Telmex to spin off international business

15 Nov 2007

Telmex has announced that it will spin off its international operations and its Yellow Pages business to form a new stand alone company known as Telmex Internacional. The proposed spin-off is expected to allow the resultant companies – Telmex Internacional and Telmex – to operate more efficiently and improve their respective competitive positions. Telmex’s international businesses include fixed line operators, cable TV companies and internet service providers in Brazil, Argentina, Chile, Colombia, Ecuador and Peru. Together they account for about 30% of Telmex’s annual revenues. The new Telmex Internacional will be floated on the Mexican and US stock markets.

It is not the first time the Mexican company’s owner Carlos Slim has separated a smaller but rapidly expanding unit from a slow-growing parent company. In 2000 he spun off Telmex’s wireless operations to create America Movil, which has quickly grown to become one of Latin America’s largest telecoms companies.

As part of the operational reshuffle, Telmex also announced plans to create a new division with responsibility for fixed line services in rural areas. As of September 2007 Telmex claimed a total of 18.2 million main lines in service in Mexico, with a presence in more than 22,880 communities. Of these lines, approximately 9.8 million were in areas served by other telecoms companies and thus deemed ‘competitive’. However 8.3 million lines are located in communities in which no competition exists: according to Telmex customers from these areas generate annual revenues of approximately MXP17.5 billion (USD1.61 billion), EBITDA of MXP3 billion and an operating loss of MXP1.98 billion. As a result, Telmex has decided to separate the operation and marketing of these rural areas in order to address ‘their particular needs and monitor their development’.

Mexico, Telefonos de Mexico (Telmex)