Telmex edges closer to decision on pay-TV market entry?

12 May 2011

Long-delayed efforts by Mexican fixed line incumbent Telefonos de Mexico (Telmex) to enter the pay-TV sector appear to have moved one step forward, after the telco announced that a federal court had ruled that the Secretario de Comunicaciones y Transportes (SCT) must make a decision on its request to offer such services. Telmex has previously been prohibited from entering the pay-TV market amid concerns over competition, with Carlos Slim, who controls the dominant fixed line telco via Latin American telecoms giant America Movil (AM), also owning the country’s largest mobile network operator by subscribers, Telcel. According to Bloomberg, the state has been given 15 days to issue its decision in the matter, although Gerardo Sanchez Henkel, the SCT’s head of legal affairs, noted: ‘The ruling is not ordering us to change or eliminate the restriction. It’s ordering us to resolve Telmex’s petition.’

In separate but related news, Reuters reports that Telmex also benefited from another favourable court ruling this week, with a local court dismissing an appeal from alternative fixed line operator Marcatel aimed at exempting the latter from making payment related to allegedly outstanding interconnection fees. Telmex had previously claimed that Marcatel stopped making interconnection fee payments for local and long-distance calls in February 2008; the outstanding amount, Telmex says, is around USD155 million.

These two small victories for Slim however pale compared to other recent rulings. As previously reported by CommsUpdate, last month the Mexican antitrust agency, the Federal Competition Commission (Cofeco) confirmed that it had fined Telcel for having engaged in ‘relative monopolistic practices’ by overcharging its competitors to connect calls to Telcel subscribers. With the regulator claiming that Telcel charged its rivals higher interconnection rates than those related to connecting calls between its own clients, it issued the highest-ever penalty levied in its history, MXN12 billion (USD1 billion). Subsequently, at the beginning of May it was then reported that Mexico’s Supreme Court had ruled that Telcel could no longer utilise court injunctions to suspend the effects of rulings by the country’s telecommunications regulator while they are being challenged by phone operators. The development followed continued criticism that Slim’s companies have often used Mexico’s legal system to hinder regulation, with interconnection fees highlighted as a notable example. Under the country’s existing legislation if operators are unable to agree on an interconnection rate then regulator Cofetel is permitted to intervene and set the price. However, in instances where this has happened Telcel has often challenged the regulator’s decision in court, obtaining injunctions that, in essence, allowed it to ignore the Cofetel-set rate until the legal case is concluded.