GLOBAL ECONOMY

War Is On: It's Mexican President Vs. Billionaire Carlos Slim In Telecommunication Bill

Carlos Slim at the White House for a state dinner May 19, 2010 in  Washington, DC.

Carlos Slim at the White House for a state dinner May 19, 2010 in Washington, DC.  (2010 Getty Images)

Mexico has one of the highest cell phone rates in the world: the yearly cost of a decent plan (phone included) comes close to a year of working for minimum wage, which in 2013 was $1,269. The reason, most argue, is the near-monopoly of the industry held by tycoon Carlos Slim, who owns América Móvil and its cell operator, Telcel.

According to International Business Times, not only does Slim control most of the market but also own practically the totality of the telecom infrastructure and network in the country.

Other two companies, Movistar and Iusacell, have 22 percent and 4 percent of the market, respectively, and have to rent the equipment and pay Slim for network access.

So the war is on. President Enrique Peña Nieto is pushing ahead with a reform plan that would give equal access to the network to all three – and Slim is not happy about it, arguing that the investment América Móvil made in the infrastructure should return profit for the company.

“It is surprising that they are trying, by law, to force a company to invest in order, later, to make it sell its services to its competitors for nothing,” Carlos Slim Domit, Slim's son and now chairman of the company, said in a statement quoted by IBT. “The confiscatory proposal rewards the chronic lack of investment on the part of our competitors to the detriment of consumers.”

So far this year, América Móvil shares traded on the New York Stock Exchange have fallen more than 12 points. It closed Monday at $19.88 according to the Wall Street Journal.

President Peña Nieto introduced the reform proposal in March 2013 and it is now being debated in the Mexican Senate. It aims also at simplifying the much convoluted cell phone service, whose rates these days vary from state to state. In the richest states, rates are higher and some calls between states can be as costly as international phone calls.

Not surprisingly, 88 percent of the 101 million Mexicans who own a cell phone use pre-paid cards to avoid such plans.

“This reform will allow the development of a key sector for Mexico’s economic competitiveness and every Mexican’s quality of life,” Peña Nieto said a year ago when first presenting the bill, just three months after taking office.

In a 2012 report, the Organization for Economic Co-operation and Development (OECD) concluded that Mexico’s costs for mobile phone usage were five times the average of other Latin American countries.

“As a result of this reform, companies will be able to grow, but they will have to do so through innovation and investment, by improving their tariffs and raising the quality of their service,” Peña Nieto said.

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