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 Business News | July 2007 
Slim's Companies to Face Antitrust Probe in Mexico
 Adriana Arai - Bloomberg
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| | Mexican businessman Carlos Slim speaks to journalists during a news conference in Mexico City, March, 2007. (AP/Eduardo Verdugo) |
Carlos Slim, who vies with Bill Gates as the world's richest man, may face increased scrutiny at home as Mexican antitrust regulators step up efforts to curb the dominance of the telephone companies that created his fortune.
Mexico's Federal Competition Commission wants to identify markets where Telefonos de Mexico SAB and America Movil SAB have a share large enough that would require special regulation to encourage new entrants, commission president Eduardo Perez Motta said. The probe will begin before the end of the year, he said.
"We want a level playing field," Perez Motta said in a July 5 interview. "Declaring them dominant is another step toward competitive telecommunications."
Shares of Telefonos de Mexico, known as Telmex, fell the most in 6 ½ years. Regulators are renewing attempts to rein in the market power Slim has in the industry more than 16 years after he bought a former phone monopoly from the government. Telmex had 91 percent of the nation's fixed telephone lines as of March 31. Sister mobile-phone carrier America Movil has 77 percent of wireless subscribers.
Telmex shares slid 1.17 pesos, or 5.3 percent to 20.88 pesos in Mexico City trading, its biggest decline since December 2000. They have climbed 36 percent this year. Shares of America Movil, up 41 percent, lost 1.17 pesos, or 3.3 percent, to 34.4 pesos.
The investigation will test a new antitrust law enacted last year that gave the commission more power to punish practices deemed anticompetitive, Perez Motta said. Telmex has overturned every antitrust ruling by the agency, including one in 1997 that declared the company dominant.
Investor Concerns
Telmex General Counsel Javier Mondragon said in a July 6 interview that the company isn't a dominant carrier and will work with the antitrust agency to prove its position.
The shares fell because the planned investigation may signal that President Felipe Calderon, who took office Dec. 1, will make good on a promise to improve competition in the country, said Damian Fraser, head of equity research at UBS Pactual, the Latin American unit of UBS AG.
"This raises all these concerns that the new Calderon government will finally get tougher on competition, including in the telecommunications sector," Fraser said. "There's still a long way to go between Perez Motta wanting more competition and new regulations that may be subject to challenges themselves."
Slim, 67, used Telmex to create the biggest telecom companies in Latin America, amassing a fortune that Forbes magazine estimated at $53.1 billion in a March update of its annual list of billionaires. That made Slim the second-richest man, ahead of Warren Buffett, with a net worth of $52.4 billion, according to Forbes.
Slim's Fortune
Last week, online Mexican newspaper Sentido Comun put the spotlight on Slim after estimating his net worth surpassed that of Microsoft Corp.'s Gates following a surge in America Movil stock. Slim's fortune is $62.9 billion, Sentido Comun said, compared with the Forbes estimate for Gates of $56 billion in March.
"A good part of the increase in this wealth has come from the Mexican market," Perez Motta said.
Mexico has the highest corporate phone rates of the 30 countries in the Organization for Economic Cooperation and Development, and broadband Internet access is more expensive than in most member nations, Perez Motta said. Telmex disputes the OECD figures because the study adjusts prices for the purchasing power of each country.
Telmex's Position
Telmex faces "strong" competition from other carriers in the most profitable markets in Mexico, Telmex attorney Mondragon said. The company has 66 percent of the telephone market among the highest-income consumers, according to its quarterly income statement.
"In those locations where no one else wants to compete, we're the provider of last resort," said Mondragon. "So it's not the result of a monopolistic attitude, but rather negligence on the part of authorities, who give licenses to our competitors without demanding that they provide services in certain areas."
America Movil had no comment, according to an e-mail from its press office in Mexico City.
Slim, the son of Christian immigrants from Lebanon, learned financial acumen from his father, Julian Slim Haddad, who ran a store in the heart of Mexico City.
In 1965, the young Slim started a brokerage that today is Mexico's seventh-largest bank, Grupo Financiero Inbursa SA. He also set up companies in construction, bottling, leasing, real estate and cigarettes that in 1980 were grouped under Grupo Carso SA - the combination of his first name, Carlos, and his late wife's, Soumaya.
Buying Telmex
His biggest gambit was in 1990, when then Mexican President Carlos Salinas de Gortari put Telmex up for sale. In December 1990, a group consisting of France Telecom SA, Southwestern Bell Telephone Co., Slim's Carso and 35 individual Mexican investors bought control of Telmex for $1.7 billion. Slim put up a quarter of the money and was named chairman.
Today Telmex's market value is about $39 billion. America Movil, spun off of Telmex in 2001, is worth about $114 billion and is the biggest company on the Mexican Stock Exchange. Since 2003, both Mexico City-based companies have stepped up expansion throughout Latin America.
In 2005, Slim, who is called "the engineer" by his aides for his engineering degree, ventured into construction. He created Impulsora del Desarrollo y el Empleo SA to invest in hospitals, schools, roads and dams.
To contact the reporter on this story: Adriana Arai in Mexico City at at aarai1@bloomberg.net. |
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