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Slim’s Dominance of Mexico’s Telephone Market Challenged

Source: Reuters

A court has ordered Mexico’s competition watchdog to investigate claims of collusion between businesses controlled by telecommunications tycoon Carlos Slim and Spain’s Telefonica, according to a court document seen by Reuters on Sunday.

The federal court asked the Federal Competition Commission (Cofeco) to determine whether there was anything improper in Isidro Faine, a vice-chairman on the Telefonica (TEF.MC) board, also sitting on the board of Slim’s financial group Inbursa (GFINBURO.MX).

“(It) could possibly mean that the said companies find it easier to make deals … that reduce competition,” the court said in the January 30 document, a copy of which was obtained by Reuters.

The ruling is the latest twist in a legal complaint brought against Slim and Telefonica last year by companies owned by Mexico’s two top broadcasting moguls, Emilio Azcarraga of Televisa and Ricardo Salinas of TV Azteca, who are keen to challenge Slim’s dominance of the telephone market.

The Organisation for Economic Co-operation and Development has slammed the lack of competition in Mexico and estimates the country’s phone and internet users were overcharged $13.4 billion each year from 2005 to 2009.

Azcarraga’s Bestphone and Operbes, along with Salinas’ Iusacell and Unefon, are among the companies which brought the March 2011 complaint.

Cofeco earlier this month rejected a bid by Televisa to buy 50 percent of Iusacell, citing concerns about the proposed alliance between the two top broadcasters.

Slim’s telephone companies dominate Mexico with home phone giant Telmex controlling about 80 percent of landlines while Telcel has 70 percent of the country’s mobile phone customers.

Telefonica has about 22 percent of Mexico’s cell market, and the two companies are also leaders in much of the Latin American telecoms market.

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A Telefonica spokesperson declined to comment on the court order, and a spokesman for Slim had no immediate comment. Faine was not immediately available for comment.

Cofeco said it had been notified of the court’s demand in the Slim-Telefonica case. “Cofeco is aware of the court order and will act accordingly,” an official at the regulator said.

Early in 2011, the companies linked to Televisa and TV Azteca asked Cofeco to investigate Faine’s board positions, as well as a bilateral deal reached in late 2010 for Telefonica to pay much higher rates to access Slim’s phone network than others in the market were willing to pay.

The court has not ruled on the merit of the claims made in the complaint but instead ordered an investigation to look at the possible conflict of interest that Faine faces as a board member of both a Slim company and of one of Slim’s major rivals.

Cofeco declined to investigate the charges in 2011, saying the complaint did not provide enough evidence of collusion. The court order means that the regulator must now take up the matter again, or challenge the order in a federal appeals court.

 

 

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