Over the past week, we have witnessed the short memory of the telecommunications sector. First, an inexplicable commotion arose following the repetition, by a Telefónica executive, of the company’s decision to withdraw from Latin America. As if this were something new, reactions quickly emerged, highlighting the operator’s experience since its entry into the country through the purchase of smaller players already established in the market.
Analyses ranged from the difficult conditions for competing in a market where, for many years, the treatment of different players by government authorities has been asymmetric. Likewise, some voices have recalled that part of the Spanish operator’s problems stemmed from its own poor decisions, from an initial strategy of buying market share through aggressive handset subsidies to subsequent administrative missteps. The outcome is that Movistar’s user profile in Mexico is significantly different, in terms of consumption and, consequently, average revenue per user, compared to what the Spanish operator has achieved in the rest of the region.
The truth is that the announcement of Telefónica’s exit from Spanish-speaking Latin America, excluding Brazil, where the strong influence of Portugal Telecom can still be seen in Vivo’s management, had been expected since the creation, in 2019, of this business unit that grouped all the operator’s Spanish-speaking markets. One needs to pay attention to the rationale behind grouping Spain, Brazil, Germany, and the United Kingdom: the goal was to focus the company on its high-growth, high-revenue markets.
For those who understand, few words are needed. If Telefónica’s focus is on those four markets, the rest is open for sale, as was initially observed in its Central American operations.
The other piece of news that caused a stir was the mention, now for the third time in less than 18 months, by an AT&T executive, this time its president, Mónica Aspe, of the company’s limited interest in participating in a spectrum auction. AT&T considers that such an auction would be designed primarily for revenue collection, as the Telecommunications Regulatory Commission (CRT) calculations indicate that the price of radio spectrum for mobile services in Mexico is 7% above the global average.
Notwithstanding the CRT’s statement, the reality is quite clear: if Mexico does not emulate what several European Union countries, and in the region, Brazil, Colombia, or the Dominican Republic, to name only a few, have done by reducing the cost of spectrum concessions, then the auction will have at most two participants: Telcel and Altán.
If history is any indicator of what could happen in an auction intended to promote 5G, it is contrary to what the government may assert. In that case, it is unlikely that any operator not already present in the market will show up to participate and provide mobile services. The last time operators without existing mobile service participated in a spectrum auction was in the previous century. All processes over the past 25 years have involved operators already established in the market, with name changes resulting from mergers and acquisitions that have occurred over time.
In light of this evidence, the CRT presents a challenging proposal: achieving a spectrum assignment that enables 5G service growth in the country, but through standalone networks rather than reusing 4G infrastructure via 3GPP’s Release 15.
If the 5G spectrum auction in Mexico is suspended, the national deployment of this technology would face a significant delay, not only in coverage and user adoption, but also in the version of 5G offered to businesses and citizens. While other regions are beginning to discuss advanced 5G, with 3GPP Releases 17 and 18, Mexico remains anchored to Release 15. Put simply, the higher the release version, the better the performance and the greater the technology’s capacity to deliver improved services.
In other words, without the auction, operators would be forced to depend more heavily on refarming 4G frequencies, resulting in a limited or “diet” version of 5G. This would slow and fragment the network’s progress, leaving Mexico further behind compared to countries that have already implemented broad and robust deployments.
Furthermore, the suspension would maintain and even widen Telcel’s competitive advantage, as it already uses part of the 3.5 GHz spectrum reassigned through technical reorganization. Telcel could preserve and expand its dominance, while competitors such as AT&T, regional operators, and wholesale operator Altán would miss the opportunity to access new spectrum. This would deepen the asymmetry among operators, consolidating an imbalanced market in which Telcel continues to lead without significant pressure. Although if the CRT follows its predecessor’s approach, surprises could arise, potentially with the participation of an actor interested in obtaining a concession in a partial service area (over 2,000 identified across different frequencies) to complement its local offering and possibly combine it with a hybrid model for national coverage by purchasing capacity from a national operator.
The alternative is yet another suspension of the auction, which would reduce competition in the sector and limit AT&T’s and Altán’s ability to expand and improve their services. Without acquiring additional spectrum in new frequency bands, it will be more difficult to offer competitive speeds or prices, which could lead to a stagnant market with less rivalry. Ultimately, this would affect consumers, who would face limited choices and potential stagnation in innovation and pricing.
More broadly, the suspension would affect the country’s digital transformation. 5G is essential for advancing Industry 4.0, since cost reductions of up to 80% in data transmission (which are not achieved with 3GPP Release 15) make it an enabler of data-centric applications such as virtual reality, cloud computing, blockchain, and the various branches of artificial intelligence.
As can be seen, the CRT faces a significant dilemma and fewer days to decide. If there is no auction, or if one is held without AT&T’s participation, Mexico would advance more slowly in digitalization. This would force companies to rely on 4G or private networks with limited spectrum, diminishing their international competitiveness. The CRT would be naïve to underestimate the long-term consequences of AT&T’s absence in an upcoming auction process.
What the market expects is an announcement guided not by discretion in deciding whether discounts are offered or which operator would receive them. With greater transparency and clear rules, the different market players can make more informed decisions. Let us not forget that it is not the government that launches new technologies; operators do so based on a business model that must ensure profitability. The government’s role is to create all necessary conditions to facilitate technological innovation by incorporating new technologies.
Hopefully, Mexican authorities will recognize this responsibility sooner rather than later.
