At first glance – but first glance only – the decision by Mexico’s competition authorities to reject the purchase of a small telecoms operator by the country’s largest broadcaster is bad news for the companies involved and for those wanting greater competition in the telecoms sector.
In its first public statement on the matter, Cofeco, as the anti-trust body is known, said on Tuesday that the April 2011 deal, under which Mexican broadcaster Televisa would acquire a 50 per-cent stake in mobile operator Iusacell for US$1.6bn, would be harmful for competition.
Not competition in the telecoms sector, where authorities have long complained that billionaire Carlos Slim’s 70 per cent share of the mobile market through his operator, Telcel, has kept prices high and arrested investment from other potential players.
Rather, Cofeco’s concerns rest on the effect that the deal could have on television advertising given that Iusacell is controlled by Ricardo Salinas Pliego, who also happens to control Azteca, Mexico’s second-largest broadcaster. Add the two companies’ market share together, and Televisa and Azteca control just about all of Mexico’s commercial free-to-air broadcasting.
But a closer look suggests that the authority’s decision may not be as bad for the companies involved as it looks. The first reason is that the ruling states that Cofeco could approve the purchase if the companies address its concerns relating to advertising. That opens the door to a plethora of possible solutions to unblocking the deal.
It is understood that the companies, which were informed of the decision last week, are planning to appeal. They now have 30 business days to do so.
Moreover, only three of Cofeco’s five commission members voted against the deal, with two voting in favour. And Cofeco said that the two who voted in favour did so because they believed that it would increase competition in the telecoms sector.
In practice, that means Televisa and Iusacell only have to turn one of the commissioners during the next 60 days – presumably by offering guarantees on the issue of television advertising – to reverse the decision.
Whether the deal will actually make much of a difference to competition in Mexico’s telecoms sector – Iusacell only has 4 per cent of the market – is a hard question to answer, and will likely take a long time to become clear.
What does seem clear, however, is that Televisa’s designs on Iusacell are far from over.
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