Subject: [NEXTEL-1] Mexican Govt Lifts Special 10% Tax On Trunking, Pay-TV

From: [email-masked]
Date: Fri, 31 Oct 2003 13:40:40 -0500

Dow Jones Business News
Mexican Govt Lifts Special 10% Tax On Trunking, Pay-TV
Friday October 31, 1:22 pm ET
By Santiago Perez, Of DOW JONES NEWSWIRES

MEXICO CITY (Dow Jones)--The Mexican government has lifted a special 10%
tax charged on pay-TV and the radio communications service known as
trunking, a move that could boost revenues for companies such as Nextel
Communications Inc.

(NasdaqNM:NXTL - News) and local broadcaster Grupo Televisa (NYSE:TV -
News) SA
.

The Finance Ministry said in a
decree published in the Official
Gazette Thursday that the Special
Tax on Production and Services -
known by its Spanish acronym IEPS
- will be reversed with an identical
tax credit starting Sunday.
"It's necessary to establish a tax
stimulus that would prevent the
special tax on production and
services from limiting the expansion
of pay-TV services," the ministry
said in its decree.

The ministry said the tax was
removed because it could have
hindered the sign- up of new clients,
considering the growing importance of pay-TV companies as an alternative
source for telecommunications services. High piracy rates in cable
television have also affected the industry, the ministry said.

By removing the 10% IEPS on trunking services, which are widely used by
company truck fleets across the country, the government seeks to foster
efficiency and economic productivity, according to Thursday's decree.

Nextel, which has invested more than $1.5 billion to become Mexico's
leading provider of trunking, said in newspaper advertisements Friday
that it " respectfully appreciated the publication of the decree."

Nextel's Direct Connect technology, similar to the concept of
walkie-talkies, has been growing in popularity in Mexico, especially
among small- and medium- sized businesses seeking to reduce
communications costs.

Since trunking is 20% cheaper than wireless phone service, the trunking
industry expanded by 30% last year and sales reached $490 million.
Roughly 800,000 people use trunking services in Mexico, a small fraction
of the country's 42 million subscribers to mobile and regular phone
services.

The tax removal gives a breather to Televisa's cable TV unit Empresas
Cablevision SA , which has been steadily losing subscribers.

The cable TV company lost more than 38,000 clients during the third
quarter, or 9% of its total subscriber base. It now has 383,000 clients.

Televisa believes that the drop is directly linked to pirate
connections. Cablevision is planning to invest about $70 million in a
digital platform to prevent pirate hookups, which are widespread across
Mexico City.
"This decree will benefit Televisa's pay-TV operations," the company
said in a filing with the Mexican Stock Exchange late Thursday.

Televisa's management said last week that Cablevision wasn't planning to
cut prices.
Also benefitting from the 10% tax elimination is Innova, which provides
direct-to-home, or DTH, satellite television services in Mexico under
the Sky brand name.

Innova controls about three quarters of Mexico's DTH market with 809,000
subscribers.  Televisa owns 60% of the satellite pay TV company, while
Australian satellite giant News Corp. and media investment company
Liberty Media Corp. (NYSE:L - News) own the remaining 30% and 10%,
respectively.
-By Santiago Perez, Dow Jones Newswires;

(5255) 5080-3451; [email-masked]
http://biz.yahoo.com/djus/031031/1322000708_2.html