Mexico allows cell alliance if TV opens up

AP News
Posted: Jun 14, 2012 3:13 PM
Mexico allows cell alliance if TV opens up

Mexico's anti-trust regulators announced Thursday they will allow the country's two largest broadcasters to form an alliance in cellphone service, but only if their own industry is opened to more competition through the auctioning of new television frequencies.

The ruling aims at opening both Mexico's highly concentrated telecommunication and media sectors, while offering new business opportunities to the powerful magnates who already control many of those industries. It could represent a graceful end to a turf battle that had been raging for years between the Televisa network, which controls about 70 percent of broadcast TV ad revenues, and telecoms tycoon Carlos Slim, whose Telcel phone carrier controls about the same percentage of the cellphone market.

Each has wanted to move into the other's territory, Televisa by entering the cellphone market and Slim by getting into television. However, analysts have expressed concern about letting them into new sectors since each has been accused of smothering competition in their home industries.

The companies are scrambling for position as services such as fixed and mobile telephones, the internet and television increasingly converge.

Adding to the concerns was the fact that the cellphone company in which Televisa wanted to buy a 50-percent stake, Iusacell, is owned by the same man who controls Televisa's only broadcast competitor, TV Azteca SAB de CV.

The ruling announced by the federal competition commission allows the cell deal to go forward, on the condition that broadcast frequencies for a third national network are auctioned off within two years. That was an implicit warning to the networks not to challenge the auction plan in court, where they have blocked previous initiatives.

Regulators initially rejected Grupo Televisa' SAB's $1.6 billion deal for half of Iusacell, but Televisa demanded they reconsider, resulting in Thursday's announcement.

The political weight of the actors involved is enormous. Slim is considered the world's richest man, and Televisa wields enormous power through its newscasts, entertainment shows and print arm.

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Both sides have argued more competition is needed in their rivals' fields, but not in their own.

The Paris-based Organization for Economic Cooperation and Development has said that Mexicans overpaid for telecommunications services by more than $13 billion a year from 2005 to 2009. It said a lack of competition cost Mexico $25 billion a year in the same period.

Televisa said in a statement it would analyze the terms of the ruling, which also requires numerous firewalls to prevent the two broadcasters from colluding in television services, requires them to offer their broadcast channels unbundled to cable providers and forbids cross-platform bundling in advertising sales.

Telcel is part of America Movil SAB de CV.