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 News Around the Republic of Mexico | July 2005 
Mexico Opens Up Phone System to Resellers
 Wire services
| | Deregulation of the nation's long-distance call service will allow more competitive prices for consumers. |
Mexico will allow companies to lease lines from its telecommunications carriers to provide long-distance calls, seeking to lower prices by increasing competition for former state monopoly Teléfonos de México SA.
The new regulations, to be published in coming days, are part of a settlement with the U.S., said Clara Luz Álvarez, a director of Mexico's telecommunications regulator. Mexico agreed to open its market to resellers after the World Trade Organization in 2004 ruled in favor of a U.S. complaint that Telmex thwarted competition and kept rates for completing calls into Mexico at more than double the actual cost.
"Resale will be yet another way to stimulate competition, broaden the range of services available, and make rates more attractive for users," Luz Álvarez said in a telephone interview from Mexico City yesterday.
Telmex, controlled by billionaire Carlos Slim, may face pressure to lower prices and lose revenue because of the resale regulations, said Mario Epelbaum, an analyst from Morgan Stanley. Telmex handles about 80 percent of the domestic long-distance calls, and 60 percent of outgoing international calls, according to Morgan Stanley estimates. Telmex had 17.5 million lines in service as of March 31.
REVENUE
Long-distance calls accounted for 22 percent of Telmex's 13.5 billion pesos (US1.25 billion) first-quarter revenue in Mexico, where the company had 77 percent of total sales.
Telmex had no comment on the new regulations on resellers, according to an e-mailed statement.
Telmex shares today fell 13 centavos, or 1.3 percent, to 10.25 pesos. The stock has underperformed the Bolsa index this year, with a 4.3 percent decline while the index gained 6.8 percent. Shares of wireless carrier America Movil SA, also controlled by Slim, rose 12 percent this year to date.
The regulations would open the nation's market to any company, big or small, that is willing to spend money on an effort to market telephone services, said Epelbaum in a telephone interview from New York. In the United States, there are thousands of resellers, among them retailers such as CVS Corp., he said.
Resellers can buy big volumes of airtime from existing carriers at a discount and resell them to consumers and companies by means of calling cards and pre-paid plans.
RESELLERS
With resellers, final rates may become cheaper in Mexico because existing carriers charge 98 centavos per minute to make 500 minutes of domestic long-distance calls, whereas the cost of 5 million minutes is as low as 50 centavos per minute, Luz Álvarez said.
Luz Álvarez said the resale regulations have been sent to President Vicente Fox's office for publication. Under the agreement with the U.S., Mexico had committed to enforcing the resale regulation by July 1. U.S. Trade Representative spokesman Richard Mills didn't return phone calls seeking comment.
Mexico will allow resellers to enter other markets such as local and mobile telephony, and pay television, a year after the new regulations are published, Luz Álvarez said.
Daniel Hajj, chief executive of America Movil SA, said at a June 21 news conference the company was against the introduction of resellers in Mexico because the country has enough pre-paid mobile telephones. America Movil operates in the U.S. as a reseller and had 4.9 million customers as of March 31.
"In the U.S. there are resellers because none of the companies, Verizon, Sprint, Cingular, SBC are interested in the pre-paid market, so we entered the market," Hajj said. "But here in Mexico, we're against resale because the four carriers are selling post-paid, pre-paid, subsidizing handsets so we don't think it's reasonable."
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