September 8, 2000

Call 900 Gouge: State Department Connects With Masters Of Overcharging In Mexico

By Martin Espinoza

MEXICO CITY — What does the U.S. Embassy here have in common with the porn industry? Ask any Mexican citizen who has had to get a U.S. tourist visa recently and he'll tell you — both use 900 numbers to generate outrageous amounts of money.

Since December 1997, the American Embassy here has allowed Telscape International, a U.S.-based telecommunications company, to make a fortune from the number Mexicans must call if they want to get an appointment with the embassy for a tourist visa.

Telscape's 5-year contract with the embassy is a sweetheart deal that's worth an estimated $20 to $30 million a year. The average call lasts five minutes, but there are stories about being put on hold for long periods and being cut off after waiting on the line for 15 minutes. People often have to call the number several times before they get an appointment.

To be sure, some of the 15,000 or so people who daily call Telscape's "Infocita" service are looking for nothing more than, say a fun-filled weekend at Disneyland or a walk through New York's Times Square or San Fran-cisco's Fisherman's Wharf.

However, many callers are looking for a safe alternative to dying as human contraband while trying to cross the border. And in that capacity, Infocita is yet another example of how entrepreneurs have — with the paternal help of Uncle Sam — figured out a way of making a quick buck off the restricted border between the U.S. and Mexico.

Not unlike thousands of "coyotes" (immigrant smugglers), Telscape, whose stock trades on the NASDAQ market, is profiting from migration.

The U.S. Embassy and Telscape are joined in this lucrative business by Mexico's number one poverty pimp, Telmex, the country's monopoly telephone company. Like the embassy, Telmex gets an undisclosed cut of Telscape revenues.

Neither the embassy nor Telscape will say how the three divide the loot.

Telscape's marketing director in Mexico City, Alejandro Ceballos Benitez, says Infocita has made it much more convenient to get an appointment with the embassy. Before, said Benitez, people would show up and have to wait in line six, seven hours. If they had the wrong documentation, the trip to Mexico City was a waste of time.

"Now," said Benitez, "you may have to wait in line, but at least you have an appointment."

But neither that appointment, nor the money spent on the phone call, nor the $45 you have to shell out to be processed, guarantees you'll get a visa. What's more, while Telscape receives 15,000 calls a day, the embassy has the capacity to see only 2-3,000 people per day.

Benitez explained not every call represents an appointment — some call just for information. That may be true, but each call does represent part of a revenue stream, a flow of cash that is guaranteed by the U.S. government, because the embassy offers no alternative number for getting a visa.

Both the embassy and Telscape deny that Infocita is a lucrative operation. The embassy's deputy press attache Stephen Morisseau says the "vast majority of the money goes to cover the cost of the service, i.e. the operators working for the contractor."

And Benitez claims not only that Telscape's "call center" revenues are small compared to the company's overall revenue, he denied that Infocita had higher profit margins than compared than the company's other lines of business, which include pre-paid phone cards sold to Mexicans living in the United States.

Both Morisseau and Benitez should read Telscape's annual 10-K report (filed with the U.S. Securities Exchange Commission), which states that the company's "call center operations in Mexico have historically provided relatively higher gross margins than our other lines of business."

Serving a changing America in the last four years, Telscape (formerly Polish Telephones & Microwave Corporation) has grown rapidly through a series of mergers with several U.S. and Mexican telecommunications companies, with annual revenues rising from $8 million in 1996 to approximately $130 million in 1998.

Telscape's latest acquisition was Pointe Communications Corporation, a telecommunications company that, like Telscape, offers such services as pre-paid calling cards and long distance services to Hispanic communities in the U.S. and abroad, a booming business.

The merger now makes Telscape one of the biggest players in this growing niche market. And it is a lucrative market — Telmex rates from Mexico to the U.S. are among the highest in the world, and during the holiday season, when Mexicans return in massive numbers to their hometowns, airlines dramatically jack up their airfare.

Telscape's U.S. embassy contract falls in line with the gouging that has become common when both U.S. and Mexican business "serve" this niche.

Espinoza reports from Guanajuato, Mexico.

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