America Movil S.A.B. (AMX - Free Report) , the undisputed leader of the Mexican telecom (both wireless and wireline) market, is currently facing a regulatory probe by the Federal Telecommunications Institute (IFT). The probe relates to a business agreement between the company’s fixed-line wing Telmex and satellite TV operator Dish Mexico.
Over the last two years, the Mexican telecom market (including phone, Internet and pay-TV) has witnessed several regulatory changes. The government is trying to inject competition in this highly monopolistic market where America Movil dominates the phone and data segment while Grupo Televisa S.A. (TV - Free Report) controls the pay-TV segment.
In Mexico, while pay-TV operators are allowed to enter the telecom field by offering triple-play digital phone, high-speed Internet and pay-TV services, America Movil is currently barred from offering TV services due to the terms of its government concession. However, the company is nearing the end of an 18-month compliance period after which it would be eligible to apply for a TV licence.
Meanwhile, in 2008, Telmex had entered into an agreement with Dish Mexico which enabled the former to print a single bill for shared services of broadband and TV. Under the terms of the partnership, America Movil had an option to acquire a 51% stake in Dish Mexico which was subsequently waived in July 2014. Televisa and other pay-TV operators hold that the deal between Telmex and Dish Mexico is improper. Notably, Dish Mexico is jointly held by Mexico-based MVS Comunicaciones and U.S.-based EchoStar Corp. (SATS - Free Report) .
Last year, the Mexican government reformed its telecommunications sector norms to curb the monopolistic power enjoyed by the incumbent America Movil. The company controls nearly 80% and 70% share of the Mexican wireline and wireless market, respectively. The Mexican regulator aims to restrict America Movil’s market share within 50%.
U.S. telecom behemoth AT&T Inc. (T - Free Report) has already forayed into the Mexican wireless market through its acquisition of Grupo Iusacell and Nextel de Mexico. At this juncture, an enquiry by the regulator might not bode well for America Movil given that it is desperately trying to enter the pay-TV market.
America Movil currently carries a Zacks Rank #5 (Strong Sell).
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