Mexico’s Telecom Industry Shaken up by Billionaire Feuds

26 Mar

By Carlos Arredondo @ MATT.org

Earlier this month Forbes magazine came out with its list of “The World’s Billionaires”and “The World’s Most Powerful People” and #1 on the Billionaire’s list was the Mexican Carlos Slim Helu. Not only was he at the top of the list, but to say he held the title comfortably and unchallenged would be an understatement. The nearest competition he had, namely Bill Gates and Warren Buffet, trailed behind him by more than $20 billion dollars!

Bruno Ferrari Garcia, the Secretary of Economy of Mexico, expressed a positive outlook on Carlos Slim being formally recognized as the richest man in the world and congratulated him. Ferrari conveyed his faith that Slim would continue to be generous to the country that helped him make his billions by focusing some of his resources to helping Mexico in a variety of ways. Speaking of the fact that several other Mexican’s also made the billionaire’s list this year Ferrari said, “We should not rejoice that there is one but that more and more Mexicans are on that list because it means more jobs and investment. Carlos Slim’s fortune represents 7 percent of Mexico’s gross domestic product (GDP), surpassing that of 118 economies in the world.”

So if you’re anything like me, you might be wondering how in the heck a guy you possibly haven’t even heard of acquired a $74 billion US dollar net worth. Well apparently he’s got his hands in everything from hotels, mining, oil drilling, tobacco, construction, department stores, to financial services, but the real cash cow is Telmex and Telcel. Companies which have essentially monopolized the telecommunications market nationally. Some 80% of landlines in Mexico are connected through Telmex, and Telcel has some 70-90% of the mobile-phone market. Slim had bought struggling companies in the inflationary crisis of the 1980’s and bought up Telmex in 1990 when the government was privatizing the national telephone company.

Slim is not the only player in Mexico though, billionaire Emilio Azcarraga maintains practically as dominant a hold on the television sector. His company, Televisa, controls some 70% of the country’s free-to-air TV audience. The history of the stability of these near-monopolies has been primarily due to the fact that there has been no reason for them to interfere with each other’s market. Until now that is. The evolution of technology is beginning to blur the lines that had so clearly defined and divided their industries. Televisa is now bundling phone and internet with its cable-TV services and wants to add mobile phones while Slim wants to use his phone cables to distribute pay-television.

It appears that this industry might be birthing into an era where competitive players vie to win market share. On March 9th a group of 25 companies spearheaded by Televisa and TV Azteca filed a complaint with the CFC or Federal Competition Commission against Slim’s telephone company. On the same day Slim filed his own complaint against Televisa and TV Azteca accusing them of plotting to block him from the TV business. Slim already withdrew $70million of advertising from Televisa’s channels in February, and within weeks TV Azteca had forbade him from advertising on their channels also.

Two thoughts come to my mind about all of this. Firstly, while I was already aware of the stark contrast of social class division in Mexico, I am still intrigued that the wealthiest man in the world grew and cultivated his empire in a nation where nearly half of its 100 million plus inhabitants live in some degree of poverty. Secondly, an old proverb I believe of some Eastern origin comes to mind, “When elephants fight, it is the grass that suffers.” I have never found a scenario where this isn’t true, until now. It seems the opposite might be the case here… in this case the grass might benefit from a few elephants duking it out.

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