Mexico. The telecommunications sector in Mexico registered a greater dynamism than the economy as a whole during 2019, measured in its income evolution.
While the Mexican economy is in a scenario of slowdown and even on the verge of technical recession, there is a sustained dynamism of the revenues generated by the provision of voice, data, video and packaged services, as well as by the commercialization of mobile equipment.
Telecom Revenue Dynamics in 2019
The set of telecommunications operators generated revenues of $496,942 million pesos (mdp.) in 2019, 3.8% more than in the previous year.
The increase in the Pay-TV and Convergent Services segment stands out, reaching an annual growth of 10.5%. This is the second component of sectoral revenues, with a relative weight of 20.8% in the total, after mobile telecoms.
The diversification of offers, the increase of alternatives in access to content, the higher quality and speed in the transmission of networks, from the growing investment in infrastructure by cable competitors; as well as the lower relative price of packaging compared to the individual contracting of services, has driven the contracting and preference for the offer of these operators.
Another driver is mobile connectivity, which grew 4.7% and reaches 6 out of every 10 pesos that enter the sector.
In stark contrast, the fixed voice and data segment continues its secular decline. Despite the use and contracting of the internet in households and economic units, their income contracted 4.6% in 2019, due to the continued fixed-mobile substitution.
Competitive Decline
An element that draws attention, in fact, worries, is that the described sectoral dynamism is framed by a growing market share of the preponderant (América Móvil, Telmex-Telnor/Telcel) in the sector. This, both in terms of your monetary income and by the number of subscribers or lines.
While in the 2017-2018 biennium, it remained relatively constant, in 2019 it rebounded to 58.8% in the fourth quarter. That is, practically at the same level as three years ago, when the first review of the preponderance measures was carried out.
This profit appropriation is markedly higher in the mobile segment.
In terms of revenue, the subsidiary of the preponderant in this segment (Telcel) registers a market reconcentration since 2018. Sequentially, in the last eight quarters, the operator has increasingly appropriated market share by providing voice and data services and marketing mobile devices. By accumulating $210,318 million pesos. in mobile revenue, equivalent to an annual growth of 6.7%.
This upward trajectory has taken Telcel's weight from 68.2% in Q4-2017, to 70.7% in Q4-2018 and more recently to 72.3% in Q4-2019. With this trajectory, soon the preponderant would recover its levels close to those of the beginning of the Reformation.
Measured through the Herfindahl-Hirschman Index (IHH), the market structure went from a level that approached 5,000 points during 2017 (already over-concentrated zone), to one of 5,642 points in Q4-2019. That is, a frank upward trajectory that evidences a loss in gains in competition, taking the form of "flattened u" in the last five years (2015-2019).
However, we see a preponderant economic agent in crescendo and competition is in decline.
This quantitative testimony shows us the need to adjust and add measures that comply with this task in asymmetric regulation, to realize the releveling of the competitive terrain.
In the next revision of the preponderance regulatory framework, the regulator must not only detonate and accelerate market deconcentration, but also curb and reverse the reconcentration in revenues and lines, especially in the mobile segment. Since this makes it impossible to develop competition and efficient market dynamics.
This scenario of dynamism with reconcentration of revenues and loss of profits in competition is incompatible with the role of the regulator to ensure sustained growth, a growing dynamism of investments in service infrastructure and greater affordability of services in the medium and long term.
