América Móvil (NYSE:AMX), Mexican billionaire Carlos Slim Helú's telecom giant, announced Tuesday that it was selling assets to comply with Mexico's new anti-trust telecom rules that forbid companies from controlling more than 50 % of market share.
Through Telmex, América Móvil currently controls 80% of Mexico’s landline phone market, and through Telcel, 70% of the wireless market. In March the Federal Institute of Telecommunications (IFT), Mexico's new autonomous regulatory body, declared Slim's companies "preponderant" or market dominant.
Slim's unexpected decision represents a preemptive move. Rather than waiting for regulators to tell him how to divest, the world's second richest man is taking the initiative to move his chips in anticipation of Mexico's more competitive telecom landscape.
In a statement released after the markets closed on Tuesday, América Móvil, Americas’ largest mobile phone network, which operates in 26 countries with 292 million wireless subscribers, announced that the company's board of directors resolved to authorize measures to reduce its domestic market share to under 50% in order to cease being a “preponderant economic agent” under Mexico's law and regulations.
Slim's decision came as Mexico's lower house was in its final phase of approving a new set of rules, known as secondary legislation, spelling out the fine print of a major telecom Constitutional reform passed last year. As I write, Mexico's lower house overwhelmingly passed the secondary legislation after 20 hours of non-stop debate.
As the new rules became clear, a wave of speculation emerged as to how Slim's companies would react. In its latest issue, The Economist wrote that it is widely rumored that Slim "has stopped investing in his existing telecoms networks" in Mexico and is worried that the reforms unfairly favor his arch-rival Televisa, Mexico's dominant TV broadcaster. But Arturo Elías Ayub, Slim's spokesperson and son-in-law, told me by email that it is "false" that América Móvil has stopped investing.
In its statement América Móvil said that certain assets will be sold to a new and independent carrier, which it did not name. Yet in an interview with the Mexican radio Wednesday, Elías Ayub, Slim's spokesperson, said that they are looking for a single buyer who can either be Mexican or a foreigner as long as it is sound and a strong competitor capable of participating in what he described as a capital-intensive sector.
In its statement, América Móvil said that all cellular sites (base stations), including towers and related passive infrastructure, will be separated from Telcel for their operation and commercialization.
However the statement clarified that any divestitures are "conditioned" upon Telmex and Telcel ceasing to be “preponderant economic agents” and subject to asymmetric regulations, and being able to access the provision of convergent services.
América Móvil added that after selling the assets, it expected to be allowed to offer pay TV. Slim’s Telmex has been banned from gaining access to pay TV at least over the next 18 months. According to the Mexican regulator, his companies will need to first comply with all the antitrust requirements in the telecom sector.
América Móvil also said in its statement that it would renounce its option to buy a majority stake in satellite television company Dish Mexico. It has a billing and collection service, distribution and equipment lease arrangement with Dish Mexico, which Televisa has accused of violating the TV ban. Elías Ayub said that América Móvil has no shares in Dish but rather an option to buy shares. The relationship is being investigated by the IFT.
Slim must now present his plan to the IFT and, if it is accepted, the plan must be executed within a year.
Twitter: @DoliaEstevez
