Telmex privatization was the sale of Mexico’s state telecommunications monopoly to a consortium led by Carlos Slim’s Grupo Carso. It became a defining example of how privatization could transfer a public monopoly into private hands without creating effective competition: Slim acquired the company despite not making the highest bid, used Telmex’s own dividends to defer payment, and built a fortune around exclusive access to a market that remained difficult for rivals to enter.

The sale and its terms

The Mexican government announced in September 1989 that it intended to sell 51 percent of Telmex’s voting stock, equivalent to 20.4 percent of its total stock. Bids followed in November 1990. Although Slim did not offer the highest bid, the auction was won by a consortium led by his Grupo Carso. The transaction therefore turned not simply on the price offered: the successful buyer gained control of a company that already held a dominant position in telecommunications.

A further advantage lay in how Slim paid. Rather than paying for the shares immediately, he delayed payment and used Telmex’s own dividends to finance the stock purchase. A publicly owned monopoly thus became Slim’s private monopoly, and it proved hugely profitable. The account presents this outcome as an important contrast with the rise of Bill Gates and Microsoft in the United States, where the Justice Department challenged Microsoft over alleged abuse of monopoly power.

Barriers, influence, and expansion

The Telmex acquisition exemplifies the obstacles facing Mexican entrepreneurs. Entry into lucrative sectors could depend on securing expensive licenses, navigating red tape, overcoming resistance from politicians and incumbent businesses, and finding financing in a financial sector often aligned with those incumbents. Such barriers could shut new businesses out, but they could also shelter an established firm from challengers. In the book’s account, the difference depended in part on whom an entrepreneur knew and could influence.

Slim, described as ambitious and talented and as coming from a relatively modest background of Lebanese immigrants, became adept at obtaining exclusive contracts. Telmex supplied the platform for extending his reach beyond Mexico into the rest of Latin America. The acquisition was therefore both a particular transaction and a foundation for wider commercial expansion, built around privileged access rather than innovation as the source of his fortune.

Challenges to the monopoly

The monopoly attracted formal scrutiny, but the efforts to constrain it achieved little. In 1996, long-distance provider Avantel petitioned the Mexican Competition Commission to examine whether Telmex held a dominant position. The following year, the commission found that Telmex had substantial monopoly power in local telephone service and national and international long-distance calls, among other areas.

Regulatory findings did not translate into effective limits on the company’s dominance. Slim and Telmex could use the recurso de amparo, or appeal for protection, to argue that a particular law did not apply to them. The device dated to Mexico’s 1857 constitution and was originally intended as a safeguard of individual rights; in this account, it also helps explain why attempts by Mexican regulators to limit Telmex’s monopolies came to nothing.

Significance

The privatization illustrates how the sale of a state asset does not, by itself, ensure open competition. Telmex passed from public to private ownership while retaining its monopoly position, and the barriers surrounding entry could protect the resulting private incumbent. The contrast drawn with the United States is institutional as well as personal: Microsoft faced civil action and a settlement with the Justice Department, while Telmex’s recognized dominance proved resistant to regulatory challenge.

The transaction thus connects ownership, market access, and political influence. Its consequences extended beyond the initial sale: Telmex generated substantial profits for Slim and supported his expansion across Latin America, while competitors continued to face a market in which formal competition rulings did not bring the monopoly under control.