UPDATE 2-Reuters Summit-Mexico's CFE sees more fiber optic deals

Tue Apr 1, 2008 1:36am BST

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(For other news from the Reuters Latin America Investment Summit, click here)

By Michael O'Boyle and Tomas Sarmiento

MEXICO CITY, March 31 (Reuters) - Mexico's Federal Electricity Commission (CFE) will announce new deals in the coming months to rent its fiber optic network to budding telecommunication providers, the utility's head said on Monday.

Director General Alfredo Elias Ayub told the Reuters Latin American Investment Summit the CFE would likely soon close rental contracts with cable companies, which began expanding into telecommunications services last year.

"I think in the next two months there will be more announcements," Elias said, specifying they would be with some of Mexico's cable companies.

The CFE, the bigger of Mexico's two state-run electricity companies, has an enormous network of fiber optic cable that it began to rent out last year to telecoms companies.

Mexican cable companies have been unrolling so-called triple play packages, adding telephone and Internet options to existing pay TV services in a bid to compete with Telmex TELMEXL.MXTMX.N, which serves more than 90 percent of fixed line telephone customers in Mexico.

The first of the CFE's fiber optic contracts was signed last December with Axtel (AXTELCPO.MX), the second-biggest provider of fixed line services behind the giant Telmex.

Since then, the CFE has signed deals with Alestra, a partnership between conglomerate Alfa (ALFAA.MX) and AT&T (T.N), as well as Spain's Telefonica (TEF.MC), Elias said.

While Elias said the fiber optic business would likely "grow a lot" he said he doubted it would be become a major source of revenue for the CFE, which sees annual revenues of around $21 billion from its electricity business.

"At the most it will get up to $100 million," he said.

Elias also said the CFE would begin a test run later this year to explore a new business of providing telephony and Internet directly to customers through the CFE's electrical network, a technology known as power line communications (PLC).

"We are carrying out tests," Elias said. "The costs are still not competitive as the modems are very expensive.

In an attempt to make the technology more cost-effective, the CFE will begin a trial run in the northern industrial city of Ciudad Juarez bordering Texas, Elias said.

The CFE will use its electrical network to transmit customers' electricity consumption data back to the company, reducing the costs associated with reading meters. (For summit blog: summitnotebook.reuters.com/) For more on the Reuters Latin America Investment Summit see [ID:nN31419789] (Reporting by Michael O'Boyle and Tomas Sarmiento)

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