The high spectrum fees deter operator interest in the Mexican 5G auction announced by the Federal Telecommunications Institute (IFT), according to GlobalData.
In recent years, Telefónica and AT&T returned spectrum licenses; this issue highlights the financial strain on operators and can potentially impact the auction's outcome, mentioned the GlobalData analysis.
“The bidding is set to take place in 2025 and features the 600 MHz and L-Band (1427-1518 MHz), both of which are primed for 5G, a generation of mobile technologies that is projected to concentrate 53% of the mobile subscriptions in Mexico by 2028,” GlobalData’s estimates.
Jesus Romo, Research Director at GlobalData, explained that the auction combines ‘fresh spectrum’ in the L-Band and 600 MHz, and ‘leftovers’ in the 800 MHz, 1.7/2.1 GHz, 1.9 GHz and 2.5 GHz bands.
The regulator's decision to offer most of the spectrum in local blocks, except for the L-Band and a single 10 MHz block of the 600 MHz band, indicates a strategic move towards smaller geographical markets.
“This segmentation could result in lower spectrum fees for winners, as fees are determined by bandwidth held and coverage area. Spectrum fees were a factor in Telefónica’s decision to return all of its mobile spectrum in Mexico. Spectrum fees are set by the Mexican Legislative Branch, with input from the Executive, and are not likely to be reduced in the short-term, especially during an election year,” said Romo.
The bases of the auction will allow AT&T and Telcel to obtain low-band spectrum to enhance 5G coverage.
“But the auction could also allow Altan Redes to expand the spectrum portfolio of the 'Red Compartida’ it operates, a pure wireless wholesaler that currently holds the entirety of the 700 MHz band in Mexico,” added Romo.
Altan Redes is currently the main host of the mobile network operators (MVNOs), a segment that has grown in the last two years and currently holds 11.8% of the mobile subscriptions, GlobalData’s estimates.
“For Altan Redes, the 2.5 GHz band could be appealing as a capacity band, but it is unclear if it has the resources to obtain the spectrum at current market prices, without subsidies to the annual spectrum fees, especially since Altan was bailed out by the federal government in 2023. For AT&T and Telcel, the spectrum fees from the 600 MHz are likely to limit appetite, since spectrum fees for sub 1 GHz bands tend to be superior to higher bands and will add to the annual costs of the operators,” mentioned Romo.
