America Movil, Televisa Deemed Dominant in Initial Finding

Mexico’s telecommunications regulator identified America Movil SAB and Grupo Televisa SAB as dominant companies in a preliminary finding, singling them out for closer scrutiny.

Under a law passed earlier this year, the companies will have an opportunity to challenge the finding, which must be made final by March 9. The two telecommunications giants are the only companies that have received notifications of a dominance finding, according to a person with direct knowledge of the matter who asked not to be identified because the information is confidential.

The decision is the first legal step the Federal Telecommunications Institute must take to develop tighter regulations to make the market more competitive. America Movil, controlled by billionaire Carlos Slim, has about 70 percent of Mexico’s mobile-phone customers and about 80 percent of its landlines. Televisa gets about 70 percent of Mexico’s broadcast-television audience.

This year’s telecommunications law lets the agency, known as IFT, regulate prices, force network-sharing or even require a breakup of companies that are declared “preponderant” in their industries.

Televisa said it received notification from the IFT that it could be considered a preponderant economic agent in broadcasting. The company is in the process of analyzing and answering the regulator’s documents, it said today in a filing.

The IFT told America Movil it was likely to declare it preponderant in the telecommunications market and may impose regulatory measures, the company said today in a filing.

‘Processes Started’

“What we have to do is resolve before March 9 who are the preponderant economic actors and the regulation that we should impose on them,” IFT President Gabriel Contreras said yesterday at an event in Mexico City. “Those processes have indeed started.”

The IFT moved forward with the dominance findings while Congress continues working on so-called secondary laws that are more specific than the overview provided by the telecommunications legislation.

America Movil Chief Executive Officer Daniel Hajj said in April that, while the company was likely to be declared dominant, it was too soon to decide whether it should make decisions such as divesting assets.

“What we need to see is what are going to be the secondary laws,” he said on a conference call. “Then we can make a decision.”

Stock Pressure

America Movil shares dropped 1.7 percent to 14.55 pesos at the close in Mexico City. Televisa, which has cable-TV units that compete with America Movil for phone customers, fell 2.1 percent to 74.08 pesos, a low of almost two months.

The notice from the IFT implies “the regulator is carrying out its tasks,” which puts pressure on the companies’ shares, said Manuel Jimenez, an analyst at Grupo Financiero Banorte SAB in Mexico City.

Slim, appearing at the event yesterday hosted by the IFT, said regulators should focus on boosting investment in telecommunications.

“There’s always going to be a company that has more clients than the others, whether it be popsicles or tamales,” he said. “What’s important is that there aren’t practices of dominance, that everybody has to invest and that the one that invests most be the one that advances.”

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