Carlos Slim Better Than Buffett: Global Entrepreneur Yes, Local Monopolist Hardly
Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Wrongly accused of being anti-competitive, the only monopoly the world’s richest man Carlos Slim has engineered is one on talent in Latin America – and while consumers are flocking to his enterprises for the savings, investors are reaping the rewards. Meanwhile, his political detractors use spurious calculations, opaque review processes, and unique definitions in the same way that new media companies and Chinese reverse mergers abuse accounting and other standards.
America Movil (NYSE: AMX) is the crown jewel in Carlos Slim’s global holdings which stretch from the gates of Vienna to Tierra del Fuego. However, geographic breadth is where the similarities to the sixteenth century Habsburg empire end and Slim and his Grupo Carso (NASDAQOTH: GPOVY) begin to appear more like Warren Buffett and Berkshire Hathaway (NYSE BRK-A)(NYSE: BRK-B) did in the twentieth century.
Best known as Claro in most of Latin America, and by its minor USD 3 billion subsidiary TracFone in North America, America Movil (with revenues around USD 50 billion) has been an active participant in bringing its hemisphere into the global mainstream and serving emerging markets in both the developing and developed economies. Responsible for almost a tenth of the Mexican economy, the experience has given Slim’s varied companies valuable training in a country that literally and figuratively bridges both socio-economic worlds. (Despite gringo perceptions to the contrary, Mexico has become a powerhouse.)
More incredible has been America Movil’s ability to succeed in and reform neighboring economies. For instance, data from the independent International Telecommunications Union indicates that America Movil was key to taking Peru from under 20% mobile penetration in 2005 (when it entered the market) to over 110% as of 2011 – even though, true to historic form, Spain’s Telefonica (NYSE: TEF), re-branded in 2011 as Movistar in Peru, had done little since the mid-90s when it entered the country. During that same period,America Movil-less Canada went from 53% to 75% penetration (and the US from 69% to 106%). Mexico’s numbers which surpassed Canada during the period, also tell a story of how their progress has been hamstrung by previous OECD politics.
Had a US investor bought shares in America Movil when it listed its ADRs in 2005, they’d currently be enjoying twice what Berkshire’s given them – and if they’d have switched horses back in 2000 instead of continuing to party like it was 1999, they’d be bragging even harder – maybe about being the richest person in the world. Though when asked what is it like to be rich, Carlos Slim famously replied to Forbes, “The stock market goes up and it goes down,” and has gone on to say, “Poverty isn’t solved with donations. Building businesses that create jobs often does more for society than going around like Santa Claus.”
And build he has – though his little publicized philanthropic pursuits could also get him canonized.
Unlike the Warren Buffett of the twenty-first century, Slim has spent less time preaching and propagandizing, and more time establishing the institutions of his diverse holdings – and getting his successors firmly situated in handling and expanding the operations he began decades ago. While refreshing, this lack of attention to engineering a cult of personality popular with institutional and retail investors alike (not to mention government regulators and predatory politicians), has allowed media a field day with hyperbole as it is always easy (almost instinctual) to demonize a successful entrepreneur as a robber baron.
Nevertheless, the well-run Carlos Slim operations of Grupo Carso and America Movil have put America’s favorite conglomerate Berkshire Hathaway to shame by most every metric ranging from return to transparency to succession planning. At 72, Slim has already executed his transition (possibly the single most important act of any founder), while Buffett is making his second, possibly third, attempt despite being a decade wiser than Slim. It is also likely the Buffett cult, like the Jobs cult with Apple, will ultimately be their enterprises’ undoing – no matter what is achieved by either’s successors.
Still, it has not helped that everyone knows that the Paris-based OECD, one of many bloated inter-governmental bureaucracies, has declared America Movil anti-competitive. Fortunately for the consumer, on closer inspection of the OECD analysis (at least the portion that the OECD would disclose), and further information available from other international agencies like the ITU and independent academics, the OECD accusations are not only untrue (and possibly politically motivated), but the research actually ends up reading like a strong buy recommendation for America Movil because either they are evil masterminds with control over space and time (always go long on omniscience), or they are an incredibly competitive force to be able to achieve the market share they currently enjoy (also a good sign for buy-and-holders). (Incidentally, Motley Fool CAPS rate AMX four-stars with 98.5% of the Fool All-Stars believing it will outperform the market.)
While the OECD’s 2012 report on the Mexican telecoms industry was commissioned by the Mexican government (which at the time was run by anti-Slim factions – and had appointed the current OECD president), it is just one in a series of OECD studies that have been ignored or challenged. Paragon of economic virtue Canada has been particularly irked by the OECD’s frequent mistakes and sloppy execution – and they were one of the few OECD economies to avoid the follies that lead to the financial crisis and recent recession. Moreover, the OECD has yet to respond or adequately address any of the rejoinders offered by everyone from the BBC to MIT. The OECD also has a habit of frequently publishing studies that say things like the US has the most expensive mobile rates, only to be shown the opposite is true by legions of independent analysts.
Recently, Mario Lopez, President of the Hispanic Leadership Fund, took the OECD’s fantastical conclusions and opaque research to task in Forbes:
[The OECD promotes] policy recommendations via reports that have irritated member countries due to critical methodological errors, and incorrect, incomplete, or sometimes even fictitious data…A 2012 report on the state of Mexico’s telecommunications industry, for example, targeted the largest provider of services in that country and claimed that Mexican consumers were overcharged $25 billion for services…The OECD’s deceptive analysis naturally leads to spurious conclusions for aggressive regulation targeting telecommunication providers, but which in the end would hurt consumers more.
The world over, both partisan hacks and practical decision-makers have ignored the OECD’s proposals for price caps and reduced profit margins which would limit coverage and degrade services, ultimately leaving millions without access. That they would target America Movil as in it for a quick buck is especially ridiculous as the company has been on the forefront of expanding coverage and access to the less profitable rural customers. (In Mexico, America Movil reaches over 185,000 communities through its fixed line service, whereas its closest competitor only serves 85,000.) Moreover, America Movil has become the largest telecom provider in the world in terms of actual infrastructure and assets.
Yet another indicator that America Movil is in it for the long-term, Slim’s successors have successfully survived their transitions, and his directors are a good mix of fresh faces and seasoned experts – and Slim’s six offspring are far more active and competent than Buffett’s kids (a corporate welfare farmer, and two hippy castoffs – all three of whom have more experience giving money away than creating it). Moreover, his management teams show no sign of Henry Ford Derangement Syndrome, and the company’s workers enjoy superior metrics in regional comparisons.
The ability to harness talent to America Movil’s widening footprint has underpinned the company’s triumph in most every market it chooses to enter. Moreover, when compared regionally, those countries in which America Movil operates have seen overall quality spike (both with Claro and competitors), and most importantly, customers have increased at a more rapid rates as a result of America Movil being able to strike a balance between its pricing and value.
[continued from America Movil Puts European Carriers to Shame]
[continued in Beware of Bureaucrats Bearing Reports – Debunking the OECD’s Bunk]
Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication. The Motley Fool owns shares of Apple and Berkshire Hathaway. Motley Fool newsletter services recommend Apple and Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!