By Juan Montes 

MEXICO CITY -- Billionaire Carlos Slim's telecommunications company América Móvil SAB said Wednesday that Mexican regulators imposed additional measures on its local operations, including the separation into a new company of certain wholesale services provided by fixed-line unit Telmex.

The additional measures follow a review of regulations imposed in 2014 on Telmex and mobile unit Telcel, which were determined to be dominant with more than 50% of their respective markets.

Those regulations included asymmetric interconnection rates and infrastructure sharing with rivals. Those regulations will remain in place while the Federal Telecommunications Institute adds restrictions on both mobile and fixed-line services, including terms under which the company provides wholesale services to other operators.

The agency also ordered the creation of a company independent of Telmex to provide wholesale access to last-mile infrastructure for competitors, while Telmex's other wholesale services must be separated from its retail services.

América Móvil intends to challenge the new regulations, which it said doesn't consider "the profound changes in the Mexican telecommunications sector within three years from the imposition of the asymmetric regulations and the effective competition that exists in mobile and fixed services."

The agency's decision comes as a blow for Mr. Slim's Mexican telecommunications operations, which have already seen profit margins shrink amid tougher competition. In the fourth quarter, América Móvil reported a net loss of about $300 million, in part because of a weak performance in Mexico.

The main beneficiaries of the decision are Mr. Slim's rivals AT&T Inc. of the U.S. and Telefónica SA of Spain, which have gained market share in recent years and are aggressively investing in Mexico.

AT&T has committed to invest about $3 billion from 2015 to 2018 on top of the $4.4 billion purchase in 2015 of mobile-phone companies Iusacell and Nextel.

The U.S. telecom giant, which has about a 10% share of the Mexican mobile market, has launched an advertising campaign, deploying hundreds of banners around Mexico City implicitly criticizing Telcel's service.

AT&T also has sought further restrictions on América Móvil. Company executives met twice in the past year with top officials of Mexico's regulator to discuss the effectiveness of the regulations, according to public records.

In a 2016 report about Mexico's telecom sector, AT&T said the existing regulations were insufficient to tackle América Móvil's dominant position in the market and urged regulators to impose additional measures.

"The promise of the 2013 telecom reform has not been fulfilled yet, and there is a risk it joins the long list of failures to control the overwhelming power of América Móvil," AT&T said.

Telmex and Telcel were first declared dominant in March 2014 under laws passed the previous year to stoke competition in a near-monopolistic market that had resulted in poor service and high prices for Mexican consumers.

The telecom regulator has said the phone market has improved since then. Prices of cellphone services have fallen about 30% in the past year, while investments have increased and the market is less concentrated.

Telcel's market share fell to 66% in the third quarter of 2016 from 71% in the same period of 2013. In turn, AT&T and Telefónica have increased their share of subscribers to 10% and 24%, respectively.

But Mr. Slim's companies still have a market share well above the 50% threshold that requires companies to face specific regulations. In mobile broadband services, Telcel even increased its market share to 70% in the third quarter from 62% three years before.

Telmex, which has about 64% of Mexico's fixed phone lines, will continue to allow competitors low-cost access to its network, including the so-called last mile that reaches final users.

Telcel must still pay to connect calls to rival networks, while completing incoming calls free of charge -- a system known as asymmetric regulation that works as a subsidy to rivals, making them better able to compete on prices.

Mr. Slim's companies also must share parts of its infrastructure -- such as rights of way, transmission towers and antennas -- with rivals.

Anthony Harrup contributed to this article.

Write to Juan Montes at juan.montes@wsj.com

 

(END) Dow Jones Newswires

March 08, 2017 23:38 ET (04:38 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
America Movil SAB de CV (NYSE:AMX)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more America Movil SAB de CV Charts.
America Movil SAB de CV (NYSE:AMX)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more America Movil SAB de CV Charts.