purchase of all the shares and the stock option was carried out through a special trust fund.
The formal proposal with which Slim won Telmex states that the group of investors “wishes to support the development and spread of knowledge in the field of telecommunications in Mexico, for which purpose it proposes to establish, carry out and finance education programs and training in said field, acting through the appropriate Mexican institutions.” It also clarifies that the offer was under the condition that, by December 7, 1990, the company SBIH would waive certain restrictions imposed by the courts of the United States of America, referred to as “Modification of Final Judgment-MFJ.”
Slim and his partners attached to the proposal a “modernization plan” and a “joint-venture association contract,” which specified the equity participation of each one of the members of the consortium. “In its totality,” says the text by Slim and his partners, “they comprise a powerful and singular combination that meets all the necessary attributes to make Telmex one of the top telecommunications companies in the world.” It goes on to provide a profile for each of the shareholders:
Grupo Carso is one of the most important industrial conglomerates in Mexico, with a successful track record in the management and modernization of complex businesses. France Cables, wholly owned by France Telecom, which in turn depends on the French government and is considered among the main international telecommunications companies, has widely demonstrated its ability to rapidly and effectively modernize large-scale telecommunications systems. SBIH is a wholly owned subsidiary of Southwestern Bell Corporation, a publicly listed stock corporation recognized in the industry as a leader in network operations management and development of mobile communications and telephone directories.
Other documents that formed the offer include a series of receipts for the deposits left as security for $50 million, copies of authorizations and powers of the members of the consortium, and the sales contract of the members of the consortium in case the government accepted the offer and the trust agreement of Grupo Carso, France Telecom and Southwestern Bell. Slim and his partners also clarified that, should they win the bid, they would need to discuss with the government aspects of the concession titles of Telmex and the business service, as well as technical assistance contracts.
Jaime Chico Prado, who at the time was one of Slim’s associates, signed the formal proposal and provided as his address 1020 Sierra Vertiente, in Lomas de Chapultepec in Mexico City. The message ends with a succinct list of motives: “We have a great deal of interest in the challenges and opportunities that the privatization of Telmex represents, and we would like to underline our absolute dedication to the task of collaborating with Telmex and the government to develop a world-class telecommunications system.”
One little-known aspect of Slim’s formal proposal to purchase Telmex is the special participation of a group of Mexican entrepreneurs. The document states that other shareholders—through Grupo Carso, on behalf of third parties—were businessmen Agustín Franco (and family), Miguel Alemán, Rómulo O’Farril, Bernardo Quintana, Antonio y Moisés Cosío, Ángel Lozada Moreno, Manuel Espinosa Yglesisas, Antonio del Valle, the Mary Street Jenkins Foundation, José Miguel Nader, Claudio X. González, Antonio Chedraui, Ángel Demerutis Elizarraraz, investors from Sinaloa, such as Ignacio Cobo, and investors from Tabasco.
Rogozinski claims it is wrong to state that Slim purchased Telmex in 1990: “Salinas de Gortari’s friend was not the owner of Telmex. If Southwestern Bell had not decided to contribute $72 million more to the group’s offer, the owner would have been Roberto Hernández. In other words, the privatization did not favor any friend of the president, but was won by an American businessman! Ed Whitacre III offered more money than the rest. The silence around this is deafening. And if you don’t believe me, you have one advantage: Mr. Whitacre is alive. He has invited many people to go and interview him, but no one has wanted to do so. Why? Because then their false tale about the government handing Telmex to Slim will fall to pieces.”
The day after my interview with Rogozinski, I requested an interview with Whitacre III. At the date of publishing this book, no response had arrived. And reading Rogozinski’s book, I found a table preceded by the following text:
The press never mentioned that American shareholders earned two dollars for each one that Slim received, nor did it pay too much attention to the composition of the share capital of Telmex by the end of the privatization process:
• 10%: Southwestern Bell
• 5.23%: 32 Mexican investors
• 5.17%: Carlos Slim
• 5%: France Telecom
• 4% reserved for the workers (50,000 people)
• 70.6% was in the New York and Mexico stock exchanges
Truth be told: Salinas’s “friend” was not the owner of Telmex.
On December 11, 2014, exactly twenty-five years after Carlos Slim purchased Telmex, former president Carlos Salinas de Gortari, upon request from the newspaper El Financiero, responded to some often-asked questions about this sale with an article published in two parts under the title “Telmex, a successful privatization that was later questioned.” The reason the still-powerful ex-president decided to delve further into this point, as he writes in his introduction, is that it coincided with “the fresh perspective of the great telecommunications reform in 2014.”
In the article, Salinas defends the privatization conducted by his government and cites favorable opinions from the World Bank. The interesting part is that he goes on to question the lack of regulation of Telmex by the governments that followed his term of office (Ernesto Zedillo, Vicente Fox and Felipe Calderón) and quotes recent surveys (which he does not identify) in which “most users complained despairingly about cut-off calls, undue charges, not enough coverage, lack of connectivity and disconnection of the service for no reason.” The politician, who a wide sector of the population in Mexico at some point believed was the person behind Slim, concludes his text saying that, “to many, Telmex has become the ‘black beast’ of Mexican private companies.”
Throughout the article, the ex-president rules out that the privatization of Telmex was done for ideological reasons or that it produced a greater concentration of wealth in Mexico. He also contends that the process was not rushed, nor that it sought to benefit hidden partners. Likewise, he argued that the funds obtained never disappeared from the treasury. This is the position that Salinas has defended in other texts and public speeches. However, Salinas’s last three arguments are direct accusations against Slim, as he claims that Telmex in fact is now a private monopoly, citing a study by the OECD: “Telmex controls 80 percent of the market in landlines and 70 percent of mobile telephony. It is a company with dominant power throughout all sectors of the market (landline, mobile and broadband networks) and across all the regions of the country.” The OECD concludes that Telmex, the dominant operator, “enjoys lasting power over the market that the competition is not denting and which is equally not limited by regulation in any efficient way.”
The ex-president also states that Telmex “is now an inefficient and abusive company” and he again quotes the OECD document:
Its prices are too high: Mexican users pay more than most member countries of the OECD. The case of broadband, the most important one technologically, is the worst: the prices are among the highest and the rate of coverage is lower with very slow speeds. Telmex has profit margins double those of the OECD, and in exchange it occupies the last place in coverage and the last in investment per capita. High costs, high prices, bad quality, and few options have a negative impact on the welfare of all Mexicans.
Finally, Salinas claims it was not the privatization of Telmex—made during his government—that catapulted Slim to his position as richest man in the world:
Slim did not inherit his fortune from Telmex. He took advantage of neoliberal deregulation