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Telecoms reform "can be positive" says América Móvil CFO

Jul 25, 2014

Mexico's reforms - which have banks and buyers lining up for asset sales from América Móvil - could have a silver living for the Slim family's company, says CFO Carlos Garcí­a Moreno

 Photo source: Matthew Hurst
América Móvil's chief financial officer Carlos García Moreno has said Mexico's sweeping telecoms reform - which has prompted the company to divest assets to lower its domestic market share - could prove a boon for the telecoms heavyweight.

"We think the reform can be very positive," he told LatinFinance in an interview. "I think there are opportunities in the telecom law," he said, adding that the reform brings a more up-to-date legal framework to the sector after more than decade of inertia.

His comments come as potential buyers line up to pitch for América Móvil's assets and as banks seek advisory roles on the planned divestments.

"Already we're beginning to get signs of interest from many quarters, including many unexpected ones," García Moreno said, discussing the shape that the asset sales might take.

Mexican regulators earlier this year declared América Móvil, controlled by the Slim family, a "preponderant economic agent" in the local telecoms market. New laws impose asymmetric regulation, such as different connection rates, on dominant players.

América Móvil announced in July that it would sell assets to reduce its market share in landlines and mobile subscribers to below 50%.

Ending the impasse

Asked whether the firm was a winner or a loser from the reform, García Moreno said asset sales would be "neutral" because the board of directors stipulated a divestment must be at market prices. The uniqueness of the opportunity for potential buyers made a sale at market prices highly achievable, García Moreno said.

Once the firm is no longer classed as dominant in the market, América Móvil should be able to get a license for its long-held ambition to provide its clients pay television, García Moreno said. The firm had been barred from pay TV under regulation dating back to an initial telephone concession granted in 1990.

"There was a bit of an impasse," under the previous framework, he said. Technology has evolved since the 1990s, making it possible for telecoms firms to provide television and phone lines using the same infrastructure, said García Moreno. He noted that pay TV is an "integral part" of América Móvil's business in its operations outside Mexico.

Under the new framework, América Móvil is still barred from pay TV if it remains dominant in the wider telecoms market.

"To the extent that we cease to be a preponderant player, and not subject to asymmetric regulation, that does away with regulatory uncertainty and clears the way for us to move into pay TV," he said, discussing the benefits of the reform.

Meanwhile, a decision to spin-off the firm's Mexican telecoms towers into an independent entity - which he said would be listed, and owned by the same shareholders on a share-for-share basis - will also benefit shareholders, as the towers can be rented out to new competitors.

"If there are more players using the same towers, you get more revenue out of them," he said. As such, he said the towers would have a higher market value: "They will be assigned a higher multiple, so our current shareholders will extract more value."

"What we want is to extract more value from assets that we have buried in our balance sheet, at cost." LF

Read more: Buyers, banks line up for AMX asset sales

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