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Mexico telecom overhaul passes, billionaire Carlos Slim loses -- maybe

MexicoTelevision IndustryLaws and LegislationPoliticsElectionsCarlos Slim
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Mexican legislators on Wednesday passed a sweeping overhaul of the telecommunications industry that officials maintain will help break up monopolies and provide better service and more competition in the TV and telephone market.

Anticipating the approval, Mexican telephone tycoon Carlos Slim -- listed by Forbes magazine as the second-richest man in the world thanks to the near-monopoly he and his family hold -- announced he would sell off part of his empire to avoid a series of regulatory restrictions the new laws impose on any company with more than a 50% market share.

By scaling back his holdings in the telephone industry, Slim will avoid having to share certain assets, such as transmission towers, with tiny companies that government regulators determined were forced to operate at a disadvantage. He also avoids limits on the rates his phone business can charge.

Slim also expects the move to allow him an easier expansion into pay TV and other broadcasting outlets, a long-coveted goal of his, a spokesman for the billionaire said.

Many in Mexico have seen the new telecom laws as an effort by the government to rein in Slim’s vast power, noting that he conspicuously did not support the 2012 election campaign of President Enrique Peña Nieto.

“In a way, this decision by Latin America’s largest telecommunications company is a victory for authorities, who for years have tried different ways to reduce its participation in the market,” said the financial website Sentido Comun, which specializes in coverage of Slim.

But the shrewd entrepreneur seems to have found a way not to lose too badly.

The approximately 30% of assets that Slim’s America Movil will sell will be offered at fair-market value -- a fortune. And there do not appear to be any restrictions on the purchaser; Slim’s company said it would be an “independent” and “solid” carrier “with experience in the telecommunications sector [and] with sound economic and technical resources.” In Mexico, at least, that would be a fairly short list.

In addition, the expanding TV sector could prove a gold mine for Slim and his associates.

America Movil’s Telmex controls 80% of landlines in Mexico, and its mobile carrier Telcel controls 70% of that market. Mexicans routinely complain of high costs and spotty service.

Outside Mexico, America Movil has 292 million cellphone users in 26 countries, the company said in a statement. Those operations will not be affected by the new legislation.

Mexico’s lower house of Congress, following a session that lasted overnight, passed an unwieldy package of laws known as the “enabling legislation,” which essentially provides the details of how the broader telecommunications changes will work.

The only real opposition came from the left, amid numerous complaints that much of the fine print was being hidden from the public. One component, for example, gives the increasingly powerful Interior Ministry the duty to monitor television and radio broadcasts for fairness. Critics worried that could mark a return to the kind of censorship that existed when Peña Nieto’s Institutional Revolutionary Party ruled for most of the last century.

Other critics said the legislation was tougher on the telephone industry than on television. The powerful Televisa, largest TV broadcaster in Spanish-speaking Latin America, shares a virtual monopoly with the smaller TV Azteca. Televisa is expected to move into the telephone sector.

Still, the package passed by a vote of 314 to 107. It had already been approved by the Senate, so the measure only awaits Peña Nieto's expected signature.

The reform “provides a level playing field, more players and a strong referee” for the telecommunications sector, presidential spokesman Eduardo Sanchez said at a news conference. “And the winners are the 117 million Mexicans who will have better service and more value for their money.”

Arturo Elias Ayub, Slim’s spokesman and son-in-law, confirmed in a series of radio interviews Wednesday that the company hoped to move aggressively into pay TV. He also said the company had not yet decided which assets it would shed and that the process could take a long time.

America Movil shares jumped nearly 5% Wednesday on the Mexican Stock Exchange.

“This was Slim’s best play,” columnist Samuel Garcia said in Periodico 24 Horas. “He knew to listen, wait, negotiate and place his bet at the precise moment.”

News assistant Cecilia Sanchez contributed to this report.

For more news out of Mexico and Latin America, follow @TracyKWilkinson

Copyright © 2014, Los Angeles Times
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MexicoTelevision IndustryLaws and LegislationPoliticsElectionsCarlos Slim
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