Trust-busting in Mexico: Taking on the tele-garchs; Just as America bust its trusts a century ago, so Mexico needs to take on its near-monopolies in TV and telecoms

Trust-busting in Mexico: Taking on the tele-garchs; Just as America bust its trusts a century ago, so Mexico needs to take on its near-monopolies in TV and telecoms

Mar 1st 2014 | From the print edition


IN HIS second year in office President Enrique Peña Nieto of Mexico is admirably keen to develop a reputation as a cartel-killer. In December his reforms stripped Pemex, the state oil firm, of its 75-year monopoly. Last month he sent a bill to Congress raising the maximum jail sentence for anticompetitive behaviour to ten years. (He has even made some headway against the relentless drug cartels, as the capture on February 22nd of Joaquín “El Chapo” Guzmán, Mexico’s most-wanted kingpin, attests—see article.)

Now Mr Peña’s government has its sights set on Mexico’s two most prominent businessmen, Carlos Slim (pictured left), a telecoms magnate, and Emilio Azcárraga (pictured right), a television mogul. A new telecoms regulator will shortly decide whether their companies are so powerful that they should be handicapped with tougher rules than their smaller competitors—or even broken up. The case for muscular intervention by the regulator is overwhelming, and Mr Peña must do his utmost to ensure that it takes place.

Bringing true competition to these businesses would do wonders for Mexico’s economy, which in some industries resembles the United States before the Sherman Antitrust Act of 1890. Mexico’s 21st-century Standard Oil is Mr Slim’s América Móvil, which has 70% of mobile subscribers and controls access to 80% of fixed-line telephones. Even by Latin American standards, its services are pricey. It is so profitable that it has made Mr Slim one of the world’s richest men. Mr Azcárraga’s Televisa has about 70% of the terrestrial television market in Mexico, and almost half of pay-TV, driving up the prices of advertising and subscriptions. The OECD, a rich countries’ club of which Mexico is one of the poorest members, reckons that the lack of competition in these “dysfunctional” markets costs Mexico about 1.8% of GDP a year. Improving the economy’s sluggish growth is one of Mr Peña’s top priorities.

Taming the big beasts

Both América Móvil and Televisa have dodged past attempts to rein them in, partly by exerting excessive influence over regulators and partly because competition law was full of holes that allowed them to use the courts to tie the authorities in knots. This should change with the recent creation of a new, more powerful regulator, Ifetel. By March 9th it has to declare whether both firms are “dominant”, which they clearly are, and should therefore be subject to tougher regulation. Ifetel has already stood up to Televisa, by allowing pay-TV firms to rebroadcast terrestrial channels without paying for the privilege. The regulator’s next, and even more important, move should be to force América Móvil to offer other firms access to its infrastructure, so they can set up rival services.

As it happens, the strongest source of competition to América Móvil is likely to be Televisa, and vice versa. The two firms are well placed to take each other on. In recent days documents have emerged showing that Mr Slim has secured an option to buy Dish Mexico, a satellite-TV operator, if regulators approve. Dish, a five-year-old upstart, has already helped to bring down pay-TV prices in Mexico, and could go further in Mr Slim’s hands. That is why Televisa is so alarmed by Ifetel’s decision to let Dish (with Mr Slim in the background) rebroadcast its terrestrial channels free of charge: it will make it much easier for Dish to sign up subscribers. By the same token, if Televisa had greater access to Mr Slim’s wires it would be able to challenge América Móvil by offering its pay-TV subscribers “bundles” that included telephone and broadband services.

Britain’s experience provides a salutary example. In 2006 it forced BT, the former state telecoms monopoly, to create an arms-length subsidiary to run its network infrastructure and sell access to new entrants at fair prices. Consumers now enjoy a broad choice of competitively priced telecoms bundles. One of the biggest new entrants to the market is BSkyB, Rupert Murdoch’s pay-TV giant. More recently, the regulator has turned its attention to BSkyB’s stranglehold on televised sports: the new challenger which the regulator is helping break into that market is none other than BT. Orchestrating a similar battle of the titans in Mexico, while clearing a path for other contenders, is the best way to bring about the competitive revolution the country’s communications industries need. It will also make for a wonderfully entertaining spectacle.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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