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Telcos Negotiate Fixed-To-Mobile Rate Reduction
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MEXICO CITY -(Dow Jones)- Mexico's phone companies are negotiating this week a plan to lower tariffs and interconnection charges on calls from fixed lines to mobile phones under the "calling party pays" system.
Talks involve officials of the country's main fixed-line operator, Telefonos de Mexico SA (TMX), or Telmex, the four wireless service providers, and regulators.
A final agreement has yet to be reached, although the Federal Telecommunications Commission, or Cofetel, is backing a proposal to lower by 35% over three years the amount that fixed-line operators will charge customers for calls to mobile phones.
"Calling party pays" was introduced in 1999, with Telmex customers paying 2.50 pesos ($1=MXN11.2580) a minute for each call to a mobile phone, of which Telmex would pay MXN1.90 to the wireless carrier.
The per-minute charge would drop to MXN2.25 in 2005, MXN2.03 in 2006, and MXN1.82 in 2007. Interconnection fees would also drop.
Telmex controls more than 90% of the fixed lines in the country with 16.8 million lines in service. America Movil SA (AMX), which like Telmex is controlled by businessman Carlos Slim, has about 26.8 million of Mexico's 35 million mobile users. Other wireless providers are Spain's Telefonica Moviles SA (TEF), Grupo Iusacell SA (CEL), and Unefon SA (UNEFON.MX).
With the new fixed-to-mobile rates, which would take effect on Jan. 1 of each year, regulators say they hope to pass on the benefits of competition to consumers.
Morgan Stanley said in a report Thursday that Telmex's profit on calls from fixed lines to mobile phones should drop by MXN0.05 or MXN0.06 a minute each year.
The impact on earnings could be less, however, if demand proves elastic and additional traffic compensates the lower rate, the investment bank said.
The president of the Federal Telecommunications Commission, Jorge Arredondo, said in a radio interview this week that regulators haven't reached an estimate of how much call traffic could increase with the reduced rates, "but we do estimate there will be significant traffic growth."
Morgan Stanley was less enthusiastic.
"Fixed-to-mobile calls continue to be much more expensive than most mobile-mobile calls. Price sensitive consumers are likely to continue reaching for their mobile phones when making a call to a mobile phone," Morgan Stanley added.
-By Anthony Harrup, Dow Jones Newswires; (5255) 5080-3450, anthony.harrup@dowjones.com
(END) Dow Jones Newswires "
Tags: [grupo iusacell] [iusacell] [morgan stanley] [telmex] [interconnection]
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