The Mexican government has finally announced the bidding rules to kick off the upcoming wireless spectrum (radio bandwidth) auction in the country. The Mexican telecom regulator Cofetel released details of radio-electric spectrum to be offered to the qualified bidders through two separate auctions. However, no specific date of the auction has been announced.
In the first auction, Cofetel will offer nine blocks of frequencies ranging from 1850 to 1990 megahertz (MHz) across eight of Mexico’s nine wireless operating regions including the capital Mexico City. The regulator will also offer seven blocks of spectrums between 1710 MHz and 2170 MHz band in the second auction which will cover all nine operating regions.
Technical specification of the two acutions will be released between Jan 6 and Jan 8, 2010. Interested bidders need to get approval from the Mexican antitrust watchdog Federal Competition Commission (CFC). Eventual winners at the second auction (1710 MHz and 2170 MHz) will get nationwide coverage and secure the necessary bandwidth frequency that supports 3G wireless services, enabling a wider range of advanced services (high-speed transmission of voice, data, and video).
The impending spectrum auction, which was announced in late 2007, was delayed due to prolonged negotiations between the CFC, Cofetel and the Mexican Communications and Transportation Ministry. The auction is aimed at fostering growth of incumbent operatros while opening the door for new wireless entrants which will enable more competitive services in the country.
With approximately 74% mobile penetration, the Mexican wireless market still offers ample opportunity for growth vis-à-vis the other major markets in Latin America. Despite the economic headwinds, the country’s cellular market continues to grow at a respectable pace. Through its largest subsidiary Telcel, America Movil (AMX) dominates the Mexican wireless market with roughly 72% share facilitated by its well-known brand, extensive distribution network and nationwide coverage.
Spanish telecom giant Telefonica’s (TEF) Movistar is the second-largest player in the Mexican wireless market with 20% share. Movistar is desperately seeking more bandwidth capacity to roll out 3G services in Mexico City which will enable it to more effectively compete with Telcel.
Both America Movil and Telefonica will be the principal bidders in the forthcoming spectrum auction. The other leading participant in the bidding war is expected to be Mexico’s largest media company Grupo Televisa (TV) which is gearing up to offer wireless services in Mexico through its cable unit Cablevision. Moreover, smaller domestic mobile operators like Grupo Iusacell and NII Holdings’s (NIHD) Latin American mobile unit Nextel Mexico may also bid at the auction.
The upcoming spectrum auction is designed to open the Mexican wireless telephony market to more competition and reduce monopolistic trends in this industry. Moreover, it will further boost mobile phone demand in Mexico driven by the wider access to advanced data applications enabled by 3G technology. This will help operators to lure subscribers by offering premium applications (including bundled services) on high-speed network, thereby creating opportunity to boost data revenue growth.
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