A law that has paved the way for greater mobile competition in Mexico—including AT&T’s entry into the region—could be overturned if a legal challenge gains broad support in the country’s highest court.
Ahead of oral arguments expected next week, Mexican Supreme Court Justice Javier Laynez Potisek has proposed backing billionaire Carlos Slim in his legal quest to overturn a law that bans interconnection fees between wireless operators.
Slim’s América Móvil, which controls about two-thirds of the Mexican market via units Telmex and Telcel, lost a major revenue stream when those charges were banned in Mexico’s 2014 telecom overhaul, as it terminates most calls in the country.
That revamp, which involved amending Mexico’s constitution, cracked open the door to a market that has historically been dominated by América Móvil and, to much a lesser extent, Telefónica S.A. After the regulatory changes, AT&T jumped into the fray there with the $4 billion acquisitions of Nextel Mexico and Iusacell, and has risen to be Mexico’s third-largest cellular carrier, claiming roughly 13.1 million subscribers.
AT&T CEO Randall Stephenson was quick to see the opportunity when the changes became law. “They have literally made constitutional changes to implement changes in the telecom law that make it very, very attractive for companies to come in and invest,” he said at a November 2014 conference. “It’s an interesting time, when you have a government there who is incentivizing you and motivating you to come and invest.”
This week, AT&T issued a statement to the Wall Street Journal that “we remain optimistic that all the Mexican institutions will uphold the interest of citizens, and their commitment to deliver effective competition.”
Fans of the law as it stands include AT&T, Telefónica, and units of broadcast and cable operator Grupo Televisa, who have argued that overturning it will mean that competitors will no longer be able to afford to offer unlimited long-distance and other offers that have been good for Mexican subscribers, and that a downward pricing trend in the market will be reversed. The WSJ reported that mobile service prices have fallen more than 40%, and fixed-line prices about 5%, since the law went into effect.
Opening arguments in the case are set to begin next week.