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UPDATE 3-Slim's America Movil wins telecom battle in top Mexico court

(Adds background on Mexican telecom industry)

MEXICO CITY, Aug 16 (Reuters) - The Mexican Supreme Court on Wednesday found unanimously that billionaire Carlos Slim's telecommunications company America Movil should not be barred by law from charging its rivals interconnection fees, a setback to a sweeping reform intended to curb the firm's dominance.

The 2014 telecom industry reform, one of Mexican President Enrique Pena Nieto's signature accomplishments, prohibited America Movil from charging other carriers for calls made to customers on its network, even though those firms are allowed to bill America Movil for using their networks.

The Supreme Court ruling said such interconnection rates should be set by Mexico's telecom regulator IFT, siding with America Movil - Latin America's largest telecom firm by number of subscribers and the crown jewel of Slim's empire. The tariffs set by the IFT will go into effect from January 2018, the court said.

The court also said, however, that the ruling would not have "retroactive effects," suggesting that competitors such as AT&T Inc and Telefonica would not have to reimburse America Movil for the time they did not pay.

"The (IFT) will be responsible under its constitutional mandate for recognizing the asymmetry, establishing regulation regarding rates, the so-called 'zero-rate' or whatever else it defines, in line with the exercise of its constitutional faculties," Minister Javier Laynez Potisek said during the court's session.

If its rivals had paid the same interconnection rates as America Movil, Slim's company would have received additional revenue of over $1 billion, according to a recent report by Banamex.

Industry experts believe the decision weakens the reform, which significantly lowered prices for consumers.

"It opens up Pandora's box and creates a terrible uncertainty," said Luis Rubio, a partner specializing in telecommunications at the law firm Jones Day.

America Movil fought hard against the reform, arguing to the court that legislators did not have the right to create "asymmetrical" rules meant to handcuff Slim's firm and help smaller industry players.

A spokesman for America Movil did not immediately respond to a request for comment.

Shares of America Movil edged up 0.04 percent following the news of the decision.

Although America Movil's market share only slipped modestly after the reform, hovering around two-thirds of mobile subscriptions in Mexico, the entry of new players such as AT&T with billions of dollars in foreign investment touched off a price war among carriers.

Cellphone service prices dropped by more than 40 percent, according to Mexico's telecom regulator.

But if interconnection rates paid to America Movil eat into carriers' margins, prices may begin to creep up again as a result of the decision, said analyst Ernesto Piedras. "The benefits of the (so-called zero-rate policy) are diverse the investments, the coverage, the quality."

The ruling does not necessarily spell a return to the past, industry experts said.

The IFT, created as part of the reform, enjoys greater autonomy than the previous regulator and has broad authority to police the operations of telecom companies and TV broadcasters.

It has ratcheted up antitrust scrutiny against America Movil, ordering the firm to separate part of its network infrastructure into a new entity in March.

By clarifying the role of the IFT, the decision could prove helpful to other players in the market, said Ramiro Tovar Landa, a professor at the Autonomous Technological Institute of Mexico.

"The resolution is beneficial for the sector because it normalizes the economic relations between the operators," he said. (Reporting by Noe Torres, Julia Love and Sheky Espejo; editing by Richard Chang and G Crosse)