By Juan Montes
MEXICO CITY--Mexican President Enrique Peña Nieto submitted to
Congress on Monday a telecommunications bill intended to boost
competition in the quasimonopolistic markets dominated by tycoon
Carlos Slim's América Móvil and broadcast company Grupo Televisa,
just weeks after the country's telecom regulator imposed tough
restrictions on both companies.
The proposed legislation is the final step toward overhauling
rules governing the country's telecommunications and television
markets, following constitutional changes passed last year in
Congress.
Investors are awaiting the passage of so-called secondary laws
to start taking decisions on new investments and corporate
strategy, such as possible mergers and acquisitions.
Mr. Peña Nieto's proposals come at a decisive moment for
Mexico's telecommunications market. In early March, the new telecom
regulator declared América Móvil and Televisa dominant in their
markets. As a result, the regulator ordered them to share
infrastructure with competitors, banned them from obtaining
exclusive rights to certain content such as sporting events, and
imposed asymmetric interconnection tariffs on América Móvil.
The chances appear good for the bill to pass. The ruling
Institutional Revolutionary Party, or PRI, along with two smaller
allies, has almost enough votes in both houses of Congress to pass
the bill, while the two main opposition parties have indicated they
are willing to pass it during the current congressional period that
runs through April.
Senators from the opposition, however, said that several changes
to the bill will likely be made during negotiations.
The telecom bill gives unprecedented powers to the new regulator
created last year--an autonomous body in charge of awarding
concessions and determining dominant players.
The regulator will also function as a referee, settling disputes
between incumbents and newcomers when they can't reach an agreement
on rates to be paid for sharing infrastructure. It will also
authorize the phone tariffs that dominant players, such as América
Móvil, charge to the public.
The proposed law also raises fines for monopolistic practices. A
firm could be fined as much as 4% of its previous year's revenue
for trying to block the entrance of other competitors, compared
with the current maximum fine of around $500,000.
Critically, the application of regulatory decisions can't be
suspended while they are challenged in court. That is a huge
advantage for regulators that in the past suffered endless
litigation with companies that dragged measures through the courts
as a way of avoiding regulation.
The changes could potentially attract new investors, including
foreigners, to the mobile and TV markets, improving deficient
services and lowering tariffs, many analysts say. Some say that the
new rules will lead to mergers and acquisitions in the coming
months that could transform the country's telecom market.
"The conditions are given to see the creation of two big players
to compete face-to-face with Carlos Slim in the phone sector," said
Ernesto Piedras, a telecom analyst with the consultancy firm the
Competitive Intelligence Unit.
Mr. Piedras said that Spain's Telefónica can't afford to waste
the opportunity to consolidate its position as the second-biggest
mobile operator in Mexico, and that it will likely seek to merge
with Iusacell, the third-largest mobile operator partially owned by
Televisa, and other minor players such as Axtel or NII Holdings
Inc. unit Nextel Mexico.
Telefónica officials have publicly left open the door to
possible mergers or acquisitions in Mexico. Axtel and Nextel
weren't immediately available for comment.
Some observers expressed skepticism about the bill, as it gives
powers to the Interior Ministry to regulate TV advertising and
content and to manage the related sanctions.
"This is a regressive step clearly intended to benefit
Televisa," said Javier Corral, a senator with the conservative
opposition National Action Party, or PAN. "They have taken from the
telecom regulator an important tool."
America Movil's Slim controls around 80% of Mexico's fixed-line
business and about 70% of mobile subscribers, while Televisa has
around 70% of the TV market. Mexicans pay among the highest phone
and broadband rates among member countries of the Organization for
Economic Cooperation and Development.
In the television market, competition is expected to come with
Mexico's first-ever tenders for two new digital broadcast
networks.
A likely candidate to bid for one of the networks is Mr. Slim,
who has shown great interest in the TV business in recent years and
has the experience and the financial muscle to compete with
Televisa. He could be allowed to bid if his companies comply with
measures imposed on the phone market.
"If we get two more players [in television], we could see real
competition in three or five years," said Jorge Negrete, head of
consultancy Mediatelecom Policy & Law. "The new networks could
be a game-changer for the advertising market, giving small and
medium firms access to the advertising pie that is now monopolized
by big corporations."
Although Mr. Slim's fixed-line company Telmex will be able to
request authorization to offer television service, from which it is
currently barred, there is no time for the company to obtain it
before the network tender begins in June.
The bill proposed by Mr. Peña Nieto says the regulator will
review compliance with the regulatory measures imposed on dominant
companies such as Telmex in two years time, making it impossible
for the company to get a single license for all telecommunications
services in the short term.
If Mr. Slim decides to bid for a network concession, it is more
likely he will apply through a different company in a joint venture
with foreign partners, analysts and observers say.
A spokesman for Mr. Slim declined to comment on Mr. Slim's
intentions to bid for a TV network until Mr. Peña Nieto's proposals
are reviewed.
The telecom bill presented by Mr. Peña Nieto allows foreign
investment of up to 49% in a broadcast TV station, which was
previously forbidden.
Write to Juan Montes at juan.montes@wsj.com