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America Movil Drops Most in Five Months on Antitrust Fine

Billionaire Investor Carlos Slim. Photographer: David Rochkind/Bloomberg
Billionaire Investor Carlos Slim. Photographer: David Rochkind/Bloomberg

America Movil SAB fell the most in five months as a record $1 billion fine by Mexico’s antitrust agency increased pressure on Latin America’s biggest mobile carrier to defend its 71 percent market share in its home country.

America Movil dropped 66 centavos, or 1.9 percent, to 33.33 pesos in Mexico City trading at 4:10 p.m. New York time, the biggest daily percentage slide since Nov. 9. The shares have declined 6 percent this year.

The Federal Competition Commission assessed the fine for monopolistic practices in the market for fees charged to complete calls to a wireless network, America Movil said late April 15 in a stock exchange filing. The Mexico City-based company, controlled by billionaire Carlos Slim, said it will use “every one of the defense measures at its disposal.”

The fine, which may get reduced or overturned in court, signals that the regulatory and competitive pressures on America Movil in its biggest market are rising, said Christopher King, an analyst at Stifel Nicolaus & Co. in Baltimore. Mexico will represent 39 percent of America Movil’s sales this year and 49 percent of profit before interest, taxes, depreciation and amortization, King estimated.

“There’s clearly a sharpened focus on their competitive position,” King, who rates the shares “neutral,” said in an interview. “It’s clear that America Movil has to enter a new era from a competitive standpoint, that they need to be more fair and judicious with respect to their business practices.”

America Movil executives declined to comment beyond the statement, said an official who can’t be named under company policy. Federal Competition Commission President Eduardo Perez Motta wasn’t available for comment, an agency official said.

Fee Battle

The carrier had 225 million mobile-phone subscribers at the end of last year, including 64 million in Mexico. America Movil represents about two-thirds of Slim’s $78.3 billion in publicly disclosed holdings, according to data compiled by Bloomberg. The company had about $9.24 billion in cash and short-term investments at the end of 2010.

The company’s Mexican mobile unit, Telcel, and its Telefonos de Mexico SAB fixed-line unit have battled this year over interconnection fees, which each carrier has to pay to competitors to connect calls. Mobile carrier Grupo Iusacell SA and Grupo Televisa SA, which controls cable rivals to Telmex, began an advertising campaign in February associating the fees with phone-service prices in Mexico.

Necessary for Investment

Mexico’s phone-industry regulator decided against America Movil in March in an interconnection-fee dispute with a smaller fixed-line carrier, Alestra SA, slashing by more than half the rate America Movil had proposed. Mony de Swaan, the regulator’s president, told Congress in March he expected the ruling to be challenged in court for two or three years.

America Movil Chief Financial Officer Carlos Garcia Moreno told reporters in March that the company has already been cutting interconnection fees and that the prices are competitive in dollar terms with the fees charged in European and Latin American countries. The fees are necessary to promote investment in the wireless industry, he said.

Both sides have filed complaints against each other this year with the antitrust agency. The $1 billion fine disclosed last week was the result of a probe begun by the competition commission in 2006, America Movil said.

The company said the fine was for “relative monopolistic practices,” which under Mexican law can apply to actions by a company to restrict the entry of competitors into a market or to establish anticompetitive advantages. The antitrust agency hasn’t released specifics of its decision.

Aggressive Competition

Televisa raised the pressure on America Movil this month, announcing that it would buy a 50 percent stake in Iusacell for $1.6 billion to enter the wireless market itself. While Iusacell, which has more than 4 million subscribers, has struggled to gain market share in Mexico, Televisa Chief Executive Officer Emilio Azcarraga pledged in an interview this month to offer lower prices and higher quality to consumers.

If Televisa is committed to the wireless business, the added rivalry represents “the most serious threat from a competitive standpoint to Carlos Slim’s business that we’ve seen over the last 10 years,” King said.

Telefonica SA, Mexico’s second-largest carrier, and NII Holdings Inc., the fourth-largest after Iusacell, are also expanding their networks to offer high-speed Internet downloads after acquiring airwaves in a government auction last year.

Record Penalty

“Telcel is facing new competitive threats,” Walter Piecyk, an analyst at BTIG LLC in New York who recommends buying NII shares, said in an e-mail. “With the government’s firm stance with this fine, larger multinational telecom companies might have increased interest in looking at the independent wireless competitors in Mexico.”

The fine of 12 billion pesos ($1.03 billion) by the antitrust agency surpassed the 1 billion peso total of fines assessed last year against a group of pharmaceutical companies and individuals for collusion, said the antitrust official, who can’t be named under the agency’s policy.

The current maximum antitrust penalty for first-time violations is about 85 million pesos. America Movil’s fine was larger because of repeated incidents, the official said. The agency last fined America Movil in 2007, and the details of that case have been sealed in court, the official said.

The lower house of Mexico’s congress approved a measure this month that would allow fines for monopolies of up to 10 percent of the sales of the unit of the company that committed the violations. The proposal also includes jail sentences for individuals. The proposal awaits approval by the Senate.

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