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MCI's Mexican Unit Wins Partial Relief From Fees

Communications: Avantel to quit paying part of Telmex levy pending a final decision.

April 23, 1998| From Bloomberg News

MEXICO CITY — MCI Communications Corp.'s Mexican unit won a court ruling Wednesday allowing it to suspend part of the $50 million to $100 million in fees its pays Telefonos de Mexico on calls from the U.S. each year.

A civil court judge in Mexico City said the unit, Avantel, does not have to pay the fee to Telmex, which previously held a monopoly on operating in Mexico, until another judge decides whether the fee is justified.

MCI brought the suit because it says the fees it pays Telmex are unreasonably high and make it unprofitable to operate in Mexico. MCI has put a $900-million expansion plan on hold, saying the high fees would make it unprofitable, and asked the government to lower the rates, which were set in 1996, just before Telmex's monopoly ended.

Telmex enjoys a close relationship with high government officials, making it one of Mexico's most powerful companies. Its shares account for about 20% of the capitalization of Mexico's benchmark stock market index, and it is one of the country's largest employers.

The court ruling also gives Avantel the right to stop paying new fees set recently by the Federal Telecommunications Commission, such as a charge for failed call attempts, as well as a new charge for a switching center interconnection.

But Avantel will still have to cover all other connection costs that were determined by a government commission in April 1996.

The fee on calls from the U.S., along with costs to connect other phone lines to Telmex's network, have been sources of complaint from Mexican long-distance operators since Mexico set a series of guidelines for interconnection costs two years ago.

The criteria were released a few months before Mexico opened its long-distance telephone market to competition in 1997.

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