AT&T is unlikely to participate in Mexico’s next auction of frequencies used to provide network services, according to a company source that spoke to Reuters.
Reportedly, the move is motivated by the high costs associated with spectrum use and the conditions of the Mexican market, which limit competition and hinder profitability for foreign operators. The news comes a month after Bloomberg reported AT&T’s intention to exit the Mexican market.
“With the current spectrum costs it is very likely that this auction will again be left deserted, as happened in the last auction,” a source at AT&T said, adding it was also very unlikely AT&T itself would be interested in taking part.
The source said AT&T has repeatedly expressed its concerns to the Mexican government, but its demands have not been met so far. Mexico’s Economy and Finance Ministries did not immediately respond to requests for comment.
The upcoming auction, primarily focused on the radio spectrum for advanced services such as 5G, faces limited interest among established operators with a high probability that several blocks will again be left without bidders, similar to what occurred in 2021. At that time, most blocks were left unclaimed due to high prices, discouraging participation by major operators including AT&T.
The radio spectrum is the basic resource for high-quality mobile communications, but Mexico has some of the highest prices in the region. The overall cost of spectrum in Mexico includes initial payments for concessions and annual fees established by the Federal Rights Law, which represent up to 85% of the total cost. In contrast, the average for other Latin American countries is only around 20%.
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The GSMA, a global trade association representing mobile operators, has estimated that if Mexico had lower costs, at least 5 million more people in the country would be connected to mobile telecommunications using 4G technology.
Due to the high costs, Telefónica returned all of its spectrum to the government in 2021, while AT&T returned part of its spectrum in 2022 and another part in 2023. This persistent issue prevents small players from consolidating their position as operators, causes medium-sized players like Telefónica and AT&T to return spectrum, and allows large players like Telcel parent company América Móvil (owned by billionaire Carlos Slim) to be the only ones who achieve profitability.
AT&T arrived in Mexico in 2014, when former President Enrique Peña Nieto opened the market to competition. AT&T first purchased Grupo Iusacell for US $2.5 billion from Mexican tycoon Ricardo Salinas Pliego, before acquiring Nextel Mexico’s operations for another US $1.9 billion. But despite investing more than US $10 billion in Mexico, AT&T hasn’t been able to challenge the dominance of Telcel, which holds 55% of the Mexican phone carrier market.
With reports from Reuters and La Política Online
