Telmex could see $107 mln profit after AT&T pact
Reuters, Tuesday, June 22, 1999 at 19:38
By Veronica Galan
MEXICO CITY, June 22 (Reuters) - Telmex (MEX:TELMEXL),
Mexico's dominant telephone company, could see a $107-million
profit in back fees during the current quarter, after coming to
an agreement with AT&T Corp. over international connection
rates, analysts said on Tuesday.
Under the accord, signed on Monday after two years of
wrangling, AT&T (NYSE:T) agreed to pay Telmex (NYSE:TMX) a so-called
settlement rate of 37 cents a minute for all calls placed from
the AT&T network to Telmex's network in Mexico during 1998.
AT&T has already paid an average of 19 cents for each call
it sent to Mexico during 1998, and analysts said $107 million
was the difference due.
Gerardo Copca, an analyst with Valores Finamex brokerage,
told Reuters that the $107 million would go directly to the
balance sheet as a profit, since Telmex has already reported
expenses from the time period for which that money was due.
"I don't know whether they will record it as an
extraordinary earning or as income," he said.
Under the accord, Telmex will also charge settlement rates
of 31 cents per minute for calls placed during the first half
of 1999 and 19 cents per minute from July 1, 1999 through the
end of 2000.
MCI WorldCom (NASDAQ:WCOM), another U.S. long distance operator
that has been haggling over settlement rates with Telmex, said
it expected to come to a similar agreement with Telmex in the
next two weeks, possibly adding another $40 million to Telmex's
profit for this quarter or next.
"As soon as MCI signs, it would be another $30 million to
$40 million," said Ilana Treston, an analyst with Merrill
Lynch.
Analysts said the accord could also signal that Telmex is
also ready to resolve conflicts with its Mexican long-distance
competitors Alestra, partly owned by AT&T, and Avantel, in
which MCI has a stake.
"I don't want to make a direct connection, but it's all part
of ongoing negotiations between Telmex, Avantel and Alestra to
settle all kinds of outstanding issues," Treston said.
The Mexican telephone industry is in the middle of a legal
battle in which Telmex, which operated without competition
until 1997, is trying to avoid being forced to provide
information to its competitors and lose its competitive edge,
after the government monopoly watchdog recently declared that
it was the "dominant" telephone company in the country.
mexicocity.newsroom@reuters.com))
Copyright 1999, Reuters News Service
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