On July 14th, Mexican President Enrique Peña Nieto signed into law major new regulations for Mexico’s telecommunications and broadcasting industries.

These are what are known as the “secondary” laws which will implement the original legislation proposed in 2013, and will effect Mexican consumers in myriad ways, including abolishing long-distance phone charges, making it easier for customers to switch phone companies, and punishing firms that enjoy “asymmetric advantages” through a different pricing regime. The government is also now able to break up monopolistic companies – called “preponderant companies” – with over 50 percent market share in any sector.

With these actions, the government is generally seen as attempting to curb the power of Carlos Slim’s empire: America Movil in telecom and that of Televisa in broadcasting. Telmex, which is a subsidiary of America Movil, and Televisa also dominate most internet services in the country. Until recently, America Movil had 70 percent of the mobile market in Mexico and 60 percent of the fixed lines, while Televisa owned over 64 percent of the Mexican television market.

Televisa fought the Mexican Federal Telecommunications Institute’s (IFT) designation of preponderance through the courts; however, they lost that challenge at the end of August.

On July 14th, Mexican President Enrique Peña Nieto signed into law major new regulations for Mexico’s telecommunications and broadcasting industries.

These are what are known as the “secondary” laws which will implement the original legislation proposed in 2013, and will effect Mexican consumers in myriad ways, including abolishing long-distance phone charges, making it easier for customers to switch phone companies, and punishing firms that enjoy “asymmetric advantages” through a different pricing regime. The government is also now able to break up monopolistic companies – called “preponderant companies” – with over 50 percent market share in any sector. 

With these actions, the government is generally seen as attempting to curb the power of Carlos Slim’s empire: America Movil in telecom and that of Televisa in broadcasting. Telmex, which is a subsidiary of America Movil, and Televisa also dominate most internet services in the country.  Until recently, America Movil had 70 percent of the mobile market in Mexico and 60 percent of the fixed lines, while Televisa owned over 64 percent of the Mexican television market.

Televisa fought the Mexican Federal Telecommunications Institute’s (IFT) designation of preponderance through the courts; however, they lost that challenge at the end of August. The ruling surprised many given Televisa’s historically close relationship with the ruling PRI party – the station was widely viewed as openly favoring the current president in the last election and giving him more air time than any other candidate. It has thus boosted confidence that the reforms will truly tackle the large monopolies, instead of making superficial alterations. 

Unlike Televisa, America Movil did not fight the designation and instead announced that it was going to begin selling assets in Mexico a few days before the legislation was signed. It is estimated that the company aims to sell between 15-20 percent of its assets for a sale which is expected to be valued at $17.5 billion. In doing so, the company will be able to stop sharing infrastructure (such as towers and wires) with competitors and it will be able to raise connection costs for competitors. America Movil stocks rose sharply with the announcement, after decreasing earlier in the summer. 

America Movil has said that the sale will be to a “strong competitor,” and rumors are swirling as to who that competitor could be. One of the most-discussed possibilities is AT&T, which sold a minority stake in America Movil in June so the company could pursue purchasing DirecTV, which is one of America Movil’s competitors in Latin America. This, in turn, enables them to bid to purchase America Movil assets outright. In addition to AT&T, America Movil reached out to SoftBank Corp from Japan, Bell Canada and China Mobile Ltd. for bids. The IFT would have to approve any sale to ensure that it would enhance competition in the country. 

Since President Peña announced the proposed media reforms, America Movil has been energetically seeking new opportunities outside of Mexico. The company is, for example, entering talks to make a joint bid with Oi SA for Telecom Italia SpA’s wireless unit in Brazil, and took a majority stake in Telekom Austria AG. 

The company seems to be well-positioned to thrive through the reforms in general, and it may enable them to expand into new sectors in Mexico, such as television.  Some believe that America Movil would ultimately like to offer a “triple play” option for customers in Mexico with phone, internet and television bundled together. 

The reforms have been billed by the Peña Nieto administration as good for business, because they increase competitiveness, and good for consumers, since they should lower prices and improve service. The costs for mobile phone roaming have already decreased, 250 public spaces with free wifi will soon be created, public television channels are in the works, and Peña Nieto has committed the Mexican government to maintaining net neutrality and open social media access. 

It is also hoped that regulating media monopolies will change some of the perception that Mexico is “not free” in terms of freedom of the press. Freedom House has ranked Mexico as “not free” since 2011 largely due to the violence which is frequently perpetrated against journalists, but also because of limited ownership of the media industry and high barriers to entry.

So far, both Mexican consumers and emerging market investors are optimistic about the pace of the reforms, and the Peña administration’s will to follow through with them. Even though the “preponderant” media companies remain powerful, as they can still control up to half of the market, the reforms will hopefully create more competitors which will lead to better products and pricing for consumers and opportunities for both domestic and foreign firms.  The media reforms do not have the same licensing requirements as the energy reform and so it should also be comparatively easier for foreign companies to invest. 

All of this makes for an exciting moment in history to observe and invest in Mexico. As President Peña Nieto said at a recent Atlantic Council event, the reforms “are indispensable to unleash Mexico's potential and provide opportunities for its citizens." It remains to be seen if the reforms can live up to this early potential.