International -- Int'l Business: MEXICO
CAN THIS ULTRA-RICH MEXICAN KEEP CHARMING THE WORKING CLASS? (int'l edition)
Now, Ricardo Salinas Pliego plans a low-cost phone service
Ricardo Salinas Pliego surrounds himself with the trappings of Mexico's ultra-rich. He flies his own helicopter, skis in Vail, Colo., and travels to his office at TV Azteca in Mexico City protected from kidnappers by 10 bodyguards.
Ironically, what has made Salinas Pliego Mexico's fastest-rising business star is his common touch. His market is Mexico's vast working class--whether he is providing credit to buy washing machines at his retail chain, Grupo Elektra, or building ratings with soap operas and celebrity gossip on the two broadcast networks operated by his TV Azteca. Now, Salinas Pliego plans a $1 billion project to launch a telephone company, installing wireless phones in low-income neighborhoods that lack conventional phone lines. "We understand perfectly well what our market needs in phone service," says Salinas Pliego.
At 42, Salinas Pliego is one of a new generation of Mexican businessmen who came of age during the debt crisis of the 1980s and thrived as Mexico opened to competition. Total sales of his three companies--Elektra, TV Azteca, and paging service Biper--reached $1.3 billion last year, up 41% from 1996, while profits rose 12.5% to $227 million.
The targets of his newest venture are the same neighborhoods served by Elektra's 640 stores, which sell electronics, appliances, and clothing on credit and handle money transfers from the U.S. via Western Union. Under Salinas Pliego's plan, households within a two-kilometer radius of the stores will be able to buy digital phones for $50 on credit, plug them into electrical outlets, and place calls through antennas built atop the store buildings. Conventional phone lines would cost $210, if available.UNTESTED. So far, Salinas Pliego, a technology buff, has bid $250 million in an ongoing government auction of radio-frequency licenses for his "fixed-wireless" service. By yearend, he hopes to begin hooking up 1.5 million homes with the phones, which are cheaper than cellular phones because they aren't mobile. Payment will be assured by Elektra's knowhow in collecting from more than 1 million installment-plan customers. "We have the right distribution, the right financing, and the right promotion," says Salinas Pliego. The project may be risky, though. The technology is untested on a mass scale, and the demand for such service is uncertain. "My sense is that it's still a tentative opportunity rather than a tangible reality," says analyst Lars Schonander at Santander Investment in Mexico City.
Still, Salinas Pliego's record suggests that if anybody can make the new technology profitable, he will. He brought Elektra, his family's business, out of bankruptcy in the 1980s and borrowed heavily to expand. In 1993, when he bought a government media package including Azteca for a hefty $643 million, few believed he would be able to compete with giant TV rival Televisa. But he has boosted Azteca from less than 10% of Mexico's TV audience and advertising to 35% of prime-time viewers and a third of ad spending. A key audience builder: home-produced soap operas that take on formerly taboo subjects such as politics, divorce, and abortion.
Now, Salinas Pliego is pushing Azteca, Elektra, and Biper into the rest of Latin America, buying TV networks and opening stores from Guatemala to Chile. And he proposes to group his family's holdings in a new company, perhaps called Salsa, and sell shares. That would allow some of his relatives to cash out. But Salinas Pliego, who would hold some 40% of Salsa shares to start, says he wants to buy more.
His swashbuckling style doesn't sit well, though, with some investors and partners. In one face-off, Salinas is fighting the U.S.'s NBC Inc. over a 1994 contract that gave NBC the option to buy up to 21.5% of Azteca in return for assistance. Salinas says he never got the assistance. NBC says he misled the network about how well Azteca was doing and claims damages of $300 million.
Amid such skirmishing, it is perhaps no coincidence that Salinas Pliego's taste in reading runs to empires, from Rome to the Aztecs. Reminded that empires fall, he pauses for a second. "I think I have a good 25 years ahead," he says. Right now, there seems little to stop him.By Elisabeth Malkin in Mexico CityReturn to top