Mexico’s Telmex Reaches Accord With Two Long-Distance Operators

Mexican telecom giant Telefonos de Mexico said Wednesday that it reached an accord with two partly U.S.-owned long-distance operators to resolve an escalating trade dispute over access to the country’s $12-billion telecommunications market.

Telmex and long-distance companies Alestra, 49% owned by U.S. telecom giant AT&T;, and Avantel, part-owned by WorldCom Inc., said in a joint statement released by Telmex that the three companies had hammered out a deal on pending debts, interconnection rates and other issues.

The announcement provided few details on the points of the pact but was being viewed as potentially having an impact on the 6-month-old dispute between the Mexican and U.S. governments over what U.S. firms have said is Telmex’s excessive dominance of the Mexican telecom market, industry analysts said.

“Telmex is recognizing the new reality that there will be more competition and much lower interconnection rates,” said UBS Warburg Mexico analyst Damian Fraser.

The two nations’ telecom tug of war began in July when the United States took the complaints of AT&T; and WorldCom--the No. 1 and No. 2 U.S. long-distance providers, respectively--to the World Trade Organization.

After months of talks between the two neighbors failed to produce an accord, the United States took the complaints a step further by asking a WTO dispute panel to decide whether Mexico had met its pledges to open up the market. Mexico has insisted it has met these commitments.

While the joint statement suggested that the dispute is all but over, uncertainty lingered Wednesday over how comprehensive the deal was. An Alestra official told Reuters that, although the negotiations had advanced, there was still no consensus between Avantel and Telmex on some areas.

The U.S. Trade Representative, meanwhile, noted that its concerns on the Mexican telecommunications sector spanned a broad range of topics and that its discussions were with the Mexican government, not the firms.

“It’s premature to discuss at this point the impact any kind of potential commercial agreement might have on our pending WTO dispute because we’re basically dealing with the government of Mexico and not the specific carriers,” said a USTR spokesman.

The spokesman added that if the deal were given the green light by the Mexican government, the United States would then weigh the agreement to determine whether it was consistent with WTO obligations.

“Potentially, it could have an impact. But we would have to have them finalized and then take a look at them,” he said.

Avantel and key U.S. shareholder WorldCom declined to comment.