Mexico Lets Cable, Satellite Carriers Keep Broadcast Channels

Mexico’s telecommunications regulator said broadcasters must continue to offer up their signals to cable and satellite operators for free.

The so-called must-offer rule has been in effect since last year, said Gabriel Contreras, president of the Federal Telecommunications Institute, or IFT, at an event yesterday in Mexico City. The rule covers Mexico’s four most-watched broadcast networks, he said.

The decision is a rebuke to Grupo Televisa SAB (TLEVICPO), the nation’s largest broadcaster, which had questioned the IFT’s legal authority to rule on the matter. The IFT was temporarily blocked from making the decision earlier this month by a judge who’s hearing a lawsuit filed by Televisa. President Enrique Pena Nieto intervened, persuading the Supreme Court to let the IFT move forward with its decision.

At stake is the revenue Televisa and TV Azteca SAB get from pay-TV companies for the rights to include their over-the-air stations in cable and satellite channel lineups. A law passed by the government in June requires broadcasters to offer their over-the-air signals to pay-TV companies at no charge, a measure Televisa said will cause it to miss out on about 1.4 billion pesos ($105 million) in sales this year.

Photographer: Susana Gonzalez/Bloomberg

Grupo Televisa SAB signage is displayed on top of the company's building in Mexico City. Close

Grupo Televisa SAB signage is displayed on top of the company's building in Mexico City.

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Photographer: Susana Gonzalez/Bloomberg

Grupo Televisa SAB signage is displayed on top of the company's building in Mexico City.

Televisa owns channel 2 and channel 5, and Azteca has channel 7 and channel 13, all covered under the law because of their coverage and viewership, Contreras said.

Dish Mexico, the nation’s second-largest satellite-TV company, and phone carrier Axtel SAB added signals from Televisa and Azteca (AZTECACP) in September. Previously, they would have had to pay the networks for their signals as part of a bundle of channels. Before the new law was passed, Dish chose not to carry the signals at all. Axtel was just starting its television service at the time.

Concentrated Industry

Televisa and Azteca, both based in Mexico City, had disputed Dish’s move to go ahead with the retransmissions, arguing that it hadn’t yet been properly authorized by the regulatory agency, which itself was created by the June law.

Mexico’s broadcast industry is highly concentrated, with 96 percent of the country’s audience split among Televisa and Azteca. Azteca is scheduled to report fourth-quarter results on Feb. 27.

The IFT heeded broadcasters on another matter. The agency will look into Dish Mexico’s relationship with Telmex, Mexico’s largest phone company, said Commissioner Adolfo Cuevas.

Televisa and Azteca have asked the regulator to examine whether Telmex’s partnership with Dish violates the phone company’s license, which doesn’t let it offer video services. Telmex, a unit of America Movil SAB (AMXL), has an option to acquire control of Dish if the phone company gets permission to offer TV.

Dish Partnership

In a statement yesterday, Telmex said it gets commissions for selling Dish service and provides financing for Dish set-top boxes. It also participates in a committee with Dish to discuss joint plans. Telmex can charge customers of Dish directly through their phone bills.

While it could acquire control of Dish someday, as it has disclosed for years in regulatory filings, it has no equity stake in the satellite provider and isn’t represented on the company’s board, it said. The company disclosed all details of its relationship with Dish to antitrust officials in 2008, and the antitrust agency approved the relationship the following year, Telmex said.

Cuevas said there were discrepancies in documents Telmex and Dish submitted to regulators. The IFT doesn’t have any contracts that mention a Telmex option to buy control of Dish, Contreras said.

To contact the reporter on this story: Patricia Laya in Mexico City at playa2@bloomberg.net

To contact the editor responsible for this story: Sarah Rabil at srabil@bloomberg.net

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