Slim’s America Movil Hamstrung as Colombia Woos DirecTV, NII

Posted on Nov 13 2012 - 12:40am by Rico

(Bloomberg) – America Movil, the mobile-phone carrier controlled by billionaire Carlos Slim, has to face limits in Colombia so the country can open up to potential new investors such as DirecTV, the nation’s top telecommunications official said.

Slim’s America Movil is the third largest mobile operator in the world.

To boost competition, Colombia’s government must partially exclude America Movil from an auction of airwaves next year that would allow mobile-phone companies to upgrade their networks to offer faster 4G service, Information Technology and Communications Minister Diego Molano said.

The proposal, which awaits public comment, strikes a blow against America Movil, the largest mobile-phone company in the Americas by subscribers, in a country that is its third-largest and third-most profitable market. The partial auction ban would hurt investment and slow the spread of wireless high-speed Internet in Colombia, the company has said.

“We have to seek a balance,” Molano said in a Nov. 9 interview in Bogota. “With this scenario, there’s going to be a lot of investment in the country.”

The auction may lure new companies into Colombia to offer wireless data services, including U.S. companies DirecTV (DTV) and NII Holdings Inc. (NIHD), Mexico’s TV Azteca SAB and Chile’s Empresa Nacional de Telecomunicaciones SA, known as Entel, Molano said.

America Movil is 72-year-old Slim’s largest company, representing about 54 percent of his $71.8 billion fortune as the world’s richest person, according to the Bloomberg Billionaires Index. America Movil fell 0.3 percent to 15.68 pesos at the close in Mexico City.
2.5 Gigahertz

Under the draft auction rules, America Movil would be allowed to bid on spectrum in the 2.5 gigahertz band. It would be barred from acquiring airwaves in a separate band of spectrum known as AWS that has wider range, requiring fewer towers to cover a wide area. More towers means higher costs to build a new network for 4G, or fourth-generation, services such as faster downloads and high-definition video.

Steering America Movil, which operates under the Claro brand in Colombia, to the airwaves that will require more investment makes sense because it has greater financial strength than smaller competitors, Molano said. Slim’s company has 61 percent of Colombian mobile-phone customers, competing against Madrid-based Telefonica SA (TEF) and Luxembourg-based Millicom International Cellular SA. (MIICF)

“For Claro, competing in this scenario is profitable because it has a competitive advantage, the size of its networks across the country,” Molano said. “It’s not as difficult as it would be for another operator.”
Slim’s Spending

Slim told reporters last month that America Movil plans to spend $1 billion in network investments in Colombia next year, up 8.7 percent from this year. That plan was contingent on a acquiring 4G airwaves, and he didn’t say what America Movil would spend if it didn’t have full access to the auction.

“The inclusion of Claro to participate in the auction only in the 2.5 gigahertz band to implement 4G networks doesn’t allow the company to compete in equal conditions,” America Movil said in a Nov. 1 statement. “It goes against investment and legal certainty and will slow the roll-out of mobile broadband across the nation.” The company’s press office declined to comment beyond the statement.

Lawmakers are studying a proposal to limit market share in Colombia’s mobile-phone industry to 30 percent. While the government shares concerns about America Movil’s dominance, the proposal requires further study and needs to be designed so that it promotes competition, Molano said.
DirecTV Analysis

DirecTV, the U.S. satellite carrier that acquired 4G airwaves in Brazil last year, is analyzing Colombia’s auction and hasn’t decided whether to participate, said Darris Gringeri, a spokesman for the company. An Entel press official who asked not to be named under company policy said the carrier often considers participating in airwave auctions in the region.

NII has mobile-phone service in Brazil, Mexico, Argentina, Chile and Peru under the Nextel brand. Claudia Restrepo, a spokeswoman for Reston, Virginia-based NII, didn’t return phone and e-mail messages.

TV Azteca, controlled by billionaire Ricardo Salinas, won’t participate in the auction because “too many key details remain undefined,” Samer Salameh, chief executive officer of the company’s communications unit, in an e-mail. Azteca won a contract last year to extend fiber-optic Internet lines to 700 Colombian communities in its first foray into the country.

DirecTV, TV Azteca and Telefonica were among companies that signed an open letter Nov. 9 urging the government to support the proposal to cap America Movil’s market share.

“Colombians have had to pay rates that in a more competitive market would be lower,” the letter said.