Crossing the Atlantic.

Mexican telephone giant Telmex is quietly preparing an expansion into Spain and the rest of Europe.

BUOYED BY A RECENT STRING OF SUCcesses in its drive to expand its empire throughout the Americas, Mexican telecommunications giant Telefonos de Mexico (Telmex) is quietly laying the groundwork for a similar assault on the European market, where a wireless communications network may be up and running within months in Spain.

When questioned about details and the scope of its European strategy Telmex executives in Mexico City responded with a polite "no comment." But while Mexico remains mum on Europe, there is sound evidence abroad that the country's leading telecom concern is plotting a wireless expansion into the Old World.

Telmex has purchased a 17.5% interest in FirstMark Comunicaciones Espana (FMCE), the Spanish subsidiary of U.S. telecom upstart FirstMark Communications International, which was founded by New York entrepreneur and socialite Lynn Forester. FirstMark's Spanish consortium, which also includes the Spanish media company Grupo Prisa, department store chain El Corte Ingles and a number of Spanish savings banks, is one of about a dozen companies bidding for licenses to exploit new frequencies to be awarded during the first half of 2000.

"As yet, none of the group's partners has put up any capital; there was only an agreement to present an offer [for the licenses]:' says Jose Fernandez Lizaran, president of FMCE, confirming that this was Telmex's first move into Europe. "Telmex's reputation as a top operator adds balance to the FMCE consortium of partners.

Telmex and its partners are seeking frequencies to operate so-called fixed wireless networks that will compete with traditional phone service--currently the sole domain of Spain's Telefonica. The licenses are for the spectrums covering the 3.5 gigahertz (residential) and the 26 gigahertz (commercial) bandwidths. Three licenses in each bandwidth are on the auction block.

No digging required. The broadband allows FirstMark to use its patented technology to deliver quality voice, data, Internet and video service to users via radio waves. That means the networks, technically referred to as Local Multipoint Distribution Services, can be set up quickly on demand and without the costly and time-consuming process of laying down cable.

The company will simply transmit signals via radio from base stations to a rooftop antenna and down into the home or office. Telecom operators can therefore enter homes and businesses without digging up streets or gardens. Telefonica, curiously enough, is also seeking licenses for each of the bandwidths.

FirstMark says its aim is to develop telecom services for small and medium-sized companies and make available a high-capacity network on a local level that could be used--for a price--by other operators. The company has already hammered out agreements for British Telecom and Cable & Wireless to use its networks.

The move comes in response to recommendations from Brussels that European Union countries open up their local telephone markets by allowing the use of technologies other than copper wire--still controlled by the former European monopolies--and fiber optic cable, which is still mostly nonexistent in the continent's main urban centers.

FirstMark Communications International has already been granted 135 licenses in Germany to provide service to about 50% of the population. The parent company's European subsidiaries also have permanent licenses to operate nationwide in Luxembourg and Portugal and provisional licenses to operate in Lyon, France and Brussels. But among all its partners in Europe with experience in operating telecommunication services, Telmex is by far its top player.

The Spanish tender demands that the 24 cities having a population of more than 200,000 must have the service within a year. FirstMark's Fernandez says it can do much better than that. "In six months, we'll be serving 50 cities:' he says. "After a year, we'll be in 109 cities, including all those with a population of more than 25,000, and in 10 years, in 400 cities throughout Spain.

Fernandez adds that FirstMark plans to build two switching centers in Madrid and Barcelona that will be connected by high-speed and high-capacity fiber optics to six other major Spanish cities. Infrastructure costs are estimated at US$400 million.

The Spanish government had pledged to announce the winners of the tender by February. But at press time, the verdict was still out, with FirstMark a top contender along with Telefonica Airtel and Jazztel.

Even if Telmex misses out on this round, many say it could still enter Europe by renting frequencies or infrastructure from the winners. "If Telmex is really keen on getting a foothold in Spain and Europe, but doesn't get a license, it can do so by renting a bandwidth," Fernandez says. A likely scenario, but one that Telmex is keeping to itself.