Calling On Cross-Border Savvy in Telecom Wars

Maria Zanabria recalls the day in October when technicians came to install a telephone in her home in this small village, a place so sleepy that herds of goats blithely wander the unpaved streets.

“I said to them that if I had to pay anything for the phone, I didn’t want it,” the 48-year-old grandmother recalled, “because I can’t afford such luxuries.”

In fact, the bill is being paid by her son Gilberto Gonzalez, who migrated to Tucson eight years ago. Gonzalez got her a phone through a joint venture of Telmex, Mexico’s national phone company, and Kansas City, Mo.-based Sprint.

The arrangement is part of a culturally savvy marketing scheme aimed at capturing telephone customers from among the 18 million Mexican Americans living in the United States. The pitch: a convenient and affordable way for relatives to pay for the installation and monthly costs of phone service for family members in Mexico.

The Telmex-Sprint program is among the most imaginative expressions of the growing economic integration that is binding the United States and Mexico ever closer.

At the same time, the program points up the immense economic disparities between the neighboring countries that drive Mexican families apart in the first place as they export their young to America.

Telmex has become far more aggressive and efficient since it was privatized in 1991, but Mexico, a country of 95 million people, still lags far behind other countries in providing telephone lines. It has about 10 lines per 100 residents, compared with 65 per 100 in the United States.

Indeed, although the village of San Miguel, 30 miles south of Guadalajara, has electricity, television and other basics, phones are few and far between; there was not even a public pay phone until a year ago.

“When [Gilberto] first went to America, it was so hard to keep in touch,” Zanabria said. “For three months I didn’t hear anything from him, and I thought my son had died there, what with all the violence we see on TV.”

Now her own phone sits atop her aging TV set. Each month, she receives a copy of her phone bill that is being paid by her son in Tucson. In February it was a staggering (to her mind) 489 pesos--about $50. That is nearly as much as her husband earns each week in a nearby candy factory.

But for Gilberto Gonzalez, a $700-a-week construction worker, it is a reasonable cost for the privilege of communicating easily with family members and knowing they can reach him when necessary.

“Many Mexicans here are doing this now,” Gonzalez, 32, said. “I believe this is very cheap.”

The Telmex-Sprint alliance is part of a wave of cross-border telecommunications investments that has followed the privatization of Mexico’s state-owned phone company, Telefonos de Mexico, or Telmex.

The Telmex-Sprint assault on the U.S. market is itself a competitive response to the invasion of the Mexican market by U.S. giants MCI WorldCom and AT&T;, which have captured 25% of Mexico’s long-distance business.

In reply, Telmex joined with Sprint to go after a piece of the American long-distance market, targeting the millions of people of Mexican descent living in the United States who seek to keep in touch with home by phone. Increasingly, Telmex-Sprint is looking at Southern California Latino customers; it announced in February that it is moving its headquarters from Houston to San Diego.

Telmex isn’t the only foreign firm seeking a piece of the U.S. phone market. Two dozen foreign telecommunications companies are now competing in the United States, including Japan’s huge NTT Corp. and Cable & Wireless of Britain. But the volume of the U.S.-Mexican long-distance market and its healthy growth prospects make it a particularly valuable prize.

About three-fourths of the calls between the U.S. and Mexico originate in the United States, and U.S. phone traffic to Mexico is second in volume only to U.S.-Canada traffic.

Javier Palomarez, director of marketing for Telmex-Sprint, estimated total revenues from U.S. calls to Mexico at “well over $2.5 billion a year.”

Analysts say the international long-distance market in Mexico is worth an additional $1.5 billion to $2 billion, bringing the total value of traffic between the two countries to roughly $4 to $4.5 billion annually. (Nearly all Mexico’s long-distance traffic is to the United States.)

The remote-payment scheme is central to the strategy of Telmex-Sprint, which also offers U.S. clients the usual array of long-distance services.

“Since our team is all Latinos . . . we realized that the real issue for Mexicans is that it would be great if Mama didn’t have to walk four blocks to a neighbor to get a call at a certain time on Sundays, or use the pay phone on the corner,” said Palomarez.

Rizwan Ali, telecommunications analyst for Latin America for Bear Stearns, estimates Telmex-Sprint has signed up 4,000 to 5,000 customers so far, modest by U.S. market standards.

Palomarez declined to disclose sales figures for competitive reasons, but he said about half the fledgling company’s sales include paying for a phone in Mexico. And sales have gained momentum, he said, noting that a record 2,200 customers signed up on one Saturday in early March.

Telmex-Sprint’s sales tactics are aggressive: In addition to its Spanish-language TV and radio advertising, it sets up stands at swap meets and other events where Latinos gather in the Southwestern United States.

Telmex-Sprint charges a U.S. customer $267 to have a phone installed in a Mexican home, and the charge can be spread over 12 months. The basic monthly service charge for the phone is $19 for up to 100 local calls. Those costs are well above the $140 average installation charge and $14 monthly fee paid by a customer in Mexico who gets phone service the traditional way.

Palomarez said those premiums are quickly offset by the plan’s lower long-distance rates. But beyond matters of cost, the new service is selling convenience and peace of mind.

Mexicans living in the United States frequently ship money back to family members in Mexico to pay bills. Traditionally such shipments are plagued by fraud and high transaction charges. Paying a relative’s phone bill directly in the United States is one solution.

Mario Hernandez Olmedo and his wife, Angelina Zarate de Hernandez, both 39, are careful customers. Residents of the urban working-class district of Tlaquepaque in greater Guadalajara, the Hernandez family records every call on a chart taped to the wall to make sure they control the cost of the phone installed by Mario’s brother, Carlos Hernandez, who lives in Fresno.

Mario, an electrician, isn’t working at the moment, though he normally makes about $30 a week. His wife makes about that much selling homemade flan in the neighborhood. They made 52 local calls in February, below the 100 allowed in the service contract.

“If I am sick or my sister is sick, we can let each other know easily, and they come and help,” said Angelina. They make few calls to the U.S., instead waiting for Carlos to call them once a week.

Brother Carlos--who has two lines in his Fresno home so he won’t miss important calls--also installed a phone several months earlier for his father in Guadalajara, so Carlos is now paying phone bills for two relatives. And Carlos’ wife is paying for a phone for her mother in Guadalajara.

“In Mexico, earning such low wages, it would take a long time to put together the money to buy phone service,” Carlos said. “Now I have the ability to communicate directly with them. In the case of an emergency, I no longer have to bother a neighbor or arrange to call them at a pay phone.”

And back in San Miguel, Maria Zanabria is still astonished at having her own phone.

“Who would have invented something so beautiful, so useful?” she mused.