Growth and investment opportunities in the telecoms sector in Mexico

Telecoms Sector Overview

Every year since 2010, the Mexican telecoms sector has outpaced GDP growth. According to the Federal Telecommunications Institute (IFT), Mexico’s broadcasting and telecoms regulator, and the 5G Americas organization, Mexico is currently second in the use of radioelectric spectrum to provide internet and telephony services in Latin America. The Competitive Intelligence Unit (CIU), a leading strategy consultant, stated that in 2018, the domestic telecoms sector was valued at c. US$26 billion.

Expectations in 2019

The status quo is as follows: President Andrés Manuel López Obrador (AMLO) faces the challenge of implementing an ambitious connectivity agenda within budgetary constraints and uncertainty regarding long-term plans for the sector. This budget cut, nearly 35% for several government agencies and bodies involved in the design and execution of IFT policies, may bring significant business opportunities for interested private stakeholders. It is known that AMLO is committed to bringing internet connectivity to all, particularly with the project Internet Para Todos (Internet For All). This project prioritizes closing the digital gap by building connectivity infrastructure in remote, isolated parts of the country.

The Market and its Major Players

To promote competition, the IFT is due to review how dominant players such as América Móvil and Televisa are complying with additional regulations imposed after the 2014 telecoms reforms. The Mexican Supreme Court (SCJN) is expected to rule this year on an injunction filed by América Móvil on its significant market share. The company controls over 60% of the sector despite anti-monopolistic regulations. This ruling could influence the market, given that the regulator-ordered split of América Móvil’s wholesale fixed line business would affect the company’s interaction with its competitors and market share composition.

Red Troncal Relaunch

To increase telecoms companies’ wholesale transport capacity, the Mexican government also has the task of deciding whether to launch its ambitious fiber-optics backbone network, which would use over 25,000km of high-capacity fiber belonging to the Federal Electricity Commission (CFE). The project, Red Troncal, is expected to be a public-private partnership operated by a private company. The Government is currently analyzing the viability of this project, which could potentially benefit more than 40 million Mexicans. Nevertheless, due to the usage of CFE distribution network, coverage is limited to the existing connection nodes of CFE and additional investment would be required to reach populations not proximate to the CFE connection nodes. The public bidding is expected to be concluded by the end of this year.

Panorama of the Radioelectric Spectrum for Fifth Generation Mobile Services

In December 2018, the IFT announced that it would relocate the final two television channels in the 600MHz transmission band in order to allow the freed-up spectrum to be used for 5G broadband services. Despite being the only OECD country not to have carried out 5G tests, Mexico became the first country to completely free-up the 600MHz spectrum band for high-speed 5G services.

5G is the next generation of mobile technology with significant potential, including greater bandwidth, higher data transmission capacity and improved latency. These advances can allow millions of devices to be inter-connected at the same time in densely populated areas, as well as the allowing high rates of data transfer.

Frequency bands planned in Mexico for 5G

Below is an analysis of each of the frequency bands that the European Broadcasting Union (EBU) considers as viable for the future implementation of 5G systems in Mexico. In making these recommendations, the EBU considered existing telecoms infrastructure, trends of harmonization at regional and global level, the perspective of standardization by 3GPP, the planning of the radioelectric spectrum prepared by the EBU, as well as the recommendations of international organizations. The following 5G systems are likely to be implemented in Mexico:

1. Low frequencies (below 1 GHz) provide greater coverage and limited capacity.

These frequencies will be used to allow a gradual migration of 4G systems to 5G systems.

2. Average frequencies (between 1 and 6 GHz) coverage reduced but capacity increased compared to the low frequencies.

These frequencies will provide sufficient coverage and capacity to meet the constant increase in data and video traffic in open areas, while allowing the deployment of new technologies that are compatible with the bands currently assigned and with the new frequency bands for 5G.

3. High frequencies (over 6 GHz) provide short range with very high capacity and very low latency.

These frequencies will be used for large numbers of users and with channels with bandwidths that provide high rates of data transfers in specific areas where traffic demands are highest.

Conclusion

The telecoms sector in Mexico is going through a significant transition, the main objective of which is to reach international standards. Both investors and the Government recognize Mexico’s telecom sector as one of the most attractive in Latin America. The current Government has stated that the situation requires both private and public investment to finance the projects and measures needed to achieve the country’s objectives.

It is necessary to focus all efforts to make the radioelectric spectrum resources available in the most efficient way possible. The radioelectric spectrum, being an extremely scarce resource and of an unprecedented strategic value, demands efficient management and planning to ensure that the different services and/or applications can be provided for the maximum benefit of the end user. The activities related to the use and exploitation of the radioelectric spectrum have an enormous impact on the social and economic aspects of the country and constitute a fundamental component for the competitive development of the nation on a global level.

Alejandro Antillon is a contributing author.