Mexico: Carlos Slim responds to claims of ‘excessive’ phone and web fees
Although Mexico is one of the poorest countries in the OECD, a report published this week shows that it has some of the highest fees for phone and web services among the 34 nation club. On average Mexicans shell out $15 more for every 100 mobile calls than U.S. citizens. (Photo Flickr: Plumerio Pichas)
By MANUEL RUEDA
Channel: Economics, Latin American Affairs
Mexicans are paying exorbitant phone and internet fees according to a report from the Organization for Economic Cooperation and Development released this week. The report claims that monopolistic telecommunications companies owned by multi-billionaire Carlos Slim are overcharging customers and slowing down economic growth in Mexico.
The OECD is an international club made up of the world’s 34 most advanced economies.
In its report, the OECD highlights that between the years 2005 and 2009, Mexicans overpaid by more than $13 billion per year in phone services and internet connection fees. Most of that money went to Telmex and America Movil, two companies owned by Slim, which control 80 percent of the landline market and 70 percent of the mobile phone market in Mexico.
According to the OECD report, the average broadband connection cost $90 a month in Mexico in 2011, while in the U.S. the average price for broadband last year was at around $40 per month.
When it comes to landline services, Mexican households pay $25 more, on average, for every “basket” of 140 calls than U.S. households, even though per capita income in Mexico is roughly one third of that in the United States.
The report has caused outrage in Mexico, where presidential candidates from all political parties have expressed their desire to tackle monopolies in telecommunications and other sectors of the economy, which they say are preventing Mexico from becoming a developed country.
It also prompted Carlos Slim to give a rare press conference, in which he described the OECD’s findings as “improvised” and “a fantasy.”
Slim began by striking back at claims that his companies were ripping off Mexicans, pointing out that in 2010, for example, total earnings for his fixed line company, Telmex were $9.2 billion. Therefore, he argued, it was exaggerated to say that his companies had overcharged customers $13 billion per year in 2005-2009.
Slim, who was recently listed as the world’s richest man by Forbes magazine, argued that the very fact that Telmex controls 80 percent and not 100 percent of the landline market proves that there is no monopoly in Mexico. He also slammed the OECD for using figures that only go up until 2009.
“In a business (like telecommunications) were things grow so fast … they should use 2011 numbers, because there has been strong growth (in the sector), and some services have evolved and the prices for some packages have changed,” Slim said.
But Mexico still lags other OECD members in affordability of communication services according to the report, which also calculated that Mexicans pay more than $45 on average for every 100 cell phone calls, while Americans pay $30 and residents of Ireland just under $20.
Slim argued that services in Mexico are expensive because the country has a less developed market, with less customers and therefore smaller economies of scale.
When it comes to Internet connection for example, Mexico had 10 broadband subscribers per every 100 inhabitants in December 2010, compared to more than 25 broadband subscribers per 100 inhabitants in the U.S.
The OECD states in its report that policies which would allow more competitors to enter the Mexican market could significantly bring down the prices of telecommunications services in Mexico.
The report also says that current laws make it too easy for companies like Telmex or America Movil, to challenge — and stop — price regulations and other policies put in place by the local telecommunications regulators.
