Telecom Breakthrough for Mexico

After four years of costly and fruitless litigation, a landmark agreement between Mexico’s former state-owned telephone monopoly and two U.S.-backed competitors should finally open that country’s $12-billion telecommunications market to both domestic and international competition. Once the dust settles, families and businesses on both sides of the border should feel the benefit. The deal also sends a larger message of reassurance to foreign investors.

Telefonos de Mexico, the national phone company that was privatized in 1990 and retains nearly 80% of Mexico’s international long-distance market, will receive nearly $140 million owed it by competitors Alestra and Avantel. Alestra is 49% owned by AT&T;, and Avantel is 45% owned by WorldCom. In exchange, the former monopoly, known widely as Telmex, will substantially reduce what it charges competitors to use its local networks.

The accord goes more than halfway toward settling a dispute on telecom issues between the U.S. and Mexican governments that U.S. Trade Representative Charlene Barshevsky took to a World Trade Organization panel last year. The now-settled interconnection charge was one major concern. Another is the size of a fee that Telmex collects for receiving calls to Mexico from the United States. Meetings between representatives of both countries and the telephone companies are reportedly scheduled to work on the remaining problems.

The sweeping agreement, brokered by Mexico’s Communications Minister Pedro Cerisola, is also good news for local and foreign investors. It signals the intention of the Vicente Fox administration to foster open competition in key Mexican industries. These could include electric power and possibly even oil, both of which still operate as virtual government monopolies.