Mexico Sets Up New Agency to Supervise Network-Sharing by Telecom Operators

The creation of the Mexico Telecommunications Investment Promotion Agency is another telecom reform aimed at raising competition in a market dominated by América Móvil.

Mexico Telecommunications Investment Promotion Agency

In another reform to its telecom sector, the Mexican government has set up an agency called to manage the installation of new networks and provisioning of telecom services. According to Zacks Research, the federal government will provide the resources to the agency that will be managed by a board of directors, headed by the Minister of Communications and Transport.

Though it is still not clear exactly how the new agency, the Mexico Telecommunications Investment Promotion Agency, will operate and how different are its responsibilities from that of the regulator, Federal Telecommunications Institute (IFT), its main job will be to make sure that dominant telecom operators, like América Móvil, share their networks with smaller players.

Under the new regulations, a dominant company cannot charge competitors for calls to its network, but those providers can charge it for calls to theirs. The dominant company must also share its infrastructure and is prevented from charging roaming fees. The reforms will eliminate long-distance charges for all providers as well.

Such sharing has lowered telecom service prices but has hurt the revenues of América Móvil, whose revenues declined by 1% in 2015 compared to a year ago, while the EBITDA margin fell to 40.0% from 43.8%.

Comprised of Telmex and Telcel, América Móvil still accounts for a large portion of subscribers. Telmex controls around 80% of the country’s landlines, while Telcel controls around 70% of mobile subscriptions. But Móvil has been told to sell its assets to reduce its marketshare to below 50% to comply with new regulation.

Unlike the United States, Mexico’s telecom market is is still a long way from being saturated. Mobile subscribers in Mexico stood at 73.7 million at the end of last year, up by 3.1% on the previous year, according to Total Telecom. Today the main competitors are América Móvil, Telefónica and AT&T.

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