Far-reaching reform of Mexico’s telecoms markets has moved a step closer following approval by the country’s lower house of Congress to a bill put forward by President Enrique Pena Nieto.
Under the proposals, the dominance of America Movil – in which billionaire Carlos Slim holds a 43 per cent stake – is under threat.
A new regulatory body, minded to boost competition, would be in charge of granting and revoking telecoms and media concessions. What’s more, it would be able to classify any company with more than 50 per cent share of the market as being dominant, enabling it to force those companies to sell assets.
America Movil commands about 70 per cent of Mexico’s mobile market, and controls an 80 per cent chunk of the landline market.
Since the telecoms reform bill was first presented on 11 March, America Movil’s share price has been under pressure.
However, with the proposed legislation opening up the possibility of America Movil entering the country’s pay-TV market for the first time – the bill also envisages a reduction in broadcaster Televisa’s dominance – some analysts believe America Movil will benefit overall.
“America Movil will end up with more profits than losses [after or due to this bill],” said Gerardo Copca, a strategist at consultancy MetAnalisis, in a report by Reuters.
Shortly before the lower house’s bill approval, America Movil announced it had won exclusive transmission rights in Latin America for the 2014 winter Olympic Games, as well as the 2016 summer games.
Improving market sentiment further towards America Movil was the company’s announcement this week that it would be doubling its share buyback programme from 79.2 billion pesos ($6.4 billion) from 39.2 billion.
It has helped give Slim’s company a share price boost, which was up 4.3 per cent on Thursday. That’s the biggest daily increase since May, according to Bloomberg.
The Mexican reform also removes restrictions on foreign ownership in telecommunications, eliminating current limits on fixed-line assets. The bill further envisages allowing foreign investors to take up to 49 per cent ownership of TV or radio broadcasters.
Amendments to the bill have still to be voted on, but Enrique Pena Nieto’s ruling Institutional Revolutionary Party (PRI) are reportedly confident that the bill will pass Congress before the current session ends in April.