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Mexico to Review Telecom Market Concentration Measures

Per a recent report by El Financiero, Mexico’s telecom regulatory authority -- Federal Telecommunications Institute (IFT) – will assess this month whether to maintain or eliminate asymmetric measures under current conditions of competition that the regulator initiated two years back in order to reform the country’s telecommunications sector.

In 2014, the government of Mexico introduced major reforms within its telecommunications sector. The IFT identified America Movil SAB AMX and Grupo Televisa SA TV as the dominant players in the telecom and broadcasting sectors, respectively. America Movil’s wireline division, Telmex, currently controls around 70% of the Mexican market, whereas its wireless division, Telcel, holds about a 68% market share. Televisa, on the other hand, accounts for nearly 70% of TV broadcasting market share.

As a stringent measure, IFT will ban America Movil from charging national roaming fees. Further, the company will have to share its infrastructure with other operators particularly in the local loop (last mileage) segment. Interconnection fees levied by America Movil will also be closely monitored. Similarly, Televisa will have to share its broadcast towers with its peers for a stipulated amount of fees. Moreover, Televisa will not be allowed to acquire exclusive broadcasting rights of popular sports and entertainment events.

America Movil has already filed an injunction against the regulator's decision to identify the company as a dominant operator and to impose asymmetrical regulations. In Dec 2015, America Movil listed its wireless tower business – Telesites -- which was spun off from the company, on the Mexican stock exchange. The spin-off of the wireless tower division was a strategic move on the part of America Movil to restrict its market share within the 50% limit imposed by the IFT. In the same month, the company won approval from the IFT regarding the prices it can charge as interconnection fees.

Televisa also stated that the new telecommunications bill would impose disproportionate obligations on the company, such as, place limitations on its advertising sales, use of infrastructure and content distribution.

Meanwhile, the Mexican telecom market has witnessed innumerable changes. Beside the existence of Telefonica SA TEF which controls around 20% of the telecom market share, the U.S. telecom behemoth AT&T Inc. T also entered the fray with the acquisition of Grupo Iusacell and Nextel de Mexico. Last year, AT&T acquired U.S. satellite TV giant DIRECTV, which had a strong Latin American presence including Mexico.

In its review process, the IFT will thoroughly evaluate existing measures in order to ensure whether these policies are still relevant to achieve its initial objectives. According to El Financiero, the IFT may replace the market concentration calculation methods adopted by the regulatory body in 1998 with the Herfindahl-Hirschman Index, a popular measurement method of market concentration in theoretical economics. The IFT stated that if necessary it may scrap some measures initiated earlier or may impose new measures to fulfil its target.

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AT&T INC (T): Free Stock Analysis Report
 
TELEFONICA S.A. (TEF): Free Stock Analysis Report
 
GRUPO TELEVISA (TV): Free Stock Analysis Report
 
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