IHS Global Insight Perspective | |
Significance | After a number of delays, Mexican regulator COFETEL has announced the results of Auction 21. |
Implications | Telcel, Telefónica, and the Nextel/Televisa consortium have received 28 spectrum blocks in the 1710-1770/2110-2170 MHz band. |
Outlook | The auction, which follows that in the 1.9-GHz band, is expected to increase competition in a sector currently dominated by América Móvil's Telcel, which had an estimated market share of 70.8% as of end-December 2009. |
Mexican regulator COFETEL yesterday (16 August) awarded 28 spectrum blocks in the 1710-1770/2110-2170 MHz band (Auction 21) to Telcel, Telefónica, and the Nextel/Televisa consortium. The licences will have a validity of 20 years.
- Telcel: América Móvil’s local unit has been awarded 21 spectrum blocks of 10 MHz each, covering regions 1 to 9, for a total 16,494 million Mexican pesos (US$1,306 million), of which 3,794 million pesos is due within 45 days of the award process.
- Telefónica: Pegaso Comunicaciones y Sistemas, controlled by Telefónica, has been awarded a concession to use six spectrum blocks of 10 MHz each to operate mobile services in regions 2 to 4, 6, 7, and 9. The Spanish operator will have to pay a total of 6,708 million pesos for the whole spectrum amount, which includes an initial payment of 1,274 million pesos.
- Nextel/Televisa: The Mexican consortium has been awarded a 30-MHz block of spectrum for 18,315 million pesos, including an initial payment of 180.3 million pesos. The concession covers regions 1 to 9.
Outlook and Implications
- New Competitor: With this move, Nextel, through its consortium with Televisa, becomes Mexico’s fourth-largest mobile operator, adding extra pressure to market leader Telcel. Earlier in July 2010, the two companies were also awarded 10 MHz of spectrum in the 1.9-GHz band to operate 3G services in region 4 (see Mexico: 20 July 2010: Mexican Regulator Awards Mobile Spectrum to Telefónica, Iusacell, and Nextel/Televisa). Nextel and Televisa signed an agreement in February 2010 that granted Televisa a 30% stake in Nextel for US$1.44 billion. The sum implies a pre-investment value of US$4.3 billion, with the remaining investment made in three equal annual instalments. The agreement also grants Televisa the option to acquire an additional 7.5% equity interest in Nextel Mexico on either the third or fourth anniversary of the completion of the initial investment, as well as specifying the consortium's participation in Mexico’s forthcoming 3G spectrum auction (see Mexico: 16 February 2010: Grupo Televisa Buys 30% of Nextel Mexico for US$1.4 bil.). In fact, Televisa's investment and the other transactions were conditional on the Nextel/Televisa consortium being awarded licences to use specified amounts of spectrum in the auction. Televisa is currently the largest media company in the Spanish-speaking world with interests in television production and broadcasting, production of pay-TV networks, international distribution of television programming, direct-to-the-home satellite services via Sky, cable television and telecommunication services, magazine publishing and distribution, radio production and broadcasting, professional sports and live entertainment, feature film production and distribution, the operation of a horizontal internet portal, and gaming.
- Telefónica Strengthens Position: The spectrum tender will also strengthen Telefónica’s position as the second-largest player in the country. In the previous tender (Auction 20), Telefónica was awarded 140 MHz in spectrum to provide 3G services nationwide, which has allowed it to launch 3.5G mobile broadband services in 33 cities, including the capital, Mexico City, where it was previously not present. The operator will also launch mobile phone services once the operator has undertaken the required technical upgrades on its network, with its mobile broadband service expected to reach maximum speeds of up to 10 Mbps (see Mexico: 16 August 2010: Movistar Mexico Launches 3.5G Broadband Services).