Analysis: Tech showdown looms in Mexico

From...

by Kevin Roderick

(IDG) -- Call it the cowboy boot summit. George W. Bush takes his first official foreign trip Friday, to the ranch of Mexico's horseback-riding President Vicente Fox. The two new leaders are expected to talk about immigration, trade and Mexico selling electricity to California. Fox is also expected to continue his crusade to bring Mexico's 97 million people into the digital age with the help of U.S. investment.

But standing in the way is a powerful force: Carlos Slim Helu, who controls Telefonos de Mexico, or Telmex, the country's dominant phone company. For years U.S. telecom companies have been trying to crack the $12 billion Mexican market and have come up frustrated largely due to Slim's resistance. The faceoff got so contentious that last year the United States filed a complaint against Mexico with the World Trade Organization.

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Telmex operates nearly all of Mexico's 12 million phone lines, is the leading ISP and even sells discounted PCs that customers need to hook up to the Net. Slim's also a partner with Microsoft (MSFT) in T1MSN.com, Mexico's premier Web portal. His $8 billion empire extends beyond technology to cigarettes, chemicals and retail, making him Mexico's biggest employer.

Slim's clout doesn't stop at the Mexican border. In the United States, Slim and his three sons hold controlling stakes in Prodigy and the CompUSA retail chain, plus lesser interests in retailers OfficeMax (OMX) and Saks (SKS) . Last week, Telmex spun off its wireless business as America Movil, which begins life as one of the world's largest wireless providers, with 12 million subscribers.

For all of his technology plays, Slim doesn't use computers himself. But he believes in their power to transform Mexico into an economic powerhouse. In that, he and Fox see eye-to-eye. But whether the two men will work out the details of their considerable differences is still a question.

The first obstacle is politics. Slim built his fortune during the decades that the Institutional Revolutionary Party ruled Mexico, and he was close to former president Carlos Salinas de Gortari. Fox comes from the business-oriented National Action Party and campaigned against the PRI's legacy of corruption. Nonetheless, Fox and Slim need each other, and many expect them to find a way to work together.

That will take some doing. Fox wants to double the number of domestic phone lines, and Telmex is the logical company to do that. But Fox's advisers say Telmex impedes progress -- its hold on the market allows it to resist competition and charge high fees. Daniel Suzuki Lavin, a technology manager at Allianz Mexico, a subsidiary of German insurance giant Allianz, gripes about poor service from Telmex. "They don't apologize, and there's no way to complain," he says.

Mounting political pressure and prodding from Mexican regulators, however, is forcing Telmex to change its ways. In January, Telmex announced far-reaching agreements to improve access for its chief rivals, WorldCom (WCOM) 's Avantel and AT&T (T) 's Alestra. "We have huge competitors now," says Telmex commercial director Isodoro Ambe Altar.

That's partly true. But Fox and Slim still have to work together on further opening the market and wiring Mexico.

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'Cibercultura' is on the rise in Mexico
(The Industry Standard)
Latin America starved for bandwidth
(IDG.net)
AT&T LatAm pleased with 2000 achievements
(IDG.net)
Citibank Mexico launches e-commerce services, Net banking
(IDG.net)
Net ventures grow cold in Latin America
(The Industry Standard)
Chile lays out welcome mat to ASP industry
(IDG.net)
AOL struggles in Latin America
(IDG.net)
Latin America's latest launch
(The Industry Standard)

Microsoft
CompUSA
OfficeMax

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