Digital Slim.

Starting with the makeover of an aging ISP, Carlos Slim aims his sights at the Internet.

SINCE TURNING OVER THE DAY-TO-DAY OPERATIONS OF HIS Grupo Carso empire to his sons last October, Carlos Slim, Latin America's richest individual, has turned his sights on Internet activities, snapping up a variety of properties. "Every day, long distance becomes a less valuable commodity," says the principal in Carso Global Telecom and Telefonos de Mexico (Telmex), Mexico's cash-cow dominant telephone company. So Slim is moving up the value chain.

The sphinx-like magnate who has amassed a personal fortune estimated at US$8 billion, made his money turning around assets picked up at fire-sale prices. His genius over the years has been his ability to see value in companies that others do not. These days, loading up on "dot com" companies seems a no-brainer. "Slim is a value-driven investor and if something comes along that's cheap and fits into his general portfolio, he gets it' says Ilana Treston, telecoms analyst with Merrill Lynch in New York. Has Mexico's premier investor become an Internet herd-follower?

Not so, says Treston: "It all fits together. There's a plan."

Here it is: The lack of Internet access in the region along with a dearth of Spanish-language content online have long been cited as barriers to growth. Slim is attacking both fronts, bundling his formidable Internet assets in the United States and wielding them from the Hispanic market on south of the border.

Back in 1996, Slim started collecting a stake in an ailing U.S. Internet service provider called Prodigy. Poised as a 2-million-member-strong powerhouse back in the early days of the Internet, the pioneer service burned its own wagon with its now infamous decision to charge users for incoming e-mail. Membership at the joint venture between Sears and IBM slid until Prodigy was a sad shell of its former self and the company was sold off, in part to Slim's Carso Global Telecom, leaving the original partners with a $750 million loss.

Under Slim, Prodigy first announced that it would shutter its proprietary AOL-like content service--due to Y2K problems according to the official line--and concentrate on providing Internet service and a web portal. The company had always received kudos for its technology, albeit not for its handling of customers, and the "Super ISP," as Prodigy executives called it, began to woo clients back with smooth service and a smattering of content. PC Week named it the best ISP last year and subscribers topped 600,000.

When the opportunity arose last year, Slim upped his stake through Telmex and Carso to a controlling 68% stake. Suddenly, Prodigy morphed into Spanish.

In a spate of announcements surrounding its initial public offering, the Internet service provider said it would launch a sister service in Spanish aimed at U.S. Hispanics. Next, it assumed Telmex's Internet provider business under the name Prodigy de Telmex and promised to break open new markets even farther south of Mexico. When Prodigy stock hit the market last February, the once downtrodden company brought home a whopping $1.68 billion.

To encourage the still slow penetration of the Internet in Mexico, Telmex has linked up with computer company Acer to provide 300,000 low-cost computers with Internet services included. The package, aimed at kicking off Prodigy's entrance into Mexico, includes a computer and unlimited Internet access for $50 a month spread over two years.

But Slim's not done yet. Splitrock, Prodigy's state-of-the-art data communications service provider--in which Carso has a 30% stake--is busy garnering new clients and is preparing the groundwork for its own $172.5 million initial public offering. In the meantime, Slim picked up some network content in May, acquiring part of CDnow, the online music retailer, through his chain of Sanborn's retail stores.

Prodigy also recently purchased Cable & Wireless USA's consumer Internet service. Analysts estimate the company could acquire up to 200,000 new clients in the deal, including those subscribed to C&W's Campus Dial-Up service, which provides Internet to U.S. university students. Meanwhile, Slim has been busy on a related front, using Telmex to take a $100 million stake in Williams Communications Group, which operates one of the leading nationwide fiber optics networks in the United States.

Also buying into Williams was SBC Communications, the San Antonio-based Baby Bell that also owns a 9.82% stake in Telmex, and analysts speculate the two are preparing to forge an alliance to operate in the United States once SBC receives a long-distance license. Together, they also exercised an option in June to buy a small stake in Network Access Solutions. The company uses advanced digital subscriber line (DSL) technology to increase bandwidth on residential phone lines, thereby upping Internet capacity.

The buying spree is expected to continue following a $1 billion convertible bond issued by Telmex in early June. Analysts predict Slim, the consummate speculator, could be in the market to pickup Brazilian data transmission properties on the cheap given the country's bleak economic outlook and recent devaluation.

Slim's betting he can stay one step ahead in this rapidly growing sector by creating niches, such as developing Internet services for small and medium-sized businesses, and keeping up with the latest technology And while innovations are being introduced at lightning speed, Slim's pockets are not only deep enough but he has proven he's willing to spend. Says the patriarch, "It's fundamental that we are as advanced as possible and remain at the vanguard of telecommunications."