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.
