Spanish phone company Telefonica SA (TEF) has asked Mexico's anti-trust agency to investigate rivals Telefonos de Mexico SAB, or Telmex, and Telcel for possible anticompetitive practices, according to Yago Bazaco, a board member of Telefonica Mexico.

Telefonica Mexico also wants the Federal Competition Commission, or CFC, to declare fixed-line phone company Telmex and Telcel, the Mexican wireless unit of America Movil SAB, dominant operators in their respective markets, Bazaco said.

Telcel had about 74% of the country's 64.6 million mobile users at the end of September, while Telmex controls more than 90% of Mexico's fixed lines with about 18.2 million lines. Both companies are controlled by Mexican billionaire Carlos Slim.

"The final objective of these measures is that a series of obligations be imposed on Telmex and Telcel that prevent them from abusing (their) position of dominance," Bazaco said.

Specifically, Telefonica Mexico wants regulators to force the two firms to connect rivals to their networks on non-discriminatory terms, and put an end to anticompetitive practices such as TelCel offering calls between its clients at prices below what it charges rivals to terminate calls made by their clients on its network, he said.

CFC officials confirmed the agency had received Telefonica Mexico's request last week.

Telmex officials declined to comment on the matter, while America Movil officials weren't immediately available for comment.

Previous attempts by rivals to have Telmex declared a dominant operator in the late 1990s met with little success as the fixed-line giant successfully appealed the CFC's dominance finding in court.

However, regulators and President Felipe Calderon, who made boosting competition in sectors like telecommunications part of his presidential campaign last year, have shown greater willingness to promote competition than their predecessors.

A new antitrust law that went into effect last year has also given CFC greater power to investigate and sanction monopolistic practices.

Deutsche Bank said in a report last Thursday after a conference call with Angel Lopez, the CFC's director of international affairs, that the agency is only days away from launching an investigation into Telmex and Telcel's dominance in their respective markets, which should take about eight months to complete.

Telecommunications regulator Cofetel plans to implement number portability rules early next year that will make it easier for consumers to change service provider. The regulator has also said it will auction four spectrum bands in 2008 with a view to attract more competition in mobile and fixed-line telephony.

Last week, Cofetel ordered Telmex to allow cable TV operators Empresas Cablevision SAB (CABLE.MX) and Megacable Holdings (MEGA.MX) to connect to its network in order to resolve an interconnection dispute between the companies.

Cofetel also said that Telmex can't use foreign ownership restrictions to deny network interconnection to Telefonica Mexico's fixed-line subsidiary Grupo de Telecomunicaciones Mexicanas SA, or GTM.

Telmex has said it refused GTM interconnection on the grounds that Telefonica's stake in the firm violates Mexican law, which limits foreign ownership in fixed-line phone companies to 49%.

Bazaco said Telefonica Mexico has a 49% direct stake in GTM as well as neutral investments through a holding company that have been authorized by Mexican authorities.

Telefonica, which already competes with Telmex and America Movil in fixed-line and wireless telephony across Latin America, is keen to grow its presence in Mexico.

Telefonica Mexico trails a distant second behind Telcel with 11.07 million wireless clients at the end of September, while GTM provides local and long distance phone service to more than 3,200 clients over a fixed-wireless network.

Speaking at the same press conference, Francisco Gil Diaz, executive president of Telefonica Mexico, said the company plans to expand its fixed-line phone service next year.

GTM currently operates in about seven cities and "next year we are going to be in practically all the important cities," he said.

Telmex, the domestic operations of which had sales of 99.12 billion pesos ($9.02 billion) in the first nine months of the year, faces growing competition in its phone and high-speed internet markets from wireless operators, cable companies, and smaller fixed-line firms.

In what was seen by some analysts as a bid to shield its fast-growing international operations from regulatory actions in Mexico, Telmex said earlier this week it will spin-off its Latin American businesses and Yellow Pages unit into a publicly traded company.

Telmex's L shares traded on the Mexican Stock Exchange fell 2.8% Wednesday to close at MXN18.96.