Telephone service in Mexico is run by a monopoly that is overcharging customers billions of dollars, according to a new report by the Organization for Co-operation and Development (OECD).
"The lack of telecommunication competition in Mexico has led to inefficient telecommunications markets that impose significant costs on the Mexican economy and burden the welfare of its population," say the report's authors.
The culprit companies, America Movil (mobile phones) and Telmex (fixed lines), are owned by the world's richest man--Carlos Slim. According to Forbes' list of top billionaires, Slim's net worth is $74 billion; next in line is Bill Gates with a $56 billion worth.
"The Mexican telecommunications market is dominated by a single company with 80 percent of the fixed line market and 70 percent of the mobile phone market," reads the report. The average market share of the largest telecom company in the 34 other countries that the OECD examined, including the U.S., Japan, and Chile, is roughly 40 percent.
In total, Mexicans are being overcharged $13.4 billion a year, according to the report, and poor people are being charged disproportionately higher. This equals a $25 billion cost to the Mexican economy each year, which is equivalent to nearly 2 percent of the country's GDP, say the report's authors.
Mexico is the second-largest economy in Latin America and, according to the report, the America Movil and Telmex monopoly is limiting it from growing. In order for the country to develop, more people need access to telephone services, the costs must go down, and there needs to be more public investment in telecommunications.
According to the report, the Mexican government is partially responsible for Slim's monopoly because it restricts foreign investment in the telecom industry and does not give the regulatory authority, Cofetel, enough independence or power.
Earlier today, Reuters reported that Slim held a news conference to repudiate the OECD's findings and to deny that Telmex was monopolizing the market. He announced that he did not know how the OECD got its figures and that Mexico's 4-cent revenue-per-minute was lower than other Latin American countries, including Argentina, Brazil, Chile, Colombia, and Peru.