BUSINESS
03/12/2013 07:20 pm ET Updated Mar 13, 2013

Carlos Slim Welcomes New Telecom Rules In Mexico As Analysts Predict Tycoon Will Push Into TV

At first inspection, the new rules unveiled by Mexican politicians this week in a bid to make the country's telecommunications sector more competitive look like bad news for the magnate who has dominated that industry for decades, Carlos Slim Helú.

Under the proposed rules, Mexico’s current telecommunications regulator -- widely seen as a pawn in the service of Slim’s interests -- would be replaced by an independent regulatory body. The board would be empowered to break up companies that control more than 50 percent of the market in any area of telecommunications.

Given that Slim’s company, América Móvil, commands 70 percent of Mexico’s mobile telephone market and 80 percent of the country's landline service, few were surprised when the stock market absorbed the new rules and swiftly pushed down the company’s share price by more than 5 percent over two days.

But analysts in Mexico told The Huffington Post on Tuesday that the complex package of rules actually contains a substantial opportunity for Slim, whose savvy in protecting his dominant hold on the market has given him a fortune estimated at $73 billion, while keeping him atop Forbes Magazine's list of the world's richest billionaires four years in a row.

The new rules would force the country’s two major television broadcasters, Televisa and TV Azteca, to accept fresh competition, giving Slim a way in to establish the one business he has long been said to covet: a national television broadcast network.

“The business opportunities now open to him couldn’t be clearer,” Jorge Fernando Negrete, chief executive officer of regulatory consulting firm Media Telecom Policy and Law in Mexico City, told The Huffington Post in a telephone interview. He suggested that Slim’s company would use the new rules in a bid to become a force within television broadcasting.

Outside of Mexico, Slim has already ventured into broadcast, boasting significant cable and satellite networks in Brazil, Colombia and Argentina.

América Móvil declined to comment on its plans. In a statement distributed to the media, the company said it “approved of the constitutional reforms in the fields of telecommunications and radio broadcasting presented by the President of Mexico,” adding that it “reiterates its promise of continuous intensive investment” in the country.

The most immediate impact of the reforms may be the encouragement of greater competition for telephone and Internet service. Traditionally, the Mexican regulatory structure has favored the creation of private cartels, saddling Mexican consumers with inferior service options and exorbitant prices -- a factor oft-cited by economists as a major impediment to greater private-sector growth.

This model has yielded some of the lowest rates of mobile, landline telephone and broadband Internet usage among the 34 countries in the Organization for Economic Cooperation and Development. It has also produced a prominent crop of billionaire telecom magnates -- among them, Ricardo Salinas Pliego, Emilio Azcarraga Jean and Slim.

Observers expect increased competition in the telecommunications field should help many rural and poorer areas of Mexico, which have been underserved by current providers, connect to the rest of the world and enable local entrepreneurs to launch new businesses.

Mexico currently has about 82 mobile phones per 100 people, according to World Bank data, far less than countries like Peru, Honduras and Ecuador, where there are more cellphones than citizens. In remote rural areas, many communities are dependent on shared satellite telecommunications links.

“The Mexican market is enormous and there are still millions and millions who are not plugged in,” said Negrete, the telecom analyst. "Attending to marginal and rural areas is a problem this will deal with. The most important part of the reform really deals with tackling poverty through digital inclusion."

Though the new rules are explicitly aimed at rolling back the near-monopoly that Slim’s company holds over Mexico’s telecom service, he and his fellow magnates nonetheless appear to be gaining something in return: the chance to carve into other industries.

“I think all the telecommunications sectors in Mexico were tired that we hadn’t seen any of the progress being observed in other parts of Latin America,” said Negrete. “The system we had was keeping us stuck so that nobody won.”

Emilio Azcarraga Jean, the billionaire owner of broadcaster Televisa, wrote on his Twitter account that the new reforms meant the telecommunications industry would go through “a time of great challenges, and also opportunities.”

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