Carlos Slim Domit Discusses the Era of Access

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Carlos Slim Domit chair of Grupo Carso and co-chair of America Movil (NYSE: AMX)(NASDAQ AMOV) outs global developments in perspective.

[continued from Carlos Slim Domit Shares Management Insights]

Nick Slepko:  Your father is a great man.  Are you?  I ask because celebrity CEOs have become such an important part of investing for many in the US, but not so much in the rest of the world.  Moreover, Warren Buffett’s offspring, for example, have all proven themselves completely inadequate to even give away money.  Why are you the best choice to run America Movil and Grupo Carso?

Carlos Slim Domit:  First of all, I think that is a question that I should not answer. It is more a question for the people who are impacted by my position.  More importantly, keep in mind that I am not running the companies. I am not the CEO.  As the chair of Telmex and Grupo Carso, and co-chair of America Movil, I deal more with the overall strategy and integrity of the organization.  I think the teams that are running the companies are extremely capable and have proven this through time.

Our management teams try to stay close to the operation by innovating and growing through working with customers and suppliers. 

We of course use international benchmarking, but we also measure our gains against ourselves continuously. 

What I learned working in various parts of the companies over the years was that the secret is not one person, but the team.  That’s the focus of my strategy, and a founding principle of our operations.  It creates a long-term commitment with the team, and that’s good for the company and the consumers. 

Slepko:  Why is mobile penetration lower in Mexico than in other significant Latin American markets – despite having better penetration at the beginning of this century?  What is unique about the Mexican market?

Slim Domit:  I think it comes back to investment, and in Mexico’s case regulation has inhibited the kind of investments that have been easier to undertake elsewhere.

The telecom business is particularly demanding due to three main factors.  First, infrastructure in many places at once is required to deliver coverage.  Second, this infrastructure demands updating at a faster and more extensive rate than most industries – and again, all this needs to happen in many places at once.  Third, the explosion in services and data demand, connecting many new developers, content providers, and many others to a rapidly evolving business in a sector that does not allow for many mistakes.

This industry requires a lot of investment continuously, and while we have been investing where possible, our competitors in Mexico have not done enough.  This is not an opinion.  Our CAPEX figures are public as well as those of our strongest competitors.

Slepko:  Do you feel America Movil is carrying the whole burden of servicing Mexico on its own?

Slim Domit:  No, but it is undeniable that we are carrying most of it.  I believe that there is room for more companies to invest more than what they are doing. [Mexico] is also one of the few countries that does not allow full triple play - the offering of packages that include Internet access, telephony, and TV – and the networks should be allowed to provide all the services because that would help the networks get more volume and for people to gain access to more services under better conditions. 

Slepko:  So why do Columbia and Nicaragua [where America Movil also holds dominate positions] have higher rates of penetration than Mexico?

Slim Domit:  As I mentioned before, investment complications specific to telecoms in Mexico is one part of the answer.  I think Mexico not allowing triple play is part of the answer as well.  For instance, by not allowing America Movil to deliver video while the natural growth in other markets is to better integrate various services to increase quality and reduce costs ultimately frustrates us, but also hurts consumers not giving them access to more services with better conditions.  Moreover, there are millions in Mexico that cannot access our competitors’ services, even just some of the stand alone services, because many of them do not have a credit card, or it’s not in our competitors’ strategy to deliver services to these areas. 

Regulations that boost private investment, which allow networks to give all services that are capable of delivering, and allowing them to provide access to people where it is convenient, is needed to change these penetration rates.

Slepko:  Why are your competitors in Mexico not investing more like they are in other countries?

Slim Domit:  I think that is a question that you should be asking them.  The market is there, they are investing some, but they should be investing more. 

Slepko:  Wal-Mart has recently run into some problems related to the US Foreign Corrupt Practices Act because of some activities by Wal-Mart de Mexico.  The perception is that they were only doing what everyone else does in Mexico – and maybe the real damning aspect is that Walmart was not as good at corruption as everyone else.  What is the reality in Mexico, and how does America Movil and Grupo Carso operate in these sorts of environments?  If you’d been CEO of Wal-Mart and found out that bribery and other activities they are accused of happened, how do you think you would handle it?

Slim Domit:  Cases of wrongdoing can be found all over the world – including in the United States.  In many ways, the fact that big issues like this come up and get resolved is a sign that the system is working and of course they can’t be interpreted as common or general. 

As for us specifically, we have strong ethics codes and we are increasingly transparent in our operations as we discover new and better ways to achieve the openness that is necessary for a modern, global corporation.

In the case of land and building issues, when opening new stores or shopping centers we have found that working with neighborhood committees has not only helped us to develop better projects that serve our customers better than we initially envisioned accomplishing under current regulations. 

Our internal auditing has become very proficient in identifying potential problems and reinforcing our ethics codes. Moreover, as a rapidly growing company that has a great number of employees for whom we are their first employer, our customer service training is not just about etiquette, but also about helping them understand what is legally right as well as morally right in a sales or any other transaction.  This approach becomes increasingly important as we develop our business in different societies, cultures, and economies.  We follow all the laws in every jurisdiction (our legal team ensures that), but we also hold ourselves to higher standards and seek to make these the norm in markets we enter and when internal audit finds any breach it acts immediately to make it right.

Slepko: America Movil, Grupo Carso, and a lot of their subsidiaries are pretty amazing companies.  Just sifting through all the documents you guys produce could lead one to believe you run some of the most public-public companies in the Global Fortune 1000.  What other companies do you admire, and which ones are you learning the most from? 

Slim Domit:  Definitely, Apple. I believe that is a company which changed the way we handle ourselves every day regarding technology and connecting with the new era in which we are living.  It shows us and many other companies, I believe, that innovation is the key to success.  Everyday we challenge ourselves and our employees to innovate and think of new ways of doing business.  

Samsung is a company I also believe is performing strongly well.  They are fast and they are continuously innovating and are involved in many areas.  Samsung is appealing because it is a foreign company that has had to compete with big dominant competitors worldwide and is succeeding.  In other words, their commitment to innovation is propelling them to success.

Salman Khan from Khan Academy combines all these things in his online education and related webcasts.  He not only believes that education should be free to people everywhere, but he has created a very smart and accessible way for people to achieve a useful education.  I believe his efforts will make a difference in the opportunities available to societies around the world in the near future, and figuring out ways our companies can come along side his innovations gives us plenty to consider.

These are companies that are going to have a very strong social impact, much like AMX/GC. In this new Era of Access, it is not only about people being closer to a given business. For me, the Era of Access also means providing access to all services and options available, offering true choice. It also means access to e-learning, e-health new employment activities and access to opportunities for all. In sum, it is about providing people with all the tools available, bridging the digital divide and allowing them access to information and opportunities they did not have before.  

Slepko:  As you are a major investor in Formula One and global motorsports, I’m curious how that fits into your overall worldview and management philosophy. (I’m also curious what kind of car you drive on a normal day.)

Slim Domit:  Well, my regular car is a 2008 ML63, an SUV.  But actually, we are not so much investors in racing, as much as we have been developing a strong sports and social integrity program.

Our sports and recreation programs has three main objectives. The first one is to support men and women athletes that achieve results at the international level, and support careers that showcase human excellence, determination, and strength of character in many activities.

Second, we want to bring sports to the masses because even if you never become a world champion, we believe that athletics and friendly competition is an important outlet and when executed correctly a valuable learning experience and a powerful way to bring communities together.  The Telmex Soccer Cup has achieved the Guinness World Record five years in a row for involving the most players in a soccer tournament.  We have over 200,000 kids play in it every year.   Ring Telmex, another one of our programs, has produced four world-boxing champions.

Our involvement in racing is exciting as well, and while a natural and prominent extension of our brand, it is also a way to fully use our platform and improve the lives of our customers in meaningful ways.  We recently launched a road and traffic safety initiative with our race car drivers centered on preventing road accidents.  [Car] accidents in Mexico are the leading cause of death for children and youth ages 5 to 29.  Worst of all, upwards of 90% of these tragedies were preventable if vehicle operators had taken sensible precautions and their responsibilities seriously.  Race car drivers provide two important functions.  They are public figures that can talk to the youth (from kids to college) and be listened to.   They also drive at speeds nobody else can even attempt, but they are the first to tell you that to stay alive they follow the rules of the road.  Their school and university presentations make for compelling stories, and our partnerships with the Red Cross, the Peloton Foundation, insurance companies, and others have helped get it off to a good start with the goal of cutting fatalities by half by the end of the decade.

You don’t always have the chance to go into great detail about business strategy in public – in part because not everyone is as interested in financial ratios as the Motley Fool audience – but racing and other community sponsorships not only meets important needs in a growing economy, but also gives us a chance to illustrate what our companies capabilities when it comes to organizing complex undertakings, pushing innovation to its limits, and integrating the human element into our work.

[continued in Carlos Slim Domit Talks Mexico & Beyond]

Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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!

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