21 January 2014

Mexico poised for telecoms overhaul

With its large population and new telecoms laws, Mexico has the potential to be one of the most interesting mobile and internet markets of the next few years.

Mexico has the potential to be one of the most interesting telecoms markets of the next few years lculig

The big question, however, for the 120-million population of the United Mexican States is how long it will take to implement the new laws through the new regulator, Ifetel (the Federal Telecommunications Institute). The reforms are taking place as part of the modernisation package that President Enrique Pena Nieto signed, soon after taking office in 2012, with the three main political parties. Pessimists might fear that impetus will slow before he stands down in 2018. Optimists can point to a fast start in telecoms.

The new regulator, Ifetel, started work on last October and will have ‘a massive impact’, according to Federico Hernandez Arroyo, head of the telecomms team at Barrera, Siqueiros y Torres Landa. In broad terms, the reforms stretch from greater constitutional underpinning on the rights to expression and information to improving access to radio, television, the internet and the launch of a third TV network. 

A large part of the reform project is to reduce the domination of two big players - Carlos Slim’s America Movil in phone and internet, and Emilio Azcarraga’s Televisa in television. As a sign of what was to come when the reforms fully took place, competition regulators imposed a US$50 m fine on two America Movil subsidiaries this summer for uncompetitive practices. The America Movil empire controls about 80 per cent of the fixed line sector and about 70 per cent of mobiles.

Ifetel will soon have all the tools it needs to force these players to share infrastructure with rivals, according to Javier Lozano, head of the Senate’s transport and communications committee and a former head of Ifetel’s predecessor regulator. He told Reuters that secondary legislation now going through parliament will give Ifetel the necessary powers: ‘With these instruments at hand, there have to be very visible changes in the medium term.’  When asked if Carlos Slim’s market share is likely to fall under 50 per cent by the time the president’s mandate finishes in 2018, Mr Lozano said: ‘I would expect so. Above all, in terms of mobile services.’

Mexico is predominantly a mobile phone country - with 102 m mobile subscribers, compared to just 20 m fixed lines, according to the Mexico Telecommunications Report Q4 2013, just published on SBWire.  Existing players will continue to play a crucial role in the developing market sectors. For instance, the country is second only to Brazil in the Latin American VoD (Video on Demand) market - and America Movil, a leading player here, predicts 50 per cent growth per annum for the next four years, according to the Mexico Telecomms Report.

Law firms  will be involved in many difficult battles over telecoms in the next five years. Former regulator Mr Lozano believes that the reforms will strip away about 80 per cent of the legal protections which the dominant players used to hold off regulators in the past. And he is also hopeful that the seven people making up the Ifetel board have enough independence. He told Reuters: ‘They’re not linked to any of the companies.’

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