| | |  Business News | November 2009 
Mexico Senate Could Vote on Telecom Laws Next Week
 Noel Randewich - Reuters
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November 19, 2009
Mexico City - Mexican senators could vote next week on a proposal to remove foreign-investment limits in fixed-line telephone companies, which would be a blow to market leader Telmex, controlled by tycoon Carlos Slim.
Sen. Marko Cortes, who proposed changes to existing laws, told Reuters on Thursday that Senate committees were still debating a reciprocity clause in the initiative that would restrict unlimited investment terms to companies whose home countries offer the same to Mexico.
With an eye to making Mexico's economy more competitive, President Felipe Calderon has urged lawmakers to remove limits on foreign investment in Mexican fixed-line telephone companies.
Proponents of the bill being discussed in the Senate say it would increase competition against Telmex (TELMEXL.MX) (TMX.N), which has 85 percent of Mexico's fixed-telephone lines and is often accused of making it difficult and expensive for smaller players to connect calls through its network.
"Through this initiative, we want Mexicans to pay lower bills for their telephone and Internet," Cortes, of the ruling National Action Party (PAN), said in an interview. "Competition is the best way to create better prices."
Foreign investment in Mexican fixed-line telephone companies is currently limited to 49 percent.
ACQUISITIONS EYED
Letting foreign investors take controlling positions in fixed-line telephone and Internet operators could make smaller companies like Axtel (AXTELCPO.MX), Megacable (MEGACPO.MX) and Maxcom (MXCMCPO.MX) acquisition targets for international players like Spain's Telefonica.
Cortes said the Senate could vote on the proposal on Tuesday after resolving disagreements about the reciprocity clause.
"Some legislators are against including it, so that's what we're discussing," he said.
Telefonica (TEF.MC) is already No. 2 in Mexico's cell phone market, where foreign firms are given a free hand. It has been the only serious challenger there to incumbent America Movil (AMXL.MX) (AMX.N), also controlled by Slim.
"If the restriction on foreign investment is lifted, Telefonica could begin a consolidation process to quickly build a fixed-line telephone company with sufficient critical mass to compete with Telmex," Ixe brokerage analyst Manuel Jimenez said in a note to clients.
Telefonica Chairman Cesar Alierta told Reuters in Madrid on Wednesday he has no other acquisition plans in Brazil after his company was beaten by France's Vivendi (VIV.PA) with a bid of up to $2.39 billion to gain control of Brazilian telecom GVT (GVTT3.SA).
But Alierta highlighted the importance of Latin America to Telefonica's growth.
Shares of Axtel (AXTELCPO.MX), Mexico's No. 2 fixed-line telecom with about 5 percent market share, rose 2.37 percent to 11.22 pesos after hefty gains in the prior session on speculation a vote in the senate was imminent.
Shares in leading cable operator Megacable (MEGACPO.MX), which offers fixed-line telephone service and is planning to launch a mobile network, rose 1.52 percent to 30.00 pesos.
Telmex's stock was down 2.45 percent at 11.14 pesos.
(Additional reporting by Miguel Angel Gutierrez; Editing by Gary Hill)
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