Mexico faces uphill battle in upcoming 5G auction

Mexico’s telecoms regulator has started preparations for an upcoming 5G spectrum auction with the express purpose of attracting new players to the market. It could struggle.

The Federal Telecommunications Institute, or IFT as it is known locally, this week opened a public consultation into its planned multi-band spectrum auction. It is seeking feedback on the allocation of a total of 330 MHz of frequencies nationwide, with a particular eye on the usual 5G use cases, such as smart cities, low-latency cloud services, AR and VR and so forth.

“The design of this new tender process will seek to assign the greatest amount of spectrum possible and to enable new players in the mobile market to access this resource, especially for the provision of mobile services,” the IFT said, in a Spanish language statement.

Attracting new players to an established mobile market is rarely easy, given the costs associated with market entry. But it will likely be particularly tough in Mexico, where the market is still dominated by one big player, despite the state’s best efforts, and where even big international telcos are reluctant to invest in facilities-based competition.

The frequencies being put up for sale by the IFT include spectrum handed back by Telefonica. Three years ago the telco group inked a carriage deal with AT&T – which has had a retail mobile operation in Mexico since 2015 – with the aim that its Movistar unit would no longer operate a network.

Amongst other things, hefty spectrum usage charges make operating a network in Mexico a costly business. Which begs the question that if a player as big a Telefonica couldn’t make the numbers stack up, who can? Or more to the point, will anyone be willing to give it a go?

At a national level, probably not. America Movil’s Telcel serves around two thirds of the market, with AT&T and Movistar accounting for the bulk of the remainder. To put that in context, Telcel had 81.8 million mobile subscribers at the end of September, an increase of 3.1 percent year-on-year. There is a national 4G wholesale operator in Altan Redes, recently emerged from bankruptcy protection, which could help a newcomer. But even so, this is not an easy place to play catch up.

However, there could be opportunities for players looking at specific market niches or segments. And the IFT noted that it is looking for new entrants, “especially for the provision of services in neglected or underserved areas.” So the auction, when it happens, will perhaps include certain incentives to that end, which could encourage participation.

It shouldn’t be too long before we know whether that will indeed be the case. The IFT’s consultation will run until February 3rd, after which date it can start to look at setting out the draft rules for the spectrum sale.

The regulator has a lot of valuable airwaves in its hands; the 330 MHz of frequencies include 90 MHz at sub-1 GHz with the remainder coming it at 3.3 GHz or below. It just has to persuade companies – aside from Telcel and America Movil – that they want them, otherwise we’re in for another two-horse race and a lot of unsold spectrum, much like the last auction in late 2021.

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