| | |  Business News 
Tycoon Slim Escalates Latam War Against Telefonica
 Tomas Sarmiento - Reuters
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January 16, 2010
| | Carlos Slim, Chairman of Grupo Carso participates in a panel discussion at the Clinton Global Initiative, in New York, September in this 24, 2009 file photo. (Reuters/Chip East) | |
Mexico City - Mexican tycoon Carlos Slim's plan to combine his Latin American telecommunications assets into a single company will strengthen his position in a growing war against regional rival Telefonica.
Slim launched a $20 billion plan this week to absorb his Mexican fixed-line operator Telmex (TELMEXL.MX) and regional fixed-line operator Telmex Internacional (TELINTL.MX) into his flagship America Movil (AMXL.MX) cellphone company.
The tie-up would create a Latin American giant, offering wireless, fixed-phone, Internet and television services in Mexico, Brazil and other countries where Slim clashes with Spain's Telefonica (TEF.MC).
"Carlos Slim's group will come close to matching the integrated structure of its arch-competitor, Telefonica, which has merged its wireless and wireline operations in Argentina, Chile and Peru," Deutsche Bank analyst Rizwan Ali said in a report this week.
Once Slim's companies are combined, America Movil will have clients with a total of 250 million connections, making it one of the world's largest telecom operators.
Telefonica has 164 million fixed-line, wireless, Internet and television clients across Latin America.
UBS reiterated its "buy" rating on America Movil's stock, adding, "We see the move as taking advantage of a near-perfect strategic fit."
The minority stake in Telmex that Slim does not own will continue to be listed on the stock market.
Slim's plan to consolidate his telecom empire comes as fixed-line users increasingly switch to cheaper cell phones or telephone services via broadband bundles offered by other operators.
Telmex, once the crown jewel of Slim's business empire, was the only company in Mexico's IPC stock market index .MXX to fall last year, sinking 25 percent as clients canceled their lines and investors bet future profits would continue to shrink.
The plan to combine his companies into one operator that can sell a broad variety of telecom services follows other international giants like Telecom Italia SpA (TLIT.MI) and Deutsche Telekom AG (DTEGn.DE).
Pairing Slim's Embratel fixed-line operator and Claro mobile operator in Brazil will put more pressure on Telefonica's fixed-line operator Telesp (TLPP4.SA), which is struggling with stagnant subscriber growth.
Telefonica's Vivo Participacoes (VIVO4.SA) is the top cellphone operator in Brazil, Latin America's largest mobile telecom market.
After losing a bidding war against French media group Vivendi (VIV.PA) for control of Brazilian telephone operator GVT last year, Telefonica says it plans to invest $1 billion in the South American country in 2010.
MEXICO PROSPECTS
In Mexico, where Telefonica's mobile operator Movistar is a distant second to Slim's Telcel, President Felipe Calderon wants legislators to lift a ban on foreign companies controlling fixed-line telephone operators, a rule he says cripples competition.
If lawmakers remove that ban, Telefonica would be widely expected to challenge Telmex, which has more than 80 percent of market share.
Also in Mexico, Telefonica is seen as the main winner in upcoming mobile frequency auctions. Desperately short of bandwidth in the key Mexico City region, Telefonica has been waiting years for the frequency sale.
America Movil Chief Financial Officer Carlos Garcia-Moreno said in a radio interview on Friday that grouping the Slim telecoms will make them more efficient. But some analysts say the operators could have partnered up to offer triple- or quadruple-play packages while remaining separate companies.
"We remain unclear as to what synergies the companies could achieve today that were not available to them yesterday," said Stifel Nicolaus analyst Christopher King in a note to clients.
America Movil's stock was down 2.25 percent to 29.54 pesos.
(Writing and additional reporting by Noel Randewich; editing by Gunna Dickson)
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