In our fourth series of blog posts, we are introducing telecom sector trends and opportunities, moving onto Mexico.
The opening telecom market in Mexico offers many opportunities for international investors.
The telecom market is dominated by a couple of big players. Carlos Slim’s América Móvil (Telcel) controls over 70% of the telecommunications sector, with 11,5% to Nextel, 11,3% Telefonica Movistar, 5,6% Iusacell/AT&T as of 2014 according to PwC Mexico. As for broadband, Telmex controlled around 60% of the market as of 2014, though its share has decreased to 50% in 2015 according to Investopedia.
There were 102 million mobile subscribers in Mexico as of 2014, out of which 85% are pre-paid, with smart phones as 1/3 of mobiles sold. There were 13,8 million broadband internet users as of 2014, with 12,6% penetration rate as of 2014 according to PwC Mexico.
President Enrique Peña Nieto signed a telecom reform in mid-2013, though secondary laws were published in the following year. With the reform, government wants to broaden the usage of digital technology and offer internet for all. For the policy of “universal digital inclusion”, government is building a broadband network expected to be complete in 2018 according to PwC Mexico.
Thanks to the reform, the mobile broadband subscription has doubled from 23 to 57 subscribers per every 100 inhabitants and thus more and more Mexicans can access this service. The reform has generated annual savings of 20 billion MXN with the elimination of long distance tariffs within Mexico and a decrease of over 40% in the prices of long distance international calls according to the Minister for Communications and Transport, Gerardo Ruíz Esparza, at a news article at el Financiero in May 2016.
As the foreign ownership is now permitted up to 100% in the sector, the FDI in the sector has increased 200% in the last 2 years with an investment of 6,5 billion USD, which is 12% of the total FDI in Mexico. The sector retains its place as one of the most dynamic sectors in the country: the GDP of the sector grew nearly 21% in the third trimester of 2015 compared to the same trimester in the previous year according to the Minister for Communications and Transport.
This reform has been internationally recognised by OECD as less restrictive than implemented in many countries in average. Furthermore, the International Telecommunication Union (ITU) recognised the so-called Connected Mexico-programme as one of the best in the world in the category of Information Infrastructure and Communication.