Published: 2 August, 2011
Round the world, carriers are cutting costs and integrating services, in a bid to fend off new competition, often from cablecos moving into a quad play. France Telecom has recently made a string of cuts and changes in preparation for the launch of Free Mobile by broadband provider Iliad. Now Carlos Slim is reintegrating his Mexican telecoms empire to defend it against Grupo Televisa, a powerful cableco which is entering the mobile space.
Slim, one of the world's richest men, split the mobile and fixed arms of his company Telmex a decade ago, spinning off the cellular activities under the name America Movil. Movil is now Latin America's largest wireless operator, and engaged in a head-to-head with Telefonica. It has offered about $6.5bn to take control of its former parent, buying the 40.4% it does not currently own. This would pave the way for massive efficiencies, according to the firm, and for even deeper integration than Slim achieved when Movil acquired a majority stake in Telmex last year. CFO Carlos Garcia- Moreno said the companies would cross-sell service and share retail outlets and customer service facilities.
For Movil, however, there is the downside of taking on a fixed line business which is losing sales to mobile operators, including Movil itself. But the group believes the benefits of efficiencies outweigh this as there will be a single quad play network across Mexico, a strong counterpoint to Grupo Televisa's plans to add mobile services to its cable-based TV, internet and phone offerings.
Slim is making a long term bet on future demand for quad play services, which could affect all his Latin American footprint. Jorge Lagunas of Grupo Financiero Interacciones in Mexico told Bloomberg: "In some point in its history, we could see news about quadruple play from Telmex, or something like that, that could help boost profit at America Movil itself." Mexico is not the first country to indicate the trend - America Movil has already started to offer fixed/mobile bundles in other territories, notably Colombia, where it bought fixed networks last year.
Slim acquired control of Telmex from the government in a 1990 privatization sale and spun off America Movil in 2001. Movil bought its 59.6% stake in Telmex last year for $23bn, also gaining ownership of Slim's other fixed line networks in South America. Movil is currently appealing a $1bn imposed by the Mexican regulator for alleged anti-competitive practices in charging interconnection fees to rivals.
AT&T, which holds an 8.5% stake in Telmex, said it will accept America Movil's offer for its shares, which will be valued at about $1.37bn. The US operator also owns about 9% of America Movil and is part of a group, with Slim and his family, that controls the company's voting shares.