América Móvil hit by Mexican telecoms reforms
22 July 2014 | Kavit Majithia
América Móvil has claimed that Mexico’s revolutionary telecoms reforms are already beginning to take its toll, after the company revealed a slightly poorer performance than predicted in its core market.
The company, owned by billionaire Carlos Slim, increased its profit by 32.7% year-on-year in Q2, with revenue also rising by 4% for the same period, but results were below analyst expectations for a higher net profit.
New regulations directly targeting América Móvil’s dominance in Mexico have now begun to take effect. The company makes approximately two thirds of its core profit in the country, and under the new laws it will be required to share infrastructure and slash charges to competitors that want to use its network.
The company said that overall mobile voice revenues in Mexico were down by 8.7% year-on-year because of the reforms, with data revenue growing as a result.
Mexico’s telecoms reform came after an assessment by regulators, which indicated that Slim owns approximately 70% of the mobile market and 60% of the fixed-line industry.
Slim said earlier this month that the company will divest some of its assets in the country in order to drop its market share to less than 50%.
If his proposals are accepted by the Federal Telecommunications Institute (IFT), Slim will avoid anti-trust rules and gain entry into Mexico’s pay-TV market.
Analysts predict that Móvil may offset some of the tougher regulations in Mexico by focussing on other parts of Latin America, including Brazil, where it presently owns a 25% share of the wireless market and 54% of the pay-TV industry.
It also has opportunities in Europe, where it recently took majority control of Telekom Austria, with plans for wider expansion across Eastern Europe.