Mexico Telecommunications Report Q1 2009

As the first Latin American country to launch number portability (NP) in July 2008, Mexico has put itself at the forefront of the region's telecoms markets. Regulator Cofetel reports that 152,424 ports had been requested over the 16 weeks since it was introduced. Surprisingly, mobile ports did not dominate the list, with fixed-line porting requests making up around 40% of the total. While mobile market leader Telcel, a unit of Amrica Mvil, and fixed-line incumbent Telmex were expected to see impacts on their market shares, the operators reported that they had both made gains in the quarter since NP was introduced.

Meanwhile, Telcel was found to be dominant in several areas of the mobile market by a report from Cofetel. What action the regulator will take remains to be seen, but its increasingly rigid stance on competition does not bode well for the market leader.

Mexico's broadband market has continued to see strong growth forcing BMI to increase forecasts for the five years to 2013. We now anticipate the market will double between 2008 and 2013 to 12mn subscriptions, passing 10% penetration in 2012. Growth will be driven by a wider range of services on offer with bundles of fixed-line and broadband with pay-TV helping operators to expand their bases.

Additionally WiMAX will be a tool to expand services outside of major towns and cities given the technology's potential in to reach more remote areas. WiMAX licences have attracted the attention of existing telecoms operators and newcomers to the market, helping to diversify the offerings available and boost competition in the market.

The growth in broadband services has helped to reverse the decline in fixed lines in service, according to the latest data from Cofetel. The market grew by around 1.5% in H108 and BMI anticipates 2008 will see a 2% increase in fixed line subscriptions. This reversal has been brought about by bundled services and an increased focus on alternative calling plans, particularly prepaid services. Although we welcome the increase, we do not anticipate it will continue into next year or beyond. However, we have revised forecasts to show a much slower decline of fixed-line services and expect the market to remain above 20mn subscribers until the end of 2010 after which the decline will increase due to the proliferation of VoIP services and mobile penetration.

Although the mobile market continues to exert pressure on fixed-line services, it has resisted any appearance of extra strong growth. The market expanded at the same rate for both Q108 and Q208, and BMI expects this will not pick up until the final quarter of the year. ARPUs continue to fall as Telcel and Telefnica's Movistar unit in particular battle it out for new subscribers. Although Telcel retains its hold on the market its dominance is slipping to the benefit of Movistar.