Analysis: Mexico's Nextel-Televisa spectrum bid could fail

MEXICO CITY (Reuters) - Mexican broadcaster Televisa and its partner Nextel are at risk of a major setback in the telecoms market as regulators evaluate their low bid for a new block of wireless spectrum.

The Nextel-Televisa group was the only bidder for the 30 MHz block in the 1.7 GHz band with a bid of $14 million, regulator Cofetel said on Tuesday.

The auctions are at the center of the government's push to stoke competition in an industry long dominated by Mexican billionaire Carlos Slim. His America Movil (AMXL.MX) is the leading wireless operator in Mexico, with Spain's Telefonica (TEF.MC) a distant second.

Since the Nextel-Televisa bid is a fraction of the $400 million America Movil and Telefonica offered for other blocks of spectrum, some experts warned Cofetel could declare the auction for the 30 MHz block void, even though the bid is above the minimum originally set by the government.

"(If) the spectrum is granted to Nextel for such a low amount, then it is possible that Cofetel will be severely criticized for allocating unfairly a public good," BBVA analyst Andres Coello said in a note to clients on Tuesday.

"There would be a cascade of legal complaints by Nextel's competitors," Coello said.

With bidding completed, the regulators will evaluate the various offers, Cofetel commissioner Rafael del Villar said in a radio interview on Monday.

Cofetel commissioners could not be reached on Tuesday for further comment.

SOLO BIDDER

Nextel and Televisa (TLVACPO.MX) were the only group eligible to bid for the 30 MHz nationwide block because of rules capping the amount that any one operator can own.

Anxious to enter the wireless market, Televisa in February announced it was buying a 30 percent stake in Nextel, owned by NII Holdings (NIHD.O), for $1.44 billion. But that deal depends on their bid for frequency succeeding.

Nextel said it is concerned competitors are trying keep the government from awarding it the spectrum.

"If the 1.7 GHz tender is not authorized, the incumbent operators will avoid the entry of a new competitor and will be the only ones to gain," Nextel said in a statement on Monday.

On the other hand, awarding the spectrum to Nextel and Televisa on the cheap could revive criticism that government officials are beholden to the media giant, which has a 70 percent market share in television and is most Mexicans' main source of news.

In 2006, a political scandal erupted after lawmakers rubber-stamped legislation deregulating television and radio spectrum seen as so beneficial to Televisa that it was dubbed the "Televisa law".

But voiding Nextel-Televisa's bid several weeks after it was made might be seen by investors as a step away from transparency and as a weakening of the government's commitment to competition.

"Declaring that a bid which was made on May 25, almost two months ago, now is null and void -- I would argue that Cofetel would be treading into the Venezuelan-like waters of government interference," said Stifel Nicolaus brokerage analyst Christopher King.

Last week, Cofetel said the Nextel-Televisa group won spectrum in another auction for frequencies in the 1.9 GHz band. But Nextel says the 1.7 GHz block is key to offering clients 3G data services.

Cofetel has 30 days to finalize the results of the 1.7 GHz auction, but took only about a day to rule on the 1.9 GHz auction once bidding ended.

"There are a lot of rumors that that 1.7 (GHz) is being declared void. Please don't believe them," Cofetel head Mony de Swaan said on his Twitter account on Monday. "The analysis is just beginning and it depends on the commission."

($1 = 12.80 pesos)