Demand for high-speed internet spurs major changes in Mexico's ICT sector

Mexico has been upgrading parts of its telecoms networks to the LTE standard that is also sometimes described as 4G; however, there can be minor differences between the two. The upgrade allows for the provision of faster and more extensive data services. According to consultancy Ovum and telecoms lobby 5G Americas, by mid-2016 there were 1.4bn LTE connections worldwide, representing 18.7% out of a total of 7.5bn cellular connections (mostly using early technologies such as 3G/WCDMA-HSPA). LTE’s market share of connected devices was 60% in North America, 34% in the Asia-Pacific region, 30% in Western Europe, 14% in the Middle East and 11% in Latin America.

Closer To Home

Although a detailed country-by-country breakdown was not provided, Mexican LTE connections appear to be somewhat above the Latin American average. José Otero, 5G Americas’ director for Latin America and the Caribbean, said that consumer demand for high-speed data was driving LTE adoption, despite an economic slowdown in some of the region’s largest economies, such as Brazil. The data showed that Latin America’s LTE connections had almost tripled in one year to reach 82m. Later data, up to the end of the third quarter of 2016, showed continued growth, with Latin American LTE connections rising to 97.9m, or 14% of all mobile connections.

According to 5G Americas, by the beginning of 2016 there were five LTE networks operating in Mexico: Iusacell and Nextel (both acquired by AT&T), Movistar (Telefónica), MVS and Telcel (América Móvil). A fifth LTE network, the shared wholesale network that was tendered in 2016, is expected to become operational in 2018. Spanish operator Telefónica said in early 2016 that it was investing just over $180m to improve its networks over the course of that year, principally through expanding LTE and fibre-optic links between base stations. The company said it was extending 4G coverage to cities like Veracruz, Mérida, Cancún, Torreón, Cuernavaca, Villahermosa and Aguascalientes.

Industry Focus

There has been significant interest within the industry over AT&T’s network plans. The US-based operator spent $4.4bn to enter the Mexican market by acquiring Iusacell and Nextel in 2014, and was reported to be spending a further $3bn to extend its LTE network there. By October 2016 the company’s Mexican network was covering more than 70m people across 42 cities. AT&T says that when its single North American mobile service area is complete, it will reach a total of 400m subscribers. The company recently announced that it would also be deploying a North American LTE-M network in 2017. LTE-M is a variant of LTE technology adapted to support internet-of-things devices, and is reported to have a number of advantages including better indoor coverage.

Of particular interest to Mexico is AT&T’s decision to develop networks to serve all of its North American subscribers across the US and Mexico in an integrated way. This will allow it to achieve economies of scale and may offer Mexican subscribers more sophisticated services than they would otherwise receive. Additional competition in LTE coverage is expected to come from the new shared wholesale network, which will be used by a range of smaller operators.

Looking ahead, one important issue will be how América Móvil responds to the challenges coming from AT&T. The operator can be expected to seek to bolster the quality and technical capacity of its own networks. According to press reports in early 2017, América Móvil was able to outbid Telefónica in an offer to purchase a 60-MHz block of spectrum in the 2.6-GHz band held by Grupo MVS. The sale of this block of spectrum is subject to approval by the IFT. The regulator was expected to announce its decision during the first quarter of 2017. It would have to consider whether use of the block of spectrum would give América Móvil – already the dominant operator in the mobile market – an unfair competitive advantage. Should the deal not receive authorisation, Telefónica could be back in contention.