August 18, 2017 / 12:42 AM / 3 years ago

Despite legal victory, America Movil may face tough ride with regulator

MEXICO CITY (Reuters) - Despite a landmark Supreme Court ruling in his favor, Mexican mogul Carlos Slim shouldn’t break out the champagne just yet.

A view of The Mexican Supreme Court in Mexico City, Mexico August 16, 2017. REUTERS/Carlos Jasso

Mexico’s top court ruled unanimously on Wednesday that America Movil (AMXL.MX), Slim’s telecommunications juggernaut, should not be barred by law from charging its competitors interconnection fees.

The decision weakened a key pillar of a 2014 sector reform designed to curb the dominance of America Movil, which was created from a state monopoly and still holds about two-thirds of mobile subscriptions in Mexico.

But the ruling also recognized the authority of Mexico’s IFT telecommunications regulator to promote competition, giving it power to set rates carriers pay America Movil for calls made to customers on its network.

While America Movil ran rings around regulators in the past, the IFT may be different. It was created as a product of the reform and has already shown its willingness to stand up to Slim on a number of issues, experts say.

By handing more power back to the regulator, the court decision may have in fact reinforced the reform process, said industry consultant Michael Camunez.

“It can be viewed as really empowering the regulator and deferring to its autonomy and independence, which I think is a good thing for the rule of law in Mexico,” said Camunez, chief executive of Monarch Global Strategies, which advises firms doing business in Mexico.

Foreign companies such as AT&T Inc (T.N) and Telefonica SA (TEF.MC) were quick to raise concerns.

But IFT Commissioner Adriana Labardini said the ruling had strengthened the agency’s mandate to drive competition.

“After this ruling, there is nothing to worry about” for foreign companies, Labardini said in an interview. “There’s now certainty that the constitutional arrangement and constitutional powers of the institute will be honored and respected.... It should be very (calming) to know that this will be in the hands of experts.”

“NOT LENIENT, GENTLE”Resetting the terms of the relationship between America Movil and its competitors marks one of the four-year-old regulator’s biggest tests yet.

Nevertheless, industry experts say the IFT is well-positioned for the task. Unlike its predecessor, Cofetel, the IFT is independent from the executive branch of government, insulating its decisions from political pressure.

And for the most part, the regulator’s decisions cannot be suspended pending litigation, which weakened Cofetel’s regulations, said Luis Rubio, a partner specializing in telecommunications at the law firm Jones Day.

Still, the IFT must take a firm stance, or “we can end up in the whole game that was played before by America Movil, which is basically litigating everything,” Rubio said.

The IFT has ratcheted up antitrust scrutiny against America Movil, ordering the firm to separate part of its network infrastructure into a new entity in March.

The agency’s regulations for America Movil number more than 100 points, compared with just six for broadcaster Grupo Televisa TLVACOP.MX, another company that has been deemed dominant in its market, noted Jorge Bravo, a professor at the National Autonomous University of Mexico (UNAM).

A view of The Mexican Supreme Court in Mexico City, Mexico August 16, 2017. REUTERS/Carlos Jasso

Labardini declined to estimate how long it would take for the IFT to determine rates for America Movil, saying the regulator must still study the court’s decision.

The court left open the possibility of maintaining the so-called zero rate for America Movil, giving the regulator complete sway over the issue.

The IFT “has not been lenient, gentle or generous” with America Movil, Bravo said.

Reporting by Julia Love; Editing by Andrew Hay

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