While Mexico is undergoing relevant changes to its legal framework for the telecom sector, brokerage and analyst firm Ve por Más discuss the possible outcome of the reform, the impact on leading telecom companies and the implications for a potential wave of new players entering the Mexican market.
TowerXchange: Please tell us about Ve por Más, its activities and focus with specific attention to the Mexican telecom sector.
Andrés Audiffred Alvarado, Equity Analyst, Ve por Más:
Ve por Más is a Mexican brokerage firm. Along with its financial service, Ve por Más runs its own equity research unit and I am specifically involved as analyst in the TMT sector.
TowerXchange: Can you give us an overview of the public telecom companies you are paying attention to in your activities?
Andrés Audiffred Alvarado, Equity Analyst, Ve por Más:
Currently, I am working on a recommendation for Maxcom, which is a local provider of fixed line services, voice IP and pay TV. The company has undergone a restructuring process and has created a stronger financial structure with the goal of increase its operational income and users.
In the mobile sector, I have been analysing trends regarding América Móvil with specific attention to its Mexican operations.
The recent Constitutional reform is looking at changing the dynamics of the telecom sector and we have been paying attention to see how this might affect América Móvil, among others.
TowerXchange: Many of TowerXchange’s interviewees have hinted that some players might have a dominant position in the telecom sector in Mexico. What is likely to happen in the near future due to changes in the national regulation?
Andrés Audiffred Alvarado, Equity Analyst, Ve por Más:
The recent reform is looking at avoiding the presence of dominant players in the telecom sector with regards to both their market share and their infrastructure. However, the changes have occurred at a Constitutional level only which means that we need to wait for the actual secondary legislation to be in place to fully understand the practical impact of these changes.
For now, we can say that the goal of IFT, the new telecom regulatory body, is to improve competition in the sector and to allow new players to enter the market, not only in terms of mobile services but also fixed line, data and TV offerings.
In a recent statement, Gerardo Ruiz Esparza, the Mexican Secretary of Communications and Transport, has declared that news regarding the implementation phase and secondary legislation would be available during the first week of March.
Therefore, we cannot comment on the extent of these changes until we receive news regarding the practical measures that will be adopted.
TowerXchange: América Móvil has recently announced its acquisition of the US based Start Wireless Group. Can you give us some details with regards to the deal and how it’s likely to impact the Mexican company?
Andrés Audiffred Alvarado, Equity Analyst, Ve por Más:
Start Wireless is a U.S. based MVNO with approximately 1.4 million subscribers. This opens up new business scenarios and helps the company diversifying its activities.
Mexico represents approximately 35% of América Móvil’s total revenue and it’s been estimated that the newly acquired U.S. operations will sum up to 10% of the company’s revenue. Therefore, I can foresee financial benefits for América Móvil and a new source of income.
So far, we haven’t gathered any detail regarding the deal and the structure of the transaction (Amounts, Multiples, etc).
TowerXchange: From a financial perspective, does it make business sense for America Movil to keep hold of its passive infrastructure portfolio in Mexico and internationally?
Andrés Audiffred Alvarado, Equity Analyst, Ve por Más:
In light of the fact that there is no legislation that mandates passive infrastructure sharing, América Móvil has greatly benefitted from retaining its own portfolio of towers. This factor has helped the company retain a considerable portion of the market while charging other carriers to use its infrastructure.
However, it’s been hinted that the telecom sector reform might include an obligation to share passive infrastructure. Considering that América Móvil owns more than half of the towers in Mexico, this new ruling would aim at stopping the company from holding a dominant position on the infrastructure side.
it’s been hinted that the telecom sector reform might include an obligation to share passive infrastructure
Some local newspapers have reported that América Móvil is considering divesting its tower portfolios but the company has firmly denied the rumours.
I think we need to wait for the legislation to come into place to fully analyse its consequences and assessing América Móvil’s next moves.
TowerXchange: How are local and international investors looking at the Mexican telecom sector?
Andrés Audiffred Alvarado, Equity Analyst, Ve por Más:
While the Constitution was being modified to open up to a more competitive telecom sector, there have been rumours about Telefonica’s interest in the Mexican market as well as Virgin Mobile’s intention to enter the local sector.
This would be great news for the local market and a step forward towards the creation of a highly competitive and modern telecom sector.
TowerXchange: Are there any programmes or incentives to encourage rural coverage extension?
Andrés Audiffred Alvarado, Equity Analyst, Ve por Más:
To date, Mexico doesn’t have any formal programme to push rural coverage extension.
However, I believe that a move towards mandatory infrastructure sharing would be a great incentive for companies to extend their services beyond urban areas. In fact, there is a lot of infrastructure in place outside of metropolitan areas which is part of América Móvil’s portfolio. With a pro-sharing law in place, new carriers are more likely to be able to start utilising these assets and, as a result, coverage in these areas would be enhanced.
