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Summary

The Mexican regulator, Ifetel, looks set to finally award vital spectrum during 2016, having planned to do so for some time. An auction of spectrum in the AWS band is in progress and awards in key bands (2.6GHz and 700MHz) are scheduled for later in the year. These awards will provide MNOs with the spectrum boost they need to make the most of the large Mexican market. However, Ifetel will have to ensure that the outcome of the auctions does not hamper the already precarious levels of competition.

The spectrum auctions could unleash the potential of the Mexican mobile market

Three spectrum awards are planned for 2016, one of which is imminent. The auction of spectrum in the AWS band (1710–1780MHz/2110–2180MHz) started on February 15, 2016. It has two participants: the dominant operator, Telcel, which held a 69.3% share of subscribers as of 4Q15, and AT&T, which has merged the previous operators Iusacell and Nextel and held an 8.2% market share. Telefonica, which held a 22.4% market share, has not expressed interest in the spectrum under auction, despite currently being the only MNO with no spectrum in the AWS band. In fact, it recently swapped its AWS spectrum holdings with AT&T in return for an equivalent amount of spectrum in the 1.9GHz band.

The spectrum caps set by Ifetel for the current auction are a maximum of 2×25MHz in the AWS-1 band, including existing holdings, and not more than 2×40MHz in total across the whole band. This should allow both operators to bid for spectrum across all the three parts of the AWS band, but it will also likely create a significant spectrum imbalance: Telefonica will have far less spectrum across the 1.9GHz and AWS bands after the award. The regulator will have to be mindful of this in the following spectrum awards and ensure that Telefonica remains a strong competitor to the other two MNOs. Despite having a much larger subscriber share than AT&T, Telefonica now ranks third in terms of revenue and experienced a decline during 2015. The Mexican market needs at least two credible rivals to Telcel’s dominance if it is to benefit from the regulator’s recent efforts to foster competition.

Later in 2016 all three operators will participate in another crucial auction: the long-awaited award of 2.6GHz spectrum. The details of this auction are yet to be defined, but Ifetel will have to ensure that at least all the existing MNOs walk away with sufficient spectrum holdings. The 2.6GHz lots will be crucial to MNOs’ ability to improve the quality of their LTE offers. Ovum expects the operators to seize the opportunity to grab this spectrum, given that Mexico is now one of the few large markets in which this band is not yet used by mobile operators.

Finally, 2016 will also be the year when the shared network in the 700MHz band will come to life. At the end of January 2016 the Secretariat of Communications and Transport published the terms for the award of the license for the private–public partnership. The winning bidder will operate a wholesale-only network for 20 years, using 2×45MHz in this band. We will have to wait until 2018, when the network will start its operations, to see if this unprecedented model works.

Appendix

Further reading

Mexico (Country Regulation Overview), TE0007-000951 (November 2015)

Author

Luca Schiavoni, Senior Analyst, Regulation

luca.schiavoni@ovum.com

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