Francisco Hernández Juárez, leader of the Union of Telephone Operators of the Mexican Republic (MRS), comes from putting an end to a conflict over retirements that pitted the workers of Telmex with the owners of that company, the slim family, for three years. He now faces one of the most difficult challenges in his 45 years at the helm of the MRS: avoid the possibility that the Federal Institute of Telecommunications (IFT) order the partition of Telephones of Mexico in two companies with different owners and their own brand and infrastructure.
This would be the structural separation of Telmex and it would also mean that some 14,000 workers of that telephone company would have to go to a totally different company, with the labor challenges that contracting with a new employer would imply. A similar quota of workers is already integrated into the company Last Mile National Networkwhich was the result of the functional separation that the IFT ordered in 2018 to Telmexby detaching from that company its infrastructure arm in a new company, but with the same owner, and which is the step prior to the structural separation.
AT&T, Grupo Televisa and the National Chamber of the Electronic Industry, Telecommunications and Information Technology (Canieti) promote the partition of Telmexas the only way to balance market competition.
Even with seven years of financial losses, Telmex It is still a colossus with 320,000 kilometers of fiber optic networks and operates more than 50 metropolitan rings throughout the country. Its telephony, voice and streaming services total 21 million accesses and its workforce is 60,000 workers, 28,000 of them active. Its network infrastructure also supports the traffic of the 83 million users of Telcel and its coverage reaches 130 million Mexicans. All this what his adversaries accuse of market dominance.
—What do you think when you read in the press about the possibility of definitively splitting Telmex into two totally separate companies from one another?
—I think that this is a provocation, even though we have lost an important space in the market due to asymmetric regulation and even though we come from three years of fighting with the company to find a solution to the issue of retirement and that we finally reached a agreement, that a lot was due to the intervention of the State. At that time, the IFT did not have the kindness or sensitivity to help us find a solution from its own powers; And now that we have found a solution and that we are working to strengthen the financial viability of the company, they come with these reactions from all sides. I would not be surprised if the position of the Canieti extends to the IFTbecause these companies have no more than the purpose of hitting to advance their own interests, than to help the development of connectivity in the country.
The truth is that we agree and we insist that the competition model promoted by the IFT has to change by squeezing Telmexbecause by itself this model has not solved the problems of coverage, convergence and being able to connect the majority of Mexicans.
Only with a complementary scheme where the State fulfills the role of driving the development of the companies themselves will there be connectivity. Trying to pressure the IFT and intimidate it to take control of its network away from Telmex and place it in the hands of a third party to fully dispose of the conditions and override Telmex’s own capabilities, will not be the solution. I tell them and I am sure that the government is going to be concerned, because after having gone through such an important problem as the issue of retirement that even they contributed a lot to its solution, now these people want to generate structural separation.
—Although the industry pressures the IFT to declare the structural separation, that authority defends that its regulatory policy on Telmex has allowed them to gain 11 million Internet subscriptions, to the detriment of Prodigy. Do you consider that position of the IFT as part of its impartiality to analyze the structural separation of Telmex?
—The IFT itself already realized how untenable the position of Canieti, Televisa and AT&T. They bring a question of appropriating the market in any way, because not even by tying us down as they have us, they have not been able to grow and now they are launching regulatory maneuvers, and that is why they are interested in putting pressure on it.
The government has some plans for Altán and CFE, and has publicly said that it needs Telmex’s arm to bring connectivity to the most remote places and we agree with them, because honestly the only way to fulfill the purpose that this government has set for itself It is by making the companies make joint efforts and these companies that are now accusing us, have not been able to cover with the competition that the IFT has been generating through the regulation that squeezes us, the connectivity that is needed. If structural separation comes, who will the government rely on?
If it was only the pressure of Televisa and AT&T and the State remained with its arms folded just watching and we were not alert, I would not be surprised if they went down that path of structural separation. But we have a strong State in this six-year term and we will not sit idly by.
—Do the telephone operators notice any positive effect with the structural separation, such as what type of regulation would affect Telmex and the new company now?
—If there is structural separation, the logical thing is that in Teléfonos de México we should no longer have asymmetric regulation. It would thus seem an immediate and positive effect. Of course, one would have to think carefully about that positive effect that would be generated, but we telephone operators would not be surprised if they now come up with a policy like the one they did with preponderance and continue to regulate us in this way. What’s more, at this moment Telmex already has the conditions not to be declared the preponderant agent and they still find reasons to subject us with their regulation. With that history that we have seen, it is difficult for me to think that with the structural separation there will be no harm to the company and the workers.
Well, the structural separation occurs and the regulation is taken away from us, who of all of them who pressure the IFT will help the government to bring connectivity if we no longer have regulation? Have those who press think about it?
— Are you referring to the fact that if there is structural separation and therefore the asymmetric regulation changes or it is extinguished, then you or the spun off company would no longer be obliged to share their infrastructure?
-Yes that’s how it is. It seems that these conditions could exist, but I honestly do not imagine that they are promoting this structural separation so that these conditions exist that the wholesale company no longer has the obligation to share its infrastructure, that it is no longer obliged to subsidize the infrastructure with its competition, that it no longer has that asymmetric regulation, I am not sure that this is the path they are thinking of. Who will also buy Telmex? AT&T or Televisa… Is it enough? They are pressing so that with this intention they allow themselves to have other advantages that we will see if the structural separation occurs. I hope that this separation does not occur, that this is an assumption.
—Paraphrasing a comment from the same IFT that if “touch, touch” the structural separation, then there would be fewer obstacles for Telmex to sell video products, do you see it as possible?
—Here it turns out that América Móvil is not processing the video concession for Telmex, but for Clarovideo. If it happened that they give it the concession, perhaps they would look for us to give access to fiber infrastructure. I don’t see Televisa promoting a new competitor in its own market. There could be those benefits, hypothetically thinking that this would happen with the structural separation, but I doubt that they are promoting thinking that this will be the case.
—In the press, there are those who say that the structural separation could benefit Telmex given what they describe as financial imbalances due to the size of the workers’ payroll…
—We have not been an obstacle, because with that, in the year 2000, the company was considered the best telecommunications company in the world and with the income of that time, our payroll and our contract represented 35% of Telmex’s income.
What happened? That the company dedicated itself to extracting the most profitable services from Telmex and then the regulation came, and then revenues fell and the company’s finances fell, and therefore, in this comparison, our payroll reached a greater weight in the Telmex finances. As a company we have been without profit for almost seven years due to the effects of its asymmetric regulation and now they have come to tell us that living wages cause a financial obstacle in Telmex.
—The term functional separation is heard a lot in forums and is read too much in the press, doesn’t it really take away your sleep as a union leader?
—According to our own studies of the reports of our own colleagues from the external plant, they, those who put pressure on the IFT, have access to the entire network of Telephones in Mexico; They know where the infrastructure is, the poles, the fiber, and they have had all the facilities. What they have asked for we have given.
This first scheme of functional separation has not worked. They said that the market was going to expand, like connectivity. This is how they took away our income from long distance, interconnection, metered service and others…
And where is what has been achieved? Everything has been at the cost of the sacrifice of Telmex And if that was the idea, they succeeded, because we are going for seven years without profits. They sold us the idea of expanding telecommunications, but we have not seen Televisa, AT&T or Canieti say to the president: “Don’t worry, we are going to bring coverage to the disconnected”, because if there is no coverage, they simply won’t go.
Does it make me sleepy? No. It is the figure of complete asymmetric regulation that affects us. Functional separation could therefore be acceptable if it worked, but it has not worked and it is causing problems for the company and the workers.
The functional separation basically had to do with the external network (metropolitan rings, transport networks…). But after a little more than with the power plants and with another little more, the buildings. If the structural separation comes, what are they going to sell: part of the head office, the building or the servers? It’s very complicated; It is a very difficult network framework, because how far is the fiber that they are going to sell. The Canieti and AT&T have imagination and creativity to tease.
