New Rules to Reshape Telecom in Mexico

Posted by Unknown on Friday, March 7, 2014

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International Business |New Rules to Reshape Telecom in Mexico

http://nyti.ms/MVfjat

MEXICO CITY â€” In a ruling intended to break virtual monopolies in Mexican telecommunications and television broadcasting, a recently created regulator issued tough new conditions for two of the countryâ€™s largest companies, the wireless carrier América Móvil and the media company Televisa.

The ruling promises to redraw the landscape of both industries as it takes direct aim at the core businesses of Carlos Slim Helú, whose control over telephony here has made him one of the worldâ€™s richest men; and Emilio Azcárraga, whose television channels play an outsize role in the countryâ€™s politics.

Televisa and América Móvil confirmed on Friday that they had been notified of the ruling. Both companies said they were studying the measures.

The conditions imposed on Televisa â€œlook very good in my opinion,â€ said Irene Levy, president of Observatel, a consumer advocacy group. They are aimed at â€œpromoting effective competition and avoiding the abuses of such a large company.â€

Ms. Levy said she expected the measures against América Móvilâ€™s two Mexican subsidiaries, the fixed-line carrier Telmex and the wireless company Telcel, would be even stricter.

At the center of the ruling by the new regulator, the Federal Telecommunications Institute, known as Ifetel, is the requirement that the companies share their infrastructure with competitors, eliminating the central barrier for new firms looking to enter or to grow in the market.

The decisions, announced late Thursday, are a critical step in President Enrique Peña Nietoâ€™s effort to remake parts of the economy where monopolies have stifled productivity. Last year, Mexicoâ€™s economy grew only 1.1 percent.

Attempts by regulators over the years to rein in América Móvil and Televisa have been blocked by weak mandates and wavering political support. The companies have succeeded in blocking decisions by tying them up in Mexicoâ€™s labyrinthine courts. But last year, congress rewrote the constitution to take on the powerful companies directly.

Legislators created Ifetel and gave it sweeping new powers to declare large companies dominant and set conditions on them. To end the legal maneuvering, they set up specialized courts to handle legal challenges.

Shares of América Móvil increased 1.24 percent on Friday, while Televisa shares dropped 2.29 percent.

Analysts warned that the strength of Ifetelâ€™s rulings may be diluted in the coming weeks as legislators hash out details of the legislation guiding last yearâ€™s constitutional overhaul. Congress is already three months behind a deadline to approve the regulations; experts believe heavy lobbying by the companies may be responsible.

Mr. Slim, who owns a stake of about 17 percent in The New York Times Company, turned the high margins he earned from Mexicoâ€™s fixed-line telephone monopoly into América Móvil, a telecommunications giant with 270 million subscribers across the Americas. But in Mexico, competitors complained that his control over telecommunications infrastructure made it too expensive to compete. Telmex controls 80 percent of the fixed-line business, and Telcel has 70 percent of the wireless market.

The lack of serious competition in Mexico has kept prices high, has limited investment and has held back the penetration of new technologies. According to the International Telecommunications Union, only 26 percent of Mexican households had access to the Internet in 2012, compared to more than 45 percent in Brazil.

In a 2012 report, the Organization for Economic Co-operation and Development estimated that Mexicoâ€™s â€œdysfunctionalâ€ telecommunications sector cost Mexican consumers $25.8 billion a year between 2005 and 2009.

Televisa controls 70 percent of the television audience through two national television networks and two smaller ones. But this weekend Ifetel will publish conditions to auction two new concessions for national networks, and Televisa will be required to share its towers, rights of way and other parts of its physical network.

â€œWithout exaggeration we are looking at a historic decision,â€ said Raúl Trejo Delarbre, a media analyst at the National Autonomous University of Mexico, speaking of the new rules and the planned auction.

Paulina Villegas contributed reporting.