Mexico. Mexico and its telecommunications sector has historically suffered from an infrastructure deficit, resulting from under-exercises of investments in the last decade, but especially in the most recent five years.
Why is it important to invest sufficiently and consistently in telecommunications? First, since this infrastructure sector is clearly intensive in the use of new generation capital, to achieve universal access and coverage of its services. Second, to optimize and update the available networks. To think that having allocated investments 10 years ago is enough, would imply a myopia of technological evolution. A decade ago, investment efforts were focused to migrate to the third generation (3G) of mobile services, then 4G and today on the eve of the fifth generation (5G). Therefore, this capital-intensive sector requires a pace of resource exercise aligned with the dynamics of technological updating.
In international and historical experience, traders invest in proportion to the size of their operation. For example, a trader with a weighting of 30% of total revenue is expected to invest a similar or higher proportion to preserve its footprint in the market.
It is striking that in Mexico, the main operator/incumbent/preponderant in telecommunications (América Móvil, Telmex-Telnor/Telcel) has spared in the aggregate of past years its application of resources to capitalization. One of its effects has even been mentioned recently by President López Obrador in terms of the insufficient coverage of services in the national geography.
Likewise, although the world is already in a fourth generation technological stage (4G) and is moving quickly to the next (5G), in our country the containment of investment in infrastructure, mainly by the preponderant, has condemned us to the permanence of areas in which only 2G services are provided. In fact, it is mobile competitors who are leading efforts to shut down these signals.
Thus, the preponderant operator that enters 2 out of every 3 pesos generated in the market, only invests 1 out of every 3 pesos for the development of Mexican telecommunications infrastructure.
With information from 2017 (the most recent published by the telecommunications regulator), Grupo Televisa holds 32.6% of the total investments exercised in the telecommunications sector, followed by América Móvil with 32.2%, AT&T 15.8%, Megacable 7.4%, Telefónica 6.0% and the set of other minor operators 6.0%.
By comparing the investment amount of traders as a proportion of their income, a sub-investment by the overriding operator is again identified."
During the five years 2013-2017, the Investments/Revenue ratio shows that América Móvil invested on average only 11.2% of its competitors, while Grupo Televisa led with an average of 38%, almost four times more than that. On the other hand, the rest of the operators show the following coefficients: Megacable 23.3%, AT&T 24.0% (and at the time, its predecessors Iusacell and Nextel) and Telefónica 11.2%.
This scenario of investments of the main operators illustrates that it is the competitors of the preponderant who invest the most.
That is why the best strategy to promote investments that compensate for the infrastructure deficit is the promotion of effective competition.
It is the set of competitors that follow a model of generation and market attraction based on the intensification of investments, addition and updating of capital.
Text written by Ernesto Piedras of The Competitive Intelligence Unit.
