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July 26, 2010
In Mexico, the results of the 1.7-2.1GHz auctions have been published by Cofetel. As expected, Nextel Mexico/Televisa grabbed the nationwide spectrum (30MHz), while both Telcel and Movistar each secured several blocks of spectrum (10MHz each). The auction will make the Mexican telecom market more competitive because Movistar is now capable of offering mobile data services such as broadband nationwide, and the entrance of Televisa/Nextel to the area brings another strong competitor to the field.
The bidding showed a few interesting points. Televisa/Nextel Mexico paid around US$14m, while competitive bids for what was left of the 1.7-2.1GHz bands equaled about $380m. Unsurprisingly, current mobile operators expressed dissatisfaction at the wide difference in what was paid through competitive bidding compared to the nationwide block, and there have been rumors of a potential delay from Cofetel, which we believe won’t happen because rules were public and available for months before the auction took place.
As we described in our Mexico Mobile Demand 2Q 2010 forecast, mobile penetration in Mexico will be 85% at year-end 2010, which means that the underserved market is a relatively small percentage of the population. In addition, the cost of the spectrum for Nextel/Televisa is just a portion of all costs to launch operations, which include network deployment, marketing, labor expenses, legal fees and the cost of maintaining the connection to provide services.
All these reasons make economics of marginal spectrum for Telcel and Movistar very different than those of Nextel Mexico/Televisa. Telcel and Movistar made such investments years before and with a much lower penetration of the market. Currently, Telcel and Movistar are perhaps among the most well known and trusted brands in Mexico, while Televisa will have to convince users to try their services. For Nextel Mexico, the joint venture is a must, since its currently highly successful niche strategy is likely to face serious challenges as competition moves towards mobile data services.
In our view, the effects on the auction are positive for the Mexican market:
- First, it brings a new strong competitor that is likely to push prices down, leverage its expertise in the content market and compete in all market segments. More competition is better for the customer because it increases the number of choices and hopefully may decrease prices or improve the already good selection of services.
- Second, the positive externalities of the launch of a nationwide mobile service are not small and include employment, local and national taxes, and capital investments, among others.
- Third, Telcel and Movistar got spectrum that will help them expand their mobile data offerings and definitely will give Televisa a strong fight in the mobile data market. In voice services, Televisa has an uphill battle against much larger networks where on-net calling is crucial to attractting subscribers.
For a full overview of the Mexican market, see our Mexico Mobile Demand 2Q 2010 forecast.
— Jose Magana, Senior Analyst
Related resources:
Latin America Mobile Demand Forecast
Forecasts published quarterly
Our Mobile Demand Forecast products provide complete pictures of demand trends for 19 geographical markets in Latin America. The Excel output includes five years of historical data and five years of market projections for metrics such as GDP, mobile penetration, subscriptions (by operator, type of package, technology), ARPS and total mobile service revenue (data and voice). The Forecasts are based on extensive field research and use a consistent methodology across all markets, aiming to capture the total spending, from an end-user perspective, on mobile communication services in each market.
Latin America Mobile Data Forecasts
Forecasts published quarterly
Our Mobile Data Forecast products provide complete pictures of demand trends for 19 geographical markets in Latin America. The Excel output includes five years of historical data and five years of market projections for metrics such as penetration, mobile subscriptions (by type of package, by operator or MVNO and by network technology), users of specific data services (SMS, music, etc.), MOU, ARPS (by operator, by subscription type, by service, by application) and revenue (by messaging and non-messaging applications). The Forecasts are based on extensive field research and use a consistent methodology, aiming to capture the total spending on mobile data services in each market. Data from these Forecasts is available online for subscribers to our Data Tracker service.
Mexico Intelligence Report
Country Intelligence Report published September 2009
The Mexico Intelligence Report is the industry’s best available analysis on market trends, regulatory environments, and competitive dynamics, providing detailed competitive analysis on fixed and mobile sectors, tracking market adoption of new technologies and services such as WiMAX, IPTV, and VoIP
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