Wireless
The company is gathering data on how the 4 percent tax would affect its Mexican units revenue and profit, Vice President Gustavo Cantu said in an interview yesterday in Mexico City. The carrier, Mexicos fourth-largest wireless provider, will begin talking to legislators next week, he said.
The tax would apply to all telecommunications services save for rural phone lines, public pay phones and connection fees carriers charge each other. That would cost NII and larger rivals such as Carlos SlimsAmerica Movil SAB more than $1 billion, according to Calderons proposal.
“Its a pretty short-sighted measure,” said Cantu, who oversees business development for NIIs Mexico division. “It will affect our customers directly.” He declined to provide more specifics on the expense because the company is still studying the matter.
Calderon, who proposed the tax on Sept. 8, wants to use that and levies on beer and tobacco to shore up Mexicos budget as revenue from the state-owned oil company drops. If NII passes the cost of the tax to consumers, subscribers may reduce their wireless phone use, cutting into revenue, Cantu said.
“It will make people more aware of their consumption,” Cantu said.
NII, based in Reston, Virginia, gained 44 cents, or 1.6 percent, to $27.23 at 10:22 a.m. New York time in Nasdaq Stock Market trading. The shares had climbed 47 percent this year before today.
Tax Revenue
Calderons budget proposal to Congress argues that while wireless providers already pay for the use of airwaves, which are legally the property of the public, its fair to also levy a special charge for the services the carriers provide using a public good.
Mexicos wireless industry is dominated by America Movil, the Mexico City-based company controlled by Slim. Madrid-based Telefonica SA and Grupo Iusacell SA, also in Mexico City, are second and third, respectively.
Representatives of America Movil, Iusacell and Telefonos de Mexico SAB, the fixed-line phone company also controlled by Slim, declined to comment on the tax proposal. Isabel Suarez, a spokeswoman for Telefonica, didnt return phone and e-mail messages.
Mexico is NIIs largest market, with 2.83 million subscribers at the end of June. The company also operates in Brazil, Argentina, Peru and Chile, where it won wireless airwaves this week in a government auction.
The company plans to participate in a Mexican government auction of wireless airwaves this year. The spectrum, suitable for voice calls and services such as high-speed Internet, would allow NII to build a faster nationwide network and provide capacity for more customers, Cantu said.
Regulators have considered designating some airwaves in the auction for a new competitor. Cantu said he opposes that, even if NII qualifies as a new entrant, because giving a bidder preferential treatment might draw lawsuits against regulators and slow the auction process, he said.
Mexicos antitrust agency has recommended that regulators limit the amount of airwaves each participant in the auction can own. That rule should ensure that there are enough airwaves for new competitors to enter the industry, Cantu said.