Carlos Slim's Phone Companies to Face Tougher Regulation in Mexico
March 08 2017 - 11:53PM
Dow Jones News
By Juan Montes
MEXICO CITY -- Billionaire Carlos Slim's telecommunications
company América Móvil SAB said Wednesday that Mexican regulators
imposed additional measures on its local operations, including the
separation into a new company of certain wholesale services
provided by fixed-line unit Telmex.
The additional measures follow a review of regulations imposed
in 2014 on Telmex and mobile unit Telcel, which were determined to
be dominant with more than 50% of their respective markets.
Those regulations included asymmetric interconnection rates and
infrastructure sharing with rivals. Those regulations will remain
in place while the Federal Telecommunications Institute adds
restrictions on both mobile and fixed-line services, including
terms under which the company provides wholesale services to other
operators.
The agency also ordered the creation of a company independent of
Telmex to provide wholesale access to last-mile infrastructure for
competitors, while Telmex's other wholesale services must be
separated from its retail services.
América Móvil intends to challenge the new regulations, which it
said doesn't consider "the profound changes in the Mexican
telecommunications sector within three years from the imposition of
the asymmetric regulations and the effective competition that
exists in mobile and fixed services."
The agency's decision comes as a blow for Mr. Slim's Mexican
telecommunications operations, which have already seen profit
margins shrink amid tougher competition. In the fourth quarter,
América Móvil reported a net loss of about $300 million, in part
because of a weak performance in Mexico.
The main beneficiaries of the decision are Mr. Slim's rivals
AT&T Inc. of the U.S. and Telefónica SA of Spain, which have
gained market share in recent years and are aggressively investing
in Mexico.
AT&T has committed to invest about $3 billion from 2015 to
2018 on top of the $4.4 billion purchase in 2015 of mobile-phone
companies Iusacell and Nextel.
The U.S. telecom giant, which has about a 10% share of the
Mexican mobile market, has launched an advertising campaign,
deploying hundreds of banners around Mexico City implicitly
criticizing Telcel's service.
AT&T also has sought further restrictions on América Móvil.
Company executives met twice in the past year with top officials of
Mexico's regulator to discuss the effectiveness of the regulations,
according to public records.
In a 2016 report about Mexico's telecom sector, AT&T said
the existing regulations were insufficient to tackle América
Móvil's dominant position in the market and urged regulators to
impose additional measures.
"The promise of the 2013 telecom reform has not been fulfilled
yet, and there is a risk it joins the long list of failures to
control the overwhelming power of América Móvil," AT&T
said.
Telmex and Telcel were first declared dominant in March 2014
under laws passed the previous year to stoke competition in a
near-monopolistic market that had resulted in poor service and high
prices for Mexican consumers.
The telecom regulator has said the phone market has improved
since then. Prices of cellphone services have fallen about 30% in
the past year, while investments have increased and the market is
less concentrated.
Telcel's market share fell to 66% in the third quarter of 2016
from 71% in the same period of 2013. In turn, AT&T and
Telefónica have increased their share of subscribers to 10% and
24%, respectively.
But Mr. Slim's companies still have a market share well above
the 50% threshold that requires companies to face specific
regulations. In mobile broadband services, Telcel even increased
its market share to 70% in the third quarter from 62% three years
before.
Telmex, which has about 64% of Mexico's fixed phone lines, will
continue to allow competitors low-cost access to its network,
including the so-called last mile that reaches final users.
Telcel must still pay to connect calls to rival networks, while
completing incoming calls free of charge -- a system known as
asymmetric regulation that works as a subsidy to rivals, making
them better able to compete on prices.
Mr. Slim's companies also must share parts of its infrastructure
-- such as rights of way, transmission towers and antennas -- with
rivals.
Anthony Harrup contributed to this article.
Write to Juan Montes at juan.montes@wsj.com
(END) Dow Jones Newswires
March 08, 2017 23:38 ET (04:38 GMT)
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