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Mexican Telecom Billionaires Spar Over Fees, Investment

America Movil SAB, the Latin American wireless provider owned by billionaire Carlos Slim, challenged Mexican rivals to invest $1 billion each this year after competitors including Grupo Televisa SA and Grupo Iusacell SA called for lower fees to connect to America Movil’s networks.

The dispute places Slim, listed by Forbes magazine as the world’s richest man, against the broadcasters controlled by billionaires Emilio Azcarraga and Ricardo Salinas that are seeking to expand their businesses in wireless, Internet and fixed-line communications.

“Would these operators be willing to invest $1 billion each in reciprocal terms in Mexico in the present year?” Telcel, America Movil’s Mexico unit, said in an e-mailed statement late yesterday. Competing companies are “characterized by a poor rhythm of investment in Mexico” and “uniting so they can avoid paying services provided by Telcel,” the company said in the statement.

Earlier yesterday, Iusacell, units of Televisa, Axtel SAB and Megacable Holdings SAB sent joint statements titled “Operators unite against Telcel’s abuses.” The statement asked Mexico’s government for “pro-competition regulation in the area of inter-connection to benefit 90 million Mexican consumers.”

“It’s important to highlight that this group of operators is willing to not charge Telcel for interconnection in exchange for reciprocal treatment,” the statement said.

‘Greater Competition’

The government “will promote greater competition and legal certainty so that better levels of quality and price are achieved,” according to a joint statement from Mexico’s Federal Telecommunications Commission and the Communications and Transportation Ministry, issued after the statements from Telcel and its competitors.

The regulators said they have taken actions to reduce connection fees and are waiting for the resolution of court challenges to their rulings so they can be implemented. Authorities will continue meeting with telecommunications providers, the statement said, without providing details.

Telcel and Telmex each plan to spend about 10 billion pesos ($830 million) in infrastructure investments this year, Slim said in January.

America Movil fell 2 centavos to 34.12 pesos at 4 p.m. New York time in Mexico City trading. Telmex dropped 6 centavos to 10.81 pesos, and Televisa gained 59 centavos to 57.1 pesos. Iusacell is closely held.

Affecting Sales

Slim’s companies, which also include holding company Grupo Carso SAB and miner Minera Frisco SAB, have stopped advertising with Televisa because of a disagreement on prices, Televisa Executive Vice President Alfonso de Angoitia said Feb. 18.

On Feb. 23, Slim’s companies said they also rejected an ad contract with TV Azteca because the broadcaster tried to negotiate a side deal for its sister company, mobile-phone carrier Iusacell. TV Azteca wanted Slim’s carriers to charge lower fees for connecting Iusacell customers’ calls to their networks, an official of Slim’s group said at the time.

TV Azteca has said it gets 3 percent of its sales from Slim’s companies, while Televisa has said Slim’s advertising purchases last year contributed 1.5 percent of Televisa’s 57.9 billion pesos ($4.8 billion) in sales.

Slim is the controlling shareholder in America Movil, which has 71 percent of Mexico’s wireless market, and Telefonos de Mexico SAB, operator of about 79 percent of Mexico’s fixed phone lines. Telmex, as the Mexico City-based company is known, is also the nation’s largest Internet provider. Mexico’s government has not yet authorized Telmex to bundle cable television with phone and Internet, known as triple play.

Economy Underperforming

Slim’s companies will invest 44 billion pesos in Mexico this year, he said at a press conference on Jan. 31.

Azcarraga is chairman, chief executive officer and controlling shareholder of Televisa, Mexico’s largest broadcaster, which has captured market share from Telmex by offering cable, phone and Internet.

Salinas is Mexico’s second-richest man after Slim and controls TV Azteca SAB, Mexico’s second-largest broadcaster, and Iusacell, which trails Telcel and Spain’s Telefonica SA in the country’s wireless market.

Mexico’s economy has underperformed peers in the region because of lack of competition in industries including telecommunications, banking and energy, antitrust chief Eduardo Perez Motta has said.

‘Growing Conflict’

The Federal Competition Commission, known as Cofeco, is prioritizing telecommunications cases and will conclude a probe into dominance in the market for completing phone calls to mobile networks by July, Perez Motta said March 1. The Federal Telecommunications Commission must also establish a reference price to resolve disputes over how much carriers charge each other to connect calls between their networks, he said.

“There has been growing conflict in the industry,” Perez Motta said. “Like all crises, this should be an opportunity.”

Telmex should receive authorization to offer pay television services after disputes in Mexico’s telecommunications industry are resolved, Perez Motta said today.

Telefonica, which is Mexico’s second-largest wireless provider, reached a separate agreement with Telmex and Telcel in December to reduce interconnection fees for calls to mobile phones to 69 centavos (5.7 cents) a minute by 2014 from 95 centavos this year.

The rate set for this year by government regulators to resolve disputes between carriers is 42 centavos a minute. Telcel is challenging that decision in court.

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