Goings-on in mexican telecoms are akin to a telenovela. América Móvil, the empire owned by the country’s richest man, Carlos Slim, stars in every season. So it is with the latest instalment of the soap opera. Televisa, a heavyweight of Mexican broadcasting, at&t, an American telecoms group with big operations in the country, and Mexico’s chamber of telecommunications have asked the Federal Telecommunications Institute (ift), the industry regulator, to order that Telmex, the broadband and fixed-line subsidiary of América Móvil, be split into separate firms with two sets of shareholders. That, its rivals contend, would increase competition.
América Móvil has been subject to laws aiming to boost competition for almost a decade. Under anti-monopoly legislation passed in 2014 “preponderant” firms, with over a 50% share of the market, such as Telmex, have been subject to strict regulations. The legislation (which is revised every three years) has forced Telmex to run its retail and wholesale businesses separately. It was previously obliged to share its infrastructure with other operators, for a fee.
The results have been mixed. Telmex’s retail arm, Telcel, remains the dominant firm in mobile phones and mobile internet. In the former it held 63% of the market last year, compared with 69% in 2013. The mobile market is hard for more than a few companies to crack, says Leonardo Olmos of ubs, a bank. Creating a network with national coverage is expensive, giving incumbents a formidable advantage.
The regulations have been more successful at sparking competition for fixed-line and broadband services, in which regional operators can more easily make a mark. Telmex’s share of broadband connections dropped from 73% to 40% between 2013 and 2022, and from 72% to 39% of fixed-line phones. Megacable and Totalplay are growing fast, in part by offering packages that include pay tv. Telmex is barred from providing this add-on.
Rivals accuse Telmex of dragging its feet over requests to allow them access to its infrastructure. But it is “hard to sustain” the argument that there isn’t competition these days, says Jorge Fernando Negrete, an analyst. He would like to see the legislation enacted in 2014 done away with for good. He thinks it may now be harming consumers by reducing incentives for firms to connect new users for fear of becoming “preponderant” and by excluding customers from cheaper bundling of all their telecoms services from one provider.
The demands for a break-up of Telmex may be less about promoting competition and more a “game” in the run-up to the ift’s third revision of the reforms of 2014, due this year, says Mr Olmos. Its rivals fear that América Móvil will finally be allowed to enter the pay-tv market. The request could be used as leverage to prevent it. Previous revisions have hardly dented the behemoth’s profits. And the ift has been less active of late, partly because almost half the seats on its board remain vacant. Andrés Manuel López Obrador, Mexico’s populist president, has little time for such bodies. Telecoms-watchers will be tuned in as the drama unfolds.■
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The battle to control Mexican telecoms - The Economist
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