What if América Móvil had to divest its wholesale fixed-line business?
Mexico's telecom regulator IFT should "leapfrog" current regulatory measures ordering América Móvil to functionally split its Telmex unit and instead move directly to consider having the leading telecoms player divest its wholesale fixed-line business, local telecoms think-tank the CIU said in a report.
Early in March, the regulator ordered América Móvil to functionally split the wholesale fixed line business as a measure to improve competition in a market where the Carlos Slim-owned regional giant still operates over 60% of mobile and fixed lines after five years of a telecoms reform designed specifically to reduce its market power. The company has promised to fight the decision in court.
Critics of Telmex – a former state monopoly – have accused its wholesale services unit of discriminating against its competitors and to favor requests by its own retail units. The functional split would lead to the creation of a new company with an independent management and accounting structure. But ownership will remain in the hands of América Móvil.
The functional split, said The CIU, "does not guarantee that its decisions will be really independent and take into consideration the investment needs and interests of the wholesale companies instead of those of its parent company, of which they will be direct subsidiaries." Under the current scenario, América Móvil has two years to create the new wholesale company.
The report went on to say that "it might be worth to look for the application of regulatory 'leap-frogging'" to avoid a continued delay in advances in competition and go directly to a structural separation.
The structural separation, which normally includes asset divestitures and different ownership, is a mainstay recommendation of the Organization for Economic Cooperation and Development (OECD) for companies with significant market power in regulated markets. Mexico is a member of the OECD.
América Móvil has complained that the IFT's drive to increase competition via asymmetric regulations has hampered its investments in increasing coverage and infrastructure, as they are forced to reduce market share to avoid being subjected to harsher rules.
"Mexico is a country where there is still much to do in terms of coverage. Unfortunately, regulations have penalized our investments in coverage," Carlos Slim Jr, the company's chairman of the board, said in March.
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