Friday, March 18, 2011

Business Spat of the Year

The Financial Times had a helpful rundown of the issues behind Telmex vs. Televisa earlier this week:
Tensions began rising last month when Telmex, the fixed-line telephone company controlled by Carlos Slim, the billionaire media mogul, said it would not place an estimated $100m in advertising this year with Televisa, Mexico’s largest broadcaster and the world’s biggest Spanish-speaking media company. A few days later, Telmex also broke off negotiations with TV Azteca, the country’s second television network.

Each company has its own version of the hostilities. But, at heart, the reason for the brawl lies with “convergence” – the process whereby it is now possible to bundle video, voice and data into one service and transmit it to consumers down a single line.

“Convergence has brought these groups into closer competition with each other than ever before,” says Mr Piedras.

Televisa and TV Azteca have made significant inroads into Mexico’s telecommunications market, which was once almost the exclusive domain of Mr Slim. They complain that Telcel, Mr Slim’s mobile phone operator, and Telmex, which accounts for about 75 per cent of all fixed telephone lines in the country, overcharge for connecting to their networks. The result, they say, is stifled competition and higher costs for consumers.

On Wednesday, in a sign of mounting aggression, 25 of Telmex’s competitors, including the sister companies of Televisa and TV Azteca, filed a complaint with Mexico’s antitrust commission formally accusing Mr Slim of “monopolistic practices”.
And Bloomberg reports on a preliminary regulatory ruling in the ongoing dispute:
Mexican regulators said America Movil SAB [parent company of Telmex], the largest wireless carrier in the Americas, must cut the fees it charges a land-line rival by more than half, a decision that may set a precedent in a dispute over interconnection fees.

America Movil should charge 39 centavos (3.2 cents) per minute this year to connect calls coming from the network of fixed-line carrier Alestra SA, the five-member board of Mexico’s Federal Telecommunications Commission ruled unanimously yesterday. That compared with the 95-centavo rate America Movil has proposed and charges some of Alestra’s competitors.

“The resolution is relevant because it establishes a precedent leading to the creation of public policies for the application of interconnection fees that promote competition between operators,” said NII Holdings Inc., a wireless provider that operates as Nextel in Mexico, in an e-mailed statement yesterday after the decision.

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