Mexico Said to Make Telecom-Dominance Ruling Harder to Avoid

Jan 21, 2014 4:19 pm ET

(Updates with closing share prices in final paragraph.)

Jan. 21 (Bloomberg) -- Mexico’s government is preparing a complex formula to identify dominant phone and media companies, aiming to keep industry giants from manipulating numbers to avoid regulation, said a person with knowledge of the plan.

The nation’s new telecommunications regulator won’t determine the biggest companies in an industry just based on their subscribers or viewers, said the person, who asked not to be identified because the details aren’t public. Rather, the calculation will include a range of measurements, including investments and infrastructure.

Under a law passed last year, companies that have been found dominant in Mexico face tougher scrutiny and enforcement measures, including regulation of the prices they charge and even the forced sale of assets. The government’s rules are most likely to affect America Movil SAB and Grupo Televisa SAB, which were already identified as dominant companies in a preliminary finding in December.

After watching companies circumvent regulation in the past through technicalities and loopholes, the government is determined to make sure a dominance ruling is airtight by not depending on a single measurement, which would be easier for businesses to dispute, the person said.

“We see this as tough to evade” for operators, Andres Audiffred, an analyst with Grupo Financiero Ve Por Mas SA, said in a phone interview from Mexico City. “It makes for a more thorough review on behalf of regulators because it takes into account all these different parts.”

‘Just Beginning’

America Movil, controlled by billionaire Carlos Slim, has about 70 percent of Mexico’s mobile-phone customers and almost 80 percent of its landlines. A press official for the Mexico City-based company declined to comment on the dominance formula.

Televisa, which gets about 70 percent of Mexico’s broadcast-television audience, said last month that it was in the process of analyzing and answering the regulator’s documents.

The broadcaster trusts that regulators will follow the law and doesn’t find it appropriate to speculate about a process that’s just beginning and several weeks away from resolution, said an official at the Mexico City-based company.

America Movil and Televisa have an opportunity to challenge the Federal Telecommunications Institute’s preliminary finding of dominance, which by law must be made final by March 9. Congress is working on secondary laws, or supplemental rules, for last year’s telecommunications legislation.

A press official for the telecommunications institute declined to comment because the process for the dominance rulings is still under way.

Colliding Industries

America Movil and Televisa have been drawn into competition against each other as the phone and media industries collide. Televisa owns cable companies that compete for Internet and voice customers with America Movil. The rivalry has led to regulatory complaints by each side of unfair practices.

America Movil’s landline unit, known as Telmex, denied a report last week by El Financiero that the carrier had designed a mechanism to avoid regulation by assigning its network assets to a spinoff real-estate holding company.

The newspaper report focused on a lawsuit by a unit of Televisa. A company official told Bloomberg News that the division, Bestphone, is a creditor of Telmex and obtained a court order Jan. 7 to suspend the plans of Slim’s company to spin off the units.

Telmex said its spinoff only included real-estate and equipment-logistics businesses, not telecommunications. It said Bestphone isn’t a Telmex creditor.

America Movil fell less than 1 percent to 14.40 pesos at the close in Mexico City, while Televisa slid 1.9 percent to 78.45 pesos.

--Editors: Crayton Harrison, Kevin Miller