No Relief in Sight for Slim 3 Years After Watchdog Crackdown

  • IFT set to review America Movil’s asymmetric laws in November
  • While Mexico’s mobile prices fall, market share barely shifts

Three years after Mexican regulators tightened their grip on Carlos Slim, the government is showing no signs of relenting on his dominant wireless carrier America Movil SAB, with a top official showing support in an interview for a continued crackdown.

Historically overcharged, Mexicans saw a 17 percent decrease in mobile-phone service costs last year, and prices now are among the cheapest in the region, according to industry group GSMA. As result of the telecom overhaul signed into law three years ago, an independent oversight agency -- the Federal Telecommunications Institute, or IFT -- was formed, American phone giant AT&T Inc. entered the market and the process for consumers to switch between phone providers became easier and faster.

Still, Mexico’s mobile market share has barely shifted, with America Movil serving about 68 percent of the country, down just a few ticks from 70 percent six years ago. Telefonica SA and AT&T complain of an uneven market and have called for asymmetric rules designed to affect America Movil and benefit its rivals, while America Movil argues that competition is thriving and regulations should be lifted. The government is due in four months to review whether the laws backed by President Enrique Pena Nieto have met their goals to increase competition.

“I have no doubt that we should continue asymmetric laws, whatever we see as most efficient as a result of this review to get to where we want to be,” Monica Aspe, Mexico’s deputy telecommunications secretary, said in an interview. The IFT, a separate body, will make the final decision on any revisions.

As part of the original measures, America Movil had to reduce market share to below 50 percent or face penalties. Since it hasn’t met that provision, the company has been forced to eliminate the fees it charges competitors for incoming calls to its network. Telefonica and AT&T can still bill America Movil when its users call their customers.

America Movil’s Telmex fixed-line service will now be under pricing limits until 2018, according to a statement from the IFT Tuesday. Telmex said last week that it would gradually reduce some rates by 50 percent over the next several years.

One of Aspe’s largest projects is Mexico’s planned wholesale network, meant to reduce costs for operators and increase coverage across the country, including rural areas where operators have little economic incentive to expand. The network, scheduled to be operational in 2018, will also help lower the end prices to users without eating into the operators’ margins, she said.

“These structural changes don’t happen from one day to the next,” Federal Telecommunications Institute President Gabriel Contreras said in an interview. “Does this mean that they can compete without regulation today? Of course not. We have to make sure that the benefits we’re seeing today remain in the medium and long term.”

After years of slow growth, an expanding economy pared with near-record-low inflation and falling mobile prices are helping drive up the number of mobile users in Mexico, GSMA’s Latin American director Sebastian Cabello said. There are about 89 million mobile-phone subscribers in Mexico, or 69 percent of the population, according to GSMA.

The IFT plans to review and analyze the effect of dominance rules on America Movil in November, with the option to change or add new measures. Any regulatory relief for America Movil in the short-term is a long shot, Itau analyst Gregorio Tomassi said in a recent note.

Competitive Balance

Alejandro Cantu, America Movil’s general counsel, said that if the company is still the biggest operator, it is because of consumer preference -- not a lack of competition. About 769,000 clients have switched to America Movil’s Telcel since the regulator eased rules in 2008, more than twice the number that switched to Telefonica.

“There should be judicial certainty and predictable and stable regulation for all operators,” Cantu said in an e-mailed statement Monday. “This includes us."

Cantu also called for an end to a subsidy system in Mexico where competitors interconnect with America Movil’s network for free. “That no operator can fix prices is proof of existing effective competition,” he said. “There are no entry barriers -- except for pay-TV -- and our competitors have increased their market share.”

Slim’s operator has faced increasing price pressure in its home country after AT&T bought two rival businesses there, NII Holdings Inc.’s Nextel Mexico unit and Grupo Iusacell SA, and lured customers with offers like no cross-border charges between the U.S. and Mexico.

The IFT has applied measures to boost competition in the pay-TV industry, where Grupo Televisa SAB has a 60 percent market share. Dish Mexico and Megacable Holdings SAB split the rest.

“We are still in stagnant competition despite Titanic efforts,” Oscar Guevara, the head of economic competitiveness at Grupo Salinas, whose pay-TV provider Totalplay also competes against Slim for fixed-line phone users, said on the same June panel. “It’s is not healthy for segments of the market to be so heavily concentrated.”

Before it's here, it's on the Bloomberg Terminal.