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Approval of Reforms Jolts Mexican Telecommunications Powerhouse

Mexican telecom giant América Móvil stands to lose its stronghold on the telecommunications market after the Mexican Congress approved legislative reforms on Wednesday intended to break down telecommunications monopolies in the country.

President Enrique Peña Nieto proposed the reforms on March 24 as part of his campaign to create more competition in the Mexican telecommunications market and improve Mexico’s economy. The new reforms require businesses to hold less than 50 percent of the market share, will place restrictions on pricing, and require that telecommunications infrastructure be shared—but will also allow such companies to determine their own breakdown of the market share.

Owned by billionaire Carlos Slim, América Móvil currently dominates the market with 70 percent of Mexico’s cellphone subscribers and 80 percent of its landlines—and with over 272 million wireless subscribers, it is the largest operator in the Americas. Arturo Elias, a spokesperson for Carlos Slim, said yesterday that to meet the requirements of the new reforms, América Móvil would have to sell between 15 and 17 percent of its overall phone market.

Spain’s Telefonica, which is currently second in the Mexican telecommunications market, may try to expand its current market due to the new reforms—and companies with a smaller portion of the Mexican market, such as AT&T, Virgin Mobile and Grupo Televisa, could also benefit from the legislation. Mexico’s transportation and communications ministry said in a statement that “this decision could transform competition in the telecommunications sector with improved quality and better prices for services to end users.”

While América Móvil is currently valued at $73 billion, it has lost $17 billion in market value since 2012, when Peña Nieto won the presidency. However, the reforms may offer benefits for Slim, who could expand into the Brazilian and European markets and could be allowed to participate in the pay-tv market if América Móvil cuts its market share below 50 percent.

The reforms, passed by the Senate this week, the lower house on Monday, and Congress yesterday, still need to be approved by Peña Nieto.

Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.
Tags: Mexico, Mexican telecommunications, América Móvil

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