Carlos Slim Domit Talks Mexico & Beyond
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[continued from Carlos Slim Domit Discusses the Era of Access]
Slepko: By decade’s end, where do you see Grupo Carso and America Movil?
Slim Domit: That’s always a difficult question, especially when trying to predict anything in the telecommunications industry. I think our emphasis on re-investing into the companies and improvements in all our services and management abilities will continue to be rewarded.
In addition to constantly experimenting with new businesses, new content, new models, I think realizing you can have multi-functional relationships with other companies is important in the way business groups are evolving. For example, our relationship with Microsoft (NASDAQ: MSFT). They are our partners in our web portal information page. They are our software providers. They are our customers in telecommunications, but we are also competing with them on voice over IP. Ultimately, this mix of activities and competition is a functional relationship that allows us to provide the services we think customers want. The customer does not care how you do it or what you need to do because they want a good service with good price and with quality. They don’t want to be bothered with small-minded feuds between two big corporations. The companies that realize this first and don’t try to limit their customers’ lives, but figure out ways to be the most attractive option are going to do well. By keeping our frontline personnel trained on new services and new products, this is one way we stay aware of what the needs are, and how we can fit into that picture.
Slepko: Is it right to think of Grupo Carso and America Movil as Latin companies?
Slim Domit: I think they are international companies – especially in the telecommunications sector. Companies need to become either more international or be making strategic alliances internationally if they want to have the possibility of delivering better service. In our case, we are present in 30 countries, and are aggressively pursuing roaming and other deals in countries in which we are not present. Customers need – and demand – competitive pricing in these areas. We would be foolish not to give them the best deal possible.
Our philosophy of investing, then investing some more, and investing even more after that, was developed and proven in Mexico (which has proven one of our most challenging markets even today). So now we have teams that have a workable framework for when we enter as the third or fourth place competitor in a market, or come in totally new and have to buy frequencies and put in infrastructure from scratch.
Eighteen of the countries we´re present in are in the Americas. Often infrastructure, frequencies, devices, services, and applications are fairly common among markets. Some of the big changes are usually connected to differing per capita incomes in various countries. For example, some countries are more inclined to post-paid services, others pre-paid, and then there are others that have a mix of services. Europe has so many different variations on this dynamic that we have to deal with a much larger spread. Demographics are another aspect that requires a great deal of attention, and the rural and urban mix cannot be ignored either.
Slepko: How does the Mexican market differ from the US market?
Slim Domit: The biggest difference between the two markets is of course income per capita. The rural areas in the US are different than the rural areas in Mexico so the complexity of getting service to rural areas in Mexico is greater. US urban areas are also bigger, richer, and more intense. The US is as heavily post-paid as Mexico is pre-paid.
Still, America Movil’s pre-paid option in the US, TracFone, has been successful. Again, our continuous investment, strategy and management principles worked well. Also, we didn’t target Latinos like many would expect. We started by discovering that certain segments were underserved and we connected with them through home shopping channels and big retailers offering many alternatives for our customers so they can choose the best for them.
Slepko: Are your investments in rural areas just a public relations move? You talk a lot about the rural aspect of the Mexican market and I am curious, is your work in rural areas just public relations or has it (a) been profitable, and (b) has it prepared you for other markets in a way that AT&T and Verizon just are not prepared for because they are so used to an urbanized American market? Tell me more about the rural experience.
Slim Domit: Two things to consider: First, many of them are not profitable markets. Second, we have been penalized for being the only one serving them so it would be wrong to see it like that.
Sure, you can focus on strong urban markets, take easy profits, and have less pressure from the regulators, but besides settling for a lower market share, if you want to be the best in a market, you need to serve the whole market. When done properly it leads to better services, better cost efficiencies, and a better company overall. We have achieved coverage and services beyond what is required in our concession title, in part because we feel it is our responsibility, and in part because it turns out that it is good business.
Also, in the long-term, Mexico is going to continue to grow – some studies even show Mexico’s future prospects vastly ahead of China and the other BRICs. This growth will occur in urban areas as well as rural ones and we will be an integral part of that growth – and in some ways will make it possible for rural areas to participate in that growth.
There are interesting figures from the FCC that I read recently as part of the Connect2Compete initiative that is working to connect households to broadband. In the US, there are approximately 100 million people in US in economically underserved areas or markets. One interesting stat is that just in being connected to broadband at home, an average family can save about USD 7,000 a year. So, as more people connect, the savings generated and the growth potential means that more economic activity will occur in areas that today might be depressed. This is good for the people who get connected but also for the environment in which they live in. So those are areas that we are sure the country is going to perform very well in and they are going to be economically interesting.
Slepko: What is it you want investors, media, and the public to know about America Movil and Grupo Carso?
Slim Domit: I want people to know that we are very open to answering questions about our companies as well as any other issue. For those interested in us, I think two things are very important. First, go deeper into the numbers. Whenever you read a figure about one of our companies, dig into what it means, put it in context, or connect with similar comparisons. Second, distinguish between facts and opinion.
For example, rates. Some studies mislead, such as the OECD report of the Mexican telecom market where many of their conclusions lie and say that we are the most expensive in the world. The simple facts don’t support their outrageous claims. However, we are talking about facts. It is very easy to check published rates either from our website, receipts, or advertisements. It is frustrating when you see that there is more than an 80% difference in what is said in their report and the real price. Again, we are talking about facts so a discerning investor, investigator, or analyst can verify these numbers for themselves. And we encourage that analysis.
And even though I’m not very active on Twitter, I do use it. So, if any of your readers would like to give me some input, tweet me @Carlos_Slim_D.
Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication. The Motley Fool owns shares of Microsoft. 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!