America Movil, Televisa Forced to Open Networks to Competition

America Movil SAB (AMXL) and Grupo Televisa SAB (TLEVICPO) were ordered by Mexico’s government to share their infrastructure with competitors in a bid to cut the market share of the nation’s dominant phone and media companies.

America Movil, controlled by Carlos Slim, will have its phone prices regulated and must share parts of its network, it said in a statement. Televisa, the nation’s biggest broadcaster, said it will have to let competitors use its towers for a set fee and must publish its advertising prices publicly.

The measures are the culmination of President Enrique Pena Nieto’s work with lawmakers from all three major parties to tackle the lack of competition in industries that economists say are essential for growth. Power has been concentrated in the hands of a cadre of billionaires, including Slim and Televisa’s Emilio Azcarraga.

“The ruling party is committed to following through on its impressive reform achievements of 2013, and to tackling the vested interests in the economy,” said Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington, in an e-mail. “Their influence will not be reduced overnight; other players will face major obstacles in overcoming brand recognition and the dominant presence in the public consciousness of these firms.”

Photographer: Susana Gonzalez/Bloomberg

Grupo Televisa SAB's broadcast tower stands next to the company's building in Mexico City. Televisa will be required to let competitors use its broadcast towers for a set fee and must publish its advertising prices publicly, the company said today in a statement. Close

Grupo Televisa SAB's broadcast tower stands next to the company's building in Mexico... Read More

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Photographer: Susana Gonzalez/Bloomberg

Grupo Televisa SAB's broadcast tower stands next to the company's building in Mexico City. Televisa will be required to let competitors use its broadcast towers for a set fee and must publish its advertising prices publicly, the company said today in a statement.

A bill passed last June created the Federal Telecommunications Institute, granting it powers to force companies to share infrastructure and sell services at fixed prices. In some cases, the IFT, as the institute is known, could even require an asset sale or a breakup.

Unified License

Companies must comply with the regulator’s restrictions before they can get unified licenses letting them offer a full range of services, such as TV, Internet and phone, IFT President Gabriel Contreras told reporters yesterday in Mexico City. That means America Movil may have to wait before it can meet its goal of offering TV service in Mexico.

The IFT will need at least 60 days to determine whether America Movil qualifies for a license to offer TV service in addition to phone and Internet, Contreras said.

The IFT also approved a call for bidders for two national broadcast-television networks, creating new rivals for Televisa. Participants must apply by June 17 for the auction and will learn if they qualified by Sept. 9, the agency said in yesterday’s federal gazette. The auction will conclude by March 25, 2015, the agency said in rules published yesterday.

“We’re pleased that the IFT is proceeding with the tender of new TV stations,” Televisa said in a statement. “It’s an important event for competition. We hope the same applies to the telecommunications sector.”

‘Pretty Tough’

The IFT told Televisa it will be prohibited from acquiring exclusive domestic rights to programming that has “unique characteristics that in the past have delivered high audiences,” such as World Cup soccer matches, the company said yesterday. America Movil also will be blocked from gaining exclusive transmission rights to similar content, including national soccer playoffs.

The requirement, plus the network-sharing rules, eliminates barriers to entry for new competitors in broadcast television, which should speed up their introduction to the market, said Alejandro Gallostra, an analyst at Banco Bilbao Vizcaya Argentaria SA.

“They won’t have to spend the money upfront if they don’t want to,” he said in an interview. “It’s pretty tough.”

Televisa, which gets about 70 percent of broadcast-TV viewers, said it’s reviewing the ruling to determine what actions it should take -- “legal, business, or otherwise.” Last month, Pena Nieto intervened when a judge, hearing a lawsuit filed by Televisa, threatened to delay IFT rules on making programs available on cable and satellite TV.

Analyzing Ruling

America Movil has about 70 percent of Mexico’s mobile-phone subscribers and 80 percent of landlines. The company and its subsidiaries said they are analyzing the ruling “from an economic, technical, regulatory, operating and business perspective,” according to a statement.

In addition to probable court challenges for its dominance findings, the IFT faces a legal complication because Congress has yet to fill in necessary details in the broad legislation it passed last year.

Lawmakers are still working after missing a December deadline and a February goal to approve that fine print, known as secondary laws.

Televisa and America Movil, both based in Mexico City, have been drawn into competition against each other and against Ricardo Salinas’s TV Azteca SAB as the phone and media industries collide. They’ve also waged court battles against regulators for years.

Legal Monopoly

Mexico has been trying to improve telecommunications competition for 20 years. Slim, the world’s second-richest person, took control of the industry through the 1990 privatization of the state phone monopoly.

The government let Slim operate a legal monopoly after the transaction before gradually introducing competition over the following decade. Rivals weren’t able to match the reach of his network infrastructure with their investments, and regulators were then much weaker, assuring Slim’s dominance was never seriously threatened.

Televisa is run by Azcarraga, its founder’s grandson, and the company has loomed over Mexico’s media landscape for half a century. Azcarraga’s father, also named Emilio, was known as “The Tiger” for his combative style and built Televisa into a powerhouse by aligning his interests with the government during its period of one-party rule, famously declaring himself a “soldier of the president.” The company faced little competition until 1993, when the government auctioned off a state-run channel to create TV Azteca.

America Movil shares have declined 15 percent this year, compared with an 8.9 percent decline for the benchmark IPC index. Televisa shares have gained 3.9 percent.

To contact the reporters on this story: Patricia Laya in Mexico City at playa2@bloomberg.net; Jonathan Roeder in Mexico City at jroeder@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net Crayton Harrison, James Callan

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