Mexico phone competition to heat up with numbers war

By Tomas Sarmiento

MEXICO CITY (Reuters) - Mexicans can switch telephone operators without having to change their phone number beginning this weekend, a measure that will heat up competition in an industry dominated by billionaire tycoon Carlos Slim.

Smaller rivals of Slim's cell-phone company America Movil and fixed-line giant Telmex have long yearned for the so-called "number portability" and are expected to take clients away from the market leaders.

Not being able to keep one's number when changing to a new phone company was considered an artificial barrier to competition because clients often did not want to lose a long-held number, known by family and friends.

The new measure, which already applies in much of Europe, will apply to both fixed-line and mobile phones.

"It is highly probable that the larger operators such as Telcel (America Movil) and Telmex in Mexico ... will end up being net donors, at least in the first 12 months after portability implementation," Moody's said in a report.

Of the 70 million cell phones in Mexico, America Movil (AMX.N)(AMXL.MX) has 70 percent of the users, and of the 20 million fixed lines, Telmex (TELMEXL.MX)(TMX.N) operates 90 percent.

With the new regulations, smaller mobile rivals such as Spain's Telefonica (TEF.MC) and Iusacell and smaller fixed-line operators like Axtel and Alestra could start to seduce America Movil or Telmex clients with attractive offers and packages.

Analysts say it is difficult to calculate how many clients will switch operators, although it is expected to be fewer than 5 percent of telephone users, based on similar European experiences.

"The big players are going to be the most affected," said Martin Lara, an analyst with Vector brokerage. "Market share loss will speed up."

Phone users, analysts say, will be the big winners as rates are expected to come down with operators waging a war of new options to keep current subscribers and attract new clients.

"Portability is a measure that will benefit all users ... given that it will step up competition in the sector and will bring about better prices and quality," the Federal Telecommunications Regulator said in a statement.

(Editing by Maureen Bavdek)