Foreign Investment in Mexico Telecommunications Market

Mexico would benefit from the elimination of the 49% limit to foreign investment in the telecommunication market, provided that the legal framework strengthens the Mexican telecommunication regulator (Cofetel). The historical reasons for such a limit are no longer applicable. The amendment of the foreign investment provisions on fixed-line market has been subject to severe critics. The debate has been centered between a nationalistic approach that apparently defends “sovereignty” and is aligned with Telmex interests, and a liberal viewpoint that has been linked to Telefonica from Spain. Neither perspective has assessed objectively the public interest of admitting or not more foreign investment.

Telmex labor union leader has also expressed his concerns, but they appear to be the company´s message, not the workers´. Others demand reciprocity which could be difficult to assess, and might have effect on other countries pursuant to World Trade Organization´s agreements.

Mexico´s fixed-line telecommunications market is attractive to foreign investment, and could trigger major infrastructure deployment. However, opening the fixed-line market to full foreign investment will not have significant impact on competition unless it is accompanied by other regulatory measures. These should at least grant Cofetel the power to assure timely interconnection, to sanction and revoke licenses. Also, there should be ex–ante regulations to those operators that have 25% or more market participation. Full foreign investment in fixed-line is unlikely to be approved without other conditions (i.e., demanding reciprocity), and relevant regulatory reforms might be on hold for some time.

(These comments were published in Inter-American Dialogue´s – Latin America Advisor Telecom, July 21, 2008)