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Shares in Televisa, Mexico’s biggest broadcaster, took a hammering after the company was found to have a dominant position that could curb competition in the pay-TV market.

The ruling, by the Federal Telecommunications Institute (IFT), opens the door to the imposition of restrictions to level the playing field, writes Jude Webber in Mexico City.

“It’s a big blow,” said Elisa Mariscal, an expert on the sector at university CIDE. Alexander Elbittar, another CIDE professor, added: “The market has certainly taken it as such.”

Televisa shares in Mexico tumbling more than 3.6 per cent and its ADRs in New York slid 4.74 per cent. Stock in rival Megacable rose 2.14 per cent in Mexico City.

The news, first reported by the Wall Street Journal, capped a tough week for Televisa, the world’s biggest Spanish-language broadcaster. The company, which is already seeing stiffer ratings and advertising competition from its main domestic rival TV Azteca, last week announced a nearly 60 per cent fall in fourth-quarter net profits, a 66 per cent dive in 2016 net profits and a decision to slash 2017 investment by a third.

The IFT’s decision is a U-turn on a previous ruling in September 2015 in which Televisa was found not to have “substantial power” in the market – in other words, the ability on its own to set prices or impede competition. That ruling was challenged by a rival broadcaster, and the new decision carried by a 6-1 vote last Friday, according to media reports. Neither the IFT nor Televisa could immediately comment; Televisa said it had not yet been notified.

Televisa, which has almost 60 per cent of Mexico’s pay-TV market, was already branded a dominant player – that is, with a more than 50 per cent market share – in the free-to-air television sector in 2014. But as Ms Mariscal noted, “free-to-air television is in decline worldwide. Pay TV is where the growth is coming from”. As such, the new ruling promises to be more painful.

Mexico had 20.5m pay-TV subscribers in the third quarter last year, a rise of 17.6 per cent compared with the same period in 2015, according to the IFT.

Televisa had the highest participation in the pay-TV market in the quarter with 57.1 per cent of subscriptions, including 36.8 per cent from its Sky unit, 7.5 per cent from Cablemás, 5 per cent from Cablevisión, 2.8 per cent from Cablecom and others. The second-biggest player is Dish-MVS, with 20.8 per cent, followed by Megacable-MCM with 14.8 per cent, the IFT said.

Carlos Slim’s América Móvil telecoms company was branded dominant in the telecoms sector in 2014, leading to the imposition of so-called asymmetrical regulations that have hammered the group’s financial results. However, competition has flourished.

A ruling is expected soon on the effectiveness of the asymmetric regulations imposed on América Móvil, and the measures imposed on Televisa, as a result of being named dominant players.

América Móvil complains bitterly that it is in fact subsidising international rivals like AT&T of the US because of the requirement to lift connection fees, scrap long-distance charges and share infrastructure. It is hoping it will be relieved of the measures and to win clearance to move into the pay TV sector, something that is currently banned under the terms of its fixed-line concession.

Ms Mariscal said that the first consequence of the IFT’s ruling would be that automatic obligation that Televisa pay for all free-to-air content aired on its pay TV platforms, a requirement written into the Mexican constitution. Previously, it had the obligation to carry the content but not to pay for it. “Now it’s must carry and must pay,” said Mr Elbittar.

The other measures the IFT may impose are not yet clear.

Copyright The Financial Times Limited 2017. All rights reserved.
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