America Movil may not face tougher regulation without asset sale: regulator

Reuters News
Posted: Mar 28, 2015 1:38 PM

By Christine Murray and Tomás Sarmiento

MEXICO CITY (Reuters) - Mexico's telecom regulator will not necessarily impose tougher rules against billionaire Carlos Slim's America Movil if it does not go ahead with a plan to sell off assets, the head of the regulatory agency said in an interview on Friday.

Mexico's Congress last year passed sweeping telecoms reform aimed at curbing America Movil's industry dominance, prompting the company to say it would sell a chunk of assets to reduce its market share to below 50 percent.

Gabriel Contreras, head of the Federal Telecommunications Institute (IFT), said on Friday it would not necessarily take new action against America Movil in a revision of the industry next year if the company has not made those sales.

"The problem of the market is not the size of the operator. This is a market with economies of scale, it's capital intensive. The problem is if market power is abused," he told Reuters.

Slim, whose family controls America Movil, said in July that taking six months to offload assets of Mexico's largest wireless operator would be "slow".

But eight months on, there is still no sale and some analysts have cast doubt on whether the plan will go ahead.

Analysts at UBS recently cited Chief Financial Officer Carlos Garcia Moreno as saying that with active subscriber management, virtual operator deals and stronger competition, the company could go below the 50 percent threshold.

Analysts at Itau BBA said they understood that the asset sale had been suspended "at least for the time being".

America Movil spokeswoman Paula Maria Garcia said the company was looking at all options in terms of the sale.

In the last two weeks, the company has signed its two first mobile virtual network operators (MVNOs) to its network, Axtel and a Grupo Elektra, something it was forced to do as part of the IFT rules.

Contreras said that subscribers in these MVNOs would not count towards America Movil's total market share.

Since the law was passed and the IFT imposed tougher regulation on America Movil and broadcaster Grupo Televisa, average cell phone prices have dropped and AT&T has said it will buy up Mexico's No.3 and No.4 wireless carriers.

Contreras said the industry was moving in the right direction, and that, in theory, there could be a competitive market with the status quo of three players.

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He added that, so far, America Movil was complying with many of the rules imposed on it, but that if in March 2016 the IFT had not seen the results it wanted in terms of competition, it could impose further measures.

America Movil expects to complete a spin off of around 11,000 towers in Mexico into a new company by June.

Contreras said that as long as it is controlled by the same shareholders, it will be subject to dominance regulation.

Another part of the reform meant the auction of two new free-to-air television channels. Despite local media reports that one of the winners Radio Centro may not be able to pay for the channel it won, Contreras said he had seen no evidence of that.

(Reporting by Christine Murray and Tomas Sarmiento; Editing by Bernard Orr)