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Titans clash in Mexico's fight over monopolies

A technological revolution is pushing Carlos Slim, the world's richest man, into a battle with other powerful interests in Mexico, creating a billionaires' version of a schoolyard spat: name-calling, attack ads, canceled contracts and even a physical shoving match.
/ Source: The Associated Press

A technological revolution is pushing Carlos Slim, the world's richest man, into a battle with other powerful interests in Mexico, creating a billionaires' version of a schoolyard spat: name-calling, attack ads, canceled contracts and even a physical shoving match.

To the wonderment of many Mexicans, companies accustomed to crushing competitors are now casting themselves as crusaders against monopoly.

In recent weeks, the corporate titans have run full-page ads accusing each other of lying, cheating and conspiring to overcharge customers, allegations often bolstered by official studies finding that Mexicans pay far more than they should for many services because major businesses lack strong competitors.

The feud reached new heights on Wednesday when anti-monopoly regulators showed up at the offices of a cell phone company, Iusacell SA, to formally deliver notification that its attempt to form an alliance with the nation's biggest television network had been rejected.

The proposal would have created a stronger rival to the telephone and internet companies that are the key base of Slim's estimated $74 billion fortune. And it would have created a business alliance between Mexico's only two national television broadcasters.

Iusacell workers changed the street number on the sign outside the corporate offices in an apparent bid to confuse the notice servers, according to an official of the Federal Competition Commission who was not authorized to be quoted by name.

When employees of the commission, accompanied by scores of plainclothes federal police, tried to serve the notice anyway, security guards tried to prevent them from entering. That led to a shoving and shouting match between throngs of business-suited lawyers, guards and police in one of Mexico's most exclusive neighborhoods.

The spat added to the bad blood between the television magnates and Slim's cell phone and telephone companies which are fighting for the prize known as the "triple play:" a single company supplying cell and fixed-line phones, TV and internet service to consumers. Whoever wins that market holds a key into the homes of 112.7 million Mexican consumers.

It's a battle fought all over the world. But in Mexico, only two or three major players so far are involved.

Mexico's largest TV network, Televisa, decided to invest $1.6 billion in Iusacell SA, which is controlled by the owner of the only other national network, TV Azteca. Regulators rejected the deal, reportedly citing concerns about the effects of a de-facto alliance between the nation's big broadcasters.

But the networks say the commission's ban leaves Slim's cell phone company in control of the cell market, where it already holds a 70 percent market share.

Many economists say all of the companies could be considered monopolies or duopolies, yet all are claiming they want to bring more competition to highly concentrated sectors.

"We have a sort of Gordian knot here," said Ernesto Piedras, an analyst for the Mexico City-based Competitive Intelligence Unit, who said he favors letting the titans slug it out.

"Some people say, there is already a virtual monopoly, and now another monopoly is going to get into the act,' well, I say, let four monopolies get into the action, that's competition," he said.

That appears to be the choice many say regulators are facing: should they let monopolies in one field expand into other fields, and hope the consumer will benefit from the internecine conflict?

Independent businessman and anti-monopoly crusader Ricardo Alessio Robles doesn't think that is the solution. He agrees with the decision to stop the cell phone deal.

"This alliance between Televisa and TV Azteca, even if it would give a little more competition in cell phones, would lead to a matrimony in television that wouldn't encourage confidence," said Alessio Robles, whose small group of investors lost a fight against Mexico's dominant cement producer, Cemex, in 2004.

His group tried to import a shipload of concrete from Russia and undercut Cemex's prices, but port authorities wouldn't allow the ship to dock, stevedores wouldn't unload it, and tax and customs authorities declared the shipment contraband.

"In this system ... the only ones who have benefited are the 20 families who have holdings in some monopoly," said Alessio Robles. "We, the 6 million independent businessmen, are paying their exorbitant prices and we're not growing according to our potential."

The Paris-based Organization for Economic Cooperation and Development said Monday that Mexicans overpaid for telecommunications services by more than $13 billion a year from 2005 to 2009. It said a lack of competition cost Mexico $25 billion a year in the same period.

Slim sharply disputed the claim, and his fixed-line company, Telefonos de Mexico SA, or Telmex, ran newspaper ads Friday claiming the OECD report erroneously cited rates 87 percent higher than the company really charges.

Iusacell and Televisa touted the OECD study as a reason their telephone alliance was necessary, and Iusacell officials depicted themselves as victims of intimidation tactics by the anti-monopoly commission.

"They were the aggressors," said company spokesman Dan McCosh about Wednesday's scuffle.

Eduardo Ruiz Vega, Iusacell's director of regulatory compliance, said his company would appeal the ruling and denied that the cell phone alliance would affect television operations.

The company displayed its anger at the ruling when it took out a full-page ad in the national newspaper Reforma, accusing the paper of "selling out to the interests of the world's richest man" by underplaying the OECD story.

Slim's own companies have flooded print and alternative media with lucrative advertising after pulling their commercials off the two television networks in what they said was a dispute over pricing.

Slim also has accused the TV networks of blocking his own applications to offer pay TV service, running ads saying: "The television duopoly launches attacks to prevent competition in TV."

His ally in pay TV, Dish Mexico, ran ads last week accusing the two big networks of refusing to run its ads, refusing to allow the company to carry its programming and using "legal tricks to try to knock us out of the competition."

Telmex has said opening the TV market would benefit over 55 million people.

The Mexican government has responded to the seemingly dilemma by proposing that all restrictions on foreign investment in the telecommunications sector be lifted, and offering companies help in installing antennas and fiber optics lines, while auctioning off radio spectrum.

But many fear that Slim's economic power would allow him to dominate those auctions, allowing him to dominate television as well as telecommunications.

"Some people say that if you give him (Slim) television, you might as well give him the keys to all the army bases and the national palace, so he can manage the whole country," said Piedras.