Mexico. Telecommunications and Information Technologies is perhaps the second essential sector, after health, due to its relevance for people and companies in supporting our social, educational, informative, cultural, romantic, entertainment and of course, productive life during the current pandemic.
In its long-term dynamics, this sector has been characterized by being procyclical in times of economic boom and countercyclical in periods of recession. However, this health crisis and its systemic transmission mechanisms to the macroeconomy have caused economic havoc in a variety of industries, the telecommunications has not been exempt.
Today the Mexican economy faces not one, but two crises. The first induced by the economic policy of the current government that already caused recessionary effects since 2019. The second is that caused by the pandemic that caused a social and productive paralysis.
According to the timely figures released by inegi, the Gross Domestic Product (GDP) during the second quarter of 2020 (Q2-2020), registered a contraction of 18.9% in annual terms, significantly accentuating the recessionary trend of previous quarters.
This warns of the dimension of the impacts of the COVID-19 pandemic on economic activity in Mexico and causes a new drastic depression in growth expectations for 2020 as a whole.
The effect of the suction of the national macroeconomy was so strong that it infected the entire sector, hence it tested positive. This, by detonating a containment in the demand for services, attributable to the lower availability of resources in families and companies, as well as derived from the social and economic paralysis that caused the cessation in the opening of shops and points of sale.
Telecommunications in Q2-2020
Measured by its revenues, that is, by the sale or commercialization of telecommunications services and equipment, the sector contracted at an annual rate of 10.7%, a level never recorded in recent history, with an accounting of $111,472 million pesos (mdp.) during the period.
This dynamic contrasts dramatically with the dynamics of the immediately preceding quarter and is mainly attributable to the 18.3% drop (similar to that of the economy as a whole) that was observed in the mobile segment, as the contracting and consumption of services decreased among the 119.0 million mobile users.
This component reduced its contribution to just over half (53.7%) of the revenues generated in the sectoral aggregate, 5.2 percentage points (pp.) compared to Q1-2020, with a total of $59,814 million pesos.
This, as a result of the transfer of connectivity at home through fixed networks, as well as attributable to the containment of the consumption of services and purchase of new equipment, both caused by social distancing and the paralysis of the national productive apparatus.
Another segment with a downward trajectory is fixed telecommunications. The continued process of downward rate adjustment in these services led the segment to record revenues of $23,933 million pesos (share of 21.5% of the sectoral total), 6.4% less than the figure corresponding to Q2-2019.
On the positive side, internet access has been essential during the pandemic such that there is a growth of 7.1% in residential and business fixed broadband accesses, while in fixed telephone service lines increased 2.5%.
The only segment that registered a positive, although moderate, progress was that of Pay-TV and convergent services with a total of $27,725 million pesos, a figure equivalent to an annual growth of 6.7% and a contribution of 24.9% from the sectoral aggregate.
The growing preference and demand for the contracting of packaged services (internet + telephony and / or Pay TV), especially from the implementation of teleworking and teleeducation, continues to drive the revenue dynamics of cable operators and mitigates the fall registered by the fixed and mobile segments.
Foresight for 2020
In line with the trends that characterized this quarter, it is expected that this sector like many others of the Mexican economy will be affected by the coronavirus crisis in its annual dynamics. Timely estimates prepared by The Competitive Intelligence Unit already place in a range below zero, between -2.6% and -6.6%, the annual contraction corresponding to telecommunications revenues in Mexico for 2020.
This range is higher than that projected by the monetary policy authority on the dynamics of the economy as a whole. However, it shows that this extraordinary health crisis has impacted all economic sectors. In telecommunications, it has had marked negative effects on consumption decisions and contracting of services.
The lower wage spillover and the impact on businesses, together with social and economic paralysis, has depressed and contained both its demand and access to its supply among households and companies.
It is necessary to give timely follow-up to the balance of impacts detonated by the pandemic on this sector during 2020. Since there is no precedent to anticipate the depth and longevity of its distortions in this and other industries that make up the national productive apparatus.
Text written by Ernesto Piedras, from The Competitive Intelligence Unit.
