Mexican Bill to Allow Foreign Control of Landline Providers

Mexico’s three largest parties will present legislation next week that would allow foreign companies to control Mexican landline phone providers, according to one of the bill’s negotiators.

“This has already been agreed to,” Guadalupe Acosta Naranjo, an official with the opposition Democratic Revolution Party who has helped draft the bill, said yesterday in a telephone interview in Mexico City. “There won’t be foreign investment limits in landline phone service.”

Local landline providers such as Axtel (AXTELCPO) SAB and Maxcom Telecomunicaciones SAB have seen borrowing costs spike in the last year as they have reported losses while struggling to erode the market share of billionaire Carlos Slim’s America Movil (AMXL) SAB. By eliminating the 49 percent cap on foreign ownership, the proposal would ease the path for international competitors to challenge America Movil by acquiring the Mexican companies or assets.

Acosta Naranjo said representatives of Mexico’s main parties will present the bill alongside President Enrique Pena Nieto by March 13.

The bill also seeks to expand the power of Mexico’s telecommunications regulator to level fines against companies, Acosta Naranjo said. The legislation will probably propose giving the regulator more autonomy, he said.

The current regulator, known as Cofetel, can only recommend fines against companies that violate rules. The regulatory agency sends its recommendations to the Communications and Transportation Ministry, which has failed to carry out such sanctions, in part because it has been blocked by court challenges from the companies.

Broadcast Content

The overhaul will also mandate broadcasters offer content to all pay TV providers and require the providers carry all broadcast content, Acosta Naranjo said. Last year, TV Azteca SAB’s networks were dropped by cable-TV carriers representing more than 4 million subscribers in a dispute over terms. Some of the carriers have since resolved the dispute with TV Azteca.

Pena Nieto seeks to boost Mexico’s economic growth by encouraging more investment in the nation’s $30 billion telecommunications industry.

America Movil has 70 percent of Mexican mobile-phone subscribers and 80 percent of land lines. Grupo Televisa SAB and TV Azteca, controlled by billionaires Emilio Azcarraga and Ricardo Salinas, respectively, get almost all of the broadcast- TV audience.

Pena Nieto and his Institutional Revolutionary Party signed the so-called Pact for Mexico the day after he took office Dec. 1, with Acosta’s PRD and the National Action Party. The Green Party joined in January. The pact lays out a timeline for bills to spur economic growth and employment and allow competition in sectors such as oil and telecommunications.

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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