Telmex vs. Televisa

``(Updates with details of Telmex's lines, controversy between Slim and other phone operators, TV companies.)

By Anthony Harrup 
   Of DOW JONES NEWSWIRES 
 

MEXICO CITY (Dow Jones)--Mexico's largest phone company Telefonos de Mexico SAB (TMX, TELMEX.MX) said Tuesday it plans to split into two companies, one of which will serve rural and marginalized areas where competitors haven't invested.

The decision by the company controlled by telecommunications magnate Carlos Slim aims, in part, to counter criticism about the firm's dominant position in fixed-line telephony in the country, where it owns about 80% of the fixed lines.

In a press release, Telmex said the new company, which it expects to call Telmex Social, will serve the 46% of the country "in which there is no economic interest of any competitor" to invest and develop telecommunications, and in which Telmex has invested at low profit and sometimes at a loss.
Assets, liabilities and equity would be divided up accordingly, Telmex said.

Telmex, which is 59.4% owned by Slim-controlled America Movil (AMX.MX, AMX), reported 15.6 million lines in operation at the end of 2010, of which 1.8 million were in areas not served by competitors. Most of the revenue from those lines comes from long-distance and call completion.
The new company would pay the same interconnection rates to Telmex as competitors, Telmex said.
The planned division, which company officials have commented on in the past as an idea to be considered, would clarify the differences in Telmex's operations in those areas, the company said.
The decision to go ahead with the split coincides with a complex dispute pitting America Movil, Telmex and other Slim companies against the country's two main television broadcasters-- Grupo Televisa SAB (TV, TLEVISA.MX) and TV Azteca SAB (TVAZTCA.MX)--smaller phone operators, and cable TV companies.

Slim withdrew advertising from Televisa this year in a disagreement over rates. Earlier, Televisa called on antitrust regulators to investigate Telmex's billing and marketing agreement with start-up satellite TV service Dish Mexico. While Televisa, through its cable holdings, offers TV, phone and broadband Internet, Telmex is still awaiting government clearance to directly offer television.

Following the spat with Televisa, TV Azteca refused to sell Slim advertising space unless America Movil's cell phone unit company Telcel lowered interconnection rates for Grupo Iusacell.
TV Azteca, whose controlling shareholder Ricardo Salinas Pliego also controls Iusacell, later said it's willing to sell Slim advertising, but called for broad debate on interconnection.

Then last week, several dozen cable, phone and broadcasting companies called on the government to act to lower the interconnection rates charged by Telcel, which has about 70% of the country's mobile phone subscribers.

Telcel has offered them the same 95 peso cents (8 U.S. cents) a minute rate it agreed to with No. 2 mobile operator Telefonica SA (TEF), but opponents say it should be less than half that.

The Communications and Transport Ministry said authorities are working to promote competition, and rejected assertions by phone companies that it has failed to act on complaints against Telmex and Telcel.
The planned division of Telmex requires government and corporate approvals. Telmex L shares traded on the Mexican stock exchange closed down 1.2% Tuesday, at 10.75 pesos ($0.90).''

WSJ