In twist, Mexico says non-telecom Slim firms dominate telecoms

In twist, Mexico says non-telecom Slim firms dominate telecoms

6:12pm EST

By Alexandra Alper and Tomas Sarmiento

MEXICO CITY (Reuters) – Mexico’s telecoms regulator on Friday declared two of billionaire Carlos Slim’s major financial and industrial companies “dominant” in telecommunications, but has yet to slap the tag on Slim’s flagship telecom company.

It is widely expected that Slim’s telecom company America Movil will be declared dominant, or having an outsized share in its market, although a spokesman said the company has not yet been notified.

Mexico is trying to spur competition in its tight-knit phone and TV industries through a wide-ranging telecoms overhaul passed last year.

The newly empowered Federal Telecommunications Institute (IFT) deemed Slim’s bank Inbursa and conglomerate Grupo Carso, which both have direct or indirect stakes in America Movil, dominant in telecoms given their “economic interests,” the companies said on Friday.

America Movil has about 80 percent of Mexico’s fixed-line business via its Telmex unit and some 70 percent of the mobile sector through its Telcel subsidiary.

Shares in the company, which are down 15.24 percent so far this year compared to an 8.85 percent fall in Mexico’s IPC index, were flat for most of the day but later rose by 1.65 percent.

Both Inbursa and Grupo Carso said they were analyzing the decision and would provide details on the steps they would take in response. Shares of Inbursa were down 0.6 percent, while Grupo Carso was down 0.9 percent.

Carso and Inbursa’s dominant tags surprised many analysts, who took it to mean the IFT, which was given tough new powers under the telecoms reform, was serious about going after Slim.

“They’re saying: ‘I’m blocking Slim wherever I can.'” said Gerardo Roman, head of stock trading at the Actinver brokerage in Mexico City.

The telecoms reform will allow the regulator to apply tougher rules to level the playing field for smaller competitors.

However, a break-up of dominant companies, although theoretically possible, looks unlikely in the foreseeable future. The head of the IFT has said it is only meant to be used as a “last resort” to spur competition.

Slim struck gold when Mexico privatized its telecoms industry in the early 1990s, using the money generated by his phone business to build a vast corporate empire spanning mining to retail that gave him one of the world’s largest fortunes.

Earlier on Friday, Televisa, which has more than 60 percent of Mexico’s TV market and has long been accused of wielding too much political power, said it had been notified of its dominant position and will be forced to share infrastructure.

The dominance rulings are a part of a larger telecoms overhaul and a key milestone in driving competition in Mexico’s telecoms and broadcasting sectors.

They have lifted expectations that Mexico might finally tackle the extraordinary power enjoyed by a select few companies in Latin America’s second-largest economy.

Televisa said the IFT also ruled the company cannot hold a stake in a dominant telecoms operator. Its shares extended losses following the announcement, trading more than 2 percent lower.

“All of the resolutions and actions from the IFT affect Grupo Televisa in many areas associated with its (TV and pay-TV) businesses,” the company said.

Earlier on Friday, the IFT detailed the bidding process for concessions to create two new national television networks, which would weaken the duopoly of Mexico’s two biggest players, Televisa and rival TV Azteca.

Taken together, the two broadcasters control about 95 percent of the broadcast television market.

The Ve Por Mas bank said the IFT decision was bad news for Televisa as it would dent revenue, restrict potential new business and create more competition as the company would be forced to share infrastructure with rivals.

Shares in TV Azteca, which stands to benefit from the reform, were up more than 3 percent at 8.15 pesos.

Actinver’s Roman said he wondered whether the dominance ascribed to Carso and Inbursa could be a way for the IFT to prevent Slim from entering the public TV network auctions.

Slim has long aspired to penetrate the lucrative free-to-air television industry but he has so far been barred from entering the market.

“Perhaps Inbursa, or perhaps Carso, which are both Slim companies, could go into the TV channel tenders. So, all they’re doing is blocking him so he can’t do that,” Roman said.


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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