America Movil S.A.B. de C.V.’s AMX wireline division, Telmex, was recently dealt a major blow as Mexico’s telecom regulator Federal Telecommunications Institute (IFT) decided to allow access to the "last mile" of Telmex telephone networks to rivals.
The move will compel Telmex to open up its infrastructure to other operators in the local loop (last mileage) segment. Also, interconnection fees levied by the company will be closely monitored. The IFT added that Telmex will have to decide on its terms for network offering within 60 days.
Notably, Telmex currently dominates the Mexican market with around 80% hold whereas America Movil’s wireless division, Telcel, commands about a 70% share. Notably, the IFT intends to restrict the maximum hold of a company in the market to 50%.
In 2014, the government of Mexico had reformed its telecommunications sector. The new norms identified America Movil as a dominant player in the market. Meanwhile, the nation’s telecommunications sector is highly monopolistic with just one or two companies dominating the market. The Mexican government, however, intends to instil competition by encouraging the entry of new operators. This in turn will reduce the cost of telecom as well as broadcasting services.
In Apr 2014, America Movil filed an injunction against the IFT’s decision distinguishing the company as a dominant operator and imposing asymmetrical regulations on it. However, America Movil’s failed to in its attempt to change the verdict.
We believe the IFT decision to open access to "last mile" of Telmex’s telephone networks definitely opens up significant scope for small telecom operators like Alestra, Axtel, Maxcom and Totalplay.
Apart from America Movil, Spanish telecom giant Telefonica S.A. TEF enjoys a strong presence in Mexico. Recently, U.S. telecom behemoth AT&T Inc. T took a strategic decision to explore the Mexican wireless market after its acquired Grupo Iusacell. AT&T also agreed to purchase the Mexican mobile assets of the currently bankrupt NII Holdings Inc.
America Movil currently carries a Zacks Rank #3 (Hold). A better-ranked stock in this sector is TELUS Corporation TU with a Zacks Rank #2 (Buy).
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