Slim’s Move Into Web TV Draws Protests of Piracy From Rivals

Carlos Slim, the billionaire banned from providing television service in his native Mexico, is offering shows for free on the Web, drawing protests from rivals wary of his influence in the market.

Emilio Azcarraga, the billionaire chief executive officer of Mexico’s biggest broadcaster, Grupo Televisa SA, called for regulatory scrutiny of Slim’s moves last month. TV Azteca SAB, Mexico’s second-largest broadcaster, complained to the nation’s phone regulator and filed suit against Slim’s companies for Web broadcasts such as last month’s Pan American Games.

“For an illegal competitor, a pirate company, to take away our audience, that is affecting our business,” said Luis Nino, a spokesman for TV Azteca and the other companies controlled by billionaire Ricardo Salinas. He compared it to taking away business from Slim’s Mixup stores, which sell CDs and DVDs in Mexico. “It’s as if I went right outside the store and started selling pirated music and movies, and told them, ‘No! It’s OK! I downloaded them from the Internet!’” he said.

Under the terms of their telecommunications license, acquired in a 1990 privatization sale, Slim’s America Movil SAB and Telefonos de Mexico SAB are forbidden from using their networks to offer TV service. Slim, 71, has tried unsuccessfully to reverse the ban, especially as Televisa has begun offering phone and Internet service to lure away his users.

Streaming ‘Isn’t TV’

“Streaming on the Internet isn’t TV,” Renato Flores, a Telmex spokesman, posted on his Twitter account. “The gravest part of this is that the debate in Mexico is about restricting access and limiting freedom on the Internet.”

He declined in an e-mail to comment further and said Arturo Elias, a spokesman for Slim, also declined to discuss the matter.

Regulations that ban videos on the Web without a license would affect companies beyond Slim’s, said Jose Otero, an analyst at Signals Telecom Consulting. Netflix Inc. has also begun streaming-video services in Latin America, and Mexican phone carrier Maxcom Telecomunicaciones SAB started an online TV plan in September.

“If you’re going to need a broadcasting license to offer video streaming, you’re going to need to block a lot of companies,” said Otero, who is based in Montevideo, Uruguay.

America Movil is already the biggest pay-TV provider across all of Latin America, with 12.5 million subscribers, mostly in Brazil, compared with DirecTV’s 10.3 million. Last month America Movil acquired video distribution company DLA Inc. for an undisclosed fee, gaining systems to offer pay-per-view and online streaming of Hollywood movies.

Photographer: Chris Goodney/Bloomberg

Mexican billionaire Carlos Slim. Close

Mexican billionaire Carlos Slim.

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Photographer: Chris Goodney/Bloomberg

Mexican billionaire Carlos Slim.

Future of Content

“Having content is going to be an important part of the future for all of America Movil,” said Martin Lara, an analyst at Corp. Actinver SAB in Mexico City. “It makes sense to build up content and acquire content even though they don’t have a license.”

America Movil begin offering its own online video service, Ideas Entretenimiento, with movies and TV shows in Argentina last week. The service uses video distributed by DLA, according to the website.

Telmex, as the America Movil unit is known, began offering an online news service, Uno TV Noticias, three years ago. It has added coverage of Formula One racing, where it sponsors driver Sergio Perez, and of events such as the International Cervantino Festival, an arts gathering in Guanajuato, Mexico.

TV Azteca began its legal moves after Telmex started online transmissions last month of the Pan American Games, held this year in Guadalajara, Mexico. The broadcaster argues that even though the streaming video is free for all Internet users, Telmex uses its network to transmit the programming and is therefore violating the terms of its license, Nino said. Telmex was an official sponsor of the Games and had online broadcast rights for Mexico.

‘Adhere to the Law’

Televisa’s Azcarraga, questioned about Telmex’s broadcasts at an advertising conference last month, said regulators must study whether Telmex’s license includes the right to offer TV programming.

“I call on everyone to adhere to the law,” he said.

The Federal Telecommunications Commission is reviewing the matter, Communications and Transportation Minister Dionisio Perez-Jacome told reporters last month, according to state news agency Notimex.

The competition between Slim’s companies and Mexico’s two broadcasters has intensified this year. Slim pulled his companies’ advertising from the broadcasters in what they said was a dispute over price, and both sides filed antitrust complaints against the other.

America Movil has 70 percent of Mexico’s wireless subscribers, and Telmex has 77 percent of the nation’s land lines. Televisa and TV Azteca get almost all of the nation’s TV viewers.

Telefonica’s Video

Slim’s $67 billion in publicly disclosed holdings includes a stake of about 42 percent in America Movil, which represents about 64 percent of that wealth. The billionaire, named the world’s richest person for a second year in March by Forbes magazine, also controls retail, banking, construction and mining companies in Mexico.

America Movil’s biggest rival across Latin America, Madrid- based Telefonica SA (TEF), also offers pay-TV in many parts of the region and has an online video service through its Terra Networks unit. The company, which reports third-quarter results Nov. 11, had 2.1 million pay-TV clients in the region at the end of June.

Bitter Billionaire Battle

TV Azteca’s legal actions won’t stop other companies from offering video online, Nino said. While video providers such as Netflix and Google Inc.’s YouTube unit are users of Internet services, Telmex is a provider, a distinction that carries different legal requirements, he said.

The video-streaming controversy shows the battle among Mexican telecommunications and media billionaires, tied up in lawsuits and injunctions as rivals seek the upper hand in converging businesses, is just becoming more bitter, Otero said.

“This lawsuit really doesn’t have anything to do with the Internet,” he said. “The fight between the TV companies and Slim’s group is getting bigger and bigger.”

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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