America Movil Cuts Telmex Fees to Match Government-Set Rate

America Movil SAB’s Mexican wireless unit will slash the network-connection fees it charges Telefonos de Mexico SAB by more than half, matching the rate cuts set by government officials in disputes with other carriers.

While America Movil will continue to fight the government rate in court, it is extending the fee of 39 centavos (3.3 cents) a minute to all carriers while it appeals the decision, the company said yesterday in an e-mailed statement. It had been charging 95 centavos a minute to Telmex, as the company is known.

A reduction in the fees would save Telmex 3.6 billion pesos ($305 million) a year and boost its U.S.-listed shares by $2.40, James Rivett, an analyst at Citigroup Inc., said last week in a research note. The U.S. shares rose 15 cents to $16.67 at 4 p.m. on the New York Stock Exchange.

The reduction in fees charged to all Mexican carriers would cut Mexico City-based America Movil’s earnings by 1.8 percent, leaving out interest, taxes, depreciation and amortization, Rivett said. America Movil shares rose 38 centavos to 29.45 pesos in Mexico City trading.

In Mexico, the person who initiates a phone call must pay for the airtime. Carriers are free to set the rates they charge for these interconnection fees, and if they can’t reach an agreement, they ask the Federal Telecommunications Commission to intervene.

In March, the agency settled a dispute between America Movil and Alestra SA, the fixed-line phone unit of Alfa SAB, by determining a rate of 39 centavos a minute. The commission has upheld that rate in subsequent decisions.

Largest Carriers

America Movil, controlled by billionaire Carlos Slim, owns a 59 percent stake in Telmex. The two companies and Telefonica SA agreed in December to a rate of 95 centavos a minute for calls from land lines to wireless phones, and they offered to extend that rate to other carriers. Telmex never sought intervention from the telecommunications commission.

America Movil is Mexico’s largest wireless carrier with 70 percent of subscribers, while Madrid-based Telefonica is second with 22 percent. Telmex is the nation’s biggest fixed-line phone carrier with about 80 percent of the market.

In May, Mexico’s Supreme Court ruled that fees set by the telecommunications commission can’t be blocked during the appeals process. That means that even while America Movil challenges the agency’s rate decisions in court, it is forced to charge the lower rate to companies in disputes in which the commission, known as Cofetel, has intervened.

Telcel Unit

The decision disclosed yesterday by America Movil’s Mexican wireless unit, Telcel, means that it’s applying the 39-centavo rate to all carriers, even those that haven’t sought intervention from the telecommunications commission.

“Telcel has extended the interconnection tariffs resolved by Cofetel in various interconnection disputes involving Telcel to all operators,” the company’s statement said. “This is beside the fact that these resolutions have been or will be, as the case may be, challenged by Telcel through legal channels.”

El Universal newspaper in Mexico City reported the Telmex fee cut earlier.

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