America Movil fined over $1 billion for monopoly practice
18 April 2011 |
America Movil’s mobile subsidiary Telcel has been fined $1.03 billion after accusations of monopolistic practices by the Federal Competition Commission.
The fine comes after an investigation into Mexican operator Telcel’s completion of calls to mobile networks that started in November 2006. Wally Swain from Yankee Group explained that the fine equates to almost 8.5% of annual mobile revenue which he estimates to be almost half of its CAPEX budget based on industry standards. While this is a substantial hit to the company’s earnings the company’s diversity means that it has other lines of business to fall back on.
America Movil’s competition in the Mexican mobile market has not been able to effectively compete with the mobile giant and, until now, has had very little impact on Telcel’s earnings. There are suggestions that competitors have had limited success due to investors being unwilling to put money into a market where there is clearly one dominant player.
Swain argues: “Weak regulatory mechanisms have contributed to AMX's success. Assuming the fine holds up under legal assault by the company, this will strengthen these mechanisms and assure all market participants of a fair deal.”
America Movil has 30 days to appeal against the fine with the possibility of the ruling to be overturned. According to Reuters the company, owned by the billionaire Carlos Slim, plan to appeal.