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Mexico's Antitrust Agency Starts Fixed-Line Phone Market Probe

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MEXICO CITY (Dow Jones) Mexico's antitrust agency, the Federal Competition Commission, or CFC, launched four separate probes into the country's fixed line telephone market, which is largely in the hands of a company owned by billionaire Carlos Slim.

In a statement published in the federal government's official gazette Wednesday, the CFC said it will investigate competition in the local, long-distance, and wholesale telephony markets over the next 45 days.

In December, the agency started similar investigations of the country's mobile telephony and broadband Internet markets.

Mexico's telecommunications industry is largely dominated by fixed-line operator Telefonos de Mexico, or Telmex, and the Telcel unit of wireless giant America Movil. Both companies are controlled by Slim. Telcel had about 74% of the country's 64.6 million mobile users at the end of September, while Telmex controls more than 90% of Mexico's fixed-line infrastructure with about 18.2 million lines in service.

Telmex officials weren't immediately available to comment on the CFC's investigation.

Rivals have accused both companies of using their market dominance to stifle competition. In November, the No. 2 mobile operator, Telefonica Mexico, a unit of Spain's Telefonica, filed several complaints related to pricing and interconnection fees against Telcel and Telmex.

Telmex and Telcel say they owe their success to superior business strategy. Telmex in particular has attacked its detractors for only operating in wealthier urban areas, while the former state monopoly provides phone service in unprofitable rural communities.

Regulators and the administration of President Felipe Calderon have shown more willingness to address competition in key industries than their predecessors.

The introduction of number portability regulations, due to take effect around the middle of the year, is expected to boost competition in the telecommunications industry as consumers will be able to keep their phone number when they change service provider.

Growing regulatory scrutiny of Telmex's position in the fixed-line industry was seen by many analysts as one of the catalysts behind the company's decision to spin off its faster-growing international operations this year.

Telmex also plans to divide its Mexican operations into two business units, one for the roughly 9.8 million lines it has in markets also served by competitors, and a second unit for the 8.3 million lines, mainly in rural areas, where the company is virtually the only service provider.

Telmex's direct competitors include fixed-line companies such as Axtel and Maxcom Telecomunicaciones, as well as cable TV companies like Megacable Holdings offering phone, broadband and pay-TV services.

Mobile operators, including Telcel, have also emerged as major competitors to fixed line service in recent years.

At around 11:30 a.m. EST, Telmex L shares traded on the Mexican Stock Exchange were down nearly 3% to MXN17.76, while shares of America Movil were off 2.3% to MXN29.05.

-By Ken Parks, Dow Jones Newswires; 52-55-5080-3453; ken.parks@dowjones.com

(END) Dow Jones Newswires

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Tags: telefonica  america movil  number portability  telcel  antitrust  telmex  telefonica,  Mexico