More competition for Telmex, demands Mexican official

Details: Alec Barton; Category: Trends & Forecasts; 27 March 2006; 12288 views

Vicente Fox, Mexico 's head of state, is under pressure from the country's competition chief to create a challenge to the private monopoly of Telmex. Eduardo Pérez Motta, head of the Federal Competition Commission (CFC) has identified a slowing-down on the path to full competition, which could have implications affecting the ultimate implementation of a level playing-field.

In cooperation with the Mexican Telecommunications and Transport Ministry (SCT) CFC has been planning convergence between cable companies so that they can offer telephone services and telephone operators so that the latter can offer video.

Mr Perez Motta first tabled his proposals before SCT last November. At first responses were encouraging but nothing has happened since then. His comments will stoke up arguments over the competition or non-competition) in Mexico . He was supported early this month by the Mexican central bank governor, Guillermo Ortiz: "The dominant industries and corporate groups do not like competition, and that affects Mexico' ?s economic performance."

The SCT was unavailable for comment but Mr Pérez Motta remains adamant: "This is a once-in-a-lifetime opportunity...If we do it well we can change the telecommunications market and that of video, too. If we don't we will leave it the same or probably worse than it is today."

Telmex has long been the subject of adverse comment. Its owner, Carlos Slim, has become Latin America 's richest man. With 80% of Mexico 's mobile market and 94% (18 million lines) of the fixed phone sector, coupled with some of the highest phone charges in the world, this is hardly surprising. The result: stranglehold on Mexican telecoms.

Since 2005 CFC has been urging for cable TV companies to be permitted to offer telephone services. Such have up until now been allowed to rent their networks only to separate companies offering such services.

A key part of the ownership debate in Mexico is whether Telmex should be allowed to provide video services as part of its eventual liberalisation.

Mr Pérez Motta would only be happy with that if Telmex complied with three demands: that it permits cable companies to hook up to its existing network; that it ensures compatible networks; and that its customers can retain existing telephone numbers if they churn to another provider.A healthy cynicism pervades his view: "If you put the factors in that order, you generate the right incentives for everything to converge. Why? Because you force Telmex to comply with certain disciplines...Telmex will do it because it knows that if it does it will receive a carrot in the form of video. But if you give Telmex video first, when will it comply with the other things? Never."

And on the risk that not all the recommendations would be enforced by his country's Ministry, thus diluting the reform: "There is a danger that the dog ends up with the head of a cat...In this case the dog has to be whole - from head to tail. We are going to keep pushing on this issue. We are going to be intransigent."

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