Shake-up of Mexico TV law seen good for competition

Fri Jun 8, 2007 5:38pm EDT

By Noel Randewich

MEXICO CITY, June 8 (Reuters) - A Mexican Supreme Court ruling this week against key parts of a television law favoring heavyweight broadcaster Televisa is seen boosting competition and improving programming in a market controlled by two firms.

Top court magistrates crossed out so much of the legislation, dubbed the "Televisa Law", that it will effectively have to be rewritten with fewer benefits for dominant players.

"The future of Mexico's modernization is at play," Communications Minister Luis Tellez said in a radio interview on Friday. "Like in other countries, it depends on telecommunications, radio and television working properly."

Mexico's television industry is dominated by Televisa (TV.N) (TLVACPO.MX), which has a 70 percent share of audiences and owns the country's largest cable operator and its only satellite operator. Rival TV Azteca TVAZTCACPO.MX controls most of the rest of the television market.

The Supreme Court ruling was seen as one of the biggest legal blows against big business interests in decades.

Parts of the law struck down would have let Televisa and TV Azteca use frequency freed up through future technological improvements to launch new services without having to get permission from the government or pay a fee.

It would also have guaranteed the renewal of 20-year concessions, also for free.

"This is good for the industry. There will be more opportunity for competitors to get in," said Jesus Viveros, an analyst at Actinver brokerage in Mexico City. "Costs should tend to go down and the quality of programs should increase."

Lawmakers had complained to the magistrates about the law after Congress hastily passed it in the midst of presidential election campaigns last year.

They accused Televisa of bullying political parties into passing the bill by threatening to keep their presidential candidates off the airwaves.

Using criteria other than the highest bid to hand out TV concessions makes it easier for smaller players to enter Mexico's television market, but Televisa said this week's legal step back creates uncertainty for investors.

"This could slow down or even inhibit the technological development of the industry," Televisa warned.

MORE TALENT, MORE SHOWS

In Spain, letting five companies operate national channels has led to a more dynamic industry, said Dan Lund, head of research firm MUND Americas.

"More competition in the Spanish market has resulted not only in generating greater benefits for consumers in terms of variety but also greater earnings for the television networks themselves and corresponding higher employment in the content production areas," Lund said in a report.

Televisa's stock has fallen about 5 percent since the court's main decision on Tuesday, underperforming the broader equity market.

U.S. Spanish-language broadcaster Telemundo, owned by NBC, has been struggling since last year to land a concession to launch a national channel, but has made little progress.

Televisa's cable operator and telephone company Telmex TELMEXL.MX TMX.N are eager to offer consumers "triple play" packages of video, telephone and Internet and both are working to meet regulatory requirements.

This week's rulings, which largely apply to how frequencies are shared out in a future digitalized industry, appears not to have much effect on those shorter-term plans.

"Mexico's media companies will have to live with some long-term uncertainty, but that is no different than other media companies around the world," Citigroup analyst Patrick Grenham said in a report.

((Reporting by Noel Randewich, editing by Richard Chang; Reuters Messaging: noel.randewich.reuters.com@reuters.net +52 55 5282-7153)) Keywords: MEXICO TELEVISION/

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