Telcel is not only the mobile telephone markets dominant carrier with 70 million subscribers. It is a force unto itself, as the stock markets top listing that accounts for up to a quarter of daily trades, not to mention that it is the nations biggest, most valuable and profitable private company.
So what does it really mean that on Tuesday, the Supreme Court dealt the crown jewel of the worlds top billionaire, Carlos Slim, a substantial blow by ruling that Telcel cant block competitors by using court injunctions to ignore the rulings of the heretofore useless Federal Telecommunications Commision (Cofetel)?
It means, as Ive insisted ad nauseam, that everything in Mexico is politicized. Everything includes Cofetels recent shocking and unprecedented US$1 billion fine against Telcel for alleged monopolistic practices, as well as the top courts ruling.
The background is this: Not so very long ago, Slim and his major telephony holdings, Telcel and its fixed-line sister, Telmex, were cozy partners with the dominant force in broadcasting, Televisa, and its sly chairman, Emilio Azcárraga IV. When Azcárraga was in dire straits several years ago due to a legacy family feud, Slims bank, Inbursa, came to the rescue by buying up a non-voting share package.
So far, so good. But then technology and politics reared their faces. In technology, quadruple play blurred the lines between telephony and TV and radio broadcasting, and both giants, Slim and Azcárraga, realized they were competitors.
In politics, Televisa consolidated its power by flexing its muscle on electoral processes. Since the masses in Mexico do not read newspapers, television is the influential force. The old dictum, in force for several decades, goes that whichever politician manages to get in televisions good graces will win an election.
Telmex got into an alliance with Dish to offer pay TV as part of a package that includes phone lines, Internet access and broadband services, thus invading Televisas sphere where Sky and Cablevision ruled. It was only a matter of time before the telcoms war exploded. Explode it did, with all of Slims companies, from Inbursa bank to retailers such as Sanborns, Sears and Saks Fifth Avenue, among others, yanking all TV advertising.
But what about the Supreme Courts alleged independence and integrity? During the 70 years of PRI rule through 2000, the top court was little more than a pathetic appendage of the Executive Branch. Its only recently that the court has sought true independence through a number of legal reforms, but the process if painstaking and the political forces much too strong to allow for a full and swift revamping.
In its charming but fake naiveté, the court believes that its 6-4 vote should create a more competitive landscape in the local cellphone market, by forcing Telcel to charge competitors a significantly lower rate to complete calls on its network. The point is that even if that were to happen as it should, the reduced operating costs for all will not mean a lower cost to the consumer. It may only mean a redistribution of profits.
In response to the ruling, Telcel said it respects the court's decision, but made it clear that through its veritable army of lawyers, the numerous injunctions (amparos) it promoted in connection with Cofetels rulings on interconnection rates in previous years will forge ahead.
Such Telcel rivals as Nextel Mexico claim that the interconnection fees are higher than the fees Telcel charges its own customers for calls within the network, and prevent them from offering competitive rates to their own users. Telcel vies with Spains Telefónica as the leading mobile carrier in the Americas.
Telmex controls 90% of the countrys fixed-line market, while Telcel controls 70% of the mobile market. The antitrust watchdog, the Federal Competition Commission, says higher than average telephone bills in Mexico cost consumers about US$6 billion a year.
In Mexico, there are a surprisingly high number of appeals that result in suspending the application of a regulatory decision, the international Organization for Economic Cooperation and Development wrote in a recent letter to Cofetel. In this context, Mexico is a unique case in the OECD.
The top courts ruling seeks to make sure that Telcel will no longer be allowed to ignore the regulator while the appeal takes place. The court majority argued that lower interconnection rates are in the public interest. Cofetel recently ruled Telcel has to slash interconnection rates to 39 Mexican cents a minute (about three U.S. cents) from one peso (about nine U.S. cents) for most competitors.