There could be trouble brewing for Mexican billionaire Carlos Slim and his newspaper, the New York Times.
Slim, currently the world’s richest man, has become insanely wealthy through the stranglehold his company, América Móvil SAB, has on Mexico’s telecommunications industry.
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Unfortunately for Slim, the Mexican government seems poised to loosen Slim’s grip on the industry.
Mexico is expected to pass new legislation to create competition in the industry, which would spell trouble for Mexico’s Mr. Monopoly, according to the Wall Street Journal:
Mexico's top three political parties have vowed to pass the law by April 30, which would give the government new latitude in reshaping both the telephone and television market.
América Móvil, owned 40 percent by Mr. Slim and his family, stands to be the hardest hit by the competition push, say analysts. The company, which has a market value of $75 billion, has 261.6 million wireless subscribers in North and South America.
It has commanded a quasi-monopoly in Mexico since the 1990s. It currently controls 70 percent of the country's mobile phones and 80 percent of its fixed lines, giving it some of the region's biggest profits. The profits have helped América Móvil carve up other markets with heavy investments from Colombia, where it has 60 percent of the cellphone market to Brazil where it has 24 percent.
The new Mexican regulator will be able to issue tougher sanctions and force asset sales by dominant players—and the company may have less ability to parry these decisions by tying them up in Mexican courts. Under the new law, foreign companies could buy América Móvil's small Mexican competitors and beef them up with big capital investments, ending a restriction which capped foreign investment in landline companies at 49 percent.
Christopher King, an analyst at brokerage Stifel Nicolaus & Co., puts it this way: "As long as the government is putting these kind of teeth into telecom regulators, it's bad news for América Móvil. I would say this is the biggest regulatory threat in Mexico."
Although Slim has publicly said that he welcomes the reform, the markets have not been kind to the company since the news broke.
América Móvil stock has plummeted in New York and seen its lowest price in the Mexican Stock Exchange since April 2009. Additionally, both Moody’s and Credit Suisse have lowered their ratings on the company.
Slim’s stake in the company accounts for roughly half of his $73 billion net worth.
The new laws may not be the only bump on the road ahead for América Móvil.
AT&T recently hinted that it is looking to sell off the 9.6 percent of América Móvil that it owns, a stake worth about $7 billion.
Slim has used his power and connections to turn América Móvil into the giant monopoly. The company has millions of subscribers throughout North and South America, including more than 22 million in the United States.
Slim’s influence extends into the United States as well.
Slim owns more than 7 percent of the New York Times Company, and also loaned the company $250 million in 2009 "amid a particularly rough period in its history."
This relationship earned Slim a pass from the New York Times when he held a series of closed-door meetings with senior officials in President Barack Obama’s administration such as Homeland Security Secretary Janet Napolitano and U.S. Trade Representative Ron Kirk.
According to visitor logs, Slim has also visited the White House at least twice during Obama’s presidency.