Slim Family Sees European Crisis As Good Time To Invest
By Crayton Harrison - May 24, 2012 9:23 AM
Carlos Slim sees Europe’s debt crisis as a “good moment” to apply his strategy of investing in times of turmoil, said the billionaire’s son, America Movil SAB (AMXL) Co- Chairman Carlos Slim Domit.
America Movil, controlled by the elder Slim, announced a $3.4 billion bid to increase its stake in former Dutch phone monopoly Royal KPN NV (KPN) earlier this month. While the acquisition would be Slim’s first major European foray, it follows a longstanding pattern, his son said. America Movil tries to stay as efficient and financially sound as possible so that it can quickly capitalize on fresh opportunities, he said.
“When hard times come, you can look at opportunities in a very agile way,” Slim Domit, 45, said in an interview this week in Mexico City. “Europe is in a good moment.”
Before America Movil made its offer for a KPN stake on May 7, the Dutch company’s stock had fallen as low as 6.37 euros, dragged down by concern that the European crisis would hurt demand. Slim offered to pay 8 euros a share for as much as 28 percent of KPN. That move mirrored Slim’s opportunistic buying in Argentina and Brazil a decade ago and even earlier in Mexico -- investments that helped make him the world’s richest person.
America Movil rose 0.1 percent to 16.70 pesos at 9:18 a.m. in Mexico City trading. The shares have dropped 11 percent since the company announced the KPN offer. KPN fell 0.7 percent to 7.69 euros in Amsterdam.
European leaders are meeting in Brussels this week to discuss the region’s debt crisis after deepening concern Greece will exit the euro wiped about $4 trillion from equity markets worldwide this month.
Still, Slim’s KPN deal faces hurdles. The Dutch carrier has rejected the offer, saying it “substantially undervalues the company.” If approved, the transaction would more than quintuple America Movil’s stake in the Netherlands’ largest phone company.
America Movil also may have approached the Austrian government about buying a stake in Telekom Austria AG (TKA), according to one of the carrier’s biggest investors, Egyptian billionaire Naguib Sawiris. A sale of that stake would require approval by the coalition government, which is led by the Social Democrats, who oppose privatizations. America Movil declined to comment. Sawiris said he’d be willing to sell his own Telekom Austria stake to America Movil if the Austrian government doesn’t allow changes at the telephone company.
Slim Domit co-leads the board of America Movil, the largest wireless carrier in the Americas, with his brother Patrick. He’s also chairman of the carrier’s Telmex land-line unit and of Grupo Carso SAB, a Slim-controlled company with retail, construction and manufacturing units.
The family’s investment strategy goes back decades, Slim Domit said. Along with his two younger brothers, he received lessons from his father from an early age on how to value companies. The Slim patriarch, now 72, was following the tradition of his own father, Julian Slim, a Lebanese immigrant to Mexico who gave his children savings books with their weekly allowances to teach them how to manage income and expenses.
Julian Slim took advantage of depressed prices during the nation’s 1910 revolution to buy up real estate in downtown Mexico City. The lesson stuck with Carlos Slim, who would use a series of economic crises in Mexico to build a collection of assets, from tire and cigarette manufacturing to insurance to retail, culminating in his 1990 acquisition of Telmex during a privatization movement by the government.
From Telmex sprouted America Movil, which now spans most of the Western Hemisphere, from the U.S. to Argentina. The company grew by acquiring distressed assets, such as bankrupt AT&T Latin America Corp.’s fiber-optic lines, and investing in those networks to reach consumers, Slim Domit said.
“There wasn’t a lot of infrastructure,” he said. “In many countries the company began by making an acquisition of the third- or fourth-biggest carrier, and then got as big as it is now by investing and being competitive in the market.”
America Movil is spending more than $9 billion this year, with a similar amount budgeted for the next two years, to improve its network across Latin America. It’s pushing fiber- optic lines closer to users’ homes and preparing to introduce faster wireless services known as 4G, or fourth generation.
Those investments have given America Movil an edge over its biggest rival, Telefonica SA (TEF), in most of the region, said Vera Rossi, an analyst at Barclays Capital in New York.
“They have the best position in Latin America,” she said.
The opportunity in Europe is different, mainly because phone networks are much more developed in the region than they are in Latin America, Slim Domit said.
‘A Lot of Potential’
“We’re not thinking about going there as operators,” he said. “Those are markets that we view with a lot of potential for the development of synergies, and above all we’re seeking complementary philosophies on how to develop businesses.”
America Movil aims to win approval from Dutch securities regulators for its KPN offer and carry out the transaction in early June. The company will keep looking at telecommunications investments because Slim believes the industry will be the center of technological changes over the next decade, such as the shift to using wireless devices for financial transactions, Slim Domit said.
“My dad has said it many times, but we’re in a new era, and telecommunications are the nervous system of this new era,” he said.
To contact the reporter on this story: Crayton Harrison in Mexico City at email@example.com