UPDATE 3-Mexico telco regulator to slap measures on market dominated by Slim

Fri Mar 7, 2014 12:02am EST

By Tomas Sarmiento and Elinor Comlay

MEXICO CITY, March 6 (Reuters) - Mexico's telecoms regulator said on Thursday it would take steps to boost competition in a market dominated by billionaire Carlos Slim's phone giant America Movil, exercising far-reaching new powers it was granted by the government last year.

The Federal Telecommunications Institute (IFT) said it had determined who is dominant, or has an oversized market share, in the telecoms and broadcast sectors, even though legislation to implement the sweeping telecoms reform of 2013 is still pending.

Created by the reform with the power to break up dominant players, the IFT did not name the companies in question but said it was it was in the process of notifying the firms concerned.

America Movil has about 80 percent of Mexico's fixed-line business via its Telmex unit and some 70 percent of the mobile sector through its Telcel subsidiary.

A spokesman for America Movil said the company had yet to be notified. Slim's son-in-law Daniel Hajj, the Chief Executive Officer of America Movil, said last year he expected the company to be declared dominant.

A source familiar with the ruling told Reuters broadcaster Televisa, the world's largest Spanish-language content producer, had been notified of its dominant position. Televisa has more than 60 percent of the TV market and has long been accused of wielding too much political power.

The dominance ruling is a key part of the government's telecoms reform, which has lifted expectations that Mexico might finally tackle the extraordinary power enjoyed by a select few companies in Latin America's second largest economy.

The reforms will allow the regulator to apply tougher rules to level the playing field for smaller competitors.

However, a break-up of dominant companies looks unlikely in the foreseeable future. The head of the IFT has said it is only meant to be used as a "last resort" to spur competition.

Still, Congress has yet to approve secondary laws governing the implementation of the 2013 reform. The secondary legislation is expected to be presented in the next few days.

Enrique Melrose, a former commissioner of Mexico's previous telecoms watchdog Cofetel, said it was clear that a decision appeared to have been made against America Movil and Televisa.

But the fact the secondary laws were still pending could hamper efforts to shake up the market, Melrose said.

"A legal vacuum could arise because this is about interpretations of the constitutional reform, and is not based on the secondary law, which hasn't been voted yet," he said.

According to a draft of secondary laws obtained by Reuters, the IFT will be able to force phone companies to seek approval every year for interconnection and infrastructure-sharing terms.

The draft, which could still change, says the IFT will have sweeping powers to clamp down on dominant players.

A range of offers from the prevailing telecommunications player, including promotions and discounts, will only be authorized with the express approval of the watchdog, it says.

NEW TV NETWORKS

The IFT also said it had launched the process for an auction of concessions to create two new nationwide television networks. The new networks would weaken the duopoly of Mexico's two biggest players, Televisa and rival TV Azteca.

Taken together, the two companies control about 95 percent of the broadcast television market.

The regulator said it would publish details of the auction on Friday in the government's official gazette.

"For the first time in the history of the country, it will be possible to realize a tender process to assign new concessions of free-to-air broadcast television," it said.

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