Status quo on the Mexican market
As a result of the Kreuger crash, a majority of the voting rights in Ericsson fell into the hands of International Telegraph and Telephone Corporation (ITT). Ericsson in turn had a minority holding in ITT's Mexican subsidiary, the Mexican Telegraph and Telephone Company (Mexicana). This was the result of an agreement in 1933 in which Ericsson traded several of its holdings in Argentina for shares in Mexicana. At the same time, Ericsson operated another telephone company in Mexico (Mexeric).
There are a number of documents in Ericsson's archives discussing how the problems of two competing telephone companies in Mexico should be solved. The agreement from 1933 actually did not mean much, since the two companies continued to compete throughout the 1930s and 1940s. The fundamental problem, which had a great impact on subscribers, was that the two networks were not integrated. In other words, subscribers in one network could not phone to subscribers in the other network.
The negotiations were conducted largely by Marcus Wallenberg and ITT's president, colonel Sosthenes Behn. During 1939, negotiations were held concerning a merged telephone company in Mexico. The most difficult question seems to have been whether management should be Swedish or American.
Wallenberg and Behn had a talk on October 26 regarding the situation in Mexico. Wallenberg was somewhat skeptical towards one of the colonel's proposals for a solution that would have meant American management for the merged company. This infuriated Behn. He could absolutely not tolerate Wallenberg's criticism of the proposal, which he considered both generous and advantageous for both parties. Behn continued by saying that he wanted nothing more to do with Wallenberg or Ericsson and that he intended to resign from Ericsson's board of directors. He also demanded a meeting of Handelsbankens management together with Wallenberg to protest against Ericsson's (miss)-management of the Mexican business.
Wallenberg did not allow himself to be provoked, but instead replied that he in that case intended to respond in the same manner on the basis of Ericsson's minority holding in Mexicana. The discussion appears to have been heated, to say the least. Adding to the situation, was that Wallenberg had been trying for several months to arrange a meeting with Behn, who had constantly made excuses for not meeting.
Eventually, the two men put business aside and began to talk about other matters. After a while, lunch was served. Wallenberg assumed that Behn's outburst had could be explained by the fact that he earlier that day had been forced to fire 200 persons from his company. After lunch, Behn once more took up the merger issue, although he had previously said that he would never again talk business with Wallenberg. The result was the Behn promised to produce a new memorandum that would be of interest to Ericsson.
In a letter to Ericsson's president Hans Theodor Holm from London dated November 8, 1939, Marcus Wallenberg provided a long summary of the recent negotiations with the colonel. Little ill will towards Behn can be noted in the letter. Towards the end, Wallenberg mentioned that if he had time, he would gladly "travel to the US and wage a campaign like nothing Behn had seen before". He requested that Holm should assign to Mexeric's president Berhard Wahlqvist the task of summarizing the various rounds of negotiations that had taken place with Behn since 1933 regarding the Mexican companies "in which ITT's underhanded tactics should naturally be given a prominent place".
A solution to the problems in Mexico did not appear until the late 1940s. At that time the Swedish businessman Axel Wenner-Gren broke the deadlock between Ericsson and ITT.
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