The country has no real alternative to Telcel
The sale of Movistar Mexico to the Melisa Acquisition consortium (450 million dollars for an operator with approximately 15% of the market) closes a chapter of more than two decades in which the Spanish operator has invested more than 3,600 million euros to end up competing, in permanent structural inferiority, against a monopoly that has never ceased to be a monopoly. Why is it important. Anyone might think that the departure of Telefónica changes the Mexican telecommunications market, but the reality is that it does not change it much. On the contrary: it confirms it. Mexico has one of the most concentrated mobile markets in the developed world, with Telcel, owned by Carlos Slim, controlling almost 60% of users. No competitor has managed to gain share in a sustained manner so far this century. The strange thing is that Telefónica has taken so long to leave the country, because it has only done so in the context of a total withdrawal in Latin America after years of losses. The backdrop. Telcel inherited the commercial muscle, infrastructure and customer base of Telmex, the former state monopoly privatized in 1990. Since then, Mexican regulators have not been able to balance the market, or have not been willing enough to do so. AT&T has been trying for years with its own network and remains below 16%. In fact is also looking for a way out. Telefónica, which In 2019 it had to return its spectrum and relying on AT&T’s infrastructure to survive, it already operated in practice as a kind of “premium MVNO”: with its own brand, but without its own network and without room to grow. Between the lines. The buyer says a lot. Melisa Acquisition is not a typical telecommunications operator: it is the sum of Oxio (technological platform for virtual operators with barely 350,000 clients) and an investment fund. They are not there to build network infrastructure or to dispute Telcel’s quota. They simply arrive to manage what is there: an inherited customer base, an asset-light model, and the hope that Oxio’s technology will allow some more margin to be squeezed out of an operation that Telefónica no longer wanted to maintain. In figures. The ARPU (average income per user) tells in numbers the trap in which Telefónica operated in Mexico: 64.7 pesos per month per customer, less than half that of AT&T (141.1) and less than a third that Telcel (176). It is no longer that Movistar had few clients, it is that each client was worth little in terms of billing and profitability. A model like this does not allow for investment in the network, in spectrum or in the future. The sale is not an elegant strategic retreat: it is the logical conclusion of years competing in the cheapest segment of an already cheap market. Yes, but. The sale will generate heavy accounting losses for Telefónica, something inevitable given the historical outlay, but it fits perfectly into its strategy. In less than a year and a half, the telecom chaired by Marc Murtra has undone practically all of its positions in Latin America: Argentina, Chile, Peru, Uruguay, Ecuador, Colombia… and now Mexico. Only Brazil remains, the only market in the region where Telefónica has enough scale to truly compete and which has become one of its growth enginesif not the main one. Main loser? The Mexican user. With Telefónica jibarized, the Mexican market is even more unprotected in the face of Telcel. Effective competition in price, coverage and quality of service now depends almost exclusively on AT&T, which has also not demonstrated the ability to challenge Slim’s dominance and, as we have already said, look for a way out for a long time. Mexico doesn’t just lose one operator: it loses one of the few that at least had incentives to try. In Xataka | Mexico has an ambitious plan to be the tenth economy in the world and that involves technology: semiconductors Featured image | david carballar
