Antitrust move may let America Movil cut labor costs – union

MEXICO CITY, March 16 (Reuters) – Antitrust measures announced last week that would split up Carlos Slim’s America Movil and open its fixed line network to competition may help Mexico’s dominant telecommunications provider reduce labor costs, according to a labor union spokesman.

The announcement initially hammered the company’s shares , though they have since rebounded and closed at 13.60 pesos each on Thursday.

The new rules drew opposition from a labor union representing 60,000 workers at America Movil’s fixed line unit, known as Telmex.

The reorganization would create a new entity that could hire new workers and pay them less than under the existing contract, said Eduardo Torres Arroyo, spokesman for the Mexican Telephone Workers’ Union (STRM).

“That possibility exists,” Arroyo said. “We’re trying to keep that from happening.”

Paula Garcia, spokeswoman for America Movil, declined to comment on whether the company’s labor costs could be reduced or not as a result of the new rules.

STRM has threatened a strike if the rules are not changed, though the union has not had a major walkout since 1982.

Mexico’s regulator, the Federal Telecommunications Institute (IFT), is looking to increase access to America Movil’s fixed line network while attracting capital for the network’s expansion, according to Alexander Elbittar, a researcher with Mexico’s CIDE university who specializes in regulation and competition.

The rules could end up benefiting America Movil, in part by freeing it from some of its obligations to its workers, according to Elbittar.

“There’s going to be a separation of the part of the company that has union representation,” Elbittar said. “Telmex hasn’t been a great performer of late. This could be a chance for a relaunch.”

America Movil, which has businesses throughout Latin America, saw revenues grow by about 9 percent in 2016. Expenses, however, rose by nearly 15 percent. Rising costs in Mexico drew questions from analysts during a Feb. 3 conference call, according to a transcript posted on the company’s website. An executive who was not named in the transcript said the company needed more time to bring costs lower, but did not say how it would do so.

Francisco Hernandez Juarez, leader of the STRM, told Reuters that America Movil requested the rule, even though the company has publicly opposed it and said it plans to challenge it.

“This order comes from the regulator,” Garcia wrote via email. The IFT declined to comment.

Elbittar said it is common for a regulator to design a rule in consultation with the businesses it will affect.

“Regulators aren’t businesspeople, and they aren’t aware of all the subtleties,” he said.

(Reporting by Dan Freed in Mexico City; Editing by Gopakumar Warrier)

Article Courtesy of CNBC