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June 24, 2017

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Carlos Slim's TracFone under fire as it moves to expand in California

SACRAMENTO, California -- A prepaid cellular company controlled by Mexican billionaire Carlos Slim is taking fire as it moves to expand in the lucrative California market.

TracFone Wireless Inc., which has more than 21 million users in the United States, is the country's biggest player in the fast-growing business of selling low-cost cellphones and prepaid minutes — often to low-income customers.

These phones, typically costing users as little as US$20 for a phone and 60 minutes of use, appeal to many customers who don't want or can't afford to sign yearlong or multiyear contracts.

At issue in California is whether the Miami company should collect and pay the state the same fees from customers that other cellphone and traditional landline companies do. These state-required fees fund phone and Internet services to the poor, disabled and rural residents.

TracFone, which acquired Irvine, California-based Simple Mobile last year, is being pummeled publicly by activists on both sides of the U.S.-Mexican border because of what they call monopolistic business practices of its corporate parent, Mexico City-based America Movil. Slim, the company's chairman, is worth an estimated US$69 billion and tops Forbes magazine's most recent list of the ultrawealthy.

"We've taken it upon ourselves basically to do work in the states to educate the public about who Carlos Slim is, and specifically to tell them about what we perceive to be his monopolistic and predatory business practices as we see them develop over time in Mexico and throughout Latin America," said Juan Jose Gutierrez, a co-director of a binational organization called Two Countries, One Voice.

The group publicly criticized Slim at a news conference attended by state legislators that was held in December on the California State Capitol steps. Regulators should be wary of TracFone, the activists warned.

California regulators have been investigating TracFone for more than three years. In February, the state Public Utilities Commission ruled that the company violated California law by refusing to send the state required service fees that it should have been collecting from customers.

Officials at the Public Utilities Commission contend that TracFone could owe them as much as US$20 million. The company is appealing the ruling to the state Court of Appeal.

And the Legislature is getting ready to jump into the fray. Los Angeles County lawmakers say they expect to introduce a bill that would give the state more authority to regulate prepaid cellphone companies such as TracFone and approve proposed mergers in the future.

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