Basic Telephony revenues, which include the fixed monthly charge, variable charge, connections and other installations, plans of minutes (allowed under tariff flexibility), value-added services and other basic telephony revenues (services through operator and rural telephony, among others), decreased 14.1% to Ch$59,529 million (US$110.4 million) in 1Q07 as compared to 1Q06. This decrease is mainly attributable to a 44.8% decrease in the fixed monthly charge and a 37.7% decrease in the variable charge. These were partially offset by an increase in revenue from flexible plans, which represented 62.4% of total lines in service. Revenues from flexible plans account for 19.0% of total revenues, surpassing the aggregate revenues from fixed charge and variable charge and contributing to the Company's revenue diversification. The decline in basic telephony is mainly due to: (i) a 9.6% decrease in average local traffic per line for 1Q07 compared to 1Q06, and (ii) a decrease in average lines in service of 9.6% compared to 1Q06, mainly as result of a revision of the customer base and a change in the criteria used to cut-off lines (136,909 lines reduced in 2Q06 and 3Q06). The increased mix of flexible plans helps mitigate the decline of lines in service and traffic.

Broadband (ADSL) revenues grew 53.5% to Ch$21,712 million (US$40.3 million) in 1Q07, due to (i) the 47.6% growth in ADSL connections in the quarter, driven by the successful marketing of bundled offers of broadband plus plans of minutes and/or, starting in June 2006, Pay TV, and (ii) a change in the marketing of the "Speedy" internet service. Beginning in 2007, all revenues from broadband and internet access collected from clients are recorded in the income statement, and outsourcing service costs are recorded in general expenses. By providing a single point of contact, through which the Company provides the customer with both the broadband infrastructure and, through outsourcing, internet access, the Company strengthens its relationship with the final customer. In 1Q07, the Company recognized Ch$ 3,879 million in additional revenues related to this change.

Access charges and interconnection revenues include revenues from access charges generated by LD carriers, as well as those paid by other telecommunications operators that use Telefónica Chile's network. They also include other interconnection services apart from access charges, such as interconnection of networks, information services for carriers and, beginning in 4Q05, network services for wholesalers, among others. These revenues decreased by 2.5% in 1Q07 to Ch$12.193 million (US$22.6 million) as compared to 1Q06. This decrease was mainly due to a 16.0% decrease in access charge revenues from DLD, which was partly offset by a 4.7% increase in access charge revenues from ILD and a slight increase in other interconnection services. Access charge traffic decreased 17.6% in 1Q07 as compared with 1Q06.

Revenues from Other fixed telecommunications businesses include revenues generated as a result of the Company's contract with Publiguías, revenues from dedicated and dial-up Internet service, revenues generated by the subsidiary Telemergencia (home security services), and revenues from public telephones, interior installations, equipment marketing and, starting in June 2006, Pay TV. These revenues increased 18.6% in 1Q07 to Ch$17,372 million (US$32.2 million) as compared to 1Q06. This is mainly due to Ch$4,228 million (US$7.8 million) in revenues from the Pay TV business, which as of March 31, 2007 reached 129,062 clients. This increase was partly compensated by lower revenues from: (i) directory advertising (-33.0%) due to increased competition; (ii) dedicated and dial-up Internet access (-11.9%) due to the migration of clients to broadband (ADSL); (iii) home security services (-4.7%), due to an 11.5% decrease in clients; (iv) equipment marketing revenues (-31.8%) associated to decreased sales of PABX, fax machines and telephone equipment; (v) public telephones (-8,8%); and (vi) interior installations (-10.5%), due to a lower number of lines subject to maintenance charges.

Long distance revenues include revenues from domestic and international long distance traffic, as well as revenues from the rental of the long distance network to other telecom operators. Total long distance revenues, which accounted for 9.7% of consolidated operating revenues in 1Q07, decreased 3.2% as compared to 1Q06, amounting to Ch$13,932 million (US$25.8 million). The decrease in revenues is explained in part by a 27.4% decrease in rental of the long distance network as compared to 1Q06. This difference is mainly due to the change in the marketing of the "Speedy" Internet service: Prior to January 1, 2007, Internet Service Providers (ISPs) contracted network rental services for international access to content, and beginning said date, the Company provides this access directly, through its subsidiary Telefónica Larga Distancia. Upon consolidation, the revenues from these accesses are recorded as part of broadband revenues.

Another factor contributing to the decrease in long distance revenues is the 6.3% decrease in DLD revenues due to a 6.7% decrease in DLD traffic in 1Q07 as compared to 1Q06. This decrease was partly compensated by a 15.9% increase in ILD revenues due mainly to higher revenues from incoming international interconnections. The ILD traffic increased 4.0% in 1Q07 as compared to 1Q06.

The Company's successful commercial activities, such as the marketing of "unlimited plans" for DLD traffic, resulted in an increase in DLD market share from 36.2% in 1Q06 to 39.0% in 1Q07. Meanwhile, ILD market share increased from 31.3% in 1Q06 to 39.1% in 1Q07.