Mexican Supreme Court Backs America Movil on Interconnection Fees -- Update
August 16 2017 - 8:07PM
Dow Jones News
By Robbie Whelan and Anthony Harrup
MEXICO CITY -- Mexico's Supreme Court ruled Wednesday that a law
requiring dominant phone carrier América Móvil SAB to complete
calls from rival networks without charge is unconstitutional,
leaving it up to regulators to determine interconnection fees.
América Móvil, controlled by billionaire Carlos Slim, challenged
the 2014 law that was seen as a key to increasing competition in
the telecommunications market, encouraging U.S. giant AT&T Inc.
to invest more than $4 billion in the purchase of two smaller
operators and setting up a major challenge to Mr. Slim's
company.
Under the reform law passed by Mexico's Congress, América Móvil
was prohibited from charging fees to its competitors, which include
the Mexico unit of Spain's Telefónica SA, to complete calls on its
network.
Five justices voted unanimously in favor of the ruling, which
says Congress doesn't have the authority to set interconnection
fees. The IFT, a telecom regulator created as part of the overhaul,
is the only body with the power to do so, the court said.
The Supreme Court said its decision doesn't establish whether
there should be a zero tariff for América Móvil to complete calls,
but that it is up to regulators to determine such rates.
One bright spot for América Móvil's competitors is the ruling
prohibits the dominant phone carrier América Móvil from charging
retroactive fees, which would have been costly for them. An
analysis by the Competitive Intelligence Unit, a Mexico City
pro-competition think tank, estimated that AT&T and Telefónica
would have had to pay more than $600 million in back fees.
América Móvil, which controls roughly two-thirds of Mexico's
cellphone market, declined to comment through a spokeswoman.
In a prepared statement, AT&T said it would continue to
focus on improving its network and competing for customers.
"AT&T invested in Mexico with trust in the widespread public
support for the constitutional and legislative reform of the
telecom market. Two years after we arrived, we still face a
dominant carrier who holds nearly 65% of the market," AT&T
said. "We trust in the leadership of the IFT who will see that the
spirit of the reform is respected in benefit of all Mexicans."
Wednesday's ruling leaves the zero tariff in effect until the
end of the year, a Supreme Court spokesman said. The IFT said it
would comply with the court's ruling and determine the rates that
apply to América Móvil. It didn't give a timeline.
"We're putting our hopes in that the tariffs from now on are not
too high. If the rate is set high, it could practically demolish
our Ebitda, " said Francisco Gil Díaz, who stepped down as
president of Telefónica's Mexico unit last year, but continues to
work for the company in an advisory role. "The question is whether
we will be able to increase our prices to cover those costs."
The zero tariff led many Mexicans to switch to services offered
by América Móvil competitors, said Manuel Molano, an economist at
Mexican competition think tank IMCO.
"To the extent that interconnection charges return, we're going
to realize quite quickly that our cellphone bills are going to
become scandalous as they used to be," he said.
America Movil has denied a ruling in its favor would cause the
cost of cellphone service to rise.
The IFT had previously set rates where América Móvil was
required to pay rivals more for outgoing calls than it could charge
for incoming calls.
The Senate denied this week that Congress had invaded the
functions of the regulator in writing the zero tariff into the law
for phone operators with more than a 50% market share, saying the
constitutional overhaul allowed lawmakers to include specific
measures in secondary legislation.
The impact of removing a measure that has helped level the
playing field would be more damaging in the long run than the
decision not to allow for retroactive charges, and risks
compromising the Congress' ability to legislate on specific
sectors, the Senate said in a statement.
Write to Robbie Whelan at robbie.whelan@wsj.com and Anthony
Harrup at anthony.harrup@wsj.com
(END) Dow Jones Newswires
August 16, 2017 19:52 ET (23:52 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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