Sao Paulo, March 13, 2013 -- Newly proposed changes to the Mexican constitution regarding telecommunications
and broadcasting services would be a credit negative for established companies
in the sector, says Moody's Investors Service in reports on
individual companies likely to be affected by the law.
In reports on Televisa (Baa1, stable) and America Movil (A2,
stable) the rating agency reports that the changes, proposed March
11 by the federal government, sets the stage for more competition
in TV broadcasting and telecoms, and has the potential for tighter
regulatory oversight and pricing pressures.
"While the government expects that revision and approval of the
changes to the constitution should happen before the end of April,
the final rules, the timeline in implementation and the company's
response would have to be evaluated before a clearer assessment of the
credit impact can be determined," said Moody's VP --
Senior Analyst Nymia Almeida, author of one of the reports,
"Proposed Changes to Telecom Law a Credit Negative for Televisa."
The proposed changes include obligations to carry over-the-air
channels on pay TV systems, and the designation of comprise as dominant,
which could trigger asymmetric rules, network unbundling or even
the obligation to sell certain assets, says Moody's.
The telecom law also contemplates the government granting two new concessions
for over-the-air TV chains. Another change for TV
broadcasting is a proposed raising of the foreign ownership cap for broadcasting
services from 0% to a maximum of 49%.
"The proposal gives the new telecom regulator powers to affect overall
pricing of certain services and interconnection rates that companies can
charge customers," said Moody's VP --Senior Credit
Officer Soummo Mukherjee, author of the report, "Mexico's
Broad Telecom Sector Reform Proposals are Credit Negative for America
Movil."
"We believe the new regulator would have greater authority --
including to force a company's break-up or order asset sales
-- to implement and enforce changes to stimulate competition
in Mexico," said Mukherjee. "It would also limit
companies' ability to stall competition through lengthy litigation,
as has been the case."
However, the Moody's reports point out, it is not clear
if and when new, competing TV broadcasters would emerge, let
alone be able to pose a challenge to existing companies, given the
advantages of established entities.
The reports are available to Moody's subscribers at:
http://www.moodys.com/research/Proposed-Changes-to-Telecom-Law-a-Credit-Negative-for-Televisa-Issuer-Comment--CMT_0000675835
http://www.moodys.com/research/Mexicos-Broad-Telecom-Sector-Reform-Proposals-are-Credit-Negative-for-Issuer-Comment--CMT_0000675894
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Soummo Mukherjee
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Corporate Finance Group
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Nymia C. Almeida
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Moody's: Proposed changes are credit negative for Mexico's telecoms