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Mexico’s Telecommunications Industry’s Bull Run Continues

Zacks

According to a recent report by The Competitive Intelligence Unit (CIU), Mexico’s telecom sector witnessed 10.9% growth in revenues year-over-year in 2016. This growth rate is highest among all other sectors of the economy. Remarkably, the telecom sector’s growth rate is more than four times higher than the 2.3% overall growth rate of Mexico’s GDP in the same time frame.

Interestingly, Mexico’s telecom regulatory authority, the Federal Telecommunications Institute (IFT) initiated major reforms within its telecommunications sector to instil competition in its telecommunication sector in 2014. Those reform initiatives have started bearing the desired results.

For 2016, overall revenues of the country’s telecom sector were MXN 454.6 billion, up 3.3% year over year. This figure was better than CIU’s previous estimate of MXN 445.3 billion. Of the total, mobile telephony revenues were MXN 250 billion (up 0.3% year over year), constituting 55% of the total telecom sector revenue.

Fixed telephony revenues, 27% of the total telecom sector revenue, were MXN 123 billion (up 1.0% year over year). Pay-TV revenues came in at MXN 81.4 billion (up 18.5% year over year) generating 17.9% of the total telecom sector revenue.


Widespread implementation of flat rate plans resulted in a whopping 28.5% decline in mobile telephony prices year over year. Nevertheless, CIU is optimistic about future growth prospect of this industry. According to the research firm, Mexico’s overall telecom revenues are forecasted to grow around 4% to MXN 463.3 billion in 2017. Mobile telephony, fixed telephony and pay-TV segments are anticipated to grow by 1.3%, 1.1% and 17.3%, respectively, in 2017.

At present, there are three nationwide telecom operators in Mexico. Mexican telecom behemoth America Movil SAB AMX and Spanish telecom giant Telefonica SA TEF are the two incumbents. In 2015, the U.S. telecom behemoth AT&T Inc. T entered the fray with the acquisition of Grupo Iusacell and Nextel de Mexico. Telefonica, America Movil and AT&T currently carry a Zacks Rank #1 (Strong Buy), #2 (Buy) and #3 (Hold), respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

Furthermore, AT&T acquired U.S. satellite TV giant DIRECTV, which had a strong Latin American presence including Mexico. Moreover, the IFT has permitted the Mexican TV broadcasting giant Grupo Televisa SA TV to enter the country’s telecom market. However, the company is yet to take any decision in this regard.

In Mar 2016, Mexico established the Telecommunications Investment Promotion Agency through a presidential decree. The agency is responsible for the installation of the government’s proposed 4G LTE shared network and provision of telecommunications services. The federal government will provide the resources to the agency that will be managed by a board of directors, headed by the Minister of Communications and Transport while the IFT will regulate it.

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