Competition bill is ratified in Mexico

Mexico’s President Enrique Peña Nieto has signed a bill aimed at breaking the dominance of telecom monopolies. The main target of the new law is Carlos Slim’s America Movil, which has a roughly 70% share of the Mexican mobile market and around 80% of the fixed-line sector.

The new law will introduce a new regulatory body, Ifetel, which has a substantial amount of power. Most notably, it can force any company that it considers ‘dominant’ – i.e. a company with a market share of over 50% - to sell assets.

While it would therefore be within Ifetel’s power to enforce a breakup of America Movil, it is widely believed that this will be unnecessary. Analysts from Moody’s Investors Service believe that the obligatory asset sales would likely be used as a trump card “in the case of operators that resist the pro-competitiveness decisions of the new regulator”.

Peña Nieto’s approval of the constitutional changes has opened the door for further overhauls via “secondary legislation”, which will have to be drafted and approved by Congress within six months if it is to come into effect. The President has stated that any secondary laws should be made with the same mindset of improving competitiveness for the benefit of the Mexican people.

America Movil has reportedly acknowledged that the regulatory changes could have a substantial effect on its business, but has declined to comment further on how it might restructure its operation.

One possible outcome could in fact be beneficial to America Movil, as the new law also challenges the dominance of pay-TV provider Televisa. With both monopolies challenged, the stage could be set for Carlos Slim’s firm to move into the television market.