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Mexican Tycoon Carlos Slim Suspected Of Trying To Circumvent New Anti-Monopoly Telecom Regulations

Jan 17 2014, 11:51am CST | by

Mexican Tycoon Carlos Slim Suspected Of Trying To Circumvent New Anti-Monopoly Telecom Regulations
Photo Credit: Forbes

With the apparent intention of circumventing new antitrust regulations, Mexican billionaire Carlos Slim’s fixed-line phone monopoly Telmex has designed a new strategy for divesting assets, reports Mexico’s leading financial daily El Financiero. The plan is supposed to go into effect by March 9, when the Federal Communications Institute (IFT) is expected to declare Slim’s telecom conglomerate América Móvil (NYE:AMX) market dominant.

But on January 7, a Mexico City civil judge ordered Telmex to stop divesting assets. According to El Financiero, the ruling against Telmex resulted from a request introduced by Bestphone, an affiliate of Grupo Televisa, owned by fellow Mexican billionaire and Slim’s archenemy Emilio Azcarraga Jean. A Bestphone spokesperson told Reuters: “Bestphone is very concerned that the spin-offs are a ploy to avoid the telecom reform, in particular an effort to avoid important aspects such as interconnection (between phone companies), which would reduce costs to consumers’ benefit.”

The court ruling means that Telmex must halt plans announced last July to divest certain assets. Slim and Azcarraga Jean have used the courts to keep each off of the other’s telecom turf.

América Móvil, the dominant telephone operator controlled by Slim, has 70% of Mexico’s mobile market and 80% of the fixed-line market, while Televisa has more than 60% of the country’s TV market. Televisa is also expected to be declared market dominant by IFT. The Constitutional reforms, which were signed into law by President Enrique Peña Nieto in June 2013, are designed to broaden competition by ending monopolistic practices in the phone and TV industries.

The IFT, a new regulatory body that will impose a new asymmetric system of rules under which different telecom firms will be subject to different levels of regulatory restraint, has the power to force companies to divest if they are found market dominant. Under the new law, Telmex could be obliged to share the so-called “last mile” of its network, which connects phones and Internet directly to customers, with other operators.

According to analysts cited by Reuters, Telmex is spinning off a unit that holds assets such as fiber optics and telephone poles to get them off the books of América Móvil. Once the assets are outside of América Móvil, they could be factored out of regulations that might force Slim to give up some of his power in the local phone market, reports Reuters.

Reports of Telmex’s plans to divest are not new. Last year the company announced that it had approved splitting assets at its July shareholders meeting. Telmex officials claimed at the time that the divesture would only deal with real estate and leasing, not telephone and telecommunications. At a conference call in July, América Móvil Chief Executive Daniel Hajj said that the Telmex split-off was “not connected with the telecom business of Telmex.”

But El Financiero tells a different story. It reports that through the spinning-off operation, Telmex rendered part of its assets, liabilities and capital to Empresa de Servicios y Soporte Integral, a new divested holding that includes companies that are directly involved with providing telephone and telecommunication services.

Arturo Elias, Slim’s spokesperson, did not respond to a request for comment. Slim, the world’s second richest person behind Bill Gates, is worth an estimated $70 billion based on Thursday’s closing stock prices.

Twitter: @DoliaEstevez

Source: Forbes

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