In Ovum's view, Mexico has the most comprehensive prepaid offers in Latin America. Unlimited calls and SMS within Mexico, the US, and Canada; zero-rating of the main social media applications; and a basic data quota for less than $6 month on a prepaid basis is the standard offer of the three network operators – America Movil (Telcel), Movistar, and AT&T – and the MVNOs. In this Opinion piece, Ovum analyzes the market dynamics underlying the prepaid offers and the possible future impacts.
Low prepaid prices may lead to negative market dynamics
Constitutional telecom regulatory reform, AT&T's entrance into the market, and MVNOs' service launches have been the key drivers behind Mexico becoming the most competitive prepaid market in the region.
Latin America is mainly prepaid (76% as of March 2016). Mexico is slightly above the regional average at 84%, which accounts for more than 90 million subscribers. AT&T Mexico initially concentrated on the postpaid market due to its higher ARPU and even reported declining prepaid subscribers (mainly due to a stricter prepaid subscriber classification). AT&T Mexico's ARPU is twice as large as Telcel's ($7.33) and four times larger than Movistar's ($4.19). AT&T shifted its strategy last year, adding almost 1 million prepaid subscribers in 4Q15 and 1Q16, which account for 10% of its customer base. As part of this, AT&T relaunched "Unefon," a former Iusacell second-budget brand, with a new logo and marketing campaign in March 2016 to reinforce the low-end prepaid market (similar to what it is doing with Cricket Wireless in the US).
When AT&T entered the market, its offer included free North America roaming at the same rate under the "AT&T Unidos" slogan, in an attempt to make its networks as seamless as possible between the US / Canada and Mexico. All three operators now provide this benefit to all users, including prepaid. This is in part possible due to the regulatory changes by which Telcel had to substantially lower its interconnection rates because it was declared a dominant operator in its market.
Mexico is the only Latin American country that offers unlimited calls and SMS to prepaid customers (in the case of Mexico, the US and Canada are included in the prepaid plans) with a monthly top-up of $5.70 (MXN 100), plus it includes zero rating to most popular social networks (WhatsApp messages and calls, Facebook, and Twitter) with a basic data quota (200MB) for $5.40 (MXN 100 per month). So, for less than $6, a Mexican prepaid consumer can practically have "full mobile access," which is usually complemented with free Wi-Fi networks. In the rest of Latin America, a similar offer (without unlimited calls) would cost more than $10 per month.
Several MVNOs started operations in Mexico in 2014. As of May 2016, there are six active MVNOs that account for almost 1% of total mobile subscribers, and several more are about to launch in the Movistar and Telcel networks. MVNOs collaborated in these innovative and transparent prepaid offers too.
The consumer is benefiting from these inclusive, low-price offers; at this stage, it is cheaper and easier to have a prepaid plan than a postpaid plan in Mexico. However, low prices may impact smaller players and MVNOs, and might impact the future competitiveness and investments in the market. The industry should implement commercial strategies and plans to encourage more rational use of network resources, where consumers use network resources more carefully and understand the value of what they are paying for, and so that lucrative postpaid or fixed monthly plans become more attractive than prepaid.
Mexico Update, March 2016, TE0001-001023 (March 2016)
Mexico (Country Regulation Overview), TE0007-000951 (November 2015)
"MVNOs generate high expectations in Mexico," TE0001-000980 (August 2015)
Sonia Agnese, Senior Analyst, Latin America