NEW YORK-The establishment of Mexico’s Federal Telecommunications Commission by Aug. 10 heralds the advent of significant new foreign ownership opportunities south of the border for wireless services companies.
“Joint auctions for personal communications services and local wireless access are contemplated for year-end 1996,” said Carlos Casasus, undersecretary of communications and technical development for the Mexico Secretariat of Communications and Transportation (SCT). “This is a large opportunity for U.S. companies to participate in Mexican spectrum auctions. Foreign equity participation will be limited to 49 percent of voting equity of bidding companies.”
Bids for paging licenses will be taken this summer, according to Salma Jalife, Casasus’ chief of staff. While following the U.S. auction model in many ways, she said Mexico will “try to set price caps (on bids), so that any one company won’t have more than five frequency bands.”
Information about the auctions is available in Spanish only on the Internet (www.sct.gob.mx), Jalife said.
The Mexican telecommunications industry is growing seven times faster than the rest of its economy, Casasus said. Cellular service, available in 170 cities, had more than 680,000 users as of the end of July; paging, available in 55 major cities, had 207,000 subscribers. Subscriber growth in the cellular and paging sectors has been at a brisk 43 percent annual rate from 1991 through 1995.
Within the next 12 months, Mexico will hold auctions for wireless telephony, broadband and narrowband PCS, digital radio, specialized mobile radio service and voice and data communications, said Casasus, a likely appointee as Mexico’s first FTC secretary, or commissioner. “Mexico will offer the same spectrum plan available in the U.S. for PCS, and will have a coordination agreement,” he added.
Casasus was the keynote speaker Aug. 6 at a conference titled, “Navigating the New World: How You Can Profit from the Latin American Telecom Revolution,” sponsored by the International Institute of Wireless Communications, Washington, D.C.
“Regarding the checks and balances in the Mexican legal system, the ministry will supervise the concessions granting process exclusively,” Casasus said. “All the rest will be done by the FTC with the goal of keeping the transparency of the auction process*…*and non-discretionary licensing to inspire confidence by investors. Either bureaucracy can veto the granting of the concession.”
The new FTC, mandated by a January 1995 amendment to Mexico’s Constitution, will have the powers of the U.S. Federal Communications Commission after the 1996 federal telecommunications law went into effect, according to Jose Manuel Villalvazo, president of Tecelmex, a cellular carrier, and chairman of the Institute. Borrowing from the British model, the new FTC secretary also will have the power to sign off on any contract, he said.
Plans are for the FTC to be financed by industry, rather than government, although the new agency won’t itself be able to impose fees or taxes. That will remain a government function, Casasus said.
“In July 1995, Mexico opened long-distance telephone licenses to applications for multipurpose telecommunications systems, and 518 companies expressed interest,” Casasus said.
The new long-distance licensees include participation of well-known American telecommunications companies: MCI Communications Corp. in Avantel; AT&T Corp. and GTE Corp. in Alestra; MobileMedia Corp. and Nextel Communications Inc. in Investcom; Bell Atlantic Corp. in IUSATE.
This April, the SCT issued a series of rules to level the competitive playing field, eliminating preferential treatment for Telmex, the state-run monopoly that was privatized in 1990.
“Special dialing access codes for cellular service are to be eliminated under a new technical number plan,” Casasus said. “By the end of 1997, we will eliminate cross-subsidies in Telmex tariffs, with rural subsidies to be funded by the government. All public telecommunications networks must interconnect.”
Telmex, not surprisingly, has strenuously resisted these developments, according to Villalvazo.
Although Telcel lost millions of dollars last year, “it wages a vicious price war that hurts other providers,” he said. Villalvazo said he would prefer it if Telmex was compelled to divest itself entirely of its Telcel cellular subsidiary.
