Mexico Telecom Retail Sector insights

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With a population approaching 125 million and with relatively low broadband and mobile penetration, Mexico’s telecom sector retains significant potential for growth. The market is still dominated by the incumbent America Movil (Telcel), which  retains about almost 70% of subscribers overall. A regulator newly set up in 2013 has enforced measures aimed at removing barriers to foreign investment and at reducing the market share of this dominant operator. The reforms are helping to make Mexico’s telecom market more competitive. By the other hand, other carriers have faced a complex context to gain market share, they haven’t been able to reach a solid financial results to let them reinvest in infrastructure which is a most to try to compete to America Movil (Telcel in Mexico). One result of competitive pressure is the decision of Telefónica Group to exit the Mexican telecoms market, a process which is being undertaken in stages which includes the sale of fiber assets, the migration of mobile subscribers to AT&T Mexico’s network and the return of spectrum concessions to the regulator. On behalf of AT&T the market share growing is practically stopped for the main reasons, lack of  significant infrastructure to compete to Telcel. 

The mobile market also continues to undergo considerable changes in the wake of regulatory efforts to curb the market dominance of Telcel. Although the MVNO segment has only a very small market share it continues to attract investment, and new players enter the market each year. A wholesale mobile network operating in the 700MHz band was set up in 2018 and will reach the vast majority of the population by 2025. Developments in 5G have been slow given the existing capacity of LTE, though the auction of spectrum in the 600MHz band.

Te outbreak of the Coronavirus in 2020 is having a significant impact on production and supply chains globally. During the coming year the telecoms sector to various degrees is likely to experience a downturn in mobile device production, while it may also be difficult for network operators to manage workflows when maintaining and upgrading existing infrastructure. Overall progress towards 5G may be postponed or slowed down in some countries.

On the consumer side, spending on telecoms services and devices is under pressure from the financial effect of large-scale job losses and the consequent restriction on disposable incomes. However, the crucial nature of telecom services, both for general communication as well as a tool for home-working, will offset such pressures. In many markets the net effect should be a steady though reduced increased in subscriber growth.

On the brands (manufactures) side, they are under the same financial pressure, not only for the market decrease but they are been affected in their production capacity to deliver full inventories and reach a 100% of fill rate to all commercial partners at all sales channels, this issue is mostly affecting largest manufactures, letting other competitors to set emergent inventories due to Mexican Market is ready for the best sales season of the year, which is Buen Fin, the Mexican version of the U.S Black Friday.

No doubt 2021 will be a year to replace traditional strategies into a year fo thinking out of the box if some brands really want to survive at Mexican market, on the carriers side we will wait if any other challenger appears in the market in the role of Macro Operator, otherwise Telcel will continue ruling the game..

Luis Vazquez
(Mexican Business Consultant)

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