UPDATE 2-Mexico's competition agency fines Slim company $52 mln

Thu Feb 7, 2013 3:23pm EST

MEXICO CITY Feb 7 (Reuters) - Mexico's competition watchdog said on Thursday it will fine the fixed-line phone company controlled by Carlos Slim $52 million for monopolistic practices.

The Federal Competition Commission (Cofeco) said Telmex, which is part of Slim's phone behemoth America Movil, should pay 657 million pesos after Cofeco found it denied rival telephone company Axtel access to some of its network.

Slim's Telmex, which he bought from Mexico's government in 1990, refused to connect its network with Axtel's in various locations over two years, Cofeco said.

"Telmex has substantial power in the market for local and long distance connections and, under the terms of its (government) concession, it is obliged to offer connections to third parties," said the statement.

Telmex has about 80 percent of Mexico's fixed-line market, while America Movil's Telcel unit controls about 70 percent of Mexico's mobile phone market.

Both Axtel and Telmex have 30 days to ask Cofeco to review its ruling.

Telmex said in a that it believes Cofeco's ruling is unfounded and the company is fully in compliance with the terms of its concession.

Cofeco said in 2011 it would fine Slim's America Movil $1 billion for anti-competitive practices but after the company disputed that fine, the watchdog allowed it to skip the payment in return for cutting charges to competitors.

Mexico's competition watchdog has been trying to increase supervision of Slim's companies, but with little success to date.

As a result of the lack of competition in Mexico's phone market, Mexicans were overcharged $13.4 billion a year from 2005 to 2009 for phone and Internet services, according to a January 2012 report published by the Organization for Economic Co-operation and Development (OECD), which was funded by the Mexican government.

Axtel shares were down 5.17 percent at 3.30 pesos in afternoon trading, while America Movil shares were flat at to 15.86 pesos.

Axtel, which offers broadband and home-phone line services, has waded deep into debt in its attempt to compete with Telmex. The company last month completed a debt exchange offer to keep it afloat.