Mexico’s Richest Man Left Out in Pena Nieto’s TV Push

Carlos Slim has been preparing for eight years to offer TV service in Mexico. The government wants him to wait even longer.

The billionaire, who controls Mexico’s biggest phone company, rounded up soccer teams and exclusive programming and built TV studios to quickly swoop into the industry as soon as he’s given a government license. Already, an online network owned by Slim produces news segments, and he holds an option to acquire a controlling stake in satellite carrier Dish Mexico.

The foray into TV was going to be Slim’s answer to a regulatory crackdown on his dominance in the phone industry, giving his America Movil SAB a new line of business that may generate 20 billion pesos ($1.5 billion) in sales by 2018, according to Citigroup Inc. Now, under a bill proposed by President Enrique Pena Nieto last week to rein in companies with too much market power, his budding video operation wouldn’t find an audience outside of the Internet until at least 2016.

“America Movil is practically ready for the day its concession allows it to offer paid TV,” said Julio Zetina, an analyst at Vector Casa de Bolsa SA. “The company is at a disadvantage even in its own market. Today you can’t just offer a fixed phone line, you have to be able to offer a bundle of services.”

While Pena Nieto’s legislation also seeks to increase competition in the TV industry, dominated by Grupo Televisa SAB, the government argues that Slim can’t be allowed into the market before he proves he’s following the rules, according to the proposal. America Movil has seven out of 10 mobile-phone users and 80 percent of Mexico’s landlines.

Quick Gain

Congress is studying Pena Nieto’s proposal with the goal of passing the bill by the end of this month, and some of the proposal’s measures could change in the process.

Press officials at America Movil and the Federal Telecommunications Institute, the regulatory agency known as IFT, declined to comment. A Pena Nieto press official didn’t respond to requests for comment.

Mexico’s pay-TV market is highly concentrated, and the 24-month delay hurts competition, America Movil General Counsel Alejandro Cantu told lawmakers today at a hearing in Mexico City.

The delay is necessary to protect smaller cable companies and give America Movil time to adhere to regulatory measures, such as sharing its network with rivals, said Jose Ignacio Peralta, Mexico’s deputy communications minister.

“We have about 500 small cable companies in Mexico, regional companies that are trying to grow in the sector, and that would be very vulnerable to a big change in the structure of the market,” Peralta told reporters today in Mexico City.

New Users

America Movil could get about 7.7 million pay-TV users by 2018 if it received a license this year, putting it among the top providers with almost twice the number served today by Megacable Holdings SAB and Televisa’s cable units, according to estimates by Citigroup analyst Lucio Aldworth.

Slim has been pushing for a TV license since at least 2006, when the government began letting cable companies offer phone service. Felipe Calderon, Pena Nieto’s predecessor, never granted Slim’s request, arguing that he wasn’t complying with regulators’ demands.

Pena Nieto’s proposal, a follow-up to last year’s constitutional amendments that promised to bring long-awaited competition into Mexico’s telecommunications market, would require America Movil to abide by the regulatory agency’s orders for 24 months before it can apply for a license to offer pay-TV services or broadcast over the air.

Sochi Clock

The IFT named America Movil dominant in the industry in March and said it would have to start sharing its network infrastructure and have its prices regulated. Pena Nieto’s bill would go even further than the regulator, requiring America Movil to phase out long-distance charges and eliminate the fees it charges to competitors for incoming calls. America Movil has filed a court motion to block the IFT’s dominance ruling.

America Movil has said it may enter a 2015 government auction of two new national broadcast-TV networks. Slim has also been building up his programming, with a stake in soccer team Club Pachuca, the rights to air the Olympics and a library of shows and movies through the acquisition of DLA Inc. In the meantime, Slim’s son-in-law Arturo Elias, a vice president at America Movil’s Telmex unit, has built up the company’s online UnoTV operation, a trial run for what the billionaire’s TV channel could look like in the future. Elias declined to comment.

Plaza Carso

UnoTV’s offices stretch across a floor of Plaza Carso, the center of the mogul’s real-estate development in one of Mexico City’s wealthiest districts. TV personalities and news reporters meet in the bullpen, where clocks set to international time zones hang from the wall. One shows the time in Sochi, Russia, where the staff recently covered the Winter Olympics. While America Movil has made the Olympics and soccer games available for free online, America Movil has offered a digital subscription for DLA’s TV shows and movies, competing with Netflix Inc.

“America Movil has been building a content strategy for years now,” Valeria Romo, an analyst with Banco Monex SA, said in a phone interview. “What’s interesting for the company in Mexico is that it can capitalize on the infrastructure it already has. It wouldn’t be a start from scratch.”

Slim is tantalized by the prospect of offering pay TV in Mexico because it’s been a success for him in other parts of Latin America. Television is leading America Movil’s revenue growth as expansion slows in the phone business. TV sales in countries including Brazil and Colombia jumped 22 percent from the year before, and subscriber rolls swelled to almost 19 million.

Easy Coverage

Only about 44 percent of Mexican households have cable or satellite TV, according to the Latin American Multichannel Advertising Council. Slim could easily begin providing television over the fiber-optic Internet connections he has in some neighborhoods, and Dish Mexico would give him coverage for other areas.

The government’s proposal represents a step backward in terms of promoting competition in the television industry, Benito Berber, an analyst at Nomura Securities, said in a note this week.

“Two years is longer than what the market expected or what the company expected,” Zetina said. “But there’s no doubt that sooner or later America Movil will enter the pay-TV market.”

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