Mexico Telecom Overhaul Wins Final Approval

--Telecom reform wins final congressional support
--Biggest transformation of the sector in two decades
--President Pena Nieto likely to sign the bill into law in June

 
   By Juan Montes 

MEXICO CITY--Mexico's Senate on Tuesday adopted legislation to revamp the country's telecom market, giving final congressional passage to a bill intended to increase competition and end quasimonopolistic practices.

The telecom reform, proposed by Mexican President Enrique Pena Nieto and the main parties of the opposition in early March, is seen as a game-changing effort that gives the Mexican state enlarged powers to rein in longtime dominant players such as billionaire Carlos Slim's America Movil SAB (>> America Movil SAB de CV) and Grupo Televisa (>> Grupo Televisa SAB), the world's largest Spanish-language television network.

The vote in the upper house was 108-3 in favor, ratifying a revised bill passed by the Chamber of Deputies last week. It obtained support across the political spectrum, from Mr. Pena Nieto's Institutional Revolutionary Party, or PRI, to the right-wing National Action Party, or PAN, and the leftist Party of the Democratic Revolution, or PRD.

With the congressional approval, the bill now has to be passed by a majority of state legislatures, a process that will likely be a formality, lawmakers said. Mr. Pena Nieto could sign the bill into law in June, they added.

Experts say the reform is the biggest effort to transform Mexico's telecom market in the more than two decades since phone company Telmex was privatized in 1990.

"It's a historic reform, positive and very important to increase competitiveness," said economist and consultant Luis de la Calle in an article.

The telecom overhaul represents a major success of the so-called Pact for Mexico, a political agreement signed by Mr. Pena Nieto, the PRI, the PAN and the PRD, to pave the way for structural reforms that most political players here see as the means to unleashing greater economic growth.

The bill creates a new autonomous telecommunications body that will be able to break up dominant players that control more than 50% of their respective markets, apply asymmetric regulation and order the unbundling of services.

That is likely to affect Mr. Slim's America Movil SAB, which controls 75% of the country's fixed telephone lines and 70% of its mobile telephones and broadband, and Televisa, which has around a 70% share of the TV market.

"We are touching what was thought to be untouchable: the monopolies," said leftist Sen. Alejandra Barrales. "The reform will allow the state to resume power over the telecommunications sector."

Congress made just one significant change to the original initiative presented by President Pena Nieto. In the case of fines or asset sales imposed by the antitrust commission, firms will now be able to suspend the application while appealing through courts. However, the rulings of the new autonomous telecommunications body can't be stalled.

The telecom reform ends the current limits on foreign investment in fixed-line telephony and television. It also creates a state-owned "carrier of carriers" telecom network that would allow rival companies to bypass Mr. Slim's existing network.

The new regulatory body, called the Federal Telecommunications Institute, is expected to be in operation by the end of the year, with its first rulings likely to take place in the first half of 2014.

The new law gives the agency six months from the time it is set up to determine which companies are dominant in their markets and take necessary measures to guarantee competitive conditions.