It’s not too surprising that the Mexican association of cable TV operators, Canitec, has this week called upon the country’s antitrust watchdog, the Federal Competition Commission, to block the Carlos Slim plan to combine his mobile and fixed-line telephone operators right across South America. Canitec warns that this would create a cartel and damage competition at the local level.
It was only last week that Mexican billionaire Carlos Slim, the man behind Telmex and America Movil, said he was making this move as a way to strengthen his hand against main rival Telefonica. The idea is to create a massive and integrated fixed/mobile group in most of the countries in the region, some of which are still seeing high mobile growth.
Slim’s main vehicle is America Movil, Latin America’s largest cellco by subscribers. This will now acquire his Telmex and Telmex International units, which provide mainly fixed line services in Mexico and the rest of the Latin America, respectively.
This will give the combined entity huge economies of scale, plus the ability to offer flexible combinations of fixed and mobile services to drive ARPU and customer uptake ‘ an advantage already gained in many markets by Telefonica, the second largest provider, which has combined its offerings under a common Movistar brand.
“With this consolidation, the company will be able to offer integrated communications services in the region, independent of the platform on which they are generated,” the company said in a statement. The integrated operator would have about 250 million subscribers and would move aggressively towards a quad play of mobile, fixed voice, internet access and TV.
America Movil is looking to make the deal via an all-stock offer for Carso Global Telecom, a holding company that controls both Telmex and Telmex International. If Carso’s shareholders tender all their shares, America Movil would indirectly own 59.4% of Telmex and 60.7% of Telmex International. The deal remains subject to regulatory approval.
Carlos Garcia Moreno, America Movil’s finance director, told Bloomberg that the deal would reduce costs. ‘To maintain our competitiveness going forward in the medium and long term, it is of the essence that we end up running an integrated operation,’ he said.
However, shares in the giant slipped on news of the deal, on concerns about antitrust probes and integration problems. And even the new economies of scale will not make America Movil’s task against Telefonica a simple one. The Spanish company has been investing heavily in Latin America, its key growth area as its European markets saturate. Its roll-out program for 2009-2013 will involve spending at least $20 billion on expanding and upgrading its networks in the region. It will phase out CDMA to get the economies of a single GSM/HSPA platform, plus it is trialing LTE in some markets. Both Telefonica and Telmex are active in acquiring WiMAX spectrum for fixed and converged broadband use.
Telefonica is the market leader in Venezuela, Chile, Peru and Brazil (in its Vivo joint venture with Portugal Telecom). It has been extending its reach across the whole region over the past few years, and bought BellSouth’s Latin American assets in 2004. BellSouth’s activities had been in Argentina, Chile, Peru, Venezuela, Colombia, Ecuador, Uruguay, Guatemala, Nicaragua and Panama, and they gave Telefonica 40.5 million additional mobile subscribers.
The most dominant market for Slim is Mexico, where 3G auctions will be held soon (though his Telcel outfit already has a 3G network in 850MHz). These auctions could shake up the competitive landscape again, with over 90 companies gaining copies of the rules earlier this month. Fixed line operators Axtel and Maxcom, and cable/ TV companies Grupo Televisa, TV Azteca and Megacable, were among the group, and are considered the only likely winners apart from the existing mobile providers. The licenses will be in the 1850-1990MHz and 1710-2170MHz bands. Cofetel is likely to follow up swiftly with a 700MHz auction, geared to LTE.
The cellcos are America Movil’s Telcel, with 72% share of subscribers, followed by Telefonica with just over 20%, and Iusacell and Nextel Mexico with 4% and 3.5% respectively. Bids are not due until May 25, and regulator Cofetel will announce results by the end of June.
America Movil had 194.3m wireless subscribers in 18 countries at the end of September 2009. In the first three quarters of last year, its net profit soared 31% year-on-year, to $4.5 billion.