812.75/8–2244
Mr. Frank C. Page, Vice President of the International Telephone and Telegraph Corporation, to the Secretary of State
[Received August 23.]
Dear Mr. Secretary: There are two major competing telephone systems in Mexico, namely, Mexikanska Telephonaktiebolaget Ericsson (controlled by Teleric, Incorporated, a subsidiary of L. M. Ericsson of Stockholm, Sweden), and Mexican Telephone and Telegraph Company (controlled by International Telephone and Telegraph Corporation). The Ericsson operating company serves some 114,000 subscribers in Mexico and the International Telephone and Telegraph Corporation operating subsidiary, approximately 80,000; including an extensive toll system within the Republic, operated by each company.
Ever since 1932 negotiations have been carried on between L. M. Ericsson and International Telephone and Telegraph Corporation to attempt to bring about some form of merger or consolidation of the two properties in order to eliminate the uneconomic and wasteful competitive situation and to give Mexico the unified system which it has demanded and to which it is entitled.
In 1939, the Department of State became interested and suggested that International Telephone and Telegraph Corporation work out some method of obtaining control of the Swedish company. Various plans were discussed to accomplish this objective. In 1942, we were advised that the U. S. Commercial Company41 with the approval of the State Department had made various studies with respect of possible ways and means of eliminating the European interests in communication companies in the Western Hemisphere, and they considered it advisable to eliminate entirely the Swedish interests in communications in Mexico.
In cooperation with the U. S. Commercial Company a plan was evolved whereby the International Telephone and Telegraph Corporation would acquire the necessary financial support from the United States government to eliminate all the Swedish interests in telephone communications in Mexico. The plan was never consummated because, according to our understanding, of the objections of certain branches of our government.
[Page 1277]Recently, L. M. Ericsson has made International Telephone and Telegraph Corporation a fair and reasonable proposal to acquire its interests in the Mexican Telephone and Telegraph Company. While International Telephone and Telegraph Corporation is reluctant to divest itself of control to any European interest of any of its communication systems in the Western Hemisphere, it cannot continue operating a competitive property with the continuing operating losses which have aggregated a net amount of more than $1,400,000 during the last ten years together with the obligation for a substantial amount of new capital which will be required to be invested in Mexico without prospect of any return for years to come. Therefore, it is felt that this offer should be accepted.
As you know, the International Telephone and Telegraph Corporation has always placed its organization at the disposal of the Department of State to act wherever and whenever possible as an instrumentality to assist in carrying out the policies of our government. However, since certain departments of the government were not willing to have the government aid us in the purchase of the Swedish interests in telephone communications in Mexico, we see no alternative for the International Telephone and Telegraph Corporation but to sell out its interests to L. M. Ericsson.
We most respectfully request that you advise us as to whether or not this transaction would be contrary to the policy of the United States government.
Respectfully yours,
- An instrumentality of the United States Government.↩