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Mexican Senate Approves Major Telecom Reform Bill

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April 22, 2013

The Mexican Senate passed a bill that encourages more foreign investment in the telecommunications sector and gives regulators the power to stop companies from controlling more than 50% of the market

Mexico City, Mexico - A major bill to shake up competition in the Mexican phone and television markets, dominated by Carlos Slim and broadcaster Televisa, was approved by the Senate on Friday with changes that could affect the broader regulatory landscape.

The bill encourages more foreign investment in the telecommunications sector and gives regulators the power to stop companies from controlling more than 50% of the market, a measure aimed directly at Slim and Televisa and could oblige them to sell off assets.

Slim's phone company America Movil controls some 80% of the fixed line business and about 70% of the mobilemarket. Televisa has more than 60% of the TV market.

Still, if companies are declared dominant by the competition regulator, forced asset sales will not be automatic.

Seeking to accelerate change, the reform states phone and TV companies will no longer be able to suspend decisions by the regulator on appeal. But the amended bill included a section creating leeway for non-telecommunications firms to do that.

The bill, which President Enrique Pena Nieto first unveiled on March 11th, now returns to Mexico's lower house of Congress for final approval. Members of his Institutional Revolutionary Party (PRI) are confident it will pass before the month ends.

The legislation mandates the creation of a new regulator known as Ifetel which will be solely responsible for the telecoms market. It also outlines the shape of a new federal competition commission, which will regulate all other areas.

The version of the legislation passed by the Senate added a brief section saying that companies that are fined or told to sell off assets by the new federal competition commission would have the right to lodge appeals to suspend these decisions.

That cuts against government efforts to put a stop to firms using Mexico's Byzantine legal system to thwart regulatory rulings. Last month Congress passed a new bill to eliminate the ability of companies with public concessions to block those decisions during the appeals process.

Televisa and America Movil have been particularly adept at outwitting regulators. But as they would be subject to Ifetel, not the federal competition commission, the new section will not grant them more power to contest regulatory rulings.

That could still change depending on how lawmakers draw up the rules to implement the reform, provided the bill passes.

The bill also risked creating a double standard in which telecoms companies were treated more strictly than other industries, said Federico Gonzalez Luna, a Greens lawmaker who heads the radio and TV committee in the lower house of Congress.

Uncertainty over the final details of the bill has been dragging on the share prices of America Movil and Televisa.

America Movil Chief Executive Daniel Hajj said on Friday the new law was likely to mean the company would be determined a dominant player as it published its results.

America Movil shares are down more than 16% this year, while Televisa shares have fallen almost 9%.