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Long-Distance Politics: U.S. Carriers Battle Ex-Mexican Monopoly

November 19, 1996

MONTERREY, Mexico (AP) _ With attack ads saturating the air waves, the fight for Mexico’s long-distance telephone customers looks like a political campaign gone negative.

On one side is Telefonos de Mexico, or Telmex, which was privatized six years ago after a long history of inefficient and corrupt government management.

Opposing Telmex are eight newcomers that have entered the market since the government ended Telmex’s long-distance monopoly in August. Two have ties to American companies MCI Communications Corp. and AT&T Corp.

With a communications market expected to double to more than $10 billion a year by 2000, competition is fierce.

But as Mexicans in the central city of Queretaro and the northern metropolis of Monterrey prepare to become the first to make long-distance calls on non-Telmex lines in January, the ads have become downright ugly.

One of the new companies, AT&T-affiliated Alestra, exploited Telmex’s reputation for poor service by showing a wrecking ball crashing through a house as a phone technician arrived to install a new line.

Telmex hit back with an ad of a fictional American telephone fat cat, named ``Burton Helms,″ cackling to Mexicans in fractured Spanish while gripping a golf putter. The name played off the Helms-Burton Act, which is designed to discourage foreign companies from doing business with Cuba. It has been reviled in Latin America.

As in many political ads, the truth has suffered.

AT&T and MCI point out they are not majority owners in the new Mexico ventures. Telmex says it is under Mexican control, but its shareholders include U.S.-based Southwestern Bell and France Telecom.

While other companies have used TV to try to attract customers, MCI-affiliated Avantel scored a coup this summer without buying any air time. On Aug. 12, it carried the nation’s first non-Telmex long-distance call, linking President Ernesto Zedillo in Mexico City to a state governor in an Avantel plant in a northern suburb of Monterrey.

An engineer at the plant, Manuel Siurob Ruiz, worked for Telmex for 11 years before jumping ship.

``People at Telmex think they earned their place in the market. But they didn’t,″ said Siurob, showing off a state-of-the-art switching facility. ``They don’t know how to compete because they’ve never had to.″

Indeed, even though Telmex will keep its monopoly on local phone service, some analysts say it could lose as much as 45 percent of the international phone market and 30 percent of the domestic long-distance market over the next five years.

Though Telmex has improved markedly in recent years, many Mexicans recall desperate customers waiting months or even years for new phone lines. They also tell of Telmex technicians who dragged their feet on customer service orders unless tipped.

But Telmex is striving to overhaul its image.

The company has put up neighborhood question-and-answer booths in key cities, upgraded operator service and spent the equivalent of $10 billion on new fiber-optic lines and digital networks.

``The quality of service that Telmex offers is guaranteed by the investment we have been making,″ said company spokesman Andres Ortiz Lavin.

Competitors also promise major investments. Avantel, a joint venture between MCI and a conglomerate that controls Mexico’s largest bank, is ahead of the pack. It has invested $900 million so far for a network of 3,400 miles.

Many Mexican households and businesses, eager for savings after a severe national recession in 1995, are already seeing benefits.

Telmex has cut rates to high-volume customers as much as 20 percent. Avantel touts an off-peak rate of 1 peso _ 13 cents _ a minute to call anywhere within the country.

``The public might not yet be totally aware of what it means, but these are radical changes,″ said Alestra spokesman Jose Chimal.

``Before, it was the service provider who set conditions,″ he said. ``Now the customer will call the shots.″

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