MEXICO CITY, March 8 (Reuters) - The Mexican telecom regulator’s latest step to pry open the vast infrastructure controlled by the country’s dominant telecoms firm, America Movil, will have major consequences for both the company and its competitors, experts say.
On Monday, the Federal Telecommunications Institute (IFT) approved a plan to separate part of America Movil’s fixed-line units into new companies, after about a year of discussion.
America Movil, controlled by the family of billionaire Carlos Slim, has long been required to share its infrastructure with rivals, who cannot match the company’s network. But competitors have complained that they have not received the access they need.
The following is an explainer on what the plan means for the industry: WHY IS TELMEX’S INFRASTRUCTURE IMPORTANT?
Telmex, America Movil’s fixed-line unit, was the heart of the company before the rise of mobile.
Telmex, which emerged from a state monopoly in 1990, has an extensive web of infrastructure in Mexico. Its network includes telephone poles and copper cables, which transmit fixed-line calls, mobile data and internet.
More recently, the company has invested heavily in fiber optics, which in addition to transmitting calls and mobile data, are well-suited for broadband internet. Telmex has more than 180,000 kilometers (112,000 miles) of fiber optics installed in Mexico, said Jorge Negrete, CEO of think-tank Mediatelecom.
Telmex’s infrastructure is critical for companies across the sector. Mobile operators such as AT&T and Telefonica use it to transmit calls and data, and companies such as Televisa use it to deliver internet and cable packages.
Competitors often have infrastructure in major cities, but Slim’s network is the only option in many small towns and villages, Negrete said. HOW WILL THE PLAN WORK?
America Movil must separate parts of Telmex and Telnor, which covers Northern states, to form two new companies. The new firms will sell access to their infrastructure wholesale to rivals such as Televisa and Telefonica as well as America Movil. Telmex and Telnor will continue to exist as retail units.
The new companies, which have not yet been named, must have new branding as well as independent staff and boards, although they will still be owned by America Movil.
The IFT hopes that with equal access to Telmex’s resources, competitors will avoid duplicating existing infrastructure and invest more in their own networks elsewhere, improving service and coverage. HOW WILL THE PLAN BE ENFORCED?
America Movil has two years to implement the separation. The IFT has set deadlines for the company to complete steps such as assigning employees to the new companies and drafting plans for transferring resources and infrastructure. CONSEQUENCES FOR AMERICA MOVIL?
Carving up Telmex will be costly for America Movil, analysts say.
America Movil has said the prices for the new companies’ wholesale services, which are set by the IFT, are below international benchmarks. The company said it proposed alternate pricing, which the regulator rejected.
The IFT must walk a fine line with prices, setting them at a level that is accessible to competitors while encouraging the new companies to invest in infrastructure, said Alexander Elbittar, an economics researcher with Mexico’s CIDE university.
America Movil said it will ensure that the new companies are financially viable, but will not subsidize their operations. Nonetheless, the new firms will be a drag on the bottom line if unprofitable.
One possible positive for America Movil is that the IFT has said the company will be eligible to apply for a TV license once it complies with all the main measures and other legal obligations. Telmex has been barred from holding a TV license in Mexico since its privatization. (Reporting by Julia Love; additional reporting by Christine Murray, Editing by Rosalba O’Brien)