Richest Man Slim Cited
Fraud is in the Air

Indianapolis, IN

#1 Apr 26, 2013

Congressional Republicans want to rein in a $2.2 billion U.S. mobile-phone subsidy for the poor, saying it’s riddled with fraud and benefits the world’s richest man, Mexican billionaire Carlos Slim.

Slim’s TracFone Wireless Inc. received about a quarter of the funds from the U.S. government’s Lifeline program, according to the latest figures. Today, a House subcommittee asked why the program, paid for by fees charged to U.S. phone subscribers, tripled in cost since 2008.

“It’s not fair that people save and work and pay for phones from whatever funds they have, and other people get them for free,” Representative Tim Griffin, an Arkansas Republican who wants to eliminate the mobile subsidy, said in an interview before the hearing.“It’s not fair the biggest beneficiary of this is Carlos Slim, the billionaire owner of TracFone.”

Slim owns Mexico’s biggest phone company, America Movil SAB (AMXL), which offers mobile service in 17 Latin American countries and the U.S. Its TracFone unit is the largest recipient under the U.S. Federal Communication Commission’s Lifeline program, taking in $451.7 million, or 28 percent, of payments in 2011, the last year for which records are available.

“It doesn’t matter who owns the company,” Jose Fuentes, a spokesman for Miami-based TracFone, said in an interview.“Tim Griffin needs to focus on finding jobs, not trying to focus on a valuable program.”

‘Obama Phone’

The Lifeline program subsidizes monthly service, and carriers give away phones. Recipients generally can’t earn more than 135 percent of the federal poverty line, which in most states is $23,550 for a family of four.

Rules limiting phones to one per household may be violated in some cases, Representative Greg Walden, an Oregon Republican who chairs the subcommittee, said today.“We are spending large sums of money and probably squandering much of it,” Walden said.

The program has seen “explosive growth,” said Representative Marsha Blackburn, a Tennessee Republican, at the hearing.“It’s why so many of our constituents are questioning the program and are questioning the use of the ’Obama phones’ as they are commonly called.”

Started in 1985, Lifeline pays companies $9.25 per customer per month. It disbursed $772 million in 2008 and $2.2 billion last year, according to the Universal Service Administrative Co., a Washington-based nonprofit that oversees the subsidies.

TracFone is the largest prepaid wireless company in the U.S., with 23.2 million customers at the end of March and $4.8 billion in revenue last year. Lifeline accounts for about 3.6 million of those customers, Fuentes said.

Program Trimmed

Largest U.S. telephone company AT&T Inc.(T) took in $274.9 million and third-largest wireless provider Sprint Nextel Corp.(S), based in Overland Park, Kansas, received $273.5 million, according to the FCC. AT&T’s share includes aid for wired phone customers.

The FCC last year moved to trim the Lifeline program. The agency voted to set up a database of participants, which is under construction, to prevent households from collecting more than one subsidized phone service from different companies.

The FCC also told carriers to check eligibility of customers annually, which can be shown through enrollment in social assistance programs.

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