SCENARIOS-Plan to shake up Mexico telecoms market faces hurdles

MEXICO CITY, March 15 (Reuters) - An ambitious government plan to shake up Mexico's phone and television markets passed its first hurdle in Congress just days after it was unveiled, but political sniping, legal risks and the power of industry giants could still blunt or delay it.

Unveiled by President Enrique Pena Nieto on Monday, the bill aims to boost industry competition and foreign investment, and give regulators the right to force companies controlling more than 50 percent of the market to sell assets.

Billionaire Carlos Slim's phone giant America Movil controls some 70 percent of Mexico's mobile business and 80 percent of its fixed phone lines, while Emilio Azcarraga's Televisa has about 60 percent of the broadcasting market.

Pena Nieto forged the bill as part of a pact he made with the heads of the main opposition parties. Shares in both America Movil and Televisa have fallen this week.

Lawmakers in Pena Nieto's Institutional Revolutionary Party (PRI) are confident the reform will quickly become law, and a committee in the lower house passed it without changes late on Thursday. But potential hurdles still loom.

Below are some risks:

POLITICAL WRANGLES

Pena Nieto, who took office in December, lacks a majority in Congress. The PRI has near-control of the lower house, and his main reform bills have so far passed it quickly.

But the PRI is less assured of votes in the Senate, where a group loyal to Pena Nieto's conservative predecessor Felipe Calderon of the opposition National Action Party (PAN) has given his most important bills a rougher ride.

One member of the faction, former PAN labor minister Javier Lozano, heads the key communications committee of the Senate, and he criticized the bill in an interview published in daily El Universal on Thursday, saying it showed a number of flaws.

Lozano, a former telecommunications regulator, said the plan to create a new, independent watchdog contained "monumental errors," such as the requirement that it consult the president on telecom concessions. "After all, isn't the entity autonomous?" he asked.

The telecoms bill contains constitutional changes that will require a two-thirds majority in both houses, so Pena Nieto is likely to need PAN support in the Senate.

IMPLEMENTATION

After the bill passes Congress - which PRI lawmakers say should be by April 30 - separate legislation must still be drawn up to implement the constitutional changes.

Working this out can be more complex than agreeing on reforms, and analysts say if the government is not careful, the implementation bill could leave the door open to challenges.

"It is not improbable they could lodge a constitutional challenge," said Jose Roldan, a researcher and professor in the public administration faculty at the Center for Economic Research and Teaching in Mexico City. He said however it would be harder for companies to fight the reform because it is constitutional.

LEGAL PUSHBACK

Slim and Televisa spent years successfully defying efforts by previous governments to curb their power, taking full advantage of their right to appeal against rulings by blocking, outmaneuvering and suspending action by Mexico's regulators.

"They will try and turn it around, definitely," said Aleida Calleja, president of the Mexican Association for the Right to Information, which has campaigned for tougher telecoms laws.

The government wants to put an end to the legal deadlock by creating special tribunals to settle disputes in the sector and doing away with companies' right to suspend decisions by regulators while appeals are pending.

NEW OPENINGS

Even if the bill passes smoothly, it is unclear how quickly the new regulator could make dominant players sell off assets. And the law could enable Slim and Televisa to offset losses in their main businesses by moving into each other's.

Slim is keen to enter the Mexican TV market while Televisa has been trying to grow its cell phone joint venture Iusacell, which it operates with fellow broadcaster TV Azteca .

Jose Ignacio Peralta, deputy communications minister, said the new law would open the phone and TV markets to all players, provided regulators did not believe they would hurt competition.

"Let's say the size of dominant players doesn't necessarily imply anti-competitive behavior," he said. "The concentration of the market is one thing. It's something else when this dominant economic player is using its market power, its size, its concentration, to behave in a predatory, monopolistic way." (Reporting by Alexandra Alper, Michael O'Boyle, and Elinor Comlay; Editing by Dave Graham and Jeffrey Benkoe)