M&A

19 November, 2009

Mexico Senate could vote on telecom bill next week

* Mexico lawmakers eye open foreign investment in telcos

* Senator says vote could be on Tuesday

* Backers want to increase competition

By Noel Randewich

MEXICO CITY, Nov 19 (Reuters) - Mexican senators could vote next week on a proposal to remove foreign-investment limits in fixed-line telephone companies, which could be a blow to market leader Telmex, owned by tycoon Carlos Slim.

Sen. Marko Cortes, who proposed changes to existing laws, told Reuters that Senate committees were debating details of a reciprocity clause that would make unlimited investment in the sector eligible only to investors whose countries offer the same terms to Mexico.

Proponents of the bill say it would increase competition against Telmex (TELMEXL.MX) (TMX.N), which has 85 percent of Mexico's fixed-telephone lines and is often accused of making it difficult, and expensive, for smaller players to connect calls through its infrastructure.

"Through this initiative, we want Mexicans to pay lower bills for their telephone and Internet," Cortes, from the ruling National Action Party (PAN), said in an interview. "Competition is the best way to create better prices."

He said the Senate could vote on the proposal on Tuesday.

Letting foreign investors take controlling positions in fixed-line telephone and Internet operators could make smaller companies like Axtel (AXTELCPO.MX), Megacable (MEGACPO.MX) and Maxcom (MXCMCPO.MX) acquisition targets for international players like Spain's Telefonica.

Foreign investment in Mexican fixed-line telephone companies is currently limited to 49 percent.

Telefonica (TEF.MC) is already No. 2 in Mexico's cell phone market, where foreign firms are given a free hand. It has been the only serious challenger there to incumbent America Movil (AMXL.MX) (AMX.N), also controlled by Slim.

Telefonica Chairman Cesar Alierta told Reuters in Madrid on Wednesday he has no other acquisition plans in Brazil after his company was beaten by France's Vivendi (VIV.PA) with a bid of up to $2.39 billion to gain control of Brazilian telecom GVT (GVTT3.SA).

But Alierta highlighted the importance of Latin America to Telefonica's growth. (Reporting by Noel Randewich; editing by Carol Bishopric) (Additional reporting by Miguel Angel Gutierrez)

Source: http://www.reuters.com