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Carlos Slim's TV plans put on ice, for now

Mexican tycoon, Carlos Slim, the richest man in the world according to Forbes


Mexican billionaire Carlos Slim may have to wait for years to enter his domestic television market now that the government has rejected his bid so close to next year's presidential election.

Mr. Slim must go back to the drawing board after the Communications and Transport Ministry said his fixed line phone giant Telmex, which dominates the market, had not yet met the regulatory requirements for a TV concession.

The rejection was the latest in a string of setbacks for the world's richest man, whose efforts to get into Mexico's TV market have been strongly opposed by the dominant broadcasters Televisa and TV Azteca.

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With the 2012 vote just 13 months away and polls showing his conservative National Action Party is way behind the main opposition, President Felipe Calderon is more likely to want to keep the TV bosses on his side than help Mr. Slim get richer, said Lorenzo Meyer, a political scientist at the College of Mexico.

"For now the richest man on Earth can't impose his will on the government," he said. "I think Slim will have to wait until Calderon's government ends and negotiate with the next one."

Mr. Slim is already the top pay TV provider in Latin America, with customers in all countries except Mexico and Argentina.

But if he cannot overturn the decision, investors may scale back expectations for his businesses, which have flourished on the platform he built with Telmex two decades ago.

The company, which controls about 70 per cent of Mexico's fixed telephone network, pledged to fight the decision.

"This isn't the last word," said Telmex spokesman Renato Flores, insisting that a TV concession was still possible under Mr. Calderon, who cannot seek a second term in the July 2012 vote.

The new president traditionally takes office in December. No official candidates have been selected yet.

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Regulators and lawmakers from all the major parties have vowed to go after Mexico's oligopolistic business elite. None of the magnates stand out more than Slim, whose firms are worth some $74-billion (U.S.), according to Forbes.

International institutions like the OECD have long urged Mexico to break the stranglehold a select few have on key sectors of the economy. Until recently they were able to blunt antitrust efforts with time-sapping legal injunctions.

Now, greater political consensus for reform and rising public activism have sown the seeds of change, piling more pressure on the biggest names, in particular Slim.

Helping Mr. Slim is unlikely to be a vote-winner, and analysts and rivals say Telmex's near-term prospects are not good.

"The legal battle between the government and Telmex is not finished," said former telecoms regulator Irene Levy, who now runs think tank Observatel. "But in the political battle, during an election season, Televisa is stronger than ever."

Investors had been counting on Mr. Slim's Mexican television business to create lucrative new revenue streams and promote loyalty among existing Telmex customers.

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HSBC estimated in a recent research note that Telmex's entry into television would create $5 in added value per share, as well as "stronger pricing power" for other Telmex services.

Telmex receipts from pay TV would drive revenue around 6 per cent higher next year as 270,000 new television subscribers joined the company's network, HSBC wrote in its report.

The rebuff will disappoint investors who had driven Telmex stock up nearly 9 per cent since January in part because they counted on a favorable television ruling in the near-term.

Some Slim holdings have already been under pressure as markets digest the impact of increasing scrutiny by regulators and an unlikely alliance forged by the owners of Televisa and TV Azteca to loosen his hold on the telecoms market.

Shares in his mobile giant America Movil suffered double-digit losses after the Federal Competition Commission fined it $1-billion in April for abusing its market position.

Mr. Slim faces more trouble as courts consider whether to lower service fees Telmex and his local mobile brand Telcel charge rivals. Those service fees, or interconnection charges, are a major profit engine that his empire has defended in court. Slim was previously able to hold the fees in places while he battled regulators but new rules mean they must be lowered first.

Mr. Slim's rivals also expect telecoms watchdog Cofetel soon to curb Telcel promotions such as giving customers a quota of free calls inside the network. Competitors say this gives Telcel an unfair advantage with its 70 per cent market share.

For all the potential pitfalls, Observatel's Levy said it would be unwise to underestimate a man whose fortune could cover Mexico's entire education budget for the next decade.

"Telmex is not through with its legal strategy," she said. "There will not be a conciliatory attitude."

However, with his term nearing an end and his party floundering in opinion polls, Mr. Calderon had nothing to lose by defying Slim, said political scientist Meyer.

"Calderon can take this decision because Slim is not very popular," he said. "Mexicans take a dim view of his telephone monopoly because of how expensive it is and its abuses."

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