Will 2014 Be The Year Mexican Tycoon Carlos Slim's Telecom Empire Crumbles?

Jan 6 2014, 12:58pm CST | by

Will 2014 Be The Year Mexican Tycoon Carlos Slim's Telecom Empire Crumbles?
Photo Credit: Forbes Business

2014 could be the year that Mexican tycoon Carlos Slim sees his telecom empire disintegrate. At the end of 2013, Mexico’s Federal Telecommunications Institute (IFT) said the process of opening up Slim’s monopoly on the phone market has begun, Mexican media and U.S. business wires reported.

The IFT, a newly created regulatory body, said in its first quarterly report that it has started the procedure whereby América Móvil (NYE:AMX), the dominant telephone operator (controlled by Carlos Slim), would have to share with other operators the so-called “last mile” of its network that connects phone and Internet directly to customers.

América Móvil, the largest mobile phone network operator in the Americas,  currently controls 80% of Mexico’s landline phone market through Telmex, and 70% of the wireless market, through affiliate Telcel.

The IFT, an independent regulatory panel, was created in 2013 as part of a far-reaching telecom reform bill designed to boost competition in Mexico’s telephone and television industries, currently control by Slim and fellow billionaire Emilio Azcarraga Jean, CEO of  Grupo Televisa (SAB). Televisa captures close to 70% of Mexico’s broadcast television audience. The new law sets a market share cap for both telephones and TV of no higher than 50%.

The IFT recently told América Móvil and Grupo Televisa that they were placed under preliminary review to determine whether they are dominant players in the telecom sector.  The IFT has until March 9 to issue its final findings.

But while it is widely expected that the new regulations will force Slim to give up his hold on the telephone industry, he is also expected to make a strong bid to enter broadcast television, a long-time ambition.  Slim is very likely to compete for one of the two private TV networks that will be created under the new telecom law.

In anticipation, América Móvil has made a series of moves that have given it a foot in the door into television. In March 2013, América Móvil obtained the exclusive rights to the 2014 Winter Olympic Games in Sochi, Russia, and the 2016 Summer Olympic Games in Rio de Janeiro for all of Latin America (with the exception of Brazil). América Móvil left the option open to resell the rights not only in Mexico but in any of the 18 Latin American countries where, with more than 200 million users, it dominates telephone, broadband and paid TV.

In November 2013, América Móvil agreed to sell the exclusive rights to broadcast the 2014 Winter Olympics in Mexico to government-owned Canal 22, which has a small audience compared to Televisa. Industry analysts said that the deal is a way for Slim to gain access to open TV broadcasting without having to depend on rival companies Televisa, the world’s largest Spanish language broadcaster, and TV Azteca.

This piecemeal approach puts Slim closer to expanding his business empire into paid TV broadcasting in Mexico, which América Móvil has so far been barred from doing by regulators. Shares of América Móvil fell 12% in the months surrounding the Mexican Congress’ passage of the bill to limit the billionaire’s market dominance. In the medium term América Móvil could end up gaining more by accessing the TV sector than it stands to lose by having its telephone monopoly power restricted.

Slim is the world’s second richest man. Forbes currently estimates his net worth at $72 billion, a drop from Forbes $73 billion estimate in March 2013.

Twitter: @DoliaEstevez

Source: Forbes Business


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