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Mexican Standoff: Has AT&T Put a Dent in Telcel’s Dominance?

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By Tom LeinsAug 23, 2017

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AT&T had high hopes when it entered the Mexican mobile market in 2015. But despite strong subscriber gains, the cellco faces an uphill battle in its mission to dislodge longtime market leader Telcel.

Three Makes a Crowd

Owned by Carlos Slim’s America Movil (AM), Telcel is one of three main players in Mexico’s wireless market. It’s joined by Telefonica subsidiary Movistar Mexico and AT&T Mexico.

Telcel dominates the sector, while doing its best to dismiss concerns over its status as a Preponderant Economic Agent (AEP). An AEP is a company with significant market power—in this case, they have at least 50 percent of subscribers in a sector.

AEPs are subject to asymmetric regulations when it comes to tariffs, quality of service, and even divestment of network assets. In July 2014, AM pre-empted action from the Federal Telecommunications Institute by announcing plans to sell off a number of assets in Mexico to lower its market share. This would have removed their status as an AEP.

AM appeared optimistic that the arrival of AT&T Mexico had changed the competitive landscape and negated the need for divestment. 

As such, AM said its board had approved measures to cut its market share to under 50 percent, which is the threshold for dominance under current telecom laws. But despite rumored interest from Japan’s Softbank Group Corp, Bell Canada, and China Mobile, no concrete move was ever reported.

AM appeared optimistic that the arrival of AT&T Mexico had changed the competitive landscape and negated the need for any divestment. That being said, AM executives have since stressed that the arrival of a dynamic international challenger has irrevocably altered the previously lukewarm competitive landscape. But the figures tell a different story.

Telcel’s 65.6 percent market share (1Q17) is not markedly different from the 67.9 percent share of the spoils it claimed at end-2014. Further, Movistar has grown its own market share from 20.6 percent to 23.1 percent in the same timeframe and shows no sign of capitulating to the newcomer.

Executives have stressed that the arrival of a dynamic international challenger has irrevocably altered the previously lukewarm competitive landscape, but the figures tell a different story.

Slow and Steady Wins the Race?

AT&T Mexico was created following back-to-back acquisitions of Iusacell and Nextel in 2015. And while AT&T posted strong subscriber gains in recent quarters—AT&T claimed 13.082 million Mexican customers at June 30, 2017—overtaking Telcel remains a monumental task.

AT&T has overhauled its two acquired businesses at an impressive pace and recently claimed that its new LTE network now covers some 85 million people. It remains on course to meet its 100 million target by end-2018.

AT&T has overhauled its two acquired businesses at an impressive pace and recently claimed that its new LTE network now covers some 85 million people. 

Iusacell’s legacy CDMA-based networks were switched off in October 2016, and the U.S. firm is expected to deactivate the former Nextel iDEN networks before the end of 2017, thus freeing up even more spectrum which it can re-farm for 4G use. AT&T is arguably well-placed to take the fight to its rival, but it is abundantly clear that the battle has only just begun.

 

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