In a telecoms market not noted for competition, Mexico’s MVS Communicaciones’ announcement of plans to invest $1bn in an LTE network as part of a consortium that includes Clearwire and Intel should, in theory, shake things up. The consortium would sell access to its network to a variety of local players, including its rivals, opening up a market that has been dominated by billionaire Carlos Slim’s America Movil.
But, according to Informa analyst Daniele Tricarico, things are unlikely to be that simple. While MVS’s proposals await approval from Mexico’s Finance Ministry and regulator Cofetel, rival telcos are demanding that the carrier be forced to sell off its spectrum holdings in the 2.5GHz band – on the grounds that it isn’t using them. According to Tricarico, MVS has already seen more than 10 per cent of its licences expire, with the remainder set to be gone by 2018 if it doesn’t move on them.
With MVS chief Joaquin Vargas arguing that the under-utilisation is caused by the government’s seeming inability to reach any decisions on its proposals, Tricarico says the situation is fraught with tension. Spectrum in the 2.5GHz band was originally designated for use in pay-TV services; MVS’s proposed use of the spectrum to provide WiMAX services requires regulatory approval – a state of affairs that will still apply now that the carrier has said it’s interested in LTE.
“It’s a complicated situation, a very Latin American situation,” says Tricarico. “America Movil has more than 70 per cent market share. Everyone knows they’re very well connected to both the government and regulator, they have massive influence in the country.” Under the circumstances, its difficult to escape MVS’s inference that there’s more to the delay than initially meets the eye. Tricarico points to recent controversy over interconnection fees as a case in point for a market in dire need of competition: “America Movil in particular and sometimes Telefónica are so dominant that they’re able to retain control over the market,” he says.
With Movil charging what are often described as the world’s highest interconnect fees, rivals have regularly complained that this allows the telco to retain a strangehold on the market, with customers unwilling to move to operators with fewer subscribers. Its a dominant position that even the government of Mexico has struggled to break: the company was recently fined $1bn by the country’s competition watchdog in a case that took four years. The operator has said it will appeal.
Regarding Mexico’s LTE future, Tricarico says it can only be hoped that the country avoids the unbalanced outcome of its 3G rollouts; spectrum constraints saw AM’s rivals struggling to get into the 3G game even as the government invited foreign players such as Deutsche Telkom and China Mobile to bid in an effort to increase competition. They declined, citing high interconnect fees and a lack of clarity on shared infrastructure. “They’re talking about LTE, but they’ve only recently auctioned 3G spectrum,” says Tricarico of Mexico, pointing out that, until recently, even Telefonica was unable to offer that service outside of restricted urban areas. “Even before LTE, the 3G market was very unbalanced, again in favour of America Movil. In the ideal world, you wouldn’t want to replicate that situation with LTE.”
Tricarico says that, in the context of a tense local market, the presence of big American suppliers like Intel and Clearwire makes the MVS consortium an interesting proposal. “These US players are siding with a Mexican company and bringing different expertise to develop infrastructure,” he says. “It’s not clear at what stage they are in terms of planning this, if they’re just in talks or if there’s something more defined. But the real issue is that, without some evolution from the regulator, none of this is going to happen.”
With the jury out on the regulations and competition front, Tricarico says that about the only sure thing the industry can learn from the situation is that is that “Clearwire is definitely going for LTE, which we probably knew already. A lot is happening and in a sense it’s looking like everyone is taking sides against America Movil.”
Whatever way you slice it, it’s clear that Mexico’s on the LTE road but, as MVS’s Vargas said recently, “There is a lack of clear telecommunications policy in the country. The government will have to define if it wants competition or to collect more money.”