Carlos Slim takes a hit as Mexico institutes telecom reform

Following months of debate, the Mexican legislature has finally approved a major overhaul of the telecommunications sector that will institute new restrictions on monopolies, which have long-dominated the provision of basic communication services to Mexican residents. The new laws will have particularly consequential effects on Carlos Slim’s communications conglomerate—America Movil— as new regulations inhibit more than 50 percent market share by any particular company.

The aim of the reform package—which was approved last Wednesday by Mexico’s lower house—is to provide better service at cheaper prices by breaking up monopolies such as Slim’s, which all but own the telecommunications marketplace in Mexico.

As Tracy Wilkinson of the Los Angles Times reports, “[Slim’s] America Movil’s Telmex controls 80% of landlines in Mexico, and its mobile carrier Telcel controls 70% of that market. Mexicans routinely complain of high costs and spotty service.”

With the latest regulations in place, Slim has been forced to take action in order to radically restructure America Movil.

SEE ALSO: Mexico advances on telecom law to challenge Slim’s dominance

Faced with the imminent approval of the legislative package, Slim—who is listed as the world’s second-richest man by Forbes, due mostly to his telecommunications empire— was faced with two separate options: the billionaire could either choose to meet the new government regulations or sell off parts of his corporation so as to not exceed the 50 percent market threshold.

As Slim recently announced, he has selected the latter path and will sell off 30 percent of his America Movil assets before the restrictions are put in place.

The business magnate has chosen to sell rather than share telecommunications infrastructure, which would become incumbent upon his company if it maintained more than half of total market share. Ultimately, the aim of the reform is to lower prices and improve services by allowing competitors—such as Spain’s Telefonica – to exert greater influence in the consumer marketplace.

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And yet, not all prospects are bleak for Slim as his reduction of ownership in the telephone industry now allows him to invest in the pay-TV market. As BBC News explains, “If America Movil does cut its market share below 50%, it will be allowed into other markets, such as the pay-TV sector, which it is barred from at the moment.” Specifically, the sale of 30 percent of America Movil assets will garner a hefty sum on the market; Slim is likely to use these funds in order to make a move into the expanding TV sector in Mexico.

And while the legislation was generally received in a favorable manner, Tracy Wilkinson of the Los Angeles Times goes on to explain that, “Other critics said the legislation was tougher on the telephone industry than on television. The powerful Televisa, largest TV broadcaster in Spanish-speaking Latin America, shares a virtual monopoly with the smaller TV Azteca. Televisa is expected to move into the telephone sector.”

Slim will look to take advantage of this disparity as he makes a move into the television sector in order to make up for his losses in the telecom industry.