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* Mexico lawmakers eye open foreign investment in telcos

* Senator says vote could be on Tuesday

* Backers want to increase competition
(Adds quote, stock movements, background)

By Noel Randewich

MEXICO CITY, Nov 19 (Reuters) – Mexican senators could vote
next week on a proposal to remove foreign-investment limits in
fixed-line telephone companies, which would be a blow to market
leader Telmex, controlled by tycoon Carlos Slim.

Sen. Marko Cortes, who proposed changes to existing laws,
told Reuters on Thursday that Senate committees were still
debating a reciprocity clause in the initiative that would
restrict unlimited investment terms to companies whose home
countries offer the same to Mexico.

With an eye to making Mexico’s economy more competitive,
President Felipe Calderon has urged lawmakers to remove limits
on foreign investment in Mexican fixed-line telephone
companies.

Proponents of the bill being discussed in the Senate say it
would increase competition against Telmex (TELMEXL.MX) (TMX.N),
which has 85 percent of Mexico’s fixed-telephone lines and is
often accused of making it difficult and expensive for smaller
players to connect calls through its network.

“Through this initiative, we want Mexicans to pay lower
bills for their telephone and Internet,” Cortes, of the ruling
National Action Party (PAN), said in an interview. “Competition
is the best way to create better prices.”

Foreign investment in Mexican fixed-line telephone
companies is currently limited to 49 percent.

ACQUISITIONS EYED

Letting foreign investors take controlling positions in
fixed-line telephone and Internet operators could make smaller
companies like Axtel (AXTELCPO.MX), Megacable (MEGACPO.MX) and
Maxcom (MXCMCPO.MX) acquisition targets for international
players like Spain’s Telefonica.

Cortes said the Senate could vote on the proposal on
Tuesday after resolving disagreements about the reciprocity
clause.

“Some legislators are against including it, so that’s what
we’re discussing,” he said.

Telefonica (TEF.MC) is already No. 2 in Mexico’s cell phone
market, where foreign firms are given a free hand. It has been
the only serious challenger there to incumbent America Movil
(AMXL.MX) (AMX.N), also controlled by Slim.

“If the restriction on foreign investment is lifted,
Telefonica could begin a consolidation process to quickly build
a fixed-line telephone company with sufficient critical mass to
compete with Telmex,” Ixe brokerage analyst Manuel Jimenez said
in a note to clients.  Continued…