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MEXICO CITY - Mexico's once-monolithic phone company, Telefonos de Mexico SA, said on Wednesday it is focusing on broadband, service packages and computers sales to offset declining revenues from traditional voice and dial-up calls.

Telmex saw second quarter profits fall by 13 per cent as it faced stronger competition and the migration away from phone calls.

Telmex said local traffic decreased 10.3 per cent in the quarter, and the number of lines in service fell three per cent year-over-year, to 17.7 million lines in service as of the end of June.

"The statistics related to voice services continued to slow down, in part because we are actively encouraging customers to migrate from dial-up to broadband," said Telmex Chief Financial Officer Adolfo Cerezo. "Customers increasingly choose e-mails and text messages over voice for many conversations.... The traffic figures reflect those trends."

Increased competition from rival cellular and fixed-line carriers also played a role in the declining revenue, as did what company CEO Hector Slim described as "ongoing price reduction."

Company officials expressed frustration that convergence - the offering of television, voice and data packages - has been stymied by the Mexican government's slowness in establishing a regulatory framework.

"Telmex continues to believe that convergence represents the evolution of telecommunications," Slim said. "As it has been the case for some time, Telmex is ready to offer triple play."

But Slim added, "Our market strategy goes beyond triple play.... We are focusing on opportunities in broadband and packages" of bundled Internet, long-distance and other services.

Cerezo said Telmex had added 879,000 DSL Internet accounts in the first half of 2008, for a total of 3.8 million of as June 30, up 60 per cent compared to June 2007.

The company also sees high growth potential in sales of computers through its customer-office network.

Second-quarter net profits at the company fell to 6.2 billion pesos (US$612 million) from 7.1 billion pesos (US$701 million) in the same period last year.

Telmex said its sales in the period were 30.9 billion pesos (US$3 billion), down 6.3 per cent from 33 billion pesos in the year-ago quarter.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, fell 7.5 per cent to 14.4 billion pesos (US$1.4 billion).

Telmex controls more than 90 per cent of Mexico's land lines.

Telmex's U.S.-traded shares fell 2.3 per cent to US$24.20 in early trading Wednesday on the New York Stock Exchange.