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(Last updated: 20 May 2008)
Trends and opportunities
The market
Mexico continues to rank third in business in the Latin American telecoms markets, only marginally behind Brazil in second place, according to BMI Research. The telecoms market benefits from a high level of subscribers due to the large population, as well as healthy growth opportunities due similarly to the large population and relatively low mobile penetration rate. Although Telmex and its mobile affiliate America Movil dominate the fixed-line, broadband and mobile markets, there are a decent number of operators in each market giving a reasonable choice for consumers, and Telmex is not yet active in the pay TV arena.
Alongside Chile, Mexico has the highest score for per capita GDP in the region, with a relatively wealthy, urbanised and young population expected to be receptive to newer advanced telecoms offerings. The investment regime is very open and the government is broadly-pro-foreign investment, although the dip in the country’s attractiveness has been attributed to its failure to push ahead with structural reforms and simplify the investment regime quickly enough. Mexico scores average or above average in all criteria for risks to the realisation of potential returns, with a stable political and economic environment, reasonably sounds legal framework and average levels of corruption
While Mexico’s fixed-line market is stagnating, despite growth from alternative operators, the broadband market is growing more quickly than anticipated thanks to market leader Telmex. The operator continues to post above average growth for the sector despite already accounting for over 70 per cent of the market. In light of this growth and the good developments in the triple play market, it is expected that the market will grow by over one million net additions or around 54 per cent in 2008, which will increase penetration from 2.4 per cent to 3.6 per cent.
The mobile market is also growing more quickly than anticipated, with a concerted effort by Movistar, although Telcel continues to post the greater number or net additions. Even though Telcel was the only operator to record a falling market share in Q2007, it still accounted for a massive 74.3 per cent of the market.
Mobile phone services
Despite the large population and relatively low penetration, Mexico’s mobile market growth has been modest in recent years, rising by 22.5 per cent in 2005 and 21.1 per cent in 2006. The proportion of prepaid subscribers is among the highest in the region and the two main operators are already trying to migrate such customers over the post-paid services. While mobile penetration still relatively low, the Mexican market is not yet mature enough for widespread 3G usage.
Internet
According to data supplied by the Mexican Internet Association, the number of broadband Internet subscriptions exceeded the number of dial-up subscribers for the first time in 2006, with 2.5 million broadband subscribers and 1.5 million dial-up customers. The number of dial-up subscribers fell by 17 per cent in 2006, while the broadband market expanded by 47 per cent, following growth of 64 per cent in 2005. Broadband accounted for 61 per cent of the total 4.1 million Internet subscriptions at the beginning of 2007.
Opportunities
The Mexican telecommunications market represents many opportunities for investments in a medium-risk environment:
- New legislation to allow triple play services and open up mobile market to resellers should stimulate competition and lower prices.
- As Telefonica Moviles rolls out EDGE services and Iusacell 3G/EV-DO services, it is likely that other operators will follow suit with the result that there could be opportunity for infrastructure providers to bid for expansion contracts.
- The VoIP market is booming and other equipment vendors are likely to follow the lead of Nortel Networks and Siemens in focusing on VoIP in Mexico, and using Mexico as a base for regional expansion of VoIP.
- With penetration at only 58 per cent there are still plenty of opportunities to grow in the mobile market.
Specific opportunities for Australia are as follows:
- Wireless telecommunications in Mexico offers opportunities in:
- Wireless access controllers
- Internet gateways
- Wireless packet switches
- Microwave transmitters
- Multiplexors
- Personal communications services (PCS)
- Remote data access, exchange and processing
- Radio communications services
- Data acquisition
- Data service for banking, industries, retailers, government and education institutions in:
- Frame realy
- ATM
- IP
- VPN
- X.25
- Leased lines
- Satellite system, such as private network solutions and private links on commercially available satellite
- Teleconferencing – voice, data and video service
- Other related products such as:
- Cable and radio systems
- Manufacture telecommunications equipment
- Switching
- Microwave
- Power equipment
- Batteries
- Transmission equipment
- Networking monitoring
- Control system
Competitive environment
Telmex
Telmex is Mexico’s incumbent telco, offering local, long-distance and Internet telephony, data and video services, Internet access and integrated solutions for corporate customers.
Telmex operates a 74,000km digital fibre-optic and had 18.202mn fixed lines, 2.484mn 64kbit/s line equivalents for data transmission and 2.923mn Internet access accounts, including 2.381mn ADSL accesses, at H107. The operator also has significant international activities, primarily in Latin America.
Telmex has several subsidiary companies in Mexico. Red Uno provides telecommunications voice, data and video solutions for the corporate market in Mexico.
Telnor provides Telmex’s telecommunications services in the state of Baja California and in the north-western of Sonora. Finally, Uninet supports Telmex’s data network.
Axtel
Axtel is Mexico’s second largest telephony provider and consolidated its position in December 2006 with the acquisition of rival Avantel. The combined operation provides local and long-distance telephony, Internet, data and corporate telecoms services over its own infrastructure in 23 cities, as well as long-distance services to customers in over 200 cities.
Telcel (America Movil)
America Movil is the largest mobiles operator in Latin America with 37.2 million mobile and 3.8 million fixed subscribers in 16 countries. The company operates in Mexico through its wholly owned subsidiary Telcel, which was established in 1990 and is Mexico’s dominant operator with 46 million subscribers, a market share of 74.3 per cent.
Telefonica Moviles Mexico (Movistar)
Established in 1998, Telfonica Moviles Mexico is the second-largest operator in the country, behind Telcel.
Iusacell
Iusacell launched cellular services in Mexico City in 1989 and was established in its current form in 1992. The company was the first alternative operator to provide competitive long-distance services to Telmex. In August 1996 Iusacell owns and operates and PCS services in seven of Mexico’s nine regions, including Mexico City, Guadalajara, Monterrey, Tijuana, Acapulco, Puebla, Leon and Merida. In total Iusacell’s licences cover approximately 90 per cent of the country’s total population. |