Slim's TV Plans Still on Hold as Telephone Dominance Persists

  • America Movil can finally apply for TV license, but hasn't
  • Regulators unlikely to grant one in short term: Monex analyst

Mexican telecom billionaire Carlos Slim, who’s been preparing to offer television services for nine years, can finally apply for a license. It doesn’t mean he will get one anytime soon.

President Enrique Pena Nieto introduced laws last year that let Slim’s America Movil SAB request as of September a permit to offer broadcast and/or pay-TV services. First, though, America Movil will need to prove it’s taken enough steps to comply with government rules.

An option to offer TV would give Slim a new source of revenue as regulatory sanctions shrink margins in the company’s home market. The sanctions were imposed after the federal telecommunications overseer IFT declared America Movil dominant in its industry in March of 2014. Pena Nieto’s laws force phone companies with too much market power to reduce their share below 50 percent or face antitrust penalties designed to curb profits.

“We don’t see it happening in the short term,” Monex Casa de Bolsa analyst Fernando Bolanos said of regulators granting a license. “The company needs to solve several matters before it can go forward with a new concession,” he said in a phone interview from Mexico City.

Since last year, America Movil has opened its infrastructure to competitors and spun off about 11,000 of its towers into a new company. Becoming a smaller business could help America Movil’s case, yet it has done little to reduce its market share in Mexico, Bolanos said.

TV Content

Over the years, Slim has been securing exclusive sports content, with a stake in soccer teams including Club Leon and the rights to air some Olympic Games. He’s also building TV studios in Mexico’s capital and building up programming with a library of shows and movies through the acquisition of DLA Inc. He already owns an online network called UnoTV, where he produces news segments and talk shows.

An America Movil press official declined to comment on whether the company plans to pursue a TV license. The IFT hasn’t received a concession change request from a dominant operator, it said Monday in an e-mailed statement.

America Movil, which is based in Mexico-City, is currently under an IFT investigation. A probe announced in August seeks to determine whether the company’s landline unit Telmex violated terms of its license by directly or indirectly profiting from TV services through a previous commercial relationship with Dish Mexico. America Movil and Telmex are looking into the alleged violations, the companies said Aug. 25 in a filing with the U.S. Securities and Exchange Commission.

‘Negotiating Point’

“The regulator will use this as a negotiating point in demanding any additional possible action on America Movil in the future,” Itau BBA SA analyst Gregorio Tomassi said in a note to clients last week. The “worst-case scenario” for the company would be a resolution that determines a violation could imply the revocation of Telmex’s concession title, he said.

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 regulatory demands.

Even as consumers’ phone costs drop, to the tune of 12.2 percent in the year through August, Slim’s two-decade grasp over Mexico’s telecommunications industry remains strong. America Movil has almost 70 percent of mobile lines while Telmex controls 63 percent of all landlines.

Pena Nieto’s legislation also seeks to increase competition in the TV industry, dominated by Grupo Televisa SAB. America Movil’s entry into the TV business could soften the blow of its shrinking margins amid the government’s sanctions, Carlos de Legarreta, an analyst at Corporativo GBM SAB, said in a phone interview. America Movil’s margin in Mexico dropped to 41.4 percent in the second quarter from 43.6 percent a year earlier.

Net income at the company, which has business across Latin America as well as in Europe and the U.S., fell 16 percent to $14 billion pesos ($840.8 million) in the period ended in June. Revenue slipped 0.1 percent to 220 billion pesos. The shares fell 0.9 percent to 14.70 pesos at the close in Mexico City, and are down 10 percent this year.

Growth Potential

Just over half of Mexico’s homes, or 16 million subscriptions, have access to pay-TV services, meaning there is a lot of growth potential, according to data from the Competitive Intelligence Unit, a telecommunications consulting firm based in Mexico City. Pay-TV sales grew by more than 11 percent to 56.7 billion pesos last year.

“Without a doubt, this would give them an additional source of revenue that they’ve been deprived of for years,” Legarreta said. “But the list of measures imposed on them as a dominant player was so long, it’s hard to know what the regulator’s review will be.”

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