Mexico shared network secures $50m loan, but its troubles remain

Altán Redes, the company that operates Mexico’s shared LTE network, has secured a US$50 million loan from shareholders to help it continue operations.

The firm filed for bankruptcy protection under Mexican law in July. It did not give a lot away about the state of its finances, but it’s pretty clear what’s going on: it has racked up a lot of a debt and has failed to attract customers.

The new loan, which it states will enable it to continue with network operations and services while it reorganises its finances, will help the troubled company keep going for now. But question marks over its long-term viability remain.

Altán Redes won a 20-year licence to deploy and operate Mexico’s Red Compartida or shared network almost five years ago. The government made the somewhat controversial decision to award all its available 700 MHz spectrum to a single player to roll out a wholesale 4G network, believing that such a move would improve connectivity and help to curb the market dominance of incumbent operator America Movil.

It was a nice idea, but it hasn’t quite worked out like that.

It has made progress with the network rollout, which is ultimately slated to cover more than 92% of the population by 2024 and 70% by January next year. But uptake is proving a problem.

The company has made much of the fact that it has 100 customers offering services on its network, but together those 100 virtual players only serve 3 million people, as per its last customer update two months ago. To provide some context, the Mexican population stands at around the 130 million mark.

The issue is that the network’s retailer customers are mostly small outfits serving market niches. The country’s big network operators seem reluctant to get involved.

In February the government gave the go-ahead for all mobile operators, including the big three – America Movil’s Telcel, AT&T and Telefonica’s Movistar – to use what it termed ‘social roaming,’ that is, to use the shared network to provide 4.5G services in difficult to serve areas, or those with populations of fewer than 5,000.

“It’s a win-win for everyone,” said Altán Redes CEO Salvador Álvarez. “Operators can take advantage of Altán’s already installed infrastructure and bring connectivity to their customers in areas where they do not have coverage; meanwhile, the Red Compartida adds more users in areas with little traffic.

But while we don’t have access to data to prove the point, it’s pretty obvious that any usage by the big guns is minimal at best. Had they fully backed the project, the subscriber figures would have been higher. As it is, the country’s mobile network operators have done their best to circumvent the lack of 700 MHz frequencies and have built out their own high-speed mobile infrastructure in alternative frequency bands.

With that showing little sign of changing, it is difficult for the company to match the cost of the network, which was put at around the US$7 billion mark when it won the tender, with its low usage.

Nonetheless, the company itself remains optimistic…in public, at least.

“With the backing of its shareholders, Altán La Red Compartida reaffirms its commitment to bring its mobility, voice and data and high-speed internet services to the entire country,” the firm said, as it announced the shareholder loan.

Those shareholders, incidentally, are led by funds managed by Morgan Stanley, and also include the World Bank’s private sector financing arm the International Finance Corporation (IFC); the China-Mexico Fund (CMF); domestic and international pension funds, including Caisse de dépôt et placement du Québec (CDPQ); and others.

There are some big names in there, but this time they might have backed the wrong horse.