Mexican Supreme Court Proposal Backs America Movil on Fees
August 10 2017 - 9:13PM
Dow Jones News
By Robbie Whelan and Anthony Harrup
MEXICO CITY -- A Mexican Supreme Court justice on Thursday
proposed backing a legal challenge by Mexico's richest man, Carlos
Slim, which would render unconstitutional a pillar of the country's
2014 telecommunications overhaul that dramatically increased
competition in the market he dominates.
The proposal by Supreme Court justice Javier Laynez Potisek
would declare unconstitutional a law passed in 2014 by Mexico's
Congress that cut to zero what Mr. Slim's company América Móvil, as
the dominant operator, can charge rivals to complete calls on its
network. The so-called interconnection fees were a major benefit to
América Móvil, which controls about two thirds of the Mexican
cellphone market.
The new laws, which followed amendments to Mexico's
constitution, were a key reason that AT&T Inc., the world's
largest telecommunications firm, entered the Mexican market and
paid more than $4 billion to buy two smaller carriers, Nextel
Mexico and Iusacell. AT&T is currently Mexico's third-largest
cellular carrier, after Spain's Telefónica SA, with roughly 13.1
million subscribers, and has rapidly gained market share.
"They have literally made constitutional changes to implement
changes in the telecom law that make it very, very attractive for
companies to come in and invest," said AT&T chief executive
Randall Stephenson at a November 2014 conference. "It's an
interesting time, when you have a government there who is
incentivizing you and motivating you to come and invest."
Thursday's proposed ruling must be approved by a majority of the
Supreme Court's justices before it can take effect. Arguments are
expected next Wednesday.
The market appeared to react to the announcement as a positive
for América Móvil, whose shares rose 2% to $17.91 on the New York
Stock Exchange.
América Móvil and AT&T declined to comment.
The proposed ruling represents a "serious threat" to competition
and opens the door to changes to other telecom rules that are being
challenged, including free long distance calls and rules about the
handset sales, said Gerardo Soria, chairman of IDET, a think tank
that represents the interests of América Móvil's competitors,
including AT&T and Telefónica.
"This ruling will raise costs to consumers. If you permit Telcel
to charge for interconnection, its competitors will not be able
offer these unlimited minutes packages they have been offering, and
may have to offer packages that charge by the minute, like before,"
Mr. Soria said. "The money that before was earmarked for investment
in AT&T's network, for example, will have to go towards paying
interconnection charges."
A group of 21 companies, including AT&T, Telefónica, and
units of broadcast and cable operator Grupo Televisa, published a
full-page advertisement in some Mexican newspapers Thursday saying
that América Móvil is seeking through "legal resources and devices"
to overturn telecom reform.
The zero tariff has allowed competitors to invest in their
networks and offer attractive plans to users, and its elimination
would hurt competition, reversing a downward pricing trend and
hurting consumers, they said.
América Móvil units Telmex and Telcel, "accustomed to making
extraordinary profits, don't want to adapt to competitive pressure
of other operators," they added.
Since the telecom overhaul, mobile service prices have fallen
more than 40%, and fixed-line prices about 5%.
In a statement last month, América Móvil defended its position,
saying the law invades the functions of the regulator and violates
the company's rights under its concessions. It denied the
elimination of the zero tariff would raise prices for
consumers.
The proposed ruling did contain one bit of good news for
AT&T and Telefónica, which wouldn't be forced to pay back fees.
Between August 2014 and June 2017, AT&T saved $273 million and
Telefónica saved $343 million in unpaid interconnection fees as a
result of the reform law, according to the Competitive Intelligence
Unit, a Mexico City think tank.
If the proposed ruling is approved next week, responsibility for
setting interconnection fees would fall to the IFT, Mexico's
telecom regulator, although the timeline for new rates is
unclear.
Write to Robbie Whelan at robbie.whelan@wsj.com and Anthony
Harrup at anthony.harrup@wsj.com
(END) Dow Jones Newswires
August 10, 2017 20:58 ET (00:58 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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