Carlos Slim and the Telecom Monopoly

How Carlos Slim bought state telecom company Telmex in 1990 and built a near-monopoly, how the OECD estimated its costs to Mexicans, and the 2013 reforms.

In 1990, Mexico privatised its state telephone company Telmex.

The buyer

A group led by Carlos Slim bought control. Slim later built América Movil, a telecom giant across Latin America.

Monopoly power

Telmex kept a dominant share of fixed lines, and Telcel dominated mobile.
Prices for phone and internet services were high by international standards.
Slim became one of the world’s richest people.

OECD estimate

A 2012 OECD report estimated that weak competition in Mexican telecoms cost the economy around 129 billion dollars between 2005 and 2009, about 1.8 percent of GDP a year.

2013 reform

A constitutional telecom reform created a strong regulator.
América Movil was declared dominant and faced special rules.
Prices fell significantly after the reform.

Lesson

Privatising a monopoly without competition can create a private monopoly. Regulation and competition matter as much as ownership.

The expensive call

In the 2000s, Mexicans paid far more for phone calls than people in many OECD countries, because one company dominated the market.

Thinking privatisation always brings competition

Telmex became a private monopoly without strong regulation.

Key takeaways

Telmex was privatised to Slim's group in 1990.
It dominated fixed and mobile markets.
The OECD estimated weak competition cost 1.8 percent of GDP a year.
A 2013 reform cut prices.