All posts from Zacks
Zacks in Our Research. Your Success.,

Green Signal for Secondary Spectrum Market in Mexico

Mexican telecom regulator, the Federal Telecommunications Institute (IFT), recently approved a series of general guidelines for the creation of a secondary spectrum market in the country. The IFT wants the available spectrums to be used gradually rather than stay idle.

The wireless carriers, who have a strong portfolio of valuable wireless spectrums sometimes keep these assets idle without using them productively. This is because the companies do not feel it necessary to deploy the airwaves instantly as they have sufficient network coverage. However, if a new firm wants to enter the Mexican wireless market, it has to wait for IFT conducted spectrum auction to get hold of this basic wireless infrastructure asset.

The IFT considers that a readymade secondary market for wireless spectrum will be a befitting solution to this problem. The new entrant can then negotiate with incumbent wireless carriers who have idle spectrums, to either buy the holdings or conduct a spectrum swap to fulfil their needs.

In 2014, the government of Mexico introduced reforms within its telecommunications sector, which intensified competition. Incumbent carrier -- America Movil SAB AMX -- currently controls nearly 68% of the market. Importantly, the IFT seeks to restrict the maximum hold of a company in the market to 50%.

Another existing operator – Telefonica S.A. TEF – holds nearly 20% market share. In 2015, U.S. telecom behemoth AT&T Inc. T entered the Mexican telecom industry with the acquisition of Grupo Iusacell and Nextel de Mexico. Meanwhile, Mexican cable MSO (multi service operator) Grupo Televisa S.A. TV received a go-ahead from the IFT to enter the wireless space. However, the company is yet to take any decision in this regard.

In Dec 2015, the IFT approved swaps of frequency blocks and a spectrum rental deal between AT&T and Telefonica. Per the deal, AT&T will use spectrum in the range of frequencies in the 1.7–2.1 GHz band in some regions, whereas Telefonica will use frequency ranges in the 1.9 GHz band.

Notably, America Movil bought the major chunk of wireless spectrum in Feb 2016 auction, closely followed by AT&T. The IFT conducted an auction for 80 MHz of wireless spectrum across various Advanced Wireless Services (AWS) bands.

Mexico is the largest economy in the Latin American region with a growing middle class population that is eager to spend more on high-speed mobile networks for optimal use of smartphones and tablets. Also, the wireless penetration rate is still relatively lower in the country.  Thus, an investment in the nation may bode well for the telecom operators in the long run.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.">Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AT&T INC (T): Free Stock Analysis Report
TELEFONICA S.A. (TEF): Free Stock Analysis Report
GRUPO TELEVISA (TV): Free Stock Analysis Report
AMER MOVIL-ADR (AMX): Free Stock Analysis Report
To read this article on click here.
Zacks Investment Research