Geopolitics

Will Mexico's Ambitious Telecom Reform Cut Carlos Slim Down To Size?

Mexico's New President Peña Nieto’s has pushed through a sweeping reform of the telecoms and TV sector, which could undo the monopoly that turned Carlos Slim into the world's richest man.

Slim earlier this month in Mexico City
Slim earlier this month in Mexico City
Editorial

-Editorial-

MEXICO CITY – So many presidential candidates have promised reforms in Mexico and so many have failed to deliver, that almost no one took President Peña Nieto’s promises seriously during his electoral bid.

His promises were even less credible since they were coming from a candidate belonging to the PRI, the party that ruled Mexico with an iron fist for seven uninterrupted decades, and blocked the attempts at reform from Vicente Fox (2000-2006) and Felipe Calderón (2006-2012).

During his candidacy, Peña Nieto promised, among other things, to allow competition in the sectors of telecommunications and television. This was the hardest to believe. Peña Nieto’s meteoric ascent first as a political figure and then as a presidential candidate is due in large measure to the support of Televisa, Mexico’s main broadcaster and Latin America’s largest media company. Mexican businessman Emilio Azcárraga is the CEO of the network, which controls 60% of the commercial television market in Mexico.

Televisa stations provided extensive coverage of Peña Nieto’s presidential campaign, while also transmitting telenovelas (soap operas) starring his wife, Angélica Rivera. This led us to believe that if Peña Nieto’s reforms in the television sector did happen, they would be – at best – cosmetic.

This has not been the case. To our surprise, Peña Nieto’s recently-announced reforms are the strongest earthquake that Mexican television has ever felt.

The bill, which was approved by the lower house of Congress on March 22, creates two new national TV networks concessions, which Televisa cannot bid for. Production companies will be forced to offer their programs to all cable TV companies, while cable TV companies will have to transmit programs from all production companies. Lawmakers however made some amendments to the bill, including a provision that initially allowed foreign companies to own up to 49% of a TV or radio network. Now foreign investors will be limited to what other countries allow in their respective markets.

Ending the mother of all monopolies

An equally strong blow has been dealt to Carlos Slim’s telecommunications monopoly -- the richest man in the world.

In the telecoms sector, the reform prevents one company from controlling more than 50% of the market for fixed line or mobile telephones. Telmex and América Móvil, Slim’s companies, control 80% and 70% of the market. The new law forces Slim to sell 30% of Telmex and 20% of América Móvil.

The reform also creates an independent regulatory agency to enforce the 50% market share limit, with the power to set huge fines and even dismantle companies. Additionally, many regulatory reforms will make the telecoms market more competitive and transparent.

Peña Nieto’s reforms are hitting Slim worse than they are hitting Azcárraga, and this is a good thing. Broadband Internet access in Mexico is among the most expensive in the world, bordering $100 dollars a month. Research conducted by the OECD in 2012 stated that the lack of competition in telecommunications costs the country around $25 million dollars a year.

The market also anticipated that Slim would lose more than Azcárraga: América Móvil shares dipped 13% in the week the reforms were announced, while Televisa shares barely moved, losing only 1%.

Now that the law has been approved by the lower house of Congress, it is headed for the Senate, where it is also expected to be approved. Some of the reforms – especially those regarding the telecoms sector – will take effect as soon as the law is passed.

In February, Peña Nieto managed to touch the untouchable president of the Teacher’s Labor Union, Elba Esther Gordillo, who was arrested and charged with misusing members’ funds. Less than two weeks later he is now going head to head with the richest man on earth, one of the men that helped him rise to power.

So far, Enrique Peña Nieto has kept three promises he made in his presidential campaign. There are still many more, but the Mexican president's current pace proves that he was not joking when he said that he was in office to transform the country, not just to rule it.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ