| MEXICO CITY
MEXICO CITY May 19 For a generation, AT&T and
Mexican billionaire Carlos Slim's telephone business stood side
by side and grew to become giants of the industry north and
south of the Rio Grande.
Now, AT&T Inc's planned $48.5 billion purchase of U.S.
satellite provider DirecTV is severing a connection with
Slim that goes back to 1990, and turning them into competitors.
AT&T said on Sunday it would sell its 8.4 percent stake in
America Movil, Slim's main cash cow, and withdraw its board
members from the company to avoid conflicts of interest with the
Mexican's TV operations across Latin America.
News of the divestment hit Slim immediately. America Movil's
shares fell more than 5 percent early on Monday, wiping over
$3.5 billion off the company's value, although they recovered
some ground in late morning trade and were down about 3 percent.
AT&T's chief executive officer, Randall Stephenson, wasted
no time in acknowledging that the relationship had changed.
"I learned a lot from Carlos and so, obviously, Carlos and I
have spoken and he is a very dear friend, but now he is going to
be a competitor and we recognize that and off we go," Stephenson
said on a call with investors on Monday.
A spokeswoman for America Movil declined to
comment on the deal.
Slim, who was the world's richest man from 2010-2013, has
nearly 20 million pay television subscribers in Latin America,
putting him squarely into competition with DirecTV, especially
in Brazil. He has not yet been allowed into the Mexican pay TV
market, however, due to fears he could crush competitors.
DirecTV has 18 million subscribers across Latin America.
"By dumping (America Movil) shares, AT&T can pursue a more
aggressive strategy in Latam," BTIG Research analyst Walter
Piecyk said on Twitter.
The exit of AT&T from America Movil also creates a potential
new rival to Slim in the very telecoms industry where the
74-year-old made his fortune.
America Movil dominates Mexico's telecoms market but the
government is carrying out the biggest shake-up of the industry
since Slim took control of former state phone monopoly Telmex in
the early 1990s. Telmex was swallowed by America Movil, its
former mobile unit, in 2011.
Seeking to reduce America Movil's control of 70 percent of
the mobile business in Mexico and 80 percent of the fixed line
market, the government has rolled out a range of new antitrust
measures against Slim and threatened a break-up of his firm.
America Movil's stock hit a near four-year low after the
government presented its reform in March 2013, and it remains
well below mid-2012 levels. The firm also has capital committed
to taking control of Telekom Austria.
There are few telecoms companies with the financial clout to
take Slim on in Mexico, where he has for years successfully
resisted attempts to cut him down to size.
One of those companies is AT&T, which has had two members as
well as one former executive on the 17-strong board of America
Movil, a connection dating back to Slim's takeover of Telmex.
In 1990, Slim bought a majority stake in Telmex with France
Telecom and Southwestern Bell Corporation, which in 2005 took
over former parent ArastT&T and with it, its name. Today,
Texas-based AT&T is the biggest telecoms company in North
America, while its Mexican peer is the largest in Latin America.
As recently as September, AT&T said it would use its
connections with America Movil's network to improve access for
corporate clients in 15 Latin American markets including Brazil,
Mexico and Argentina.
Still, the two companies are already competing in the United
States, where Slim's U.S. business Tracfone Wireless had 25.5
millions subscribers as of end March.
Macquarie analyst Kevin Smithen said that America Movil may
now try to make deeper inroads into AT&T's home turf.
"I think we will see that America Movil is now free to enter
the U.S. We may see it try to partner with one of the other
players be it Sprint, T-Mobile or Dish,"
(Additional reporting by Marina Lopes in New York and Elinor
Comlay in Mexico City; Writing by Dave Graham; Editing by Kieran