Mexican activists question sale of cell phone frequencies to dominant broadcaster

By Mark Stevenson, AP
Tuesday, August 17, 2010

Mexico gives cell frequencies to television giant

MEXICO CITY — Mexican officials trying to dilute a near-monopoly on cell phone services have awarded valuable frequencies to a company that holds a near-monopoly in broadcast television.

Government regulators say the new radio wave concessions approved Monday by the Federal Telecommunications Commission will provide more competition for the phone empire built by the world’s richest man, Carlos Slim, whose companies control 73 percent of Mexico’s cell market.

Critics of the deal alleged Tuesday that the process appeared to favor a consortium headed by Grupo Televisa, which controls about 70 percent of Mexico’s broadcast television audience.

“This only confirms the hypothesis that the commissioners and president of the regulatory agency have a boss: the monopolies,” said Oscar Romero of El Barzon, an activist group for consumers and debtors.

The government ruled almost all of Televisa’s potential competitors out of the bidding and disqualified the remaining bidder. The Telecommunications Commission defended the unopposed auction, saying it will still create a more equitable distribution of frequencies:

“It meets the need of modifying our country’s highly concentrated market structure,” the commission said in a news release.

Government rules prevented bidders who already controlled significant chunks of cellular frequency from participating in the bidding — ruling out most potential competitors against Televisa SA de CV and its partner, Comunicaciones Nextel de Mexico SA de CV.

Officials then accepted a Televisa-Nextel bid with a much lower upfront payment than that offered by other companies in similar auctions. Looking at the entire payment over the 20-year life of the concession, the consortium acknowledged it got a slightly lower total price than offered by competitors. It will pay a total $1.45 billion over the whole period.

“We were left alone in that band to bid against ourselves,” Nextel Mexico President Peter Foyo said, noting that “this could have been much, much more money if we had had competitors.”

Foyo said the process “was done fair and square.”

“Obviously, you’re going to have one more competitor out there” for Slim’s company, he noted, “whereby consumers are going to have one more choice, and by Charles Darwin’s way of thinking, we’re going to get our consumer better prices and service.”

The Federal Competition Commission earlier said it accepted the low price because the priority was getting more competitors into the market, not getting the most money from bidders.

Foyo said the frequencies would be used for voice and data 3G cell service, and possibly to carry Televisa programming.

Some critics say the decision undermines the government’s claim it is battling monopolies.

“I think the outcry that giving it to Televisa has raised is because it just doesn’t make sense … when you say you are trying to fight monopolies all over, and then you take one of the biggest monopolies or duopolies and you just give it more power,” said Jonathan Heath, an independent Mexico City-based economist.

In a country where sectors like telecommunications, television, cement, grains and banking are dominated by a limited number of huge companies, some experts say there is some logic to promoting competition by getting powerful forces from one industry to invade another tycoon’s territory.

“It is almost a matter of religious doctrine, that a duopoly (in which two businesses control an industry) is better than a monopoly,” said Federico Estevez, a political science professor at Mexico’s Autonomous Technological Institute.

Mexico anti-monopoly commission provided a hint that Slim’s telephone empire might soon get the chance it has long sought to enter Televisa’s home turf, broadcasting.

“The commission stresses the need to auction off its frequencies as soon as possible, and also assign permits for a third television broadcast network,” it said.

That was widely interpreted as a signal to Slim.

“It is going to go to Slim, that’s clear,” Estevez said. “Who else is going to be able to pay for it?”

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