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TELECOMMUNICATIONS : MCI to Put $450 Million Into Telephone Venture in Mexico

January 26, 1994|LESLIE HELM | TIMES STAFF WRITER

Hoping to cash in on Mexico's booming telecommunications market, MCI Communications Corp. said Tuesday that it will invest $450 million in a joint venture with Mexico's leading financial company to offer long-distance phone services south of the border.

Grupo Financiero Banamex Accival, or Banacci, which already runs Mexico's largest private communications network, will be MCI's partner in the venture with a 55% share of the new company.

The success of the venture depends on Mexican government approval of the group's application to offer long-distance services beginning in 1996, when that market is scheduled to be opened up to competition.

MCI said the venture will help create a "NAFTA network"--a reference to the recently approved North American Free Trade Agreement--that will make it as easy to dial in and out of Mexico as it now is to call across the Canadian border.

To Mexican phone users, said Eugene Eidenberg, executive vice president at MCI, "the U.S. will look like another Mexican province."

Currently, 13% of international calls originating in the United States go to Mexico, while more than 90% of international calls placed in Mexico go to the United States and Canada. But Mexico's telephone system, with only seven lines for every 100 residents, is notorious for its poor service.

If approved by summer, as the partners expect, MCI will make an initial investment of $150 million to begin building a "crystal triangle" of fiber-optic cables linking the leading business cities of Mexico City, Guadalajara and Monterrey.

Until the long-distance market opens up to competition, the new venture will offer private telecommunications services to large business customers in Mexico, expanding on Banacci's existing business.

MCI's venture is the latest in a string of large U.S. investments in Mexico's phone business. Despite its many problems, the industry's huge growth potential has made it a favorite among foreign investors.

For example, since San Antonio-based Southwestern Bell helped Telephonos de Mexico go private in December, 1990, when it bought a 10% stake in the telephone monopoly for $953 million, the Mexican company's stock price has soared.

Bell Atlantic announced plans last fall to spend $1.04 billion for a 42% stake in Iusacell, Mexico's second-largest cellular phone company. Poor land-line services have resulted in heavy usage of cellular phones in Mexico as a replacement for basic phone services.

MCI expects to benefit from the growing volume of telephone traffic between the United States and Mexico as cross-border trade flourishes under NAFTA.

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