The Rise of the New Public Service Transnational Corporations

THE RISE OF THE NEW PUBLIC SERVICE TRANSNATIONAL CORPORATIONS

Judith CLIFTON (Universidad de Cantabria, Spain & Open University, UK) [email protected]

Francisco COMÍN (Universidad de Alcalá, Spain) [email protected]

Daniel DÍAZ FUENTES (Universidad de Cantabria, Spain) [email protected]

I Congreso Latinoamericano de Historia Económica, Montevideo 4-6 de diciembre de 2007

Judith Clifton, Francisco Comín and Daniel Díaz-Fuentes1

Sesión 26. Transportes, Comunicaciones y Servicios Públicos en América latina, siglos XIX y XX.

Coordinadores: Andrés M. Regalsky (UNLu-UNTreF/Conicet) [email protected], Teresita Gómez (UB), Elena Salerno (UNTreF), Benjamín Nahum (Universidad de la República), Raúl Jacob (Univ. de la República, Uruguay), Paolo Riguzzi (Colegio Mexiquense)

Draft: please do not quote

Abstract

From the end of the twentieth century, Foreign Direct Investment flows into infrastructures such as electricity, gas, water, telecommunications and transportation rose to unprecedented levels to the extent that organisations – for the bulk of that century the national monopoly provider of public infrastructure - were transformed into some of the world´s largest Transnational Corporations. With this general development in mind, this paper proposes to examine the evolution in the long-term of two of the world´s most important transnational telecommunications companies: Telefonica of Spain, and Telmex of Mexico. It is argued that not only is it important to analyse these two rival companies because they have sliced up the bulk of the telecommunications market across Latin America between them. It is also of great interest to compare the long-term evolution and transformation of their development from an economic history perspective in order to enquire to what extent the policies of privatisation, nationalisation and liberalisation were used to build up these “national champions”. One common reason for the “success expansion-growth” of both enterprises was their long-term adherence to : “Mexicanisation” and “Spanishisation” strategies beyond the more fashionable and changing economic policy options. Introduction

The objective of this paper is to analyse comparatively the evolution of two of world’s most important telecommunication Transnational Corporations (TNCs) that have been referred as Trans Latinas by UN-ELAC (CEPAL) at the beginning of the twenty first century. A study of Telmex (Teléfonos de México) and Telefonica is particularly important in the Latin American economic history context, as the duo have sliced up the bulk of this telecommunications market in recent years. In order to do this, the paper will be divided into four sections. In the first section, the generalised and unprecedented phenomenon of the rise of transnational public service infrastructures will be examined. Second, a synthesis of internationalisation and privatisation patterns in Spain will be provided, explaining the role of Telefonica and other companies in these processes. In the third section, the evolution of Mexico´s former telecommunications monopoly via privatization into one of Latin America´s top “translatins” is provided. In the final section, the evolution of Telefonica and Telmex is compared, and it is enquired to what extent economic nationalism in the form of “Spanish-isation” and “Mexicanisation” were responsible for the transnational (global, regional or crossborder) transformation of both companies.

I ON THE RISE OF THE NEW PUBLIC SERVICE TRANSNATIONAL CORPORATIONS

Across the twentieth century, Transnational Corporations (TNCs) and public services providers were largely perceived as organisations evolving in separate, not to say antagonistic, economic, social and ideological spheres.2 Whilst TNCs were associated with privately owned firms, bent on profit-maximising, rent-seeking, and aggressive expansion abroad, public services providers (in most cases monopolies) were conceived of as being non-market oriented, locally or nationally-based entities, providing welfare services, development and defence, subject to state regulation and, in many cases, state-ownership (Clifton et al. 2003, Comín y Díaz 2004). It is both dramatic and unprecedented, therefore, that, in recent years, an important number of public services providers such as, Telmex-América Móvil from Mexico (Grupo Carso Telecom), Singtel from Singapore, MTN Group from South Africa, Telecom Malaysia, PCCW from China, Teléfonica, Telecom Italia, France Telecom, Deutsche Telekom,, Electricité de France, E.On, RWE, Endesa, Enel, Deutsche-Post-DHL, and so on - have emerged among the leading TNCs in the developing and develed world. Whereas most firm transnationalisation from the 1950s was dominated by the manufacturing, oil and financial sectors, usually originating from the United States (United Nations, Centre for Transnational Corporations 1988), this new and emerging phase of transnationalisation is in the services (UNCTAD 2004), and originates in multiple countries, including Europe, Latin America and Asia3.

From an economic history perspective it can be argued that the recent transnationalisation of network infrastructure (telecoms, electricity, gas, water and transpor) is quite unprecedented in scale and scope.4 For the duration of the twentieth century, these infrastructures were deeply embedded geographically, institutionally, politically and psychologically within the confines of the nation state. Previously, during the nineteenth century, railways and the telegraph and, later, telecommunications and electricity, integrated isolated villages and towns. Private investment, backed by financial state guarantees or collateral, was crucial during this period, but was mainly interested in cream skimming - profitably linking centres including those in Latin America and the colonies – whilst ignoring the peripheries.5 State activity was channelled towards offering these investors subsidies and guarantees to invest in the peripheries. It also fell to the state to secure agreements for interconnection, interoperability and technical norms (railways, telecommunications and electricity) within the national and international systems. As state intervention increased, particularly from the interwar period, governments used networks to protect borders (both physical, in the case of railways, ports, shipping, energy and telecommunications, and psychological, in the case of broadcasting), to separate those inside from those outside, to forge a common identity and to help consolidate a centralised authority.6 Networks, then, were used physically and psychologically to help forge the nation state. Their strategic, social and economic importance were used to justify state running of network utilities in most countries around the world and, often, state ownership, but also private monopolies under exclusive concessions.7 Regulation of the networks was oriented to ensure welfare objectives such as universality and accessibility through policies such as cross-subsidisation by establishing, for example, common tariffs for residents in the centre and periphery. National networks, in other words, became to the state what arteries and veins are to the body; they linked the vital organs so the whole could function. As public infrastructure providers concentrated on their home markets, they showed little interest in investing in and controlling the provision of public services abroad. From the late 1990s, however, this all changed … XXX Oxford Economic Policy. As foreign governments privatised public service providers, FDI flowed from and towards public service providers at unprecedented levels. This had a rapid and novel consequence: public service providers, perceived during the 1980s as the ´ugly ducklings´ of national economies, slow to react, bureaucratic and constrained by old-fashioned trade union relations, were pushed to the top of the world ranking of TNCs8 emerging, surprisingly, as ´new economic swans´. Since this is still a recent and ongoing phenomenon, however, little attention has been paid to this within academic circles, with the important exception of researchers at UNCTAD and UN- ECLAC (Dunning, Ramamurti, Mortimore).

Table 1.

The 1990s marked an important shift in FDI world flows. Prior to the 1990s, FDI was concentrated in the industrial, financial and oil sectors, much of this originating in the United States. From the late 1990s, however, services, including public services, become the upcoming destination for FDI, whilst Europe replaced the United States as the leading source of FDI. So, if the archetypal TNC in the 1950s was Ford or General Electric, and Toyota or Mitsubishi in the 1980s, at the beginning of the twenty-first century, it may now be Vodafone, EDF or E.On. From the 1980s, public service providers, associated with state management and ownership, were often perceived as the úgly ducklings´ of national economies, fit only to be exposed to the ćold winds´ of privatisation and free markets. At the beginning of the twenty first century, public infrastructure service providers, partially or wholly privatised and liberalized to different extents, have emerged as ńew economic swans´. In order to identify better these new public service TNCs in terms of which countries they have their base in, which sectors they comprise, and how transnational they actually are, a short profile of the new public service transnationals is provided. One useful way of measuring transnationality, and of ´mapping´ its logic (whether the enterprise is truly global, regional or still largely dependent on its home market) is to quantify the extent of public service activity beyond the nation state in order to assess the degree of transnationality, and to rank the main public service TNC actors accordingly. Then, the transnational activity can be disaggregated according to place of destination to identify whether this is global, regional or still national. Probably the most comprehensive datasets on firm transnationalisation are provided by the UNCTAD.9 This organisation provides detailed databases on the world´s top TNCs, categorising them by country of origin, main industrial or service activity, and ranking them by size of their foreign assets and by their ´Transnationality Index´. The Transnationality Index is the average of three ratios: foreign assets to total assets, foreign sales to total sales, and foreign employment to total employment. The destination of transnational activity is not explained, however, so this must be derived from individual company annual reports. The ranking of public service providers that have become transnationalised in recent years is shown in Table 1, for the developed economies.

Table 2.

Taking first the rise of public service TNCs from developed economies, it is clear this has been dramatic: in 1996, there was only one public service company listed among the world’s top 50 non-financial TNCs, UK-based Cable & Wireless, which was in forty-ninth position. By 2005 (UNCTAD 2007), among the world’s top 50 TNCs, twelve were public service TNCs: five in telecommunications, six in electricity, gas and water and one in transport and postal services.10 In addition, there is a regional logic to this process, since most of these new transnationalised public services (100% of those in the top 50, and 15 of those in the top 100) are based in the large European economies. Both ´vintage´ players and new entrants alike are active: in the telecommunications sector, for example, the main actors include Vodafone (greenfield), Verizon (a newly formed company resulting from the merger of Bell Atlantic and GTE), and traditional players o monopolistic public operators (France Telecom, Deutsche Telekom, Telefónica, Telecom Italia, Telenor and Singtel). Of these transnationalised public services, at least one third of all their activity is now transnational, with Vodafone (87.1%) leading the pack. Though, as mentioned, networks expanded across borders in the nineteenth century, this sustained and dramatic experiment with transnationalisation in the early twenty first century is unprecedented. These public services providers in telecommunications, electricity and gas have a high TNI and, despite their often projecting themselves as ´global´ companies with a common brand, in practice, they operate in distinct national markets, often within different networks and under various regulatory bodies, rather than actually working in a global or even a regional network. Often, whilst on the one hand, the providers actively promote transnational networks, such as the TEN (Trans European Networks of energy, telecommunications and transports), via lobbying at the supranational level (through the ERT (European Round Table) or the CEER: (European Energy Regulations), many of the ex-monopolistic incumbents seek to maintain their market power and political influence at home, in order to avoid the entry (accessibility, interconnection and interoperability) of their competitors (in most cases other ex monopolistic incumbents) , and demanding sector-specific regulations. Indeed, we can examine how “global” these public service transnationals really are by examining annual company reports in order to calculate from where their revenues are derived. Telecommunications are the most internationalised of all the public services, so they will be taken here as the case study. As can be seen in Graph 1, when the revenues of the leading telecommunications TNCs are plotted in order to see how much of the international revenues are actually from Europe (the closer the dot is to the diagonal line, the more its “international” revenues are from Europe). This graph makes it clear that Telefonica is something of a maverick in European telecommunications. It should be remembered that Vodafone sold its business in Japan in 2006 and should therefore be moved much closer to the diagonal line. In 2006, Telefonica increased its activities in the EU by acquiring O2 (formerly known as BT Cell), with operations in the UK, Germany, Czech Republic and Ireland, thus shifting Telefónica closer to the diagonal line. However, Telefonica remains apart from most European telecommunications operators due to its strong and continued interest in Latin American markets.

Graph 1. European Telecom TNCs: European vis-a-vis international sales

Table 3. Leading telecom TNCs from developing economies in terms of foreign assets -2005, Assets Revenues Employees TNI Amércia Móvil Mexico 21.3 16.9 34.7 46.9 Telmex Mexico 23.2 15.2 75.5 21.9 Singtel Singapore 20.8 7.9 19.5 67.4 MTN South Africa Soth Africa 7.1 4.3 8.6 49.9 Telecom Malaysia Malaysia 10.9 3.7 34.8 15.1 PCCW China-HK 6.9 2.9 14.1 13.4 Carso Telecom Mexico 44.5 32.1 110.2 36.2 Telefónica Spain 86.7 47.2 147.0 50.1 Notes: Billions of dollars and thousands of employess Thus, in summary, the rising flows of FDI into services, in general, and public service infrastructure in particular, from the end of the twentieth century has led to the new phenomenon of public network service TNCs in developed and developing economies. We now turn to the particular cases of Telmex and Telefónica, examining the long-term development of both enterprises in the national and international context.

II. TELMEX: FROM FDI RECIPIENT TO “TRANSLATIN”

The establishment and expansion of utility networks laid the foundations, literally, in the form of physical networks of transport, communications, energy and water, for socio- economic development in modern Mexico, playing a central role throughout each different historical period of development. Continually, there was a trade-off between the aim of developing network services to promote national business, on the one hand, and the need to attract technological and business capabilities to sustain higher rates of growth through FDI, on the other. During the Porfiriato (1876-1910), network services were essential for the emerging export-led growth strategy, being financed in large measure through the accumulation of foreign debt (particularly Mexican National Railways). They were also key during the so-called économic miracle´ between the 1940s and the late 1960s. From the 1970s to 1980s, Mexico´s accumulating debt, headed by some of the largest networks, including oil and gas giant State- owned enterprise (SOE) Petróleos Mexicanos (Pemex), contributed significantly to highly cyclical economic trends and also generated what would be the deepest and prolonged debt crisis in Latin American history. Networks were important also during the 1990s in the passage from a relatively inward-looking economic strategy to a more open, privatised economy, particularly the former national telephone monopoly, Telmex, which was used as a symbol to increase the visibility and attractiveness of the privatisation programme to foreign investors.11 As the newly privatised Telmex exploited its privileges becoming a ńational champion´, its strategic shareholder, Mexican entrepreneur Carlos Slim, consolidated his business activities to become a leading force in the internationalising ambitions of Mexican enterprise from the end of the 1990s. A long-term study of the evolution of Telmex reveals that post-revolutionary Mexican governments have continuously sought to bring telecommunications under their wing - and away from foreign control - though this development has been gradual. Ownership and control preferences can be visualised as a 3-D axis that includes public, private, domestic and foreign: in this light, the government has repeatedly sought to use Mexican private investment when state ownership was either undesirable or unfeasible. Although this paper only considers the evolution of telecommunications in Mexico, study of other strategic networks, particularly railways, electricity, petroleum, gas and water, reveals a common trend to protect networks from foreign control, and this despite Mexico´s turn to open markets, the signing of the North American Free Trade Agreement (NAFTA), and the inward FDI boom to Latin America in the 1990s. This trend has differentiated Mexico from many large Southern American countries that opened more to FDI inflows.12 The nationalisation of the telecommunications sector, like that of electricity, was slow, and unfolded over decades: indeed, Telmex only became fully nationalised in 1972.13 TNCs established telephone services in Mexico City during the Porfiriato, as they also did in electricity. Fierce competition, non-cooperation and a lack of regulation characterised the industry that, by 1925, became consolidated into two TNCs: Ericsson of Sweden and ITT of the United States of America (USA).14 The Great Depression forced the two TNCs to start negotiating a merger, whilst pressure grew during the Cárdenas administration to interconnect their systems. While both foreign companies were in favour of a merger, each was determined to set the conditions, and both were vehemently opposed to accepting the conditions laid down by the government, which tried to reign in their privileges. Correspondence between the directors of the foreign firms and the Secretary of Communications and Public Works, Múgica, reveals that tensions were high during this period; this mutual distrust was exacerbated when Múgica was offered bribes if the foreigners could have their ways, and – infuriated – cut off correspondence. The vehemence of the correspondence between Múgica and the foreign TNCs was such that it has been suggested expropriation could not have been entirely ruled out.15 However, the oil expropriation acted as a shock wave: both the Mexican government and the foreign companies moderated their behaviour from 1938, whilst the Cárdenas administration ended in 1940 and was followed by a more conservative administration.16 From the 1940s, the government opted to gradually ´Mexicanise´ telecommunications. Mexicanisation is a loose, flexible tool used to describe a range of different policies from wholesale nationalisation to a more incremental shift in ownership away from foreign interests and towards Mexican private investors, allowing foreigners to return significant, though less visible, privileges once out of the limelight.17 The rationale was to attempt to channel FDI into priority areas for Mexico, rather than in the interests of foreigners. The Mexicanisation of telecommunications occurred in two phases: first, the Mexican government negotiated with Ericsson to create Telmex in 1947, to be jointly owned by Mexican and Swedish interests with a majority Mexican board.18 Next, the government negotiated the acquisition of the ITT-owned firm. By 1957, Telmex controlled 96 percent of telephone services and, the following year, the Mexican government pressurised Ericsson and ITT to sell their remaining shares to Mexican private investors, thus consolidating its Mexicanisation. From this time, the state gradually increased its ownership of Telmex, gaining funds via taxes on local and international calls and a scheme whereby new subscribers would buy State-issued shares in the company (to dilute private Mexican interests) and then buy them back using telephone taxes. By 1970, the State controlled 48 percent of shares: when Echeverría´s government bought a further 3 percent in 1972, Telmex was finally officially nationalised.19 However, Telmex was soon to play a leading role in the privatization programme launched by De la Madrid and prioritised by Salinas. The Salinas administration, which came into power in December 1988, took dramatic and rapid steps to deepen and extend the opening up of the economy. In 1989 the financial system was liberalised and FDI restrictions softened in order to make new areas of the economy accessible to foreign investors. An ambitious privatisation programme was launched to sell off many of Mexico´s largest firms. Between 1989 and 1994, Telmex, Mexicana, steel mills including Altos Hornos and Sicartsa, dozens of sugar mills, automobile companies including Dina and mines including Cananea were all sold off. Between 1982 and 1994, SOEs shrank from 1155 to 220. Newbery has observed that governments face a range of options regarding corporate governance, stakeholder arrangements, and overall transparency and openness when privatising.20 The privatisation model opted for by Salinas is most illustrative. Certainly, the sale of Telmex was the single most important instance of privatisation in Mexico for three principal reasons. Firstly, the revenue generated by the sale for the Mexican Treasury, which totalled around US$6 billion, was easily the largest sum obtained from the sale of any single firm at the time, constituting around 30 per cent of all proceeds generated during the Salinas administration. Secondly, Telmex was chosen by Salinas as a ´launching pad´ from which the rest of the sales were carried out. A successful sale would send a message to investors that the government was serious in its plans to privatise.21 Thirdly, the sale of Telmex was used for political ends. It should be remembered that Salinas came to power under suspicious circumstances, many sectors of society, including some of the main trade unions, having failed to support him. A dramatic privatisation programme could engender resistance from the general public and the unions, who associated this with job losses, the ´flexibilisation´ of labour contracts and the weakening of trade union power.22 Salinas´ objective, thus, was to guarantee a successful privatisation early on in his mandate, free from union conflict. In the run up to the Telmex sale, Salinas held meetings with the leader of the Trade Union of Mexican Telephone Workers (STRM) in order to pact a mutually satisfactory privatisation. He informed them of his plan to promote them as an example of ´vanguard, new unionism´, promising them they would benefit from privatisation if they cooperated. Salinas inaugurated the STRM´s annual meeting in 1989, and announced the privatisation of Telmex to its workers before this had been made official. Six promises were made: 1) there would be no redundancies 2) labour rights would be respected 3) workers would get shares in the company 4) the State would still be the regulator 5) the new owner would be Mexican 6) telecommunications services would improve. The workers were, in general, flattered by this personal attention: they were the union ´pets´ of the president of Mexico, and agreed to cooperate. Prior to the sale, the government modified Telmex´s ownership and corporate governance in an innovative way to ensure that Mexican investors would end up with the control of the private business. Special controlling shares restricted for Mexicans were reduced and concentrated, so that, with only a relatively small amount, Mexican investors could afford to take control.23 The sale was announced in August 1990: of the three offers made, the controlling 20.4 percent share was awarded to the Grupo Carso. This Mexican conglomerate, owned by Carlos Slim, bought 10.4 percent of total capital stock (51 percent of special controlling ÁA´ shares reserved for Mexican investors). Its partners were Southwestern Bell (SBC) and France Telecom, each with 5 percent of total capital stock.24 Thus, Telmex passed from a public to a Mexican-controlled private monopoly in 1990, which would expire after six years and thereafter face competition. Moreover, the STRM were also awarded shares in exchange for cooperation with the privatisation.25 In 1994, the Salinas administration ended in scandal, and the entire privatisation programme came under scrutiny. Rumours abounded that Salinas had used Slim as a ´straw man ´ to buy Telmex on his behalf, though this has not been proved. It is clear, however, that the new Telmex owners were privileged gaining a six-year period to enjoy a monopoly over national and international services. This gave them time to expand and modernise the network, according to the targets set by the government and also to become consolidated as a national champion before competition got a look in. Telmex also enjoyed a head start in new telecommunications markets, such as mobile telephones and internet services. When mobile telephone licences were awarded in 1998, Telmex was awarded one licence to operate in each of the nine regions (under the name TELCEL), having to compete as a duopoly with a different operator in each region (TELCEL was the only operator with national coverage). From 1995, as Telmex´s monopoly drew to a close, provisions were made to prepare for competition. The regulatory body, the Federal Commission of Telecommunications (COFETEL) was established, and a new regulatory framework for telecommunications implemented. Institutional pressure increased further when, in 1993, FDI restrictions were loosened, allowing foreigners to buy more than 49 percent of mobile telephone companies subject to approval by the National Foreign Investment Commission, and in 1998, when, as a result of the new commitments Mexico agreed to at the WTO under the fourth protocol to GATS, Telmex was forced to offer interconnection services to its rivals. Restrictions to 49 percent of foreign ownership of Telmex still stood in 2006.26 Deep privatisation of former national monopolies and other SOEs in most Latin American countries helped feed a boom in inward FDI flows to the region in the first half of the 1990s. This was the first wave of transnationalisation of the late twentieth century, characterised by TNCs, usually from the industrialised world, entering and taking advantages of newly privatised enterprises in the region. A second wave of transnationalisation started around 2000 and is still ongoing. Economic crisis, global (and regional) declines in global and regional FDI flows,27 combined with a rise of investment dispute claims going to the GATS-WTO, (Mexico was only second to Argentina in the number of claims presented), characterised this period.28 As a result, as some disillusioned TNCs started to pull out of the region, Latin American investors moved to replace the vacuum. The CEPAL (United Nations Economic Commission for Latin America and the Caribbean: ECLAC) labels these new regional actors ´Trans Latins´: these are (usually) private enterprises based in one Latin American country that cross borders by acquiring assets in other enterprises in the region, possibly as a springboard to international expansion. In order to distinguish Latin American companies from other ´latin´ companies, such as Spain and Portugal, which also seek to exploit a ´latin´ world of business, they are referred to here as Trans Latin American Corporations (TLACs). In Mexico, between 1970-93, inward FDI flows averaged around US$ 3 billion, and the proportional contribution to Gross Domestic Investment (GDI) was below 7 percent. From 1994 onwards, inward FDI flows increased five-fold while FDI contribution to GDP reached 15 percent. Outward FDI also changed significantly, increasing from an annual average of US$ 100 million between 1970-93, to over US $ 1.5 billion between 1994-2004 GRAPH . From 1997, outward FDI reached an average 1.5 percent of GDI, so, though this shows outward FDI is still much less important than inward FDI, as in many developing countries, there is increasing internationalisation by Mexican TNCs, as reflected in the number of cross-border mergers and acquisitions.29

Figure 2. Foreign Direct Investment flow in millions dollars and as percentage of GDP, 1980-2004

30 000 25.0 t n 25 000 e m

20.0 t s e v n s 20 000 I r

a 15.0 c l i l t o s d e

15 000 f m o

10.0 o s D n

o 10 000 s i l l s i o M 5.0 r

5 000 G

f o

0 0.0 %

- 5 000 - 5.0

Inw ard FDI Flow s Outw ard FDI Flow s Inw ard FDI Flow s as % GCF Outw ard FDI Flow s as % GCF

By 2005, of the top 25 TLACs in the region, half were Mexican-based. Telmex, and Grupo Carso spin-off, América Móvil, ranked second and third place respectively, whilst Grupo Carso, Slim´s industrial and commercial group, ranked eighth. The top 5 TLACs are composed either of telecommunications actors (Telmex and América Móvil) or extraction (Petrobras, CVRD) or cement (CEMEX). As can be seen in Table 4, Telmex is a very recent TLAC because, until 2003, the bulk of its revenue originated from Mexico. Indeed, it was with the acquisition of AT&T assets in 2004 that Telmex became properly internationalized.30 Comparing the transnationality index (TNI) of all five companies, Telmex has the lowest result.

Table 4. op Five Trans-Latin American Corporations in leading non-financial TNCs 1999-2005

Home Revenues* Transnationality Index * Countr 200 200 200 199 200 200 200 200 200 200 Main countries of Corporatiion y Industry 3 4 5 9 0 1 2 3 4 5 operations Telmex Mexico Telecoms 10.8 12.1 15.2 0 0 0 0 0.8 11.8 21.9 Mexico Brazil Argentina Chile Colombia Peru US América Mexico Telecoms 7.2 11.2 16.9 9.9 22.7 30.7 30.6 35.9 44.1 46.9 Mexico Argentina Móvil Colombia Ecuador Guatemala Venezuela Nicaragua Brazil US CEMEX Mexico Mineral 7.6 8.1 15.0 54.6 54.8 70.4 67.9 72.3 71.9 79.5 Mexico US Spain Venezuela Colombia Egypt Finland Indonesia Thailand Barhein Costa Rica Chile Jamaica Nicaragua Petrobras Brazil Oil 42.7 48.3 58.4 7.2 5.8 4.3 6.1 15.6 14.9 9.7 Brazil, Argentina Bolivia Colombia US CVRD Brazil Mining 7.0 8.5 15.1 34 28.9 32 35.9 40.5 41.9 36.4 Brazil US Argentina Chile Norway France Bahrein Source: Elaborated by the authors based on companies Annual Reports ** TNI is calculated as the average of the average of the following three ratios: foreign asests to total assets, foreign sales to total sales and foreign employment to total employment. The remainder of this section analyses the strategy of Telmex and América Móvil during both waves of transnationalisation. In the case of Latin American telecommunications in general, in retrospect, the objectives sought through privatisation were to maximise inward FDI rather than introducing competition, with the exception of Brasil.31 Mexico was different in that the overriding objective was to nurture a national champion. At the global level, telecommunications in the 1990s was characterised by rapid technological change, increased competition and mergers and acquisitions. Latin America became a playground for operators, mostly from the industrialised world, which saw its underdeveloped networks and unexploited technologies as offering attractive ways to extend their markets. Thus, the first wave of transnationalisation involved European enterprises, particularly Telefonica, France Telecom, Telecom Italia and Portugal Telecom and American enterprises such as Verizon and Bell South gaining new markets via the acquisition of former telecoms SOEs.32 Telefonica emerged as the leader: by 1999, it was the largest TNC in the region by consolidated sales, with coverage in most segments and most countries.33 Most early efforts focused on gaining access to fixed-line telephony in South America via privatisation whilst, in the latter part of the 1990s, TNCs strengthened their positions and entered new segments, such as internet, mobile telephony and multimedia services. Two foreign TNCs, SBC and France Telecom, entered the Mexican market with the privatisation of TELMEX (France Telecom was to sell its shares in 2000 in order to withdraw to European markets). Gradually, as TELMEX´s monopoly came to an end in 1996, and institutions for competition were established, more TNCs entered to compete with TELMEX. In the late 1990s, local telephony was gradually opened up, and concessions were granted to new companies (Axtel, SPC and Amaritel). In the mobile telephone sector, new licences were awarded: as had happened in the previous round, TELMEX´s TELCEL successfully won a licence to operate in each of the nine regions, the difference was that, this time, TELMEX was not alone; Pegaso (a partnership between a local group and Leap Wireless of the US, subsequently bought by Telefonica in 2002)34 also gained national coverage. Long-distance services were also opened up, new players with foreign and Mexican capital quickly snapped up one quarter of Telmex´s market share.35 Despite these encroaching challenges, Telmex still enjoyed very large market shares: in 2000 it held 95 percent of local telephony, 66 percent long distance, 72 percent mobile and 60 percent data/internet services. ECLAC is critical of the development of Mexican telecommunications since privatisation, arguing that although the privatised Telmex has expanded and modernised its network, other privatised Latin American telecommunications operators have developed at much better rates.36 Moreover, prices remain high in Mexico, even when compared to OECD members, and the disparity between penetration levels is increasing. Slowness in introducing competition, reinforced by the policy to protect the national champion and a weak regulatory capacity, and Telmex´s application of high interconnection fees and cross-subsidisation policies (lowering prices in exposed activity and raising them in protected ones such as local calls) in order to fend off competition are all pointed to as the causes.37 The regulatory body COFETEL has been criticised for being too dependent on the executive, lacking transparency and failing to regulate Telmex properly. When the newly established Federal Commission of Competition warned COFETEL that Telmex had a dominant position in all key telecommunications markets, COFETEL seemed incapable of correcting this: when COFETEL took Telmex to court in 1999, Telmex won. The American FCC fined a Telmex subsidiary in the USA because Telmex headquarters would not allow two competing joint ventures, Alestra (AT&T) and Avantel (WorldCom) to connect to its network. A complaint was also lodged at the WTO against the Mexican government for failing to regulate Telmex over practices such as refusing to resell long distance calls, and charging high interconnection fees, (this was suspended in 2001 with the election of a new president). While Telmex has been criticised for blocking competition at home, it has, at the same time, emerged as one of the leading TLACs. Telmex announced its strategy to internationalise from 1998, stating that its natural market was Spanish speakers across the Americas. In 1998, it firstly bought 18.9 percent of Prodigy, American internet service provider and, the next year, agreed with Microsoft to design a portal for Spanish speakers and, secondly, signed an agreement with Telecomunicaciones de Guatemala that involved Telmex managing the company restructuring with an option to buy 49 percent of the company over the next five years. The following year, Telmex acquired an American company that supplied prepaid fixed telephony and, together with SBC, Cellular Communications of Puerto Rico. In 2000, Telmex restructured, keeping basic telephony, data and internet, and spun-off TELCEL, television interests and international assets into América Móvil. The newly established América Móvil formed an alliance with SBC and Bell Canada International to expand their platform across the continent for mobile telephone, internet and data service provision, and profited from their experience while diversifying risk outside Mexico. The aim of Telecom Américas was to integrate systems and establish a large digital footprint in the region. Between 2000 and 2002, Telecom Américas bought four Brasilian mobile telephone companies. Due to different strategic approaches, América Móvil bought the shares in both of its foreign partners, and restructured in order to initially focus on the Brazilian market. At the end of 2003, América Móvil unified its regional operators under a single brand, Claro, and by 2005, had a solid position in this country, though Telefonica was still leader. As foreign investors abandoned the region, América Móvil stepped in, buying Argentine CTI Móvil from Verizon, Compañía de Telecomunicaciones El Salvador from France Telecom, Telecom Italia´s Peruvian subsidiary, and Chilean Smartcom from Spain´s Endesa. By the end of 2005, América Móvil was eye to eye with its competitor Telefonica. So, Telmex is a recent TLAC: until 2003, its aim was to ´provide telecommunications services, primarily in Mexico´ but most recently it has become transformed into a regional powerhouse.38 Between 2003 and 2005, it invested 4750 million dollars in Latin America, and this was reflected in the 2004 annual report which paid much more attention to its regional operators in Argentina, Brazil, Chile, Colombia and Peru.

Table 5. TELMEX international subsidiaries and affiliated companies 2005 Acquisition Subsidiary Company Country Equity* Value** Date Telmex Argentina *** Argentina 100 | Feb.04 Telmex do Brasil *** Brasil 100 | Telmex Chile Holding *** Chile 100 196 Telmex Colombia *** Colombia 100 | Telmex Perú *** Perú 100 | Embratel Brasil 90.3 672 Jul-Dec.04 Telmex Corp. (Chilesat) Chile 99.3 114 Apr. 04 Techtel Argentina Uruguay 83.4 100 Jun. 04 Metrored Argentina Uruguay 83.4 12 Jun-04 Latam Telecom US 100 n.a. bef.2003

Affiliated companies Televista US 45 34 bef.2003 Technology and Internet LLC US 50 17 bef.2003 Net Brazil 36.6 311 Feb-Mar.05 * : percentage corresponds to controlling interest in 2005

** : All acquisitions values from 2003 were recorded at the purchase price for the net asset in millions of dollars. *** : Assets of AT&T Latin American Corp Source: Elaborated by the authors based on TELMEX Annual Report (various years) III. TELEFONICA: THE MAKING OF AN EU OR TRANSLATIN TNC

Telefonica has its origins in the concession given by the military nationalistic dictatorship of Primo de Rivera to ITT in 1924 with the aim of integrate and interconnect the three main national private operators. In the aftermath of the Civil War, ITT supported clearly to Franco and in 1939 tried to sell Telefonica to German private business (with US opposition). Despite of ITT strong support to Franco, in 1945 the regime nationalised Telefonica taking 41% of its capital, with 12% under the control of the central bank (Banco de España) and the rest to Spanish private shareholders. In this way the Franco regime opted for a different model than the PTT that dominated in the rest of Western Europe.39 The Spanish State ownership never overcome the 47% of Telefonica, and its management always private under the control of Spanish private banks but the government designated its presidents. In the 1960s the state`s share came down to 38%, the public offering operation of shares was known as “matildes” and it was contemporary of Adenauer operations to promote privatisation and popular capitalism in Germany40 The development of the public enterprise sector in the industrial and public services sectors was uneven and asymmetrical across Western Europe. In those countries which experienced capitalism with long dictatorships during the 20th century, such as Greece, Portugal and Spain, there was a failure to develop either significant SOEs in public services or a strong Welfare State.41 In contrast, other countries as the Nordic and Benelux States, provided public service under democratic government, but did not, at the same time, experience a corresponding growth in the SOE industrial sector. However the most important expansion of the SOEs was not the result of INI industrial policies but of the State as entrepreneurial of last resort during the 1970s.42 As a result of the financial crisis and the bailout of bankrupt private firms, the proportion of employment in industrial SOEs increased significantly. Most of the countries with a significant SOE sector also had large industrial sectors (such as Austria, France, Italy, Portugal or Finland). Paradoxically, Spain is included in this latter group of large industrial sectors, though it had a minimum number of SOEs in public services such as energy, transport and communication.43 The programme to internationalise and privatise SOEs from 1983 can be divided into two main stages, which correspond roughly to the governments of the Socialist party (PSOE) years and the Popular Party (PP) period. Although these two governments pursued different policies, there were also elements of continuity in the sense that the PP’s policy of ´total privatisation´ would not have been implemented at such speed and with such dynamism if it had not been for the PSOE’s policies to clean up the public sector and implement partial privatisation programmes.44 Between 1983 and 1995, PSOE governments reorganised and cleaned up the public enterprise sector, improved its management, and implemented some privatisation that was euphemistically referred to as ‘de-investment’. This new policy was consolidated with the Spanish accession to the EEC. Accession also forced SOEs to confront challenges, which had been postponed, in order to adapt to the requirements of deregulation and Single Market Programme (SMP). For instance, some public monopolies (such as Campsa, Tabacalera, Telefonica, Iberia, Renfe, Correos) had to be opened up to competition. One of the main objective of the privatisation programme undertaken by the PSOE was to promote industrial recovery favouring concentration, as in the cases of industrial SOEs such as Enfersa and Inisel, electricity enterprises into Endesa, and oil and gas under the INH (Instituto Nacional de Hidrocarburos) into Repsol. Between 1985 and 1994, the INI earned 2.54 billion dollars from SOE sales, but spent 3.18 billion dollars on cleaning the SOE sector up. In most cases of privatisation or large SOEs, the buyers were foreign TNCs, since they were the only ones who had the technological, marketing and management know-how to ensure the survival of the privatised enterprises. The second objective of privatisation during this period was of a financial nature and included finding extraordinary capital to eliminate the budgetary deficit. In order to achieve these objectives, initial public offerings (IPO) were placed of capital of the most profitable SOE. The idea was to introduce discipline and external financial control in business activities, through stock market quotation and the introduction of private shareholders. However, in all of these stock market sales, State holdings remained majority shareholders as they were not prepared to lose control of the enterprises. Thus, we could describe this as partial privatisation, good examples being the sale of shares in the stock market of INI enterprises such as Endesa, Gesa, Ence. From 1994, privatisation started to be considered from a broader strategic perspective. The Ministry of Industry proposed that privatisation be used as an instrument of industrial policy, that anticipated the participation of both national and international partners in SOEs, so that they would constitute a ‘hard core’ of private shareholders that supported the established business policy of the company in question. In the same year, the Ministry of Economy and Finance anticipated in the budget a privatisation plan aimed at reducing the public deficit and fulfilling the European Monetary Union (EMU) convergence criteria. SOEs in public services were not privatised because they were loss-makers or were unviable commercially, rather, these were large public service network enterprises that were usually profit-making, except for occasional losses due to the economic situation or to the policy of tariff fixing (to control inflation). These companies were known as the ´jewels in the crown´. During the first phase of privatization the PSOE had not considered privatising them totally. The strategy, rather, was to offer small blocks of shares to obtain cash to balance the budget and finance capital investment into the public enterprises themselves, or cover the losses of unprofitable enterprises. This was partial privatisation with strictly financial aims, in which the SOE would remain public overall, since the State would retain enough capital to control them.

Table 6: Spanish largest privatised enterprises and number of transactions and revenues (millions of dollars) by sector: 1985-2003

Sector Transactions V a l u e Company 1985- 1997- 1986- 1996- Percentage 2003 2003 2003 2003 Energy 15 6 19721 12354 38.4% Endesa 4 2 12502 10794 24.3% Repsol 5 1 5652 1170 11.0% Gas Natural ENASA 2 0 669 0 1.3% Telecoms 5 4 9345 8242 18.2% Telefónica 3 2 8078 6975 15.7% Retevision 1 1 1208 1208 2.3% Transport 10 8 5710 5678 11.1% Iberia 3 3 1507 1507 2.9% EN Autopistas 1 1 3277 3277 6.4% Bank and Finance 10 5 6504 2644 12.7% Argentaria 4 1 5961 2295 11.6% Manufacturing 36 14 8819 5582 17.2% CSI 2 1 2609 832 5.1% Tabacalera 1 1 1808 1808 3.5% CASA 1 1 411 411 0.8% Other services 9 9 1316 1316 2.6% Total 85 46 51416 35815 85.1%

The sale of these shares was accomplished via PO to list on the stock market. To increase the market value of these firms, the merger and acquisitions of certain companies was accomplished. In addition, they were profoundly reorganised by introducing private management practices and profit-making criteria. The idea was to introduce some market capital discipline into the enterprises, as well as improving their management. It was during this period that companies such as Telefonica, Endesa, Repsol, Gas Natural and Iberia started to invest abroad, particularly taking advantage of the opening of markets to FDI in Latin America. Privatisation of these companies during this period was influenced by nationalism: “privatisation without denationalisation”. Large enterprises would remain in State hands which would rear them as national champions. To this end, some share tranches were reserved for selected Spanish financial groups and investors, with whom special prices were agreed, in exchange for the guarantee of remaining an investor over the long term. By acquiring shares, these private groups gained positions in the administration boards of companies being privatised, and ended up being fully in control. This approach changed drastically from 1996 when the PP government implemented its policy of ´total privatisation´ for all SOEs. No longer were large SOE considered necessary public policy instrument to provide public services. The State must limit itself to being an economic regulatory body in these network services. According to the liberalization policy, it was considered nonsensical that the State continued to be involved as an entrepreneur or shareholder: simply put, the enterprises should be privatised. What did not change, however, was the nationalist strategy, since the aim was that privatised enterprises would remain in Spanish hands. To avoid allowing networks to fall into foreign hands, the government reserved control of these enterprises via the golden share (nucleos duros). The State could authorise or deny operations, such as the sale of a percentage of capital, or the closure of the enterprise, using its veto power. So, ´total´ privatisation of these companies meant that they remained in Spanish hands via golden shares with board members and chairpersons nominated by the government. With freedom to act, these privatised enterprises decided to diversity their operations and markets, increasing outward FDI, mostly in Latin America and Europe, and into activities with little or no connection to their main activity.45

The internationalisation of Telefonica started earlier than in most of Europe, in some way because it was relatively private that means partially a SOE, but also because in 1987 when started to be listed on the NYSE and other international markets. Telefonica established a strategic alliance in Unisource with smaller European PTO (KPN, Telia and Swiss Telekom) with tight relations with ATT and the creation in 1985 of TISA (Telefonica Internacional) that in 1990 started its significant internationalisation acquiring 43,6% of CTC (Chile) with increasing participations in the telecom markets of Argentina, Brazil, Chile, Colombia, Ecuador, El Salvador, Marruecos, México, Perú, Puerto Rico, Venezuela. In October 1995 the Socialist (PSOE) government privatise another 12% stake through a public offering raising 1.1 billion US$. The conservative (PP) government use Telefonicas as key example of its total privatisation policy that took place in February 1997 selling a remaining 20,9% in the capital for 4,2 billion dollars, although it was maintained a 0,11% though a “golden share” to dissuade hostile take over and to block mergers or acquisition by SOE telecoms. At the same time the PP designed president of the company to Juan Villalonga, a close friend (from school days) of the President Aznar supported by “noyau dur” of financial investors BBV, Argentaria and la Caixa. After developing an ambitious strategy of expansion and slump in the Latin America market, Villlalonga was replaced by Cesar Alierta that have adopted a strategy of consolidation of asses in Spain and Europe, where bid for 3G licences in Austria, Germany, Italy and Switzerland (without a network). In June 2005 it acquire 69,4 of Cesky Telecom and in December 2005 it took 100% of the O2 of the UK, Germany and Ireland for 1,2 billion euros- Telefonica is the lasrgest Spanish TNC and has been quoted since 2000 among the top 70 companies in the FT Global 500 list and since 1998 aomong the 50 world largest TNC by UNCTAD. Telefonica has diversified its markets and operation beyond the EU more than any other EU PTO, only one third of the 173,5 thousand employees were in Spain, and one quarter of the customers were in Spain in 2005, most of Telefonica activities were in Latin America were was the first fixed telecom operator.

Government ownership of public telecommunication network operators and new entrant share, 1992-2004 k m r G . a G l o e a m n A c n i a c m m a m m m A i h e o

m r n e a g a o o c c o o o n E l m c x i i a m e n a T V l l i c u k s c c c n o a e T d u o t t r n e f e a PTO e e e e e e a B N t r T g a l l l l t l r L k u e o r O

l D I T i s l o e e e e e e e F e S e T l N E e u l T T T T T P D e B P T P e A T T K State ownership 1992 100 100 100 89 35 100 100 100 100 100 50 100 100 22 100 1995 100 80 50 51 21 100 80 92 45 80 62 100 51 1 100 1998 100 61 50 - - 100 62 65 44 80 5 100 25 - 100 2004 47.8 42.8 50 - - 53.1 56.5 33.8 34.7 -- 3.5 100 6.6 - 70,6 Access line m share new entrants 1998 0.2 0.5 0 0.9 0.5 0.5 0 0 0 0 0 0 0 14.3 0 2005 7.1 3.0 0.1 12.0 5.2 4.9 0.5 0 15.0 1.0 0.9 2.2 19.8 0.1

Internationalisation of main Public Telecommunication Operators in the EU 1999-2001 Company State Major sharejolder Foreing revenues as % Total Accces Mobile participation Revenues Lines subscirb 1999 2000 2001 USD m Deutsche Telekom 43+20 KfW Bank 8.5 19.1 27.3 43.1 30.3 66.6 France Telecom 61 13.3 25.8 35.8 38.4 34.2 43.2 BT 0 7.1 26.0 24.7 31.6 29.1 Telecom Italia 3,5 (GS) 54,99 Olivetti 5.9 13.2 13.6 27.5 27.4 24.0 Telefónica 0 (GS) 58.1 43.4 38.3 27.7 45.0 16.7 KPN Telecom 43 (+SS) 9.5 15.0 22.0 11.5 6.6 13.7 Tele Danmark 0 41,6 SBC 41.8 45.6 54.2 6.5 4.7 6.3 Telia 70,6 10.3 14.0 19.0 5.5 6.5 4.9 Telecom Portugal 0 (GS) 6,25+3,5 Telefónica , BT 8.8 31.9 24.5 5.1 4.3 3.9 Sonera 53,1 5.0 7.4 6.8 2.0 0.8 2.5 PT Austria AG 75 25 Telecom. Italy - 3.8 7.1 3.5 3.2 2.9

This emerging TNC in public services is not exclusive Spanish feature but a general trend from the largest EU countries. To a great extent, this emerging trend to Spanish TNCs could be explained by the SMP policies in telecommunications, energy and other services, since the number of services TNCs has increased from zero in 1997 to 20 among the top 100 TNC in 2005 (Clifton et al 2005, 2006 and 2008). Some author question this process of transnationalisation of networks services TNC has been more European than global. As Aharoni has pointed out,46 the UNCTAD World Investment Report considers the increase of EU FDI a “global” trend, but it should be considered an “intraregional” trend in the light of the establishment of the common market. A TNC firm is defined as one that operates in at least two different countries. However, if these two countries are both EU members, surely it is more precise to talk about an EU TNC rather than a global TNC.47 These observations should be qualified with the insight that any characterisation as “European” may well be a temporary one, perhaps as a transition between a national and international enterprise.48 In the case of Telefonica (and also Repsol, Endesa and the two largest banks; BSCH and BBVA) the transnationalisation was beyond EU border, in particular Latin America, and took place in first instance -before the EU expansion-. The intenationationalisation of Telefonica, Endesa, and Respol-YPF was clearly a reaction to the europeanisation (growing in size in Latin America to avoid to be acquired by larger EU TNC) and could be consider a “national champion” tactic - however all of these Spanish TNC are not free of take over (as shown in the case of the E.On bid for Endesa or Telmex-America Movil bid for Telecom Italia that finally war resolve by Enel and Telefonica with the agreement of the social democratic Italian and Spanish government) . The expansion of these Spanish TNC has not been except of controversies, FDI as an indicator of transnationalisation shows that the stock of outward FDI just reach the stock of inward FDI at the end of millennium – that means that FDI stock of Spanish firm exceeds those of foreign TNC in Spain. In any case the overall stock of FDI does not show the industrial and firm characteristics of the flows of inward –mainly industrial- FDI vis a vis outward FDI – mainly in services- “conquistadores” and “Trans-Latin”. Spain: Foreign Direct Investment inward and outward flows (millons of dollars) and % of World FDI total (percentage) 1979-2006

100 000 8% 7% 10 000 6% 1 000 5% 4% 100 3% 2% 10 1% 1 0%

FDI inward FDI outward FDI outward % word

A lack of managerial experience of these traditional sectors in the new activities implied many new risks as well as the possible abandonment of their traditional services. Important cases of privatisation of national champions include: Endesa (electricity); REPSOL and Gas Natural (petroleum and gas); Telefónica and Retevision-AUNA (telecoms); Iberia (air transportation); Tabacalera (alimentary industry), and Argentaria merged with BBV Banco Bilbao Vizcaya (banking).

IV. DISCUSSION AND CONCLUSIONS

In general, until the 1990s, the largest Spanish TNCs were relatively small. Scholars such as Durán and Guillen,49 both note how any book on Spanish TNCs a few years ago would seem like a work of fiction. Nowadays, however, Spanish TNCs are making a dent in international competition just like firms from other EU countries” The origins of the Telefonica and the other two largest Spanish non financial TNCs – Endesa and Repsol-YPF are not in family or private small enterprises, but the offspring of SOEs that have their origins in the inward-looking projects of INI, INH and other State holding agencies. Telefonica, and many other electricity and utilities companies, were partially or totally privately own and managed under the Franco dictatorship,50 as was common under other far right totalitarian regimes such as the Nazi regime.51 The government transferred significant proportion of assets from public and foreign TNCs national private owners close to the regime.52

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The authors must gratefully acknowledge the contribution of Carlos Marichal in this paper´s section on telecommunications in Mexico and Francisco Comín on telecommunications in Spain. 2 The term transnational corporation (TNC), rather than multinational corporation (MNC) is used, following the United Nations Conference on Trade and Development (UNCTAD), to refer to enterprises that comprise private, public or mixed ownership ´entities in more than one country which operate under a system of decision-making that permits coherent policies and a common strategy. The entities are so linked, by ownership or otherwise, that one or more of them may be able to exercise a significant influence over the others and, in particular, to share knowledge, resources and responsibilities with the others´. 3 See UNCTAD World Investment Report: The Shift towards Services. (United Nations, 2004). See OCDE 2007: Communication Outlook, chapter 7 on the emerging telecommunication in BRICS (Brasil, Russia, India, China and South Africa) 4 See Robert Millward (2007) in (eds) Clifton, Comín and Díaz-Fuentes. 5 For empires and communication networks, see Harold Innis Empire and Communications (Oxford University Press, 1950) and Jussi Ramoulin ´Views of periphery of ICT and development perspectives from Canada to Africa´ Studia Orientalia 103 (2006), pp. 185-203, for the case of public investment in railways, water and drainage in Argentina see Regalsky y Salerno (2006 and 2007 forthcoming). 6 For the case of France, see Patrice Flichy Dynamics of Modern Communication: the shaping and impact of new communication technologies. (Sage, 1995). 7 Francisco Comín & Daniel Díaz-Fuentes La empresa pública en Europa (Síntesis, 2006) and Robert Millward Private and public enterprise in Europe 1830-1990 (Cambridge University Press, 2006). 8 UNCTAD, World Investment Report (2000-2007), in particular WIR 2004 The Shift to Services. 9 The World Investment Report has been published since 1990. Another source is the journal Fortune 500 global, an annual publication that ranks the world largest corporations, but this list is based purely on the size of the TNC, and does not distinguish the degree of firm transnationalisation, for example in terms of foreign assets, employees or turnover. 10 Among the world’s top 100 the number of public services TNCs increased from six in 1996 (two based in the EU) to twenty in 2004 (fifteen based in the EU). In 1996, there were four telecoms among the world’s top 100 TNCs: BCE (57th from Canada), AT&T (64th from the US), Northern Telecom (85th from Canada) and GTE (97th from the US) and only one TNC in Electricity, gas and water, Générale des Eaux (77th from France). By 2004 there were 11 TNCs in Electricity, gas and water in the top 100, additionally to those just mentioned: Endesa (52nd), AES (62nd), National Grid Transco (66th), Scottish Power (91st) and Duke Energy (93rd). In the telecommunications sector there were three other TNCs included: Singtel (73rd), Verizon (89th) and Nortel (99th). See UNCTAD World Investment Report (2006). 11 Ramamurti (1996); Clifton (2000). 12 See J. Clifton, D. Díaz-Fuentes and C. Marichal (2007) “Taking control: transforming telecommunications in Mexico” in (eds) J. Clifton, F. Comín and D. Díaz-Fuentes (2007) Transforming public enterprise, Palgrave. 13 For an oficial, but detailed historical description of the evolution of the telephone industry in Mexico see Teléfonos de México (1991). 14 For an official story of Ericsson in Mexico see Gabriel Szekely ( 2000). 15 Grunstein Dickter (2005). 16 Grunstein Dickter (2005). 17 For further analysis of Mexicanisation see Adler Hellman (1988). 18 Telmex was owned by: Mexicana Corporación Continental S.A, Ericsson, Bruno Pagliai, Octavio Fernández Reynosa and José Joaquín César (Petrazinni 1994) p. 107. TELMEX would allow Ericsson to consolidate its business in Mexico whilst enjoying the protection of Mexican Laws behind the guise of a Mexican company. 19 See Petrazzini (1994). This turn to Mexicanisation was explained by President Echeverría´s (1970-76) new economic policy towards foreign investment and Mexicanisation. In 1973, Echeverría introduced the first serious piece of legislation that regulated foreign direct investment. See Lewis (2005). 20 Newbery (2003) 21 Ramamurti (1996). 22 See Clifton (2000). 23 For more details on how the shares were restructured, see Clifton (2000). 24 Clifton (2000). 25 Clifton (2000) 26 OECD (2005) 27 ECLAC (2003). 28 UNCTAD (2005). 29 A recent study of the internationalisation of Mexican firms is de los Angeles Pozas (2002). 30 UNCTAD (2005) Annex Table A. 1. 100 p. 271. 31 ECLAC (2000) 32 ECLAC (2000), table IV.6. 33 ECLAC (2000), p. 213. 34 ECLAC (2003) p. 56. 35 Mexican Alfa and Bancomer group which formed Alestra with AT&&, and Banamex-Accival which joined MCI WorldCom to create Avantel. 36 ECLAC (2000) 37 ECLAC (2000) p. 193 38 In August 2005, Peruvian telephone enterprise, TIM Peru, was acquired by TELMEX from Telecom Italia for 500 million dollars; and in April, 2006 TELMEX and América Móvil, bought the stock of Verizon Communications in telephone firms in Puerto Rico, Venezuela y República Dominicana for 3,700 million dollars.

39 It was a nationalisation to avoid de-nationalisation, the so called “españolización” or “Spanishisation” (Comín and Gálvez 2004), that resemble de “mexicanisation”

40 Thus Franco and Adenauer could be quote as the pioneers of privatisation before Thatcher’s revolution, but as Germa Bell has shown the privatisation of public enterprises was a policy systematically implemented by the Nazis in the 1930 (Bell 2006a and b)

41 See Espig Andersen (1990), Guillen and Alvarez (2001), Comín y Díaz (2004), Clifton et al. (2004).

42 Schwartz y González (1978), Comín et al. (1992) Comín (2001), Comín & Martin (2003) Tortella 1991 Jiménez 1994 Lasheras 1999

43 Comín y Díaz (2004), Clifton et al. (2003 and 2004) 44 See de la Dehesa (1992) and Cuervo (1998), Arocena (2004), Clifton et al. (2003 and 2006)6)

45 See Durán (2004), Tascón (2008) and Clifton et al. (2008b) 46 Aharoni (2005)

47 See Schroter (2008) and Clifton et al. (2005b, 2006b and 2008)

48 See Hayward (1995). 49 Duran 2004 and Guillén (2005). 50 See Comín (1991, 1996 and 1999), Clifton et al. (2003, 2005b, 2007 and 2008a and b), Comín y Díaz (2004). 51 See Bell (2006a and b) 52 See Comín and Galvez (2002 and 2004)