There's plenty of money in being a telco monopolist

We all know about the Evil Empire a.k.a. Telecom NZ, but it ain't the only one in the world. In a country where $US 6 an hour is considered a good income, Carlos Slim of Mexico makes $US 1.25 million an hour. He has just knocked Bill Gates off his perch as the world's richest person.

His wealth has caused some resentment in a country where 40 percent live in poverty and thousands emigrate each year to seek opportunity in the USA. Both the U.S. and Mexican governments have complained that Mexico's economic growth is stunted because large conglomerates such as Slim's have too much control.

From the minute many Mexicans are born - perhaps in one of Slim's Star Médica Hospitals - they begin putting money in his pocket. They use electricity carried by Condumex brand cables, drive on roads paved by the CILSA construction company firm and burn fuels pumped from Swecomex drilling platforms. They communicate through Telmex phone lines, smoke Slim's tobacco, which is sold under the Marlboro brand, and shop at Sears Roebuck of Mexico, a subsidiary of his huge Carso Group.

"It's hard to live a day without buying one of his products," Sandra Morales, 31, said as she ate lunch in the Plaza Insurgentes shopping center - a property owned by Slim - in Mexico City. "He's so rich and powerful and in a country where there are so many poor."

In 1990, Slim made one of his most controversial purchases. The Mexican government was auctioning off several state-owned enterprises, including Teléfonos de México, the state-run telephone company, also known as Telmex. Slim and his partners, France Telecom and Southwestern Bell, beat two other groups of bidders. The consortium paid $1.76 billion for a 20 percent controlling stake.

Since then, the market value of Telmex stock has rocketed from $7.39 billion to $41.2 billion. The company owns about 90 percent of Mexico's phone lines.

After acquiring Telmex, Slim's net worth increased dramatically. He integrated his companies so they did as much business as possible with each other. At the Carso Group, the holding company for many of Slim's investments, Rule No. 6 on the list of 10 corporate principles is: "Money that leaves the company evaporates."

The domination of large Mexican conglomerates such as Slim's chokes off growth of smaller companies, says Celso Garrido, an economist at Mexico City's Autonomous Metropolitan University who studies Mexico's business dynasties.

The resulting shortage of good jobs drives many Mexicans to seek better lives in the United States, says Roderic Ai Camp, author of Mexico's Mandarins, a book about the country's power elite.

Along with Telmex, Slim controls América Móvil, the world's fifth-largest cellphone company with 124 million customers in 15 countries. In the United States, he controls Tracfone, a pre-paid cellphone company that claims 8 million customers.

Business groups regularly complain about Telmex's business phone rates, which are more than twice as high as in the United States. In April 2007, U.S. Treasury Secretary Henry Paulson said Mexico would benefit from more competition. Mexican President Felipe Calderón pledged in April to make it easier for companies to enter the telephone market.

Does it all sound rather familiar?