigns via television, radio and print media. In 2007, following the nationalization, CANTV 

changed the colors of its corporate logo, incorporating the colors of the Venezuelan flag, and 

launched the new slogan “mueve la fibra nacional” (“moves the national fiber”). Movilnet also 

adopted the new slogan “la señal que nos une” (“the signal that unifies us”). Both phrases are 

aligned with the Company’s new mission, vision and values, and represent the nationalistic 

spirit. 

Major Shareholders 

Section II. Capital Stock and Corporate Governance 

The following table sets forth CANTV’s capital stock as of December 31, 2007: 

17 

Class 

Number of 

shares 

Ownership 

Percentage 

Bolivarian Republic of Venezuela, through the Ministry of the Popular Power for 

Telecommunications and Information Technology 

D 626,752,956 79.62% 

Venezuelan Economic and Social Development Fund Bank (BANDES) B 51,899,999 6.59% 

Bolivarian Republic of Venezuela, through Ministry of the Popular Power for Infrastructure B 1 - 

Company employees and retirees (1) C 44,334,550 5.63% 

Others (2) D 64,153,343 8.16% 

787,140,849 

(1) Class C shares include shares held in trust for distribution to employees at the Company’s discretion. The trust for 

benefit of employees held 2,883,099 Class C shares at December 31, 2007. For accounting purposes these shares 

are considered treasury shares. 

(2) Includes Class D shares held by The Bank of New York as Depositary for ADSs of CANTV, each of which represents 

seven Class D shares.

As of December 31, 2007, the Company estimates that 4,994,936 ADSs were held in the 

United States, representing approximately 54,5% of the total Class D shares outstanding 

(excluding Class D shares held by the Republic, through the Ministry of the Popular Power for 

Telecommunications and Information Technology). 

On May 21, 2008, an Extraordinary Shareholders’ Assembly approved amended and 

restated by-laws which, among other things, set forth classes of shares comprising CANTV’s 

share capital and its dividend policy. Under the new by-laws, the share capital of CANTV 

consists of three classes of shares, designated as Class B, Class C and Class D. 

Class B shares may only be owned by the Republic and other Venezuelan public sector 

entities. The transfer of Class D shares to the Republic will cause such transferred shares to be 

automatically converted into an equal number of Class B shares upon transfer of the shares. 

Class C shares may be owned by active workers of the Company with a contract for an 

indeterminate period of time and workers retired from the Company, heirs of Class C 

shareholders who received the shares in succession, trusts and benefit plans established for the 

benefit of workers or retired workers of the Company, and former workers and former spouses 

of Class C shareholders who received the shares through partition of marital property and 

holders of these Class C shares prior to the filing of the new by-laws in the Registry of 

Commerce. 

Class D shares are held by different shareholders and are registered in the capital 

markets. 

The by-laws state that each share of CANTV, regardless of class designation, is entitled 

to one vote on all matters submitted for the approval for CANTV’s shareholders at a 

Shareholders’ Assembly. In general, matters submitted to vote at a Shareholders’ Assembly will 

be adopted only if a majority of the holders of the shares present at such Shareholders’ 

Assembly vote in favor of such matters. 

Record holders of ordinary shares are registered in CANTV’s share register, which is 

administered on behalf of CANTV by Banco Venezolano de Crédito, S.A.C.A., as transfer agent, 

and registered in Venezuela. In the United States the Depositary acts as transfer agent and 

registrar in respect of holders of ADSs. 


nationalize several companies, including CANTV. On February 12, 2007, the Republic entered 

into the Memorandum of Understanding with Verizon and Verizon’s subsidiary GTE 

Venholdings to acquire Verizon’s equity stake in CANTV, which represented approximately 

28.51% of the outstanding equity share capital of CANTV. 









18










Republic. 






































19



Dividends 

The Venezuelan Code of Commerce, the Venezuelan Capital Markets Law and the 

standards issued by the CNV regulate the Company’s ability to pay dividends. The Venezuelan 

Code of Commerce establishes that dividends shall be paid solely out of liquid and collected 

earnings derived from financial statements from a closed fiscal year. The Venezuelan Capital 

Markets Law stipulates that the Company must distribute annually no less than 50% of its net 

annual income to its stockholders, after income tax and legal reserve deductions. Likewise, the 

Venezuelan Capital Markets Law establishes that at least 25% of such 50% shall be distributed 

in cash. However, if the Company has accumulated losses, net income shall be used to offset 

such deficit. 

According to CNV standards, unconsolidated net income, excluding the equity 

participation in subsidiaries, is the basis for dividend distribution. 

The Venezuelan Capital Markets Law establishes that dividends must be declared by a 

Shareholders’ Assembly at which the shareholders determine the amount, form and frequency 

of dividend payments. Furthermore, under CNV regulations, companies’ by-laws must state 

their dividend policies. 

On May 21, 2008, an Extraordinary Shareholder’s Assembly approved CANTV’s new bylaws 

which, among other things, set forth the Company’s new dividend policy. 

The by-laws state that the Company’s dividend policy will be to distribute a percentage 

of its profits, which is keeping with its investment plans for upcoming years, the availability of 

cash and any other asset with which the respective dividends are to be paid, as well as the 

general economic condition of the Company and the country. The Company’s investment plans 

shall allow for the continued operation of the business, its technological development, and the 

development of socially-oriented investment projects, so long as the sustainability of the 

Company and its subsidiaries, the quality of life of its workers and retirees, and the benefits to 

society are guaranteed. 

The by-laws provide that the Board of Directors will recommend the amounts, frequency 

and form of payment of ordinary and extraordinary dividends to the Shareholder’s Assembly. 

The Shareholder’s Assembly may instruct the Board of Directors to make the decisions that it 

deems appropriate regarding the dividends in any fiscal year, taking into consideration the 

economic and treasury conditions of the Company and the country, and the Company’s 

investment plans for upcoming years. 

20

The Company has declared ordinary and extraordinary dividends from 2002 to 2008 as 

follows: 

Declaration Date 

Payment Date 

Type 

21 

Bolivars 

per share (1) 

Bolivars 

per ADS (1)(2) 

U.S.$ 

per share (3) 

U.S.$ 

per ADS (2)(3) 

March 22, 2002 June 6, 2002 Ordinary 41.60 291.20 0.05 0.32 

December 10, 2002 January 15, 2003 Extraordinary 165.00 1,155.00 0.12 0.82 

December 10, 2002 January 15, 2003 Ordinary 140.00 980.00 0.10 0.70 

March 28, 2003 April 23, 2003 Ordinary 71.00 497.00 0.04 0.31 

December 2, 2003 December 19, 2003 Extraordinary 350.00 2,450.00 0.22 1.53 

March 31, 2004 April 16, 2004 Ordinary 550.00 3,850.00 0.29 2.01 

December 7, 2004 December 22, 2004 Extraordinary 120.00 840.00 0.06 0.44 



November 27, 2006 December 13, 2006 Extraordinary 307.14 2,150.00 0.14 1.00 


March 31, 2008 April 15, 2008 Extraordinary 127.04 889.28 0.06 0.41 


(1) Expressed in nominal bolivars. 

(2) Each ADS represents seven Class D shares. 

(3) Dividend information in U.S. dollars is expressed at the exchange rate as of the dividend payment date. 

The conversion of dividends from bolivars to U.S. dollars payable to ADS holders 

requires the approval by the Comisión de Administración de Divisas (“CADIVI”) (the 

Commission for Administration of Foreign Exchange). 

Shareholders’ Assembly 

Ordinary Shareholders’ Assemblies must take place within three months after the end of 

each fiscal year. Any other general Shareholders’ Assembly is an Extraordinary Shareholders’ 

Assembly and may be called by the Board of Directors, the statutory auditors or shareholders 

representing at least 20% of the equity share capital of CANTV. The quorum required for either 

any Ordinary or Extraordinary Shareholders’ Assembly consists of shares representing at least 

50% of the votes of the equity share capital or, in the case of a meeting convened solely for the 

purpose of election or removal of directors, shares representing at least 50% of the votes of the 

equity share capital entitled to vote with respect to such directors. 

Ordinary Shareholders’ Assemblies are called to consider the annual report of CANTV’s 

consolidated financial statements, elect the Board of Directors and their alternates, elect the 

principal Statutory Auditors and their alternates, elect the external auditors, declare dividends 

and to consider any other matters that may be properly presented to the meeting. 

The by-laws state that each share of CANTV, regardless of class designation, is entitled 

to one vote on all matters submitted for the approval for CANTV’s shareholders at a 

Shareholders’ Assembly. In general, matters submitted to vote at a Shareholders’ Assembly will 

be adopted only if a majority of the holders of the shares present at such Shareholders’ 

Assembly vote in favor of such matters.

Directors and Senior Management 

Directors 

On May 21, 2008, an Extraordinary Shareholder’s Assembly approved CANTV’s new bylaws. 

Under the new by-laws, CANTV is managed by its Board of Directors which consists of 

the Company’s President and ten principal directors, each of whom has an alternate to act in his 

or her absence. The principal directors and their respective alternates are elected annually by 

the Shareholders’ Assembly. 

The Republic, as holder of a majority of the shares, appoints the President of the 

Company and seven Principal Directors and their alternates as representatives of the Ministries 

of Telecommunications and Information Technology, Finance, Defense, Energy and Oil, 

Science and Technology, and Light and Commercial Industries. Holders of Class C shares have 

the right, voting as a separate class, to elect one Principal Director and an alternate, if Class C 

shares represent at least 2.5% of CANTV’s equity share capital. In addition, all of the 

Company’s employees have the right to elect two labor Principal Directors and their alternates, 

in a universal, direct and secret vote, and such Directors must be active employees of the 

Company for no less than three years. Currently, these labor directors have not been elected. 

CANTV’s by-laws require that the Board of Directors meet at least once every month. 

A quorum at any meeting of the Board of Directors is six members. In addition, CANTV’s bylaws 

require Directors with proven experience, executive capacity, and competence to manage 

the operations of the Company. 

CANTV’s current directors, elected at the Extraordinary Shareholders’ Assembly on May 

21, 2008, are: 

Name 

First 

appointed 

22 

Current term 

ends 

Present principal occupation or 

employment 

Elected by the Republic as 

holder of the majority of all 

shares: 

President- 

Socorro Hernández May 2007 May 2009 President, Chairwoman and Chief 

Executive Officer, CANTV and 

Minister of the Popular Power for 

Telecommunications and Information 

Technology 

Principal Directors- 

Franco Silva May 2007 May 2009 Executive Vice President and Chief 

Operating Officer, CANTV 

Manuel Fernández May 2007 May 2009 President, Red de Transmisiones de 

Venezuela, C.A. (RedTV) 

Nuris Orihuela May 2007 May 2009 Minister of the Popular Power for 

Science and Technology 

Euclides Campos Aponte May 2007 May 2009 Second Commander and Chief of Staff 

of the Third Infantry Division of the 

Venezuelan Army

Name 

First 

appointed 

23 

Current term 

ends 

Present principal occupation or 

employment 

Jesús Villanueva May 2007 May 2009 Director, Petróleos de Venezuela, S.A. 

(PDVSA) 

Ángel Belisario May 2007 May 2009 Advisor to the Minister of the Popular 

Power for Light Industries and 

Commerce 

Rafael Isea May 2007 May 2009 Former Minister of the Popular Power 

for Finance 

Alternate Directors- 

Carlos Figueira May 2007 May 2009 President, Centro Nacional de 

Tecnología e Información (CNTI) 

Eva Escalona May 2008 May 2009 President, Instituto Postal Telegráfico de 

Venezuela (IPOSTEL) 

Vicente Mujica May 2007 May 2009 Telecommunications Project Engineer of 

the Venezuelan Space Center 

Henry Rangel Silva May 2007 May 2009 General Director, Servicios de 

Inteligencia y Prevención (DISIP) 

Ower Manrique May 2007 May 2009 Manager Director of Automation, 

Information Systems and 

Telecommunications, Petróleos de 

Venezuela, S.A. (PDVSA) 

Gerardo Ramírez May 2008 May 2009 President, Servicios de Gestión 

Financiera 

Eyilde Margarita Gracia May 2007 May 2009 General Manager, Banco de Desarrollo 

Económico y Social de Venezuela 

(BANDES) 

Elected by CANTV Employees 

and Retirees as holders of 

Class C shares: 

Principal Director- 

Yelitza García March 2001 May 2009 Coordinator of Life Quality, Participation 

and Voluntary Work, CANTV 

Alternate Director- 

Ricardo Armas March 2002 May 2009 Technician in Telecommunication 

Systems, CANTV 

Executive Officers 

All executive officers of CANTV are appointed by the Board of Directors and hold office 

at the discretion of the Board.

The Company’s current executive officers are: 

Name 

Position 

24 

Current Position 

Held Since 

Socorro Hernández President, Chairwoman and Chief Executive Officer May 2007 

Franco Silva Executive Vice President and Chief Operating 

Officer 

Alexander Sarmiento General Manager, Finance and Chief Financial 

Officer 

January 2008 

May 2007 

María Amparo Genovés General Manager, Planning and Corporate Matters May 2007 

Eloína Pérez General Manager, General Counsel April 2007 

Enrique Velásquez General Manager, Corporate Marketing May 2007 

Dicsa Chacón General Manager, Communications and Public 

Affairs 

June 2008 

Leonardo Hernández General Manager, Services Center May 2007 

Ramón Gómez General Manager, Regulatory Affairs May 2007 

Isabel Bianco General Manager, Human Resources May 2007 

Carmen Rodríguez General Manager, Technology and Operations May 2007 

Wilfredo Figueroa Chacín General Manager, Revenue Assurance May 2007 

Evelyn Vásquez General Manager, Transition to Socialism May 2007 

Ignacio Ramírez Interim General Manager, Internal Audit May 2007 

Sharaid Contreras General Manager, Telecommunications Operators May 2007 

Enrique Cayama General Manager, Enterprises and Private 

Institutions 

October 2007 

Carlos Joa General Manager, Public Institutions June 2008 

Carlos Alviárez General Manager, Mass Markets May 2007 

Jacqueline Faría President, Movilnet May 2007 

Annie Monange President, Caveguías May 2007 

Set forth below is additional biographical information concerning the Company’s 

directors and executive officers: 

Socorro Hernández, President, Chairwoman and Chief Executive Officer, CANTV and 

Minister of the Popular Power for Telecommunications and Information Technology. Mrs. 

Hernández has been the President, Chairwoman and Chief Executive Officer since May 2007. 

Additionally, in January 2008, she was appointed Minister of the Popular Power for 

Telecommunications and Information Technology. Prior to her appointment in CANTV, Mrs. 

Hernández worked for 25 years in Petróleos de Venezuela S.A. (PDVSA), where she served as 

Manager Director of Automation, Information Systems and Telecommunications, as well as in 

other several positions in this area, and was responsible for PDVSA’s Automation, Information 

Systems and Telecommunications Situation Room during the work stoppage in 2002. In 

addition, she was the leader of the team for the transition of CANTV to a State-owned company 

in 2007.

Franco Silva, Executive Vice President and Chief Operating Officer, CANTV. Mr. Silva 

has been Executive Vice President and Chief Operating Officer since January 2008. In 

addition, he has been a member of the Board of Directors of CANTV since May 2007. Prior to 

joining CANTV, Mr. Silva served as Operating General Manager of the Comisión Nacional de 

Telecomunicaciones (CONATEL) where he was responsible for the transition of CANTV to a 

State-owned company and the development of the National Telecommunications, Information 

Systems and Postal Services Plan. In addition he served as Planning and Telecommunications 

Development Manager. In the Ministry for Interior Affairs and Justice he also served as 

Coordinator for the Ministry’s program with the Inter-American Development Bank and as 

General Coordinator of Institutional Transformation Projects. On the international level, he 

served as Chief of the Venezuelan Delegation in several meetings of the International 

Telecommunication Union, Inter-American Telecommunication Commission and the Andean 

Committee of Telecommunications Authorities. 

Manuel Fernández, President, Red de Transmisiones de Venezuela, C.A. (RedTV). Mr. 

Fernández has served in this position since 2007. Prior to this appointment, Mr. Fernández 

served as Vice President of Technical Support, Director of Technical Adjustments Projects and 

Transmission Manager at C.A. Venezolana de Televisión (VTV). Previously, he served as 

National Transmission Manager at Telecaribe, Field and Project Engineer at Ecuatronix and 

Installation Engineer at Eproserca. In addition he served as Transmission Engineer at 

Omnivisión and at Canal Metropolitano de Televisión (CMT). 

Nuris Orihuela, Minister of the Popular Power for Science and Technology. Mrs. 

Orihuela was appointed Minister of the Popular Power for Science and Technology in May 

2008. In addition, Mrs. Orihuela serves as Interim President of the Venezuelan Space Center. 

Previously, she served as Deputy Minister of Research and Innovation at the Ministry of 

Science and Technology and Interim President of the Venezuelan Foundation for Seismological 

Research. In addition Mrs. Orihuela has been Professor of Engineering and Geophysics at the 

Universidad Central de Venezuela (UCV). 

Euclides Campos Aponte, Second Commander and Chief of Staff of the Third Infantry 

Division of the Venezuelan Army. Euclides Campos Aponte is a Brigadier General of the 

Venezuelan Army. Previously, he has served as Commander of the 34 th Regiment of 

Communications. In addition, he was member of the team for the transition of CANTV to a 

State-owned company in 2007. 

Jesús Villanueva, Director, Petróleos de Venezuela, S.A. (PDVSA). Mr. Villanueva has 

been member of the board of directors of PDVSA since 2005. Mr. Villanueva has 26-years of 

experience in the oil industry, where he has served as General Auditor and Deputy Internal 

Controller of PDVSA, Internal Control Evaluation Manager at Corpoven and Audit and Finance 

Manager at Meneven. Prior to joining PDVSA, he served as Audit Manager at Espiñeira, 

Sheldon y Asociados. Mr. Villanueva is certified as a Certified Internal Auditor by the Institute of 

Internal Auditors and as a Certified Fraud Examiner by the Association of Certified Fraud 

Examiners. 

Ángel Belisario, Advisor to the Minister of the Popular Power for Light Industries and 

Commerce. Mr. Belisario also serves as member of the board of directors of the Universal 

Service Fund of the Comisión Nacional de Telecomunicaciones (CONATEL) and of Venirauto, 

C.A. Previously, he served as Advisor to the Minister of the Popular Power for Labor and Social 

Security and Consultant to the Comisión Interministerial para Formular el Plan de Implantación 

de la Ley Orgánica del Sistema de Seguridad Social Venezolano. 

25

Rafael Isea, Former Minister of the Popular Power for Finance. Mr. Isea was Minister 

of the Popular Power for Finance from January 2008 to June 2008. Prior to this time 

appointment, he served as President of Banco de Desarrollo Económico y Social de Venezuela 

(BANDES) and as Venezuela’s Counselor at the Inter-American Development Bank. Mr. Isea 

was Assistant to the Minister of Planning and Development in 1999 and Assistant to the 

President of the Republic in 2000. 

Yelitza García, Coordinator of Life Quality, Participation and Voluntary Work, CANTV. 

Mrs. García has served in this position since 2008. Previously, she served as Coordinator of 

Retirees at CANTV. Mrs. García has served as a member of the Board of Directors in 

representation of Class C shareholders since March 2001. 

Carlos Figueira, President, Centro Nacional de Tecnología e Información (CNTI). Mr. 

Figueira has served in this position since February 2007. Currently he also serves as Associate 

Professor of Computer Science and Information Technology at the Universidad Simón Bolívar. 

He has been Chief of the High-Performance Computer Lab and Chief of Information Technology 

Lab of the Universidad Simón Bolívar, Visiting Professor in the Technology Department at the 

Universitat Pempeu Fabra in Barcelona, Spain, and Visiting Research Fellow at the University 

of Wisconsin. He has also served as Technology Advisor of Automation of Electoral Processes 

to the National Electoral Council (CNE) and member of several science and academic 

committees. 

Eva Escalona, President, Instituto Postal Telegráfico de Venezuela (IPOSTEL). Mrs. 

Escalona has served in this position since 2006. Prior to this appointment, she served as 

Advisor in Information Technology to the Instituto Nacional de Espacios Acuáticos (INEA), 

Executive Vice President of Finance and Planning of Compañía Anónima de Administración y 

Fomento Eléctrico (CADAFE) and member of the board of directors of CVG Electrificación del 

Caroní (EDELCA). Mrs. Escalona has also served as Deputy Minister of Administrative 

Management and Deputy Minister of Communications Management at the Ministerio de la 

Secretaría de la Presidencia de la República. Currently, she also serves as a member of the 

board of directors of Telecomunicaciones Movilnet, C.A. and the Comisión Nacional de 

Telecomunicaciones (CONATEL). 

Vicente Mujica, Telecommunications Project Engineer of the Venezuelan Space 

Center. Mr. Mujica has served in this position since 2007. Prior to this appointment, he served 

as Telecommunications Project Engineer at the Fraunhofer Institute for Open Communication 

Systems (FOKUS) in Berlin, Germany, and Professor of Electronics, Computer Sciences and 

Control at the Universidad Central de Venezuela (UCV). 

Henry Rangel Silva, General Director, Servicios de Inteligencia y Prevención (DISIP). 

Henry Rangel Silva is a Brigadier General of the Venezuelan Army. He has been Commander 

of Basic Units of Transmission, Communications Officer and Aide-de-Camp of the President of 

the Republic. He has also served as President of the Instituto Nacional de la Vivienda (INAVI) 

and member of the board of directors of the Fondo Nacional de Desarrollo Urbano (FONDUR). 

Ower Manrique, Manager Director of Automation, Information Systems and 

Telecommunications, Petróleos de Venezuela, S.A. (PDVSA). Mr. Manrique has 19 years of 

experience at PDVSA, were he has served also as Corporate Manager of Industrial Automation, 

Corporate Coordinator of Production Automation, Leader of Automation Planning and Leader of 

Automation Projects. 

26

Gerardo Ramírez, President, Servicios de Gestión Financiera. Mr. Ramirez has served 

as Sales Representative at C.A. Venezolana de las Industrias Militares (CAVIM), President of 

Armería Nacional Monagas, President of Armas Guayana, Director of the Sheriff Centro and 

Director of Nit de Venezuela. 

Eyilde Margarita Gracia, General Manager, Banco de Desarrollo Económico y Social 

de Venezuela (BANDES). Mrs. Gracia has held this position since 2007. Prior to this 

appointment, she served as President of Expertia Consultores, C.A., Chief Financial Officer of 

Multiphone Venezuela, Collections Manager of Enterprises and Institutions of CANTV and 

Strategic Planning Advisor at Steyr Venezuela. She has also served as Advisor to the Deputy 

Minister of Economic Development at the Ministry of the Planning and Development, Financial 

Advisor of the Executive Direction of Commerce and Supply of Petróleos de Venezuela S.A. 

(PDVSA) and Director of Public Debt Management at the Ministry of Finance. Currently, she 

also serves as member of the board of directors of Telecomunicaciones Movilnet, C.A., Banco 

Industrial de Venezuela (BIV) and BANDES Uruguay. 

Ricardo Armas, Technician in Telecommunication Systems, CANTV. Mr. Armas has 

worked for 29 years at CANTV where he has also served as Supervisor of Analog Switches. In 

addition, Mr. Armas has served as a member of the Board of Directors in representation of 

Class C shareholders since March 2002. 

Alexander Sarmiento, General Manager, Finance and Chief Financial Officer, CANTV. 

Mr. Sarmiento was appointed to his current position in May 2007. In 2007 he was a member of 

the Executive Secretariat of the Presidential Commission for the creation of the Bank of the 

South. He was founder of the Banco Agrícola de Venezuela, C.A. Banco Universal where he 

served as Executive Vice President. Mr. Sarmiento served as Financial Advisor to the Deputy 

Minister of Financial Management, Deputy Director of the General Direction for Planning at the 

Ministry of the Popular Power for Finance and Treasurer of CVG Electrificación del Caroní 

(EDELCA). Currently, he also serves as a member of the board of directors of Banco del 

Tesoro, C.A. Banco Universal. 

María Amparo Genovés, General Manager, Planning and Corporate Matters, CANTV. 

Mrs. Genovés has served in this position since May 2007. Prior to that time, she was a member 

of the team for the transition of CANTV to a State-owned company in 2007. Mrs. Genovés has 

worked for more that 20 years in Petróleos de Venezuela, S.A. (PDVSA), were she has served 

as Corporate Manager of Quality Management, Leader of the Corporate Project of Migration to 

Free Software, Corporate Manager of Information Technology, and was responsible for the 

recovery of the technological platform for trading and supply during the work stoppage in 2002 

Eloína Pérez, General Manager, General Counsel, CANTV. Mrs. Pérez has served in 

this position since April 2007. Previously, Mrs. Pérez served as General Manager, Regulatory 

Affairs, from April 2000 to April 2007. Before joining CANTV, she served as Director at the 

Procuraduría General de la República, Legal Consultant at the Ministerio de Justicia, Legal 

Consultant at the Ministerio de Transporte y Comunicaciones, Legal Consultant at the Ministerio 

de Secretaría de la Presidencia de la República and Legal Advisor of the Ministerio de 

Planificación y Desarrollo (CORDIPLAN), Siderúrgica del Orinoco, C.A. (SIDOR) and C.A. 

Energía Eléctrica de Barquisimeto (ENELBAR). 

27

Enrique Velásquez, General Manager, Corporate Marketing, CANTV. Mr. Velásquez 

has served in this position since May 2007. Prior to this period, Mr. Velázquez served in other 

positions in CANTV such as Corporate Manager, Product and Pricing, Voice Products 

Coordinator, and Business Development Manager. Before joining CANTV he served as 

Category Manager, Promotions Manager and Category Assistant at Mavesa, S.A. and as 

Marketing and Sales Manager at Cellular Trading, C.A. 

Dicsa Chacón, General Manager, Communications and Public Affairs, CANTV. Mrs. 

Chacón has served in this position since June 2008. Previously, Mrs. Chacón served as 

General Manager, Public Institutions from May 2007 until June 2008. Before joining CANTV, 

Mrs. Chacón worked for 20 years at Petróleos de Venezuela S.A. (PDVSA), were she served in 

several positions in the information technology area, such as International Manager of 

Automation, Information Technology and Telecommunications. In addition, she was member of 

the drafting Commission for First Agreement of the Bolivarian Alternative for the Americas 

(ALBA) in telecommunications and information technology matters for PDVSA. 

Leonardo Hernández, General Manager, Services Center, CANTV. Mr. Hernández has 

served in this position since May 2007. Before joining CANTV, Mr. Hernández served as 

General Director of Information Technology at the Electoral National Council (CNE), Information 

Technology General Manager at Hidrocapital, C.A., President of Rightsizing Software Solution, 

C.A. and Information Systems Development Coordinator at Banco Mercantil. 

Ramón Gómez, General Manager, Regulatory Affairs, CANTV. Mr. Gómez has served 

in this position since May 2007. Prior to this period, Mr. Gómez served in other positions in 

CANTV such as Planning and Marketing Manager of the Telecommunications Operators Unit, 

Manager of Economic Analysis, Manager of Environment Analysis, and Director of Planning and 

Logistic Resource Control. Before joining CANTV he served as Associate Consultant at EEFCA 

Consultores. In addition, Mr. Gómez has represented CANTV at a speaker at a number 

conferences such as the International Telecommunications Society conference in Seville, Spain, 

the First Conference of Operators and Telecommunication Regulators in San José de Costa 

Rica, the Caribbean Telecommunications Council conference in Puerto Rico, and a conference 

of the Cámara de Empresas de Servicios de Telecomunicaciones de Venezuela (CASETEL), 

among others. 

Isabel Bianco, General Manager, Human Resources, CANTV. Mrs. Bianco has served 

in this position since May 2007. Prior to her current appointment, Mrs. Bianco worked for 19 

years at Petróleos de Venezuela, S.A. (PDVSA), were she was assigned by PDVSA as Advisor 

to the board of directors of the Medical Federation of the Metropolitan District of Caracas. Prior 

to that time she served as Functional Manager of PDVSA’s Organizational Services, Human 

Resources Manager of PDVSA’s subsidiaries, and Corporate Manager of Organizational 

Development, among other management positions in PDVSA’s human resources department. 

Carmen Rodríguez, General Manager, Technology and Operations. Mrs. Rodríguez 

has served in this position since May 2007. Prior to this period, she was a member of the team 

for the transition of CANTV to a State-owned company in 2007. Previously, she worked at 

Petróleos de Venezuela, S.A. (PDVSA), where she served in several positions such as 

Manager of Automation, Information Technology and Telecommunications for Eastern Region, 

Manager of Administration Services, Manager of Information Technology and was responsible 

for the protection of PDVSA’s Data Centers in the Metropolitan Area during the work stoppage 

in 2002. 

28

Wilfredo Figueroa Chacín, General Manager, Revenue Assurance, CANTV. He has 

served in this position since May 2007. Wilfredo Figueroa Chacín is a Colonel of the 

Venezuelan Army with studies in Electronic Engineering and Information Technology and 

Communications. 

Evelyn Vásquez, General Manager, Transition to Socialism, CANTV. Mrs. Vásquez 

has served in this position since May 2007. Before joining CANTV, Mrs. Vásquez served as 

General Director of Environmental Quality and as Assistant Deputy Minister of Environmental 

Management at the Ministry of Environment. She served in several positions in the engineering 

area at Hidrocapital, Instituto de Tecnología Venezolana para el Petróleo (INTEVEP) and 

Siderúrgica del Orinoco, C.A. (SIDOR). 

Ignacio Ramírez, Interim General Manager, Internal Audit, CANTV. Mr. Ramírez has 

served in this position since May 2007. Prior to joining CANTV, Mr. Ramírez was General 

Director of the Instituto Nacional de Tierras (INTI). Previously, he served as Principal Advisor to 

the Executive Finance Direction and as Advisor to the board of directors of Petróleos de 

Venezuela, S.A. (PDVSA). He has also been Legal Advisor to the Attorney General’s Office, 

Legal Advisor to the Instituto Universitario de Tecnología del Oeste Mariscal Sucre (IUTOMS), 

Legal Advisor to the Economic Development Commission and Agriculture Sub-Commission of 

the National Assembly, and Alternate Superior Judge of the Appeal Court of the State of 

Miranda. 

Sharaid Contreras, General Manager, Telecommunications Operators, CANTV. Mrs. 

Contreras has served in this position since May 2007. During her 15-year career at CANTV, 

she has held several positions, such as Telecommunications Operators Planning and Marketing 

Manager, Telecommunications Operators Customer Service Manager, Interconnection 

Collection and Reconciliation Coordinator, Interconnection Billing Coordinator, Network Billing 

Coordinator and Network Projects Coordinator. 

Enrique Cayama, General Manager, Enterprises and Private Institutions, CANTV. Mr. 

Cayama has served in this position since October 2007. Previously, Mr. Cayama served in 

other positions in CANTV such as Voice and Data Product Manager, Network Functional 

Integration Manager, Engineering and Technical Support Manager and Corporate Sales 

Manager of Enterprises and Institutions. Before joining CANTV, he was Promotion Manager at 

Corposistemas Tec. 

Carlos Joa, General Manager, Public Institutions. Mr. Joa has served in this position 

since June 2008. Before joining CANTV, Mr. Joa served as Director of Information Systems at 

the Ministry of the Popular Power for External Affairs. Previously, he was President of the 

Bolivarian Foundation of Information Systems and Telematics (FUNDABIT) and General 

Director of the Office of Information Systems of the Ministry of Education. He also served as 

Director of Information Systems of the Contraloría del Municipio Libertador, Coordinator of the 

Data Processing Department of the Fundación Nacional de Transporte Urbano (FONTUR) and 

y Chief of Information Systems Department of the Venezuelan Foundation for Seismological 

Research. 

Carlos Alviárez, General Manager, Mass Markets, CANTV. Mr. Alviárez has served in 

this position since May 2007. During his 16-year career at CANTV and its subsidiaries, Mr. 

Alviárez has served in several positions such as Mass Markets Commercial Manager at 

CANTV; and Commercial Director, Director of Corporate Subscribers, Sales Manager for Large 

29

Subscribers, and Project Manager at Telecomunicaciones Movilnet, C.A. Before joining CANTV 

he served as Systems Programming Engineer at Corpoven S.A. 

Jacqueline Faría, President, Movilnet. Mrs. Faría has been the President of Movilnet 

since May 2007. She was member of the team for the transition of CANTV to a State-owned 

company in 2007. Before joining CANTV, she served in several high-level positions such as 

Minister of Environment and President of Hidrocapital, C.A. 

Annie Monange, President, Caveguías. Mrs. Monange has been the President of 

Caveguías since May 2007. Prior to her appointment in Caveguías, she served in Petróleos de 

Venezuela S.A. (PDVSA) as Assistant to the Vice President of Finance and Planning, 

Coordinator of Accounting and Assistant to the Executive Finance Director. In the past she 

worked at CANTV and its subsidiaries where she served as Assistant to the Finance Manager 

and Planning and Financial Analysis Manager of CANTV, and as Production Manager, Planning 

and Budget Manager and Vice President for Production of Caveguías. 

Share ownership 

As of May 31, 2008, the members of the Board of Directors and executive officers of 

CANTV as a group owned an aggregate of 10,745 shares, representing 0.0014% of CANTV’s 

issued and outstanding shares at such date. 

Corporate Governance Principles 

Pursuant to Resolution No. 19-1-2005 published in the Official Gazette of Venezuela No. 

38,129 dated February 17, 2005, the CNV adopted de corporate governance principles for 

companies with shares registered in the Registro Nacional de Valores (the “Venezuelan 

National Securities Registry”), such as the Company. The corporate governance principles 

establish, among other things, that: 

- Companies must present to their Ordinary Shareholders’ Assembly a report on 

compliance with the corporate governance principles. 

- At least one-fifth of a company’s board of directors must be comprised of 

independent directors. 

- Registered companies should have an audit committee comprised of a majority of 

independent directors. 

Corporate Governance 

The supreme governing body of CANTV with power to consider and decide matters of 

interest to CANTV is the Shareholders’ Assembly followed by the Board of Directors and its 

Committees. 

The Board of Directors is in charge of the of direction and management of CANTV. The 

Board of Directors has chief responsibility for establishing policies to prepare plans, programs 

and budgets, the definition and control of corporate strategies and the determination of business 

30

policies. In addition, it authorizes entering into all types of contracts, recommends the amount 

of dividends to be submitted to shareholders for consideration, approves business and 

accounting reports for submission to the Shareholders’ Assembly, recommends and establishes 

administrative policies and creates management and/or consulting committees. 

The Board of Directors must consider the interests of CANTV’s shareholders and its 

employees, retirees and the public interest. Those Directors who violate their duties may be 

held jointly and severally liable for any resulting damages. In addition, under the Anti-Corruption 

Law, members of the board of directors of State-owned companies are considered public 

officers and as such are subject to liability under this Law and the Organic Law of the General 

Controller of the Republic and National System of Tax Control. 

Audit Committee 

The Audit Committee consists of five members of the Board of Directors. Since July 4, 

2007, the Audit Committee members are Jesús Villanueva, Franco Silva, Eyilde Margarita 

Gracia and Ángel Belisario. Until January 2008, Elda Rodríguez was also a member of the 

Audit Committee, and her replacement has not been appointed. The Audit Committee is 

responsible primarily for overseeing the accounting and financial reporting processes of the 

Company and audits of the consolidated financial statements of the Company. The Audit 

Committee is responsible for the evaluation of independent auditors and assists the Board in 

their selection, whose appointment is subject to an affirmative vote by the shareholders at the 

annual general Shareholders’ Assembly, and reviewing the scope of external audit services, 

including compatibility of non-audit services with independence requirements. The Audit 

Committee also provides support to the Board of Directors of CANTV in supervising the 

procedures for the preparation of financial reports; reviewing compliance with internal control, 

including monitoring and management of business risk and compliance with legal and ethical 

requirements; reviewing the annual and quarterly consolidated financial statements of CANTV 

and monitoring the qualifications, independence and performance of the external auditors and 

discussing any issues to be communicated to the Audit Committee by the external auditors. In 

addition, the Audit Committee meets separately with internal and external auditors, with or 

without the presence of the Company’s management, to discuss the results of the audits and 

provide sufficient opportunity for a private meeting between members of internal and external 

audit and the Audit Committee, who may also request additional information from employees 

and legal counsel. 

Compensation and Executive Development Committee 

The Compensation and Executive Development Committee consists of six members 

responsible for the administration of human resources, including matters related to evaluation, 

development, training and compensation. The Compensation and Executive Development 

Committee members are Socorro Hernández, Jacqueline Faría, Annie Monange, Franco Silva, 

María Amparo Genovés and Isabel Bianco. 

31

Section III. Telecommunications Regulatory Framework 

The legal requirements that regulate the services provided by the Company are 

established under each of the concessions granted to it by the Venezuelan Government, the 

Telecommunications Law and its Regulations. 

CONATEL is an independent regulatory body under the direction of the Ministry of the 

Popular Power for Telecommunications and Information Technology (the Republic, through the 

Ministry of the Popular Power for Telecommunications and Information Technology, is the 

principal shareholder of the Company). Among others things, CONATEL has the authority to 

manage, regulate and control the use of limited resources for telecommunications services, 

grant administrative licenses and concessions, recommend the approval of tariffs and collection 

of taxes and, together with the Superintendencia para la Promoción de la Libre Competencia 

(“Pro-Competencia”) (Superintendency for the Promotion of Free Competition), promote and 

protect free competition. 

Telecommunications Law and Regulations 

The Telecommunications Law provides the general legal framework for the provision 

and regulation of telecommunications services in Venezuela with the stated objectives of 

establishing the conditions for fair competition between operators and service providers, setting 

the rules on tariffs and interconnection, developing and modernizing telecommunications 

systems, and at the same time obtaining and establishing universal service contributions. 

The Telecommunications Law considers the provision of telecommunications services to 

be an economic activity that affects the public interest, which may be provided by the private 

sector on a competitive basis subject to regulation, and includes a requirement for universal 

contributions. Providers are free to set their own rates unless there is insufficient competition, in 

which case certain telecommunications services would become subject to tariff regulation by 

CONATEL. 

The Telecommunications Law provides for the creation of the Universal Service Fund 

and the Telecommunications Training and Development Fund. The purpose of the Universal 

Service Fund is to ensure that every citizen has the opportunity to access telecommunications 

services, including the Internet. This fund is used to subsidize the development of infrastructure 

for the provision of telecommunications services by operators in unprofitable areas. Also, a 

research and development fund was created to provide financial resources to universities, 

technology institutes and research institutions to study and research telecommunications 

technology. In May 2006, CANTV signed an agreement with CONATEL to provide for the 

installation, operation, administration and maintenance of telecommunications infrastructure 

related to the Universal Service Fund. Under this agreement CANTV will provide for the 

connectivity of the civil records’ and notaries’ offices of the Ministerio del Poder Popular para las 

Relaciones Interiores y Justicia (the “Ministry of the Popular Power for Interior Affairs and 

Justice”). In addition, in December 2006, CANTV and CONATEL signed an agreement to 

provide for the installation, operation, administration and maintenance of telecommunications 

infrastructure for the creation of a virtual private network that would connect 47 offices and 100 

mobile identification units with the main office of the Oficina Nacional de Identificación y 

Extranjería (“ONIDEX”) (National Office of Identification and Immigration). The funding for the 

infrastructure of both projects will be provided by the Universal Service Fund, and the property 

32

ights to the infrastructure will be transferred to CANTV once the obligation is met and subject to 

certain other conditions. 

The Telecommunications Law also provides for a tax regime applicable to all 

telecommunications service providers on the basis of annual revenues. These taxes total 4.8% 

and consist of a 2.3% activity tax, a 0.5% tax to cover CONATEL’s activities, a maximum 0.5% 

tax for spectrum allocation, a 1.0% tax to create the Universal Service Fund, a 0.5% tax for the 

Telecommunications Training and Development Fund and charges for administrative 

procedures. 

The Regulations for Basic Telephony Services 

The Reglamento de Apertura del Servicio de Telefonía Básica (the “Regulation for Basic 

Telephony Services”) establishes the general model, requirements, conditions, limitations and 

general provisions necessary to ensure the opening of the basic telephony services market to 

free competition, transparency and equality of opportunity. 

The Regulations for Basic Telephony Services also govern the system for pre-selecting 

domestic and international long distance carriers. Consumers may select the long distance 

carrier of their choice on a per-call basis by dialing the operator’s prefix before the desired 

phone number. 

The Interconnection Regulations 

The Telecommunications Law provides for mandatory interconnections with charges 

based on costs to stimulate the commencement of effective competition and promote selfregulation 

of the sector. The Reglamento de Interconexión (the “Interconnection Regulations”) 

require access for the interconnection of other operators’ networks to CANTV’s telephone 

network and allow interested parties to negotiate the terms and conditions of their 

interconnections subject to general principles of non-discrimination, equality of access and good 

faith. Pursuant to the Interconnection Regulations, operators are required to make available to 

other operators soliciting interconnection, the essential resources of their network needed to 

provide telecommunications services. 

New interconnection agreements are required to be consummated no later than 60 days 

following the receipt of a request for interconnection and are subject to review by CONATEL. In 

the event parties fail to enter into an interconnection agreement within 60 days, CONATEL must 

establish the terms and conditions of interconnection between the two parties within 30 days, 

setting interconnection charges based on long-term incremental costs related to the provision of 

unbundled network elements. 

Current operators maintaining interconnection agreements with the Company are 

Movistar, Digitel, Convergence Communications de Venezuela (“Convergence”), Veninfotel, 

123.com.ve, Multiphone, Totalcom, Etelix, C.A. (“Etelix”), New Global Telecom, LD Telecom, 

Convergia, Corporación Intercall, C.A. (“Intercall”) and Intercable. These agreements permit 

interoperations between CANTV’s basic telecommunications network and local and long 

distance domestic and international services of these companies. 

33

The Administrative and Concessions Regulations 

The Reglamento de la Ley Orgánica de Telecomunicaciones Sobre Habilitaciones 

Administrativas y Concesiones de Uso y Explotación del Espectro Radioeléctrico (the 

“Administrative and Concessions Regulations”) establishes that all service providers are 

required to obtain an administrative licenses and concessions to provide basic 

telecommunications services and to establish and make use of a network. 

CONATEL has established the general conditions required to obtain an administrative 

license, with the objectives of providing adequate telecommunications services, consumer 

protection, free competition among operators, efficient and effective numbering administration, 

satisfaction of technical and service quality, obligations for interconnection, and universal 

service contributions, among others. Administrative licenses have a term of up to 25 years, are 

subject to renewal for equal periods. 

Regulation for Quality Service 

On June 28, 2004, CONATEL enacted the Providencia Administrativa sobre Parámetros 

de Calidad de Servicio para los Servicios de Telefonía Fija Local, Larga Distancia Nacional, 

Larga Distancia Internacional y Telefonía Móvil (the “Regulation for Quality Service”), a new 

regulation for quality and service standards for Basic Telephony Services and Mobile operators 

effective in January 2005. This regulation established a period of 120 days for the operators to 

adapt their systems and measuring mechanisms, after which they have an adaptation period of 

up to three quarters to reach minimum and maximum targets established. 

Regulation of Tariffs 

The telecommunications regulations establish with respect to tariffs that operators are 

free to set prices and that only the tariffs of an operator providing services in a dominant 

position will be regulated. The asymmetric regulation of services provided in a dominant 

position is based on the concept of setting “price-caps” which are indexed by applying a 

compound index established in the Regulations for Basic Telephony Services. 

Since the enactment of the Telecommunications Law and its Regulations in 2001, 

CONATEL has established maximum tariffs as a result of agreements reached with CANTV. 

These agreements cover, in addition to the definition of price-caps for each telecommunication 

service, other tariff-related matters including: definition of the compound index of adjustment 

tied to the Wholesale Price Index (WPI) and the devaluation rate of the bolivar against the U.S. 

dollar; establishment of schemes for extraordinary adjustments allowing additional adjustments 

to established tariffs in case of deviations in the projected macroeconomic variables included in 

the compound index of tariff adjustment; changes in residential plans and migration of clients 

between residential plans; and the possibility of incorporation of new proposals for additional 

plans. 

On February 13, 2003, as published in the Official Gazette of Venezuela No. 37,631, the 

Venezuelan Government instituted price controls for all products considered as essential needs, 

including residential fixed telephone services. The adoption of the price controls has suspended 

the approval of tariff increases applicable to CANTV since 2003 for residential services. In 

34

addition, this situation has affected approval of tariff increases in non-residential and public 

telephony where tariffs have been frozen since 2004. 

Beginning July 1, 2007, CANTV reduced its fixed-to-mobile tariffs by an average of 21%, 

as part of its new corporate strategy and to support the new regulatory framework for 

interconnection matters that CONATEL will announce in the coming months. 

On November 22, 2007, pursuant to Administrative Ruling No. 1.110 published in the 

Official Gazette of Venezuela No. 38,816, CONATEL established the price-caps that apply to 

CANTV’s international long distance services for non-residential subscribers and public 

telephony. This Administrative Ruling reiterated the existing price-caps, except for the price-cap 

applicable to Cuba which was increased by 65%. 

On January 3, 2008, pursuant to the Joint Resolution No. DM 323 and DM 023 published 

in the Official Gazette of Venezuela No. 38,842, CONATEL established the price-caps that 

apply to CANTV’s international long distance services for residential subscribers. This 

Resolution reiterated the existing price-caps, except for increases of the price-caps applicable to 

Cuba by 107%, Greece by 46%, Hong King by 46%, Honduras by 39%, Japan by 107% and 

Hawaii by 206%. 

Currently, CANTV and CONATEL are reviewing various tariff issues relating to basic 

services, including the development of a new tariff proposal for the inclusion of plans for socioeconomic 

sectors with the lowest resources, and the study, design and implementation of a new 

regulatory tariff regime for basic services. 

Wireless tariffs are unregulated, and only require the filing of a notice with CONATEL 15 

days before effective date of the tariff increase. 

Concession Agreement 

In 1991, CANTV entered into a Concession Agreement (the Concession) with the 

Venezuelan Government to provide, manage and operate national telecommunications 

services, including wireline telephone services, private networks and value-added services, 

guaranteeing high quality service, modernizing and expanding the network, introducing 

progressive rate rebalancing and establishing a framework for the introduction of competition 

into the market. 

The Concession is for 35 years (ending in 2026), and is renewable, with no cost, for an 

additional period of 20 years, subject to the approval of the Venezuelan Government and 

satisfactory performance by CANTV of its obligations under the Concession. 

Upon any termination of the Concession, all of CANTV’s real estate, equipment, 

structures and facilities assets utilized in the performance of services under the Concession 

would be forfeited to the Venezuelan Government in exchange for a payment equal to an 

amount determined by an expert and independent entity agreed by the Venezuelan Government 

and CANTV. 

The Concession specifies various penalties that may be imposed on CANTV for 

negligent or intentional violation of its provisions. Depending on the nature of the violation, 

35

penalties may include a public reprimand, a fine up to 1% of services billed, and/or the 

termination of the Concession. 

On May 21, 2007, the Republic became the owner of 86.2% of CANTV’s capital stock, 

mainly through the Ministry of the Popular Power for Telecommunications and Information 

Technology, and assumed operating control of the Company, without changing the terms of the 

Concession, which remain in effect until its expiration date. The telecommunications regulatory 

body (CONATEL) is under the direction of the Ministry of the Popular Power for 

Telecommunications and Information Technology. 

Cellular Concession 

The Company acquired the B-band Cellular Concession (the “Cellular Concession”) on 

May 19, 1992. The Cellular Concession was granted for 20 years and is renewable with no cost 

for an additional 20-year period, subject to the satisfactory performance of the obligations 

established in the Cellular Concession. 

On August 14, 2006, CONATEL granted Movilnet an administrative license with the 

attributes of ground mobile radio communications and establishment and use of 

telecommunication networks. On November 28, 2007, CONATEL converted the Cellular 

Concession to an administrative license and incorporated the attributes of mobile telephony and 

transportation. 




Cellular Concession, which remain in effect until its expiration date. The telecommunications 

regulatory body (CONATEL) is under the direction of the Ministry of the Popular Power for 

Telecommunications and Information Technology. 

Cellular Concession for 1900 MHz Band 

On November 28, 2007, Movilnet obtained a cellular concession for the use of 

radioelectric service in the 1900 MHz band (the “Cellular Concession for 1900 MHz band”). 

The Cellular Concession for 1900 MHz band was granted for 15 years in accordance 

with the Telecommunications Law Regulations on Administrative Licenses and Concessions for 

the Use of the Radioelectric Spectrum. 

Value-Added Services Concession 

The majority of the Company’s value-added services are provided directly by the 

Company’s wholly owned subsidiary, CANTV.Net, under the Value-Added Services 

Concession. On October 5, 1995, CONATEL granted CANTV.Net the Value-Added Services 

Concession, which has an initial term of 10 years. The Value-Added Services Concession is 

renewable for another 10-year term, subject to certain conditions. 

36

The Value-Added Services Concession granted CANTV.Net the right to offer voice-mail 

services nationwide. Pursuant to the Telecommunications Law, CANTV.Net applied for the 

conversion of its Value-Added Concession into an administrative license. The conversion of 

concessions into administrative licenses had to be completed within two years following the 

enactment of the Telecommunications Law. CONATEL has not issued the administrative 

license to CANTV.Net. The Company is currently performing the necessary formalities to obtain 

the rights to continue offering these services. The Value-Added Services Concession has been 

expanded to allow CANTV.Net to offer additional services such as Internet access. On March 

30, 2006, CANTV.Net received a communication from CONATEL indicating that all rights and 

obligations established in the concession remain in effect until CONATEL completes the 

conversion of the administrative licenses. 




Value-Added Services Concession, which remain in effect until its expiration date. The 

telecommunications regulatory body (CONATEL) is under the direction of the Ministry of the 

Popular Power for Telecommunications and Information Technology. 

TV Subscription Administrative License 

On April 30, 2008, CANTV obtained a general concession for TV subscription (the “TV 

Subscription Administrative License”). The TV Subscription Administrative License allows 

CANTV to install and exploit equipments and infrastructure to transmit, issue or receive signal, 

writings, images, sounds o information of any nature, by wire, radioelectricity, optical media or 

other similar media. 

The TV Subscription Administrative License was granted for 25 years in accordance to 

the Telecommunications Law Regulations on Administrative Licenses and Concessions for the 

Use of the Radioelectric Spectrum. 

37

Executive Summary 

Section IV. Financial and Operating Information 

The Company’s operating revenues are derived from domestic telephone services, 

including public telephones and rural telephone services, and from international telephone 

services, wireless services, directory information services, Internet access, data transmission, 

and other value-added services. 

Revenues from local and domestic long distance services depend on the number of 

access lines in service, utilization of the network as measured by minutes or seconds of use, the 

rates charged by the Company to its customers and utilization of public telephones. 

Revenues from international telephone services are primarily derived from charges to 

subscribers in Venezuela for outgoing calls and access charges paid by other international 

telecommunications operators for incoming calls originating outside Venezuela and carried 

through the Company’s network in Venezuela. 

Under the “calling party pays” concept, wireline customers pay a rate to make a call to a 

wireless line. 

Interconnection incoming revenue consists of charges paid by other operators for 

connection to the Company’s wireline network. 

Revenues from data transmission services include ADSL, Frame Relay and Digital 

Private Lines services. 

Revenues from other wireline-related services consist of interconnection facilities 

charges, late payment charges, reconnection fees, equipment sales, vertical services and 

miscellaneous charges. Vertical services include caller ID, voice mail, call blocking and call 

forwarding, among others. 

Revenues from wireless services consist primarily of basic monthly recurring charges, 

usage charges, activation fees and revenues from handsets and equipment sales. Revenues 

from wireless services depend on the number of cellular subscribers, utilization of the network 

as measured by minutes or seconds of use and rates charged by the Company to its customers. 

Wireless service revenues include access, airtime, interconnection, activation, special services, 

wireless equipment sales and other wireless-related services. 

Revenues from other telecommunications-related services primarily include Internetrelated 

services and directory information services. Internet-related services include Internet 

access via dial-up and broadband or dedicated channels. The Company earns directory 

information services revenues from sales of advertising space in its printed White Pages and 

Yellow Pages, sales of information from its database, and electronic dissemination of 

information. Revenue is recognized based on the point-of-publication method as directories are 

distributed. 

The Company’s operating expenses mainly consist of a provision for uncollectibles, 

operations, maintenance, repairs and administrative expenses, labor and benefits, depreciation 

and amortization, interconnection costs, concession and other operating taxes, and other 

(income) expense, net. 

38

The provision for uncollectibles is an estimate that reflects the anticipated loss due to 

uncollectible accounts receivable. 

The Company’s operations, maintenance, repairs and other expenses are comprised of 

contractors, materials and other miscellaneous expenses. Contractors include expenses 

related to services rendered to the Company related to maintenance and customer services, as 

well as audit, legal and consulting fees. Materials costs include use of inventories, spares and 

supplies and the provisions for obsolescence and net realizable value of inventories. Other 

miscellaneous expenses include the costs related to provision for litigation and advertising, 

among others. 

Labor and benefits expenses depend on the number of employees, changes in wages 

and benefits negotiated in collective bargaining agreements, pension plan assumptions, 

together with other factors. 

Depreciation and amortization expense is dependent on the book value of fixed assets 

and intangible assets. 

Interconnection costs cover all traffic from the Company’s network to other operators’ 

networks, including traffic from fixed to mobile, traffic from fixed to fixed of CANTV, and traffic 

from mobile to mobile and mobile to fixed of Movilnet. 

Concession and other operating taxes consist primarily of amounts due to the 

Venezuelan Government under the various concession agreements, and municipal taxes. The 

amount of concession and other taxes is generally assessed based on a percentage of billings. 

Other (income) expense net, includes gain on sale of investments and gains and losses 

for transactions of purchase-sale and exchange transactions with securities in bolivars and 

foreign currency. 

Interest and exchange gain (loss), net, consists of net foreign exchange gain or loss, 

interest income and interest expense. 

Interest income is the result of the Company’s temporary cash investments, and the 

interest expense in the result of the Company’s debt. 

Foreign exchange gain or loss represents the impact of devaluation of the bolivar on the 

Company’s net holdings of net monetary liabilities denominated in U.S. dollars and other foreign 

currencies. All balances and transactions in foreign currency are recorded at the equivalent in 

bolivars using the official exchange rate. 

39

Operating Data for the Years Ended December 31, 2005, 2006 and 2007 

The following table sets forth operating data of the Company for the years ended 

December 31, 2005, 2006 and 2007: 

2005 

40 

2006 

% 

increase 

(decrease) 

from prior 

year 

2007 

% 

increase 


from prior 

year 

Wireline Services: 

Access lines in service: 

Residential 2,384,672 2,701,113 13.3 3,413,684 26.4 

Non-residential 625,446 651,794 4.2 735,379 12.8 

Public telephony 104,558 112,974 8.0 115,060 1.8 

ADSL 289,931 449,445 55.0 735,507 63.6 

Total 3,404,607 3,915,326 15.0 4,999,630 27.7 

Access lines per 100 inhabitants 12.8 14.5 13.3 18.5 39.1 

Call Volume(in millions): 

Local unbundled minutes (billed): (1) 

Residential 6,058 5,486 (9.4) 4,740 (13.6) 

Non-residential 3,174 2,869 (9.6) 3,956 37.9 

Public telephones 312 134 (57.1) 105 (21.6) 

Telecommunication Centers 363 344 (5.2) 239 (30.5) 

Total 9,907 8,833 (10.8) 9,040 2.3 

Local bundled minutes consumed: (2) 

Residential 3,447 3,188 (7.5) 3,166 (0.7) 

Non-residential 611 442 (27.7) 438 (0.9) 

Total 4,058 3,630 (10.5) 3,604 (0.7) 

Total local bundled and unbundled minutes 13,965 12,463 (10.8) 12,644 1.5 

Domestic long distance: 

Residential 507 533 5.1 695 30.4 

Nights and weekends 729 630 (13.6) 521 (17.3) 

Non-residential 657 625 (4.9) 698 11.7 

Public telephones 56 32 (42.9) 24 (25.0) 

Telecommunication Centers 227 217 (4.4) 169 (22.1) 

Total 2,176 2,037 (6.4) 2,107 3.4 

International long distance: 

Incoming minutes 427 588 37.7 592 0.7 

Outgoing minutes (3) 304 416 36.8 501 20.4 

Net settlement minutes 123 172 39.8 91 (47.1) 

Incoming/outgoing ratio 1.40 1.41 0.7 1.18 (16.4) 

Outgoing minutes charged to customers (3) 263 315 19.8 364 15.6 

Interconnection: 

Local fixed to mobile: 


Non-residential 697 774 11.0 722 (6.7) 

Public telephony 288 322 11.8 285 (11.5) 

Total 1,596 1,819 14.0 1,950 7.2 

Domestic long distance fixed to mobile: 


Non-residential 331 415 25.4 531 28.0 

Public telephony 217 310 42.9 330 6.5 

Total 772 1,041 34.8 1,344 29.1 

Incoming: (4) 1,951 1,797 (7.9) 1,829 1.8 

Wireless Services: 

Wireless subscribers: 

Postpaid 254,790 356,109 39.8 445,258 25.0 

Prepaid 4,933,380 7,561,840 53.3 9,056,538 19.8 

Total 5,188,170 7,917,949 52.6 9,501,796 20.0 

Minutes of use outgoing (collect): (1) 

Postpaid 489 748 53.0 1,045 39.7 

Prepaid 1,326 1,751 32.1 2,507 43.2 

Total 1,815 2,499 37.7 3,552 42.1

2005 

41 

2006 

% 

increase 


from prior 

year 

2007 

% 

increase 


from prior 

year 

Minutes of use outgoing (bundled) (2) 1,684 3,542 110.3 5,144 45.2 

Minutes of use incoming: (5) 

Fixed to mobile 216 419 94.0 407 (2.9) 

Mobile to mobile 310 489 57.7 751 53.6 

Total 526 908 72.6 1,158 27.5 

Total minutes of use (collect + bundled + incoming) 4,025 6,949 72.6 9,854 41.8 

Short message service (SMS) (in millions) 6,675 10,698 60.3 13,118 22.6 

Internet Services: 

ADSL subscribers 289,931 449,445 55.0 735,507 63.6 

Dial-up subscribers 239,268 186,862 (21.9) 113,410 (39.3) 

Total 529,199 636,307 20.2 848,917 33.4 

Employees: 

CANTV 6,185 6,022 (2.6) 6,124 1.7 

Subsidiaries 3,014 3,446 14.3 3,684 6.9 

Total 9,199 9,468 2.9 9,808 3.6 

Economic statistics: 

Increase in the Consumer Price Index 14.4% 17.0% 260 bps 22.5% 550 bps 

Increase in the Wholesale Price Index 14.2% 15.9% 170 bps 17.2% 130 bps 

Exchange rate at the end of year 2,150 2,150 - 2,150 - 

(1) Represents billed minutes of use, excluding free minutes included in certain of the Company’s tariff plans. 

(2) A “bundled minute” refers to minutes included in the various monthly rate plans. Any minute in excess of what is included in 

the rate plan is billed separately and is termed “unbundled minutes.” Certain plans such as “Nights and Weekends” allow 

unlimited usage, so there is no direct correlation between usage and revenues for minutes generated under those plans. 

(3) Outgoing net settlement minutes are measured on settlement periods negotiated with each carrier which may differ from the 

dates customers are billed. 

(4) Interconnection incoming minutes excluding minutes from Movilnet. 

(5) Interconnection incoming minutes excluding minutes from CANTV.

Results of Operations for the Years Ended December 31, 2005, 2006 and 2007 

The following table sets forth the results of operations of the Company for the years 

ended December 31, 2005, 2006 and 2007 (in millions of bolivars except per share and per 

ADS data): 

Bs. 

2005 2006 2007 

% of 

total 

operating 

revenues 

42 

Bs. 

% of 

total 

operating 

revenues 

% 

increase 


from prior year 

Bs. 

% of 

total 

operating 

revenues 

% 

increase 


from prior year 

Operating revenues: 

Local services (1) 912,042 17.9 920,574 13.5 0.9 966,129 11.6 4.9 

Domestic long distance 296,380 5.8 284,253 4.2 (4.1) 303,873 3.7 6.9 

International long distance 115,435 2.3 121,894 1.8 5.6 146,051 1.8 19.8 

Fixed to mobile – outgoing calls 751,561 14.8 922,810 13.6 22.8 992,480 11.9 7.5 

Interconnection incoming 97,963 1.9 91,307 1.3 (6.8) 88,193 1.1 (3.4) 

Data transmission 542,112 10.7 687,191 10.1 26.8 908,073 10.9 32.1 

Other wireline-related services 200,662 3.9 213,735 3.2 6.5 376,249 4.5 76.0 

Total wireline services 2,916,155 57.3 3,241,764 47.7 11.2 3,781,048 45.5 16.6 

Access 119,758 2.4 172,850 2.5 44.3 228,273 2.7 32.1 

Airtime 769,304 15.1 1,366,645 20.1 77.6 1,782,798 21.4 30.5 

Interconnection 215,244 4.2 339,050 5.0 57.5 373,796 4.5 10.2 

Activation 42,925 0.8 56,452 0.8 31.5 66,066 0.8 17.0 

Special services 376,487 7.4 677,030 10.0 79.8 1,004,469 12.1 48.4 

Wireless equipment sales 431,169 8.5 571,654 8.4 32.6 586,228 7.1 2.5 

Other wireless-related services 26,771 0.5 58,957 0.9 120.2 103,362 1.2 75.3 

Total wireless services 1,981,658 38.9 3,242,638 47.7 63.6 4,144,992 49.8 27.8 

Other telecommunications-related services 190,579 3.8 313,265 4.6 64.4 393,576 4.7 25.6 

Total operating revenues 

Operating expenses: 

5,088,392 100.0 6,797,667 100.0 33.6 8,319,616 100.0 22.4 

Labor and benefits 898,016 17.7 1,147,256 16.9 27.8 1,492,430 17.9 30.1 

Operations, maintenance, repairs and other 1,217,369 23.9 1,536,891 22.6 26.2 2,157,179 25.9 40.4 

Cost of sales of wireless equipment 

Additional pension obligation due to Supreme 

Court ruling, Master Agreement and Monthly 

743,556 14.6 1,172,817 17.3 57.7 1,397,550 16.8 19.2 

Incentive 

694,916 

13.7 

23,043 

0.3 

(96.7) 

362,162 

Provision for uncollectibles 35,068 0.7 65,438 1.0 86.6 117,521 1.4 79.6 

Interconnection costs 534,494 10.5 656,431 9.7 22.8 718,132 8.6 9.4 

Depreciation and amortization 827,692 16.3 858,476 12.6 3.7 965,782 11.6 12.5 

Concession and other taxes 295,161 5.8 429,192 6.3 45.4 490,774 5.9 14.3 

Other (income) expense, net (71,721) (1.5) 8,738 0.1 N.M. (116,633) (1.3) N.M. 

Total operating expenses 5,174,551 101.7 5,898,282 86.8 14.0 7,584,897 91.2 28.6 

Operating (loss) income 

Interest and exchange gain (loss), net: 

(86,159) (1.7) 899,385 13.2 N.M. 734,719 8.8 (18.3) 

Interest income 85,572 1.7 92,987 1.4 8.7 50,014 0.6 (46.2) 

Interest expense (27,393) (0.5) (12,351) (0.2) (54.9) (9,212) (0.1) (25.5) 

Exchange gain (loss), net 32,843 0.6 (530) (0.0) (101.6) (2,037) (0.0) 284.3 

Total interest and exchange gain (loss), net 91,022 1.8 80,106 1.2 (12.0) 38,765 0.5 (51.6) 

Income before income tax 

Income tax: 

4,863 0.1 979,491 14.4 N.M. 773,484 9.3 (21.0) 

Current tax (provision) (147,881) (2.9) (186,576) (2.8) 26.2 (302,018) (3.6) 61.9 

Deferred tax benefit 357,426 7.0 337,460 5.0 (5.6) 552,461 6.6 63.7 

Total net income tax benefit 209,545 4.1 150,884 2.2 (28.0) 250,443 3.0 66.0 

Net income 

Net income attributable to: 

214,408 4.2 1,130,375 16.6 427.2 1,023,927 12.3 (9.4) 

Equity holders of the Company 213,929 4.2 1,127,420 16.6 427.0 1,021,295 12.3 (9.4) 

Minority interest in subsidiary 479 0.0 2,955 0.0 516.9 2,632 0.0 (10.9) 

Net income 214,408 4.2 1,130,375 16.6 427.2 1,023,927 12.3 (9.4) 

Basic and diluted net income per share 276 N/A 1,457 N/A 427.2 1,316 N/A (9.4) 

Basic and diluted net income per ADS (1) Weighted average shares outstanding (in 

1,934 N/A 10,197 N/A 427.2 9,213 N/A (9.4) 

millions) 

776 N/A 776 N/A 

778 N/A 

(1) Each ADS represents seven Class D shares. 

N.M. Not Meaningful 

4.4 

N.M.

Comparison of Results of Operations - Years Ended December 31, 2007 and 2006 

Operating Revenues 

Consolidated net operating revenues increased by Bs. 1,521.9 billion (22.4%) in 2007 to 

Bs. 8,319.6 billion compared to Bs. 6,797.7 billion in 2006, primarily due to increased wireless 

revenues of Bs. 902.4 billion, data revenues of Bs. 220.9 billion and other wireline-related 

services of Bs. 162.5 billion. 

For the years ended December 31, 2005, 2006 and 2007, 57.3%, 47.7% and 45.5%, 

respectively, of total operating revenues were derived from wireline services. Revenues from 

wireless communications services accounted for 38.9%, 47.7% and 49.8%, respectively, of total 

operating revenues for the years ended December 31, 2005, 2006 and 2007. Revenues from 

Internet and directory publications accounted for 3.8%, 4.6% and 4.7%, respectively, of total 

operating revenues for the years ended December 31, 2005, 2006 and 2007. 

Local Services 

Local services revenues, which include local usage, basic monthly recurring charges, 

installation charges and equipment sales, increased by Bs. 45.5 billion (4.9%) to Bs. 966.1 

billion in 2007 compared to Bs. 920.6 billion in 2006. 

Basic monthly recurring charges increased by Bs. 52.2 billion (9.8%) to Bs. 585.9 billion 

in 2007 compared to Bs. 533.6 billion in 2006, attributable to a Bs. 45.6 billion (14.5%) increase 

in residential charges and a Bs. 6.6 billion (3.0%) increase in non-residential charges, both 

driven by the increase in lines. 

Installation charges decreased by Bs. 5.7 billion (10.7%) to Bs. 47.1 billion in 2007 

compared to Bs. 52.8 billion in 2006, due to lower fixed equipment sales and installation 

charges. 

Local usage revenues decreased by Bs. 1.0 billion (0.3%) to Bs. 333.1 billion in 2007 

compared to Bs. 334.1 billion in 2006. At the end of 2007, there were 1,759,017 prepaid 

residential lines compared to 1,094,882 prepaid residential lines at the end of 2006. The 

prepaid customer segment generally has lower-usage consumers. 

The total number of fixed access lines in service increased by 27.7% to 4,999,630 lines 

at December 31, 2007, compared to 3,915,326 lines at December 31, 2006. This increase 

reflects the success of the prepaid platform which increased 64.1%. During 2007, residential 

access lines increased 26.4% and non-residential access lines increased 13.0% from 2006. 

The number of public telephones in service increased by 1.8% during the same period. 

Total billed minutes of use decreased by 2.3% to 9,040 million minutes in 2007 

compared to 8,833 million minutes in 2006. 

Total bundled minutes of use decreased by 0.7% to 3,604 million minutes in 2007 

compared to 3,630 million minutes in 2006. 

43

Public telephony minutes of use decreased by 28.0% to 344 million minutes in 2007 

compared to 478 million minutes in 2006 as a result of the Company’s customers using other 

communications alternatives, such as wireless, and the illegal rental of fixed wireless phones or 

wireless handsets. During 2007, the Company continued fostering the growth in the number of 

Telecommunication Centers. As of December 2007, CANTV had 855 Telecommunication 

Center franchises, a 13.2% increase over December 2006. 

Domestic Long Distance 

Revenues from domestic long distance increased by Bs. 19.6 billion (6.9%) to Bs. 303.9 

billion in 2007 from Bs. 284.3 billion in 2006, primarily due to a 3.4% increase in domestic long 

distance minutes traffic. 

Total bundled and unbundled domestic long distance minutes of use increased by 3.4% 

to 2,107 million minutes in 2007 compared to 2,037 million minutes in 2006. Total residential 

bundled and unbundled domestic long distance minutes of use increased by 4.6% to 1,216 

million minutes in 2007 from 1,163 million minutes in 2006. Unbundled residential domestic 

long distance minutes of use increased by 30.4% to 695 million minutes in 2007 compared to 

533 million minutes in 2006. Bundled residential domestic long distance minutes of use 

decreased by 17.3% to 521 million minutes in 2007 compared to 630 million minutes in 2006. 

Non-residential domestic long distance minutes of use increased by 11.7% to 698 million 

minutes in 2007 compared to 625 million minutes in 2006. Public telephony volumes decreased 

by 22.5% to 193 million minutes in 2007 compared to 249 million minutes in 2006, driven by 

decreased usage at Telecommunication Centers. 

International Long Distance 

Total international long distance revenues increased by Bs. 24.2 billion (19.8%) to 

Bs. 146.1 billion in 2007 compared to Bs. 121.9 billion in 2006. 

International long distance revenues from calls charged to customers increased by Bs. 

36.4 billion (27.4%) to Bs. 169.2 billion in 2007 compared to Bs. 132.8 billion in 2006, resulting 

from a 15.6% increase in outgoing minutes charged to customers. 

Net settlement expense with international carriers increased by Bs. 12.2 billion to 

Bs. 23.1 billion in 2007 compared to Bs. 10.9 billion in 2006. Outgoing minutes increased by 

20.4% to 501 million minutes in 2007 compared to 416 million minutes in 2006. Incoming 

minutes increased by 0.7% to 592 million minutes in 2007 compared to 588 million minutes in 

2006. The ratio of incoming to outgoing calls was 1.18 in 2007 compared to 1.41 in 2006. 

The Company’s largest international traffic route is between Venezuela and North 

America (the United States, Mexico and Canada), which represented 71.0% and 73.3% of the 

minutes recorded in 2007 and 2006, respectively. 

Fixed to Mobile – Outgoing Calls 

Fixed to mobile revenues increased by Bs. 69.7 billion (7.5%) to Bs. 992.5 billion in 2007 

compared to Bs. 922.8 billion in 2006, mainly due to volume increases of 7.2% and 29.1% in 

local and domestic long distance traffic, respectively, and the sharp increase in wireless 

subscribers in Venezuela. 

44

Local fixed to mobile revenues increased by Bs. 16.2 billion (2.7%) to Bs. 612.9 billion in 

2007 compared to Bs. 596.7 billion in 2006. Local fixed to mobile residential minutes increased 

by 30.4% to 943 million minutes in 2007 compared to 723 million minutes in 2006. Local fixed 

to mobile non-residential minutes decreased by 6.7% to 722 million minutes in 2007 compared 

to 774 million minutes in 2006. Local minutes of use from public telephony to mobile decreased 

by 11.5% to 285 million minutes in 2007 compared to 322 million minutes in 2006. 

Domestic long distance fixed to mobile revenues increased by Bs. 53.3 billion (16.4%) to 

Bs. 379.5 billion in 2007 compared to Bs. 326.2 billion in 2006. Domestic long distance fixed to 

mobile residential minutes increased by 52.8% to 483 million minutes in 2007 compared to 316 

million minutes in 2006. Domestic long distance fixed to mobile non-residential minutes 

increased by 28.0% to 531 million minutes in 2007 compared to 415 million minutes in 2006. 

Domestic long distance from public telephony to mobile minutes increased by 6.5% to 330 

million minutes in 2007 compared to 310 million minutes in 2006. 

Interconnection Incoming 

Interconnection incoming revenue decreased by Bs. 3.1 billion (3.4%) to Bs. 88.2 billion 

in 2007 compared to Bs. 91.3 billion in 2006, mainly driven by call transit decreases in locations 

with no interconnection facilities, partially offset by the increase of incoming minutes of use by 

1.8%. 

Data Transmission 

Revenues from data transmission increased by Bs. 220.9 billion (32.1%) to Bs. 908.1 

billion in 2007 compared to Bs. 687.2 billion in 2006. This increase was mainly due to an 

increase of Bs. 146.6 billion in ADSL revenues and a 63.6% increase in ADSL subscribers, 

combined with Bs. 11.6 billion from services provided for electoral processes. 

Other Wireline-Related Services 

Other wireline-related service revenues increased by Bs. 162.5 billion (76.0%) to 

Bs. 376.2 billion in 2007 compared to Bs. 213.7 billion in 2006, mainly driven by equipment 

sales and vertical services. 

Wireless Services 

Wireless service revenues increased by Bs. 902.4 billion (27.8%) to Bs. 4,145.0 billion in 

2007 compared to Bs. 3,242.6 billion in 2006, reflecting continued growth in both the postpaid 

and the prepaid customer base combined with handset sales increases. 

The total number of wireless subscribers increased by 20.0% to 9,501,796 at December 

31, 2007 from 7,917,949 at December 2006. The postpaid customer base increased 25.0%, 

reaching 445,258 subscribers at December 31, 2007, compared to 356,109 subscribers at 

December 31, 2006, while the prepaid subscribers increased by 19.8%, reaching a total of 

9,056,538 customers at December 31, 2007, compared to 7,561,840 customers at 

December 31, 2006. This growth was generated by several promotions offered during 2007, 

including, among others, Valentine’s Day Promotion, Mother’s Day Promotion, Father’s Day 

Promotion and Christmas Promotion. These promotions included special prices for cellular 

handsets and bundling services such as activation fees, credits and short messages, among 

others. In addition, during 2007, the Company launched two new plans, the Plan Consejo 

45

Comunal (“Communal Council Plan”) and the Plan Servidor Público (“Public Servant Plan”). 

The Communal Council Plan, exclusively for members of these community organizations, offers 

a low basic monthly access charge, 3,000 free seconds for Movilnet-to-Movilnet and Movilnetto-CANTV 

calls and 500 free SMS. The Public Servant Plan, exclusively for employees of 

Venezuelan Government agencies and State-owned companies, offers a low basic monthly 

access charge, 100 free minutes and 300 free SMS. 

Total minutes of use (incoming and outgoing) increased by 41.8% to 9,854 million 

minutes in 2007 compared to 6,949 million minutes in 2006. Total outgoing billed minutes of 

use increased by 42.1% to 3,552 million minutes in 2007 compared to 2,499 million minutes in 

2006. Total usage of bundled minutes increased by 45.2% to 5,144 million minutes in 2007 

compared to 3,542 million minutes in 2006. Total incoming minutes of use increased by 27.5% 

to 1,158 million minutes in 2006 compared to 908 million minutes in 2007, driven by a 53.6% 

increase in fixed to mobile calls, partially offset by a 2.9% decrease in mobile to mobile calls. 

Airtime revenues increased by Bs. 416.1 billion (30.5%) to Bs. 1,782.8 billion in 2007 

compared to Bs. 1,366.7 billion in 2006, as a result of lines and volume growth. 

Revenues from wireless special services increased by Bs. 327.5 billion (48.4%) to Bs. 

1,004.5 billion in 2007 compared to Bs. 677.0 billion in 2006, mainly driven by the increase in 

SMS messages of 22.6% to 13,118 million messages in 2007 compared to 10,698 million 

messages in 2006. 

Equipment sales increased by Bs. 14.5 billion (2.5%) to Bs. 586.2 billion in 2007 

compared to Bs. 571.7 billion in 2006. During 2007, the Company sold approximately 

5,557,591 handsets, a 19.9% increase compared to the approximately 4,637,087 handsets sold 

in 2006. 

Other Telecommunications-Related Services 

Revenues from other telecommunications-related services increased by Bs. 80.3 billion 

(25.6%) to Bs. 393.6 billion in 2007 compared to Bs. 313.3 billion in 2006. 

Internet revenues increased by Bs. 88.3 billion (34.4%) to Bs. 346.0 billion in 2007 

compared to Bs. 257.5 billion in 2006, due to a 33.4% increase in the subscriber base, which 

reached 848,917 subscribers at December 31, 2007 compared to 636,307 subscribers at 

December 31, 2006. The growth in the subscriber base was due to promotional campaigns, 

improved connectivity and attractive pricing. In addition, the Company continues to offer, as 

part of its Internet market promotion strategy, the Internet Equipado (“Internet with Equipment”) 

program, which facilitates customers’ acquisition of personal computers together with 

CANTV.Net services through attractive financing offers. 

Revenues from directory publications decreased by Bs. 8.2 billion (14.7%) to Bs. 47.6 

billion in 2007 compared to Bs. 55.8 billion in 2006. 

Operating Expenses 

Total operating expenses increased by Bs. 1,686.6 billion (28.6%) to Bs. 7,584.9 billion 

in 2007 compared to Bs. 5,898.3 billion in 2006 mainly due to the recognition of additional 

pension obligations due to the Supreme Court ruling, the Acuerdo Marco (“Master Agreement”) 

46

and Bono Solidario (“Monthly Incentive”), higher cost of cellular handsets, labor and benefits, 

and contractor and miscellaneous expenses. 

Labor and benefits expenses increased by Bs. 345.1 billion (30.1%) to Bs. 1,492.4 billion 

in 2007 compared to Bs. 1,147.3 billion in 2006, mainly due to higher pension and 

postretirement benefits expenses and salary increases. In addition, the Company’s employees 

increased by 3.6% to 9,808 employees at December 31, 2007 compared to 9,468 employees at 

December 31, 2006. 

Operations, maintenance, repairs and other expenses increased by Bs. 620.3 billion 

(40.4%) to Bs. 2,157.2 billion in 2007 compared to Bs. 1,536.9 billion in 2006. This increase 

was mainly due to a Bs. 170.0 billion increase in contractor expenses supporting our customer 

service activities and network maintenance, Bs. 116.9 billion regarding tax assessments due to 

CONATEL for telecommunication taxes, Bs. 261.3 billion in miscellaneous expenses, and Bs. 

75.9 billion in material expenses for use of inventories, spares and supplies and the provisions 

for obsolescence and net realizable value. 

Cost of sales of wireless equipment increased by Bs. 224.8 billion (19.2%) to Bs. 1,397.6 

billion in 2007 compared to 1,172.8 billion in 2006, mainly due to the increase in equipment 

sales as a result of to the significant growth in the number of subscribers. 

Additional pension obligations due to the Supreme Court decision on pension payment 

liabilities increased by Bs. 339.2 billion to Bs. 362.2 billion in 2007 compared to Bs. 23.0 billion 

in 2006. The amount recorded in 2007 resulted from an April 16, 2007 decision rendered by the 

Second Superior Court for the Transitory Procedural Regime of the Circuit Court of the 

Metropolitan Area of Caracas and includes Bs. 291.1 billion regarding the Master Agreement 

and Bs. 71.1 billion from the Monthly Incentive, which, beginning in January 2008, is being paid 

to retirees as determined during the Mesa de Conciliación (the “Mediation Board”) process 

managed by the Social Chamber of the Supreme Court. The amount recorded in 2006 resulted 

from the December 13, 2006 decision rendered by the Thirty Seventh Court of First Instance of 

Substantiation, Mediation and Labor Execution of the Circuit Court of the Metropolitan Area of 

Caracas on the calculations made by the experts appointed by the Execution Court to determine 

the pension payments. 

Provision for uncollectibles increased by Bs. 52.1 billion (79.6%) to Bs. 117.5 billion in 

2007 compared to Bs. 65.4 billion in 2006, due to the implementation of a new fixed telephony 

billing system, which generated delays in the Company’s collections. 

Interconnection costs increased by Bs. 61.7 billion (9.4%) to Bs. 718.1 billion in 2007 

compared to Bs. 656.4 billion in 2006 due to increases in traffic volumes. 

Depreciation and amortization expense increased by Bs. 107.3 billion (12.5%) to 

Bs. 965.8 billion in 2007 compared to Bs. 858.5 billion in 2006, mainly due to continuing capital 

investments made and the reduction of useful lives of certain assets during 2006 and 2007. 

Concession and other non-income taxes increased by Bs. 61.6 billion (14.3%) to Bs. 

490.8 billion in 2007 compared to Bs. 429.2 billion in 2006, resulting from a higher revenue 

base. 

During 2007, the Company recorded Bs. 116.6 billion in other income, net, compared to 

Bs. 8.8 billion of other expense, net. In 2007, other income, net includes Bs. 71.9 billion of 

47

income generated in the purchase-sale and exchange transactions with securities in bolivars 

and foreign currency and Bs. 35.0 billion of income related to subscriber deposits of customers 

who lost the refund rights due to a default in compliance of their contracts. In 2006, other 

expense, net includes Bs. 60.6 billion of expense generated in the purchase-sale and exchange 

transactions with securities in bolivars and foreign currency and Bs. 43.1 billion of income 

related to subscriber deposits of customers who lost the refund rights due to a default in 

compliance of their contracts. 

Interest and Exchange Loss, Net 

Interest income decreased by Bs. 43.0 billion (46.2%) to Bs. 50.0 billion in 2007 

compared to Bs. 93.0 billion in 2006, due to lower average short-term and temporary 

investments during 2007. 

Interest expense decreased by Bs. 3.2 billion (25.5%) to Bs. 9.2 billion in 2007 compared 

to Bs. 12.4 billion in 2006, due to reduction of debt balances. 

Exchange loss, net increased by Bs. 1.5 billion to Bs. 2.0 billion in 2007 compared to Bs. 

0.5 billion in 2006, due to the appreciation of the exchange rate of the Japanese yen against the 

U.S. dollar. 

Income Tax 

Total income tax benefit increased by Bs. 99.5 billion (66.0%) to Bs. 250.4 billion in 2007 

compared to Bs. 150.9 billion for 2006. 

Current income tax provision increased by Bs. 115.4 billion (61.9%) to Bs. 302.0 billion in 

2007 compared to Bs. 186.6 billion in 2006, due a higher taxable income in 2007 and the 

recognition in 2006 of investment tax credits for new investments from 2005 and 2006 of Bs. 

199.8 billion as a result of a favorable tax ruling issued in July 2006. 

Deferred tax benefit increased by Bs. 215.0 billion (63.7%) to Bs. 552.5 billion in 2007 

compared to Bs. 337.5 billion in 2006. The 2007 deferred tax benefit includes the impact of the 

provision for the additional pension obligations due to the Supreme Court decision on pension 

payment liabilities. 

48

Cash Flows, Liquidity and Capital Resources 

The following table summarizes cash flow data for the Company for the years ended 

December 31, 2005, 2006 and 2007 (in millions of Bs.): 

Cash and temporary investments beginning of the year 967,543 1,098,629 1,151,987 

Operating activities: 

Net income 

Adjustments to reconcile net income to 

214,408 1,130,375 1,023,927 

49 

2005 

net cash provided by operating activities 1,593,178 

2006 

1,296,303 

2007 

1,969,142 

Changes in current assets and liabilities (152,109) (225,856) (939,241) 

Changes in non-current assets and liabilities (5,326) (315,248) 58,514 

Net cash provided by operating activities 1,650,151 1,885,574 2,112,342 

Investing activities: 

Acquisition of 1900 MHz band cellular concession - - (129,000) 

Acquisition of information systems (software) (177,573) (195,681) (194,938) 

Acquisition of property, plant and equipment (867,339) (1,042,573) (1,250,683) 

Disposal of property, plant and equipment and information systems 

(software) 86,522 37,901 38,375 

Net cash used in investing activities (958,390) (1,200,353) (1,536,246) 

Financing activities: 

Proceeds from borrowings 69,095 6,237 - 

Payments of debt (243,007) (52,150) (28,906) 

Dividend payments (415,133) (583,745) (916,086) 

Purchase of shares for workers’ benefit fund, net (2,255) (2,205) (6,780) 

Net cash used in financing activities (591,300) (631,863) (951,772) 

Increase (decrease) in cash and temporary investments before effect 

of exchange rate changes on cash and temporary investments 100,461 53,358 (375,676) 

Effect of exchange rate changes on cash and temporary investments 30,625 - - 

Increase (decrease) in cash and temporary investments 131,086 53,358 (375,676) 

Cash and temporary investments at the end of the year 1,098,629 1,151,987 776,311 

Comparison of Cash Flows - Years Ended December 31, 2007 and 2006 

Net cash provided by operating activities increased by Bs. 226.7 billion (12.0%) to 

Bs. 2,112.3 billion in 2007 compared to Bs. 1,885.6 billion in 2006. 

Net cash used in investing activities increased by Bs. 335.8 billion (28.0%) to Bs. 1,536.2 

billion in 2007 compared to Bs. 1,200.4 billion in 2006. Capital expenditures during 2007 

included: (i) Bs. 129.0 billion for the acquisition of a concession for the use of the radioelectric 

spectrum in the 1900 MHz band for cellular services; (ii) Bs. 157.3 billion for the deployment of 

the new GSM network for mobile telephony, which will contribute towards strengthening the 

mobile network’s growth program and expansion of coverage throughout the country; (iii) the 

expansion of the Company’s CDMA-1X network footprint to support projected demand in mobile

and fixed wireless services; (iv) deployment of backbone and data transmission networks to 

sustain the growth in the Company’s ADSL and other data transmission product lines; (v) 

integration and transformation of the Company’s information systems; (vi) deployment of EvDO 

technology for wireless broadband services; and (vii) substitution of analog switches with multiservice 

access nodes to support service enhancements and increase operating efficiency. 

Net cash used in financing activities increased by Bs. 319.9 billion (50.6%) to Bs. 951.8 

billion in 2007 compared to Bs. 631.9 billion in 2006. During 2007, the Company made debt 

payments totaling Bs. 28.9 billion, a Bs. 23.3 billion decrease when compared to Bs. 52.2 billion 

in 2006. During 2007, debt payments included Bs. 9.4 billion (U.S.$4.4 million) for the IFC loans 

(as described below) and Bs. 19.5 billion (¥1,081.9 million) for the JBIC loan (as described 

below). During 2006, debt payments included Bs. 9.4 billion (U.S.$4.4 million) for the IFC loans 

(as described below), Bs. 20.1 billion (¥1,081.9 million) for the JBIC loan (as described below), 

repayment of Bs. 11.2 billion of commercial paper, and Bs. 11.5 billion for other local loans. 

During 2007, the Company paid Bs. 916.1 billion in dividends, compared to Bs. 583.7 billion in 

2006. 

Liquidity and Capital Resources 

As of December 31, 2007, the Company’s current assets totaled Bs. 2,942.7 billion, an 

decrease of Bs. 275.4 billion (8.6%) compared to Bs. 3,218.1 billion at December 31, 2006. The 

Company’s current liabilities totaled Bs. 3,589.9 billion at December 31, 2007, a decrease of 

Bs. 491.5 billion (12.0%) compared to Bs. 4,081.4 billion at December 31, 2006. As a result, 

the Company’s working capital ratio increased to 0.82 at December 31, 2007, from 0.79 at 

December 31, 2006, mainly due to lower accounts payable and dividends payable. 

Management believes that as of December 31, 2007, the Company’s working capital is 

sufficient to meet its operating requirements. 

During 2007, the Company reduced its total debt obligations by Bs. 27.4 billion (47.1%). 

As of December 31, 2007, the Company’s outstanding indebtedness totaled Bs. 30.8 billion, 

with Bs. 20.6 billion classified as short-term debt, as compared to total debt of Bs. 58.2 billion 

with Bs. 28.9 billion classified as short-term debt at December 31, 2006. The Company 

continues to maintain a strong capital structure as evidenced by a 0.8% debt-to-equity position 

at December 31, 2007. 

In February 1990, CANTV obtained a loan from the Japan Bank for International 

Cooperation (“JBIC”) (formerly The Export-Import Bank of Japan) of ¥16,228 million, and 

invested in technological changes in the transmission and urban connection network. This loan 

is amortized semi-annually at a fixed annual rate of 5.8% maturing in 2009, and as of December 

31, 2007, the outstanding balance of this loan was ¥1,622.8 million. 

On June 7, 1996, CANTV entered into an agreement with the International Finance 

Corporation (“IFC”) and obtained loan commitments of U.S.$261 million, of which U.S.$175 

million was disbursed. Of the amount disbursed, U.S.$75 million was used in CANTV’s 

modernization and expansion program, as mandated by the Concession, and for certain other 

capital expenditures. The remaining U.S.$100 million represented the conversion of certain 

debt outstanding into longer-term debt. In March 1998, CANTV paid U.S.$150 million of this 

loan with the proceeds from the sale of variable interest rate notes issued by CANTV Finance, 

which are unconditionally and irrevocably guaranteed as to payment of principal and interest by 

50

CANTV. The IFC loan balance of U.S.$25 million was repaid in a single installment in 

September 2005. 

In 1997, Movilnet signed an agreement with the IFC for two loans totaling U.S.$95 

million, which were drawn down during 1998. These loans were used for expansion and 

modernization of the cellular network. The final installment of this loan was paid in July 2007. 

In September and December 2000, two loan agreements were signed with local banks 

for Bs. 7.0 billion each, with maturities between five and ten years. During 2006, these loans 

were paid in full. 

At a Shareholders’ Assembly held on March 31, 2004, the issuance of commercial paper 

for an amount up to U.S.$100 million or the equivalent in bolivars was approved. During 2004 

and 2005, six series were issued for a total amount of Bs. 80 billion from the first issuance. The 

total amount was placed in the market on a discount basis and at annual interest rates between 

12.5% and 12.59%. The paper matured in June 2005 and July 2005. During 2005, three series 

of commercial paper were issued, for a total amount of Bs. 33.6 billion. The total amount was 

placed in the market at a discount at annual interest rates between 12.50% and 12.625%. The 

commercial paper matured between August 2005 and January 2006. All of this commercial 

paper was paid in full during 2005 and 2006. 

As of December 31, 2007, the estimated debt payments are Bs. 20.6 billion in 2008 and 

Bs. 10.2 billion in 2009, translated into bolivars at the exchange rate at this date. 

Related Party Transactions 

On May 21, 2007, the Republic, became the owner of 86.2% of CANTV’s capital stock, 


Technology, and assumed operating control of the Company. 

The Company’s largest customer is the Venezuelan public sector, including the central 

Venezuelan Government and its centralized and decentralized entities, State-owned 

companies, and agencies at both the state and municipal level. During the year ended 

December 31, 2007, the Company billed Bs. 623.2 billion to Venezuelan Government entities, 

which represents 7% of the Company’s consolidated revenues. 

Additionally, during 2007, the Company recorded as expenses Bs. 38.6 billion for basic 

services of electricity, water supply and mail services with Venezuelan Government entities. 

51

Section V. Litigation 

The Company is involved in a number of legal and administrative proceedings; the main 

cases are presented below: 

Income tax: 

In May 2000 and December 1999, the Servicio Nacional Integrado de Administración 

Aduanera y Tributaria (“SENIAT”) (the National Integrated Service of Customs and Taxes) 

notified CANTV and Movilnet of additional tax assessments amounting to Bs. 271.2 billion and 

Bs. 27.0 billion, respectively, mainly related to the rejection of investment tax credits used for 

fiscal years ended December 31, 1994, 1995, 1996 and 1997. SENIAT objected to these 

credits claiming that telecommunications activities do not qualify as industrial activities. These 

assessments were appealed before the Tribunal Superior Sexto de lo Contencioso Tributario 

(the “Sixth Court of Contentious Matters”) and, in the opinion of management and its legal 

counsel, there is a high probability of a ruling in favor of CANTV and Movilnet. In 1999 this 

Court ruled in favor of another telecommunications company. However, that decision was 

appealed by SENIAT and a final ruling is pending. Based on the opinion of the Company’s 

management and its legal counsel, no provision has been recorded. 

In June 2002 Caveguías was subject to an additional tax assessment by SENIAT of 

approximately Bs. 44.3 billion. This assessment was in respect of income tax returns for the 

years ended December 31, 1996, 1997, 1998 and 1999, in which SENIAT objected to the 

deferral of revenue in respect of the sale of advertising space. The Company appealed these 

assessments before the Tribunal Superior Octavo de lo Contencioso Tributario (the “Eighth 

Court of Contentious Matters”). In the opinion of management and its legal counsel, there is a 

high probability of a favorable decision for Caveguías, and accordingly, no accrual or provision 

has been recorded. 

Value-added tax: 

During February 2004, CANTV Telecommunication Centers were subject to additional tax 

assessments by the tax authorities in two states of the central region of Venezuela. As a result 

of this assessment, 37 centers received sanctions including fines and were closed for 48 and 72 

hours as a result of their non-compliance with certain value-added tax matters. Some of the 

sanctions were effective at that moment while others are currently being appealed. There is a 

risk for CANTV that Telecommunication Centers could request CANTV to assume some 

responsibility as business allies for the periods 2001 to 2003. Based on the opinion of legal 

counsel handling these proceedings, Company management believes that the provision is 

reasonable to cover this risk. 

In September 2006, SENIAT notified CANTV of additional tax assessments amounting to 

Bs. 21.6 billion related to revision of the value-added tax paid by CANTV for the periods 

between January 2002 and December 2003. In October 2006, SENIAT notified CANTV.Net of 

additional tax assessments amounting to Bs. 3.8 billion related to revision of the value-added 

tax paid by CANTV.Net for the periods between January 2003 and July 2005. The objections 

presented by SENIAT to the tax assessments were based on the lack of verification of tax 

credits. In November 2006 and December 2006, the Company presented administrative 

appeals of the tax assessments of CANTV and CANTV.Net, respectively. On September 12, 

2007, CANTV.Net received the final resolution in respect of the Administrative Summary, which 

confirmed the tax assessment for Bs. 0.9 billion and revoked Bs. 2.5 billion. On October 17, 

52

2007, CANTV.Net presented an administrative appeal against the tax assessment of Bs. 0.9 

billion. On October 31, 2007, CANTV received the final resolution in respect of the 

Administrative Summary, which partially revoked the tax assessment for Bs. 19.8 billion and 

partially confirmed it for Bs. 1.7 billion. On December 5, 2007, CANTV paid Bs. 0.5 billion, and 

on January 14, 2008, CANTV presented an administrative appeal of the tax assessment of Bs. 

1.2 billion. The administrative appeals are awaiting final decision. Based on the opinion of 

external legal counsel, considering the documentation submitted to SENIAT by CANTV and 

CANTV.Net in the administrative appeals, the Company believes that these tax assessments 

will be decided favorably for the companies; accordingly, no provision has been. 

Telecommunications tax: 

In December 2004, CONATEL notified CANTV of inspection reports resulting from their 

review of tax payments called for by the Telecommunications Law, made by CANTV in 2000 

and Movilnet and CANTV.Net for 2000 to 2003. The main concepts objected to by CONATEL in 

determining the tax base for computation of this tax are the deduction of uncollectible write-offs 

and discounts granted to customers. In addition, CONATEL objected to Movilnet’s exclusion of 

net interconnection revenue from the tax base for the Special Telecommunications Tax of 

Wireless Services, which was in effect until December 31, 2005. In January 2006, the 

Company received the final resolution from CONATEL in respect of the Administrative Summary 

indicating total additional taxes, penalties and interest of Bs. 8.1 billion for CANTV, Bs. 92.9 

billion for Movilnet and Bs. 0.7 billion for CANTV.Net. In February 2006, the Company 

presented an administrative appeal to the tax assessments and was awaiting a formal response 

from the tax authorities. In December 2006, CONATEL notified CANTV of inspection reports for 

net taxes of Bs. 6.9 billion resulting from their review of tax payments called for by the 

Telecommunications Law, made by CANTV for the periods from January 2001 to December 

2003. The main issues objected to by CONATEL in determining the tax base for computation of 

this tax are the deduction of uncollectible write-offs and discounts granted to customers. 

Beginning in fiscal year 2007, CANTV, Movilnet and CANTV.Net, changed their view that 

uncollectible write-offs and discounts granted to customers should be deducted from the tax 

base for computation of telecommunications taxes. In this respect, beginning January 1, 2007, 

CANTV, Movilnet and CANTV.Net calculate the tax base for telecommunication taxes including 

these concepts. In 2007, the Company recorded a provision of Bs. 123.4 billion for this concept. 

In January and February 2008, the Company paid Bs. 48.1 billion with respect to the taxes 

objected to by CONATEL for the years 2000 to 2003. 

Labor lawsuits: 

A significant number of other labor-related lawsuits and claims have been made against 

CANTV for an aggregate of approximately Bs. 567.5 billion (including inflation adjustment of the 

lawsuits), most of which are related to special retirement initiatives, employee severance 

benefits and other benefits related to early retirement. These lawsuits are currently pending, 

and their final outcome cannot be determined. CANTV has settled a number of these cases 

through mediation and negotiation with the parties involved, and is currently in the process of 

resolving claims and lawsuits filed by former employees to reduce the number of lawsuits 

against the Company. 

53

Other legal proceedings: 

In June 2003, a commercial party introduced an arbitration request against Movilnet 

before the Dirección Ejecutiva del Centro de Arbitraje de la Cámara de Comercio de Caracas 

(the “Executive Direction of the Arbitration Center of the Caracas Commercial Chamber”), 

claiming damages of Bs. 20.4 billion alleging a default by Movilnet under an agreement dated 

September 19, 2000. On October 8, 2003, Movilnet answered these claims and on January 16, 

2004, an Arbitration Court was installed to hear the case. In September 2004, the Arbitration 

Court found in favor of the commercial party, and required a payment of Bs. 8.0 billion by 

Movilnet, which was paid in January 2005. In October 2005, this commercial party filed a new 

lawsuit before a Commercial Court for damages of Bs. 257.0 billion due to alleged default under 

the same commercial agreement. This case went before the Supreme Court which ruled 

against the commercial party, due to the existence of an agreement to arbitrate. On November 

24, 2006, this commercial party filed a new claim before the Executive Direction of the 

Arbitration Center of the Caracas Commercial Chamber Bs. 38.0 billion for alleged loss of future 

income due to alleged default under the same commercial agreement. On February 28, 2007, 

Movilnet answered this claim. In the opinion of external legal counsel, this second claim filed by 

the commercial party has a low probability of success; accordingly, no provision has been 

recorded for this concept. 

Management believes that most of these cases and others will be resolved through 

negotiation and mediation processes, and that the total provision set aside is reasonable as of 

December 31, 2007 to cover the contingencies considered probable and the cost of legal 

procedures. However, the timing for the utilization of this provision cannot been determined. 

The Company considers that it has recorded the necessary provisions to cover each of 

the foregoing assessments and lawsuits based on the likelihood of their occurrence and the 

possibility of quantifying them. 

Pension litigation and Supreme Court Ruling 

In September 2004, the Sala de Casación Social del Tribunal Supremo de Justicia (the 

“Social Chamber of the Supreme Court”) issued its ruling dismissing the pension payments 

litigation brought against CANTV by the Federación Nacional de Jubilados y Pensionados de 

Teléfonos de Venezuela (“FETRAJUPTEL”) (the National Federation of CANTV Retirees and 

Pensioners). In January 2005, the Sala Constitucional del Tribunal Supremo de Justicia (the 

“Constitutional Chamber of the Supreme Court) allowed an appeal filed by some members of 

the Asociación de Jubilados y Pensionados de Teléfonos de Venezuela (“AJUPTEL-Caracas”) 

(Caracas Association of CANTV Retirees and Pensioners) against the decision of the Social 

Chamber of the Supreme Court issued in September 2004. The Constitutional Chamber of the 

Supreme Court declared the prior decision annulled and remanded the case to the Social 

Chamber of the Supreme Court for a new ruling consistent with its decision. The Constitutional 

Chamber of the Supreme Court’s decision, issued in January 2005, also indicated that retiree 

pensions would be subject to adjustment up to the official minimum urban wage. 

54

In January 2005, CANTV’s management, based on the opinion of its external legal 

counsel, believed at the time that certain matters under court review would be decided on 

appeal in favor of CANTV, and the Company estimated for year-end 2004 a provision to cover 

the potential additional liability with respect to the remaining matters. In accordance with the 

applicable accounting principles, the estimated effect in the pension projected benefit obligation 

was Bs. 71.9 billion, which was recorded in the consolidated financial statements of 2004 as a 

provision for pension. 

On July 26, 2005, the Social Chamber of the Supreme Court issued its revised decision in 

the lawsuit brought by FETRAJUPTEL regarding the adjustment of pensions of retirees of 

CANTV. The decision required CANTV to adjust the pensions of retirees up to the official 

minimum urban wage, retroactive to December 30, 1999. In addition, the decision indicated that 

pensions below the official minimum urban wage should be adjusted in proportion to the salary 

increases that resulted from the collective bargaining process from January 1, 1993 to 

December 1999. This decision applied to current and future retirees and their eligible survivors. 

On October 14, 2005, the Social Chamber of the Supreme Court denied a request for 

clarification of the July 26, 2005 decision filed by the parties. 

On December 31, 2005, CANTV, based on the interpretation of the ruling that required 

that pensions paid after December 30, 1999 should not be lower than the official minimum 

urban wage, recorded an additional expense and raised to Bs. 764.6 billion its accumulated 

provision related to additional pension obligations due to the Supreme Court ruling to reflect the 

estimated additional pension liability, which was estimated based on actuarial calculations 

including the retroactive payments and the projected benefit obligation, and incorporating the 

new assumption related to the minimum urban wage increase as a percentage of projected 

future inflation. 

The execution of the Social Chamber of the Supreme Court’s ruling was being 

administered by the Juzgado Quinto de Primera Instancia de Sustanciación, Mediación y 

Ejecución del Área Metropolitana de Caracas, (“the Execution Court”) (the Fifth Court of First 

Instance of Substantiation, Mediation and Execution of the Metropolitan Area of Caracas), which 

appointed the Central Bank of Venezuela to perform the necessary calculations to determine 

the actual amounts due to the beneficiaries. On June 6, 2006, the Central Bank of Venezuela 

concluded its analysis of damages but failed to specify the amount payable by CANTV to each 

retiree pursuant to the Social Chamber of the Supreme Court’s ruling, and defined eight 

possible payment scenarios depending on the inclusion of different items. Both parties objected 

the analysis, and therefore, the Execution Court appointed the Ministry of the Popular Power for 

Finance and SENIAT to perform a new expert calculation. 

Pursuant to the ruling of the Social Chamber of the Supreme Court, CANTV agreed to 

adjust current pension payments up to the official minimum urban wage beginning February 1, 

2006. However, in accordance with the criteria of the Execution Court, valid adjustments could 

only be made individually upon written request from the beneficiary whose pension fell below 

the minimum urban wage level. 

On August 2, 2006, the Execution Court issued its ruling which revoked the appointment 

of the Ministry of the Popular Power for Finance and appointed the Contraloría General de la 

República (the “General Controller’s Office”) in its place. 

55

In August 2006, the Execution Court decided that beginning September 1, 2006, CANTV 

had to adjust all retirees’ pensions that were lower than the official minimum urban wage to the 

new effective minimum urban wage and it lifted the written request requirement. Beginning 

September 1, 2006, none of CANTV’s pension beneficiaries is collecting monthly pension 

payments lower than the minimum urban wage. 

On November 14, 2006, the General Controller’s Office and SENIAT issued the new 

expert report. 

On December 13, 2006, the Juzgado Trigésimo Séptimo de Primera Instancia de 

Sustanciación, Mediación y Ejecución del Trabajo del Circuito Judicial del Área Metropolitana 

de Caracas, (the “Thirty Seventh Court of First Instance of Substantiation, Mediation and Labor 

Execution of the Circuit Court of the Metropolitan Area of Caracas”) announced its ruling that 

the amounts due and the corresponding payments to retirees had been finally determined, and 

the calculations of the two new independent experts were delivered as ordered by the Execution 

Court. CANTV agreed to make the retroactive payments to more than 4,000 retirees to provide 

an adjusted pension equal to the minimum wage pursuant to the Execution Court’s decision. 

For the cases CANTV had accepted, the final determination of retroactive payments resulted in 

an additional Bs. 23.0 billion pension obligation expense and liability. However, CANTV 

appealed the decision expressing disagreement with the expert’s methodology and benefits 

calculation, mainly in those cases in which pension adjustments would result in payments in 

excess of the minimum wage. In 2006, CANTV created a trust funded with Bs. 153.9 billion in 

order to cover the retroactive obligation as a result of the Supreme Court ruling. 

On April 16, 2007, the Tribunal Segundo Superior para el Régimen Procesal Transitorio 

del Área Metropolitana de Caracas (the “Second Court for the Transitory Procedural Regime of 

the Circuit Court of the Metropolitan Area of Caracas”) announced its decision on the 

determination of retroactive payments performed by the appointed experts and approved by the 

Thirty Seventh Court of First Instance of Substantiation, Mediation and Labor Execution of the 

Metropolitan Area of Caracas on December 13, 2006. The decision rejected the majority of the 

claims introduced by pension beneficiaries and also declined to consider CANTV’s claim 

regarding the calculations of amounts exceeding the official minimum urban wage benefits. On 

April 24, 2007, CANTV filed an appeal with the Social Chamber of the Supreme Court of the 

decision of the Second Court for the Transitory Procedural Regime of the Circuit Court of the 

Metropolitan Area of Caracas of the calculations performed by the experts with respect to 

amounts exceeding the official minimum urban wage benefits. 

On July 13, 2007, CANTV announced that it agreed to accept the decision issued on 

December 13, 2006 by the Thirty Seventh Court of First Instance of Substantiation, Mediation 

and Labor Execution of the Circuit Court of the Metropolitan Area of Caracas, which was 

confirmed on April 16, 2007 by the Second Court for the Transitory Procedural Regime of the 

Circuit Court of the Metropolitan Area of Caracas. CANTV thereby agreed to accept the final 

decision to be rendered by the Social Chamber of the Supreme Court in the appeal of the 


Metropolitan Area of Caracas. In the event that the appeal was admitted, the Company would 

pay any additional amounts due to retirees as a result of the final ruling. 

In August 2007, CANTV proposed the execution of a Master Agreement by the retirees in 

order for them to receive the corresponding retroactive pension payments. 

56

In September 2007, the Procuraduría General de la República (the “Attorney General’s 

Office”) recommended that retirees should sign the Master Agreement at the Mediation Board at 

the Supreme Court, so that any differences or calculation errors as well as any other 

disagreements regarding any items to be recognized could be resolved in that setting. On 

October 10, 2007 CANTV and its retirees began meetings at the Supreme Court for the signing 

of the Master Agreement and installed the Mediation Board in Caracas and in other five regions 

of the country. 

The Master Agreement contemplates payments to retirees of the amounts established in 

the decision issued by Thirty Seventh Court of First Instance of Substantiation, Mediation and 

Labor Execution of the Circuit Court of the Metropolitan Area of Caracas, which was confirmed 

on April 16, 2007 by the Second Court for the Transitory Procedural Regime of the Circuit Court 

of the Metropolitan Area of Caracas. Additionally, CANTV updated the amounts due to the 

payment date and increased the amounts to be paid to its retirees based on the salary increase 

established in the collective bargaining agreement for 2007-2009. The Master Agreement 

covers all retirees identified in this court decision and all those who decide to become parties. 

In addition, CANTV decided to extend the Master Agreement to the retirees’ survivors, after 

their status has been legally certified in accordance with the applicable court rules. 

During 2007, 7,239 persons signed the Master Agreement, and the payments made 

related to the December 13, 2006 court decision were Bs.166.1 billion. 

During 2007, as a consequence of the Master Agreement, the Company recorded an 

additional expense of Bs. 291.1 billion, which includes Bs. 77.2 billion of retroactive benefits. In 

addition, the Company recorded as an expense Bs. 71.1 billion for the Monthly Incentive, which, 

beginning in January 2008, is being paid to the retirees as determined during the Mediation 

Board process managed by the Social Chamber of the Supreme Court. 

Trading Markets 

Section VI. Trading Information 

Following the initial public offering of CANTV’s Class D shares on November 22, 1996, 

the Class D shares began trading on the Caracas Stock Exchange under the symbol “TDV.d”. 

At the same time, the ADSs, each representing seven Class D shares, began trading on the 

NYSE under the symbol “VNT.” The Bank of New York is the Depositary for the ADSs. 













57

The Venezuelan securities market is substantially smaller, less liquid and more volatile 

than the securities market in the U.S. and certain other countries. At May 30, 2008, the 

aggregate market capitalization of the 17 largest Venezuelan companies listed on the Caracas 

Stock Exchange was Bs. 11,816.4 billion (U.S.$5,496 million), of which the Company comprised 

Bs. 1,552.0 billion (U.S.$722 million), which represents 13.1% of total market capitalization. 

On February 12, 2007, the Republic announced that it had entered into the 

Memorandum of Understanding with Verizon and Verizon’s subsidiary GTE Venholdings to 

acquire Verizon’s equity stake in the Company. On February 13, 2007, following this 

announcement, the CNV suspended the trading of CANTV’s shares in the Venezuelan market 

for 24 hours. 

On March 30, 2007, the CNV suspended trading of CANTV’s shares in the Venezuelan 

market after receiving a communication from the Ministry of the Popular Power for 

Telecommunications and Information Technology of the Republic’s intention to commence a 

tender offer for the shares of CANTV. The suspension was for four business days until the CNV 

completed its review of the tender offer and approved the terms of the tender offer on April 4, 

2007. 


















Republic. 



Renaissance. On April 1, 2008, following this announcement, the CNV suspended the trading 

of CANTV’s shares for 24 hours. 

The acquisition was consummated on April 4, 2008. The consideration paid to 






58




















59

Share Price Information 

The table below sets forth, for the periods indicated, the reported high and low sale 

prices and average trading volume for the Class D shares on the Caracas Stock Exchange: 

High 

Caracas Stock Exchange 

Low Average 

(Bs.) (Bs.) Trading Volume 

Annual highs and lows 

2003 6,700.00 2,250.00 116,880 

2004 9,500.00 6,325.00 209,953 

2005 8,450.00 4,500.00 68,229 

2006 9,850.00 5,100.00 74,859 

2007 9,780.00 2,250.00 14,327 

Quarterly highs and lows 

2006 

1st quarter 7,751.00 5,100.00 60,672 

2nd quarter 8,200.00 6,800.00 251,577 

3rd quarter 7,600.00 7,200.00 69,586 

4th quarter 9,850.00 7,600.00 65,319 

2007 

1st quarter 9,780.00 6,820.00 73,473 

2nd quarter 7,001.00 3,025.00 45,623 

3rd quarter 3,200.00 2,455.00 10,838 

4th quarter 2,800.00 2,250.00 8,741 

Monthly highs and lows 

2007 

July 3,200.00 3,000.00 11,757 

August 3,200.00 3,000.00 11,084 

September 3,000.00 2,455.00 9,313 

October 2,800.00 2,555.50 7,030 

November 2,800.00 2,350.00 5,556 

December 4,463.75 2,250.00 14,691 

2008 

January (1) 2,500.00 2,300.00 5,751 

February (1) 2,500.00 2,400.00 5,460 

March (1) 3,990.00 2,680.00 12,331 

April (1) 5,750.00 4,050.00 26,357 

May (1) 4,500.00 3,610.00 5,181 

June (1) 3,800.00 3,700.00 7,585 

(1) Pursuant to the Monetary Conversion Law, and only for comparison purposes with the share prices of 2007 and 

prior years, the share prices of year 2008 (originally expressed in Bs.F.), have been multiplied by 1,000 to 

convert them into Bs., the same monetary unit that was in effect until December 31, 2007. 

60

The table below sets forth, for the periods indicated, the reported annual high and low sale 

prices and the average trading volume for the ADSs on the NYSE: 

High 

NYSE 

Low Average 

(U.S.$) (U.S.$) Trading Volume 

Annual highs and lows 

2003 16.85 8.63 188,410 

2004 24.20 15.60 212,928 

2005 21.76 12.13 291,735 

2006 

2007 

22.75 13.89 299,462 

(1) 19.98 11.22 911,206 

Quarterly highs and lows 

2006 

1st quarter 21.50 13.89 413,656 

2nd quarter 22.75 17.97 348,073 

3rd quarter 19.95 19.00 196,694 

4th quarter 19.95 18.90 241,237 

2007 

1st quarter 19.98 11.22 1,187,279 

2nd quarter (1) 17.30 14.42 263,496 

(1) Through May 8, 2007. CANTV’s ADSs were traded in the NYSE until May 8, 2007. 

Inflation 

Section VII. Additional Information 

Venezuela has historically experienced high levels of inflation. The rate of inflation as 

measured by the Consumer Price Index was 19.2%, 14.4%, 17.0% and 22.5% for the years 

2004 to 2007, and as the rate of inflation measured by the Wholesale Price Index was 22.4%, 

14.2%, 15.9% and 17.2% for the years 2004 to 2007. The rate of inflation as measured by the 

Consumer Price Index was 12.4% for the five months ended May 31, 2008. 

The Venezuelan Government has established a series of measures to curb inflation, 

among which are reduction of the value-added tax rate, establishment of price controls since 

February 2003, interest rate increases and dollar-denominated bond issues placed in the local 

market and tradable in international markets. 

High inflation rates can adversely affect our business and results of operations by 

adversely affecting consumer purchasing power and consumer demand for our services, and, to 

the extent inflation exceeds our price increases. 

61

Exchange Controls 

On January 21, 2003, the Venezuelan Government, by means of an agreement with the 

Central Bank of Venezuela, suspended the trading of foreign currencies in the country for ten 

business days. 

Beginning February 5, 2003, several Exchange Agreements were published set out the 

rules for the foreign currency administration regime and the exchange rate applicable for 

transactions set forth in the Exchange Agreements. 

CADIVI was created, with the and has functions of coordinate, manage, control and 

establish the requirements, procedures and restrictions for the execution of the Exchange 

Agreements. CADIVI has issued several rulings related to the registration, guidelines, 

requirements and conditions related to the foreign currency administration regime. 

On May 21, 2007, the Venezuelan Government assumed operating control of the 

Company, when it acquired ownership of 86.2% of CANTV’s shares. Beginning on that date, 

the Company is subject to Rulings No. 44 and No. 46, which establish the requirements, 

controls and procedures for the acquisition of foreign currency for public sector purposes, 

including importation of goods and services, payment of contracts for construction or services, 

and other payments by the public sector not includes in the Exchange Agreements. 

In addition, the Exchange Agreements establish that public sector entities are allowed to 

maintain foreign exchange currency deposits in accounts abroad, as long as they are authorized 

by the Central Bank of Venezuela, for payments of obligations related to importation of goods 

and services required for their operations. These deposits of foreign currency in accounts 

abroad must only be used to pay obligations denominated in foreign currency and payable 

abroad, and any excess over the amounts authorized by the Central Bank of Venezuela must 

be sold to the Central Bank of Venezuela, unless they are duly justified. The maximum amount 

authorized by the Central Bank of Venezuela for the Company is a monthly average of 

U.S.$63.36 million. 

The different official exchange rates set under the exchange control regime since it was 

established area as follows: 

a) On February 5, 2003, the exchange rate was set at Bs. 1,596.20 per U.S.$1 for 

purchase and Bs. 1,600,00 per U.S.$1 for sale. 

b) On February 9, 2004, the exchange rate was set at Bs. 1,915.20 per U.S.$1 for 

purchase and Bs. 1,920,00 per U.S.$1 for sale. 

c) On March 2, 2005, the exchange rate was set at Bs. 2,144.60 per U.S.$1 for 

purchase and Bs. 2,150,00 per U.S.$1 for sale, which have not been modified and 

remain as the current official exchange rates. 

Since the implementation of the exchange controls regime in February 2003, the 

Company’s requests to CADIVI, and approvals and foreign currency received from CADIVI, for 

2003, 2004, 2005, 2006 and 2007 are detailed as follows: 

62

2003 2004 2005 2006 2007 Total 

(in millions of U.S.$) 

Requests 

Goods and services 96.5 271.6 601.7 1,178.5 193.4 2,341.7 

Debt payments 137.8 24.2 48.6 10.7 8.2 229.5 

Dividends 160.8 158.0 186.8 192.3 377.8 1,075.7 

Total requests 395.1 453.8 837.1 1,381.5 579.4 3,646.9 

Approvals 

Goods and services 84.3 201.6 577.6 1,116.7 183.5 2,163.7 

Debt payments 18.5 129.1 63.0 10.7 8.2 229.5 

Dividends 24.1 294.7 186.8 - 570.1 1,075.7 

Total approvals 126.9 625.4 827.4 1,127.4 761.8 3,468.9 

Received 

Goods and services 32.3 138.9 361.9 639.1 727.1 1,899.3 

Debt payments 18.5 129.1 63.0 10.7 8.2 229.5 

Dividends 24.1 294.7 186.8 - 570.1 1,075.7 

Total received 74.9 562.7 611.7 649.8 1,305.4 3,204.5 

The Company continues processing the necessary formalities required by CADIVI for the 

application of additional foreign currency. 

Taxes and Contributions 

During 2005, 2006 and 2007, the Company recorded income tax, telecommunications tax 

and other operating taxes detailed as follows (in millions of bolivars): 

63 

2005 2006 2007 

Income tax 147,881 186,576 298,626 

Telecommunications taxes 210,002 285,537 362,500 

Municipal taxes 13,798 10,265 13,304 

Value-added tax 46,901 59,759 28,176 

Bank debit tax 20,072 2,427 - 

Municipal tax on telecommunications services - 65,603 82,553 

Other taxes 4,389 5,601 3,298 

Total taxes 443,043 615,768 788,457 

In addition the Company is subject to the payment of labor contributions, including Seguro 

Social Obligatorio (“Social Security”), Seguro de Paro Forzoso (“Unemployment”), Ley de 

Política Habitacional (“Housing Policy Law”) and Instituto Nacional de Cooperación Educativa 

(“Worker training”), among others. For the years ended December 31, 2005, 2006 and 2007, 

the expense recorded for these contributions in the Company’s consolidated results are as 

follows (in millions of bolivars): 

2005 2006 2007 

Social security 15,557 20,301 25,595 

Unemployment 3,842 5,437 6,841 

Housing policy law 4,955 5,619 6,677 

Worker training 5,174 6,760 7,454 

Other contributions 3,119 3,271 11,261 

Total contributions 32,647 41,388 57,828

Employees 

CANTV has unionized and non-unionized employees. The CANTV’s unionized 

employees are members of 28 separate labor unions which deal with CANTV either directly or 

through the Federación de Trabajadores de Telecomunicaciones de Venezuela (“FETRATEL”) 

(Federation of Telecommunications Workers of Venezuela). As of December 31, 2007, 

approximately 3,166 employees were members of a labor union, representing approximately 

51.7% of CANTV’s 6,124 employees and approximately 32.3% of the Company’s 9,808 

employees. 

On July 17, 2002, a new labor contract agreement was signed between CANTV and 

FETRATEL. This agreement was due to expire in June 2004 but remained in force pursuant to 

the Labor Law which allows up to three years for expiration until a new labor agreement is 

reached. 

In February 2004 FETRATEL presented a proposal to the Ministerio del Poder Popular 

para el Trabajo y Seguridad Social (the “Ministry of the Popular Power for Labor and Social 

Security”) to negotiate a new contract to replace the June 2002 agreement. CANTV presented 

a proposal to FETRATEL to extend the conditions and provisions included in the 2002-2004 

agreement until June 2005, pursuant to the Labor Law. This proposal was accepted by 20 of 

the unions registered with FETRATEL through the execution of an agreement which extended 

the 2002-2004 agreement in exchange for a special bonus for each employee. However, the 

remaining unions did not agree to this extension. The extension expired on August 30, 2005 

once the 2005-2007 labor agreement was finalized upon its filing with the Ministry of the Popular 

Power for Labor and Social Security, effective retroactively from June 18, 2005. 

On May 16 2007, a new labor contract agreement was signed between CANTV and 

FETRATEL. This labor agreement would be in effect from June 18, 2007 until June 17, 2009, 

and was presented on May 21, 2008 to the Ministry of the Popular Power for Labor and Social 

Security for its approval. On January 31, 2008, the Ministry of the Popular Power for Labor and 

Social Security, notified CANTV and FETRATEL that the approval would be partial, and that 

they should renegotiate 11 clauses and 2 appendices, of a total of 86 clauses and 11 

appendices, and that the remaining clauses and appendices of the labor contract agreement 

would be in effect. On July 25, 2008, CANTV and FETRATEL reached a final agreement 

regarding the 11 clauses and the 2 appendices of the labor agreement that were pending, and 

were presented on July 28, 2008 to the Ministry of the Popular Power for Labor and Social 

Security for its approval. 

CANTV has three pension plans: normal, deferred and special. The normal pension 

plan is available to workers meeting certain age and/or service criteria. The deferred pension 

plan is applicable to those workers that CANTV retains beyond the time of normal retirement. 

The special pension plan is available to certain workers who have completed at least 20 years 

of service (14 years for people employed as of June 23, 1995) and who CANTV dismissed 

without just cause. 

During 2007, the Company decided to establish a defined contribution pension plan for 

all employees of the subsidiaries Movilnet, CANTV.Net and Caveguías, and for those 

employees of CANTV who began their employment on May 21, 2007 or thereafter. The plan 

comprises a 3% contribution from the employee and 3% contribution from the Company. The 

64

Company has no further payment obligations once the contributions have been paid. The 

contributions are recognized as employee benefit expense when they are due. 

In 1993 the Company set up a bank trust fund known as the “Benefit Fund” with the 

purpose of acquiring Class C shares representing up to 1% of CANTV’s capital stock as of 

December 2, 1991, to be distributed to its workers in accordance with benefit plans promoted by 

the Company, one of which is the “Excellence Award.” On October 24, 2001, an Extraordinary 

Shareholders’ Assembly approved the increase of this fund via the purchase of Class C shares 

representing up to 2% of the Company’s capital stock as of December 2, 1991. As December 

31, 2007, the trust maintained 2,883,099 shares. During the year ended December 31, 2007, 

288,125 shares were granted to employees. 

In September 2007, the Company conducted a plan to award Class C shares to active 

employees and retirees, as part of a commitment made by the Ministry of the Popular Power for 

Telecommunications and Information Technology in connection with the tender offer. The plan 

consisted of granting one share for each two shares owned by each employee and retiree as of 

May 28, 2007. Pursuant to this plan, 9,577,859 shares were granted to 5,017 employees and 

retirees. 

Legal Framework Applicable to State-owned Companies in Venezuela 

On May 21, 2007, the Republic, through the Ministry of the Popular Power for 

Telecommunications and Information Technology, assumed operating control of the Company 

when it acquired ownership of 86.2% of the capital stock of CANTV. Beginning on that date, the 

Company is subject to the legal dispositions applicable to decentralized entities of the public 

sector, including the following: 

Public Administration Organic Law 

The purpose of the Ley Orgánica de la Administración Pública (the “Public Administration 

Organic Law”) is to establish the principles and guidelines governing the organization and 

operations of the Public Administration; the National Public Administration and decentralized 

administration; to regulate performance commitments; to create structures to promote the 

participation in and control over public policy and results; and to establish the basic rules for 

public archives and registries. 

Under this Law, the Ministry of the Popular Power for Finance is required to keep a 

registry of the equity ownerships structure of Venezuelan State-owned companies and to submit 

this information semi-annually to the corresponding Commission of the Venezuelan National 

Assembly within 30 days before the beginning of the next six-month period. 

In addition, the Ministerio del Poder Popular para la Planificación y el Desarrollo (the 

“Ministry of the Popular Power for Planning and Development”) is required to determine 

performance indicators for the management of State-owned companies such, and will establish 

the subscription of performance commitments with the Ministry of the Popular Power for 

Telecommunications and Information Technology, as governing body of the Company. 

In addition, the Company must inform the Ministry of the Popular Power for 

Telecommunications and Information Technology of any subscription of an equity interest in the 

Company and of its financial results and submit relevant performance and other reports to the 

65

Ministry of the Popular Power for Telecommunications and Information Technology, as its 

governing body. 

Partial Amendment of the Organic Law of Financial Administration of the Public Sector and its 

Regulations 

Under the Ley de Reforma Parcial de la Ley Orgánica de la Administración Financiera del 

Sector Público y sus Reglamentos (the “Partial Amendment of the Organic Law of Financial 

Administration of the Public Sector and its Regulations”), CANTV’s and its subsidiaries’ senior 

management must approve their annual performance budgets, which must be submitted to the 

Oficina Nacional de Presupuesto (“ONAPRE”) (the National Budgeting Office), through the 

Ministry of the Popular Power for Telecommunications and Information Technology, before 

September 30 of each fiscal year. In addition, CANTV is required to submit any information 

required by ONAPRE and to comply with its rules and technical requirements, as well as submit 

the financial statements and accounting information required by the Oficina Nacional de 

Contabilidad Pública (“ONCOP”) (the National Office of Public Accounting), thereby adjusting its 

accounting procedures to the Sistema de Contabilidad Pública (the “Public Accounting 

System”), the unified and integrated system for all public sector entities. 

The budget must be prepared in accordance with instructions issued by ONAPRE, 

considering the national plans developed within the general framework of the Plan de Desarrollo 

Económico y Social de la Nación (the “Nation’s Plan for Economic and Social Development”), 

the annual policy agreement, the guidelines for national development and the Ley del Marco 

Plurianual del Presupuesto (the “Multiannual Budget Framework Law”), and it must contain the 

policies, strategic objectives, products and indicators in the Plan Operativo Anual (the “Annual 

Operating Plan”). 

The Company must also coordinate the timing of the physical and financial execution of its 

budget financial resources and expenses with the preparation of its budget proposal, pursuant 

to the sub-periods, rules and procedures established by ONAPRE. 

Organic Law for Planning 

The Ley Orgánica de Planificación (the “Organic Law for Planning”) establishes the basis 

and guidelines for the preparation, practicability, improvement and organization of planning for 

all public sector entities. 

The Company must submit information regarding its programs, projects and actions to be 

developed during the fiscal year to the Ministry of the Popular Power for Telecommunications 

and Information Technology, which as its governing body will inform the Ministry of the Popular 

Power for the Planning and Development, to fulfill planning requirements and ensure 

compliance with the Law. 

Organic Law of the General Controller of the Republic and National System of Tax Control 

The Ley Orgánica de la Contraloría General de la República y del Sistema Nacional de 

Control Fiscal (the “Organic Law of the General Controller of the Republic and National System 

of Tax Control”) establishes that the Company is subject to the control, oversight and fiscal 

review of the General Controller’s Office, and must comply with the internal and external control 

rules established by this Law. Violations of this Law by actions, events or omissions that cause 

damage to the national wealth will result in administrative responsibility. 

66

The Company is required to assign an internal auditor in accordance with the open 

competition procedures established in the Reglamento sobre los Concursos Públicos para la 

Designación de los Contralores Distritales y Municipales, y los Titulares de las Unidades de 

Auditoria Interna de los Órganos del Poder Público Nacional, Estadal, Distrital y Municipal y sus 

Entes Descentralizados (the “Rules for Open Competition for the Designation of District and 

Municipal Controllers, and Internal Auditors of Organisms of the Public Sector of the Nation, 

States, Districts and Municipalities and Decentralized Entities”). 

When public administrators or those who manage or have custody of public assets or 

funds leave office, they must comply with the Normas para Regular la Entrega de los Órganos y 

Entidades de la Administración Pública y de sus respectivas Oficinas o Dependencias (the 

“Standards Governing the Delivery of Organisms and Entities of the Public Administration and 

their respective Offices or Dependencies”). 

Anti-Corruption Law 

The provisions of the Ley Contra la Corrupción (the “Anti-Corruption Law”) are designed to 

preserve public ethics and administrative morals, and prevent corruption by establishing legal 

rules in specific areas and circumstances. The objective is to prevent corruption and safeguard 

the national patrimony through moral principles (honesty, transparency, participation, efficiency, 

efficacy, legality, accountability and responsibility). 

Under the Anti-Corruption Law, members of the board of directors of State-owned 

companies are considered public officers and as such are subject to liability under this Law and 

the Organic Law of the General Controller of the Republic and National System of Tax Control. 

Also subject to this Law are those who perform management, supervisory, control and auditing 

functions; voting members of committees for purchasing, bidding, contracts and donations; and 

those who are authorized to transfer funds from the Company’s bank accounts. 

A violation of this Law will constitute a crime against the public interest and will be 

sanctioned in accordance with the Law. 

Public Contracting Law 

The Ley de Contrataciones Públicas (the “Public Contracting Law”) replaces the Ley de 

Reforma Parcial de la Ley de Licitaciones y su Reglamento (the “Partial Amendment of the 

Bidding Law and its Regulations”). The Public Contracting Law rules the Venezuelan 

Government’s activities for acquisition of goods, rendering of services and execution of works. 

The Law establishes that are subject to direct award: contracting ob goods and services 

for commercialization with third parties; contracting of goods, services and works that could 

compromise the Company’s secrets or commercial strategies before its competitors; contracting 

related to the immediate reestablishment of services as a consequence of a interruption or 

failure. 

The Company must establish a Comisión de Contrataciones (“Contracting Commission”) 

and adjust its internal rules for the selection of contractors and suppliers, which must include 

rules to govern the authority of the internal organization to perform contracting processes. 

67

Organic Law that Regulates the Transfer of Assets of the Public Sector not Subject to Basic 

Industries and the related Rules 

According to the Ley Orgánica que Regula la Enajenación de Bienes del Sector Público 

no Afectos a las Industrias Básicas y Normativa relacionada (the “Organic Law that Regulates 

the Transfer of Assets of the Public Sector not Subject to Basic Industries and the related 

Rules”), the Company must apply these rules to the disposition of all goods or assets that are 

not necessary to meet its objectives, as well as those that have been dismantled or are obsolete 

or damaged. 

A request for authorization to transfer goods or assets of the public sector must be made 

before the Comisión para la Enajenación de Bienes del Sector Público no Afectos a las 

Industrias Básicas (“CENBISP”) (the “Commission for the Transfer of Goods of the Public 

Sector not Subject to Basic Industries”), governed by the Ministry of the Popular Power for 

Finance, through the Secretaría Técnica (the “Technical Secretariat”). 

The base price for the transfer of the property of the Republic will be determined by 

CENBISP, considering the information submitted by the respective entities or organisms or by 

any other factors determined by CENBISP. The senior officers of public entities must submit to 

the Technical Secretariat a periodic report of the status and condition of the managed assets, 

with the periodicity established in the Law. 

Organic Law of the Attorney General of the Republic 

The Ley Orgánica de la Procuraduría General de la República (the “Organic Law of the 

Attorney General of the Republic”) establishes that the Company must notify the Attorney 

General’s Office of lawsuits against CANTV and its subsidiaries, in the event that they could 

affect the direct or indirect interests of the Republic or provision of public services, or in the case 

of labor lawsuits. 

This Law also establishes that the Company’s contracts with its legal advisors must be 

approved by the Attorney General’s Office. 

The Company is adapting its processes and systems to comply with the requirements of 

the new applicable legal framework. 

Adoption of IFRS by the Venezuelan Federation of Public Accountants 

In January 2004, the FCCPV decided to adopt IFRS and its interpretations, issued by 

the IASB. 

be: 

In August 2006, the FCCPV resolved that the adoption date of these standards would 

- For all entities, except for those that offer securities to the public, and those that 

qualify as small and medium-sized entities, the initial adoption date will be the close 

of the fiscal year ended December 31, 2008, or the close of the immediately 

following fiscal period. 

68

- For small and medium-sized entities, the initial adoption date will be the close of the 

fiscal year ended December 31, 2010, or the close of the immediately following 

fiscal period. 

- For entities that offer securities to the public, the initial adoption date will be 

established by the CNV, the regulatory body of public companies. 

In December 2007, the FCCPV published the following three IFRS Adoption Bulletins 

(Adoption Bulletin VEN-FRS) which were approved in April 2008: 

- Adoption Bulletin VEN-FRS No. 0 (Framework for the adoption of International 

Financial Reporting Standards): revokes, beginning in 2008 for large enterprises 

and in 2010 for small and medium-sized entities, the former Venezuelan Statement 

of Accounting Principles and Technical Publications. It establishes that the 

Venezuelan generally accepted accounting principles will be designated by the 

symbol VEN-FRS. It indicates that fist-time adoption of VEN-FRS should be in 

accordance to the procedures and factors established in IFRS 1 “First-time adoption 

of IFRS”. It also indicates the specific IFRS, IAS and interpretations of these 

standards that should be used as the standards approved by the FCCPV for VEN- 

FRS purposes. In the future, new Adoption Bulletin VEN-FRS will be issued to 

adapt IFRS to Venezuela’s situation. 

- Adoption Bulletin VEN-FRS No. 1 (Definition of small and medium-sized entities): 

this standard establishes the factors to be considered to determine whether an entity 

is to be classified as a large or a medium-sized of small entity. 

- Adoption Bulletin VEN-FRS No. 2 (Criteria for the application of International 

Accounting Standard No. 29 “Financial reporting in hyperinflationary economies” 

(IAS 29) in Venezuela): this standard would require that under VEN-FRS, inflation 

should be recognized in the financial statements if the year inflation is more than 

one digit. Inflation recognition would be done in accordance with IAS 29. 

During 2005, the Company adopted IFRS which are different from VEN-FRS; therefore, 

the Company is currently analyzing the possible effects that the VEN-FRS could have on its 

consolidated financial statements. However, until the CNV issues a statement regarding this 

adoption plan, it is not possible to determine the potential effects. 

Changes in Internal Controls 

There have been no changes in the Company’s internal controls during the year ended 

December 31, 2007 that have materially affected, or are reasonably likely to materially affect, 

the Company’s internal controls, except for what is indicated in the next paragraph. 

In February 2007, the Company started operating a new billing and collection system for 

fixed telephony services as part of an ongoing project directed towards the integration and 

transformation of the Company’s information systems. During 2007, with the implementation of 

this new system there were technical failures in the automated billing and collections processes 

for fixed telephony services. 

69

Business Conduct Code 

CANTV has adopted a “Business Conduct Code” covering all its officers and employees. 

The Business Conduct Code addresses, among other things, the following items: 

• honest and ethical conduct, including the ethical handling of actual or apparent 

conflicts of interest between personal and professional relationships, including 

suppliers; 

• full, fair, accurate, timely and understandable disclosure in reports and documents 

the Company makes public; 

• compliance with applicable governmental laws, rules and regulations; 

• the prompt internal reporting to an appropriate person or persons identified in the 

Business Conduct Code of violations of any of the provisions described above; and 

• accountability for adherence to the Business Conduct Code. 

CANTV undertakes to provide a copy of its Business Conduct Code at no charge to 

electronic mail requests at the following e-mail address: etica@cantv.com.ve. 

The Company has a Compliance Office to be in charge of overseeing compliance with 

the Business Conduct Code by each manager and employee of the organization, as well as by 

third parties. The Business Conduct Code facilitates the constant exercise of the best ethical 

practices in complying with work requirements and the relations that a company in general has 

with the society in which it operates. 

In addition, the Compliance Office is responsible for assisting both the units and the 

employees who may have doubts as to the interpretation of the Business Conduct Code, to take 

notice of any violations of the established norms and to suggest appropriate action via the 

phone number +58 212 5001669 and e-mail address etica@cantv.com.ve, created for this 

purpose. 

Subsequent Events 

The subsequent events are all those material events occurred after December 31, 2007 

and until de publication of this document; the main events are presented below: 

On March 31, 2008, an Ordinary Shareholders’ Assembly declared an ordinary cash 

dividend of Bs. 757.14 per share and an extraordinary dividend of Bs. 127.04 per share, 

payable on April 15, 2008 to stockholders of record at April 8, 2008. 




70

























On May 21, 2008, an Extraordinary Shareholders’ Assembly approved CANTV’s new bylaws 

which establish, among other things, CANTV’s new share class distribution, voting rights, 

the number of members of the Board of Directors, and the new dividend policy. 











71

Report of Statutory Auditors 

Report of Independent Public Accountants 

Consolidated Balance Sheet 

Consolidated Statement of Operations 

Section VIII. Exhibits 

Consolidated Statement of Changes in Stockholders’ Equity 

Consolidated Statement of Cash Flows 

Notes to the Consolidated Financial Statements 

72

Compañía Anónima Nacional 

Teléfonos de Venezuela 

(CANTV) and Subsidiaries 

Report of Statutory Auditors and 

Consolidated Financial Statements as of 

December 31, 2007 and 2006 and for the years 

ended December 31, 2007, 2006 and 2005

Compañía Anónima Nacional 

Teléfonos de Venezuela 

(CANTV) and Subsidiaries 

Report of Independent Public Accountants and 

Consolidated Financial Statements as of 

December 31, 2007 and 2006 and for the years 

ended December 31, 2007, 2006 and 2005

Compañía Anónima Nacional Teléfonos de Venezuela (CANTV) 

and Subsidiaries 

Consolidated Balance Sheet 

December 31, 2007 and 2006 

(In millions of bolivars) Note 2007 2006 

Assets 

Non-current assets 

Property, plant and equipment, net 5 4,094,344 

Cellular concessions, net 3 384,656 

Long-term accounts receivable from Venezuelan Government entities 10 93,025 

Deferred income tax 17 1,720,153 

Information systems (software), net 6 532,345 

Other assets 7 32,931 

Total non-current assets 6,857,454 

Current assets 

Other current assets 8 176,702 

Inventories, spare parts and supplies, net 9 465,596 

Accounts receivable from Venezuelan Government entities 10 304,281 

Accounts receivable, net 11 1,219,789 

Cash and temporary investments 12 776,311 

Total current assets 2,942,679 

Total assets 9,800,133 

Stockholders' equity and liabilities 

Stockholders' equity 

Capital stock 13 2,151,299 

Additional paid-in capital 13 - 

Legal reserve 13 215,130 

Workers' benefit shares 13 (18,726) 

Retained earnings 13 1,501,554 

Attributable to equity holders of the Company 3,849,257 

Minority interest in subsidiary 4,548 

Total stockholders' equity 3,853,805 

Liabilities 

Non-current liabilities 

Long-term debt 14 10,278 

Cellular concession long-term payable 3 55,298 

Provision for litigation 19 (c) 311,785 

Pension and other post-retirement benefit obligations, net 15 1,979,048 

Total non-current liabilities 2,356,409 

Current liabilities 

Current portion of the long-term debt 14 20,556 

Accounts payable 4 1,854,208 

Accrued employee benefits 112,042 

Current portion of pension and other post-retirement benefit obligations, net 15 324,141 

Income tax payable 17 166,330 

Dividends payable, including minimum dividend required by law 13 (b) 486,593 

Deferred revenue 2 (n) 370,746 

Other current liabilities 16 255,303 

Total current liabilities 3,589,919 

Total liabilities 5,946,328 

Total stockholders’ equity and liabilities 9,800,133 

The notes on pages 5 to 71 are an integral part of the consolidated financial statements 

1 

3,714,737 

144,407 

55,856 

1,167,692 

461,940 

159,502 

5,704,134 

266,030 

681,139 

203,908 

915,009 

1,151,987 

3,218,073 

8,922,207 

2,151,299 

31,905 

215,130 

(83,044) 

969,493 

3,284,783 

4,871 

3,289,654 

29,303 

- 

170,254 

1,351,563 

1,551,120 

28,942 

2,061,758 

118,170 

242,275 

153,982 

923,583 

271,435 

281,288 

4,081,433 

5,632,553 

8,922,207



Consolidated Statement of Operations 

Years ended December 31, 2007, 2006 and 2005 

(In millions of bolivars, except information per share and per ADS) Note 2007 2006 2005 

Operating revenues 

Local services 966,129 

Domestic long distance 303,873 

International long distance 146,051 

Fixed-to-mobile outgoing calls 992,480 

Interconnection incoming 88,193 

Data transmission 908,073 

Other wireline-related services 376,249 

Total wireline services 3,781,048 

Access 228,273 

Airtime 1,782,798 

Interconnection 373,796 

Activation 66,066 

Special services 1,004,469 

Wireless equipment sales 586,228 

Other wireless-related services 103,362 

Total wireless services 4,144,992 

Other telecommunications-related services 393,576 

Total operating revenues 2 (n) 8,319,616 

Operating expenses 

Labor and benefits 2 (q) and 15 1,492,430 

Operations, maintenance, repairs and other 2,157,179 

Cost of sales of wireless equipment 

Additional pension obligation due to Venezuelan Supreme Court ruling, 

1,397,550 

"Acuerdo Marco" (Master Agreement) and "Bono Solidario" (monthly incentive) 15 362,162 

Provision for uncollectibles 11 117,521 

Interconnection costs 718,132 

Depreciation and amortization 3, 5 and 6 965,782 

Concession and other taxes 3 and 17 490,774 

Other (income) expense, net 4 and 7 (116,633) 

Total operating expenses 7,584,897 

Operating income (loss) 734,719 

Interest and exchange (loss) gain, net 

Interest income 50,014 

Interest expense (9,212) 

Exchange (loss) gain, net (2,037) 

Total interest and exchange (loss) gain, net 38,765 

Income before income tax 773,484 

Income tax (provision) benefit 

Current 17 (302,018) 

Deferred 17 552,461 

Total income tax benefit 250,443 

Net income 1,023,927 

Net income attributable to: 

Equity holders of the Company 1,021,295 

Minority interest in subsidiary 2,632 

Net income 1,023,927 

Basic and diluted earnings per share 1,316 

Basic and diluted earnings per ADS (based on 7 shares per ADS) 9,213 

Weighted average shares outstanding (in millions) 778 


2 

920,574 

284,253 

121,894 

922,810 

91,307 

687,191 

213,735 

3,241,764 

172,850 

1,366,645 

339,050 

56,452 

677,030 

571,654 

58,957 

3,242,638 

313,265 

6,797,667 

1,147,256 

1,536,891 

1,172,817 

23,043 

65,438 

656,431 

858,476 

429,192 

8,738 

5,898,282 

899,385 

92,987 

(12,351) 

(530) 

80,106 

979,491 

(186,576) 

337,460 

150,884 

1,130,375 

1,127,420 

2,955 

1,130,375 

1,457 

10,197 

776 

912,042 

296,380 

115,435 

751,561 

97,963 

542,112 

200,662 

2,916,155 

119,758 

769,304 

215,244 

42,925 

376,487 

431,169 

26,771 

1,981,658 

190,579 

5,088,392 

898,016 

1,217,369 

743,556 

694,916 

35,068 

534,494 

827,692 

295,161 

(71,721) 

5,174,551 

(86,159) 

85,572 

(27,393) 

32,843 

91,022 

4,863 

(147,881) 

357,426 

209,545 

214,408 

213,929 

479 

214,408 

276 

1,934 

776

Compañía Anónima Nacional Teléfonos de Venezuela (CANTV) and Subsidiaries 

Consolidated Statement of Changes in Stockholders’ Equity 


Attributable to equity holders of the Company 

Additional Translation Workers' Minority Total 

Capital paid-in Legal and other benefit Retained interest stockholders' 

(In millions of bolivars) Note stock capital reserve adjustments shares earnings in subsidiary equity 

Balance as of December 31, 2004 2,151,299 33,724 

Net income - 

- 

Dividends declared and approved 13 (b) - 

- 

Workers' benefit shares 

Valuation of available for 

- 

(675) 

sale investments, net of realization 2 (y) - 

- 


Net income - 

- 


- 

Minimum dividends required to be declared 13 (b) - 

- 

Workers' benefit shares 

Valuation of available for 

- 

(1,144) 

sale investments, net of realization 2 (y) - 

- 


Net income - 

- 


- 

Reversal of minimum dividends 13 (b) 

required to be declared for 2006 - 

- 

Minimum dividends required to be declared 13 (b) - 

- 

Workers' benefit shares 13 (c) - 

(31,905) 

Balance as of December 31, 2007 2,151,299 - 

215,130 


3 

- 

- 

- 

- 

215,130 

- 

- 

- 

- 

- 

215,130 

- 

- 

- 

- 

- 

111,767 

- 

- 

- 

(111,510) 

257 

- 

- 

- 

- 

(257) 

- 

- 

- 

- 

- 

- 

215,130 - 

(80,403) 

- 

- 

(1,580) 

- 

(81,983) 

- 

- 

- 

(1,061) 

- 

(83,044) 

- 

- 

- 

- 

64,318 

(18,726) 

1,524,116 

213,929 

(390,407) 

- 

- 

1,347,638 

1,127,420 

(779,786) 

(725,779) 

- 

- 

969,493 

1,021,295 

(715,327) 

725,779 

(486,593) 

(13,093) 

4,837 

479 

(1,637) 

- 

- 

3,679 

2,955 

(1,763) 

- 

- 

- 

4,871 

2,632 

(2,955) 

- 

- 

- 

1,501,554 4,548 

3,960,470 

214,408 

(392,044) 

(2,255) 

(111,510) 

3,669,069 

1,130,375 

(781,549) 

(725,779) 

(2,205) 

(257) 

3,289,654 

1,023,927 

(718,282) 

725,779 

(486,593) 

19,320 

3,853,805



Consolidated Statement of Cash Flows 


(In millions of bolivars) Note 2007 2006 2005 

Cash flows provided by operating activities 

Net income 

Adjustments to reconcile net income to net cash provided by 

operating activities 

1,023,927 

Exchange (gain) loss, net 2,037 

Minority interest in subsidiary (2,632) 

Depreciation and amortization 3, 5 and 6 965,782 

Current income tax provision 17 302,018 

Deferred income tax (benefit) 17 (552,461) 

Provision for pension and other post-retirement benefits 

Additional pension obligation due to Venezuelan Supreme Court ruling, 

15 585,240 

"Acuerdo Marco" (Master Agreement) and "Bono Solidario" (monthly incentive) 15 362,162 

(Release of) provision for inventories obsolescence 9 (9,045) 

Provision for litigation 19 (c) 172,420 

Provision for uncollectibles 11 117,521 

Gain on sale of investments in equity 7 - 

Special plan of distribution of Class "C" shares 13 (c) 26,100 

Changes in current assets and liabilities 

Accounts receivable (405,336) 

Accounts receivable from Venezuelan Government entities (117,416) 

Inventories, spare parts and supplies 224,588 

Other current assets 89,328 

Accounts payable (272,514) 

Accrued employee benefits (6,128) 

Pension and other post-retirement benefits payments (238,051) 

Income tax payable (289,670) 

Deferred revenues 99,311 

Other current liabilities (23,353) 

Changes in non current assets and liabilities 

Long-term accounts receivable from Venezuelan Government entities (37,169) 

Other assets 126,572 

Provision for litigation (30,889) 

Net cash provided by operating activities 2,112,342 

Cash flows used in investing activities 

Acquisition of 1900 MHz band cellular concession 3 (129,000) 

Acquisition of information systems (software) 6 (194,938) 

Acquisition of property, plant and equipment 5 (1,250,683) 

Disposal of information systems (software) and other 6 3,277 

Disposal of property, plant and equipment and other 5 35,098 

Net cash used in investing activities (1,536,246) 

Cash flows used in financing activities 

Proceeds from borrowings - 

Payments of debt (28,906) 

Dividends paid 13 (b) (916,086) 

Purchase of shares for workers' benefit fund, net (6,780) 

Net cash used in financing activities 

(Decrease) increase in cash and temporary investments before 

(951,772) 

effect of exchange rate changes on cash and temporary investments (375,676) 

Effect of exchange rate changes on cash and temporary investments - 

(Decrease) increase in cash and temporary investments (375,676) 

Cash and temporary investments 

Beginning of the period 1,151,987 

End of the period 12 776,311 

Supplementary information 

Unpaid dividends and provision for minimum dividends required by law 486,593 

Cash paid during the period for: 

Interest 1,778 

Income tax 396,853 


4 

1,130,375 

530 

(2,955) 

858,476 

186,576 

(337,460) 

348,998 

23,043 

110,073 

43,584 

65,438 

- 

- 

(310,717) 

1,230 

(478,957) 

(203,478) 

896,035 

25,562 

(356,901) 

(109,946) 

86,917 

(3,201) 

8,521 

(88,326) 

(7,843) 

1,885,574 

- 

(195,681) 

(1,042,573) 

5,074 

32,827 

(1,200,353) 

6,237 

(52,150) 

(583,745) 

(2,205) 

(631,863) 

53,358 

- 

53,358 

1,098,629 

1,151,987 

923,583 

5,472 

474,718 

214,408 

(32,843) 

(479) 

827,692 

147,881 

(357,426) 

279,839 

694,916 

912 

68,878 

35,068 

(71,260) 

- 

(250,266) 

(6,088) 

(59,111) 

769 

394,857 

14,195 

(147,993) 

(126,832) 

40,716 

(12,356) 

(46,111) 

52,867 

(12,082) 

1,650,151 

- 

(177,573) 

(867,339) 

35,840 

50,682 

(958,390) 

69,095 

(243,007) 

(415,133) 

(2,255) 

(591,300) 

100,461 

30,625 

131,086 

967,543 

1,098,629 

- 

14,447 

419,665





And for the years ended December 31, 2007, 2006 and 2005 

(Amounts are expressed in millions of Venezuelan bolivars, unless otherwise 

indicated) 

This is a free translation into English of a document issued in the Spanish language and is 

provided solely for the convenience of the English speaking readers. This document should 

be read in conjunction with, and construed in accordance with, laws of the Bolivarian 

Republic of Venezuela. 

1. General Information 

Compañía Anónima Nacional Teléfonos de Venezuela (referred to hereinafter as CANTV) is 

the primary provider of telecommunications services in Venezuela, and the owner of a 

nationwide basic telecommunications network, through which it provides local, domestic and 

international wireline telephone services, as well as private network, data networks, public 

telephony and rural telephony services. In addition, CANTV and its consolidated subsidiaries 

(referred hereinafter collectively as the Company) provides other telecommunications 

services, including national wireless communications, Internet access and publication of 

telephone directories through its principal subsidiaries: Telecomunicaciones Movilnet, C.A. 

(Movilnet), CANTV.Net, C.A. (CANTV.Net) and C.A. Venezolana de Guías (Caveguías) (Note 

2 (d) - Summary of significant accounting principles and policies - Consolidation). 

CANTV is a corporation (“compañía anónima”) incorporated in Venezuela on June 20, 1930. 

CANTV’s registered office is located at Avenida Libertador, Centro Nacional de 

Telecomunicaciones, Nuevo Edificio Administrativo, Piso 1, Apartado Postal 1226, Caracas, 

Venezuela 1010. 

In 1991, VenWorld Telecom, C.A. (VenWorld), a company organized under the laws of 

Venezuela by a private consortium of companies, majority owned by a subsidiary of GTE 

Corporation (currently Verizon Communications Inc.), acquired operating control and initially 

40% of the capital stock of CANTV owned by the Bolivarian Republic of Venezuela. 

On January 8, 2007, the President of the Bolivarian Republic of Venezuela announced the 

intention to nationalize several companies, including CANTV. On May 21, 2007, the 

Government of the Bolivarian Republic of Venezuela (the Venezuelan Government) assumed 

operating control of the Company, when it acquired ownership of 86.2% of CANTV’s capital 

stock following completion of a public in a tender offer (Note 13 (a) - Stockholders' Equity - 

Capital stock). 

The Company’s shares are listed on the Caracas Stock Exchange. Therefore, the Company 

is subject to regulations of the Comisión Nacional de Valores (CNV) (the Venezuelan National 

Securities Commission), which is the regulatory body of companies that trade on this stock 

exchange. On May 11, 2007, the New York Stock Exchange (NYSE) notified CANTV that it 

had suspended CANTV’s shares from trading on the exchange. On June 18, 2007, the 

NYSE filed with the Securities and Exchange Commission (SEC) a notification of its intention 

to remove the ADS from listing and registration on the exchange (Note 13 (a) - Stockholders' 

Equity - Capital stock). 

5







indicated) 

The Company’s consolidated financial statements were approved for issue by the Board of 

Directors on March 10, 2008. 

2. Summary of Significant Accounting Principles and Policies 

The Company’s most significant accounting principles and policies for the preparation of the 

consolidated financial statements are described as follows. These practices and policies 

have been consistently applied for all periods presented, unless otherwise indicated. 

a) Basis of presentation 

The consolidated financial statements have been prepared in accordance with International 

Financial Reporting Standards (IFRS), issued by the International Accounting Standard Board 

(IASB), which comprise: (i) IFRS, (ii) International Accounting Standards (IAS) and (iii) 

International Financial Reporting Interpretations Committee (IFRIC) or the former Standing 

Interpretations Committee (SIC), and under the historical cost convention, except for 

adjustment for inflation (Note 2 (c) - Summary of significant accounting principles and policies 

- Adjustment for inflation). 

Pursuant to Resolution No. 157-2004 published in the Official Gazette of Venezuela No. 

38,085 dated December 13, 2004, the CNV required companies offering their public 

securities to the public under the Venezuelan Capital Markets Law to prepare and present 

their financial statements in accordance with IFRS beginning on January 1, 2006, based on 

IFRS in effect as January 1, 2005, with earlier adoption of IFRS permitted. On December 8, 

2005, the CNV issued Resolution No. 177-2005 which postponed the requirement to prepare 

financial statements under IFRS until the Venezuelan Federation of Public Accountants 

adopts IFRS as accounting principles generally accepted in Venezuela (Note 25 - Adoption of 

International Financial Reporting Standards (IFRS) by the Venezuelan Federation of Public 

Accountants). However, early adoption of IFRS is permitted once certain requirements are 

complied with. 

The Company’s consolidated financial statements as of and for the year ended December 31, 

2005 are covered by IFRS 1, “First-time adoption of IFRS”, because they are part of the first 

financial statements prepared by the Company in accordance with IFRS. IFRS 1 is applied 

when the entity adopts IFRS for the first time and, in general, requires the entity to comply 

with IFRS in effect on the date of the preparation of the first financial statements prepared 

under IFRS. In addition, IFRS 1 includes certain exemptions for some requirements under 

other IFRS. 

Standards, amendments and interpretations effective for annual consolidated financial 

statements as of December 31, 2007 

The following new standards, amendments and interpretations of existing standards have 

been published and are mandatory for the Company’s accounting periods beginning on 

January 1, 2007, or thereafter: 

6







indicated) 

- IFRS 7, “Financial instruments: disclosures, and a complementary amendment to IAS 1, 

presentation of financial statements - capital disclosures” (effective from January 1, 2007). 

IFRS 7 introduces new disclosures to improve the information about financial instruments. 

It requires the disclosure of qualitative and quantitative information about exposure to 

risks arising from financial instruments, including specified minimum disclosures about 

credit risks, liquidity risks and market risks, including sensitivity analysis to market risk. 

IFRS 7 replaces IAS 30. The amendment to IAS 1 introduces disclosures about the level 

of an entity’s capital and how it manages capital. Beginning January 1, 2007, the 

Company includes all the disclosures of its financial instruments according to IFRS 7. 

Standards, amendments and interpretations effective for annual consolidated financial 

statements as of December 31, 2007 but not relevant to the Company’s operations 

The following standards, amendments and interpretations of existing standards have been 

published or amended and are mandatory for accounting periods beginning on January 1, 

2007, or thereafter, but are not relevant to the Company’s operations: 

- IFRS 4, “Insurance contracts”; 

- IFRIC 7, “Applying the restatement approach under IAS 29, Financial reporting in 

hyperinflationary economies” 

- IFRIC 8, “Scope of IFRS 2”; 

- IFRIC 9, ‘Re-assessment of embedded derivatives’; and 

- IFRIC 10, “Interim financial reporting and impairment”; 

Standards and interpretations of existing standards that are not yet effective and have not 

been early adopted by the Company 

The following standards and interpretations of existing standards have been published and 

are mandatory for the Company’s accounting periods beginning on January 1, 2008, or 

thereafter, but that the Company has decided not to adopt them earlier: 

- IAS 1 (Amendment), “Presentation of financial statements” (effective from January 1, 

2009). IAS 1 (Amendment) establishes changes to require information in financial 

statements to be aggregated on the bases of shared characteristics. IAS 1 (Amendment) 

establishes the option of presenting items of income and expenses and components of 

other comprehensive income either in a single statement of comprehensive income with 

subtotals, or in two separate statements (a separate income statement followed by a 

statement of comprehensive income). The Company will apply IAS 1 (Amendment) form 

January 1, 2009. 

- IAS 23 (Amendment), “Borrowing costs” (effective from January 1, 2009). IAS 23 

(Amendment) eliminates the option of recognizing immediately as an expense all 

borrowing costs related to assets that require a substantial period of time before they can 

be brought to use or sold; as a result, these borrowing costs must be capitalized as part of 

the cost of the asset. Qualifying assets measured at fair value are excluded from the 

scope of IAS 23 (Amendment). The Company will apply IAS 23 from January 1, 2009. 

7







indicated) 

- IFRS 8, “Operating segments” (effective from January 1, 2009). IFRS 8 sets out 

requirements for disclosure of information about an entity’s operating segments as well as 

about the entity’s products and services, the geographical areas in which it operates, and 

its major customers. IFRS 8 replaces IAS 14 “Segment reporting”. The Company will 

apply IFRS 8 from January 1, 2009. 

- IFRIC 11, “IFRS 2 - Group and treasury share transactions” (effective from January 1, 

2009). IFRIC 11 provides establishes that share-based transactions involving treasury 

shares or shares of a group entity should be accounted for as equity settled. The 

Company’s management is currently assessing the impact of IFRIC 11 on the Company’s 

operations. 

- IFRIC 12, “Service concession arrangements” (effective from January 1, 2008). IFRIC 12 

gives guidance on the accounting by operators for public-to-private service concession 

arrangements and is applicable if: (a) the grantor of the concession controls or regulates 

what services the operator must provide with the infrastructure, to whom it must provide 

them, and at what price; and (b) the grantor of the concession controls—through 

ownership, beneficial entitlement or otherwise—any significant residual interest in the 

infrastructure at the end of the term of the arrangement. The Company’s management is 

currently assessing the impact of IFRIC 12 on the Company’s operations. 

- IFRIC 13, “Customer loyalty program” (effective from July 1, 2008). IFRIC 13 establishes 

that where goods or services are sold together with a customer loyalty incentive, the 

arrangement is a multiple-element arrangement and the consideration receivable from the 

customer is allocated between the components of the arrangement using fair values. The 

Company’s management is currently assessing the impact of IFRIC 13 on the Company’s 

operations. 

- IFRIC 14, “IAS 19 - The limit on a defined benefit asset, minimum funding requirements 

and their interaction” (effective from January 1, 2008). IFRIC 14 provides guidance on 

assessing the limit in IAS 19 on the amount of the surplus that can be recognized as an 

asset. It also explains how the pension asset or liability may be affected by a statutory or 

contractual minimum funding requirement. The Company’s management is currently 

assessing the impact of IFRIC 14 on the Company’s operations. 

b) Use of estimates in the preparation of financial statements 

The preparation of consolidated financial statements in accordance with IFRS requires 

management to make estimates and assumptions that affect the reported amounts of assets 

and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated 

financial statements and the amounts of income and expense recognized during the reporting 

period. The consolidated financial statements have been prepared based on estimates and 

assumptions determined based on the Company’s strategic business plan for the period 

2008-2013 approved by the Board of Directors on February 12, 2008. Future changes in the 

Company’s business plan and/or in management assumptions may significantly affect 

8







indicated) 

estimates as of December 31, 2007. The consolidated financial statements as of December 

31, 2007 have been prepared based on events and facts known as of March 10, 2008, the 

date on which the Board of Directors approved issuance of the financial statements. 

The most significant judgments and principal assumptions made in the application of 

accounting principles are indicated in sections “c”, “f”, “h”, “k”, “m”, “n”, “p”, “r” and “t” of this 

note. 

c) Adjustment for inflation 

Items included in the financial statements of each one of the Company’s entities are 

measured using the currency of the primary economic environment in which the entity 

operates (the functional currency). IAS 29, “Financial reporting in hyperinflationary 

economies”, is applied to the financial statements of the entities whose functional currency is 

the currency of a hyperinflationary economy. The functional and presentation currency of the 

Company is the Venezuelan bolivar (Bs). 

According to this standard, an economy is considered as hyperinflationary if the following 

conditions exist: 

a. The general population prefers to keep its wealth in non-monetary assets or in a 

relatively stable foreign currency. 

b. The general population regards monetary amounts not in terms of the local currency but 

in terms of a relatively stable foreign currency. 

c. Sales and purchases on credit take place at prices that compensate for the expected 

loss of purchasing power during the credit period. 

d. Interest rates, wages and prices are linked to a price index. 

e. The cumulative inflation rate over three years is approaching, or exceeds, 100%. 

For IAS 29 purposes, Venezuela was considered as a hyperinflationary economy until 

December 31, 2003 and, accordingly, non-monetary assets and liabilities (fixed assets, 

inventories, intangibles and deferred revenue) and equity accounts include the effects of 

inflation through that date. Beginning January 1, 2004, Venezuela is not considered as a 

hyperinflationary economy and all new transactions are recorded and maintained at their 

original nominal values; non-monetary assets and liabilities originated before January 1, 2004 

are maintained at their acquisition or original value in constant bolivars as of December 31, 

2003. 

Three-year cumulative inflation for the years ended December 31, 2007, 2006 and 2005 was 

63.8%, 59.4% and 73.2%, respectively. For the years ended December 31, 2007, 2006 and 

2005, inflation was 22.5%, 17.0% and 14.4%, respectively. 

9







indicated) 

d) Consolidation 

An entity is considered a subsidiary when the Company has the power to determine its 

financial and operating policies, generally by owning equity representing more than 50% of 

the voting rights. 

The consolidated financial statements include CANTV and all its majority owned subsidiaries. 

CANTV’s principal subsidiaries are: Movilnet, CANTV.Net and Caveguías. The Company 

also consolidates the workers’ benefit fund (Note 13 (c) - Stockholders’ equity - Workers’ 

benefit fund). All subsidiaries are wholly owned, except for Caveguías which is 80% owned. 

All significant intercompany balances and transactions among companies are eliminated in 

consolidation. The accounting practices and policies used by the Company’s subsidiaries 

have been adapted to be consistent with those used by CANTV. 

e) Segment reporting 

A business segment is a separate group of assets and operations engaged in providing 

products or services that are subject to risks and returns that are different from those of other 

business segments (Note 20 - Segment reporting). Substantially all of the Company’s 

businesses are conducted in Venezuela and substantially all its assets are located in 

Venezuela. 

f) Property, plant and equipment and depreciation 

Property, plant and equipment is recorded at acquisition or construction cost, only when it is 

probable that it will generate future benefits and the asset’s cost can be determined. 

Property, plant and equipment includes the costs of materials used, as well as direct labor 

costs and other allocable costs incurred in connection with construction work in progress. 

The Company capitalizes the estimated cost of asset retirement which is depreciated over the 

remaining useful lives of the assets. Maintenance and repair costs are expensed when 

incurred, while major improvements (including technological upgrades) and significant 

renewals that extend the assets’ useful lives or asset capability are capitalized. 

Upon disposal of fixed assets, the cost and accumulated depreciation are removed from fixed 

asset accounts, and any gain or loss determined by comparing the proceeds with the carrying 

amount and are recognized as other expense (income), net in the consolidated statement of 

operations. 

Depreciation is calculated using the straight-line method over the estimated useful lives of 

fixed assets. Land is not depreciated. 

Due to rapid changes in technology and new competitors, selecting the estimated economic 

life of telecommunications plant and equipment requires a significant level of judgment. The 

Company annually reviews data on expected utilization of new equipment, asset retirement 

activity and net salvage values to determine adjustments to depreciation rates. 

10







indicated) 

During the first quarter of 2006 and 2007, the Company performed an analysis of useful lives. 

The most significant changes were made for new additions, mainly in the plant category, 

resulting in a shorter useful life for commutation, transmission and data equipment. The 

remaining useful lives of assets already installed remained unchanged. The Company’s 

management considers that as of December 31, 2007 and 2006, in accordance with 

applicable accounting principles, there is no impairment in the carrying value of this group of 

assets. Future changes in the Company’s business plan and/or in management assumptions 

may significantly affect estimates of the value of the use of property, plant and equipment as 

of December 31, 2007 (Note 2 (h) - Summary of significant accounting principles and policies 

- Impairment of long-lived assets). 

The estimated useful lives as of December 31, 2007 are as follows: 

11 

Useful 

lives 

(Years) 

Plant 

Wireline telecommunications 

Transmission equipment 5 to 15 

Access network 10 to 32 

Commutation equipment 4 to 13 

Other 3 to 20 

Wireless telecommunications 

Data transmission 5 to 6 

Commutation equipment 3 to 6 

Radio bases 3 to 7 

Other 3 to 7 

Other telecommunications services 2 to 13 

Buildings and facilities 3 to 30 

Furniture and equipment 5 to 10 

Vehicles 4 to 5 

g) Information systems ( software) and amortization 

This account includes computer systems (software) acquired, developed or modified solely to 

meet the internal needs of the Company and is not for sale. The cost of certain projects and 

computer systems (software) for internal use and upgrades that extend the assets’ useful 

lives or improve their capabilities is capitalized as assets and classified as information 

systems. Software maintenance and modification expenses that do not increase its 

functionality are expensed when incurred. 

Software acquired is capitalized on the basis of the costs incurred to acquire and bring to use 

the specific software. Costs related to the evaluation phase of an internally developed 

software project are recognized as an expense, and the identifiable costs of developing 

software applications are capitalized if the Company is able to control the future benefits. 

Post-implementation and operation expenses are recognized as an expense of the year.







indicated) 

Amortization is calculated using the straight-line method over the estimated useful lives which 

are between three and seven years. 

The Company upgrades its systems to adapt the network to the technological requirements of 

new products and services. Identifiable system upgrade costs are capitalized to the 

corresponding hardware within property, plant and equipment or information systems when 

this upgrade meets the criteria of a major improvement and renewal that extends the asset’s 

useful life or improve asset capacity and the Company is able to control the future benefits, or 

otherwise expensed. For accounting purposes these activities are not considered to be 

research and development expenses. The Company conducts no other activities that could 

be considered research and development. 

The Company does not hold intangible assets with indefinite useful lives. 

h) Impairment of long-lived assets 

The Company assesses impairment of long-lived assets, including intangible assets, whenever 

events or changes in circumstances indicate that the carrying amounts of such assets may not 

be recoverable. The recoverable amount is the higher of an assets’ fair value less cost to sell 

and its value in use. The value in use is the present value of the projection of discounted cash 

flows estimated to be generated by these assets or upon disposal. In the event that such cash 

flows are not expected to be sufficient to recover the recorded value of the assets, these assets 

are written down to their estimated recoverable values. For the purposes of assessing 

impairment, assets are grouped at the lowest levels for which there are separately identifiable 

cash flows (cash generating units). 

The Company’s management, based on its business plan for the period 2008-2013 approved 

by the Board of Directors on February 12, 2008, considers that there are no events or 

circumstances that indicate that the carrying amount of long-lived assets may not be 

recoverable and, in accordance with applicable accounting principles, there is no impairment in 

the carrying value of these assets. In addition, management considers that the estimates of 

future cash flows are reasonable; however, changes in estimates resulting in lower future cash 

flows and fair value due to unforeseen changes in business assumptions could negatively affect 

the valuations of those long-lived assets. These unforeseen changes include significant 

technological changes, timely tariff approvals and macroeconomic changes, among others. 

i) Investments 

Investments in equity and obligations are classified as financial assets for “trading” and 

“available for sale” depending on the purpose for which they were acquired, and are recorded 

at their realizable or fair value. 

An investment is classified as for “trading” if acquired principally for the purpose of selling in 

the short term. Gains or losses arising from changes in fair value are presented in the 

consolidated statement of operations, under other expense (income), net. 

12







indicated) 

“Available for sale” investments are measured at their estimated realizable or fair value. The 

change in their fair values is presented in the statements of changes in stockholders’ equity, 

under translation and other adjustments, until their sale. 

If the market for a financial asset is not active, the Company establishes fair value by using 

valuation techniques. These include the use of recent arm’s length transactions, reference to 

other instruments that are substantially the same, discounted cash flow analysis and option 

pricing models, making maximum use of market inputs and relying as little as possible on 

entity-specific inputs. 

j) Inventories, spare parts and supplies, net 

Inventories, spare parts and supplies are recorded at acquisition cost, net of reserves, which 

does not exceed their net realizable value. Certain inventories, spare parts and supplies are 

expensed when purchased due to their low value. Cost is determined using the average 

method. 

Net realizable value is the estimated selling price in the ordinary course of business, 

considering promotions, less the applicable variable selling expenses. 

The provision for inventory obsolescence is determined based on an analysis performed on 

the specific turnover of materials and supplies, and the provision for net realizable value is 

recorded monthly based on the lower of the specific net market price of wireline and wireless 

terminal equipment for sale and the book value. These provisions are presented as operating 

expenses. 

Current conditions in the local and global economies have a certain level of uncertainty. As a 

result, it is difficult to estimate the level of growth or contraction for the economy as a whole, 

and it is even more difficult to estimate growth or contraction in various parts of the economy. 

Because all components of Company’s budgeting and forecasting are dependent upon 

estimates of growth or contraction in the markets it serves and demand for its products or 

services, the prevailing economic uncertainties render estimates of future demand for product 

or services more difficult. Such economic changes may affect the sales of the Company’s 

products and its corresponding inventory levels, which would potentially impact the valuation 

of its inventory. 

k) Accounts receivable and provision for uncollectible accounts 

Accounts receivable are recognized initially at fair value less provision for impairment. A 

provision for impairment of accounts receivable is established when there is objective 

evidence that the Company will not be able to collect all amounts due according to the 

original terms of the receivables. Accounts receivables from Venezuelan Government entities 

that are expected to be collected after one year are adjusted at their present value at 

origination date. When an account receivable is uncollectible, it is written off against the 

provision for uncollectible accounts. Subsequent recoveries of amounts previously written off 

are credited as other income (expense), net in the consolidated statement of operations. 

13







indicated) 

The Company maintains a provision for uncollectible accounts at a level deemed adequate to 

provide for potentially uncollectible receivables. The balance of this allowance for 

uncollectible accounts is continuously assessed and adjusted by management based on 

historic experience and other current factors that affect the collectibility of accounts 

receivable. Based on the analyses, as of December 31, 2007, the Company recorded a 

provision equivalent to 1.8% of wireline services accounts receivable, 1.7% for wireless 

services accounts receivable, and 1.9% for Internet and other voice services. Additionally, a 

review of the age and status of receivables is performed, designed to identify risks on 

individual accounts and groups of accounts, in order to provide these accounts with a specific 

allowance on a continuous basis. 

During 2006, based on historic experience and current trends, the Company changed its 

estimate for wireless telephony and Internet provision for uncollectibles, which was accounted 

for prospectively. The provision was previously estimated based on a percentage of gross 

revenues and aging analysis of accounts receivable but now the estimation is based on a 

percentage and aging analysis of accounts receivables, which is considered to be more 

appropriate under current circumstances. This change in estimate resulted in a reversal of 

Bs. 12,000 in the provision of 2006. 

During 2005, based on historic experience and current trends, the Company changed its 

estimate for fixed telephony provision for uncollectibles, which was accounted for 

prospectively. The provision was previously estimated based on a percentage of gross 

revenues and aging analysis of accounts receivable but now the estimation is based on a 

percentage and aging analysis of accounts receivables, which is considered to be more 

appropriate under current circumstances. This change in estimate resulted in a reversal of 

Bs. 20,000 in the provision of 2005. 

A full allowance is provided for receivables of wireline and wireless subscribers from 

permanently disconnected subscribers. Permanent disconnections are made after 

performing several collection efforts following non-payment by subscribers. Such permanent 

disconnections generally occur within approximately 90 days. 

Changes in external factors, such as economic environment, may impact the estimations. 

The Company believes that its provision for uncollectibles as of December 31, 2007 and 2006 

is adequate and proper. However, if the financial condition of customers were to deteriorate, 

actual write-offs might be higher than expected. 

l) Cash and temporary investments 

Cash and temporary investments include short-term and highly liquid investments, having 

maturities of three months or less, and are considered cash equivalents. These investments 

are recorded at their fair value. Foreign exchange gain (loss) on cash and temporary 

investments are reflected as a separate caption in the consolidated statement of cash flows. 

14







indicated) 

m) Provision for litigation 

The Company’s management records a provision for those contingencies and/or litigation, 

which are considered probable and can be measured with reasonable sufficient reliability, 

based on the opinion of legal counsel (Note 19 (c) - Commitments and contingencies - 

Litigation and provision for litigation). The Company’s management believes that the 

provision for litigation recorded as of December 31, 2007 and 2006 is adequate and 

reasonable to cover the identified risks. However, the provision is based on developments to 

date and the final outcome of litigation may be different than expected. 

n) Revenue recognition 

Revenue for wireline services, wireless services, Internet access and data transmission, are 

recognized in the period in which services are rendered, based on minutes of use and basic 

monthly recurring charges, all net of promotional discounts. Revenue from settlement of 

traffic with international telecommunications carriers is recognized on a net basis and based 

on estimates of traffic volume and rates as earned or caused. 

Revenue related to phone handset sales is recognized when the equipment is delivered and 

accepted by the customer or distributor. The distributor only has the right of return of 

equipment using the warranty only in case of damaged equipment. The Company does not 

have obligations of returns for excess inventories with the distributors. Equipment sales are 

recognized as income and the corresponding cost of sales as part of the operating expenses. 

Submarine cable usage is recognized as revenue on a monthly basis, once the service is 

rendered. 

Unlimited plans for Internet access are recognized as revenue on a monthly basis, once the 

service is rendered. 

Amounts related to prepaid cards are recognized as revenue based on monthly usage. 

Prepaid cards expire in one year after being activated by the customer. Unused balances of 

prepaid cards are recognized as revenues at expiration date. 

Monthly charges for telecommunications services are recognized as revenues on a monthly 

basis, once the service is rendered. 

Advertising in telephone directories is recognized as revenues when the obligations to the 

customers are fulfilled, which is at the time of the publication and distribution of directories. 

The Company records revenues from other telecommunications services which include 

interconnection facilities, data transmission services, late payment charges, reconnection fees 

and miscellaneous charges. 

Interconnection facilities are recognized as revenue on a monthly basis, once the service is 

rendered. 

15







indicated) 

Data transmission services include a monthly recurring fee, which is initially recorded as 

deferred revenue for services billed in advance, and revenue is recognized based on traffic 

when the service is rendered. 

Late payment charges are recognized as revenues when generated, which is after 30 days of 

non-payment by the subscriber. 

Reconnection fees are recognized as revenue when generated, which is the moment the 

subscriber’s line is reconnected after paying overdue amounts. 

Miscellaneous charges include subscriber line relocation, private number, other equipment 

sales and vertical services, and are recognized as revenue once the service is rendered or 

the equipment is sold and delivered. 

Revenue from wireless line activation fees charged to new customers is deferred and 

recognized monthly over the estimated average time that the customer will maintain and use 

wireless lines. The amortization of the deferred amount is calculated using the straight line 

method. 

The Company records as deferred revenue billed services not rendered, such as submarine 

cable usage, unlimited plans for Internet access, amounts related to unused prepaid cards, 

monthly advanced charges for telecommunications services and telephone directories. 

Earned revenues pending for billing are included in accounts receivable. 

Deposits received from subscribers for wireline service activation are recorded as a liability 

when reimbursable (Note 16 - Other current liabilities). 

The Company has agreements with customers, in which certain equipments are sold 

including modems, personal computers, among others, financed without charging interest. 

These revenues and the corresponding accounts receivable are recognized at present value 

using the effective interest method. Interest income is recognized on a time-proportion basis 

using the effective interest method. 

Customer arrangements that include both equipment and services sold in bundled packages 

are evaluated to determine whether the elements are separable. If the elements are deemed 

separable and fair value can be reliably determined, total revenue is allocated based on the 

relative fair values of the separate elements and the revenue associated with each element is 

recognized as earned. Equipment sales are recognized upon delivery and each service is 

recognized according to the applicable revenue recognition policy. If the elements are not 

deemed separable, total revenue is deferred and recognized ratably over the longer of the 

contractual period or the expected customer relationship period. 

16







indicated) 

The Company has agreements with third parties to act as exclusive authorized agents to 

capture and provide wireless services and equipment sales to new customers. The Company 

gives discounts based on volume of equipment sold. Discounts earned by the authorized 

agents are accrued based on equipment sold, and recorded as a reduction of the Company’s 

revenues in the corresponding caption. 

The Company also has agreements with third parties to provide them with Telecommunication 

Center franchises that render fixed line services directly to the public. The Company is 

required to pay commissions as sales incentives established by type and volume of services 

rendered by the Telecommunication Center in its installations. Commissions earned by the 

Telecommunication Centers are considered as cash incentives and are recorded as a 

reduction of the Company’s revenues in the corresponding caption, depending on the related 

services. The Company also gives discounts based on volume of equipment sold. Discounts 

earned by the Telecommunication Centers are accrued based on equipment sold, and 

recorded as a reduction of the Company’s revenues in the corresponding caption. 

o) Cost and expense recognition 

Costs and expenses are recognized on an accrual basis. 

Accounts payable are initially recognized at their fair value and later recorded at the 

amortized amount. 

Costs and expenses related to the publication of directories, including production and printing 

costs and selling and distribution costs are recognized upon publication and distribution of the 

directories. 

The Company, through its business units, performs multiple market studies to identify new 

products and services to remain competitive, which are recognized as operating expenses as 

incurred. These activities are not considered to be research and development costs. 

Advertising costs are recognized as operating expenses as incurred. Advertising expense for 

the years ended December 31, 2007, 2006 and 2005 was Bs. 195,097, Bs. 108,801 and Bs. 

82,835, respectively. 

p) Income tax 

Income tax is calculated based upon taxable income, which is different from income before 

tax for accounting purposes. Venezuelan tax legislation does not permit consolidation of 

results of subsidiaries for tax purposes. Tax credits for new investment in property, plant and 

equipment reduce income tax for the year in which such assets are placed in service and are 

permitted to be carried forward for three years (Note 17 - Taxes). Tax losses generated 

during the year, except those from tax inflation adjustment, are permitted to be carried 

forward for three years. 

17







indicated) 

The Company records income taxes in accordance to IAS 12, “Accounting for income taxes”, 

which requires the recognition of assets and liabilities for the accounting of deferred income 

taxes. Under this method, deferred income taxes reflect the net effect of the tax 

consequences expected in the future as a result of: (a) Temporary differences due to the 

application of statutory tax rates applicable in future years over the differences between the 

amounts according to the balance sheet and the tax base of existing assets and liabilities; 

and (b) Tax credits and losses carryforwards. In addition, under IAS 12, the effects on 

deferred taxes of changes in tax rates are recognized in the income of the year. A deferred 

tax asset is recognized if it is probable that future tax income will be generated to be used. 

Deferred income tax provides for temporary differences arising on investments in 

subsidiaries, except where the timing of the reversal of the temporary difference is controlled 

by the Company and it is probable that the temporary difference will not be reversed in the 

foreseeable future. The main items generating deferred taxes are the differences between tax 

and book bases of property, plant and equipment, pension and other post-retirement benefit 

obligation liabilities, net and some provisions which will be deductible in future years. 

Differences between tax and book bases of property, plant and equipment generate a 

deferred tax asset since property, plant and equipment are adjusted for inflation for tax 

purposes creating a higher tax base which will be realized in the future through a higher 

depreciation expense deductible for tax purposes. Pension plan and other post-retirement 

benefit obligation liabilities also generate a deferred tax asset which will be reversed in the 

future when payments and contributions will be made. 

The Company, based on its business plan for the period 2008-2013 approved by the Board of 

Directors on February 12, 2008, and considering that the Company generated taxable income 

in the past, considers that the estimates of future taxable income to be reasonable and 

sufficient to realize the recognized deferred tax assets. 

q) Employee severance benefits and other benefits 

The costs of defined contributions to employee severance benefits are calculated and 

recorded on an accrual basis in accordance with the Venezuelan Labor Law and CANTV’s 

current collective bargaining agreement. Under the current Venezuelan Labor Law, 

employees earn a severance indemnity equal to five days’ salary per month, up to a total of 

60 days per year of service, with no retroactive adjustment. Labor-related indemnities are 

earned once an employee has completed three months of continuous service and are 

recorded on an accrual basis. Beginning with the second year of service, the employee 

earns an additional two days’ salary for each year of service (or fraction of a year greater than 

six months), cumulative up to a maximum of 30 days’ salary. Severance benefits must be 

calculated and settled monthly and either deposited in a severance trust fund or accrued in 

the employer’s accounting records and bear interest, as specified in writing by each 

employee. No additional payments and/or deposits related to past services are required. 

18







indicated) 

In the event of unjustified termination, employees have the right to an additional indemnity 

payment of one month’s salary per year of service up to a maximum of 150 days of current 

salary. Furthermore, in the event of unjustified termination, the Venezuelan Labor Law 

requires payment of an additional severance benefit up to a maximum of 90 days of current 

salary based on length of employment. This additional indemnity does not apply when the 

employee voluntary terminates the labor relation. The Company recognizes the costs of this 

additional termination benefits when it is demonstrably committed to either: (i) terminating the 

employment of current employees according to a detailed formal plan without possibility of 

withdrawal, or (ii) providing termination benefits as a result of an offer made to encourage 

employees to voluntary terminate. 

Additionally, the Venezuelan Labor Law requires a mandatory annual profit-sharing 

distribution to all employees in amounts of up to 120 days of salary. The Company made 

distributions equal to 120 days of salary for the years ended December 31, 2007, 2006 and 

2005, totaling Bs. 132,201, Bs. 109,916 and Bs. 88,549, respectively. 

Employee entitlements to annual compensated leave are accrued as earned by the 

employees. 

The Company has a workers’ benefit program designed, among other things, to annually 

reward employee excellence via the voluntary free granting of Company shares (Note 13 (c) - 

Stockholders’ equity - Worker’s benefit fund). This benefit is recognized as an expense when 

the shares are awarded to the worker and the amount is determined based on the market 

value at the date when the shares are granted. 

The Company does not grant stock purchase options, except for the option mentioned in 

Note 13 (d) - Stockholders’ equity - Stock option. 

As of March 10, 2008, certain provisions of CANTV’s 2007-2009 collective bargaining 

agreement are still under negotiation with CANTV’s workers, and the possible effects on the 

2007 consolidated financial statements of the final agreements reached with respect to such 

provisions are not known, 

r) Pension plan and other post-retirement benefits 

The costs of defined benefit pension plan and other post-retirement benefits relating to health 

care expenses are accrued based on actuarial calculations performed by independent 

actuaries, using the projected credit method and nominal discount rates, asset returns, salary 

progressions and projected medical costs, to calculate projected benefit liabilities (Note 15 - 

Retirement benefits). 

Actuarial gains and losses may result from differences between assumptions used for their 

estimates (including inflation rates) and actual results (Note 15 - Retirement benefits). In 

2007 and 2006, cumulative actuarial gains and losses in excess of 10% of the greater of 

projected benefit obligations and market-related value of plan assets are amortized 

19







indicated) 

conservatively and consistently over a period of four years, which was shorter than the 

expected average remaining future service of currently active employees and resulted in a 

faster recognition of cumulative actuarial gains and losses. Beginning in 2008, the Company 

has changed the amortization period for cumulative actuarial gains and losses to the 

expected average future service of current active employees. 

The measurement of pension obligations, costs and liabilities is dependent on a variety of 

long-term assumptions, including estimates of the present value of projected future pension 

payments to plan participants, considering the likelihood of potential future events, such as 

minimum urban wages increases and demographic experience. These assumptions may 

have an effect on the amount and timing of future contributions, if any variation occurs. 

Additionally, the plan trustee conducts an independent valuation of the fair value of pension 

plan assets. 

The discount rate enables us to state expected future cash flows at a present value on the 

measurement date. The Company is required to select a long-term rate that represents the 

market rate for high-quality fixed income investments or for Venezuelan Government bonds, 

and considers the timing and amounts of expected future benefit payments, for which the 

Company has selected the Venezuelan Government bonds. A lower discount rate increases 

the present value of benefit obligations and usually increases expense. The Company’s 

inflation assumption is based on projections by the Ministry of the Popular Power for Finance 

and the Central Bank of Venezuela. The salary growth assumptions consider the Company’s 

long-term actual experience, the future outlook and projected inflation. The expected return 

on plan assets reflects asset allocations, investment strategy and the views of investment 

managers. The actuarial values are calculated based on the Company’s specific experience 

combined with published statistics and market indicators. The plan assets are presented at 

their fair value and those denominated in foreign currency are converted into bolivars using 

the official exchange rate at the date of the financial statements. 

The Company provides certain medical benefits to substantially all retired employees and 

accrues actuarially determined post-retirement benefit costs as active employees earn these 

benefits. 

During 2007, the Company decided to establish a defined contribution pension plan for all 

employees of the subsidiaries Movilnet, CANTV.Net and Caveguías, and for those employees 

of CANTV who began their employment on May 21, 2007 or thereafter. The plan comprises a 

3% contribution from the employee and 3% contribution from the Company. The Company 

has no further payment obligations once the contributions have been paid. The contributions 

are recognized as employee benefit expense when they are due. 

20







indicated) 

s) Foreign currency transactions 

Foreign currency transactions are recorded at the exchange rate as of the transaction date. 

Outstanding balances of foreign currency assets and liabilities are translated into bolivars 

using the official, controlled and fixed exchange rate at the balance sheet date, which was Bs. 

2,150 per US$1 as of December 31, 2007 and 2006 (Note 4 - Balances in foreign currency 

and Note 21 - Exchange controls). Any exchange gain or loss from the translation of these 

balances or transactions is presented as exchange gain (loss), net shown in the 

accompanying consolidated statement of operations. The Company does not engage in 

hedging activities in connection with its foreign currency balances and transactions. 

During the years ended December 31, 2007 and 2006 there was no official devaluation of the 

Bolivar against the U.S. dollar. The devaluation of the bolivar against the U.S. dollar was 

12% for the year ended December 31, 2005. 

t) Fair value of financial instruments 

Financial instruments are recorded in the balance sheet as part of the assets or liabilities at 

their corresponding fair market value. The carrying value of cash and cash equivalents, trade 

accounts receivable and trade accounts payable approximates their fair values since these 

instruments have short-term maturities. Management believes that carrying amounts of 

CANTV and subsidiaries’ loans and other financing obligations subject to market-variable 

interest approximate fair value. The Company has not identified any financial instruments 

that qualify as embedded derivatives. The Company records transactions with financial 

instruments at their transaction date. 

Financial instruments that qualify as derivatives are initially recognized at fair value on the 

date a derivative contract is entered into and are subsequently remeasured at their fair value 

through profit and loss, based on current market value. 

The Company does not have financial instruments that qualify for designation as hedging 

instruments. 

u) Concentration of credit risk 

Although cash and temporary investments, accounts receivable and other financial 

instruments of CANTV and subsidiaries are exposed to a potential credit loss risk, the 

Company’s management considers that this risk is adequately covered by recorded 

provisions. Cash and temporary investments include short-term financial investments, 

primarily certificates of deposit and commercial paper, which have maturities of three months 

or less, in institutions with high creditworthiness. Other financial instruments include 

investments in bonds denominated in bolivars and U.S. dollars. Most of the Company’s 

accounts receivables are from a diversified group of customers and individually do not 

represent a significant credit risk. There is a concentration of Venezuelan Government 

accounts receivables (Note 10 - Accounts receivable from Venezuelan Government entities). 

There is also a concentration of credit risk due to the fact that subscribers accounts 

receivable are all from debtors of the same country. 

21







indicated) 

v) Earnings per share 

Earnings per share is calculated by 778,287,442, 775,950,426 and 776,167,423 average 

common shares outstanding on December 31, 2007, 2006 and 2005, respectively. This 

number of shares excludes workers’ benefit shares, which are considered as treasury stock 

for accounting purposes. Basic and diluted earnings per share are the same for all the 

periods presented, since the Company did not have instruments considered potentially 

dilutive. 

w) Dividend distribution 

Dividend distribution to the Company’s stockholders is recognized as a liability in the 

Company’s financial statements in the period in which the dividends are approved by the 

Company’s stockholders. 

Additionally, the Company recognizes a liability for the minimum dividends required to be 

declared pursuant to the Capital Market Law (Note 13 (b) - Stockholders’ equity - Dividends). 

x) Market and liquidity risk 

The carrying amounts of cash and temporary investments, receivables and payables, and 

short and long-term debt approximate their estimated fair values. 

The Company is exposed to market risk, including changes in interest rates and foreign 

currency exchange rates. 

The Company limits investment risk by only investing in securities of the most solid 

companies and institutions. The Company is averse to investment loss and ensures the 

safety and preservation of its invested funds by limiting default risk, market risk and 

investment risk; therefore, it mainly invests in those investments secured or guaranteed by its 

parent company. The Company sometimes has acquired derivative financial. The Company 

does not expect any material loss in its investment portfolio. 

The Company does not hedge against foreign currency exposures. Currently, U.S. dollars 

are not readily available due to the exchange controls regime in effect since February 5, 2003 

(Note 21 - Exchange controls). 

Prudent liquidity risk management implies maintaining sufficient cash and temporary 

investments, the availability of funding through an adequate amount of committed credit 

facilities and the ability to close out market positions. Due to the dynamic nature of 

underlying businesses, the Company’s treasury aims to maintain flexibility in funding by 

keeping committed credit lines available. 

The Company’s objective when managing capital risk is to safeguard the Company’s ability to 

continue as a going concern in order to provide returns for shareholders and to maintain an 

optimal capital structure to reduce the cost of capital. 

22







indicated) 

y) Total recognized gains and losses (includes those recognized directly in equity) 

Total recognized gains and losses represents changes in stockholders’ equity for the period 

from transactions and other events, and circumstances from non-owner sources. It includes 

all changes in equity for the period, except those resulting from investments by owners and 

distributions to owners. During the years ended December 31, 2006 and 2005, the only 

component recorded directly in equity and not recognized in the statement of operations was 

the unrealized gain (loss) from investments considered as available-for-sale. During the year 

ended December 31, 2007, there is no amount recorded for this concept. 

23 

2007 2006 2005 

Net income 1,023.927 1,130,375 214,408 

Unrealized loss on investments available-for-sale - - (837) 

Realization of gain on investments available-for-sale - (257) (71,260) 

Realization of cumulative translation adjustment - - (39,413) 

Recognized directly in equity - (257) (111,510) 

Total recognized gain and loss 1,023.927 1,130,118 102,898 

3. Concessions and Telecommunications Regulation 

CANTV’s services and tariffs are regulated by the rules established in the Concession 

Agreement (referred to as the Concession), the Telecommunications Law enacted in 2000 

(referred to as the Telecommunications Law) and its Regulations. 

The Telecommunications Law and its Regulations, which provide the general legal framework 

for the regulation of telecommunications services in Venezuela, establish that suppliers of 

public telecommunications services must operate under administrative licenses and 

concessions granted by the Venezuelan Government, through the Ministry of the Popular 

Power for Telecommunications and Information Technology (the Company’s principal 

stockholder). 

The Comisión Nacional de Telecomunicaciones (CONATEL) (the Venezuelan National 

Telecommunications Commission) is an independent regulatory body under the direction of 

the Ministry of the Popular Power for Telecommunications and Information Technology 

(principal stockholder of the Company), created by Presidential Decree in September 1991, 

which has, among others, the authority to manage, regulate and control the use of limited 

resources for telecommunications services, grant administrative licenses and concessions, 

recommend the approval of tariffs and collection of taxes, as well as the promotion and 

protection of free competition together with the Superintendencia para la Promoción de la 

Libre Competencia (Pro-Competencia) (Superintendency for the Promotion of Free 

Competition).







indicated) 

Concession Agreement 

CANTV entered into a Concession Agreement with the Venezuelan Government in 1991 to 

provide, manage and operate national telecommunications services, including wireline 

telephone services, private networks and value-added services, guaranteeing high quality 

service, modernizing and expanding the network, introducing progressive rate rebalancing 

and establishing a framework for the introduction of competition into the market. CANTV did 

not make an initial payment for this Venezuelan Government concession and for accounting 

purposes it was recognized at a symbolic minimum nominal amount. November 2000 

marked the opening of the telecommunications market to competition and the entrance of 

new competitors (Note 3 (c) - Concessions and telecommunications regulation - Regulation - 

Competition). Since June 12, 2000, the Company has been regulated by the Concession, the 

Telecommunications Law and its Regulations (Note 19 (d) - Commitments and contingencies 

- Concessions mandates). 

Significant terms of the Concession are as follows: 

a) The Concession established a special privilege regime of limited concurrence, through 

which the Venezuelan Government designated CANTV, except in certain circumstances, 

as the exclusive provider of basic telephone service, including local, national and 

international access until November 27, 2000. Beginning on that date, any party that 

obtains the corresponding administrative concession is permitted to provide basic 

telecommunications services nationwide. 

b) The Concession is for 35 years (ending in 2026), and is renewable, with no cost, for an 

additional period of 20 years, subject to the approval of the Venezuelan Government and 

satisfactory performance by CANTV of its obligations under the Concession. 

c) Until December 31, 2000, CANTV paid the Venezuelan Government an annual 5.5% of 

billed services by means of a concession tax. Beginning January 2001, the Company is 

required to pay up to 4.8% of gross revenues (Note 3 (a) - Concessions and 

telecommunications regulation - Regulation - Tax regime). These expenses are 

presented in the accompanying consolidated statement of operations as concession and 

other taxes totaling Bs. 157,582, Bs. 127,798 and Bs. 107,363 for the years ended 

December 31, 2007, 2006 and 2005, respectively. 

d) The Concession specifies various penalties that may be imposed on CANTV for 

negligent or intentional violation of its provisions. Depending on the nature of the 

violation, penalties may include a public reprimand, a fine up to 1% of services billed, 

and/or the termination of the Concession. As of December 31, 2007, CANTV has not 

been penalized for any violation. Furthermore, the penalties that have been assessed 

against CANTV for other matters through December 31, 2007 have not been material. 

e) Upon any termination of the Concession, all of CANTV’s real estate, equipment, 

structures and facilities assets utilized in the performance of services under the 

24







indicated) 

Concession would be forfeited to the Venezuelan Government in exchange for a 

payment equal to an amount determined by an expert and independent entity agreed by 

the Venezuelan Government and CANTV. 

On May 21, 2007, the Venezuelan Government, through the Ministry of the Popular Power for 

Telecommunications and Information Technology, assumed operating control of the 

Company, when it acquired ownership of a majority of CANTV’s shares (Note 13 (a) - 

Stockholders' Equity - Capital stock), without changing the terms of the Concession, which 

remain in effect until its expiration date. The regulatory body (CONATEL) is under the 

direction of this Ministry. 

Cellular Concession 

On May 19, 1992, CANTV purchased a cellular service concession (the Cellular Concession) 

from the Venezuelan Government for Bs. 230,766 (Bs. 5,388 in nominal amounts) and 

established the subsidiary Movilnet to operate wireless communications. The Cellular 

Concession was granted for 20 years and is renewable with no cost for an additional 20-year 

period, subject to the satisfactory performance of the obligations established in the Cellular 

Concession. The amount paid for the acquisition of the Cellular Concession is being 

amortized over 40 years using the straight-line method. As of December 31, 2007 and 2006, 

accumulated amortization is Bs. 92,039 and Bs. 86,358, respectively. Amortization expense 

was Bs. 5,681 for each one of the years ended December 31, 2007, 2006 and 2005. 

The Cellular Concession specifies various penalties that may be imposed on Movilnet for 

negligent or intentional violation of its provisions. Depending on the nature of the violation, 

penalties may include a public reprimand, the imposition of fines proportionate to the damage 

caused and/or temporary suspension or termination of the concession. Through December 

31, 2007, no penalties have been imposed on Movilnet for any such violation. 

Upon any termination of the Cellular Concession, all of Movilnet’s real estate, equipment, 

structures and facilities utilized in the performance of services under the Cellular Concession 

would be forfeited to the Venezuelan Government in exchange for a payment equal to the net 

value of such assets recorded for income tax purposes. The net tax value of Movilnet’s 

assets as of December 31, 2007, on such basis was Bs. 3,227,475. 

Beginning in 2001, the tax regime applicable to cellular telephony service operators is up to 

9.3% of gross revenues and with periodic decreases of 1% per annum through 2005 (Note 3 

(a) - Concessions and telecommunications regulation - Regulation - Tax regime). These 

expenses are presented in the accompanying consolidated statement of operations as 

concession and other taxes totaling Bs. 189,410. Bs. 146,046 and Bs. 94,852 for the years 

ended December 31, 2007, 2006 and 2005, respectively. 

On August 14, 2006, CONATEL granted Movilnet the administrative license with the attributes 

of ground mobile radio communications and establishment and use of telecommunication 

networks. Later, on November 28, 2007, CONATEL transformed Cellular Concession into an 

25







indicated) 

administrative license and included the attributes of mobile telephony and transport. 







Cellular Concession for 1900 MHz Band 

On November 28, 2007, Movilnet obtained a cellular concession for the use the radioelectric 

service in the 1900 MHz band (the Cellular Concession for 1900 MHz band) for Bs. 258,000 

(equivalent to Bs. 248.798, which represents the present value of the discounted cash flow to 

be disbursed for the payment of the concession), payable in three installments without 

interest as follows: 

a) Payment of Bs. 129.000 (equivalent to US$60 million at the official exchange rate in 

effect on the date of the subscription of the concession), at the time the concession was 

granted. 

b) Payment of Bs. 64.500 (equivalent to US$30 million at the official exchange rate in effect 

on the date of the subscription of the concession), one year after the date that the 

concession was granted. 

c) Payment of Bs. 64.500 (equivalent to US$30 million at the official exchange rate in effect 

on the date of the subscription of the concession), two years after the date that the 

concession was granted. 

The Cellular Concession for 1900 MHz band was granted for 15 years in accordance to the 

Telecommunications Law Regulations on Administrative Licenses and Concessions for the 

Use of the Radioelectric Spectrum. The Cellular Concession for 1900 MHz band will be used 

for the new GSM cellular network (Note 5 - Property, plant and equipment, net). The amount 

paid for the Cellular Concession for 1900 MHz band will be amortized over 15 years using the 

straight-line method. 

Value-Added Services Concession 

The majority of the Company’s value-added services are provided directly by CANTV’s wholly 

owned subsidiary, CANTV.Net. On October 5, 1995, CONATEL granted to CANTV.Net the 

Value-Added Services Concession, which has an initial term of 10 years and is renewable for 

an additional 10-year period, subject to certain conditions. 

Under the Value-Added Services Concession, CANTV.Net is granted the right to offer voicemail 

services nationwide. Subsequently, the Value-Added Services Concession has been 

expanded to allow CANTV.Net to offer additional services such as Internet access. Pursuant 

26







indicated) 

to the Telecommunications Law, CANTV.Net applied for the conversion of this concession 

into an administrative license. The conversion of concessions into administrative licenses 

had to be completed within two years following the enactment of the Telecommunications 

Law. CONATEL has not issued the administrative license to CANTV.Net. The Company is 

currently performing the necessary formalities to obtain the right to continue offering these 

services. On March 30, 2006, CANTV.Net received a communication from CONATEL 

indicating that all rights and obligations established in the concession granted remain in effect 

until CONATEL completes the transformation of the administrative licenses. 

The Value Added Services Concession requires the payment to CONATEL of an annual 

concession fee equal to 4.3% of the revenues of CANTV.Net (Note 3 (a) - Concessions and 

telecommunications regulation - Regulation - Tax regime). These expenses are presented in 

the accompanying consolidated statements of operations as concession and other taxes 

totaling Bs. 15,507, Bs. 11.693 and Bs. 7,787 for the years ended December 31, 2007, 2006 

and 2005, respectively. 







Regulation 

a) Tax regime 

Beginning in 2001, the Telecommunications Law adopted the tax regime applicable to all 

telecommunications service operators based on gross revenue. The composite tax rate 

established in the Telecommunications Law totals 4.8% and is comprised of the following: 

2.3% activity tax, 0.5% CONATEL funding tax, up to 0.5% spectrum allocation tax, 1% 

Universal Service Fund tax and 0.5% Telecommunications Research and Development Fund 

tax. In addition, cellular service operators became subject to a supplementary tax of up to 

4.5% of their gross revenue (excluding interconnection revenue), which decreased by 1% per 

annum through 2005 when it was eliminated. 

b) Tariffs 

Telecommunications regulations establish regarding tariff matters that operators are free to 

set prices and that only tariffs from operators rendering services in a dominant position will be 

regulated. Asymmetric regulation of rendered services in a dominant position is founded in 

setting “price-caps” and its indexation through the application of the compound index of 

adjustment as established in the Regulations for Basic Telephony Services. 

Since the enactment of the Telecommunications Law and its Regulations in 2000, CONATEL 

has established maximum tariffs as a result of agreements reached with CANTV. These 

agreements cover, in addition to the definition of price-caps for each telecommunication 

27







indicated) 

service, other tariff-related matters including: definition of the compound index of adjustment 

tied to the Wholesale Price Index (WPI) and the devaluation rate of the bolivar against the 

U.S. dollar; establishment of schemes for extraordinary adjustments allowing additional 

adjustments to established tariffs in case of deviations in the projected macroeconomic 

variables included in the compound index of tariff adjustment; changes in residential plans 

and migration of clients between residential plans; and the possibility of incorporation of new 

proposals for additional plans. 

On February 13, 2003, as published in the Official Gazette of Venezuela No. 37,631, the 

Venezuelan Government, as a supplementary measure to the new exchange controls regime, 

instituted price controls for all products considered as essential needs, including residential 

fixed telephone services. The adoption of the price controls has suspended the approval of 

tariff increases applicable to CANTV since 2003 for residential services. In addition, this 

situation has affected approval of tariff increases in non-residential and public telephony 

where tariffs have been frozen since 2004. 

Beginning July1, 2007, CANTV reduced its fixed-to-mobile tariffs by an average of 21%, as 

part of its new corporate strategy and to support the new regulatory framework for 

interconnection matters that CONATEL will announce in the coming months. 

On November 22, 2007, Administrative Ruling No. 1.110 was published in the Official Gazette 

of Venezuela No. 38,816, pursuant to which CONATEL established the price-caps that apply 

to CANTV’s international long distance services for non-residential subscribers and public 

telephony. This Administrative Ruling reiterated the existing price-caps, except for the pricecap 

applicable to Cuba which was increased in 65%. 

On January 3, 2008, the Resolution No. DM 323 and DM 023 was published in the Official 

Gazette of Venezuela No. 38,842, pursuant to which CONATEL established the price-caps 

that apply to CANTV’s international long distance services for residential subscribers. This 

Resolution reiterated the existing price-caps, except for increases of the price-caps applicable 

to Cuba by 107%, Greece by 46%, Hong King by 46%, Honduras by 39% Japan by 107% 

and Hawaii by 206%. 

Currently, CANTV and CONATEL are reviewing various tariff issues relating to basic 

services, including, development of a new tariff proposal for the inclusion of plans for socioeconomic 

sectors with the lowest resources, and the study, design and implementation of a 

new regulatory tariff regime for basic services. 

c) Competition 

Pursuant to the Concession, prior to November 27, 2000, the Company was the sole provider 

of basic telephone services. During that period, the Venezuelan Government could grant 

concessions to operate in population centers with 5,000 or fewer inhabitants if CANTV was 

not providing basic telephone services in such areas and did not contemplate doing so within 

two years, according to the network expansion and modernization plans established in the 

28







indicated) 

Concession. CONATEL granted multi-service concessions to Infonet Redes de Información 

C.A. (Infonet), Corporación Digitel, C.A. (Digitel) and Digicel, C.A. (Digicel) to provide basic 

telecommunications services, except domestic and international long distance services, in 

population centers with 5,000 or fewer inhabitants. On May 18, 2006, CONATEL approved 

the merger of Digitel, Infonet and Digicel. Digitel continues as the surviving entity after the 

merger. 

On November 24, 2000, CONATEL issued regulations based on the Telecommunications 

Law, which established the basic regulatory framework to create an appropriate environment 

for new participants and allowing effective competition. These regulations govern, among 

other things, the sector’s opening, interconnection, administrative licenses and spectrum 

concessions. 

Additionally, CONATEL has granted administrative licenses to offer long distance services to 

the following companies: Convergence Communications de Venezuela (Convergence), 

Veninfotel Comunicaciones, C.A. (Veninfotel), Multiphone de Venezuela, C.A. (Multiphone), 

Telecomunicaciones NGTV, S.A. (New Global Telecom), Totalcom Venezuela, C.A. 

(Totalcom), Etelix.com, C.A. (Etelix), Telcel, C.A. (Movistar), Entel Venezuela, C.A. (Entel), 

LD Telecom Comunicaciones, C.A. (LD Telecom), Convergia de Venezuela, S.A. 

(Convergia), Corporación Intercall, C.A. (Intercall) and Corporación Telemic, C.A. 

(Intercable), most of which offer the service by means of prepaid cards (calling cards). 

Current operators maintaining interconnection agreements with the Company are: Movistar, 

Digitel, Convergence, Veninfotel, Entel, Multiphone, Totalcom, Etelix, New Global Telecom, 

LD Telecom, Convergia, Intercall and Intercable. These agreements permit interoperations 

between CANTV’s basic telecommunications network and local and long distance domestic 

and international services of these companies. 

Effective April 5, 2002, CONATEL initiated a pre-subscription long distance service where 

wireline service customers can access continually and automatically a previously selected 

operator’s domestic and international long distance network without the use of the long 

distance operator’s identification code. 

In 2004, the Venezuelan Government incorporated CVG Telecomunicaciones (currently 

Telecom Venezuela), a telephone company to provide data transmission and other services 

through fiber-optics and Internet protocol platforms in north-central Venezuela and the 

Guayana region, located in the southeast of Venezuela. As of August 14, 2007, Telecom 

Venezuela became a company under the direction of the Ministry of the Popular Power for 

Telecommunications and Information Technology (the Company’s principal stockholder). 

29







indicated) 

d) Universal Service Fund 

The Telecommunications Law provides for the creation of the Universal Service Fund and the 

Telecommunications Research and Development Fund. These funds are created by 

CONATEL from the contributions made by telecommunications companies as part of the 

telecommunications taxes. 

The purpose of the Universal Service Fund is to ensure that every citizen has the opportunity 

to access telecommunications services, including the Internet. This fund is used to subsidize 

the development of infrastructure for the provision of telecommunications services by 

operators in unprofitable areas. 

The Telecommunications Research and Development Fund was created to provide financial 

resources to universities, technology institutes and research institutions to study and research 

telecommunications technology. 

In May 2006, CANTV and CONATEL signed an agreement to provide the installation, 

operation, administration and maintenance of telecommunications infrastructure for the 

connectivity of the civil records’ and notaries’ offices with the General Office of Civil Records 

and Notary Offices of the Ministry of the Popular Power for Interior Affairs and Justice. In 

addition, CANTV and CONATEL signed an agreement to provide the installation, operation, 

administration and maintenance of telecommunications infrastructure for the creation of a 

virtual private network that would connect 47 offices and 100 mobile identification units with 

the main office of the Oficina Nacional de Identificación y Extranjería (ONIDEX) (National 

Office of Identification and Immigration). The funding for this infrastructure of both projects 

will be provided by the Universal Service Fund, and the property rights to the infrastructure 

will be transferred to CANTV once the obligation is met and subject to certain conditions. 

4. Balances in Foreign Currency 

The Company has monetary assets and liabilities in U.S. dollars and liabilities in Japanese 

yen (Note 2 (x) - Summary of significant accounting principles and policies - Market and 

liquidity risk) as of December 31, 2007 and 2006 as shown below: 

(Expressed in millions of U.S. dollars) 2007 2006 

Cash and temporary investments 25 161 

Accounts receivable, net 23 27 

Other assets 11 71 

Trade accounts payable (517) (601) 

Debt obligations (14) (27) 

30 

(472) (369) 

Pension plan assets (Note 15 (a) - Retirement benefits - Pension plan) 349 343







indicated) 

Effective February 5, 2003, the Venezuelan Government and the Central Bank of Venezuela 

signed exchange controls agreements that immediately established limits to foreign currency 

transactions (Note 21 - Exchange controls). 

The Company conducted purchase-sale and exchange transactions with securities in bolivars 

and foreign currency, originating a net income of Bs. 71,873 during the year ended December 

31, 2007, and a net loss of Bs. 60,604 during the year ended December 31, 2006, shown in 

other expense (income), net in the consolidated statement of operations (Note 21 - Exchange 

controls) 

5. Property, Plant and Equipment, Net 

A reconciliation of the carrying amount at the beginning and end of years ended December 

31, 2007 and 2006 is as follows: 

Cost 

December 31, 

2006 

31 

Additions 

Disposals and 

other 

Transfers 

December 31, 

2007 

Plant 

Wireline telecommunications 12,132,881 37,339 (276,863) 347,023 12,240,380 

Wireless telecommunications 1,807,816 48,533 (1,503) 316,487 2,171,333 

Other telecommunications services 44,428 30 - - 44,458 

Buildings and facilities 3,114,475 25,292 (7,915) 82,568 3,214,420 

Furniture and equipment 630,747 12,928 (6,157) 94,260 731,778 

Vehicles 71,993 15,349 (4,337) - 83,005 

Land 74,677 755 (119) - 75,313 

Construction work in progress 201,486 1,110,457 (17,979) (840,338) 453,626 

18,078,503 1,250,683 (314,873) - 19,014,313 

Accumulated depreciation 

December 31, 

2006 

Expense 

Disposals 

and other 

December 31, 

2007 

Plant 

Wireline telecommunications (10,501,314) (403,109) 262,898 (10,641,525) 

Wireless telecommunications (902,511) (244,271) 187 (1,146,595) 

Other telecommunications services (40,142) (3,108) - (43,250) 

Buildings and facilities (2,410,123) (86,883) 1,969 (2,495,037) 

Furniture and equipment (450,342) (90,311) 10,589 (530,064) 

Vehicles (59,334) (8,296) 4,132 (63,498) 

(14,363,766) (835,978) 279,775 (14,919,969) 

Net book value 3,714,737 4,094,344







indicated) 

Cost 

December 31, 

2005 

32 

Additions 

Disposals and 

other 

Transfers 

December 31, 

2006 

Plant 

Wireline telecommunications 12,200,315 19,919 (326,021) 238,668 12,132,881 

Wireless telecommunications 1,294,575 40,171 (2,007) 475,077 1,807,816 

Other telecommunications services 44,428 - - - 44,428 

Buildings and facilities 3,020,535 18,813 (19,446) 94,573 3,114,475 

Furniture and equipment 526,172 9,850 (477) 95,202 630,747 

Vehicles 86,003 5,233 (19,243) - 71,993 

Land 72,020 3,065 (408) - 74,677 

Construction work in progress 181,799 949,229 (26,022) (903,520) 201,486 

17,425,847 1,046,280 (393,624) - 18,078,503 

Accumulated depreciation 

December 31, 

2005 

Expense 

Disposals 

and other 

December 31, 

2006 

Plant 

Wireline telecommunications (10,361,753) (460,837) 321,276 (10,501,314) 

Wireless telecommunications (736,328) (166,547) 364 (902,511) 

Other telecommunications services (36,602) (3,540) - (40,142) 

Buildings and facilities (2,348,346) (80,859) 19,082 (2,410,123) 

Furniture and equipment (388,523) (63,169) 1,350 (450,342) 

Vehicles (71,232) (6,827) 18,725 (59,334) 

(13,942,784) (781,779) 360,797 (14,363,766) 

Net book value 3,483,063 3,714,737 

As of December 31, 2007 and 2006, the balance of fully depreciated assets was Bs. 

11,442,104 and Bs. 10,632,041, respectively. As of December 31, 2007 and 2006, 92% and 

93%, respectively, of the fully depreciated assets relate to wireline telecommunications. 

Labor and other allocable costs included under construction work in progress amounted to 

Bs. 37,357 and Bs. 33,637 for the years ended December 31, 2007 and 2006, respectively. 

As of December 31, 2007 and 2006, construction work in progress mainly includes ongoing 

projects for the expansion of the cellular network under CDMA-1X technology and the new 

cellular network under GSM technology, expansion of the Internet broadband access 

network, and integration and transformation of the Company’s information systems. 

During 2007, the Company began the deployment of a new cellular network with GSM 

technology. As of December 31, 2007, the Company has made capital expenditures of Bs. 

157.253, which are included in the balance of construction work in process, and expects that 

this new technology will be in operation in mid-2008. 

As of December 31, 2007 and 2006, the amount of non-operating assets not classified as 

held for sale were Bs. 776 and Bs. 1,499, respectively. Non-operating assets are mainly land 

and buildings. The Company’s management believes that there is no impairment of these 

assets.







indicated) 

6. Information Systems (Software), Net 

Information systems (software) include the cost of computer systems for internal use, net of 

accumulated amortization. 

A reconciliation of the carrying amount at the beginning and end of the years ended 

December 31, 2007 and 2006 is as follows: 

33 

2007 2006 

Cost 

Beginning of the year 1,625,769 1,437,000 

Additions 194,938 195,681 

Disposals and other (70,569) (6,912) 

End of the year 1,750,138 1,625,769 

Accumulated amortization 

Beginning of the year (1,163,829) (1,094,651) 

Expense (121,256) (71,016) 

Disposals and other 67,292 1,838 

End of the year (1,217,793) (1,163,829) 

Net book value 532,345 461,940 

During 2007, the company made significant disposals of information systems (software). The 

main disposal was the former billing system for wireline services (Note 11 - Accounts 

receivable, net) 

As of December 31, 2007 and 2006, the balance of fully amortized information systems 

(software) was Bs. 1,025,080 and Bs. 987,219, respectively. 

7. Other Assets 

Other assets as of December 31, 2007 and 2006 were comprised of the following: 

2007 2006 

Warranty deposits to suppliers 24,715 152,599 

Assets held for sale 4,827 6,066 

Other 3,389 837 

32,931 159,502 

Warranty deposits to suppliers are granted to foreign suppliers while the Company obtains 

the foreign currency required to make payments for importation of assets and services 

pursuant to the current exchange control regime (Note 21 - Exchange control).







indicated) 

The balance of assets held for sale includes non-operating building and land currently in the 

process of sale, which do not exceed their estimated market value. Beginning in October 

2004, the Company’s management began a sale process through the auction of nonoperating 

property, plant and equipment. During 2007 and 2006, assets with a carrying value 

of Bs. 499 and Bs. 6,066, respectively, were sold through this mechanism, with a gain of Bs. 

3,251 and Bs. 4,468, respectively. 

In September 2004, CANTV’s Board of Directors approved the sale of the investment in the 

International Telecommunications Satellite Organization (INTELSAT) to Zeus Holdings Ltd. 

On January 28, 2005, INTELSAT announced the closing of negotiations with Zeus Holding 

Ltd. The effective sale was approved for an amount of US$34,978,950, equivalent to Bs. 

75,205, which generated in 2005 a realization of Bs. 110,673 corresponding to exchange 

gains, previously included in translation and other adjustments in the statement of changes in 

stockholders’ equity (Note 2 (y) - Summary of significant accounting principles and policies - 

Total recognized gains and losses). 

8. Other Current Assets 

Other current assets as of December 31, 2007 and 2006 were comprised of the following: 

34 

2007 2006 

Value-added tax credits, net (Note 17 - Taxes) 61,719 175,010 

Short-term investments 57,576 70,070 

Prepaid expenses 

Deferred telephone directories costs (Note 2 (o) - Summary of significant 

33,995 11,795 

accounting principles and policies - Cost and expense recognition) 

16,175 

8,441 

Other 7,237 714 

9. Inventories, Spare Parts and Supplies, Net 

Inventories, spare parts and supplies, net as of December 31, 2007 and 2006 were 

comprised of the following: 

176,702 266,030 

2007 2006 

Network equipment inventories 296,732 205,654 

Equipment for sale 289,179 624,035 

Prepaid cards for sale 7,334 7,194 

593,245 836,883 

Less: Allowance for obsolescence and net realizable value of equipment for sale (127,649) (155,744) 

465,596 681,139







indicated) 

Reconciliation of changes generated during the year ended December 31, 2007 and 2006 of 

the allowance for obsolescence and net realizable value of inventories is as follows: 

35 

2007 2006 

Balance at beginning of year 155,744 56,486 

(Release) / expense of the period (9,045) 110,073 

Write-off (19,050) (10,815) 

Balance at the end of year 127,649 155,744 

10. Accounts Receivable from Venezuelan Government Entities 



companies, and agencies at both the state and municipal level (collectively, Venezuelan 

Government entities). 




Stockholders' Equity - Capital stock). 

Government entities generated approximately 7%, 9% and 8%, respectively, of the 

Company’s consolidated revenues for years ended December 31, 2007, 2006 and 2005. 

The following table shows the aging of accounts receivable from Venezuelan Government 

entities as of December 31, 2007 and 2006: 

2007 2006 

Years in which were originated 

2007 196,139 - 

2006 133,728 164,337 

2005 and prior years 93,282 121,768 

Total accounts receivable from Venezuelan Government entities 423,149 286,105 

Less: Present value adjustment (25,843) (26,341) 

Less: Long-term portion (93,025) (55,856) 

304,281 203,908







indicated) 

During the year ended December 31, 2007 and 2006, changes in accounts receivable from 

Venezuelan Government entities are shown below: 

36 

2007 2006 

Balance at the beginning of year 286,105 291,047 

Billings 623,156 631,246 

Collections and adjustments (486,112) (636,188) 

Balance at the end of year 423,149 286,105 

The amounts that central Venezuelan Government entities may pay for telecommunications 

services are established in annual budgets, which do not necessarily coincide with actual 

annual usage. As a result of these budgeting processes and for other macroeconomic 

reasons, a number of Venezuelan Government entities have not timely paid the Company for 

telecommunications services received. In addition, as a result of inflation and devaluation, 

the present value of these balances has been significantly reduced, since these accounts 

cannot bear interest. 

Management has taken actions to try to reduce additional usage and recover prior years’ 

balances, thereby reducing accrued debt in this connection. In addition, collections are being 

reinforced and payment agreements are being negotiated with Venezuelan Government 

entities to reduce payment delays. However, there is no guarantee that the Company will not 

continue to experience significant delays in the collection of these receivables or that inflation 

and devaluation will not continue to reduce the real value of these accounts receivable. 

These amounts depend on Venezuelan Government annual budgets for current usage and 

on payments of extraordinary usage. 

During the years ended December 31, 2007 and 2006, the Company has recorded 

adjustments against revenues of Bs. 5,300 and Bs. 11,570, respectively, in regard to the 

initial present value of an estimated portion of these accounts receivable, due to the projected 

delay in payments from Venezuelan Government entities, included as a reduction of accounts 

receivable from Venezuelan Government entities and as a reduction of revenues, considering 

an average discount rate of short-term Venezuelan National Public Debt Bonds. Any 

subsequent adjustment to the initial fair value estimate is recorded in results of the year. 

During 2007 and 2006, payments received from Venezuelan Government entities have been 

in cash, and therefore, the Company’s management believes all amounts from Venezuelan 

Government entities will be collected in cash.







indicated) 

11. Accounts Receivable, Net 

The Company’s accounts receivable, net as of December 31, 2007 and 2006 are shown 

bellow: 

37 

2007 2006 

Subscribers 

Wireline telecommunications 860,194 587,232 

Wireless telecommunications 126,332 116,652 

Other telecommunications services 157,940 117,897 

International carriers, net 39,886 59,236 

Phone card and prepaid card sold to distributors 69,037 63,797 

Other 43,748 32,812 

1,297,137 977,626 

Less: Provision for doubtful accounts (77,348) (62,617) 

1,219,789 915,009 

Other accounts receivable as of December 31, 2007 and 2006 include Bs. 22.705 of valueadded 

taxes paid in excess by the subsidiary CANTV.Net during 2004 and 2005 (Note 17 - 

Taxes - Value added tax) 

Unbilled revenues of Bs. 116,382 and Bs. 111,339 are included in accounts receivable as of 

December 31, 2007 and 2006, respectively (Note 2 (n) - Summary of significant accounting 

principles and policies - Revenue recognition). 

Reconciliation of changes generated during the years ended December 31, 2007 and 2006 of 

the provision for doubtful accounts is as follows: 

2007 2006 

Balance at beginning of the period 62,617 70,577 

Provision for uncollectible 117,521 65,438 

Write-off (102,790) (73,398) 

Balance at the end of the period 77,348 62,617 

In February 2007, the Company started operating a new billing and collection system for fixed 

telephony services as part of an ongoing project directed towards the integration and 

transformation of the Company’s information systems. During 2007, with this new system 

there have been technical failures in the automated processes of billing and collections for 

fixed telephony services.







indicated) 

12. Cash and Temporary Investments 

The composition of cash and temporary investments balances as of December 31, 2007 and 

2006 is as follows: 

38 

2007 2006 

Cash and banks 301,198 213,573 

Temporary investments in bolivars 420,680 593,151 

Temporary investments in foreign currency 54,433 345,263 

776,311 1,151,987 

As of December 31, 2007, temporary investments in bolivars bear interest rates between 

8.00% and 13.50%, and temporary investments in foreign currency bear interest rates 

between 4.94% and 6.28%. 

13. Stockholders' Equity 

a) Capital stock 

Company capital stock, all issued and fully paid, is represented by 787,140,849 shares with a 

nominal value of Bs. 36.9 each at December 31, 2007, 2006 and 2005, as shown below: 

Number of shares 

Stockholders Class 2007 2006 2005 

Ministerio del Poder Popular para las 

Telecomunicaciones y la Informática (Ministry of the 

Popular Power for Telecommunications and 

Information Technology) 

Banco de Desarrollo Económico y Social de Venezuela 

(BANDES) (Economic and Social Development 

Bank Fund of Venezuela) 

Ministerio del Poder Popular para la Infraestructura 

(Ministry of the Popular Power for Infraestructure) 

D 

B 

B 

626.752.956 

51.899.999 

1 

- 

51.899.999 

1 

- 

51.899.999 

GTE Venholdings B.V. A - 196.401.427 196.401.427 

GTE Venholdings B.V. D - 28.009.177 28.009.177 

Telefónica Venezuela Holding B.V. A - 54.410.144 54.410.144 

Banco Mercantil, C.A. A - 367.139 367.139 

Employees and retirees C 41.451.451 37.514.060 41.645.445 

Public stockholders D 64.153.343 407.140.119 403.263.187 

784.257.750 775.742.066 775.996.519 

Workers’ benefit fund C 2.883.099 11.398.783 11.144.330 

787.140.849 787.140.849 787.140.849 

The Company’s capital stock of Bs. 2,151,299 is composed by Bs 29,047 of nominal or 

historical capital stock and Bs 2,122,252 of accumulated adjustment for inflation until 

1







indicated) 

December 31, 2003 (Note 2 (c) - Summary of significant accounting practices and policies - 

Adjustment for inflation). 

All shares have the same rights for liquidation and/or dividend distribution. 

Class “A” shares could only be held by former members of VenWorld, the consortium that 

acquired 40% of CANTV’s shares in 1991. On February 1, 2002, at a Special Stockholders’ 

Meeting of VenWorld, the liquidation of the Consortium was approved and shares were 

converted into CANTV Class “A” shares. Any Class “A” shares transferred to any entity, not a 

wholly-owned subsidiary of former members of VenWorld, would be automatically converted 

into an equal number of Class “D” shares. As of December 31, 2007, there are no holders of 

Class “A” shares, as all Class “A” shares were acquired by the Venezuelan Government 

pursuant to a public tender offer for CANTV’s shares which commenced on April 9, 2007. 

Class “B” shares may only be held by the Venezuelan Government and/or other entities 

related to the Venezuelan Government. The transfer of Class “B” shares to any non-public 

individual or entity will cause these shares to be automatically converted to Class “D” shares, 

except if they are transferred to CANTV employees or retirees, in which case the shares will 

be converted to Class “C” shares. Until January 1, 2001, Class “B” stockholders had the right 

to elect two principal members of the Company’s Board of Directors and their alternates. 

Thereafter, they may elect only one principal member and the alternate. A majority of Class 

“B” stockholders is required to approve a number of corporate actions, including by-law 

amendments in certain matters. 

Class “C” shares may be held only by employees, retirees, former employees, heirs and 

spouses of employees or retirees of CANTV and its subsidiaries, as well as workers’ 

companies and benefit plans. Any Class “C” shares transferred to any other individual or 

entity different from the aforementioned will be automatically converted to Class “D” shares. 

Holders of Class “C” shares have the right, voting as a separate class, to elect two principal 

members of the Board of Directors (from a total of nine directors) and their alternates, who 

must be retirees or active employees (with at least five years of continuing service) only if 

such Class “C” shares represent at least 8% of CANTV’s capital stock. In the event that 

these shares represent a percentage lower than 8% but equal or higher than 3% of the 

Company’s capital stock, they will be able to elect only one principal member of the Board of 

Directors and the corresponding alternate. In the event that these shares represent a 

percentage lower than 3% of the Company’s capital stock, they will not have the right to elect 

any member of the Board of Directors. 

Class “D” shares are comprised of those resulting from the conversion of Class “A”, “B” and 

“C” shares as described above, and those issued pursuant to capital increases. There are no 

restrictions on the ownership or transfer of Class “D” shares. In accordance with CANTV’s 

by-laws, holders of Class “D” shares have the right to elect, voting together with the holders of 

other class of chares, members of the Board of Directors (principal and alternate), except for 

39







indicated) 

the members of the Board of Directors elected by Class “B” and “C” stockholders, as 

described above. 

On January 8, 2007, the President of the Bolivarian Republic of Venezuela announced the 

intention to nationalize CANTV, because it is considered a strategic company for Venezuela. 

On February 12, 2007, the Venezuelan Government, through the Ministry of the Popular 

Power for Telecommunications and Information Technology, entered into a memorandum of 

understanding with Verizon Communications Inc. and its subsidiary GTE Venholdings B.V. 

(GTE Venholdings) to acquire Verizon’s equity interest in CANTV, held through its 

subsidiaries. 

On April 9, 2007, the Venezuelan Government commenced concurrent public tender offers in 

Venezuela and the United States of America for CANTV’s common shares and American 

Depositary Shares (ADS) at a price of U.S.$2.12 per share (equivalent to Bs. 4,560.43 per 

share calculated at the official exchange rate in effect at the closing date) and U.S.$14.85 per 

ADS, expiring on May 8, 2007. 

On May 16, 2007, the Venezuelan Government announced that it had acquired, through the 

Ministry of the Popular Power for Telecommunications and Information Technology, during 

the tender offer in the United States of America, 61,257,605 ADSs (representing an 

aggregate of 428,803,235 common shares) pursuant to the tender offer in the United States 

of America, and 197,949,721 common shares pursuant to the tender offer in Venezuela. The 

tendered common shares and ADSs included all common shares and ADSs previously held 

by Verizon, through its subsidiaries, and by the other Class “A” shareholders. 

Class “D” shares are traded on the Caracas Stock Exchange, and were traded on the NYSE 

in the form of ADSs, each representing seven Class “D” shares. 

On May 11, 2007, the NYSE notified CANTV that it had suspended CANTV’s ADS from 

trading on the exchange because it had determined that CANTV was no longer suitable for 

listing in light of the circumstances following the tender offer whereby by the Venezuelan 

Government assumed control of CANTV, and the NYSE commenced the formal delisting 

process. CANTV has not arranged for listing of the ADSs on another United Sates securities 

exchange or for quotation of CANTV's securities on any other quotation system in the United 

States of America. Investors that wish to make a trade with ADSs should contact their 

brokers for information on the ability to make trades with ADS in the over-the-counter market 

or exchange their ADSs for underlying Class “D” shares and make a trade with such shares 

on the Caracas Stock Exchange where such shares are listed. 

On June 18, 2006, the NYSE filed in the SEC the notification of the suspension of trading of 

CANTV’s ADSs and the withdrawal of CANTV from that stock exchange, effective June 28, 

2007. 

40







indicated) 

The ADSs and the underlying Class “D” shares remain registered under the Securities 

Exchange Act of 1934, as amended (the Exchange Act of 1934), and the suspension and 

termination of listing of the ADSs by the NYSE does not automatically suspend or terminate 

CANTV's reporting obligations under the Exchange Act of 1934. As a result, CANTV is still 

required to continue to comply with its obligations to submit reports to the SEC until such time 

as it terminates the registration of the ADS in accordance with the SEC’s rules. If CANTV is 

no longer required to comply with its reporting obligations under the Exchange Act of 1934, 

the information CANTV would be required to furnish to holders of ADSs will be substantially 

reduced. As of March 10, 2008, this deregistration process has not been completed. 

b) Dividends 

The Venezuelan Code of Commerce, the Venezuelan Capital Markets Law and the standards 

issued by the CNV regulate the Company’s ability to pay dividends. The Venezuelan Code of 

Commerce establishes that dividends shall be paid solely out of “liquid and collected 

earnings.” The Venezuelan Capital Markets Law stipulates that the Company must distribute 

annually no less than 50% of its net annual income to its stockholders, after income tax and 

legal reserve deductions. Likewise, the Capital Markets Law establishes that at least 25% of 

such 50% shall be distributed in cash. However, if the Company has accumulated losses, net 

income shall be used to offset such deficit. 

According to CNV standards, unconsolidated net income, excluding the equity participation in 

subsidiaries, is the basis for dividend distribution. 

Net income for the year ended December 31, 2007, including dividends received from 

subsidiaries, available for dividend distribution at CANTV’s level as an individual legal entity, 

is as follows: 

Unconsolidated net income for 2007 1,023,927 

Less: equity participation in subsidiaries (510,409) 

Income available as basis for declaring dividends 513,518 

Plus: Dividends paid by subsidiaries during 2007 463,251 

Net income available as base for distribution after considering dividends from subsidiaries 976,769 

The minimum required dividend to be distributed for the year ended December 31, 2007 is 

Bs. 488,382, which was recognized as a liability in the consolidated balance sheet, less the 

portion that corresponds to the workers’ benefit fund of Bs. 1,789, which is eliminated for 

consolidation purposes. 

The Venezuelan Capital Markets Law establishes that dividends must be declared in a 

Stockholders’ Meeting at which the stockholders determine the amount, form and frequency 

of dividend payments. Furthermore, under CNV regulations, companies’ by-laws must state 

their dividend policies. 

41







indicated) 

Beginning in 2002, the Company established guidelines for the annual dividend distribution. 

These guidelines call for the distribution to stockholders of 50% of the annual free cash flow, 

which is defined as cash flows provided by operating activities, less cash flows used in 

investment activities, based on the audited financial statements, net of debt and interest 

payments scheduled for the following year. Annual payment of dividends will be made in 

bolivars following recommendations by the Board of Directors and approval by the Regular 

Stockholders’ Meeting and could be paid in quarterly installments. 

On March 30, 2007, a Regular Stockholders’ Meeting declared a cash dividend of Bs. 922.07 

per share to be paid on April 18, 2007 to stockholders of record at April 12, 2007. 

On November 27, 2006, an Extraordinary Stockholders’ Meeting declared a cash dividend of 

Bs. 307.14 per share to be paid on December 13, 2006 to stockholders of record at 


On March 31, 2006, a Regular Stockholders’ Meeting declared a cash dividend of Bs. 700 per 

share to be paid on April 27, 2006 to stockholders of record at April 18, 2006. 

On March 31, 2005, a Regular Stockholders’ Meeting declared a cash dividend of Bs. 505 per 

share to be paid on April 27, 2005 to stockholders of record at April 20, 2005. 

c) Workers’ benefit fund 

In 1993 the Company set up a bank trust fund known as the “Benefit Fund” with the purpose 

of acquiring Class “C” shares representing up to 1% of CANTV’s capital stock as of 

December 2, 1991, to be distributed to its workers in accordance with benefit plans promoted 

by the Company, one of which is the “Excellence Award.” This contribution is recognized as 

an expense to the extent that the workers receive stock awards, which are granted to 

employees at no cost. On October 24, 2001, a Special Stockholders’ Meeting approved the 

increase of this fund via the purchase of Class “C” shares of up to 2% of the Company’s 

capital stock as of December 2, 1991. As December 31, 2007 and 2006, the trust maintains 

2,883,099 and 11,398,783 shares, respectively, presented in a separate account as a 

reduction in the consolidated statement of changes in stockholders’ equity. 

Trust fund assets are consolidated as part of the Company’s consolidated balance sheet and 

these Class “C” shares are presented as a reduction of stockholders’ equity. 

The shares in the trust are recorded at acquisition cost. Fair value of the shares granted 

during the period was determined based on the market value of the shares at the granting 

date. The Company recognizes an expense as shares are granted to workers, based on their 

market value. Shares may be granted at the Company’s discretion. During the years ended 

December 31, 2007 and 2006, the numbers of shares granted to employees were 288,125 

and 310,080, respectively, and the related expense recognized was Bs. 2,182 and Bs. 2,089, 

respectively. 

42







indicated) 

In September 2007, the Company conducted a plan to award Class “D” shares to active 

employees and retirees, as part of a commitment made by the Ministry of the Popular Power 

for Telecommunications and Information Technology in connection with the tender offer. The 

plan consisted of granting one share for each two shares owned by each employee and 

retiree as of May 28, 2007. Pursuant to this plan, 9,577,859 shares were granted to 5,017 

employees and retirees, and the related expense recognized was Bs. 26,100. 

d) Stock option 

In January 2003 the Board of Directors approved a stock option agreement, pursuant to which 

CANTV had the obligation to sell 875,000 CANTV common Class “D” shares at a fixed price 

of Bs. 2,697.26 per share, exercisable in whole or in part by the counterparty and expiring in 

January 2013. CANTV was able to choose to honor this commitment through a cash 

payment equal to the total difference between the market value of shares at the exercise date 

and the price referred into the option. In February 2007, this agreement was terminated by 

the counterparty and the option was not exercised. Therefore, as of December 31, 2007, 

there is no provision recorded for this stock option agreement. As of December 31, 2006, 

there was provision of Bs. 5.996 to cover the total difference calculated at that date (intrinsic 

value), which was reversed in the 2007 results of operations. 

e) Legal reserve 

The Company and each one of its subsidiaries are required, under the Venezuelan Code of 

Commerce and their corporate by-laws, to transfer at least 5% of each year’s net income to a 

legal reserve in stockholders’ equity until such reserve equals at least 10% of capital stock. 

This reserve is not available for dividend distribution to stockholders. 

14. Debt Obligations 

Debt obligations as of December 30, 2007 and 2006 were comprised of the following: 

43 

2007 2006 

Bank loans in Japanese yen at a fixed annual rate of 5.8%, maturing in 2009 

IFC loans in U.S. dollars at six-month LIBOR interest rates plus a financial margin of 

30,834 48,839 

2%, maturing in 2007 

- 9,406 

Total debt obligations 30,834 58,245 

Less: Current portion (20,556) (28,942) 

Total long-term debt 10,278 29,303 

In February 1990, the Company entered into a loan with the Japan Bank for International 

Cooperation (formerly The Export - Import Bank of Japan) for ¥16,228 million, which was 

used for technological changes in the transmission and urban connection network. This loan 

is being repaid semi-annually and as of December 31, 2007, the outstanding balance is 

¥1,622.8 million.







indicated) 

In 1997 Movilnet signed an agreement with the International Finance Corporation (IFC) for 

two loans totaling US$95 million, which were drawn down during 1998. These loans were 

used for expansion and modernization of the cellular network. The final installment of this 

loan was paid in July 2007. 

As of December 31, 2007, estimated debt payments are: Bs. 20,556 in 2008 and Bs. 10,278 

in 2009, as translated into bolivars at the exchange rate at this date. The Company’s 

management considers that estimated fair value of debt approximates its book value as of 


15. Retirement Benefits 

a) Pension plan 

The Company sponsors a defined benefit pension plan for its employees. The benefits to be 

paid under the plan are based on the employees’ years of service and final salary. As of 

December 31, 2007 and 2006, the Company has trusts funds related to this plan that have 

assets with a fair value of Bs. 862,298 (includes US$349.3 million) and Bs. 968,681 (includes 

US$343.4 million), respectively, to cover plan benefits for eligible employees. Plan assets 

denominated in foreign currency are converted to bolivars using the official exchange rate. 

During 2007, as part of the “Acuerdo Marco” (Master Agreement) and the “Mesa de 

Conciliación” (Mediation Board) (Note 15 (b) - Retirement benefits - Pension litigation and 

Court Ruling), the Company agreed to comply with the Venezuelan Supreme Court ruling 

issued issued on December 13, 2006 and to voluntarily accept the amounts calculated in 

accordance with this decision and proceeded to increase the amounts paid to retirees 

according to the salary increase established in the Company’s 2007-2009 collective 

bargaining agreement. Additionally, the Company agreed to include as part of the pension 

plan a monthly incentive called “Bono Solidario” (monthly incentive), which began in January 

2008, and covered 7,243 retirees but did not cover retirees’ survivors. Management does not 

contemplate increasing the amount of this additional incentive in the future. 

The components of pension expense, included as labor and benefits for the years ended 

December 31, 2007, 2006 and 2005 are as follows: 

44 

2007 2006 2005 

Cost incurred during the year 30,265 18,808 17,305 

Interest cost on projected benefit obligation 409,511 286,320 145,874 

Expected return on assets 

Additional pension obligation due to Supreme Court ruling, “Acuerdo 

Marco” (Master Agreement) and “Bono Solidario” (monthly 

incentive), including the effects on the other components of the 

pension expense during the year (Note 15 (b) - Retirement benefits 

(209,169) (153,445) (158,772) 

- Pension litigation and Court Ruling) 

362,162 

23,043 

694,916 

Curtailment and settlement loss - - 56,909 

Amortization of actuarial losses 26,680 1,341 - 

619,449 176,067 756,232







indicated) 

The accrued pension plan obligations as of December 31, 2007 and 2006 are as follows: 

45 

2007 2006 

Active employees 792,259 659,622 

Retirees 1,377,242 1,166,335 

Projected benefit obligations 2,169,501 1,825,957 

Funded amount in trusts at fair value (862,298) (968,681) 

Past service cost (5,935) - 

Unrecognized net actuarial loss 

Net pension obligations (including current portion of Bs. 214,111 and Bs. 154,087, 

(256,671) (282,224) 

respectively) 

1,044,597 575,052 

Unrecognized net actuarial losses are generated mainly from changes in future estimated 

inflation rates which have a significant impact on pensions since they are not increased by 

inflation. The greater the projected inflation rates, the lower the present value of the projected 

benefit obligation. Due to the volatility of the Venezuelan economy, projected inflation rates 

are revised every year. 

During 2005, the Company negotiated with some targeted employees a voluntary special 

termination program, which consisted of the following: 

a) Immediate retirement at earlier age than otherwise contemplated by the formal plan rules; 

b) Pension benefits calculated as per formal plan rules was supplemented by an amount 

depending on negotiated agreement with the individual targeted; and 

c) A lump sum payment of Bs. 20,923 was also made to targeted individuals. 

The total impact of this specific negotiation was an additional obligation of Bs. 56,909, 

including the lump-sum payments. This amount was recognized as a curtailment and 

settlement loss in 2005. The formal pension plan rules were not modified. 

Reconciliation of the changes generated during the years ended December 31, 2007 and 

2006, in the amount of assets in trusts at fair value is as follows: 

2007 2006 

Amount in trusts at fair value at beginning of year 968,681 710,392 

Additions - 171,782 

Payments (166,116) (39,778) 

Actual return on investments 59,733 126,285 

Amount in trusts at fair value at end of year 862,298 968,681







indicated) 

Percentages by type of investment of the fair value of the pension plan assets are as follows: 

46 

2007 2006 

% % 

Equity securities 56.8 50.2 

Debt securities 41.4 48.8 

Cash and temporary investments 1.8 1.0 

100.0 100.0 

Reconciliation of changes generated during the years ended December 31, 2007 and 2006 in 

the net pension liability recognized is as follows: 

2007 2006 

Net pension liability at the beginning of the year 575,052 684,844 

Expense of the year 619,449 176,067 

Payments and contributions during the year (149,904) (285,859) 

Net pension plan liability at the end of the year 1,044,597 575,052 

Assumptions used to calculate the projected benefit obligations are shown below: 

2007 2006 

% % 

Discount rate 9.30 6.51 

Expected return on plan assets 6.25 7.00 

Compensation increase rate 2.00 1.96 

Urban minimum wage increase (as % of projected inflation) 100.00 100.00 

The long-term assumptions represent estimates of average real interest and compensation 

increase rates, to which the estimated inflation rate is added to convert them into nominal 

rates. Projected inflation rates used for the calculation of liabilities as of December 31, 2007 

and 2006 were as follows: 

2007 

Rate Rate Rate 

Year % Year % Year % 

2008 15.1 2012 9.8 2016 11.5 

2009 12.1 2013 9.1 2017 11.0 

2010 12.1 2014 14.9 

2011 11.0 2015 12.9 

After 2018, projected inflation fluctuates between 9.9% and 14.8% until 2023 and remains on 

12.1% flat thereafter.







indicated) 

2006 

Rate Rate Rate 

Year % Year % Year % 

2007 18.0 2011 16.1 2015 18.4 

2008 21.5 2012 14.3 2016 17.3 

2009 19.9 2013 21.4 

2010 18.1 2014 19.9 

After 2017, projected inflation fluctuated between 15.5% and 20.1% until 2022 and remained 

on 16.8% flat thereafter. 

The mortality assumption for the years ended December 31, 2007 and 2006 was based on 

UP94 Mortality Table (projected to 2000); specimen rates being as follows (number of deaths 

per 1,000,000): 

Age Male Female 

25 669 288 

35 888 481 

45 1,569 950 

55 4,241 2,350 

b) Pension litigation and Court Ruling 

In September 2004, the Sala de Casación Social del Tribunal Supremo de Justicia (the Social 

Chamber of the Supreme Court) issued its ruling dismissing the pension payments litigation 

brought against CANTV by the Federación Nacional de Jubilados y Pensionados de 

Teléfonos de Venezuela (FETRAJUPTEL) (National Federation of CANTV Retirees and 

Pensioners). In January 2005, the Constitutional Chamber of the Supreme Court allowed an 

appeal filed by some members of the Asociación de Jubilados y Pensionados de Teléfonos 

de Venezuela (AJUPTEL-Caracas) (Caracas Association of CANTV Retirees and Pensioners) 

against the decision of the Social Chamber of the Supreme Court issued in September 2004. 

The Constitutional Chamber of the Supreme Court declared the prior decision annulled and 

remanded the case to the Social Chamber of the Supreme Court for a new ruling consistent 

with its decision. The Constitutional Chamber of the Supreme Court’s decision, issued in 

January 2005, also indicated that retiree pensions would be subject to adjustment up to the 

official minimum urban wage. 

In January 2005, CANTV’s management, based on the opinion of its external legal counsels, 

believed at the time that certain matters under court review would be decided on appeal in 

favor of CANTV, and the Company estimated for year-end 2004 a provision to cover the 

potential additional liability with respect to the remaining matters. In accordance with the 

applicable accounting principles, the estimated effect in the pension projected benefit 

obligation was Bs. 71,918, which was recorded in the consolidated financial statements of 

2004 as a provision for pension. 

47







indicated) 

On July 26, 2005, the Social Chamber of the Supreme Court issued its revised decision in the 

lawsuit brought by FETRAJUPTEL regarding the adjustment of pensions of retirees of 

CANTV. The decision required CANTV to adjust the pensions of retirees up to the official 

minimum urban wage, retroactive to December 30, 1999. In addition, the decision indicated 

that pensions below the official minimum urban wage should be adjusted in proportion to the 

salary increases that resulted from the collective bargaining process from January 1, 1993 to 

December 1999. This decision applies to current and future retirees and their eligible 

survivors. On October 14, 2005, the Social Chamber of the Supreme Court denied a request 

for clarification of the July 26, 2005 decision filed by the parties. 

On December 31, 2005, CANTV, based on the interpretation of the ruling that required that 

pensions paid after December 30, 1999 should not be lower than the official minimum urban 

wage, recorded an additional expense and raised to Bs. 764,553 its accumulated provision 

related to additional pension obligations due to the Supreme Court ruling to reflect the 

estimated additional pension liability, which was estimated based on actuarial calculations 

including the retroactive payments and the projected benefit obligation, and incorporating the 

new assumption related to the minimum urban wage increase as a percentage of projected 

future inflation. 

The execution of the Social Chamber of the Supreme Court’s ruling was being administered 

by the Juzgado Quinto de Primera Instancia de Sustanciación, Mediación y Ejecución del 

Área Metropolitana de Caracas, (the Execution Court) (the Fifth Court of First Instance of 

Substantiation, Mediation and Execution of the Metropolitan Area of Caracas), which 

appointed the Central Bank of Venezuela to perform the necessary calculations to determine 

the actual amounts due to the beneficiaries. On June 6, 2006, the Central Bank of Venezuela 

concluded its analysis of damages but failed to specify the amount payable by CANTV to 

each retiree pursuant to the Social Chamber of the Supreme Court’s ruling, and defined eight 

possible payment scenarios depending on the inclusion of different items. Both parties 

objected the analysis, and therefore, the Execution Court appointed the Ministry of the 

Popular Power for Finance and the Servicio Nacional Integrado de Administración Aduanera y 

Tributaria (SENIAT) (the National Integrated Service of Customs and Taxes) to perform a new 

expert calculation. 

Pursuant to the ruling of the Social Chamber of the Supreme Court’s, CANTV agreed to 

adjust current pension payments up to the official minimum urban wage beginning February 

1, 2006. However, in accordance with the criteria of the Execution Court, valid adjustments 

could only be made individually upon written request from the beneficiary whose pension fell 

below the minimum urban wage level. 

On August 2, 2006, the Execution Court issued its ruling in which revoked the appointment of 

the Ministry of the Popular Power for Finance and appointed the General Controller of the 

Republic in its place. 

48







indicated) 

In August 2006, the Execution Court in charge of administering the decision of the Social 

Chamber of the Supreme Court decided that beginning September 1, 2006, CANTV must 

adjust all retirees’ pensions that were lower than the official minimum urban wage to the new 

effective minimum urban wage established by the Venezuelan Government, and it lifted the 

written request requirement. Beginning September 1, 2006, none of CANTV’s pension 

beneficiaries is collecting monthly pension payments lower than the minimum urban wage. 

On November 14, 2006, the General Controller of the Republic and SENIAT issued the new 

expert report. 

On December 13, 2006, the Juzgado Trigésimo Séptimo de Primera Instancia de 

Sustanciación, Mediación y Ejecución del Trabajo del Circuito Judicial del Área Metropolitana 

de Caracas, (the Thirty Seventh Court of First Instance of Substantiation, Mediation and 

Labor Execution of the Circuit Court of the Metropolitan Area of Caracas) announced its ruling 

that the amounts due and the corresponding payments to retirees had been finally 

determined, and the calculations of the two new independent experts were delivered as 

ordered by the Execution Court. CANTV agreed to make the retroactive payments to more 

than 4,000 retirees to provide an adjusted pension equal to the minimum wage pursuant to 

the Execution Court’s decision. For the cases CANTV had accepted, the final determination 

of retroactive payments resulted in an additional Bs. 23,043 pension obligation expense and 

liability. However, CANTV appealed the decision expressing disagreement with the expert’s 

methodology and benefits calculation, mainly in those cases in which pension adjustments 

would result in payments in excess of the minimum wage. In 2006, CANTV created a trust 

funded with Bs. 153,859 in order to cover the retroactive obligation as a result of the Supreme 

Court ruling. 

On April 16, 2007, the Tribunal Segundo Superior para el Régimen Procesal Transitorio del 

Área Metropolitana de Caracas (the Second Court for the Transitory Procedural Regime of 

the Circuit Court of the Metropolitan Area of Caracas) announced its decision on the 

determination of retroactive payments performed by the appointed experts and approved by 

the Thirty Seventh Court of First Instance of Substantiation, Mediation and Labor Execution of 

the Metropolitan Area of Caracas on December 13, 2006. The decision rejected the majority 

of the claims introduced by pension beneficiaries and also declined to consider CANTV’s 

claim regarding the calculations of amounts exceeding the official minimum urban wage 

benefits. On April 24, 2007, CANTV filed an appeal with the Social Chamber of the Supreme 

Court of the decision of the Second Court for the Transitory Procedural Regime of the Circuit 

Court of the Metropolitan Area of Caracas of the calculations performed by the experts with 

respect to amounts exceeding the official minimum urban wage benefits. 

On July 13, 2007, CANTV announced that it agreed to accept the decision issued on 

December 13, 2006 by the Thirty Seventh Court of First Instance of Substantiation, Mediation 

and Labor Execution of the Circuit Court of the Metropolitan Area of Caracas, which was 

confirmed on April 16, 2007 by the Second Court for the Transitory Procedural Regime of the 

Circuit Court of the Metropolitan Area of Caracas. CANTV thereby agreed to accept the final 

49







indicated) 

decision to be rendered by the Social Chamber of the Supreme Court in the appeal of the 


Metropolitan Area of Caracas. In the event that the appeal was admitted, the Company 

would pay any additional amounts due to retirees as a result of the final ruling. 

In August 2007, CANTV proposed the execution of an “Acuerdo Marco” (Master Agreement) 

by the retirees in order for them to receive the corresponding retroactive pension payments. 

In September 2007, the Venezuelan Attorney General’s Office recommended that retirees 

sign the “Acuerdo Marco” (Master Agreement) at the “Mesa de Conciliación” (Mediation 

Board) at the Supreme Court, so that any differences or calculation errors as well as any 

other disagreements regarding any items to be recognized could be resolved in that setting. 

On October 10, 2007 CANTV and its retirees began meetings at the Supreme Court for the 

signing of the “Acuerdo Marco” (Master Agreement) and installed the “Mesa de Conciliación” 

(Mediation Board) in Caracas and in other five regions of the country. 

The “Acuerdo Marco” (Master Agreement) contemplates payments to retirees of the amounts 

established in the decision issued by Thirty Seventh Court of First Instance of Substantiation, 

Mediation and Labor Execution of the Circuit Court of the Metropolitan Area of Caracas, 

which was confirmed on April 16, 2007 by the Second Court for the Transitory Procedural 

Regime of the Circuit Court of the Metropolitan Area of Caracas. Additionally, CANTV 

updated the amounts due to the payment date and increased the amounts to be paid to its 

retirees based on the salary increase established in the collective bargaining agreement for 

2007-2009. The “Acuerdo Marco” (Master Agreement) covers all retirees identified in this 

court decision and all those who decide to become parties. In addition, CANTV decided to 

extend the “Acuerdo Marco” (Master Agreement) to the retirees’ survivors, subject to legal 

certification of their status and in accordance with applicable law after being legally certified of 

their condition and according to the legal regulations. 

As of December 31, 2007, 7,239 retirees representing 89% of all total CANTV retirees, have 

signed the “Acuerdo Marco” (Master Agreement). During 2007, the payments made related 

to the December 13, 2006 court decision were Bs. 166,116. 

During 2007, as a consequence of the “Acuerdo Marco” (Master Agreement), the Company 

recorded an additional expense of Bs. 291,068 which includes Bs. 77,178 of retroactive 

benefits. In addition, the Company recorded as an expense Bs. 71,094 for the “Bono 

Solidario” (monthly incentive), which, beginning in January 2008, is being paid to the retirees 

as determined during the “Mesa de Conciliación” (Mediation Board) process managed by the 

Social Chamber of the Supreme Court. 

During the period that this labor claim was under litigation, the Company followed IAS 37, 

“Provisions and contingent liabilities,” for measurement and disclosure. Under this approach, 

the total estimated additional obligation was immediately recognized as expense. In August 

2005, after a final court ruling was issued, the total contingent liability that was recognized 

50







indicated) 

under IAS 37 was transferred to the pension obligations. Thereafter, the Company has 

followed IAS 19, “Employee benefits,” for measurement and disclosure of this additional 

pension obligation. 

c) Post-retirement benefits other than pensions 

The Company records medical expenses related to accrued post-retirement benefits other 

than pensions, based on actuarial calculations. 

The components of other post-retirement benefits expense, included as labor and benefits for 

the years ended December 31, 2007, 2006 and 2005 are as follows: 

51 

2007 2006 2005 

Benefits earned during the year 18,716 13,795 12,110 

Interest cost on projected benefit obligation 288,108 182,179 181,983 

Curtailment loss - - 24,430 

Past service cost 6,601 - - 

Amortization of actuarial losses 14,528 - - 

327,953 195,974 218,523 

The accrued other post-retirement benefit obligations as of December 31, 2007 and 2006 are 

as follows: 

2007 2006 

Active employees 411,369 343,426 

Retirees 1,186,108 853,102 

Accumulated post-retirement benefit obligation 1,597,477 1,196,528 

Unrecognized net actuarial loss 

Accrued post-retirement benefit obligations (including current portion of Bs. 110,030 and 

(338,885) (177,742) 

Bs. 88,188, respectively) 

1,258,592 1,018,786 

Reconciliation of changes generated during the years ended December 31, 2007 and 2006 in 

the net liability recognized is as follows: 

2007 2006 

Accrued post-retirement benefit obligations at the beginning of the year 1,018,786 893,854 

Expense of the year 327,953 195,974 

Payments made during the year (88,147) (71,042) 

Accrued post-retirement benefit obligations at the end of the year 1,258,592 1,018,78







indicated) 

Assumptions used to calculate post-retirement benefit obligations are shown below: 

52 

2007 2006 

% % 

Discount rate 9.30 6.49 

Projected medical cost increase 2.80 2.00 

The long-term assumptions used for other post-retirement benefits represent estimates of 

average real interest and compensation increase rates, to which the estimated inflation rate is 

added to convert them into nominal rates. 

Actuarial assumptions are annually reviewed and changed due to the volatility of the 

Venezuelan economy. During 2005 the long-term actuarial assumptions were reviewed, and 

based on this the only change made was on the projected inflation. As a result of the 

Supreme Court ruling described in section (b) of this note, in 2005 the Company developed 

an assumption to project the minimum urban wage increases. 

At the end of 2006, the actuarial assumptions were revised. Based on additional analysis 

performed by management, the mortality table changed from 1951 Annuity Mortality Table to 

UP94 Mortality Table (projected to 2000), which is a better match to CANTV’s mortality 

experience in recent years. Additionally the projected inflation rates were updated according 

to the current economics expectation in the country. The effects of these changes in 

estimates were accounted as accumulated actuarial losses. 

During 2007, as part of the agreements reached with retirees, CANTV provided certain 

special benefits consisting of wireline and wireless services to its retirees. The Company’s 

management believes that these telephony benefits do no represent an additional cost and 

that they will generate sufficient revenues to cover the related costs. 

d) Defined contribution pension plan 

During 2007, the Company decided to establish a defined contribution pension plan for all 

employees of the subsidiaries Movilnet, CANTV.Net and Caveguías, and for those employees 

of CANTV who began their employment on May 21, 2007 or thereafter. The plan comprises a 

3% contribution from the employee and 3% contribution from the Company. During the year 

ended December 31, 2007, the Company recorded Bs. 2,580 for this expense in the 

consolidated statement of operations.







indicated) 

16. Other Current Liabilities 

Other current liabilities as of December 30, 2007 and 2006 were comprised of the following: 

53 

2007 2006 

Concession tax (Note 3 - Concessions and telecommunications regulation - Concession 

agreement) 121,769 99,622 

Subscriber reimbursable deposits 5,600 35,213 

Advances received from the Universal Service Fund 14,785 18,017 

Accrued liabilities 85,033 91,512 

Municipal and other taxes 6,539 23,879 

Interest payable 2,392 3,245 

Other 19,185 9,800 

255,303 281,288 

Subscriber reimbursable deposits represent warranty payments from wireline subscribers 

when services are activated, which must be refunded when the subscription is cancelled. 

During 2007 and 2006, based on management analysis and in accordance with the 

Venezuelan Telecommunications Law, Bs. 35.025 and Bs. 43,083, respectively, were 

recognized as income related to subscriber deposits of customers who lost the refund rights 

due to a default in compliance of their contract terms. 

Advances received from the Universal Service Fund relate to funds received from CONATEL 

for the installation, operation, administration and maintenance of telecommunications 

infrastructure for the two projects assigned to CANTV according to the agreements 

subscribed with CONATEL (Note 3 (d) - Concessions and telecommunications regulation - 

Regulation - Universal Service Fund). 

Accrued liabilities mainly include employee’s withholding and employer’s contributions 

payable according to labor regulations. 

17. Taxes 

Income tax 

According with current legislation, CANTV and its subsidiaries must individually pay income 

tax computed under the historic cost convention, plus or minus the inflation adjustment of 

non-monetary assets and liabilities and of initial stockholders’ equity for tax purposes. 

The main reconciling items between the financial and tax result relate to the effect of the 

regular inflation adjustment for tax purposes, the provision for uncollectible accounts, pension 

plan and provisions for litigation. 

The Venezuelan Income Tax Law authorizes a tax credit for new investments in property, 

plant and equipment. Any portion of the credit not used in the year it arises may be carried 

forward for three years.







indicated) 

Pursuant to the Partial Amendment to the Income Tax Law effective October 22, 1999, tax 

credits for new investments in property, plant and equipment were available for up to 10% of 

the investments for the five years following the enactment of this law, effective until December 

31, 2004. 

On December 28, 2001, the Venezuelan Government published a Partial Amendment of the 

Venezuelan Income Tax Law. Certain interpretations of the Venezuelan Income Tax Law 

concluded that investment tax credits were effective for the five years following the enactment 

of the 2001 Amendment, making them available until December 28, 2006. This interpretation 

was not accepted by SENIAT. Accordingly, the Company stopped recording investment tax 

credits since January 1, 2005. 

On July 10, 2006, the Company received the opinion from SENIAT agreeing to apply 

investment tax credits until December 28, 2006. Accordingly, the Company’s management 

prepared substitute tax returns for fiscal year 2005, which resulted in Bs. 91,205 in tax 

credits, which reduced the 2006 income tax expense. As of December 31, 2007 and 2006, 

the Company did not have any carry-forward tax credits available to be compensated in future 

periods. 

On September 25, 2006, the Venezuelan Government published, in the Official Gazette of 

Venezuela No. 38,529, the Partial Amendment of the Venezuelan Income Tax Law. This 

Amendment includes the extension of 10% investment tax credits on telecommunications 

companies for five additional years. 

The Venezuelan Income Tax Law also allows tax losses to be carried forward and recovered 

over three years from the year they were incurred and over one year for tax losses from tax 

inflation adjustments. As of December 31, 2007 and 2006, the Company did not have tax 

losses to be carried forward in future years. 

The (benefit) provision for income taxes for the years ended December 31, 2007, 2006 and 

2005 is as follows: 

54 

2007 2006 2005 

Current 302,018 186,576 147,881 

Deferred (benefit) (552,461) (337,460) (357,426) 

(250,443) (150,884) (209,545)







indicated) 

Reconciliation between total income taxes presented in the consolidated statement of 

operations and the amount that would be computed by applying the statutory income tax rate 

to income before income taxes, is as follows: 

2007 % 2006 % 2005 % 

Accounting income before income tax 773.484 979,491 4,863 

Statutory income tax rate 34% 34% 34% 

Theoretical tax provision at statutory income tax rate 262,985 34.0 333,027 34.0 1,653 34.0 

Tax inflation adjustment of the year, net (415,769) (53.8) (262,566) (26.8) (208,319) (4,283.8) 

Investment tax credits (141,721) (18.3) (199,761) (20.4) - - 

Other non-taxable and non-deductible items, net 44,062 5.7 (21,584) (2.2) (2,880) (59.2) 

Income tax (benefit) (250,443) (32.4) (150,884) (15.4) (209,545) (4,309.0) 

The components of deferred income tax asset as of December 31, 2007 and 2006 are as 

follows: 

55 

2007 2006 

Provision for uncollectible 26,302 21,453 

Provision for inventories’ obsolescence and net realizable value 43,386 51,483 

Concession and municipal taxes 48,420 42,642 

Pension and other post-retirement benefit obligations 783,145 539,884 

Accruals not deductible until paid 

Differences in tax vs. book value of non monetary assets originated mainly due to 

39,944 47,446 

inflation adjustment for tax purposes 

702,552 414,016 

Provision for litigation 76,404 50,768 

Total deferred tax asset 1,720,153 1,167,692 

The amount of the non-current portion of deferred tax that is expected to be recovered or 

settled over 12 months is Bs. 1,478,271 and Bs. 933,271 for 2007 and 2006, respectively. 

Tax dividend 

Dividends declared by Venezuelan companies, generated by net income in excess of the 

taxable net income determined in conformity to the Income Tax Law, will be subject to a tax 

dividend at the moment of payment. These dividends will be subject to a proportional tax rate 

of 34%. This tax is subject to a total withholding at the moment of payment. Stock dividends 

will be subject to an advance income tax of 1% over the total amount of the dividend 

declared, which will be credited to the proportional income tax to be paid in the final tax 

return. 

Value added tax 

The value added tax is based on a tax credit system and applies to the different stages of 

production and sales. It is payable based on the value added at each of these stages. The 

value added tax rate is set annually through the Venezuelan Budget Law and as of December 

31, 2007 the applicable rate is 9% (14% from October 2005 until February 2007, and 11% from







indicated) 

February 2007 until July 2007). The Value Added Tax Law also introduced effective 

September 2002, an additional 10% tax on defined luxury goods and services. 

During 2006 and 2007, the subsidiary CANTV.Net detected value-added taxes paid in excess 

during 2004 and 2005. The subsidiary’s management introduce a reimbursement request to 

SENIAT, and at this date ignores the amount that would be recognized by SENIAT and when 

the reimbursement would be made. 

Bank debit tax 

The bank debit tax is levied upon debits or withdrawals made from current and savings 

accounts, custody deposits, or any other type of demand deposit, liquid asset funds, trust 

funds and other financial market funds or financial instruments transacted by individuals or 

corporations with Venezuelan banks and financial institutions for transactions in excess of 40 

tax units. The applicable tax rate was 0.5% for the years ended December 31, 2006 and 

2005. During the years ended December 31, 2006 and 2005, the Company incurred bank 

debit tax expense of Bs. 2,427 and Bs. 20,072, respectively. On February 8, 2006, the Law 

repealing this tax was published in Official Gazette of Venezuela No. 38,375, effective 

beginning February 10, 2006. 

Financial transactions tax 

On October 5, 2007, the extraordinary Official Gazette of Venezuela No. 5,852, was 

published the Financial Transactions of Corporations and Unincorporated Economic Entities, 

which will start on November 1, 2007 and will remain in force until December 2008, which 

establishes that debits in bank accounts, custody deposits or any other type of demand 

deposit, liquid asset funds, trust funds and other financial market funds or financial 

instruments transacted, performed in banks or other financial institutions, a 1.5% tax will 

apply. This tax is not deducible from the income tax. This Law establishes that all 

Government entities with or without enterprise purposes are exempt of this that, by this 

reason, CANTV and its subsidiaries are exempt of this tax. 

Municipal tax on telecommunications services 

In accordance with the Municipal Power Organic Law, which became effective on January 1, 

2006, a tax is established based on gross revenues effectively earned in the tax period for 

telecommunications activities in the municipality. This tax is different to the taxes established 

on the Telecommunications Law. 

The applicable rate for telecommunications activities could not exceed 1% until the 

Telecommunications Law establishes another rate. The telecommunications companies 

should adapt the information systems to provide billing information for each municipality. 

For the years ended December 31, 2007 and 2006, the Company has incurred Bs. 82,553 

and Bs. 65,603, respectively, in municipal tax on telecommunications services included in the 

accompanying consolidated statement of operations is presented as concession and other 

taxes. 

56







indicated) 

18. Transactions with Related Parties 



Company, when it acquired a majority of CANTV’s outstanding shares following the 

completion of a tender offer (Note 13 (a) - Stockholders' Equity - Capital stock). 



companies, and agencies at both the state and municipal level (Note 10 - Accounts 

receivable from Venezuelan Government entities). Additionally, during 2007, the Company 

recorded as expenses Bs. 38,611 for basic services of electricity, water supply and mail 

services with Venezuelan Government entities. 

Until May 21, 2007, and during the years 2006 and 2005, in the normal course of business, 

the Company entered into transactions with certain of its previous stockholders and their 

respective affiliates, which included purchases of inventories, supplies, plant and equipment, 

technical and administrative assistance and net revenue (expense) related to settlement of 

international telephone traffic with these affiliates. Transactions for technical and 

administrative assistance relate to consulting services, support to implement new 

technologies, strategic planning and analysis, training and personnel services, among others. 

Also included are salaries, pension, retirement benefits and other benefits for certain 

executives. The balances of these transactions for the years ended December 31, 2006 and 

2005 are shown below: 

57 

2006 2005 

Purchase of inventories, supplies, plant and equipment of stockholders’ affiliates 4,557 75,307 

Technical and administrative assistance expenses 26,378 27,131 

Net (expense) income related to the settlement of international telephone traffic with affiliates (6,685) 1,754 

For the years ended December 31, 2007, 2006 and 2005, the aggregate amount of 

compensation paid by the Company to all principal directors, alternate directors and executive 

officers was Bs. 9,480, Bs. 11,419, and Bs. 9,928, respectively, and the aggregate amount 

accrued by the Company at December 31, 2007 and 2006 to provide pension, retirement or 

similar benefits for executive officers, pursuant to existing plans, was Bs. 2,618 and Bs. 

6,576.







indicated) 

19. Commitments and Contingencies 

The Company has the following commitments and contingencies: 

a) Capital expenditures 

The Company’s payment commitments as of December 31, 2007 and 2006 in respect of 

capital expenditures amount to approximately US$182 million y US$86 million, respectively. 

b) Operating leases 

The Company leases equipment and real property under operating leases for periods of one 

year or less. Lease agreements generally include automatic extension clauses for equal 

terms, unless written termination notification is provided. 

The Company’s operating leases expense was Bs. 52,680, Bs. 51,284 and Bs. 42,345 for the 

years ended December 31, 2007, 2006 and 2005, respectively. 

c) Litigation and provision for litigation 

The Company is involved in a number of legal and administrative proceedings; the main 

cases are presented below: 

Income tax: 

In May 2000 and December 1999, SENIAT notified CANTV and Movilnet of additional tax 

assessments amounting to Bs. 271,179 and Bs. 26,954, respectively, mainly related to the 

rejection of investment tax credits used for fiscal years ended December 31, 1994, 1995, 

1996 and 1997. SENIAT objected to these credits claiming that telecommunications activities 

do not qualify as industrial activities. These assessments were appealed before the Tribunal 

Superior Sexto de lo Contencioso Tributario (Sixth Court of Contentious Matters) and, in the 

opinion of management and its legal counsel, there is a high probability of a ruling in favor of 

CANTV and Movilnet. It is important to point out that in 1999 this Court ruled in favor of 

another telecommunications company. However, that decision was appealed by SENIAT and 

a final ruling is pending. Based on the opinion of the Company’s management and its legal 

counsel, no provision has been recorded. 

In June 2002 Caveguías was subject to an additional tax assessment by SENIAT of 

approximately Bs. 44,312. This assessment was in respect of income tax returns for the 

years ended December 31, 1996, 1997, 1998 and 1999, in which SENIAT objected to the 

deferral of revenue in respect of the sale of advertising space. The Company appealed these 

assessments before the Tribunal Superior Octavo de lo Contencioso Tributario (Eighth Court 

of Contentious Matters). In the opinion of management and its legal counsel, there is a high 

probability of a favorable decision for Caveguías, accordingly, no accrual or provision has 

been recorded. 

58







indicated) 

Value-added tax: 

During February 2004, CANTV Telecommunication Centers were subject to additional tax 

assessments by the tax authorities in two states of the central region of Venezuela. As a 

result of this assessment, 37 centers received sanctions including fines and were closed for 

48 and 72 hours as a result of their non-compliance with certain value added tax matters. 

Some of the sanctions were effective at that moment while others are currently being 

appealed. There is a risk for CANTV that Telecommunication Centers could request CANTV 

to assume some responsibility as business allies for the periods 2001 to 2003. CANTV has 

set aside a provision for this contingent liability. Based on the opinion of legal counsel 

handling these proceedings, Company management believes that the provision is reasonable 

to cover this risk. 

In September 2006, SENIAT notified CANTV of additional tax assessments amounting to Bs. 

21,551 related to revision of the value added tax paid by CANTV for the periods between 

January 2002 and December 2003. In October 2006, SENIAT notified CANTV.Net of 

additional tax assessments amounting to Bs. 3,804 related to revision of the value added tax 

paid by CANTV.Net for the periods between January 2003 and July 2005. The objections 

presented by SENIAT to the tax assessments were based on the lack of verification of tax 

credits. In November 2006 and December 2006, the Company presented administrative 

appeals of the tax assessments of CANTV and CANTV.Net, respectively. On September 12, 

2007, CANTV.Net received the final resolution in respect of the Administrative Summary, 

which confirmed the tax assessment for Bs. 940 and revoked Bs. 2,497. On October 17, 

2007, CANTV.Net presented an administrative appeal against the tax assessment of Bs. 940. 

On October 31, 2007, CANTV received the final resolution in respect of the Administrative 

Summary, which partially revoked the tax assessment for Bs. 19,845 and partially confirmed it 

for Bs. 1,705. On December 5, 2007, CANTV paid Bs. 544, and on January 14, 2008, 

CANTV presented an administrative appeal of the tax assessment of Bs. 1,161. The 

administrative appeals are awaiting final decision. Based on the opinion of external legal 

counsel, considering the documentation submitted to SENIAT by CANTV and CANTV.Net in 

the administrative appeals, the Company believes that these tax assessments will be decided 

favorably for the companies; accordingly, no provision has been recorded in respect of these 

inspection reports. 

Telecommunications tax: 

In December 2004, CONATEL notified CANTV of inspection reports resulting from their 

review of tax payments called for by the Telecommunications Law, made by CANTV in 2000 

and Movilnet and CANTV.Net for 2000 to 2003. The main concepts objected to by CONATEL 

in determining the tax base for computation of this tax are the deduction of uncollectible writeoffs 

and discounts granted to customers. In addition, CONATEL objected to Movilnet’s 

exclusion of net interconnection revenue from the tax base for the Special 

Telecommunications Tax of Wireless Services. In January 2006, the Company received the 

final resolution from CONATEL in respect of the Administrative Summary indicating total 

additional taxes, penalties and interest of Bs. 8,125 for CANTV, Bs. 92,866 for Movilnet and 

Bs. 667 for CANTV.Net. In February 2006, the Company presented an administrative appeal 

59







indicated) 

to the tax assessments and was awaiting a formal response from the tax authorities. In 

December 2006, CONATEL notified CANTV of inspection reports for net taxes of Bs. 6,920 

resulting from their review of tax payments called for by the Telecommunications Law, made 

by CANTV for the periods from January 2001 to December 2003. The main issues objected 

to by CONATEL in determining the tax base for computation of this tax are the deduction of 

uncollectible write-offs and discounts granted to customers. Beginning in fiscal year 2007, 

CANTV, Movilnet and CANTV.Net, changed their view that uncollectible write-offs and 

discounts granted to customers should be deducted from the tax base for computation of 

telecommunications taxes. In this respect, beginning January 1, 2007, CANTV, Movilnet and 

CANTV.Net calculate the tax base for telecommunication taxes including these concepts. 

As of December 31, 2007, the Company’s management recorded a provision of Bs. 123,443 

for this concept. In January and February 2008, the Company paid Bs. 48,074 regarding the 

taxes objected by CONATEL for the years 2000 to 2003. 

Labor lawsuits: 

In addition, an important number of other labor-related lawsuits and claims have been made 

against CANTV for approximately Bs. 567,521 (including inflation adjustment of the lawsuits), 

most of which are related to special retirement initiatives, employee severance benefits and 

other benefits related to early retirement. These lawsuits are currently pending and, as of the 

date of these financial statements, their final outcome is not predictable. CANTV has settled 

a number of these cases through mediation and negotiation with the parties involved, and is 

currently in the process of resolving claims and lawsuits filed by former employees to reduce 

the number of lawsuits against the Company. 

Other legal proceedings: 

In June 2003, a commercial party introduced an arbitration request before the Centro de 

Arbitraje de la Cámara de Comercio de Caracas (Caracas Arbitration Center of the 

Commercial Chamber), claiming damages of Bs. 20,399 due to default by Movilnet in 

compliance with an agreement. On October 8, 2003, Movilnet responded to these claims and 

on January 16, 2004, the Arbitration Court convened to hear the case. In September 2004 

this Arbitration Center found in favor of the commercial party, and required a payment of Bs. 

8,000 by Movilnet, which was paid in January 2005. In October 2005, this commercial party 

filed a new lawsuit before a Commercial Court for the alleged loss of future income due to 

default in compliance with the same commercial agreement for Bs. 257,000. This case was 

sent to the Supreme Court which ruled against the demanding party, due to the existence of 

an arbitration agreement. On October 24, 2006, this commercial party issued a new lawsuit 

before the Caracas Arbitration Center of the Commercial Chamber for the alleged loss of 

future income due to default in compliance with the same commercial agreement for Bs. 

38,000. On February 28, 2007 Movilnet responded to the lawsuit. In the opinion of the 

Company’s management and its legal counsel, this second lawsuit filed by the commercial 

party has little probability of success; accordingly, no provision has been recorded with 

respect thereto. 

60







indicated) 

Management believes that most of these cases and others will be resolved through 

negotiation and mediation processes, and that the total provision set aside is reasonable as 

of December 31, 2007 to cover the contingencies considered probable. However, the timing 

for the utilization of this provision has not been determined. 

The Company has recorded the necessary provisions to cover each one of these 

assessments and lawsuits based on the likelihood of occurrence of them and the possibility of 

their calculation. 

Reconciliation of changes generated during the years ended December 31, 2007 and 2006 of 

the provision for litigation is as follows: 

61 

2007 2006 

Balance at beginning of the period 170,254 134,513 

Expense of the period 172,420 43,584 

Write-offs and/or payments (30,889) (7,843) 

Balance at end of the period 311,785 170,254 

At the Regular Stockholders’ Meeting held on March 30, 2007, BANDES, indicated that it 

considered insufficient of the provisions recorded for assessments issued by SENIAT 

regarding income tax and CONATEL regarding telecommunication taxes. 

d) Concessions mandates 

Plant modernization is not currently required under the concessions. 

The Regulations for Basic Telephony Services require basic telephony service operators to 

install and maintain public telephone equipment equivalent to 3% of their subscriber base. As 

of December 31, 2007, the Company has complied with the obligations established in these 

Regulations. 

The guidelines for the market opening in Venezuela (Note 3 - Concessions and 

telecommunications regulation) included certain quality service standards that incorporate 

minimum and maximum targets. These targets were CONATEL’s basis for issuing the 

Administrative Ruling on Quality Service applicable to all basic telecommunication services 

operators. This Administrative Ruling was published in the Official Gazette of Venezuela No. 

37,968 on June 28, 2004. As of December 31, 2007, the Company has reasonably complied 

with the targets established in this Administrative Ruling and has action plans to reach the 

remaining targets. 

e) Other regulations 

Since 2004, there have been a number of new laws and related rules issued in Venezuela 

(Law of Prevention, Conditions and Work Environment; Housing Law; Employment Law; 

Science, Technology and Innovation Law; Law Against Illicit Traffic of Drugs; Reform of the 

Labor Law Rules; among others), creating a potential impact on the Company’s financial







indicated) 

statements. The Company’s management and its internal and external legal counsels are 

evaluating and analyzing such laws in order to ensure their appropriate application and to 

record the necessary provisions. 

In addition, beginning May 21, 2007, the Company is subject to other legal dispositions 

applicable to the public sector (Note 24 - Legal framework applicable to State-owned 

companies). 

20. Segment Reporting 

The identifiable segments are strategic business units offering different products and services 

in the telecommunications industry and related services. These segments are managed 

separately since each business requires different technology and marketing strategies. The 

Company manages its operations mainly in two business segments: wireline and wireless 

services. The wireline services segment provides local, domestic and international long 

distance services, data transmission and other wireline-related services, which are provided 

by the same group of assets to substantially the same group of customers. The wireless 

services segment provides nationwide cellular mobile services. Substantially all of the 

Company’s businesses are conducted in Venezuela and substantially all its assets are 

located in Venezuela; the Company’s management considers that Venezuela is its only 

geographic segment. 

In January 2005, CANTV and its subsidiary Movilnet signed a five year agreement in which 

CANTV granted Movilnet a license to use its commercial trademark in exchange for 3% of 

Movilnet’s gross revenues. In July 2007, this agreement was terminated by mutual 

agreement between the parties. 

Segment results for the years ended December 31, 2007, 2006 and 2005, and assets and 

liabilities as of December 30, 2007, 2006 and 2005, are shown below: 

62 

2007 2006 2005 

Wireline services 


Local services 967,620 922,923 915,147 

Domestic long distance 305,856 285,872 296,009 

International long distance 146,115 121,961 115,536 

Fixed to mobile outgoing calls 993,143 924,457 753,888 

Interconnection incoming 142,965 127,978 124,633 

Data transmission 2,218,174 1,618,356 1,140,131 

Other wireline-related services 546,426 409,827 328,021 

Total operating revenue 5,320,299 4,411,374 3,673,365 

Intersegment operating revenue (1,193,289) (912,141) (585,566) 

Segment operating income (loss) (•) 423,130 589,186 (235,663) 

Depreciation and amortization 559,813 571,284 536,199







indicated) 

63 

2007 2006 2005 

Income tax benefit (provision) 219,102 95,835 222,982 

Acquisition of information systems and property, plant and equipment 696,565 444,926 397,896 

Assets at the end of the period 7,968,816 7,309,660 5,910,440 

Pension and other post-retirement benefit obligations at the end of the year 2,303,189 1,593,838 1,578,698 

Liabilities at the end of the period 4,975,386 4,965,998 2,847,976 

Wireless services 


Access 229,355 173,853 119,758 

Airtime 1,795,708 1,378,241 781,822 

Interconnection 781,011 750,936 535,015 

Activation 66,066 56,452 42,925 

Special services 1,011,902 683,425 383,480 

Equipment sales 597,237 573,711 431,169 

Other 139,494 91,790 36,826 

Total operating income 4,620,773 3,708,408 2,330,995 

Intersegment operating revenue (475,781) (465,770) (349,338) 

Segment operating income 297,021 290,261 148,970 

Depreciation and amortization 405,601 286,788 291,133 

Income tax benefit (provision) 34,722 61,352 (12,760) 

Acquisition of information systems and property, plant and equipment 742,697 796,786 646,616 

Assets at the end of the period 4,267,211 4,400,116 2,456,369 

Liabilities at the end of the period 3,484,694 3,595,862 1,972,366 

The reconciliation of segment operating revenues, operating income (loss), assets and 

liabilities to the consolidated financial statements as of December 31, 2007, 2006 and 2005 

are shown below: 

Reconciliation of operating revenues: 

2007 2006 2005 

Reported segments 9,941,072 8,119,782 6,004,360 

Other telecommunications-related services 49,204 57,354 20,437 

Elimination of intersegment operating revenues (1,670,660) (1,379,469) (936,405) 

Total operating revenues 8,319,616 6,797,667 5,088,392







indicated) 

Reconciliation of operating income (loss): 

64 

2007 2006 2005 

Reported segments (•) 720,151 879,447 (86,693) 

Other telecommunications-related services 14,568 19,938 534 

Total operating income (loss) 734,719 899,385 (86,159) 

Reconciliation of assets: 

2007 2006 2005 


Elimination of assets (2,609,669) (2,993,970) (1,249,456) 


Total assets at the end of the period 9,800,133 8,922,207 7,290,111 

Reconciliation of liabilities: 

2007 2006 2005 


Elimination of liabilities (2,609,669) (2,993,970) (1,248,060) 


Total liabilities at the end of the period 5,946,328 5,632,553 3,621,042 

(•) Segments reported include Bs. 362,162, Bs. 23,043 and Bs. 694,916 for the years ended 

December 31, 2007, 2006 and 2005, respectively, related to the expense from the additional 

pension obligation due to the Supreme Court ruling (Note 15 (b) - Retirement benefits - 

Pension litigation and Court Ruling). 

21. Exchange Controls 

On January 21, 2003, the Venezuelan Government, by means of an agreement with the 

Central Bank of Venezuela, suspended the trading of foreign currencies in the country for ten 

business days. 

Beginning February 5, 2003, several Exchange Agreements were published set out the rules 

for the foreign currency administration regime and the exchange rate applicable for 

transactions set forth in the Exchange Agreements. 

The Comisión de Administración de Divisas (CADIVI) (the Commission for the Administration 

of Foreign Currency) is created, and it will coordinate, manage, control and establish the 

requirements, procedures and restrictions for the execution of the Exchange Agreements. 

CADIVI has issued several rulings related to the registration, guidelines, requirements and 

conditions related to the foreign currency administration regime.







indicated) 

On May 21, 2007, the Venezuelan Government assumed operating control of the Company, 

when it acquired ownership of 86.2% of CANTV’s shares (Note 13 (a) - Stockholders' Equity - 

Capital stock). Beginning on that date, the Company is subject to Rulings No. 44 and No. 46, 

which establish the requirements, controls and procedures for the acquisition of foreign 

currency for public sector purposes, including importation of goods and services, payment of 

contracts for construction or services, and other payments by the public sector not includes in 

the Exchange Agreements. 

In addition, the Exchange Agreements establish that public sector entities are allowed to 

maintain foreign exchange currency deposits in accounts abroad, as long as they are 

authorized by the Central Bank of Venezuela, for payments of obligations related to 

importation of goods and services required for their operations. These deposits of foreign 

currency in accounts abroad must only be used to pay obligations denominated in foreign 

currency and payable abroad, and any excess over the amounts authorized by the Central 

Bank of Venezuela must be sold to the Central Bank of Venezuela, unless they are duly 

justified. The maximum amount authorized by the Central Bank of Venezuela for the 

Company is a monthly average of US$63.36 million. 

The different official exchange rates set under the exchange control regime since it was 

established area as follows: 

a) On February 5, 2003, the exchange rate was set at Bs. 1,596.20/US$1 for purchase and 

Bs. 1,600/US$1 for sale. 

b) On February 9, 2004, the exchange rate was set at Bs. 1,915.20/US$1 for purchase and 

Bs. 1,920/US$1 for sale. 

c) On March 2, 2005, the exchange rate was set at Bs. 2,144.60/US$1 for purchase and Bs. 

2,150/US$1 for sale. 

As of December 31, 2007, the Company had applied to CADIVI for a total of US$3,646.9 

million since the implementation of the current exchange controls regime in February 2003. 

As of December 31, 2007, CADIVI has approved US$3,468.9 million, of which US$3,204.5 

million have been received. 

The Company continues to implement the necessary procedures to comply with the 

requirements of CADIVI for requests for additional foreign currency. 

The Amendment of the Illicit Foreign Exchange Conversion Law became effective on January 

28, 2008. Like the Illicit Foreign Exchange Conversion Law issued in 2004, the amended law 

establishes that any demand, offer, purchase or sale of U.S. dollars in violation of the 

requirements of CADIVI is considered illegal. Goods and services exporters are obligated to 

sell to the Central Bank of Venezuela any foreign currency representing gains from 

65







indicated) 

commercial transactions, and imports and exports in excess of US$10,000 must be declared 

to CADIVI. Transactions in ADSs and Venezuelan Government dollar-denominated bonds 

subscribed to in local currency are exempt. The Law prohibits the offering, announcement or 

disclosure of financial or trading information relating to non-official exchange rates, in written, 

audiovisual, radioelectric, electronic or other form. In addition, all commercial establishments 

must visibly display in their stores a notice indicating the goods and services acquired through 

the authorized foreign currency regime at the official exchange rate. Violators will be subject 

to fines equal to two or three times the total amount of the transaction, seizure of the subject 

foreign currency and incarceration ranging from two to seven years and fines ranging from 

500 tax units to 1,000 tax units for failure to comply with the law. 

22. Enabling Law 

On February 1, 2007, a law was published in Official Gazette N° 38.617 authorizing the 

President of the Republic, in a Cabinet Meeting, to issue Decrees with the Rank, Validity and 

Status of Law (“Decretos con Rango, Valor y Fuerza de Ley”) (Decrees with Status of Law) 

(the Enabling Law), on matters delegated pursuant to the Enabling Law in accordance with 

the Constitution of the Bolivarian Republic of Venezuela. The President of the Republic has 

the power to legislate through Decrees with Status of Law under the Enabling Law for a term 

of 18 months from the date of publication of the law, in 11 delegated areas, including 

economic welfare, finance and tax, among others. As of March 10, 2008, the potential effects 

of the Decrees with Status of Law that may be issued under the Enabling Law on future fiscal 

periods are unknown. 

23. Monetary Conversion Law 

On March 6, 2007, as published in the Official Gazette of Venezuela No. 38.638, the 

President of the Republic approved a Decree with Status of Law regarding monetary 

conversion (the Monetary Conversion Law). Beginning January 1, 2008, the Monetary 

Conversion Law establishes a system whereby the current monetary unit, the “Bolivar” (Bs.), 

will be replaced by a new unit, the “Bolívar Fuerte” (Strong Bolivar) (Bs.F.) which is the 

equivalent of Bs. 1,000.00. The Decree with Status of Law establishes that beginning on 

such date, all prices of goods and services, salaries, pensions, debt, payment obligations, 

taxes, stock quotes in exchange markets, exchange rates, rates and tariffs, amounts 

contained in financial statements or any other accounting documents and, in general, any or 

reference expressed in local currency will be expressed in the new currency. 

On June 6, 2007, the Central Bank of Venezuela issued Resolution No. 01-06-02 relating to 

the Rules for Monetary Conversion and Rounding, published in the Official Gazette of 

Venezuela No. 38.711. This resolution establishes, among other matters, that financial 

statements that are for periods ended before January 1, 2008 but that will be approved after 

such date, must be prepared and presented in current Bs. as of December 31, 2007. In 

addition, for comparison with future periods, the amounts stated in such financial statements 

must be converted into Bs.F. using the equivalency established under the new law. 

66







indicated) 

24. Legal Framework Applicable to State-Owned Companies 

On May 21, 2007, the Venezuelan Government assumed operating control of the Company 

when it acquired ownership of 86.2% of the capital stock of the Company (Note 13 (a) - 

Stockholders' Equity - Capital stock). Beginning on that date, the Company is subject to the 

legal dispositions applicable to decentralized entities in the public sector, such as: 

Public Administration Organic Law 

The purpose of this law is to establish the principles and guidelines governing the 

organization and operations of the Public Administration; the National Public Administration 

and decentralized administration; to regulate performance commitments; to create structures 

to promote the participation in and control over public policy and results; and to establish the 

basic rules for public archives and registries. 

Under this law, the Ministry of the Popular Power for Finance is required to keep a registry of 

the equity ownerships structure of Venezuelan Government-owned companies and to submit 

this information semi-annually to the corresponding Commission of the Venezuelan National 

Assembly within 30 days before the beginning of the next six-month period. 

In addition, the Ministry of the Popular Power for Planning and Development is required to 

determine performance indicators for the management of government-owned companies 

such, and will establish the subscription of performance commitments with the Ministry of the 

Popular Power for Telecommunications and Information Technology, as governing body of 

the Company. 

In addition, the Company must inform the Ministry of the Popular Power for 

Telecommunications and Information Technology of any subscription of an equity interest in 

the Company and of its financial results and submit relevant performance and other reports to 

the Ministry of the Popular Power for Telecommunications and Information Technology, as its 

governing body. 

Partial Amendment of the Organic Law of Financial Administration of the Public Sector 

and its Regulations 

Under this law, the governmental entities at the highest level must approve the annual 

performance budgets of CANTV and its subsidiaries, which must be submitted to the Oficina 

Nacional de Presupuesto (ONAPRE) (the National Budgeting Office), through the Ministry of 

the Popular Power for Telecommunications and Information Technology, before September 

30 of each fiscal year. In addition, CANTV is required to submit any information required by 

ONAPRE and to comply with its rules and technical requirements. CANTV must also submit 

the financial statements and accounting information required by the Oficina Nacional de 

Contabilidad Pública (ONCOP) (the National Office of Public Accounting), thereby adjusting 

its accounting procedures to the Sistema de Contabilidad Pública (Public Accounting 

System), the unified and integrated system for all Venezuelan Government entities. 

67







indicated) 

The budget must be prepared in accordance with instructions issued by ONAPRE, taking into 

account the national plans developed within the general framework of the Plan de Desarrollo 

Económico y Social de la Nación (the Nation’s Plan for Economic and Social Development), 

the annual policy agreement, the guidelines for national development and the Multiannual 

Budget Framework Law, and it must contain the policies, strategic objectives, products and 

indicators in the Plan Operativo Anual (Annual Operating Plan). 

The Company must also coordinate the timing of the physical and financial execution of its 

budget financial resources and expenses with the preparation of its budget proposal, 

pursuant to the sub-periods, rules and procedures established by ONAPRE. 

Organic Law for Planning 

This law establishes the basis and guidelines for the preparation, practicability, improvement 

and organization of planning at different levels of the government. 

The Company must submit information regarding its programs, projects and actions to be 

developed during the relevant fiscal year to the Ministry of the Popular Power for 

Telecommunications and Information Technology, which as its governing body will inform the 

Ministry of the Popular Power for the Planning and Development, to fulfill planning 

requirements and ensure compliance with the law. 

Organic Law of the General Controller of the Republic and National System of Tax 

Control 

The Company is subject to the control, oversight and fiscal review of the General Controller of 

the Republic, and must comply with the internal and external control rules established by this 

law. Violations of this law by actions, events or omissions that cause damage to the national 

wealth will result in liability on the part of management. 

The Company is required to assign an internal auditor in accordance in accordance with the 

open competition procedures established in the Rules for Open Competition for the 

Designation of District and Municipal Controllers, and Internal Auditors of Organisms of the 

Public Sector of the Nation, States, Districts and Municipalities and Decentralized Entities. 

When public administrators or those who manage or have custody of public assets or funds 

leave office, they must comply with the Standards Governing the Delivery of Organisms and 

Entities of the Public Administration and their respective Offices or Dependencies. 

Anti-Corruption Law 

The provisions of this law are designed to preserve public ethics and administrative morals 

and prevent corruption by establishing legal rules in specific areas and circumstances. The 

objective is to prevent corruption and safeguard the national patrimony through moral 

principles (honesty, transparency, participation, efficiency, efficacy, legality, accountability 

and responsibility. 

68







indicated) 

Under the Anti-Corruption Law, members of the Board of Directors of companies owned by 

the Venezuelan Government are considered public officials and as such are subject to liability 

under this law and the Organic Law of the General Controller of the Republic and National 

System of Tax Control. The same is true for persons who perform management, supervisory, 

control and auditing functions; voting members of committees for purchasing, bidding, 

contracts and donations; and those who are authorized to transfer funds from the Company’s 

bank accounts. 

A violation of this law will constitute a crime against the public and will be sanctioned in 

accordance with the Law. 

Partial Amendment of the Bidding Law and its Regulations 

This law establishes the rules that must be applied in the selection of contractors or suppliers 

for construction projects, purchase of property, and supply of services to the Company (other 

than professional and labor-related services). 

The Company must establish a Bidding Commission and modify its internal rules for the 

selection of contractors and suppliers which must include rules to govern the authority of the 

internal organization to perform bidding processes. 

The Company must take the necessary steps to maximize use of goods and services made 

by small and medium-sized domestic producers, as well as to establish conditions to promote 

national development through licenses for technology uses. 

Organic Law that Regulates the Transfer of Assets of the Public Sector not Subject to 

Basic Industries and the related rules 

The Company must apply these rules to dispose of all goods or assets that are not necessary 

to meet its objectives, as well as those that have been dismantled or are obsolete or 

damaged. 

A request for authorization to transfer goods or assets of the public sector must be made 

before the Comisión para la Enajenación de Bienes del Sector Público no Afectos a las 

Industrias Básicas (CENBISP) (Commission for the Transfer of Goods of the Public Sector 

not Subject to Basic Industries), governed by the Ministry of the Popular Power for Finance, 

through the Technical Secretariat. 

The base price for the transfer of the property of the Republic will be determined by 

CENBISP, taking into account the information submitted by the respective entities or 

organisms or by any other factors determined by CENBISP. The officials at the highest level 

of the public entity must submit a periodic report of the status and condition of the assets it 

owns. 

69







indicated) 

Organic Law of the Attorney General of the Republic 

This law establishes that the Company must notify the Attorney General of the Republic of 

lawsuits against CANTV and its subsidiaries, in the event that they could affect the direct or 

indirect interests of the Republic or the rendering of public services, or in the case of labor 

lawsuits. 

This law also establishes that the Company’s contracts with its legal advisors must be 

approved by the Attorney General of the Republic, in accordance with applicable rules. 

As of March 10, 2008, the Company is adapting its processes and systems to comply with the 

requirements of the new applicable legal framework. 

25. Adoption of International Financial Reporting Standards (IFRS) by the Venezuelan 

Federation of Public Accountants (FCCPV) 

In January 2004, the FCCPV decided to adopt IFRS and its interpretations, issued by the 

International Accounting Standard Board (IASB). 

In August 2006, the FCCPV resolved that the adoption date of these standards would be: 

- For all entities, except for those that offer securities to the public, and those that qualify as 

small and medium-sized entities, the initial adoption date will be the close of the fiscal 

year ended December 31, 2008, or the close of the immediately following fiscal period. 

- For small and medium-sized entities, the initial adoption date will be the close of the fiscal 

year ended December 31, 2010, or the close of the immediately following fiscal period. 

- For entities that offer securities to the public, the initial adoption date will be established 

by the CNV, the regulatory body of public companies. 

In December 2007, the FCCPV published the following three IFRS Adoption Bulletins 

(Adoption Bulletin VEN-IFRS): 

- Adoption Bulletin VEN-IFRS No. 0 (Framework for the adoption of International Financial 

Reporting Standards): revokes, beginning in 2008 for large enterprises and in 2010 for 

small and medium-sized entities, the former Venezuelan Statement of Accounting 

Principles and Technical Publications. It establishes that the Venezuelan generally 

accepted accounting principles will be designated by the symbol VEN-IFRS. It prohibits 

the application of IFRS 1 “First-time adoption of IFRS” and indicates that the Adoption 

Bulletin VEN-IFRS shall come into effect by applying the changes in accounting policies 

established in International Accounting Standard No. 8 (IAS 8). This would require the 

retroactive recognition of the new accounting policies. It also indicates the specific IFRS, 

IAS and interpretations of these standards that should be used as the standards approved 

by the FCCPV for VEN-IFRS purposes. In the future, new Adoption Bulletin VEN-IFRS 

70







indicated) 

will be issued to adapt IFRS to Venezuela’s situation. This bulletin is an exposure draft 

for public comment and therefore has not been approved. 

- Adoption Bulletin VEN-IFRS No. 1 (Definition of small and medium-sized entities): this 

standard establishes the factors to be considered to determine whether an entity is to be 

classified as a large or a medium-sized of small entity. 

- Adoption Bulletin VEN-IFRS No. 2 (Criteria for the application of International Accounting 

Standard No. 29 “Financial reporting in hyperinflationary economies” (IAS 29) in 

Venezuela): this standard would require that under VEN-IFRS, inflation should be 

recognized in the financial statements if the year inflation is more than one digit. Inflation 

recognition would be done in accordance with IAS 29. This bulletin is an exposure draft 

for public comment and therefore has not been approved. 

During 2005, the Company adopted IFRS (Note 2 (a) - Summary of significant accounting 

principles and policies - Basis of presentation) which are different from VEN-IFRS; therefore, 

the Company is currently analyzing the possible effects that the decisions of the FCCPV 

could have on the consolidated financial statements. However, until the FCCPV approves the 

final plan for IFRS adoption, and the CNV issues a statement regarding this plan, it is not 

possible to determine the potential effects. 

26. Subsequent Events 

Dividend proposal 

On March 10, 2008, CANTV’s Board of Directors approved an ordinary dividend of Bs. 757.14 

(equivalent to Bs.F. 0.75714) per share that will be presented for the approval of the 

Stockholders’ Meeting to be held on March 31, 2008. 

Additionally, on March 10, 2008, CANTV’s Board of Directors approved an extraordinary 

dividend of Bs. 127.04 (equivalent to Bs.F. 0.12704) per share that will be presented for the 

approval of the Stockholders’ Meeting to be held on March 31, 2008. 

71

compañía anónima nacional teléfonos de venezuela - Cantv

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