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Mexican Telecom and TV Tycoons to Assess Regulatory Ruling

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The government of Mexico has decided to reform its telecommunications sector, predominantly the wireline and wireless phone segments along with the cable and satellite TV segments.

In this regard, regulatory body Federal Telecommunications Institute, which is popularly known as IFT, identified telecom behemoth America Movil S.A.B. (AMX - Free Report) and broadcasting giant Grupo Televisa S.A.B. (TV - Free Report) as the dominant players in the respective markets.

America Movil’s wireline division, Telmex, currently controls around 80% of the Mexican market, whereas its wireless division, Telcel, holds about a 70% market share. On the other hand, Televisa currently dominates approximately 70% of the Mexican broadcasting and pay-TV market. Notably, the IFT wants to restrict the maximum hold of a company in a market to 50%.

As stringent measures, IFT will ban America Movil from charging national roaming fees. Further, the company will have to share its infrastructure with other operators particularly in the local loop (last mileage) segment. Interconnection fees levied by America Movil will also be closely monitored.

Similarly, Televisa will have to share its broadcast towers with competitors for a stipulated amount of fees. Moreover, Televisa will not be allowed to acquire exclusive broadcasting rights of popular sports and entertainment events.

America Movil already filed an injunction against the regulator's decision to identify itself as a dominant operator and impose asymmetrical regulations on it. Televisa also stated that the new telecommunications bill would impose disproportionate obligations on the company such as, limitations on its advertising sales, use of infrastructure and content distribution.

America Movil has decided to form a committee to strategically assess various structural, commercial, technological opportunities available to the company after the imposition of the new regulations.

However, the new regulations will allow America Movil to enter the broadcasting market of Mexico, which has been controlled by Televisa for a long time. In fact, America Movil had been eager to enter this market with its existing telecom network earlier.

On the other hand, the new telecommunications industry reform bill of the Mexican government may pave the way for Televisa to capture a large chunk of the wireless market share.

In 2010, Televisa abandoned its wireless venture with Nextel de Mexico, a subsidiary of NII Holdings Inc. owing to prolonged legal disputes. Currently, the company holds a 50% stake in Grupo Iusacell, a small wireless operator of Mexico. Telefonica S.A. (TEF - Free Report) is also negotiating with Televisa and Grupo Salinasto, the remaining 50% stake holder of Iusacell, for the complete acquisition of the company.

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