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Latino Daily News

Tuesday August 17, 2010

Is there Some Monkey Business in Mexico’s Telecommunication Sector?

In July, Televisa announced it would team up with Nextel Mexico to go into the mobile phone business and therefore submit a bid to provide mobile telecommunication services at Mexican airports. 

The $14 million bid immediately came under scrutiny for being so low and being the only bid submitted. Under Mexican law, other competitors were barred from bidding due to their other large wireless holdings.  Carlos Slim’s America Movil has paid close to $400 million for other blocks of mobile wireless services in Mexico raising eyebrows on the $14 million chump change bid. 

In a catch-22, such a low bid can succeed because it’s the only one but not before getting a lot of criticism.  This proposed transaction is reviving fears that the old days of cronyism and back room business deals Mexico has been known for are alive and well.  Televisa has a 70% television market share and is viewed by many as a monopoly that has always been favored by the Mexican political party in power trying to garner positive press.

Late last night Mexico’s regulatory agency, Cofetel,  approved the deal stating the bid was valid despite the low price.  It believes Televisa’s entry into mobile communications will promote competition in the sector. In a lone voice of opposition, one of the Cofetel commissioners refused to vote symbolically opposing the way Mexico’s licensing auctions work.