America Movil’s Wireless Prices Targeted by Mexico Regulator

The Federal Telecommunications Commission may be ready to propose the changes to Mexico’s regulatory improvement agency by February, said Mony de Swaan, the agency’s president. The rules would apply to any carrier declared dominant in the mobile-phone market by the nation’s antitrust agency, a designation that Mexico City-based America Movil received in 2010.

“We’re already in contact with operators sharing ideas,” de Swaan said last week in an interview in Mexico City. “We could even discuss the possibility of regulating prices.”

The conditions would represent another blow by the regulator as Mexico’s government seeks to chip away at America Movil’s 70 percent share of the wireless market. Last year de Swaan’s agency reduced, by more than half, the prices the carrier can charge to connect calls from rivals to its own users.

America Movil, controlled by billionaire Carlos Slim, gets 38 percent of its sales and half of its profits from Mexico, its biggest market of the 18 countries where it operates.

Singling out one operator with regulations is an “old- fashioned” practice that has been used by countries to help new entrants in the market, said Alejandro Cantu, America Movil’s general counsel, in an interview yesterday in Mexico City.

Promoting Competition

“The mandate of the authorities is to promote competition, not to help out operators,” he said. “All current operators in Mexico have been operating here forever. It’s quite different to be an inefficient operator than to be a new entrant.”

Rules that apply only to the biggest operator may increase prices for all mobile-phone users, Cantu said.

Telefonica SA (TEF), Mexico’s second-largest wireless carrier, with 21 percent of subscribers, has proposed that the regulator force America Movil to charge less to connect calls from rivals than its competitors can charge.

“Some sort of solution must be found,” Juan Abellan, president of Telefonica’s Mexico unit, told reporters last month. “If not, it will be impossible to break up this 70 percent market share.”

America Movil already is facing new rules from de Swaan’s agency in the market for lines leased to competitors. Under a proposal sent to the regulatory improvement agency in October, the dominant carrier would have to publish a reference price and would be monitored for its payment of penalties to competitors when it failed to meet obligations.

The antitrust agency declared America Movil’s Telefonos de Mexico SAB unit dominant in the leased-line market in 2009.

Agency’s Role

While the telecommunications regulator is analyzing whether to regulate prices directly, de Swaan said he isn’t convinced that should be the role of the agency. One option is to address the difference between what the carrier charges for “on-net” calls between its customers and more expensive “off-net” calls from its users to other carriers.

As the largest carrier, America Movil has an advantage by being able to provide the biggest community of subscribers, who can call each other more cheaply by being on the same network.

“These types of calls are a common practice worldwide,” said Cantu of America Movil. “Elimination of pricing differentiation such as on-net/off-net calls stops innovation and reduces benefits to end users.”

Colombian Rules

The telecommunications agency has consulted with its counterpart in Colombia, which has attempted similar regulations to reduce America Movil’s market share there, de Swaan said. Developing the rules may require some trial and error to determine their effect on the market, he said.

The Colombian Communications Regulation Commission found America Movil’s unit dominant for outgoing wireless calls in 2009, according to the carrier’s 2010 annual report. The agency required the company later that year to begin offering the same rate for calls outside its network as it does for on-net calls.

America Movil’s market share in Colombia has fallen to 65 percent at the end of September from 67 percent two years earlier, according to government statistics.

While the agency increases its scrutiny of the wireless market, it’s also turning its attention to Mexico’s broadcast television industry, where Grupo Televisa SAB (TLEVICPO) and TV Azteca SAB share almost all of the nation’s viewers.

TV Networks

After commissioning two studies and a public consultation, the agency’s board is scheduled to debate today whether to go ahead with a public auction of airwaves that could be used to create two new national TV networks or several regional networks, de Swaan said.

If the measure is approved, the process of developing the auction rules and carrying out the tender would take about 18 months, assuming there isn’t any legal action that delays the process, de Swaan said. An auction of mobile-phone airwaves was completed in 2010, three years after it was announced by the agency, following lawsuits by Grupo Iusacell SA (CEL*), the nation’s third-largest mobile-phone carrier, which disagreed with the auction conditions.

The telecommunications agency is also planning a new auction of airwaves for wireless communications, de Swaan said. It would include spectrum in the 3.5 gigahertz band and in the 1.7 gigahertz band, where 30 megahertz of nationwide coverage went unsold in the 2010 auction.

The regulator also is reviewing a new plan to consolidate area codes in Mexico, de Swaan said. Some formerly rural areas of the country are now parts of cities, and phone users still have to pay long-distance rates to call other parts of town.

America Movil was little changed at 15.09 pesos at 8:47 a.m. Mexico City time. Televisa gained 0.5 percent to 56.15 pesos, and Azteca dropped 1.9 percent to 8.76 pesos.



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