Claro parent company facing $16K FCC fine for violating foreign ownership rules

Written by  //  June 24, 2011  //  Telecommunications/Technology  //  No comments

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PRT's parent company, América Móvil, has been fined $16,000. (Credit: © Mauricio Pascual)

Mexican telecom giant América Móvil, parent of local incumbent carrier Puerto Rico Telephone (which does business as Claro), is in hot water with the Federal Communications Commission for violating indirect foreign ownership rules after issuing stock that increased owner Carlos Slim and his family’s corporate stronghold.

The misstep will cost América Móvil $16,000, a sum the FCC said could serve as a deterrent for future violations, rather than an amount the company could probably write off as a cost of doing business.

According to an FCC notice issued earlier this week, América Móvil infringed the agency’s rules in June 2010, when it issued additional stock that boosted its owner’s — Mexican magnate Carlos Slim and members of his family — equity holdings in the company from 32.4 percent to 40.18 percent, without required prior approval. In doing so, América Móvil violated agency rules, for which it will pay $16,000, or twice the standard amount.

“To ensure that a proposed forfeiture is a deterrent, and not simply a cost of doing business, the [FCC] has determined that large or highly-profitable companies, such as América Móvil, may be subject to proposed forfeitures that are higher than the base forfeiture amount,” the FCC said, as part of its rationale to double the fine applicable to such violations.

América Móvil entered the FCC-regulated Puerto Rico market in 2007 upon purchasing PRT from Verizon Communications Inc. for more than $1.8 billion. At the time, the FCC allowed the Mexican operator to exceed the agency’s 25 percent indirect foreign ownership limit, after determining it would be in the public interest. That enabled Slim and his family to enter into the transaction with a 32.3 percent equity and 66.2 percent voting interest in América Móvil.

However, when América Móvil issued the additional stock that increased the Slim family’s equity holdings, it bypassed the FCC, something the agency did not take lightly.

“While América Móvil claimed that the violation was a result of an inadvertent oversight, it is well established that administrative oversight or inadvertence is not a mitigating factor warranting a downward adjustment of a forfeiture,” the FCC said. “Moreover, América Móvil’s assertion that it has put into place internal measures to ensure that such an oversight does not reoccur, while laudable, does not mitigate its liability for the instant violation.”

The agency said it will not consider reducing or canceling the fine in response to a claim of an inability to pay unless the company shows tax returns as proof of a negative financial condition. However, such a pardon would seem far-fetched, as América Móvil reported $1.9 billion in net income and $3.2 billion in profits for the first quarter ended March 31.

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