Telmex, MCI sign pact on settlement rates
Reuters, Friday, July 09, 1999 at 21:15
MEXICO CITY, July 9 (Reuters) - Ending a two-year battle
over fees to connect calls between the United States and
Mexico, telephone giant Telefonos de Mexico (Telmex)
(NYSE:TMX">NYSE:TMX)(MEX:TELMEXL) said on Friday it reached an agreement with
MCI WorldCom (NASDAQ:WCOM) (NASDAQ:WCOM).
"Telefonos de Mexico announced today that it signed an
agreement with MCI WorldCom to reduce settlement rates between
Mexico and the United States," the company said late Friday in
a news release made through the Mexican stock exchange.
International settlement rates are the fees that U.S. phone
operators pay Telmex to end calls in Mexico. The fees are
generated when Telmex finishes more calls in Mexico for MCI
than it asks MCI to finish for Telmex in the U.S.
The agreement, which finalizes a preliminary accord made in
March, sets a retroactive rate of $0.37 per minute for calls
made in 1998, and a rate of $0.31 per minute for calls made
during the first half of 1999.
For the period July 1, 1999 to the end of 2000, the rate
will be $0.19 cents per minute.
The rates are the same as those that Telmex agreed with
AT&T Corp. (NYSE:T) in June.
Telmex said it hoped the new 19-cent rate would reduce
bypass, which is when long distance companies avoid paying the
settlement rate by passing calls over the border, then feeding
them into the Mexican system disguised as local calls.
The 37-cent rate stimulated bypass because it was so much
higher than the interconnection fee for local calls. Telmex and
other Mexican long-distance operators say they have lost
hundreds of millions of dollars this year and last because of
bypass.
A former government-owned monopoly, Telmex was privatized
in 1990. In 1997 Mexico's long-distance market opened up to
competition. Telmex's main long-distance competitors are
Alestra, which is associated with AT&T, and Avantel, which
operates with MCI.
In a report in June, Salomon Smith Barney
telecommunications analyst Patrick Grenham estimated that
Telmex could receive $30 million in back payments for what MCI
WorldCom owes to the Mexican company for settlement fees.
mexicocity.newsroom@reuters.com))
Copyright 1999, Reuters News Service
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