Slim’s challenge
Regulators peck at telecom fortune made in part on mass migration to U.S.
Mexican telecom tycoon Carlos Slim has been the world’s richest person for four straight years. But his title is under threat as Latin American countries crack down on his telecommunications dominance.
Slim’s lead over the next-wealthiest man, Bill Gates, narrowed last week to about $4.8 billion — the closest spread in almost a year.
The Lebanese immigrant’s son, who acquired Mexico’s phone monopoly and turned it into a pan-Latin American powerhouse, has long made money as migrants moved into the United States and used mobile phones to stay in touch back home.
Sill, the billionaire lost almost a 10th of his net worth last month, winnowing his fortune to $71 billion, according to the Bloomberg Billionaires Index.
The main culprit: Slim’s holdings in America Movil, whose dominance in Latin America and especially its home country of Mexico is under fire, with lawmakers and regulators pushing for tighter controls. The shifting landscape in Latin America threatens to close the steady spigot of cash that enabled Slim to make bets in Europe last year.
“The challenge facing America Movil starts in Mexico because of the increasing resistance to its dominance,” said industry analyst Mark Mobius of Templeton Emerging Markets Group. “As its competitors become much more viable, you’re going to find America Movil in trouble in Mexico, not having the kind of earnings they’ve had in the past.”
Arturo Elias, a spokesman for Slim, declined to comment.
Slim, who owns a major stake in The New York Times, has been steadily expanding his business interests in the United States. America Movil parlayed its well-known Telcel wireless brand among a growing U.S. demographic group with roots in Mexico, where Telcel has 70 percent of wireless subscribers. In the United States, people of Mexican origin increased 54 percent to 31.8 million in 2010 from 2000, according to the U.S. Census Bureau.
Slim’s company had 21.6 million wire- less subscribers in the U.S. last September, compared to nearly 70 million in Mexico. In the U.S., the company doesn’t own its own network, reselling minutes from AT&T Inc., Verizon Wireless and others. Its wireless brands in the U.S. include TracFone, SafeLink, Net10 and Straight Talk. The company acquired Simple Mobile Inc., a U.S. wireless reseller, for $118 million in 2012.
Pressure, though, is coming from Mexican regulators.
A draft of a new telecommunications reform bill in Mexico stipulates that companies with at least 40 percent market share would be declared dominant and could be forced to rent parts of their network to rivals, the Reforma newspaper said last week. Regulators could also revoke operating licenses for monopolistic behavior, the paper said, citing the draft it obtained.
America Movil continues to have the largest, most robust telecommunications network in the region, an asset that generates almost $16 billion in cash a year and
puts Slim in position to capitalize on growing demand for wireless Internet and pay-TV services.
The challenge is that neither of t hose services is as profitable as mobile-phone calls and landlines. America Movil and its competitors are offering smartphone discounts to get Internetaccessible devices in customers’ hands, cutting into income.
To lure satellite and cable TV subscribers, the company must pay companies such as Time Warner and Walt Disney Co. for programming. That’s reducing margins.
Meanwhile, the stable old business of mobilephone voice service is deteriorating. In Mexico, Brazil and Colombia — which together make up about 70 percent of America Movil’s sales — regulatory agencies have reduced the fees Slim’s company can charge competitors to connect calls from their subscribers to its own users.
At t he same t i me, the percentage of Latin America’s population that already has a mobile phone has crept closer to 100 percent — and even higher in countries such as Brazil and Argentina, where people own multiple devices. America Movil’s mobile- phone subscriber growth hasn’t topped 15 percent since 2008 after regularly doi ng so i n the previous decade.
With l ittle opportunity to pick up customers who are buying mobile phones for the f irst t i me, companies are scrambling to offer better deals on airtime and devices just to lure subscribers away from one another. America Movil, for instance, began last year offering plans with no extra charge for national roaming or longdistance calls.
All these trends converged in America Movil’s fourth quarter, which produced profit that fell short of analysts’ estimates. The margin of earnings before interest, taxes, depreciation and amortization dropped 240 basis points, or 2.4 percentage points, to 31. 1 percent, with t he Mexican and Brazilian units dropping 260 basis points each.