Back from Mexico - Let's talk Telmex and Carlos Slim

Hello all. I realize that I haven't blogged in awhile but I just got back from 2 weeks in Mexico on Business and thought I would write something on the monopolized telecommunications industry in Mexico. Of course, there is no one else to write about, but Mexico's very wealthy Carlos Slim. In my dealings with Mexican telecommunications companies, trying to get a very small piece of the pie, I have heard something very strange. If VoIP gets too big, Telmex is going to block ports, re-program their DSL modems, or do whatever it takes to block voice packets from traveling over their internet. Obviously they would have to be tracking all the traffic (RTP) and crunching the packets to the point where the are intelligible or to the point where there is no communication whatsoever. My GOD, is this even legal? Then again it is Mexico, right?

In addition to this posting I thought it would be relevant to write about the man himself Carlos Slim..........

Mexican businessman Carlos Slim is now said to be the world's richest man. He is Latin America's leading business mogul, acquiring telecommunication assets and banking and retail businesses throughout the region and beyond. His massive increase in wealth in recent years should further increase public scrutiny of Slim and his business empire, particularly within Mexico.

For several years Carlos Slim has been Latin America's most visible business leader. He is best known for his telecom business, which controls an increasing share of the region's fixed-line, Internet and wireless markets, and has blossomed thanks to a series of acquisitions. In Mexico, Slim's most important market, his telecom empire has faced criticism for high costs. Slim-owned company profits also benefit from his minimalist management style that prioritizes high profits and low overheads.

Slim's telecom empire essentially consists of two companies. In 1990 he acquired Telefonos de Mexico ( Telmex) Mexico's main telecommunications company and until then a government monopoly. Slim and his minority partners (SBC Communications and France Telecom offered the highest bid in the privatization process and got control of Telmex for what turned out to be a bargain price of $1.7 billion. Probably more important than the price was a flawed concession, which has allowed Telmex to challenge successfully in the courts attempts from the Federal Competition Commission to limit its quasi-monopoly powers. It now controls about 20 million lines and manages over 85% of the Mexican market.

On the few occasions that Telmex made concessions to competition it has been as a result of pressure from the U.S. government. Slim not only quickly modernized the company, adding new services, but also exploited its market dominance. As a result, Telmex's worth, and his wealth, skyrocketed.

In 2001, Telmex created America Movil. Since then, the company has expanded into more than a dozen countries in Latin American and the Caribbean via a series of acquisitions from companies such as France Telecom and BellSouth. Today, the company is Latin America's largest mobile operator. Its largest unit is Mexico's Telcel, a market leader. America Movil also owns Telecom Americas, a holding company that includes stakes once held by Bell Canada and SBC Communications, and enjoys major holdings in Brazil. America Movil's main rival in Latin America is Spain's Telefonica. In Mexico, Telefonica remains a distant second to Telmex.

Apart from telecommunications, Slim has stakes in numerous other sectors, including major restaurant chains and banking entities in Mexico, such as Grupo Financiero Inbursa. Slim-owned businesses account for about one-third of Mexico's stock exchange. Throughout Latin America, Slim is developing a presence in transport and infrastructure. In 2005, Slim's infrastructure company, Impulsora del Desarrollo Economico de America Latina (Ideal), listed on Mexico's stock exchange. Ideal focuses on construction, water treatment, housing, roads, airports, health services and energy projects in major Latin American markets.

Slim has been careful not to openly support any political party and has not shown interest in seeking public office. He has been relatively discreet when wielding political influence, in contrast, for example, to owners of television companies, notably Televisa. His statements are followed closely, though they are frequently naive and ineffectual. He apparently considers that all investment expenditure is positive and has repeatedly stated that policies that aim for "stability" should be substituted for those that seek "growth."

Slim would probably rather have avoided being named the world's richest man because of the spotlight it puts on his wealth and business practices. He may eventually need to respond to growing criticism over his monopolistic telecom business and his unwillingness to redistribute more of his wealth. However, he will continue to fight to keep the market power he has so profitably exploited.

Google Phone?....What's next? A Google Car?

The Observer of London is reporting that Google might be working with HTC and mobile/telecom giant Orange to build a Google Mobile Phone, which could possibly have Google software inside the device, and would be able to do many of the web tasks smartly. The device, article speculates, could go on sale in 2008. (Of course, we would all have forgotten by then… if it doesn’t happen.) Orange and Google, both declined to comment.

Their plans centre on a branded Google phone, which would probably also carry Orange’s logo. The device would not be revolutionary: manufactured by HTC, a Taiwanese firm specializing in smart phones and Personal Data Assistants (PDAs), it might have a screen similar to a video iPod. But it would have built-in Google software which would dramatically improve on the slow and cumbersome experience of surfing the web from a mobile handset.

It would be interesting to see if this actually happens. Google, in recent months has become increasingly aggressive about its mobile ambitions, and is pushing into the carrier space, though there have been some snags.

Google Phone, if you think about it is a reasonable speculation. Google has been aggressive in developing location based services, has amp-ed up its local search and mapping services. In addition, it has also been mobilizing its applications such as GTalk and GMail. YouTube, the video arm of Google, is beginning to embrace the mobile ecosystem.

Normally, one would not spend too much energy on this bit of news. However, presence of Andy Rubin on Google campus gives us a reason to pause.

Who is Rubin? He was one of the co-founders of Danger, the company that makes the Sidekick devices. He sold his last company, Android to Google for an undisclosed amount of money, and he has been holed up in Mountain View, California campus of Google, doing something.

No one knows what, but since Android was focusing on mobile, it is safe to assume that he just might be involved in Android. Danger, as you might know has become a multi-million dollar business based off the “compress web and take it mobile” technology developed by Rubin and others. Business Week has reported hat Android was working on a cell phone operating system.

One source familiar with the company says Android had at one point been working on a software operating system for cell phones. … In a 2003 interview with BusinessWeek, just two months before incorporating Android, Rubin said there was tremendous potential in developing smarter mobile devices that are more aware of its owner’s location and preferences. “If people are smart, that information starts getting aggregated into consumer products,” said Rubin.

For Orange, this could be a valuable asset in its triple play ambitions. The company owns broadband businesses across Europe, and has access to 3G networks, and is owned by France Telecom. It could use Google’s web expertise to take on its rivals, by offering web-mobile hybrid phones, and at the same time get a slice of mobile advertising revenues. I know, sounds far fetched, but not out of the real of possiblity.