In 1905, Ericsson won a concession to operate the telephone network in Mexico City and outlying areas. Four years later, an Ericsson subsidiary, Mexeric, took over these operations.
After ITT had purchased the competing company Mexicana in 1925, the two companies battled hard to become the leading, and preferably the only, telecom operator in Mexico.
Following the emergence of ITT as a major owner in Ericsson as a result of the questionable business transaction made by Ivar Kreuger, the two companies initiated negotiations in 1932 regarding their relationship. One result was that Ericsson became a part owner in Mexicana.
The awkward ownership situation, the need for inter-connecting the networks and expansion demands made a merger of the two Mexican telephone operators necessary. Such a solution would have to wait until after World War II, however.
The Swedish industrialist Axel Wenner-Gren was the one who found the solution. A new company was to be established that would operate the two companies? networks. Wenner-Gren was living in Mexico and had plenty of capital after having sold shares in the Swedish forest-products company SCA. The negotiations between him, Ericsson and Mexeric resulted in a new agreement being signed between the parties in 1947 that created a new company. It was named Teléfonos de Mexico S A and was called Telmex.
The following year, Mexerics's assets and liabilities were taken over by Telmex. Wenner-Gren's share in the new company was just over 51 percent and Mexeric's just under 49 percent. Wenner-Gren then purchased Mexeric's share of Mexicana. In the third and final step, all of Mexicana was purchased. All network operations were now consolidated in one company, and the two previously independent networks were interconnected.
After some time, the owners disagreed about the future of Telmex. In 1953, Ericsson bought out Axel Wenner-Gren, and an agreement was reached in which Ericsson and ITT would each own half of Telmex's share capital.
By the late 1950s, Telmex's national network had about 400,000 subscribers. The Mexican government at this time was eager to continue expanding the telephone network. A telephone tax was thus levied on existing subscribers to partially finance the expansion.
With the government taking an active role in the industry, it was considered best to transfer Telmex to Mexican interests. This also took place. A group of Mexican businessmen purchased Ericsson's and ITT's shares. Management, led by the skillful president Gunnar Backman, was retained, since the new Mexican owners wanted continuity. Telmex was eventually taken over by the state.
In conjunction with the take over of Telmex by Mexican interests, Ericsson decided to invest in manufacturing in Mexico. At first, in 1958, a manufacturing and industrial company was established with ITT, but Ericsson left the company in 1964, when a Mexican manufacturing company was acquired. This company was given the name Teleindustria Ericsson (TIM).
The launch of the AXE system was the start of a successful period for TIM in the 1980s. The Telmex network was digitalized at an early stage, and Ericsson's AXE system was superior to ITT's corresponding system. TIM also successfully exported AXE systems to Ecuador, Costa Rica, El Salvador and Panama.
In 1989, the first AMPS mobile telephone system was installed in Mexico with Ericsson as the supplier. When the liberalization of both the fixed and wireless telecom market in Mexico in 1997, the number of subscribers increased rapidly.
By the turn of the century, Ericsson had a market share of 55 percent for local calls and 90 percent for long distance calls. The market share in mobile telephony was 64 percent. The number of Ericsson employees in the country was 1,200.
Although there have been telephones in Mexico for a long time, the vast majority of the population still does not have their own phone. In today's growth country Mexico (where Ericsson can soon celebrate 100 years of operations in the country) there are substantial opportunities to increase sales in the future.
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