Telecom Regulation: Competition in Mexico

The Chamber of Deputies of Mexico recently passed a bill proposed by the President to overhaul the telecommunication industry. Some major initiatives are as follows:

  • Establishing the Federal Telecommunications Institute, a new regulator with the power to impose asymmetric regulation and mandate the unbundling of services and, perhaps most notably, the divestiture of firms with more than 50% marketshare
  • Raising the ceilings on foreign equity in television and fixed-line companies to 49% and 100%, respectively
  • Setting up a national carrier of carriers

The Mexican wireless sector has been dominated by the America Movil subsidiary Telcel, which captured 70.0% of the market in terms of subscriptions at the end of 2012. Consequently, the 85.7% mobile penetration rate in the country lagged behind the regional figure of 114.1%. In addition, the adoption of advanced technology has been slow. For instance, comparing the two largest markets in the region, even though the per capita Gross Domestic Product by purchasing power parity of Mexico was 30.3% higher than that of Brazil, mobile broadband subscriptions as a percentage of the total in the former stood merely at 11.2%, half as much as the 22.3% in Brazil.

In our recently published ABI Insight, we look at how the efficacy of compulsory divestment depends on the details, issues with a carrier of carriers and the implications of the reform on the upcoming spectrum auction.