In September 2013, as part of the Pacto por México initiated by the then newly elected President Enrique Peña Nieto, the Federal Commission of Telecommunications (Comisión Federal de Telecomunicaciones, or CoFeTel) was replaced by the Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones or IFT). This new, autonomous federal agency, which is headed by a board of seven commissioners, set out to undo the longstanding monopoly of América Móvil and its Telmex (fixed line) and Telcel (mobile) business units. At the time, América Móvil controlled 71% of the landline business and 82% of the mobile market. Its owner, Carlos Slim Helú, was ranked as the richest person in the world, but in terms of operational metrics Mexico's telecom market was nowhere near that of a developed country. A key objective of the telecom reform was to split América Móvil's fixed line and mobile business units.
It has been three and a half years since the reforms began (or at least three years since they were officially ratified by Mexico's legislature) and the break up of América Móvil has yet to be finalised. Despite losing market share, revenue at the company have grown and the company is now more of a leader for all Latin America. Rather than suffering a financial setback, the Carlos Slim family seems to have prospered since the reforms. So, what has changed?
Mexico's Instituto Federal de Telecomunicaciones (IFT) argues that its reforms have made measurable improvements, including:
• The price of telecommunication services in Mexico dropped by 29% between June 2013 and December 2016, even though the rate of inflation over that period was 12.8%.
• The concept of national long-distance phone calls became obsolete.
• The cost of international long-distance phone calls dropped by 40%.
• The average mobile phone bill dropped by 43%.
• The ability to easily switch mobile operators with number portability became widely implemented.
• Since June 2013, the number of paid TV subscriptions (cable or satellite) has risen by 33%; currently, 60% of Mexican homes have a paid TV subscription.
• Fixed residential broadband access grew 19% between Q4 2013 and December 2016. currently, 48% of Mexican homes have broadband Internet service. As recently as 2011, when efforts to pass the telecom reform were gathering strength, only 11% of the population had broadband access in their homes, with multiple family members in each home, it is now estimated that 61% of the population has broadband access.
• More than 80% of Mexican homes with broadband service currently enjoy download speeds of 10 Mbit/s or better; in 2015, most home were receiving download service in the 2~9 Mbit/s range.
• Broadband via coaxial cable is quickly gaining in popularity and now accounts for 35% of the market; DSL service continues to account for the largest share of the market but is dropping in popularity, while FTTH is rising at a 150% annual growth rate.
• In 2013, América Móvil (Telmex) controlled 71% of the fixed broadband access market, followed by Grupo Televisa at 12%, Megacable-MCM at 6%, and a number of other providers; by 2016, Telmex had lost 14.5 market share percentage points to its rivals and now controls under 57% of the fixed broadband access market.
• In mobile broadband, América Móvil (Telcel) has also seen its share drop from 82% in 2013 to 72% in 2016; leaders in Mexico mobile broadband include: América Móvil (Telcel) at 72%, Telefonica at 14%, AT&T at 12%, and a handful of other players capturing the rest.
• The amount of licensed spectrum has risen, before 2013, a total of 222 MHz was available for licensing; currently, 404 MHz is available for commercial use with the addition of 190 MHz of 2.5 GHz bands, Mexico will soon have 594 MHz of spectrum for commercial services.
• Mexico became the first country in Latin America to end analogue TV service.
• Private investment in telecommunications in Mexico rose 76% between 2014 and 2016, including many direct foreign investments.
IFT also noted that telecommunication service providers have also benefited directly from the reforms, as the total revenue collected by these companies rose from MXP 399 million in 2013 to MXP 456 million in 2016. Mobile revenue now accounts for 55% of the market, while fixed line accounts for 45%.
The Red Compartida project has selected its vendors
There has been limited public information about the Red Compartida (shared network) project since the selection of ALTÁN Redes as the principal contractor late last year. Red Compartida is sometimes described as the largest construction of a new public access network in the world, although it is eclipsed by the FirstNet emergency response project in the U.S.
Key facts of the initiative include:
• Red Compartida will only offer wholesale mobile services.
• Red Compartida will build a new national network covering at least 92.2% of the population.
• The commercial launch date will be March 31st, 2018, an aggressive target!
• Red Compartida's largest investor at 33% is Marapendi Holding BV, an indirect subsidiary of North Haven Infrastructure Partners II, an infrastructure fund with a value-add strategy to invest in OECD countries around the world, managed by Morgan Stanley Infrastructure; Caisse de dépôt et placement du Québec(CDPQ), one of North America's largest pension fund manager holds a 12.68% share; Mr. Miguel S. Escobedo holds a 9.35% share; and Mr. Eugenio Galdón, Chairman of Multitel, holds a 3.34% share.
• Axtel and Megacable also hold a stake in ALTÁN Redes through a series of non-voting shares and without involvement in management; each have a participation of 4.01%.
• In March, ALTÁN Redes selected Huawei and Nokia as turn-key technology providers for Red Compartida, a pure IP + LTE network.
• Huawei technology will be used for central and southern Mexico (telecommunications regions 6 to 9), as well as providing the backbone.
• Nokia's technology will be rolled out in the northern part of the country (regions 1 to 5). Nokia will also supply the network Core, which includes the Network Operation Center (NOC) and Security Operation Center (SOC).
AT&T continues to invest in Mexico
Finally, it should be noted that AT&T continues to invest heavily in Mexico, even though it may or may not be allowed to participate in the wholesale Red Compartida mobile infrastructure program when it comes online. AT&T's LTE network now covers 88 million people in Mexico and it expects to reach 100 million PoPs by the end of 2018. For Q2 2017, AT&T reported that wireless revenues from Mexico were $665 million, up 9.7% versus the year-earlier quarter, largely due to subscriber growth, which was partially offset by competitive pressures and foreign exchange. AT&T added 92,000 post-paid subscribers and 402,000 prepaid subscribers in Q2. It now has 13.1 million total wireless subscribers in Mexico, a 31% increase from a year ago.
