Mexico Refocuses on Mobile Penetration Rate

November 9, 2011

The Mexican Federal Competition Commission (CFC), the nation’s anti-monopoly watchdog, declared last week that three mobile operators (Telcel, Movistar, Iusacell/Unefon) have undue market power over the traffic termination market in Mexico, perhaps paving the way for new regulations. This resolution is yet another of several recent measures by the Mexican government aiming to establish a level playing field and consequently increasing competition in the telecom market.

Earlier this year, Mexican regulator COFETEL announced the drastic reduction in mobile interconnection fees from PS0.95 to PS0.39, effective May 2011. This decision has had a significant impact on operator revenue, with most operators reporting decreases in interconnection revenue. Nevertheless, this measure is expected to foster competition in the near and longer term and improve pricing options for consumers.

By comparing Mexico’s mobile market with that of countries with similar economic and social development, such as Colombia or Brazil, it becomes apparent why Mexican authorities are implementing these regulatory measures. Back in 2007, Brazil and Colombia showed mobile penetration rates of 65% and 76% respectively, while Mexico’s mobile penetration rate for that year was close to 63%. Four years later, Brazil and Colombia surpassed the 100% mark, while Mexico will only reach 88% in 2011.

Pyramid Research expects that the Mexican mobile market will become increasingly competitive as a result of operator strategies to increase adoption, as well as from the impact of regulatory decisions to promote increasingly affordable services.

As I note in my new Country Intelligence Report on Mexico, we expect Mexico to have estimate CAGR of 4.7% for the 2011-2016 period, and we expect that the mobile penetration rate will surpass the 100% mark by 2013, moving the Mexican market closer to its regional counterparts. This growth will be facilitated by the proliferation of affordable mobile broadband devices with higher access speeds and better coverage, as well as by an increase in M2M connections.

Exhibit: Mobile Penetration rates in Mexico, Brazil and Colombia (%), 2007-2012

Source: Pyramid Research Mobile Demand Forecast, Q3 2011

— Fernando Pafumi, Director

— Jose Mercado, Senior Analyst

Related resources:

Mexico: Growth in Mobile Services, Broadband Usage to Drive Market
Country Intelligence Report published November 2011
The Mexico Intelligence Report is the industry’s best available analysis on market trends, regulatory environments, and competitive dynamics, providing detailed competitive analysis on fixed and mobile sectors, tracking market adoption of new technologies and services such as WiMAX, IPTV, and VoIP.

Operators and Vendors Aim Smartphones at the Mass Market
Latin America Telecom Insider published November 2011
Latin America was initially a laggard in smartphone adoption. In 2008 smartphones sales represented only 3% of total handset sales in the region. After successfully weathering the world economic crisis, the region bounced back in 2010 stronger than ever. In 2010 the smartphone market in Latin America grew 117%, and total handset sales grew 17%. Pyramid Research expects smartphone unit sales in the region to grow at a CAGR of 30% in the next five years. By 2016, we expect smartphone sales to account for roughly 46% of total handset sales in the region.