But though the reforms are the furthest-reaching measures passed
against Slim since he became the dominant force in Mexico's telecoms
market more than two decades ago, they are likely to take years to
erode his hold on the business.
Slim's America Movil, which controls 70 percent of the Mexican
mobile market and 80 percent of its fixed lines, was singled out for
tougher measures last week by the Federal Telecommunications
Institute (IFT), the new market regulator.
His Mexico phone units must now present plans to lower rates for
rivals using America Movil's mobile network, eliminate roaming
charges, open up the fixed-line network and share transmission
towers, ducts and other nonelectronic infrastructure.
It could have been worse. The IFT could have ordered the company to
divest assets, and analysts forecast that Slim will still hold 60
percent of the market in a few years.
"We aren't that worried," a top-20 America Movil shareholder told
Reuters on condition of anonymity. "We think the company has
suffered a lot and that the prices and valuation of the shares
incorporated a worse scenario with regards to (IFT)."
America Movil's share price fell to a near four-year low the day
after the government presented the reform that created the IFT in
March 2013, and it remains well below mid-2012 levels.
Since last week's announcement the stock was up 0.85 percent to
13.09 pesos at Thursday's close.
"The company's entrenched market position is not likely to face any
serious decline, despite the regulatory benefit for smaller players,
given its well-established operational scale and expertise," credit
ratings agency Fitch said this week.
FALLING SHARE, GROWING MARKET
America Movil has been looking to expand into recovering European
economies for the last two years to escape the rising tide of
regulatory measures in Mexico.
After a failed takeover bid for Dutch telecoms group KPN last year,
the company is now moving toward a deal with the Austrian government
that could see Slim take control of Telekom Austria.
One of the top telecoms experts in Congress told Reuters last year
the reform would be a failure if Slim's share of Mexico's mobile
market did not drop below 50 percent by 2018. Market estimates look
Analysts at bank BBVA forecast in January that he will reach around
61 percent by end-2020, while Bernstein Research estimated it will
be around 60 percent by 2016/17.
America Movil's Mexico unit, which accounts for just under half of
group earnings before interest, taxes, depreciation and amortization
(EBITDA), is tipped to become less profitable.
The company could see its Mexico EBITDA profit margins fall to below
35 percent in 2017, from 43.9 percent in 2013, analysts at ItauBBA
forecast. Bernstein estimates that America Movil's annual EBITDA in
Mexico will decline 13 percent between 2013 and 2016, equivalent to
a drop of around $1.2 billion.
Mexico's telecoms market is expanding meanwhile.
The IFT's production index for the sector, which includes fixed and
mobile subscriptions, phone traffic, pay TV subscriptions and other
measures, grew 8 percent in 2013.
[to top of second column]
Secondary laws to implement the 2013 telecoms reform, expected to be
presented to Congress soon, are more than three months behind an
original December deadline for passing them. Legal battles over the
new laws could further delay changes.
The IFT's measures will be revised every two years, though the
regulator can still order asset divestitures if it finds sufficient
evidence of antitrust practices by America Movil. And if the company
fails to comply with accounting separation rules, it may have its
concessions revoked, the IFT has said.
IMPACT LIMITED, UNCERTAIN
America Movil's fixed-line subsidiary Telmex must, within 180 days
of last Friday, allow rivals use of its "last mile" of phone line
connecting the telephone exchange to customers for a regulated fee.
Interconnection rates, which rivals pay to use America Movil's
mobile network, were already reduced as part of a 2011 law but will
now be asymmetric, meaning the rate Slim's company can charge will
be lower than rivals.
ItauBBA analyst Gregorio Tomassi expects the rates to be halved from
0.3 pesos ($0.02) per minute now. Fitch highlights America Movil's
interconnection fees in Mexico, which account for less than 2.5
percent of group revenue.
The company also has to be ready to start sharing its infrastructure
with rivals within the 180-day period. The national roaming charges
it must drop make up less than 5 percent of Mexico's total wireless
revenue, according to Bernstein, or less than 8.968 billion pesos
In the past, America Movil and broadcaster Televisa, another target
of the sweeping overhaul, frequently used injunctions to block
Slim's lawyers no longer have the same tools at their disposal after
the 2013 reform ended his ability to suspend regulatory decisions
during the appeals process.
The carrot for compliance with the rules is that Slim could be
granted a Mexican TV license for the first time. America Movil
declined to comment on its plans in television.
But the telecoms market is about four times the size of the TV
business. Slim's potential loss in EBITDA from telecoms is around 16
billion pesos a year by 2015, while possible gains in TV are about 3
billion, a Bernstein analysis last year showed.
($1 = 13.2290 pesos)
(Additional reporting by Tomas
Sarmiento; editing by Dave Graham and Prudence Crowther)
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