UPDATE 1-Mexico's Senate approves telecom reform bill with changes

Fri Apr 19, 2013 7:02pm EDT

By Dave Graham and Miguel Gutierrez
    MEXICO CITY, April 19 (Reuters) - A major bill to shake up
competition in the Mexican phone and television markets,
dominated by Carlos Slim and broadcaster Televisa, was approved
by the Senate on Friday with changes that could affect the
broader regulatory landscape.
    The bill encourages more foreign investment in the
telecommunications sector and gives regulators the power to stop
companies from controlling more than 50 percent of the market, a
measure aimed directly at Slim and Televisa.
    Slim's phone company America Movil controls some 80 percent
of the fixed line business and about 70 percent of the mobile
market. Televisa has more than 60 percent of the TV market.
    Still, if companies are declared dominant by the competition
regulator, forced asset sales will not be automatic.
    Seeking to accelerate change, the reform states phone and TV
companies will no longer be able to suspend decisions by the
regulator on appeal. But the amended bill included a section
creating leeway for non-telecommunications firms to do that.
    The bill, which President Enrique Pena Nieto first unveiled
on March 11, now returns to Mexico's lower house of Congress for
final approval. Members of his Institutional Revolutionary Party
(PRI) are confident it will pass before the month ends.
    The legislation mandates the creation of a new regulator
known as Ifetel which will be solely responsible for the
telecoms market. It also outlines the shape of a new federal
competition commission, which will regulate all other areas.
    The version of the legislation passed by the Senate added a
brief section saying that companies that are fined or told to
sell off assets by the new federal competition commission would
have the right to lodge appeals to suspend these decisions.
    That cuts against government efforts to put a stop to firms
using Mexico's Byzantine legal system to thwart regulatory
rulings. Last month Congress passed a new bill to eliminate the
ability of companies with public concessions to block those
decisions during the appeals process. 
    Televisa and America Movil have been particularly adept at
outwitting regulators. But as they would be subject to Ifetel,
not the federal competition commission, the new section will not
grant them more power to contest regulatory rulings.
    That could still change depending on how lawmakers draw up
the rules to implement the reform, provided the bill passes.
    The bill also risked creating a double standard in which
telecoms companies were treated more strictly than other
industries, said Federico Gonzalez Luna, a Greens lawmaker who
heads the radio and TV committee in the lower house of Congress.
    Uncertainty over the final details of the bill has been
dragging on the share prices of America Movil and Televisa.
    America Movil Chief Executive Daniel Hajj said on Friday the
new law was likely to mean the company would be determined a
dominant player as it published its results. 
    America Movil shares are down more than 16 percent this
year, while Televisa shares have fallen almost 9 percent.
    The amended bill included other changes that did not
substantially affect the shape of the reform.