Mexico's Slim will cut phone fees to skip fine

Mexico City : Mexico's competition watchdog has ordered Carlos Slim to cut charges he levies on mobile phone competitors in exchange for dropping a record fine, exacting a small concession from the country's dominant tele-coms mogul.

Slim's cash cow, mobile giant America Movil, said on Thursday it had agreed with Mexico's Federal Competition Commission (Cofeco) to cut by about 20 per cent its interconnection rates, the fees it charges rivals to tap its mobile network.

Analysts said the deal was a minor setback to Slim, and shares in America Movil even rose slightly. The settlement follows a series of steps by regulators to curb the power of the tycoon, who controls some 70 per cent of Mexico's mobile market.

The latest decision ends a battle over a fine worth nearly $1 billion (Dh3.67 billion) handed down by the regulator in April 2011 against America Movil's local brand Telcel. Then, the regulator found that Slim's company charged unfair fees to competitors.

Avoiding litigation

"On paper, we can't say that this is a huge blow to Slim. But it is an achievement that avoids a long and uncertain legal fight. Those battles have left the sector paralysed," Carlos Ramirez, an analyst with the Eurasia Group, said.

Slim, the world's richest man, counted on a 0.39 peso (Dh0.11) per minute mobile-to-mobile interconnection rate last year. The Cofeco decision lst week will trim that to 0.31 peso per minute in 2014.

The cut was in line with what Telcel had agreed to with several local operators late last year.

But it was a big drop from what America Movil was charging at the start of 2011, when the interconnection rate for many of its rivals was about 0.95 peso per minute.

That cut shaved about 3 per cent, or roughly $390 million, from America Movil's quarterly revenue, executives told analysts on a call last year. The company does not publish details on how much money it makes from interconnection fees.

Share prices rise

Markets had been betting for weeks that the company would escape the big fine, and its share price has risen by more than 20 per cent since early March. Shares in America Movil were up by 1.48 per cent to 17.88 pesos at the close of trading.

Slim has been at the centre of regulatory efforts to spur greater competition in Mexico, where a number of key industries are in the hands of a few powerful families.