Mexico's Telecom Reform produces results earlier than expected

MEXICO - In Brief 09 Jul 2014 by Mauricio González

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Last week telecom’s secondary laws were approved in the Senate. Today as the Lower House passed the new legislation, with no major changes, América Móvil (AMX), announced they’ll divest some assets in order to avoid the sanctions of being a dominant telecommunications player, as was established by the regulator (IFT) a few months back. This means it will reduce its market share from 62% in fixed telephone and 70% in mobile phone service and internet, to somewhat less than 50%. Sanctions for dominant agents in the telecom market included: asymmetric zero rate charges for AMX interconnection services, and divestiture of wireless stations from the mobile phone operator in order to share infrastructure with other competitors, amongst others. In consequence, AMX will sell enough assets, in an amount as of today undisclosed, in order to be considered a non-dominant player. It is estimated this will reduce AMX’s revenues considerably by this action, however at the same time it would avoid a sacrifice of uncollected interconnection revenues in the order of US 18-US $20 billion per year if it had remained a dominant player. As a result, in a few months, there could be a new important competitor (whose identity is not known yet), in Mexico’s telecom market, that could allow better quality services at lower costs for consumers, which was the main original purpose of telecom reform. After a long discussion and some legislative delays, the government’s reform seems to be on its way to limit non competitive practices in the telecom market, much sooner than expected.