Recent Developments

On 10 June, 2013, Mexican President Enrique Peña Nieto executed a bill to amend the Mexican Constitution, which could result in an important and structural reform to the Mexican telecommunications and broadcasting legal framework.

The bill was previously approved by the Chamber of Representatives and the Senate as well as by State legislatures.

The bill presents a historic reform in Mexico's telecommunication and broadcasting sectors and could result in a new landscape for operators, resellers and users.

What is new with the reform?

  • Liberalization of foreign investment

Direct foreign investment in telecommunications and satellite companies goes from the current limitation of 49% to a fully liberalized 100%. Radio and television broadcasting goes from the current restriction of 0% to a limit of 49% of voting stock, potentially allowing for additional economic participation through limited voting stock.

Beyond opportunities to invest in existing entities, this part of the reform opens the road to market consolidations and access to non-Mexican financial resources for network and service expansion by existing operators.

  • Pro-competition measures and potential incumbent divestitures

The reform sets essential rights for  asymmetric regulation to apply to dominant operators and it transfers telecoms and broadcasting-related anti-trust regulating power to the telecommunications regulator. The bill notably includes the possibility for the regulator to mandate divestitures as well as the unbundling of networks of dominant market players concentrating over 50% of a relevant market. 

Other competition-related measures included in the bill are the implementation of must offer and must carry of open-air television content, mandating that such content must be offered to subscription-based television users, which are also required in turn to offer such content at no additional cost.

  • Carrier of Carriers

The reform creates a "carrier of carriers", which will provide telecommunications infrastructure and access to all players. Although an opportunity to provide the market with access and competitive prices, some have advised that monopolistic issues and risks may arise.

  • Upcoming spectrum bids

The reform bill accelerates spectrum bids in the next months to create at least two additional nation-wide digital television chains. This opportunity could present the unprecedented possibility for foreign investment to participate in broadcasting spectrum bids with a limit of 49% voting ownership. Importantly, incumbent broadcasters already holding over 12 MHz of spectrum would be barred from participating in the upcoming bids.

  • Specialized courts and limitations to amparo constitutional appeals

The bill mandates the creation of specialized telecommunications and anti-trust courts and dramatically limits the possibility to obtain preliminary injunctive relief by telecommunications and broadcasting operators.

  • New regulator created

The reform dissolves the Federal Telecommunications Commission and creates the Federal Telecommunications Institute, which will be lead by 7 freshly-appointed commissioners.

Which opportunities and challenges lay ahead?

  • Opportunity to rethink, restructure and deregulate

The reform is a high-level amendment to the Mexican constitution which sets the essential ideas for a new regulatory framework. Still, many doubts remain and several crucial aspects are left open and subject to restructuring and potentially deregulating.

From basic aspects such as the new licensing regime to other more technical details like numbering and portability for Mobile Virtual Network Operators, legislators will have the opportunity to improve or complicate the regulatory framework for telecommunications and broadcasting businesses in Mexico.

The next few months will be crucial in defining the future for these strategic industries in Mexico. The stakes are high and small changes could create new opportunities or shut the possibility for new disruptive business models to emerge.

Next steps

The bill was published on June 11, 2013 and will become effective on June 12, 2013. However, several of its effects are mandated to occur over time, including several of the most relevant ones which are expected to happen before the year end of 2013.