Telefónica has started the year by closing his withdrawal from Colombia and ends a latin american exodus which includes the departure of Argentina, Peru, Uruguay, Ecuador or Chile. There are only three markets left: Venezuela (in an uncomfortable chronic limbo), Chile (already in the final phase) and Mexico, which has resisted for six years.
Brazil also remains, but it is a special case: it is the only country in the region in which Telefónica wants to maintain its presence. There it continues to grow and in fact attracts greater investment than Spain itself.
Why is it important. Mexico represents the last obstacle to completing the plan’Transform & Grow‘, which concentrates the teleco’s strategy in Spain, Germany, the United Kingdom and Brazil.
But the Mexican asset has mutated to become something that no one wants to buy.
The context. In 2001, Telefónica arrived in Mexico with imperial ambition: “it could be the group’s second market in the world,” their managers said. It once had 26 million customers and today has 23.5 million, but its value has evaporated.
Between the lines. The Mexican operation is no longer that of a traditional telecom:
- Telefónica sold its towers in 2019.
- He returned the radio spectrum.
- And it migrated all its traffic to the AT&T network.
Today it is something much more similar to a virtual mobile operator (MVNO) that only manages a user base. Without its own infrastructure, without frequencies and without physical assets.
Yes, but. That customer base, even with operating costs reduced, is not attractive either. The average income per user (ARPU) is around 70 pesos per month (3.9 dollars), with a high volume of prepaid customers and low consumption.
“People more likely to receive calls than to generate them,” summarizes Ernesto Piedras, from The Competitive Intelligence Unit, in statements to The Country.
- AT&T doubles that ARPU.
- And Carlos Slim’s Telcel concentrates 66% of the market’s income.
The AT&T Mexico put up for sale It further complicates the picture because any potential buyer will prefer to evaluate the US operation first rather than stay with an MVNO that depends on its networks. Telefónica is relegated to the background.
The alarm signal. The Tax Administration Service (SAT) claims 4,442 million pesos (about 212 million dollars) for improper deductions after a merger in 2014.
The case is in the Mexican Supreme Courtwith a full inclination to toughen fiscal positions. This liability conditions any sale.
In detail. Beyond ONE, a Dubai fund that owns Virgin Mobile Mexico, seemed like the natural buyer six months ago. Telefónica valued the business at 609 million dollars. Beyond ONE offered just over half. Talks stalled over the wholesale contract with AT&T and pending tax litigation. Today that operation is frozen.
Given the impossibility of selling en bloc, Telefónica has begun to cut up:
Go deeper. Marc Murtra, president of Telefónica, confirmed the strategy in November, when he ratified the decision to leave Latin America. But Mexico shows that leaving a market can be more difficult than entering it.
Especially when you’ve sold everything valuable and only low-power users, tax debts, and a technological dependency on your competitor remain.
Featured image | Telefónica, Jimmy Woo
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