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 Business News | November 2007 
Mexico Welcomes Telefonica, Dismissing Slim's Outcry
 Adriana Arai - Bloomberg
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Mexico welcomes Telefonica SA's entry in local telecommunications to foster competition and lower prices, a government minister said, dismissing claims by Carlos Slim's Telefonos de Mexico SAB that the Spanish company is breaking a law that restricts foreign investment in the industry.
Telefonica's Grupo de Telecomunicaciones Mexicano, which began offering fixed-line phone service in July, is "a Mexican- registered company that fully complies" with local legislation, Deputy Economy Minister Carlos Arce said in an interview today.
Billionaire Slim, whose Telmex has 90 percent of the nation's telephone lines, is trying to block Madrid-based Telefonica's service by refusing to connect calls to and from its customers in Mexico. Telmex says it doesn't want be held liable for aiding a carrier that is 100 percent owned by foreigners, exceeding the 49 percent legal limit for non-Mexican ownership of a fixed-line phone company.
"There's a lot of pressure because what is at stake here isn't fixed telephony. It really is access to a number of services, broadband Internet, data transmission, television," Arce said. "That's why we're finding resistance from market players."
Telefonica has been renting lines from Alestra SA, an AT&T Inc. affiliate, to provide fixed-line phone service since July while it awaits interconnection from Telmex. The operation isn't profitable, Miguel Menchen, chief executive officer of Telefonica in Mexico, said this week at a conference.
'Conditions Are Right'
Communications and Transportation Minister Luis Tellez, talking to reporters at the Congress today, also backed Telefonica. "Of course there has to be interconnection, because conditions are right for it to happen," Tellez said, according to a transcript sent by the lower house of Congress.
The controversy in Mexico is the latest battle between Slim's companies and Telefonica in Latin America. In Mexico, Telefonica owns the second-largest mobile-telephone company. Slim's America Movil, which was spun off of Telmex in 2000, is the biggest operator, with three-quarters of the market. There's no restriction on foreign ownership in the mobile-phone industry.
Arce, who is in charge of authorizing any foreign investment in Mexico, dismissed comments by Telmex General Counsel Javier Mondragon yesterday that Telefonica "fooled" government officials by saying it doesn't control Grupo de Telecomunicaciones Mexicano, or GTM.
"We're the authority in this issue. We have the documents that prove it," he said.
Shares Fall
Telmex has fallen 14 percent since its Oct. 26 close, to 17.67 pesos, reducing this year's gains to 15 percent. The stock fell less than 1 percent today, the eighth straight session of losses.
This week Telmex filed its second complaint in the past three months against Telefonica with the Federal Telecommunications Commission. Telmex is demanding a government response to the complaint in writing, Mondragon said yesterday.
The telecommunications regulator will order Telmex to connect calls to Telefonica's customers in Mexico within 48 hours, Mexican newspaper El Universal reported today, citing unidentified people familiar with the matter.
Officials from the Federal Telecommunications Commission weren't immediately available for comment, according to its press office in Mexico City.
To contact the reporter on this story: Adriana Arai in Mexico City at at aarai1@bloomberg.net |
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