Slim’s Telmex Said to Build Faster Network to Step Up Internet Competition

Telefonos de Mexico SAB, the nation’s largest phone company, is building a network that will extend fiber-optic cables to 1 million homes this year, boosting the speed of its Internet service by as much as 10 times, a person with direct knowledge of the plan said.

The fiber-to-the-home network has already reached thousands of homes, said the person, who declined to be identified because the plans are private. Mexico City-based Telmex, controlled by billionaire Carlos Slim’s America Movil SAB, is working on the project with Alcatel-Lucent, the Paris-based communications- equipment supplier, the person said.

Telmex plans to deploy the network in 40 cities, the person said, principally in places where mobile-phone carrier Grupo Iusacell SA is introducing its own fiber-to-the-home network. Totalplay, as Iusacell calls the service, markets Internet speeds of up to 100 megabits a second, compared with the 5 megabits Telmex offers home users in most areas.

“Fiber-to-the-home is the best technology that exists,” said Martin Lara, an analyst at Corp. Actinver SAB in Mexico City. “It’s going to be good for the consumer.”

With the new network, Telmex plans to offer speeds of 10 megabits, 20 megabits and 50 megabits as it seeks to keep users from switching to Totalplay and other companies that can offer packages of phone, Internet and television. Mexico’s government bars Telmex from offering video service, saying it must comply with rules governing its connections with competitors. Telmex says it has already met those requirements.

Verizon, BT

While Telmex will probably focus on high-income areas, its plan appears “fairly aggressive,” Lara said. Iusacell has said it expects 300,000 Totalplay customers by the end of next year. Telmex’s plan is to have 1 million homes capable of receiving the fiber service, and not all will necessarily be subscribers.

A spokeswoman for Grupo Carso SAB, a holding company controlled by Slim that has a unit that builds telecommunications networks, confirmed a fiber-to-the-home project in Mexico disclosed in the company’s first-quarter report is principally for Telmex. A Telmex spokeswoman said executives had no comment, and a spokesman for closely held Iusacell had no immediate comment. Mary Ward, a spokeswoman for Alcatel-Lucent, declined to comment.

Phone companies such as Verizon Communications Inc. (VZ) and BT Group Plc have invested in fiber-to-the-home networks to provide new services to customers who are using their phone lines less in favor of wireless devices. Telmex lost 29,000 phone lines last quarter for a total of 15.6 million. Fiber networks are also capable of carrying television signals.

Spending Plan

Axtel SAB, Mexico’s second-largest phone carrier, offers fiber-to-the-home technology in some markets. Grupo Televisa SA’s cable units and Megacable Holdings SAB are selling phone, Internet and TV packages to lure Telmex’s users.

Telmex rose 8 centavos to 10.49 pesos at 4:10 p.m. New York time in Mexico City trading. The stock has gained 4.8 percent this year.

Slim, 71, said in January that Telmex will spend 10 billion pesos ($860 million) in capital investments this year. Of that amount, 70 percent will go to improving Internet speeds and quality, Chief Financial Officer Adolfo Cerezo said in February.

Investors will be happy with the fiber plan unless it leads to an increase in capital investments, Lara of Actinver said.

To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net.

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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