TELECOMMUNICATIONS IN MEXICO
THREE YEARS
AFTER THE CONSTITUTIONAL REFORM
TELECOMMUNICATIONS IN MEXICO
THREE YEARS
AFTER THE CONSTITUTIONAL REFORM
3
Telecommunications in Mexico. Three Years After the Constitutional Reform
CONTENT
.04
Introduction
.05
Drop in Telecommunications
Prices
.06
More than Half of Households in Mexico
have Pay TV Services
.07
More than 40% of Households in Mexico
have Internet Services
.08
Mexico Now has Faster Internet with
Better Infrastructure
.09
More than 50% of Population have Mobile
Internet
.10
Broader Spectrum for Better Mobile
Telecommunications
.11
More Digital Free-To-Air TV Channels with
Better Quality of Transmission
.12
Growth of Telecommunications in
Mexico
.13
Telecommunications Contribute
More to the Domestic Economy
.14
More Private Investment in
Telecommunications
.15
Telecommunications Attract More
Foreign Direct Investment (FDI)
to Mexico
.16
Increased Investor Confidence in
the Mexican Telecommunications
Sector
.17
The Industry has also Benefitted from
the Telecommunications Reform
4
Telecommunications in Mexico. Three Years After the Constitutional Reform
INTRODUCTION
For many years, the high levels of concentration that were prevalent in the various Mexican
telecommunications and broadcasting markets led to high prices, a reduced offering, poor
service penetration, substandard quality, and low levels of investment. To address this
situation, on June 11, 2013, a constitutional reform in telecommunications and broadcasting
was issued.
Not enough time has passed since the constitutional reform was approved for a substantial
structural reconfiguration of the telecommunications and broadcasting sectors to have
occurred, and although there are still several challenges ahead, the implementation of the
reform has already brought significant results during this period:
Greater competition
Significantly reduced prices
A broader service offering
More investment in infrastructure
More foreign direct investment
Technological improvements
Better quality of service
A brief description of the evolution experimented by the sectors regulated by the IFT during
the three years following the constitutional reform is provided below.
5
Telecommunications in Mexico. Three Years After the Constitutional Reform
Cumulative variation between
2Q-13 and 4Q-15
DROP IN
TELECOMMUNICATIONS
PRICES
1.9%
Cumulative variation between 2Q-13 and 4Q-15
CPI: 9.1%
Despite inflation growth by
9.1% in Mexico between June
2013, the year the telecommunications reform was passed,
and December 2015, telecommunications prices fell by
23.2%, yielding a differential of
32 percentage points between
telecommunications
prices
and those of other products in
average.
Source: Federal Institute of Telecommunications (IFT), based on data from the National Institute of Statistics and Geography
(INEGI).
N.B. Base Period December 2013 = 100. The
Communications Price Index (COMPI) is integrated by the price indices of the following
services: mobile phone, landline, internet,
domestic long-distance calls, international
long-distance calls, and landline handsets. The
abbreviations stated above refer to the CPI:
Consumer Price Index; COMPI: Communications Price Index; LD: Long Distance; and AAGR:
Average Annual Growth Rate.
2013
Quarter (Q) I
II
III
COMPI: -23.2%
2014
IV
I
II
-4.3%
2015
III
IV
I
II
0.9%
III
2016
IV
-32.4%
-40.3%
I
Higher prices
-100%
Landline
International LD
Mobile phone
Pay TV
Domestic LD
Internet
Lower prices
COMPI
CPI
During the same period, due
to the elimination of domestic
long distance call fees, international long-distance call rates
fell 40%, while mobile phone
call prices decreased more than
32%.
6
Telecommunications in Mexico. Three Years After the Constitutional Reform
Subscriptions per 100 households
MORE THAN HALF
OF HOUSEHOLDS IN
MEXICO HAVE PAY TV
SERVICES
2013
Quarter (Q) II
45
Pay TV services in Mexico have
grown more than 30% since
the telecom reform. Consequently, nearly 60% of households and companies in Mexico
now have cable or satellite Pay
TV services.
The establishment of the Must
Carry/Must Offer obligation regarding Free-to-Air television
content has led to the elimination of a significant barrier
to entry in the Pay TV market.
2014
2015
2016
IV
II
IV
II
IV
I
47
49
51
52
56
59
Source: IFT based on information provided by
the operators, current as of March 2016.
N.B. Overall subscriptions for 1Q-16 were estimated from information provided by Avantel, Axtel, Cablecom, Cablevisión, Cablemás,
Dish, Maxcom, Megacable, and Sky, which
accounted for a combined share of 88% of the
market in 4Q-15. Data include residential and
non-residential subscriptions, calculated under
the methodology established by the International Telecommunication Union (ITU). Residential subscriptions are estimated to account
for 85% of all subscriptions, with non-residential subscriptions accounting for the other
15%, according to the 2015 National Survey on
Household Availability and Use of Information
Technology (ENDUTIH).
7
Telecommunications in Mexico. Three Years After the Constitutional Reform
MORE THAN 40%
OF HOUSEHOLDS
IN MEXICO HAVE
INTERNET SERVICES
Subscriptions per 100 households
2011 2013
QuarterQuarter
(Q) II (Q) II IV
39
45
41
2014
2013
2012
IIIV
IV
47
41
43
2015
2014
II II
IV
IV
II II IV
IVII
49
51
40
42
52
56
39
41
20162016
2015
42
IV I
59
45
Before the telecom reform,
the growth of fixed broadband
(FBB) services was practically
stagnant. Between the fourth
quarter of 2013 and the end of
2015, household internet services experienced a growth of
12.5%.
I
47
Source: IFT based on information provided by
the operators, current as of March 2016.
By March 2016, the FBB penetration rate had climbed
to 47 subscriptions per 100
households,
signaling
a
growth of more than 20% in
household internet services
during the last five years.
Rate of change between 2Q-11 and
2Q-13: 0%
Rate of change between 4Q-13 and
4Q-15: 12.5%
Before the Reform
After the Reform
N.B. Overall subscriptions for 1Q-16 were estimated from information provided by Axtel, Cablemás, Cablevisión, Maxcom, Megacable, and
Telmex, which accounted for a combined share
of 88% of the market in 4Q-15. Data include
residential and non-residential subscriptions,
calculated under the methodology established
by the International Telecommunication Union
(ITU). Residential subscriptions are estimated
to account for 88% of all subscriptions, with
non-residential subscriptions accounting for
the other 12%, according to the 2015 National Survey on Household Availability and Use of
Information Technology (ENDUTIH).
8
Telecommunications in Mexico. Three Years After the Constitutional Reform
Internet Access Speed
MEXICO NOW HAS
FASTER INTERNET
WHITH BETTER
INFRASTRUCTURE
There has been a significant
improvement in reported internet speeds for households
over the last two years. As of
early 2015, 85% of households
had an internet speed between
2 and 9.9 Mbps. By late 2015,
only 22% of households had
internet services with speed
below 10 Mbps, while more
than 75% of households had an
internet speed of between 10
and 99.9 Mbps.
2014
Quarter (Q)
I
II
2015
III
100 Mbps or above
Between 10 Mbps and below 100 Mbps
IV
I
II
III
IV
Between 2 Mbps and below 10 Mbps
Between 256 Kbps and below 2 Mbps
0.1%
9.5%
85.4%
5%
0.2%
9.6%
85.2%
5%
0.2%
9.9%
84.9%
5%
0.2%
11.8%
83.7%
4.3%
0.2%
11%
85.4%
3.4%
0.2%
24.7%
71.7%
3.4%
0.2%
70.9%
27%
1.9%
0.2%
75.7%
22.4%
1.7%
III
IV
Internet Access Technology
2014
Quarter (Q)
2015
I
II
III
IV
I
4.2%
6.2%
23.8%
65.8%
4.1%
6.5%
24.5%
64.9%
4%
6.7%
25.2%
64.1%
4.1%
7%
27.8%
61.1%
3.9%
7.6%
28.9%
59.6%
II
2.9%
8.3%
30.5%
58.3%
2.7%
9.2%
32.4%
55.7%
2.5%
10.2%
33.2%
54.1%
This provision of increased internet speed has gone hand in
hand with operators investing
in more modern technologies.
For instance, the prevalence
of twisted-pair copper cable based broadband declined
from a 66% share in early 2014
to 54% by late 2015, contrasting with the rise in the use of
coaxial cables from 24% at the
beginning of 2014 to a 33%
share by late 2015. Over the
same period, the percentage of
fiber-optic internet increased
by nearly 65%.
2
Source: IFT based on information provided by
the operators, current as of December 2015.
Others
Optical fiber
Cable modem (coaxial cable)
DSL (twisted-pair copper)
N.B. Data include residential and non-residential subscriptions. Although the technology changes started in previous quarters,
subscriptions for internet speeds that ranged
between 10 Mbps and below 100 Mbps were
reported to the IFT until the 3Q-15.
9
Telecommunications in Mexico. Three Years After the Constitutional Reform
MORE THAN 50% OF
POPULATION HAVE
MOBILE INTERNET
Subscriptions per 100 inhabitants
Before the Reform
2011
Quarter (Q)
Mobile broadband has experienced significant growth
during the last five years.
While only 7% of the population had an internet access
through their cell phones in
2011, by mid 2013, 23 per
100 inhabitants could surf
the web through their mobile
handsets.
Two and a half years after the
telecommunications reform,
more than half of the population in Mexico could make use
of this service, and by March
2016, 54% of the population
had mobile internet services.
After the Reform
2012
2013
2014
2016
2015
II
IV
II
IV
II
IV
II
IV
II
IV
I
7
12
16
21
23
29
39
43
46
53
54
Source: IFT based on information provided by
the operators, current as of March 2016.
N.B. Overall subscriptions for 1Q-16 were estimated from information provided by AT&T,
Telcel, and Telefónica, which which accounted
for a combined share of 99% in 4Q-15. Data
include residential and non-residential subscriptions, calculated under the methodology
established by the International Telecommunication Union (ITU). Residential subscriptions
are estimated to account for 91% of all subscriptions, with non-residential subscriptions
accounting for the other 9%, according to the
2015 National Survey on Household Availability
and Use of Information Technology (ENDUTIH).
10
Telecommunications in Mexico. Three Years After the Constitutional Reform
BROADER SPECTRUM
FOR BETTER MOBILE
TELECOMMUNICATIONS
The radio spectrum allocated
for mobile telecommunications
before the constitutional reform was just 222 Mhz.
Following a string of public tenders awarded by the IFT, the radio spectrum allocation has increased by over 40%, and more
tenders are anticipated during
the next two years, which
would enable the use of a total of 604 Mhz for mobile telecommunications, allowing to
ensure better quality services.
Before the Constitutional Reform
120Mhz
60Mhz
42Mhz
Total: 222 Mhz
Current situation
120Mhz
130Mhz
64Mhz
Total: 314 Mhz
700 Mhz
Expected Spectrum
190Mhz
800 Mhz
120Mhz
140Mhz
64Mhz
90Mhz
AWS
PCS
2.5 Ghz
Total: 604 Mhz
Source: IFT, based on information current as of
December 2015.
N.B. IMT: Global standard for international mobile telecommunications established by the
International Telecommunication Union (ITU).
11
Telecommunications in Mexico. Three Years After the Constitutional Reform
MORE DIGITAL
FREE-TO-AIR TV
CHANNELS WITH
BETTER QUALITY OF
TRANSMISSION
Mexico was the first country in
Latin America to successfully
switch off its analogue television signal and migrate to digital
terrestrial television (DTT). The
rollout of DTT allows viewers
to watch up to 676 digital
television channels, compared
to the 311 digital channels they
could access before the constitutional reform.
This enables the reception of
better quality signals and a
more efficient use of the radio
spectrum while also offering
more free-to-air programming
to the public through multiprogramming.
Digital Channels
676
A new free-to-air national TV
network that will broadcast
digital content will begin operations shortly.
311
DTT
1Q 2013
1Q 2016
TV Analógica
Source: IFT, based on information current as of
March 2016.
N.B. Only includes television stations with analog transmission systems that use VHF or
UHF frequencies, or with digital transmission
systems (DTT).
12
Telecommunications in Mexico. Three Years After the Constitutional Reform
GROWTH OF
TELECOMMUNICATIONS
IN MEXICO
The average revenue of the
telecommunications sector
before the reform was MXN
$366 billion, and by December
2015—after the reform—was
MXN $427 billion.
AAGR of National GDP 2011-2015: 4%
AAGR of Telecom GDP 2011-2015: 11%
Before the Reform
2011
II
III IV
I
II
III IV
2014
2013
I
II
III IV I
II
III IV
2015
I
II
I
18,000
17,000
500
Telecom GDP
2016
III IV
550
Moreover, as the domestic
economy was growing at an
annual rate of 4% over the last
five years, the telecommunications sector increased 11%,
thus growing three times faster
than Mexico’s Gross Domestic
Product.
16,000
450
15,000
400
14,000
350
13,000
300
12,000
250
11,000
Average Telecom GDP: MXN $366 Billion
Average Telecom GDP: MXN $427 Billion
National GDP
Quarter (Q) I
2012
After the Reform
Telecom GDP
National GDP
Source: IFT, based on data from INEGI.
N.B. GDP is in constant 2008 Mexican Pesos
(MXN). The abbreviations stated above refer
to the AAGR: Average Annual Growth Rate.
Figures in billions of Mexican pesos. The IFT
estimated the Telecom GDP figures for 1Q-16
based on information from INEGI.
13
Telecommunications in Mexico. Three Years After the Constitutional Reform
TELECOMMUNICATIONS
CONTRIBUTE MORE
TO THE DOMESTIC
ECONOMY
Telecom annual share as percentage of National GDP
Before the Reform
2011-2012
2.56%
2.90%
Year of
the Reform
2013
3.03%
After the Reform
2014
2.97%
2015
3.21%
4Q-15
1Q-16
3.40%
3.6%
Telecommunications have increasingly contributed to the
domestic economy in the years
following the reform than before it.
This is a telling sign of the
growth the sector has experienced in recent years. Even
if we focus only on 4Q-15 or
1Q-16, we see that the share
of the telecommunications
sector as a percentage of
the Gross Domestic Product
reached record proportions,
which is a reflection of the importance the sector has in the
lives of the Mexican public.
Fuente: Source: IFT, based on data from INEGI.
N.B. GDP is in constant 2008 Mexican Pesos
(MXN). The IFT estimated the Telecom GDP
figures for 1Q-16 based on information from
INEGI.
14
Telecommunications in Mexico. Three Years After the Constitutional Reform
MORE PRIVATE
INVESTMENT IN
TELECOMMUNICATIONS
Telecom private investment
2013
2014
2015
Billions of Mexican Pesos
$49
$49
$66
Mobile telecommunications
Fixed telecommunications
$22
$27
$17
$32
$18
$48
$70
$450
$60
$50
$40
$30
$400
$20
$10
$0
$350
Billions of MXN Pesos (Telecom GDP)
This means that 2015 was a
year in which there was a remarkable rise in the sector’s
GDP together with strong
growth in investment, which is
a positive signal for the telecommunications in Mexico for
2016.
Total
Billions of MXN Pesos (Investment)
Telecommunications GDP and
private infrastructure investment practically experienced
no significant growth between
2013 and 2014. However, investment during 2015 grew
by 34.8% on 2014, while telecommunications GDP increased by 11% over the same
period.
Telecommunications GDP
Mobile telecommunications
Fixed telecommunications
Source: Investment calculated by the IFT,
based on information provided by operators,
current as of December 2015. GDP calculated
by the IFT, based on data from INEGI.
N.B. The investment figure reported by Telcel
for 2013 is being reviewed by the operator,
with the figure shown serving as an estimate
based on available data. GDP is in constant
2008 Mexican Pesos (MXN), provisional data
for 2015. The investment figures for Telcel do
not include investment by Opsimex.
15
Telecommunications in Mexico. Three Years After the Constitutional Reform
After the Reform
Year of the Reform
2013
2014
TELECOMMUNICATIONS
ATTRACT MORE
FOREIGN DIRECT
INVESTMENT (FDI) TO
MEXIC0
The legal and institutional
changes that have taken place
in the telecommunications
sector have made Mexico an
attractive prospect for foreign
investment.
Before the reform, the FDI on
the Telecommunications sector was less than 1% of the
total FDI. This figure stood at
nearly 5% for the year in which
the reform was passed, and
during 2015 it accounted for
almost 10% of the total foreign direct investment, making it the third most attractive
FDI proposition, only behind
the manufacturing and the finance and insurance services.
2015
9.6%
2,712
4.7%
2,134
0.9%
219
10.0%
Finance and insurance
9.6% Telecom
Telecom FDI
9.0% Wholesale
Trade
Telecom FDI as share of Total FDI
7.3%
Construction
50%
Manufacturing
14.1%
Others
Total FDI during 2015: USD $28,376
Source: IFT, based on data from the Ministry
of Economy as of 4Q-15.
N.B. Figures in millions of U.S. dollars.
16
Telecommunications in Mexico. Three Years After the Constitutional Reform
INCREASED INVESTOR
CONFIDENCE IN
THE MEXICAN
TELECOMMUNICATIONS
SECTOR
Before the Reform
2011
Quarter (Q) I
III IV
2012
I
II
III IV
2014
2013
I
II
III IV
I
II
2015
III IV
I
II
15
Cumulative rate of growth
The increase in foreign direct investment, combined with a rise
in production levels, investment
on infrastructure, and telecommunications sector revenue,
have brought increased investor confidence, as can be seen
from the upward trend of the
Telecom Services Index on the
Mexican Stock Exchange.
II
After the Reform
0
-15
III IV
2016
I
Before the reform, this index
grew at a level far below that
of the IPC. However, for the
quarter after the constitutional
reform was passed the Telecom Services Index recorded
growth rates that were higher
than that of the IPC, and also
trended positively during the
first quarter of 2016, which is a
reflection of the increased confidence on the profitability of
the Mexican telecommunications companies.
-30
AAGR before the Reform
3.7%
-0.6%
AAGR after the Reform
IPC
Telecom Services Index
(BMV TELECOM RT)
5.4%
8.1%
Source: IFT, based on data from the Mexican
Stock Exchange (BMV). Base Period December
2013 = 100.
N.B. The abbreviations stated above refer to
the AAGR: Average Annual Growth Rate; and
IPC: Mexican Stock Exchange Price Index.
17
Telecommunications in Mexico. Three Years After the Constitutional Reform
THE INDUSTRY HAS
ALSO BENEFITTED
FROM THE
TELECOMMUNICATIONS
REFORM
Level of income
Billions of Mexican Pesos
2013
2014
2015
397
435
443
2016
118
109
109
107
109
In addition to users and viewers having benefitted from the
constitutional reform through
a wider offering, better prices,
and a greater diversity of content, the telecommunication
companies have also increased
their revenues.
Income reported by telecommunications operators combined
was nearly MXN $400 billion
in 2013, whereas this figure
reached MXN $435 billion by
2014. In 2015, these operators generated more than MXN
$442 billion in revenue, thus
achieving a growth of nearly
12% between 2013 and 2015.
Furthermore, greater revenues
were reported for the first quarter of 2016 than were recorded
during the same period of 2015
1Q-2015
2Q-2015
3Q-2015
4Q-2015
1Q-2016
Mobile Telecommunications
Fixed Telecommunications
Fixed
Telecommunications
Mobile
Telecommunications
57%
43%
Source: IFT based on information provided by
operators.
N.B. The data for 1Q-16 were estimated based
on the information reported to the IFT by the
operators and the information reported in the
financial statements of the following operators: Grupo Televisa, Telefónica, América Móvil
(Telmex, Telnor, and Telcel), and AT&T. Figures in
billions of Mexican Pesos.
Telecommunications in Mexico. Three Years After the Constitutional Reform
JUNE 2016
Insurgentes Sur #1143, Col. Nochebuena, Delegación
Benito Juárez, Ciudad de México, México, CP. 03720