Thread: Billionaire vs. Billionaire in Mexico Feud

MARCH 4, 2011.

Billionaire vs. Billionaire in Mexico Feud

By JOSé DE CORDOBA

MEXICO CITY—Three of Mexico's most prominent billionaires—who were once a cozy group of amigos protecting each other's backs—are now battling over how to divvy up the country's $35-billion-a-year telecommunication and TV-broadcast market.

The fight pits Carlos Slim, the world's richest man and principal owner of Mexico's biggest land-line and cellular-phone companies, against the country's top two media tycoons, Emilio Azcárraga, principal owner of No. 1 broadcaster Grupo Televisa SAB, and Ricardo Salinas, principal owner of TV Azteca SAB as well as the cellphone company Iusacell.

Where They Stand
View Full Image

Mexico's economy is dominated by large companies that control their industries, and they rarely threaten each other by moving into other markets. But technological convergence has blurred the lines between the phone and TV industries, allowing both sides to invade each other's turf.

"The veneer of friendship is disappearing," says Eduardo Garcia, owner of Sentido Comun, an online business-news site in Mexico City. "Mexico's billionaires are battling over the prize using all the weapons at their disposal."

Key to the dispute is Mr. Slim's inability thus far to enter the TV market because of the terms under which he operates Telmex, the former state phone monopoly he bought in the early 1990s.

Mexican regulators and the big broadcasters argue that allowing Telmex into the TV market now would give Mr. Slim an unfair advantage because his Telmex controls 80% of Mexico's fixed-line telephones and his Telcel controls 70% of the cellphone market.

But even as Mr. Slim is barred from entering the TV industry, cable-TV operators have begun to bundle their TV and broadband Internet services with phone service in lucrative "triple play" packages.

Mr. Slim's companies, which account for roughly a third of the Mexican stock market's capitalization, fired the first shot in the battle last month, pulling advertising from Grupo Televisa, which has 70% of the country's viewers.

Days later, Mr. Salinas joined the fight, announcing that Mr. Slim couldn't advertise on TV Azteca channels unless he cut the price that his phone companies charge smaller phone companies to complete calls on his network.

Mr. Slim's refusal to buy TV ads will cost Televisa about $70 million, or 1.5% of Grupo Televisa's revenue this year, Executive Vice President Alfonso de Angoitia told analysts in a conference call recently.

For TV Azteca, a failure to come to terms with Mr. Slim's companies would mean a loss of about $30 million, or about 3% of TV Azteca's sales, says Luis Niño de Rivera, a spokesman for Mr. Salinas.

Arturo Elias, a spokesman for Mr. Slim who is also his son-in-law, says Mr. Slim dropped his Televisa commercials after a sharp increase in the company's ad rates. If Televisa trims those increases, he says, Mr. Slim would reconsider advertising with the company.

But on Wednesday, the battle between Mr. Slim and the broadcasters heated up as each side issued a barrage of accusations.

In a communiqué, two dozen cable and telecommunications companies, including Televisa and TV Azteca, called on the Mexican government to slash Telcel's connection rates.

Mr. Slim fired back, claiming his rivals were seeking a free ride on Telcel's network because they hadn't invested in their own infrastructure.

In a statement the day before, Mexico's antitrust regulator had expressed hope the billionaires' brawl would help the country find a way out of its impasse.

"The current conflict between concessionaires is an opportunity to resolve two of the main problems in telecommunications: interconnection and insufficient competition in television," the Federal Competition Commission said.

Analysts say Mr. Slim's companies have little choice but to return to TV advertising soon, especially on market-dominant Televisa. Not doing so could cause sales to drop not just at Telcel but at a dozen other companies controlled by Mr. Slim, including retailers Sears Roebuck de Mexico and Sanborns.

A spokesman for Mr. Slim and a Televisa official say there is nothing personal about the business disputes. "There's no need to confuse business with personal affairs," Mr. Salinas wrote in a Twitter post recently, adding that he admires and respects Mr. Slim.

And despite the public acrimony, Mr. Azcárraga was spotted Tuesday night at the opening of an enormous art museum housing Mr. Slim's private art collection.

But resolving the advertising dispute isn't likely to end the friction between Televisa and Mr. Slim. In January, Televisa filed a complaint with Mexico's Federal Competition Commission, or CFC, questioning the nature of Telmex's relationship with DishMexico, a satellite-TV service. Televisa argues that Mr. Slim is using the service to get around the legal hurdle that prevents him from offering TV services.

Telmex provides billing and marketing services to DishMexico, and the system's fast growth has put competitive pressure on Televisa's Sky Mexico satellite-TV system, one of the company's most important profit centers. Sky Mexico gained more than one million subscribers last year, giving it a total of three million subscribers. But in just over two years, DishMexico has signed up 2.2 million.

Telmex says it doesn't have an ownership stake in DishMexico, and Mr. Elias denies any retaliatory motive on the part of Mr. Slim. But Telmex does say it might invest in the company in the future if it gets approval from the proper authorities. It also says its current role with DishMexico is authorized by the CFC.

The commission had no comment on the Televisa complaint.

http://online.wsj.com/article/SB1000142 ... ions_world

Related Post Here

http://www.alipac.us/ftopicp-1195946.html#1195946