Mexico & Nafta - March 2011 (ISSN 1741-444X)

On 23 February, the world's richest man, Carlos Slim Helú, tore into a business battle with Mexico's two main broadcasters, Televisa and TV Azteca. The broadcasters retaliated, claiming that Slim was a danger to national security.

For the broadcasters, Slim's economic power is simply too great. His wealth is equivalent to 6% of GDP and he controls companies that account for half the capitalisation of the Mexican stockmarket. Televisa is alarmed by Slim's alliance with Dish México which is challenging Sky, which is controlled by Televisa's main shareholder, the Azcárraga family. Televisa claims that Telmex, by going into business with Dish México, which is controlled by MVS Communicaciones, is breaching the terms of its telecommunications licence. Telmex says that it is only doing Dish México's back office operations, issuing bills and managing accounts. Telmex, however, makes no secret of its desire to get into broadcasting but notes that it has not been allowed to by the federal government.

The row, essentially, is over the convergence between telecommunications and broadcasting. Telecoms is dominated by Slim's companies, Telmex and Telcel. The broadcasters, especially TV Azteca, which controls Iusacell, a mobile telecoms company, want to get into the telecoms business, but claim that Slim's (effective) monopoly means that they cannot get in on profitable terms, yet Slim is making inroads into their core business.

On 18 February Slim's master company, Grupo Carso, announced that it had cancelled all its adverstiing with Televisa. On 23 February TV Azteca announced that it had cancelled all advertising from Slim's companies. Carso says that it took the decision to cancel the advertising after Televisa increased its prices by 20%. Analysts say the broadcasters' move is in retaliation against Telmex and Telcel's refusal to allow Iusacell to connect its subscribers to the Telmex and Telcel networks at a reasonable price.

The withdrawal of Carso's advertising cut Televisa's TV ad salesbook by 4%, or M$870m (US$71m), the TV company says.  This looks like an underestimate. In 2009, Slim's telecoms companies spent MS$2.5bn on TV advertising, 70% of which went to Televisa. Telcel alone is Televisa's third biggest advertiser. The other big Slim companies which have cancelled their ads are: Sanborns, Banco Inbursa and Sears.

Iusacell and other telecoms companies are alarmed by the interconnection price Telcel was able to extract from Telefónica to connect subscribers from its Movistar network to people on Telcel: M$0.95 (US$0.08)  a minute. Telcel says that this is the cheapest interconnection rate for any Organisation for Economic Cooperation and Development (OECD) country. Iusacell and co say that the rate is twice that suggested by the regulator, the Comisión Federal de Telecomunicaciones. 
 
The big worry is what may happen in the 2012 elections when, controversially, all TV advertising will be purchased centrally. Some political commentators argue that the two main networks could refuse to carry the ads, and thus influence the result.

Slim moves into oil in Colombia: On 22 February Slim announced that he was investing in Colombian oil exploration. This is his first foray into the upstream oil business. Slim has an enviable reputation being among the first to spot business opportunities (and a fortune of US$54bn to prove it). In Mexico, oil exploration is still a state-owned monopoly, through Pemex.

Slim's vehicle is Tabasco Oil, in which he has acquired a 70% stake. It has a concession to explore for oil in eastern Colombia and has promised to invest US$6m in the project. Geoprocesados, which had set up Tabasco, has long worked with Pemex on seismic evaluations of potential oilfields.

Slim's new art museum: On 1 March Slim opened his new art museum, Museo Soumaya (named after his late wife) in Mexico City. President Calderón attended the opening. The museum will display the choicest items from Slim's 66,000 piece collection. The museum complex, which includes four residential buildings, three office buildings, a Five Star hotel, a theatre and a shopping mall, cost US$800m to build.  The museum holds works by Picasso, Rubens, Rodin, El Greco, Van Gogh, Monet, Cézanne, Renoir, Matisse and Leonardo da Vinci. It also has works by the Mexican masters: Diego Rivera, José Clemente Orozco and Rufino Tamayo.

• On 1 March Mexico's anti-trust agency, the Comisión Federal de Competencia (CFC), recommended that the authorities should offer Telmex a limited broadcasting licence in return for Telmex and its associate mobile company, Telcel, reducing their interconnection charges. If Telmex got a broadcasting licence it would break the duopoly currently enjoyed by Televisa and TV Azteca. The CFC argues that changes to interconnection charges should precede the broadcasting licence.