Telmex, a wholly owned subsidiary of
America Movil S.A.B
) and the dominant provider of fixed-line telephone services in
Mexico is facing a lawsuit filed in the civil court by the
federal consumer protection agency in Mexico. Telmex has been
accused of charging illegal fees from customers for services
deemed free by the agency.
According to market reports, Telmex has been charging illegal
fees of about 85 peso cents to about MXN$10.40 from customers who
seek privacy by not registering there names on the telephone
directory. The agency believes this is one of the many fees that
the company charges for services, which are otherwise free for
customers. These practices of the company are misleading and
result in unfair pricing competition among carriers and undue
pressure on consumers.
Beside Telmex, America Movil's wireless wing, Telcel, is also
being observed by the consumer protection agency in Mexico for
issues related to the reimbursement of recent service failures.
Cases against Telecl were filed in February this year.
Mexico has been tightening its lead against giant telecom and
cable service providers after a new bill proposed by Mexican
President Enrique Pena Nieto was introduced to reform its telecom
and television industry in Mar 2013.
The proposal struck the Mexican telecom and television industry
on a discordant note as it is unfavorable for giant corporations
- America Movil and
Grupo Televisa S.A.
). The proposal stresses on the implementation of the asymmetric
regulations that faced severe condemnation by America Movil.
The rule implies that predominant players, which control the
majority of the market share as in the case of America Movil,
will have to pay higher mobile termination rates (MTRs) to
smaller peers while receive less from them for network
interconnection. Through Telcel and Telmex, America Movil
commands about 70% market share, while the Spanish wireless
) controls nearly 22% of the Mexican market share.
AMER MOVIL-ADR (AMX): Free Stock Analysis
MOBILE TELE-ADR (MBT): Free Stock Analysis
TELEFONICA S.A. (TEF): Free Stock Analysis
GRUPO TELEVISA (TV): Free Stock Analysis
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Given the nature of the Mexican telecom and television market,
characterized by severe competition and quasi-monopolistic
practices, the proposed reform comes as no surprise. The bill, if
approved, would mark a pivotal role in shaping the telecom
industry in Mexico and decide the prospects for these carriers in
Mexico that have so far reaped large profits and grown as market
leaders throughout Latin America.
America Movil has a Zacks Rank #3, implying a Hold rating.
Mobile Telesystems OJSC
), with a Zacks Rank #1 (Strong Buy) is another stock in this
sector, which we believe is worth considering.