The Mexican telecom industry has undergone many changes since the government passed major reforms in 2013. Signed into law on June 10 of that year by President Enrique Pena Nieto, the reforms created a constitutional amendment that mandated the establishment of a nonprofit, public-service broadcaster and the development of a backbone telecom network designed to provide all carriers with equal access. The amendment also sought to reduce costs for consumers by limiting monopolies and encouraging greater competition in the telecom industry. A second set of reforms went into effect in 2014.
As the fifth anniversary of the reforms approaches, it’s easy to look back and see how the amendment has—and hasn’t—affected the Mexican telecom industry. The following is a brief rundown of the current state of the industry:
More Consumers, Falling Costs
The number of telecom consumers in Mexico has risen sharply in recent years. According to a report by the Paris-based Organisation for Economic Cooperation and Development (OECD), the rate of broadband penetration grew by 8 percent between June of 2014 and June of 2017, meaning that Mexicans increasingly purchased fixed broadband services during this time.
The country’s mobile market has also expanded. The OECD report, which was published in August of 2017, noted that mobile broadband teledensity jumped by 16 percent since June of 2013. This rate of growth exceeds that of Canada, Belgium, and Hungary.
At the same time, Mexican telecom prices have decreased by close to 75 percent. Network interconnection costs—the payments made among mobile operators to connect calls on one another’s networks—specifically fell by 84 percent, which is twice the average declines seen across other OECD nations.
More Towers Needed
Despite the growth in the number of Mexicans accessing broadband services, the country’s broadband mobile coverage has failed to expand at a comparable rate. This problem is directly attributed to the fact that, according to the Federal Telecommunications Institute, Mexico has only about one-third of the telecom towers it needs to support its networks.
The Institute for Telecommunication Rights believes that telecom companies should address this shortage by placing a greater emphasis on building new towers. Fortunately, some progress has already begun to occur on this front. One company, American Tower, is currently undertaking a $500 million project to build more than 50,000 concrete poles and install nearly 3,400 kilometers of fiber-optic cables.
Red Compartida Expands Its Reach
Another effort aimed at expanding Mexico’s mobile coverage officially launched in March of 2018. A landmark wholesale wireless network, Red Compartida intends to bring cellular service to over 90 percent of the Mexican population by 2025.
The establishment of Red Compartida (which translates to “shared network”) was written into law as part of the 2013-14 telecom reforms, which made Internet access a fundamental right. Through the network, Mexico will facilitate the expansion of coverage to rural areas that traditionally have experienced poor wireless service.
The network will achieve this goal by lowering infrastructure costs for carriers, which can then more easily enter the mobile market. This improved access will not only encourage wireless providers to extend their coverage but also increase industry competition by attracting new carriers.
As of its launch in March of 2018, Red Compartida already covers more than 30 percent of the Mexican population. In addition to reaching consumers in remote areas, the network plans to strengthen service elsewhere in the country for current cellular users.
Competition Issues Remain
In 2014, telecom company America Movil, which is owned by billionaire Carlos Slim, controlled 70 percent of the country’s mobile market and more than 60 percent of fixed lines. Although a primary goal of the reforms was to weaken American Movil’s grip on the telecom industry, the company still retains approximately the same wireless market share.
This issue is exacerbated by the fact that, as of March of 2018, neither of the country’s other two major carriers, Telefonica and AT&T, has elected to participate in the Red Compartida network. These absences raise doubts as to whether the network will have a meaningful effect on breaking America Movil’s telecom stranglehold.
AT&T’s Potential Rise
AT&T, however, has left the door open to join Red Compartida in the future. In addition, the global carrier appears to be positioning itself to challenge America Movil over the long term.
Since the 2013 reforms, AT&T has invested heavily in Mexico, purchasing the former third- and fourth-largest carriers and opening thousands of modern, full-service stores. This investment has resulted in AT&T gaining 5.7 new wireless subscribers over the last three-plus years. In doing so, it has grown its market share in the country to 11 percent.
The aforementioned progress has led experts to predict that AT&T will pass Telefonica as the country’s second-largest mobile operator within a few years. While it still has a long way to go before it can overtake Mr. Slim’s company, AT&T stands out from past rivals to American Movil in one key way: As the largest telecommunications firm in the world, it has ample resources to deploy.