Mexico may lift foreign ownership cap on telcos

New legislation is reportedly set to move ahead in Mexico that would allow companies from outside the Latin American country to acquire controlling stakes in Mexican telecom firms. The elimination of an existing 49 percent cap on foreign ownership potentially could help shake up a wireline market still dominated by billionaire Carlos Slim's Telmex.

The advancement of the legislation comes not long after America Movil (NYSE: AMX), Telmex's corporate parent, was slapped with a $51.6 million antitrust fine. Telmex currently controls about 80 percent of the local landline telephony market in Mexico, while America Movil controls almost as much of the wireless market.

The legislation, which may be announced this week, according to Bloomberg, appears to be linked to an effort to make broader changes in Mexico's telecom market as part of the "Pact for Mexico" reform document announced by new Mexican President Enrique Pena Nieto back in December, and signed by the country's top ruling legislative parties. As part of the recommended changes, lawmakers also are attempting to give regulatory agency Cofetel more authority of the telecom market and greater ability to administer fines.

In Mexico's landline sector, companies like Maxcom Telecomunicaciones and Axtel are contending for a bigger piece of the pie, but have struggled to achieve that, and legislators may be banking on the possibility that the Mexican telcos are shaping up as attractive investments for foreign operators. At one point, U.S. telcos like Verizon Communications (NYSE: VZ) were heavily invested in Mexico as a long-term prospect, and in some cases even saw short-term returns, but pulled money out of the region in an effort to focus more on core business opportunities in their home markets.

For more:
- see this Bloomberg story

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Maxcom made a deal to sell to Ventura Capital Privado last year
Verizon sold its way out of Mexico back in 2006