Mexico opens telecom market to foreigners in move to break up monopolies

McClatchy Foreign StaffJune 10, 2013 

— Mexico’s president signed into law a monopoly-busting telecommunications law Monday that’s expected to drive down telephone prices for consumers and cost the country’s richest man billions of dollars.

Carlos Slim, the tycoon whose America Movil SAB controls 70 percent of Mexico’s cellphone business and 80 percent of the country’s landlines, has seen his net worth plummet $5 billion since March, when the law was proposed, as investors sold off the company’s stock for fear of the law’s impact. The slump dropped Slim to second, behind Microsoft founder Bill Gates, in the competition to be the world’s richest man. The law’s implementation is likely to further undercut his business empire.

President Enrique Pena Nieto took less than three months to push the proposal through Congress, a sign of his race to obtain major changes before a broad pact of Mexico’s major political parties unravels. Moments before signing the measure into law, Pena Nieto said it would strengthen Mexican companies and favor consumers with lower prices. That, in turn, will attract foreign investment and speed economic growth, he said.

“Competition not only makes businesses more productive and fosters economic development,” he said, “it also assures Mexican families of getting better products and service at fair prices.”

Slim’s America Movil has lost nearly 40 percent of its value since it became clear last year that Pena Nieto would push to weaken its dominant position. The holding company has operations in 18 countries other than Mexico, yet it gains 35 percent of its revenues from Mexico. Profit margins on its mobile service are among the highest anywhere in the world, exacting a steep toll on consumers.

The new law also aims to reduce the dominance of Mexico’s two powerful television broadcasters, Televisa and TV Azteca. Televisa holds 70 percent of the country’s broadcast television market, while TV Azteca holds less than 30 percent.

Under the new measure, foreign companies are permitted to own 100 percent of a telephone firm – up from 49 percent – and 49 percent of radio and television broadcasters – up from zero.

The legislation also sets up two new autonomous regulatory bodies. One, Ifetel, will have the power to dissolve monopolies by forcing companies to divest assets. It also will issue or revoke licenses, and it will oversee the creation of two new private television networks and a nonprofit broadcaster, perhaps along the lines of the British Broadcasting Corp.

The other body, the Federal Commission on Economic Competition, “will prevent, investigate and combat monopolies, monopolistic practices, concentrations and other restrictions of efficient market functioning,” Pena Nieto said.

The signing of the measure sets a six-month clock running to pass framework laws, making it likely that the new regulatory bodies may issue their first rulings early next year on which companies are dominant in their markets and what steps will be taken to guarantee competition.

“It is a historic moment for the country because it opens new opportunities of access for society as a whole to information and knowledge,” said Gerardo Ruiz Esparza, the secretary of communications and transport.

Consumer activists hailed the new law as a boon to the country.

Adriana Labardini, a co-founder of a group called Al Consumidor – For the Consumer – tweeted that the law is “in great measure a triumph of organized and non-organized civil society, young people, academia (and) activists!”

The head of the Party of the Democratic Revolution, Jesuus Zambrano Grijalva, offered a sober note in the ceremony to enact the law, noting that Mexico has “11 families with fortunes of over $1 billion” but 50 million people living in poverty.

Given the disparity of wealth, “this should not, and must not, be a celebration,” Zambrano said, but a chance to reflect on deep inequities.

Slim’s net worth was more than $72 billion in early March, when Pena Nieto sent the measure to Congress. According to the Bloomberg Billionaires Index, Slim’s net worth had sunk to $66.9 billion by last Friday, well behind Gates’ $72.4 billion fortune.

Email: tjohnson@mcclatchydc.com; Twitter: @timjohnson4

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