Mexico City -

Mexico’s new telecommunications law aims to break the hold of dominant players that have made the country’s industry an anomaly on the global map and rebuild it “brick by brick,” a senior government official said on Friday.
The law, approved by Mexico’s states this month, gives the government sweeping powers to break up companies controlling more than 50 per cent of the market, thereby challenging the might of telecoms tycoon Carlos Slim and broadcaster Televisa.
Slim’s company America Movil has about 70 per cent of Mexico’s mobile phone business and 80 per cent of the fixed line market. Televisa has more than 60 per cent of the television industry.
The new legislation, whose implementing laws must still be drawn up, aims to foster more competition and put an end to the legal stalling Slim and Televisa have used to fight regulators’ attempts to open up the marketplace. “If the telecommunications sector was a building, that building is going to be completely demolished and we have to reconstruct it stone by stone, brick by brick,” Jose Ignacio Peralta, deputy minister of communications and transport, told the Reuters Latin America Summit. He said it would be up to the new regulator, known as Ifetel, to decide whether the government would forcibly break up America Movil or Televisa to spur competition. But he offered the strongest hints to date that the government would not hesitate to do so to open up the industry.
Mexico has changed the constitution to give it more leverage to rein in America Movil and Televisa, and Peralta said that once Ifetel had been created it would become apparent whether the regulator would use its power to force firms to sell off assets. “What we can evaluate at the moment is that the constitutional reform contains (that power). This sent out a very strong message about what the will and the intention of the president and Congress is,” Peralta said.
“I personally am very optimistic, in the sense that if a dominant player shows anticompetitive behavior, and, in accordance with the law, it leads to a measure of this kind, I’m optimistic there won’t be any doubt about taking this decision,” he said, referring to a potential break-up of firms.
Mexico has been pilloried by think thanks for failing to open up its economy to boost competition and the telecoms sector has become the most potent symbol of that.
Failure to address the concentration of power in few hands had created an “anomalous situation” in Mexico, Peralta said.
“Extremely so, in a way not seen in any country,” he said.
Despite the government’s insistence that the telecoms law will shake up the industry, doubts persist.
“Despite the passage of reform, we expect that the Mexican telecommunications market will continue to be dominated by a few players for the foreseeable future,” credit ratings agency Moody’s said in a research note published this week.
The telecoms law aims to open up telephone networks to smaller players, and could force a dominant player to charge different rates compared to competitors to level the playing field.
The law can also be used to force Slim’s America Movil to share its infrastructure with rivals to improve their access.
Slim has sought to expand his business into other sectors as regulatory pressure on his firm has built up in the last few years. However, he has failed repeatedly to persuade the government to let him enter the lucrative pay-television market.
Competitors say the economic might of Slim, who topped the Forbes list of the world’s richest people for a fourth straight year in March, could allow him to crush the competition.
Peralta said any companies trying to enter the television market would need to be carefully vetted.
“In the case of someone seeking the concession ... being a dominant player, the criteria that the Ifetel will impose will have to consider elements so that the structure of the market is not affected,” he said.