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Summary

The Mexican Secretariat of Communications and Transport (SCT) has put out an “expression of interest” to create a shared wholesale network in the 700MHz band, as was mandated by the recent reforms of the country’s telecoms sector. The plan is likely to result in competition at the retail level, because the operator should be a wholesale-only provider, and access should be granted in a nondiscriminatory way. However, the regulators will have to work out the details of regulating access to the network, ensuring that the necessary investment goes into building and upgrading the network.

MNOs could benefit from good coverage, but the wholesale network will require certainty in policies and investment

A shared wholesale network in the 700MHz band was a key point in the plan outlined by the current Mexican government when it took power. Its importance was such that the objective was included in the constitutional reform of 2013, and in turn in the new Telecommunications Act of 2014.

The SCT is now pressing ahead with the plan, the details of which are yet to be defined. Having published its expression of interest, it is seeking views on how the plan will work in practice. The plan is open to private investment, both national and international (following the recent reform there is no limit to foreign investment in Mexico). However, it is likely that the government will seek to retain significant control of the wholesale network.

Excessive concentration has long been an issue in the Mexican telecoms market, and has hampered growth. Telmex’s mobile arm, Telcel, is by far the largest mobile operator; its market share, which is currently at 68.3% of subscriptions, has declined only slightly in the last five years. The creation of a wholesale network is likely to be of significant help to competition: smaller mobile operators should be able to achieve vast LTE coverage without having to build their own networks, and will hence be able to tackle Telmex’s dominance in a more effective way.

However, implementing the plan will not be without challenges. Its pro-competitive effects will largely depend on how the details of the access conditions will be set out, which is unclear at the moment. In addition, the Mexican government will have to ensure that the appropriate investment is devoted to the network, which will have to be safe from uncertainties such as political shifts or changes in policy priorities, and be upgraded when required. A similar plan was envisaged by the Argentinean government recently, although it eventually backed down and awarded the 700MHz band to commercial operators via a competitive auction, which took place in 4Q14.

In general, spectrum policy is now a high priority for the Mexican regulators. They should look to make more spectrum available to mobile operators across all bands, including in the 2.6GHz band, which is still in the hands of broadcasters. In particular, operators other than Telcel would benefit from the allocation of more frequencies as they seek to put credible competitive pressure on the incumbent.

Appendix

Further reading

Mexico (Country Regulation Overview), TE0007-000839 (October 2014)

Superfast-Access Policy Tracker: 2014, TE0007-000825 (September 2014)

Author

Luca Schiavoni, Analyst, Regulation

luca.schiavoni@ovum.com

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