August 20, 1999

Telmex Wants to Create Hispanic Internet

Telmex, Mexico's telephone powerhouse, wants to create the Hispanic Internet in the latest bid to claim the largely-unwired market, the company's chief executive told U.S. investors, according the international news agency Reuters.

The head of Telefonos de Mexico, Jaime Chico Pardo, spoke in broad terms to mutual fund portfolio managers and institutional investors before meeting them individually during a two-day Deutsche Bank Latin American conference in Boston, Reuters said.

"There is no Hispanic Internet and we intend to become that," Chico Pardo said. The company has a 20 percent stake in U.S.-based Internet service provider Prodigy Internet and operates Prodigy in Mexico.

"We cannot be Yahoo or Excite,'' Chico Pardo said referring to two popular Internet portals. "But we intend to tackle the Hispanic market in the U.S., Mexico, wherever Spanish is spoken."

Telmex will face competition from a number of players, including America On-line Inc, which is in an Internet alliance with Venezuelan conglomerate Cisneros Group, Yahoo Inc.'s Yahoo en Espanol and StarMedia Network Inc., among others.

Telmex plans to set its plans in motion through a computer supply contract it signed last month with Acer Computec Latino America, the Latin American division of Taiwan's Acer Computer International. Through the alliance, Telmex will sell its telephone clients computers bundled with Internet access on a two-year basis, Chico Pardo said. Access will be pre-paid.

"Pre-paid is something we know a great deal about," he said, after noting the com-pany's strong sales of pre-paid telephone cards and pre-paid cellular services.

Cellular telephone service in Mexico provides 13 percent of the firm's revenues and is showing a 95 percent growth rate in Mexico, he said. Of that 95 percent, 70 percent are pre-paid customers.

Telmex is interested in providing Internet services as well to Puerto Rico, where it teamed with SBC Communications to buy Cellular Communications of Puerto Rico in a $464 million deal, and in Guatemala where it operates Telgua, Reuters said.

In May, Telmex invested $100 million and signed an alliance with U.S.-based network company Williams Com-munications Group. The company is developing a platform with Williams "which will give us the ability to support voice, data and video as an IP (Internet provider)."

Telmex was privatized in 1990. Local telephone service has recently opened to competition here, but Telmex still owns almost all of the fixed telephone lines in Mexico. Despite competition, Telmex also remains the biggest mobile phone company and long distance provider in the country.

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