Mexico’s regulatory environment – or lack thereof – good news for media empires


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Mexican business is happy chief antitrust regulator, Eduardo Perez Motta, has gone from losing 75% of the cases he brought before the country's courts, to winning 75% of them. Why?

[caption id="attachment_63821" align="alignright" width="300" caption="Eduardo Perez Motta in Washington D.C."] Image courtesy Pablo H: [/caption]

The regulator won a hard-fought settlement from world's richest man Carlos Slim and his telecom giant America Movil ( AMX , quote ) last month, though the agency eventually overturned the $1 billion sanction against the Mexican business.

So why is this good news for media monopolies like Slim's in Mexico?

For a company that has 70% of the mobile-phone market and 80% of the land lines, America Movil had to expect to tangle with antitrust regulators eventually. After years of using market dominance to inflate prices, the company actually came away from the settlement with concessions from the government in exchange for cutting fees.

Over the last three months since the announcement, shares are up 1.0% versus a selloff of almost 10% in the broader iShares MSCI Mexico Investable ( EWW , quote ). This is what Perez Motta calls a victory and attributes it to cooperation with corporate heads.

Having lived in Latin America, I have seen the violence and hardship delivered on regulators and public prosecutors so I won't take anything away from Motta. Getting any kind of deal from the telecom company was indeed nothing short of ground-breaking.

It does bode well however for the two media empires in the country: Slim's America Movil and Televisa ( TV , quote ), which commands about 70% of the Mexican broadcast market. If the weak settlement with America Movil was seen as a major victory then there is really very little to threaten the two companies' market dominance.

The relative power gained by the regulatory authority may be short-lived. The next president chooses his successor in December. Whether the next antitrust chief is as effective as Perez Motta or not seems irrelevant, it appears the only way to make any progress in Mexican business is by 'cooperating' and bargaining.

Good news for the two dominant players. They may eventually have to fight against each other, but will probably not have to fight against other Mexican business.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks

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