Billionaire Carlos Slim’s dominance of Colombia’s wireless market is under threat as lawmakers and rivals press for market-share limits and seek to prevent him from getting licenses for faster smartphone speeds.
The Colombian government is drawing up a plan for the auction of 4G radio licenses and an early document outlining the bidding process excluded Slim’s America Movil SAB. (AMXL) Separately, a group of lawmakers last week proposed a bill that would restrict any one company from controlling more than 30 percent of the wireless market, which could force Mexico City-based America Movil to break up or return airwave licenses.
A regulatory crackdown in Colombia, where America Movil has about 60 percent of mobile users, would handicap the company in its third-largest market and one of its most lucrative. The carrier said the market-cap proposal would increase client costs and an auction ban would crimp its business. Just last year, Slim, the world’s richest man worth more than $77 billion, was praising Colombia’s openness to foreign investment.
“It will basically sentence the company to a slow death,” Juan Carlos Archila, president of America Movil’s Colombia unit, said of the proposal by rivals to keep the company from the auction. “The company would have immense limitation to compete in the market,” he said in an interview.
The proposed bill seeking to cap market share, introduced by Jorge Robledo, an opposition leader in the Senate, is backed by 18 other lawmakers, said Roy Barreras, president of Colombia’s Congress. Barreras, a member of the ruling party who supports the proposal, said there’s a good chance the bill will pass.
If the market-share cap proposal is approved, America Movil would shed its less profitable customers, losing interest in clients in rural and poor neighborhoods, said Jose Otero, an analyst at Signals Telecom Consulting in Montevideo, Uruguay. The company’s network investment would drop and coverage expansion would slow, he said. Once its smaller competitors neared the 30 percent mark, they too would have little incentive to grow, he said.
“It’s a measure that doesn’t benefit the consumer in any way,” Otero said.
The move to sideline America Movil from the wireless airwave auction for so-called fourth-generation service was included in an early document for the auction plan, America Movil’s Archila said.
Competitors Telefonica SA (TEF), which has 26 percent of Colombia’s mobile-phone subscribers, and Empresa de Telecomunicaciones de Bogota said America Movil, operating under the Claro brand (BRND), uses its size in Colombia to keep customers from switching providers.
ETB advocates keeping Claro out of the auction, which had been tentatively scheduled for December.
America Movil offers discounts to users for calling within Claro’s network, so it’s more expensive to phone customers of other networks, said ETB President Saul Kattan. That makes Colombians more likely to choose Claro, he said in an interview.
“With the dominance they have in voice, with 4G they’re going to easily get dominance in data,” Kattan said.
While the government is unlikely to block America Movil outright from participating in the 4G auction, it could require the company to accept undesirable conditions to bid, said Otero, the Signals Telecom analyst. The carrier could be asked to participate in infrastructure-sharing agreements with rivals, or to allow competitors without their own wireless towers to roam on its networks, he said.
“The conditions may cause them to be more cautious in investing. If they can’t roll out LTE, we’re talking about a delay in their strategy to offer high-speed data,” Otero said.
America Movil’s licenses to operate its mobile-phone network are up for renewal in 2014, which would offer the government another opportunity to impose those conditions on the carrier, he said.
“There’s little room for them to maneuver,” Otero said.
President Juan Manuel Santos’s government is reviewing the auction-ban proposal, Information Technology and Communications Minister Diego Molano has said. Molano accepted and then canceled several interview requests by Bloomberg.
The Colombian proposals go beyond regulatory attempts in Slim’s home market to contain the power of America Movil, which has 70 percent of Mexican mobile-phone subscribers. That nation’s antitrust agency agreed this year to drop a $1 billion fine against Slim’s company for anticompetitive behavior in exchange for concessions such as lower fees to connect calls from competitors.
In Brazil, Latin America’s largest economy, regulators blocked sales of new plans by America Movil and two competitors for 11 days until they presented investment plans to address customer complaints.
While Mexico and Brazil account for almost two-thirds of America Movil’s sales, the company’s Colombia and Panama division makes up 8.6 percent of revenue and is one of the company’s most profitable markets, according to data compiled by Bloomberg. The Colombian unit recorded a profit margin last year of about 47 percent, leaving out interest, taxes, depreciation and amortization.
The Colombia government hasn’t done enough to act on a 2009 ruling that declared America Movil the dominant carrier, said Alfonso Gomez, president of Madrid-based Telefonica’s Colombian division.
“The only thing that has happened is that the market keeps on being concentrated,” he said in an interview.
Lawmakers and regulators are only pressuring America Movil because of lobbying by the company’s competitors, America Movil’s Archila, said.
“What should be asked is if the way to promote competition is by eliminating the leading competitor,” he said.