Mexico: Cellphone clash of the titans

Emilio Azcarraga, the head of Mexico's largest broadcaster Televisa, may wrestle control of Nextel from Carlos Slim, one of the richest men in the world. But cellphone users could benefit from the competition.

Daniel Aguilar/Reuters/File
View of the headquarters of Carlos Slim's telephone company Telmex in Mexico City January 7, 2010.

Mexicans like to laugh, or lament, that hardly a day goes by that they aren’t in touch with the fortune of Carlos Slim – whether they pick up the phone or sit down for a meal at a chain restaurant.

Now, a messy battle is gearing up that threatens the mogul’s dominance of the cellphone market in Mexico.

Emilio Azcarraga, the head of the nation’s largest broadcaster Televisa, could begin to wrestle control from Mr. Slim, one of the richest men in the world, with a deal this week to purchase 30 percent of cell carrier Nextel in Mexico.

But this is not David vs. Goliath. This is the clash of the titans, as two of Mexico’s most powerful men, once business partners, seek to maintain power as Mexico’s telecommunications landscape undergoes rapid change.

“It’s obviously the case that they are the guys and the corporations with the financial muscle to undertake this battle,” says Ernesto Piedras, the director general of the consultancy firm the Competitive Intelligence Unit in Mexico City. “They are the same old names that we’ve had in the Mexican market. [But] it’s a matter of weight. They are playing in the same arena, in the same competition division.”

Slim, who has dominated the telephone industry since he bought the state-run telephone company Telmex in 1990 and later spun it off into America Movil, is estimated as one of the richest men in the world, according to Forbes magazine. Today in Mexico Telmex controls about 80 percent of fixed lines, while America Movil services over 70 percent of the nation’s cellphone users.

Mr. Azcarraga, a motorcycle-riding heir of the media empire who has also moved into the gambling and soccer businesses and is worth $1 billion, according to Forbes, cannot flaunt the wealth of Slim. But he makes up for it in influence, as he controls what millions of viewers across Mexico watch each day.

The battle between the two, already ugly, is expected to get messier - but analysts hope it ultimately benefits consumers in a country with notoriously high telecommunications costs. “It’s better for the country to have more providers that compete with Telmex,” says Raul Feliz, an economics professor at the Center for Research and Teaching in Economics (CIDE) in Mexico City, though he adds that the battle, no where near its finale, will slow down the opening of the market and means Mexico is still “moving at a slower pace.”

Both companies already compete over Internet and fixed-line services. With the Nextel deal, worth $1.4 billion, Televisa is attempting to enter the “quadruple play” sector that bundles broadband Internet, telephone, TV, and wireless services in one package. The deal will help Nextel bid for wireless airwaves in a government auction scheduled for May. (Televisa has said the deal is contingent on a successful auction.) “They are on track to becoming the first real case of quadruple play in the Mexican market,” says Mr. Piedras.

While the auction should open up the market, other analysts voice concern that, as the battle progresses, the playing field is not level. Slim has been prohibited from entering the TV services market. “It creates suspicion and noise that the government is in some way helping Televisa,” explains Mr. Feliz.

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