A Mexican Supreme Court ruling this week enforcing the interconnection rates set by the telecommunications regulator while they are disputed in court won't affect the earnings or investment plans of the country's largest mobile phone operator, America Movil SAB (AMX.MX, AMX) unit Telcel, a top company official said Thursday.

America Movil Chief Financial Officer Carlos Garcia Moreno said in an interview that the Supreme Court ruling doesn't alter companies' right to challenge regulators' decisions in court, although it affects the timing as mobile operators will have to receive and pay the lower rates set by Cofetel until a final decision is reached.

The lower rates would "marginally affect flows, but not earnings," Garcia Moreno said. It also won't affect America Movil's plans to invest more than $8 billion this year in the 18 countries where it operates. Telcel said it's investing more than $1 billion this year as it continues expanding its nationwide 3.5G data network.

Cofetel sets interconnection rates when there is disagreement among operators, and recently set rates of 39 Mexican cents, or about 3 U.S. cents, per minute for completing calls on mobile networks in disputes involving America Movil unit Telcel, and several other mobile and fixed-line operators. Other resolutions are pending.

A number of fixed and mobile operators have rejected an agreement among Telcel, America Movil's fixed-line unit, Telefonos de Mexico SAB (TELMEX.MX, TMX), and the local mobile unit of Spain's Telefonica SA (TEF), which set a rate of 95 Mexican cents a minute in 2011 for mobile call termination.

The Supreme Court decision doesn't affect that agreement, but the rates that others pay those companies will probably come down to the 39 Mexican cents a minute figure, UBS said in a report, adding that it will mostly affect fixed-to-mobile calls. "The question is who takes a lower [mobile termination rate] and whether it goes to the price," UBS said. "Some players might still not effectively cut payments on concerns that legal challenges could prevail."

UBS said the court ruling was "negative, but relatively small" for America Movil.

Deutsche Bank said in a report that "while recent rulings by the Mexican regulatory agencies and the Supreme Court point towards difficult operating conditions for AMX, after digging deeper into the issues our conclusion is that any financial impact on AMX in the medium term should be limited. We thus see recent correction in the stock a good buying opportunity."

America Movil L shares closed up 0.2% Thursday, at MXN30.71, after falling around 7% over the previous three sessions.

Rival operators and Mexican regulators say that with about 70% of Mexico's mobile phone users, Telcel inhibits competition by charging other operators more in termination rates than it charges its own customers for calls within its own network. Telcel defends the lower rates for its customers, saying the practice is common in all markets where there is competition.

The company also plans to appeal against a $1 billion fine imposed last month by the country's antitrust regulator for allegedly using its market weight and termination fees to displace competitors.

America Movil Chief Executive Daniel Hajj said in a conference call with analysts on Tuesday that Telcel has been lowering interconnection rates every year for the last five or six years. "We are not against reducing the interconnection rate. It's clear that the government wants to reduce the interconnection at a faster pace," Hajj said. But reducing rates at a faster pace could bring about a lack of investment in the sector, he added.

Garcia Moreno rejected assertions that Mexico's interconnection rates are among the most expensive internationally, saying that in 2006-2009 in dollar terms they were below the median of 17 western European countries, and only slightly higher in 2010 after the peso appreciated.

He attributed the drop in the company's share price this week largely to the Supreme Court ruling, considering that the company's second-quarter earnings report released late Monday was neutral for the market.

America Movil reported a higher-than-expected 5.9 million wireless subscriber additions, above expectations of 4.6 million, although Telmex proved a drag on overall margins. The second quarter is seasonally strong for subscriber adds because of Mother's Day, so the company could end up revising its subscriber guidance higher, Garcia Moreno said. Earlier this year, Hajj estimated 2011 subscriber growth of 16 million to 17 million.

Garcia Moreno said Telcel, which up to 2005 had enormous weight in America Movil, now accounts for just over 20% of the company's overall revenue, and he defended America Movil's track record expanding across the Americas. Through investment, coverage, having the latest technology and applying aggressive marketing, the company went from practically nothing to more than 53 million subscribers in Brazil, and also grew from small beginnings in Argentina, Colombia, the U.S. and elsewhere, he said.

"That's what the market recognizes," he said. Investors who follow telcos across the globe "know what we've done being competitive...it's not something that anyone handed over to us."

-By Anthony Harrup, Dow Jones Newswires; (5255) 5980-5176, anthony.harrup@dowjones.com
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