Photographer: Susana Gonzalez/Bloomberg

Slim's America Movil May Land Partial Win in Top Court

  • Supreme Court Justice recommends allowing connection fees
  • Court to vote on justice’s proposal as soon as Aug. 16

A Mexican Supreme Court justice is proposing to allow America Movil SAB to resume charging interconnection fees that Congress eliminated, an opinion that risks watering down a key provision in the nation’s 2013 telecom overhaul that’s drastically cut mobile phone prices.

The proposal from Justice Javier Laynez, which the Supreme Court’s Second Chamber is likely to take up on Aug. 16, recommends the regulator be the one to establish new asymmetric tariffs based on price models. The justice’s proposal also argues that the ruling on America Movil’s injunction shouldn’t be retroactive, meaning the company controlled by billionaire Carlos Slim wouldn’t be entitled to the more than $800 million Bloomberg had estimated it could receive in backlogged payments.

Approval of the proposal by the high court’s Second Chamber would represent a partial win for Slim, as it would allow Latin America’s largest wireless carrier to resume charging interconnection fees to competitors like AT&T Inc. and Telefonica SA for every call that ends up in its network. Since 2014, America Movil has had to pay those fees but wasn’t allowed to charge them.

Laynez’s proposal argues for not making the ruling retroactive because consumers and Mexico’s telecom industry as a whole have benefited from this so-called zero tariff. These benefits include the entrance of new market participants and the much lower mobile costs for consumers as a result of increased competition, he wrote.

"Today, we remain very far from ensuring success of the constitutional reform: to create durable effective competition," AT&T said in a statement. "History shows that without an unwavering commitment to enforcing the rules designed to balance the sector, market reforms can fail even faster than they can progress." America Movil and Telefonica declined to comment.

Successful Reform

Among the constitutional reforms instituted by President Enrique Pena Nieto, the 2013 telecom law is noteworthy for significantly reducing prices for consumers, and has been a standout accomplishment for the president amid soaring violence and corruption scandals.

If the Supreme Court strips enough of the law to reduce competition in the sector and causes prices to rise, that could further damage the popular standing of Pena Nieto’s PRI party in the run-up to general elections, according to Javier Oliva, a political scientist at Mexico’s National Autonomous University. Pena Nieto is ineligible for a second term, but his party has been struggling in early polls ahead of the July 2018 vote.

"One of the most important successes of this administration is at risk," Oliva said. There’s a chance that the court may "reverse the ability to contain the monopolies."

Under the 2013 telecom overhaul, America Movil has lost about 5 percentage points of market share, which stands at about 65 percent. At the same time, an ensuing price war drove mobile costs down by as much as 43 percent, according to the regulator’s information. America Movil’s profit margin in Mexico has declined from 35 percent in 2014 to 20.3 percent last quarter.

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