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Announcement:

Moody's: Proposed changes are credit negative for Mexico's telecoms

Global Credit Research - 13 Mar 2013

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
VP - Senior Credit Officer
Corporate Finance Group
Moody's America Latina Ltda.
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16th Floor, Room 1601
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JOURNALISTS: 800-891-2518
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Nymia C. Almeida
Vice President - Senior Analyst
Corporate Finance Group
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700

Releasing Office:
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300

Moody's: Proposed changes are credit negative for Mexico's telecoms
No Related Data.

 

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