Nextel Mexico Calls For Fair Play In Text Messaging

MEXICO CITY -(Dow Jones)- The Mexican unit of wireless communications concern NII Holdings Inc. (NIHD) is seeking antitrust action to get other mobile operators to exchange text messages with its customers.

Nextel Mexico, as the subsidiary is called, has been unable to establish exchange of short message service, or SMS, with the other four wireless operators in the country.

First Nextel appealed to the country's telecommunications regulator Cofetel without a timely response.

In its frustration, the company has turned to the Federal Competition Commission, of CFC, which last week launched an investigation into possible anti-competitive practices by market leader Telcel, the unit of wireless giant America Movil SA (AMX) that has more than 32 million subscribers on its home turf.

Nextel considers that Telcel and the other wireless operators - Spain's Telefonica Moviles (TEM), Unefon SA (UNEFON.MX), and Grupo Iusacell SA (CEL) - are deliberately keeping it out.

"Telcel, being the biggest, is the one that has set the conditions," said Gustavo Cantu, vice president of Nextel Mexico. "They all call among themselves and send messages, but haven't wanted to with Nextel Mexico."

The antitrust agency's probe to determine whether that is happening will take three months in its initial phase. If unfair practices are found, Telcel would be notified. The company would have several routes of appeal, starting with the commission itself, and ultimately through the courts.

America Movil spokeswoman Patricia Ramirez said Telcel hasn't been notified of the CFC investigation and had no comment on the matter.

NII Holdings exchanges text messages in Peru and Argentina with all operators, including units of Telefonica and America Movil, and it's also negotiating in Brazil.

But in Mexico, Nextel is the odd man out in a number of ways.

The company's concession is defined as "trunking" and its main line of business is push-to-talk, a wireless service akin to using walkie-talkies which is geared for corporate customers and work groups.

Nextel also offers wireless data transmission, wireless Internet, and mobile phone service via network access.

The difference between its wireless spectrum around the 800 MHz frequency, and the 850 MHz band used by mobile operators, is regulatory and not technical. But from the regulator's point of view, Nextel is not officially a mobile telephone operator since it doesn't have a local service concession.

Because of that, Nextel's interconnection rates with fixed-line operators aren't regulated, putting it at a cost disadvantage in offering mobile calls.

But text-messaging isn't mobile telephony, Cantu argues, saying the lack of exchange agreements with the others is a commercial issue.

"The only logical reason is that they're displacing us from the text-message market," he said. "Our main interest is to have a level playing field for text messages and interconnection."

Nextel thinks its losing out on a major source of income by being excluded from SMS agreements. Telcel reported that in the second quarter, data transmission, including SMS, accounted for 11.3% of its service revenues.

Nextel isn't doing badly, though. The company reported revenues of $238.9 million in the second quarter, compared with $185.6 million in the second quarter of 2004.

Its customer base increased by 54,500 in the quarter to 937,100, and average revenue per user rose to $79 from $76.

Meanwhile, other wireless operators have started to enter the push-to-talk market, where Nextel is the leader.

At first, their incursion led to complaints by the telecommunications regulator Cofetel, which said they needed special permits since it wasn't mobile telephony.

"We understood that this was within the limits of our concession, but Cofetel didn't see it like that," said Juan Antonio Azacarraga, a spokesman for Telefonica Moviles.

Like Telcel, Telefonica is offering push-to-talk service, but isn't advertising it massively.

In any case, Cofetel has begun issuing permits for the mobile users to supply push-to-talk service, a commission spokeswoman said.

-By Anthony Harrup, Dow Jones Newswires; (5255) 5080-3450; anthony.harrup@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 20th August 2005