Global Insight Perspective | |
Significance | COFETEL is planning to auction blocks of spectrum in several frequency bands later this year. |
Implications | The entry of new players in the market will intensify competition and ignite the introduction of a series of new products and services such as video-streaming capabilities and high-speed data transfer. |
Outlook | Global Insight expects to see Telcel's phenomenal market share to be affected on a slow pace because of its dominant position in the market. |
COFETEL is planning to sell 30 MHz blocks of spectrum in the 1900 MHz frequency band in eight of the nine mobile telephony regions for the provision of fixed-wireless and mobile communication services. The only region excluded from the auction is Region 7, which includes the states of Puebla, Tlaxcala, Veracruz, Oaxaca, and Guerrero. The regulator has also announced the auction of spectrum in the 1.7–2.1 GHz band for the deployment of third-generation mobile services that will allow operators to offer high-speed data transfer, mobile TV and video-streaming capabilities, and enriched content.
In addition to these, COFETEL is hoping to attract bidders for the auction of spectrum in the 3.4–3.6 GHz and 3.6–3.7 GHz bands, which can be used for wireless broadband technologies such as WiMAX, and spectrum in the 70–80 GHz band for fixed-wireless broadband connections. Furthermore, COFETEL has established the number-portability rules of geographical and non-geographical numbers that permit users to keep their telephone numbers when switching providers (see Mexico: 1 June 2007: COFETEL Releases Portability Rules). According to an announcement by COFETEL President Héctor Osuna Jaime, Mexico will be the first country to implement number portability on fixed and mobile lines. The rules have been published in the official publication of the state, Diario Oficial, on 12 June 2007 and involve the creation of a Technical Committee of Portability, which will define the technical and operational specifications for the implementation of the scheme and which is due to be formed on 21 June 2007.
Outlook and Implications
- Growth Is High… According to the regular announcement of the Production Index of the Telecommunications Sector, better known as ITEL, related to the first quarter of 2007, the national telecoms industry presented growth of 22.4% year-on-year (y/y) during that period. This degree of acceleration is superior to those recorded in the first and fourth quarters of 2006, which stood at 16.4% and 19.9%, respectively, and significantly higher than the growth rate of the national economy at 2.6%. This is mainly attributed to the considerable growth of the mobile segment, which grew by 36.1%, largely affected by the implementation of the Calling Party Pays (CPP) scheme and the reduction of tariffs during the last year by 20.4% for post-paid subscribers and 4.0% for prepaid users. The number of mobile users has shown a considerable increase of 22.2% y/y, or 2.81 million net additions to 59.82 million, which translates to a national mobile-line penetration rate of 57.1%.
- ...But Competition Is Low. The Mexican mobile sector is dominated by América Móvil's local unit Telcel which holds just over 75% share of the market and around 45 million users. It is followed by Spanish giant unit Movistar with 9.3 million users and the newly merged Iusacell-Unefon with around 3.4 million subscribers. According to figures released by the operators over the last two years, Telcel's market share has only been slightly affected by the increased competition that was enforced by the introduction of a series of innovative products and services by its rivals in an attempt to raise their number of users. The Mexican mobile market presents ample space for growth as indicated by its relatively low penetration rate and the existence of only three significant players in a country of 107 million, as of the end of 2006. Therefore, the auction of new mobile concessions in the 1900 Mhz band and the further introduction of third-generation services, which can increase the data service's revenue share in the final revenue figure, could accelerate growth and bring Mexico's penetration rate in line with those of Argentina (81.6%) and Chile (77.9%).