News Column

Mexico Takes on Slim's Telco Monopoly

March 14, 2013

Sandra Parra and Andrea Sosa Cabrios


The Mexican government is taking on the world's wealthiest man, Mexican telecommunications tycoon Carlos Slim, as well as the country's powerful TV networks, in a bid to loosen monopolies and open the market to foreign investors.

President Enrique Pena Nieto, who has been criticized for being too close to TV companies, surprised many Monday by proposing legislation to curb the influence of corporate giants who have for decades stifled competition in broadcasting and telecommunications.

Implementation will take time, as the initiative needs to pass both Congress and a majority of the legislatures of the country's states. However, it shows political determination to increase competition in the sectors.

The proposed reform provides for two more television channels in Mexico, and puts limits on the market shares of telecommunications companies.

Both TV giant Televisa and Slim's company America Movil, which brings together the telecommunications firms Telmex and Telcel, have publicly welcomed the move.

"This is a very consensual reform," former Communications undersecretary Jorge Alvarez Hoth told the daily Excelsior. "It will change the look of the industry."

Televisa said the reform "will generate an atmosphere that promotes investment" and noted that "competition is always positive for private companies." Slim's Telefonica Movil said the reform is "as necessary as it is urgent."

But the planned changes would significantly affect their interests.

The deal would lift from 49 to 100 per cent the maximum foreign direct investment in any telephone or satellite TV company, and from 0 to 49 per cent the maximum foreign stake in radio broadcasters.

Slim owes his fortune - which Forbes magazine currently estimates at 73 billion dollars - to his domination of the market since the state telephone company was privatized in the 1990s.

Slim's communications empire expanded across Latin America, where America Movil is a market leader, and to Europe, where he is active through the Dutch phone operator KPN.

Slim, 73, whose touch has thus far been golden, now faces for the first time a Mexican government's decision to curtail his power.

Mexican telecommunications are worth around 26.6 billion dollars per year, according the Organization for Economic Cooperation and Development (OECD).

America Movil currently controls 80 per cent of the country's 19.6 telephone land lines and 70 per cent of its 91.3 million cellphone lines. Slim also controls 74 per cent of the Mexican non-mobile internet connections.

Allowing more market players would reduce Slim's share, but if that is not enough, he would be required to sell some of his assets.

But the world's wealthiest man will not be the only one to suffer from the reform. Companies that already have licences for the 12 MHz bandwidth or more will not be allowed to bid for the two new TV channels, which affects Televisa, the world's largest media group in Spanish, and Tv Azteca.

Besides, those granted licences for non-paying TV signals will need to allow their footage to be re-broadcast in full and for free, while those granted licences for pay TV channels will need to broadcast non-paying footage for free to their subscribers.

Televisa currently has 48.9 per cent of the pay TV market. Unlike Slim, who has so far been denied access to the field of television, TV networks can already deliver telephone and Internet services.

Slim is barred from operating pay TV channels by the terms of the licence he signed when he bought the former state company Telefonos de Mexico (Telmex), meaning he won't be able to benefit from the opening of the TV market.

Several portions of Pena Nieto's reform plan were proposed by the OECD, and the project has the backing of Mexico's three main parties.

"Politically it sends the right message, that the state is beyond the powers that be," said Irene Levy, head of the NGO Mexican Telecommunications Observatory.

Indeed, the state is perceived to be a key counterweight to the big monopolies.

The reform would forbid any company from holding more than 50 percent of the telephone, television or internet markets. In a country where monopolies control key sector, ncluding a state oil monopoly, Pena Nieto's move is a decisive one.

Slim may say he welcomes new competition, but if the reform is passed, the game is about to change, and the latter-day King Midas will have to work hard to keep his throne from challengers.

Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH

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