After a long wait, the impending Telecommunications Competition
Bill has finally received the green signal from the Mexican Senate,
according to Bloomberg reports. While the new bill favors the
small telecom players defending their competitive position, it
targets larger operators like
America Movil S.A.B.
Grupo Televisa S.A.B.
), occupying dominant positions in the Mexican telecom
In early 2013, the aforesaid new Telecommunications Competition
Bill was proposed by the Mexican President Enrique Pena Nieto,
highlighting several measures necessary to reform the telecom and
television industry in Mexico. The main objective behind
introducing this bill was lending greater uniformity and
transparency to the sector while also curbing the concentration of
power lying in the hands of select players who dictate market
behavior. The telecommunications sector in Mexico is highly
monopolistic with one or two major companies influencing the
America Movil's wireline division, Telmex, currently controls
around 80% of the Mexican fixed-line business, whereas its wireless
equivalent, Telcel, holds about 70% market share. Other wireless
behemoths in Mexico include
NII Holdings Inc.
Meanwhile, the Mexican government intends to increase
competition by encouraging the entry of new operators in the
industry. This, in turn, should help control the price of telecom
and broadcasting services in the country.
Apart from advocating the need to create a new regulatory body,
the bill stresses on the implementation of asymmetric regulations -
a move that faced severe condemnation from America Movil. The rule
implies that the leading players, who control majority of the
market share, as in the case of America Movil, will have to pay
higher mobile termination rates (MTRs) to smaller peers and receive
lower rates from them for network interconnection.
Similarly, Televisa, which rules the Mexican broadcasting
market, will have to share its broadcast towers with competitors
for a stipulated amount of fees. In addition, Televisa will also
not be allowed to acquire exclusive broadcasting rights of popular
sports and entertainment events.
In April 2014, America Movil filed an injunction against the
regulator's decision distinguishing the company as a dominant
operator and imposing asymmetrical regulations on it. On its part,
Televisa also reportedly stated that the new telecommunications
bill would impose disproportionate obligations on the company such
as limitations on its advertising sales, use of infrastructure and
However, America Movil's appeal fell on deaf ears. Despite all
its objections, the bill has successfully seen the light of the
day. The new rules could force America Movil to eliminate fees on
mobile termination and share its network infrastructure with other
operators. To add to its woes, America Movil is also likely to be
banned from charging national roaming fees. This is part of the
initiative being taken to prohibit telecom operators from charging
domestic long-distance fees beginning next year.
However, on the bright side, the new telecommunications reform
bill in Mexico may pave way for Televisa to capture a large chunk
of the wireless market share. The new regulations will also
similarly allow America Movil to enter the broadcasting market of
Mexico, which has been dominated by Televisa for a long time.
However, the proposed regulation will defer America Movil's
television expansion plans for at least another two years.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
TELEFONICA S.A. (TEF): Free Stock Analysis
GRUPO TELEVISA (TV): Free Stock Analysis Report
AMER MOVIL-ADR (AMX): Free Stock Analysis
NII HLDGS-CL B (NIHD): Free Stock Analysis
To read this article on Zacks.com click here.