Mexico telcos face shake-up

MEXICO'S government has threatened the country's telecommunications giants with forced asset sales, unveiling a plan to loosen billionaire Carlos Slim's hold on the telephone market and curb broadcaster Televisa's dominance of the airwaves.

The long-awaited bill seeks to shake up the telecoms sector by allowing increased foreign ownership of media and phone companies, and giving regulators the power to make players controlling more than 50 per cent of the market sell assets.

"The purpose of these measures is to free up the sector's potential, and do it as quickly as possible," President Enrique Pena Nieto said as he presented the plan on Monday.

Flanked by the leaders of Mexico's main political parties, Pena Nieto said the reform will allow companies to grow, but added that they would have to do so with innovation and investment, by improving prices and the quality of their service.

Previous governments have failed to curb the power of Mexico's telecoms and media tycoons, and fostering more competition in the industry is seen as a crucial yardstick of the new government's ability to unlock the economy's potential.

Pena Nieto's government, which took office in December, negotiated the reform bill with leaders from the main opposition parties after the two forged an accord with the president in December called the Pact for Mexico.

However, the planned reform may still face a tough road in Congress, where Pena Nieto lacks a majority.

Slim, the world's richest man, dominates Mexico's telecommunications market, controlling about 70 per cent of its mobile market and 80 per cent of its fixed phone lines. Televisa, controlled by tycoon Emilio Azcarraga, has about 60 per cent of the broadcast market.

The bill stipulates that any company with a market share exceeding 50 per cent will be deemed dominant.

A dominant player may be subject to sanctions, including possible forced asset disposals, the proposal said. It also seeks to curb the ability of companies to suspend legal rulings against them while they appeal decisions.

Limits on foreign ownership of fixed-line assets would be eliminated under the bill. It also envisages allowing foreign investors to take up to 49 per cent ownership of TV or radio broadcasters, pending a review by a foreign investment commission.

Analysts have said Spain's Telefonica SA could move to buy up phone companies Maxcom and Axtel once foreign ownership limits are removed.

In the television market, the bill aims to increase competition by auctioning rights to run two new television channels, a process that will not be open to the two most powerful broadcasters, Televisa and TV Azteca.

It could also open the door for Slim to the television market but it is unclear whether he will be able to take part in the new auction.

Javier Oliva, a political scientist at the National Autonomous University of Mexico, said with the leaders of the three main parties backing the bill, it would be much tougher for telecom industry lawyers to neuter the reform.

The bill proposed introducing a new telecoms regulator, the Federal Institute of Telecommunications (IFT), along with specialised courts for settling competition disputes.

Pena Nieto has pledged to ramp up economic growth to six per cent a year, from about four per cent in 2012 and has said that a shake-up of state oil firm Pemex, broadening the tax base and increasing competition will be key. Reuters