Oct. 21 (Bloomberg) -- Telefonos de Mexico SAB, Mexico’s biggest land-line phone company, reported a 12 percent decline in third-quarter profit as customers switched to voice plans offered by wireless and cable-television carriers.

Net income fell to 4.79 billion pesos ($370 million), or 26 centavos a share, from 5.44 billion pesos a year earlier, Telmex, as the company is known, said today in a statement to the Mexican stock exchange. Sales declined 5 percent to 29.5 billion pesos.

Telmex, controlled by billionaire Carlos Slim, is seeking to retain subscribers by packaging Internet service with phone plans. Cable carriers controlled by Grupo Televisa SAB signed up about 25,000 phone customers last quarter when people switched from other carriers, according to government statistics.

“It’s not a good quarter,” said Martin Lara, an analyst at Vector Casa de Bolsa SA in Mexico City. “The Internet business is being dragged down by the traditional phone businesses.” He has a hold rating on Telmex shares.

Telmex lost 69,000 phone lines in the quarter, compared with Lara’s estimate of 95,000 customer defections. The company added 403,000 high-speed Internet customers in the quarter, missing Lara’s forecast of 440,000.

Telmex fell 13 centavos to 11.34 pesos today in Mexico City trading. The shares have dropped 21 percent this year.

The company’s 18 percent increase in Internet sales from a year earlier, to 4.05 billion pesos, wasn’t enough to counter decreases in revenue from local and long-distance service and from the interconnection fees charged to other carriers.

Telmex will seek a legal review of findings by Mexico’s antitrust agency that the company, which operates almost 90 percent of the nation’s fixed phone lines, is dominant in the market for originating phone calls, according to today’s statement.

To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net.

Last Updated: October 21, 2009 19:36 EDT