Tags: Mexico | Slim | Billion | Fine

Mexico's Slim Told to Cut Phone Costs to Erase $1 Billion Fine

Thursday, 03 May 2012 08:11 PM

 

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Mexico's competition watchdog has ordered Carlos Slim to cut charges he levies on competitors in exchange for dropping a record fine, tightening controls over the world's richest man.

America Movil will cut its interconnection rates, which are the fees it charges rivals to tap its mobile network, or face a fine of 8 percent of annual revenue, Mexico's Federal Competition Commission (Cofeco) said on Thursday.

The decision ends a battle over a fine worth nearly $1 billion handed down by the regulator in April 2011 against America Movil's local brand Telcel. The regulator had found that Slim's company charged unfair fees to competitors.

Slim counted on a 0.39 peso per minute mobile-to-mobile interconnection rate last year, and the Cofeco decision this week will trim that to 0.31 pesos per minute in 2014.

However, the proposed cut of around 20 percent in the interconnection charge was in line with what Telcel had agreed with several local operators since late last year.

While the agreement is not likely to hurt Slim's bottom line, analysts say that the settlement is a show of regulatory power against a tycoon who has thwarted many previous attempts to curtail his dominance on the phone sector.

"On paper, we can't say that this is a huge blow to Slim. But it is an achievement that avoids a long and uncertain legal fight. Those battles have left the sector paralyzed," said Carlos Ramirez, an analyst with the Eurasia Group.

The 2011 fine followed a four-year probe by Cofeco into Telcel, which for months had kept the watchdog at bay.

The deal represents an improvement in dealings between Slim and regulators, said one analyst.

"In some respects the past year's events also indicate a more constructive relationship between America Movil and the authorities," said Richard Dineen, a telecom analyst with HSBC.

MORE SCRUTINY

Mexican regulators and the supreme court have hurt Slim's bottom line several times in the last 12 months or so in a handful of decisions that have lowered interconnection rates.

Both Slim's Telcel and home phone giant Telmex have counted on charging rivals high fees when they cross his phone network.

Earlier this year, the Organisation for Economic Co-operation and Development said Mexicans were overcharged $13.4 billion a year between 2005 and 2009 for fixed-phone, mobile and broadband services, a market dominated by Slim.

America Movil controls about 70 percent of the mobile market in Mexico, where it had 66.7 million subscribers as of March, and is the leading provider of mobile services in Latin America.

America Movil, the cash cow of Slim's business empire, said Cofeco had revoked and "left without effect an 11.989 billion peso fine for alleged relative monopolistic practices."

Telcel appealed the fine and managed to ban Cofeco's president, Eduardo Perez Motta, from taking part in a second vote, after arguing he made biased comments to the media.

© 2014 Thomson/Reuters. All rights reserved.

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