Telcel: Price Discrimination in Prepaid Mobile Service
Who is more dangerous: El Chapo or Carlos Slim?
Michael Massing, a former executive editor of the Columbia Journalism Review and co-founder of the Committee to Protect Journalists, ponders the question in an opinion column published by The Guardian in January 2019. The subheading on the column reads: “While attention focuses on a mafia boss on trial in Brooklyn, the billionaire [Slim] heads a power elite preserving inequality in Mexico“.
In exploring the question, Massing writes: “The group is dominated by a dozen or so oligarchs and their families, who have a lock on such key economic sectors as telecommunications, media, mining and banking. Repeated forecasts of rapid development for Mexico have come to naught due to the suffocating hold that this small circle of super-connected individuals continues to have over its economy; by eliminating competition, they can keep prices high and profits surging… At the center of the power elite is Carlos Slim.”
Slim has amassed a fortune currently estimated by Forbes to be in the amount of 62.8 billion USD. Previously the same publication had placed him as the world’s richest person for the four years running from 2010 to 2013 and by the accounting of Branko Milanovic—former lead economist in the World Bank’s research department—Carlos Slim is the richest person to ever have existed in the history of humankind.
At the root of Slim’s fortune is his longtime domination of Mexico’s telecommunication industry via Telmex and Telcel, companies that hold extremely high market shares in the fixed, mobile and broadband sectors. Slim’s companies have parlayed a privatized concession of public goods (rights of way and electromagnetic spectrum), taken advantage of network effects, engaged in anti-competitive behavior and delayed regulatory decisions by the abuse of amparos (legal injunctions) in order to overcharge Mexicans billions of dollars and underinvest in infrastructure.
In 2012, the OECD issued a report (OECD Review of Telecommunication Policy and Regulation in Mexico) which states that “Consumer welfare loss in the Mexican telecommunication sector over the period 2005-2009 is estimated at USD 129.2 billion, or an average of USD PPP 25.8 billion per year. The latter amount is equivalent to 1.8% of Mexican GDP per year (or USD PPP 240 per capita). Given the very skewed distribution of income in Mexico the burden of this loss in consumer surplus weighs significantly on a large segment of Mexico’s population.”
Evidence of Carlos Slim’s continuing role in creating an even more unequal Mexican society can be found in the structure of Telcel’s prepaid mobile service pricing. As shown in the images above, smaller mobile prepaid refills result in much higher prices for Telcel’s customers. If one were to buy 200 MXN in 20 MXN refill installments, total credit would amount to 240 MXN. If, however, the consumer were to plunk down 200 MXN at the counter of the convenience store to buy airtime, the amount credited for service would be 400 MXN.
It is important to keep in mind that, as of today, 81% of mobile lines in Mexico prepay for service (vs. 27% in the US) and that Telcel’s decision to discriminate in price against lower-ticket purchases of airtime bears no relation to the cost of service and is purely predatory in nature. It is therefore heartbreaking, for anyone possessing a conscience and informed of the situation, to see Mexicans—restaurant waiters, hotel maids, cab drivers, construction workers, gardeners—lined up at cash registers ponying up their hard-earned pesos, 20 MXN bills at a time, to further enrich Mexico’s preeminent billionaire robber baron: Carlos Slim.
Sociopathy is a mental health disorder characterized by disregard for other people. The term clearly applies to Carlos Slim and other members of Mexico’s power elite such as:
- Germán Larrea: worth 25.9 billion USD according to Forbes and whose copper mining operation in the state of Sonora—the second largest in the world—poisoned two rivers in one of Mexico’s largest toxic spills and
- Ricardo Salinas Pliego: worth 12.9 billion USD, who borrowed nearly 30 million USD from the President’s brother in order to buy the country’s public television network while the head of state was privatizing it, has had to settle with the SEC for defrauding investors to the tune of 109 million USD and used subterfuge and influence to have Mexico’s government overpay hundreds of millions in a fertilizer deal tainted with corruption.