Mexico. It is worth stating that Globalization, driven among other factors by telecommunications, today faces a real threat due to the contemporary version of Protectionism.
In the midst of a volatile global trade scenario and the possibility of multiplying tariffs, the telecommunications sector in Mexico is at a critical crossroads.
In addition, regulatory uncertainty and competitive imbalances are undermining incentives to invest in infrastructure and transition to next-generation services.
Paralysis of Investments, Lag in Infrastructure. Telecommunications are capital-intensive. Operators face high infrastructure deployment costs and long periods to recoup their investment.
Without certainty about the return of the exercise of resources, their flow stops. This is particularly worrying in Mexico, where there is still a deficit in coverage, quality, and provision of state-of-the-art services.
In perspective, at the end of 2024, no operator in the country had exceeded 85% population coverage in 4G, a generation that has been in circulation for more than a decade.
In 5G, the outlook is even bleaker: coverage barely reaches 40% of the population, well below the 90% already achieved in countries such as the United States.
Tariffs: Potential Impacts for Operators. On the other hand, dependence on imported equipment – routers, smartphones, set-top boxes, networks, etc. – means that any international trade tension translates into an increase in costs and disincentives for operators.
Paradoxically, instead of cheaper these elements and devices, their increase in price becomes inevitable in the face of uncertainty and additional costs due to the imposition of tariffs.
This would have a negative impact on the already disproportionate operating margins between operators, which would consequently reduce their investment capacity. In numbers, América Móvil achieves an EBITDA margin of 41.3%, while for AT&T and Telefónica it is only 16.4% and 9.0%, respectively.
Additional pressure on the cost of inputs for operators could exacerbate these differences and result in the exit of players, weakening competition and potentially reducing options for the end user.
Lower purchasing power, less connectivity. The impact of this new trade order is not limited to businesses, but would also result in a decrease in the purchasing power of households and individual users.
The increase in the price of imported devices would have a direct impact on citizens' ability to access digital services. According to ENDUTIH 2023, more than 7.4 million Mexicans do not have mobile telephony due to lack of resources. If the price of equipment rises, that number could rise, reversing the gains made in digital inclusion.
In addition, lower service adoption would mean lower revenues for operators. At the end of 2024, 27.9% of mobile revenues came from the sale of equipment. If these sales fall, a chain reaction is generated that would affect the profitability of the sector and its reinvestment capacity.
Crucial Moment for the Sector. The sector urgently needs clear and stable policies. The rules of the game must lead to effective competition, attract investments and allow strategic planning in the medium and long term. In addition, a comprehensive strategy is required to ensure that access to connectivity continues to rise.
Closing the digital divide will not be possible without ensuring universal access to modern networks, affordable prices for devices and services, as well as a level playing field between operators.
However, on the new geopolitical chessboard, the future of telecommunications cannot be just another piece, but the center of the strategy for economic and social development.
Analysis by Ernesto Piedras of The Competitive Intelligence Unit, The CIU.
