Mexican regulator stops Iusacell-Televisa merger but legal battle has just begun

The decision by Mexico’s Competition Commission (CFC) of preventing broadcast giant Televisa from taking over 50% of mobile operator Iusacell proves that the Commission’s primary concern was always the broadcasting market. The Commission in the end thought that the creation of a market concentration in the TV sector, resulting from number one (Televisa) and number two (TV Azteca of Grupo Salinas) broadcasters joining forces, was too high a price to pay in order to rebalance the highly unbalanced telecoms market, where America Movil enjoys around 70% share in mobile and broadband and almost 80% in fixed voice.

It would have been in the interest of Mexican consumers to have a stronger player to rival America Movil in the telecoms market, but not at the expense of creating another situation of market domination in the broadcasting sector.

It is no surprise that Grupo Salinas has already confirmed that it will take the matter to the courts. This is normal practice in Mexico, and Iusacell has been particularly active on this front. Interested parties not only appeal to decisions taken by public bodies, but often question the legitimacy of regulators or other institutions. I would not be surprised if we see yet another chapter in this story, completely overturning the decision.

Televisa has so far kept a low profile in the matter. The deal with Iusacell would represent an entry into the Mexican mobile market and offer the opportunity to bundle its existing TVand broadband offers with mobile. However, as the largest Spanish language broadcaster in the world, Televisa remains in a strong position to leverage its size and content portfolio to build partnerships with mobile operators through the MVNO model.

In contrast, Iusacell finds itself in a very uncomfortable position having lost a strong partner in Televisa. The Grupos Salinas’ mobile arm has just emerged from the brink of bankruptcy and has invested a significant amount of money to launch fiber-optic quadruple play, combining TV, fixed voice and high-speed fixed and mobile broadband, to compete with Carlos Slim’s companies.  This ruling puts it again at risk of insolvency.

 However, history teaches us that Mexico’s legal ways are long and complex. It may well be the case case that Iusacell and Televisa have just lost one battle in a long legal war.