March 9, 2014 1:09 pm

Mexico watchdog opens door to Slim’s TV ambitions

Billionaires Carlos Slim And Bill Gates Announcement On Funding The CIMMYT Agricultural Initiative©Bloomberg

The telecoms billionaire has long sought a foothold in TV

Carlos Slim, the Mexican telecoms billionaire, has long had an eye on his country’s television market but has been barred from entering it ever since he took over the national telecoms concession in 1990.

But a green light for him to enter the lucrative market could come by May 5.

The Federal Telecommunications Institute, IFT, last week branded Mr Slim’s companies “predominant” and ordered them to share infrastructure, grant network access and cut some costs, is analysing whether to allow him to offer additional services.

Gabriel Contreras, IFT president, said the institute had 60 days, starting on March 7, when it declared Mr Slim’s América Móvil and Telcel phone groups, as well his Grupo Carso and Financiero Inbursa a “preponderant economic agent in the telecoms market”, to decide on concession changes that could let him offer new services.

That could potentially open the door to his participation in tenders for two new television channels in Mexico – the first to be auctioned in the country’s history.

The tender process kicks off in June and bids have to be submitted by September 19. The IFT expects to pick the winners by March 25 2015 and hopes the new channels will be on air by the end of next year.

An astonishing degree of concentration in the hands of powerful tycoons has become a hallmark both of Mexico’s telecoms and broadcast sectors: Mr Slim has about 80 per cent of the fixed-line phone and 70 per cent of the mobile market sewn up. Televisa, which IFT declared dominant in the broadcast sector and subject to similar infrastructure-sharing orders, has about 70 per cent of the free-to-air TV market and half of pay TV.

The biggest surprise in the IFT’s rulings was that the regulator bundled Carso and Inbursa in the dominant players camp. Otherwise, as was expected, it held the threat of ordering asset sales in reserve in case the players fail to comply with the new rules. Both Mr Slim’s companies and Televisa said they were studying the orders and have not yet quantified the financial impact on their businesses.

Ernesto Piedras, head of the Competitive Intelligence Unit, a consultancy, called the rulings “a brake to let the other smaller companies play”. He told a television interviewer that “without a straitjacket, they gobble up all the market”.

Mr Contreras acknowledged that the IFT’s ruling could be challenged by the companies in court via injunctions – a weapon they have exploited successfully in the past to stave off regulation attempts.

However, the IFT rulings come as part of a wider reform drive in the sector passed by Congress, and analysts believe Mexico means business this time.

Televisa shares plunged more than 4.5 per cent at one point on Friday on the regulator’s news, before recovering, and Carso shed 1 per cent. Inbursa dipped 0.4 per cent but later regained some ground, while América Móvil did not fall as its announcement that it had been named predominant came later. América Móvil shares have already underperformed the stock market this year, losing 15 per cent.

María Elena Estavillo, one of the IFT commissioners, said the idea was to grow the television and telephone sectors, and noted that the dominant players would be paid “fair price” for access to the access they are being ordered to grant. “The short-term costs are very small compared with the benefits,” she said.

However, whether or not Mr Slim, the world’s second richest man with a $72bn fortune according to Forbes, can bid for TV will depend on the IFT’s upcoming ruling on whether he is eligible to alter the terms of his licence.

“We will have a duty to study whether or not there is no distortion, no possible concentration in the market, no any undesirable effect on competition, during the tender for the two channels,” Mr Contreras said.

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