The Telecom King Of Latin America?

On the acquisition trail, Mexico's Carlos Slim is quickly constructing an empire

Mexican billionaire Carlos Slim is determined to become the dominant telecommunications provider in Latin America. On Mar. 15, he made his latest leap toward that goal when Teléfonos de México (TMX ) (Telmex), the Mexican phone giant he controls, offered $360 million for bankrupt MCI's (MCWEQ ) 52% share of Brazil's top long-distance operator, Embratel. That move came just three weeks after Slim completed his acquisition of AT&T Latin America Corp.'s assets in the region for $207 million. And Slim isn't done yet. "Any telecommunications asset that has reasonable, appropriate conditions interests me," he recently told BusinessWeek. "Not just acquisitions but investments in telecom infrastructure."

Indeed, as he expands beyond his base in Mexico, Slim's mergers-and-acquisitions offensive is creating one of the world's largest emerging-market telecom empires, with combined sales of $15.8 billion and service to 61 million customers -- fixed line and wireless combined -- across nine nations. The latest bids follow a string of profitable ventures for the 64-year-old Slim, the wealthiest individual in Latin America. The Mexican business tycoon has an unmatched reputation for snapping up undervalued assets and turning them around, starting with Telmex after its 1990 privatization.


Slim's push into Latin American wireless, long distance, and data services comes not a moment too soon. That's because the company once regarded as his crown jewel, Telmex, while still a cash cow, has matured into a slow-growth asset. "This opens an opportunity for expanding Telmex, which was just in the Mexican market, not only to diversify but to grow," says Arturo Elias Ayub, Telmex' director of strategic alliances.

The opportunities are especially attractive in wireless. Telmex spun off its wireless business to create América Móvil in 2000: It now dominates the Mexican cellular market, and though it is not the top player in every Latin market, it is the top operator overall in Latin America, with 43.7 million wireless clients. That size allows the company to reap savings in back-office operations and in purchasing handsets and network infrastructure. "They have tremendous scale, have made some excellent acquisitions of good companies at low prices, and their timing has been great," says Stephen Graham, telecom analyst for UBS Securities in Rio de Janeiro.

Neither AT&T (T ) nor MCI could turn their Latin American businesses into money-spinners. Yet Slim figures he can. He's certainly got one advantage: He's buying the assets for a song. The $207 million Slim paid for AT&T Latin America pales in comparison with the $2 billion that AT&T spent building a 70,000-kilometer fiber-optic network in Argentina, Brazil, Chile, Colombia, and Peru to attract corporate clients. And Slim's total cost of $628 million to buy 100% of Embratel's voting shares will still be a bargain compared with the $2.3 billion MCI paid for its controlling stake when Brazil privatized Embratel in 1998.

To expand his reach further in Latin America, Slim does face stiff competition from, among others, Spain's Telefónica. That telecom titan just offered $5.85 billion in cash and assumed debt to buy BellSouth Corp.'s regional wireless operations, boosting its Latin mobile-phone customers by one-third, to 38 million. But with Telmex' $1.5 billion war chest and Slim's own billions, betting on the Mexican may prove the smart play in the end.

By Geri Smith in Mexico City

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