Mexico cancels 5G spectrum auction, America Movil’s Telcel dominance seen rising

Mexico’s telecom regulator, the Federal Telecommunications Institute (IFT), announced the unexpected cancellation of the IFT-12 multi-band tender for 5G spectrum.

This decision came right before the bidding process was set to begin, with potential participants having been invited to express interest since January 27. The auction was poised to offer approximately 2,223 blocks of spectrum across various bands, including 600MHz, 800MHz, 2.5GHz, L-band, AWS, and PCS.

The IFT revealed that it had received a directive from the Digital Transformation and Telecommunications Agency to halt the tender. This move aligns with broader reforms under the Sheinbaum administration, which include the consolidation of independent regulatory bodies’ functions into other government entities.

The telecom industry in Mexico, along with the IFT, has long advocated for reduced frequency usage fees. These fees are some of the highest in the region and have been a significant barrier to investment in spectrum and network coverage by operators. The last spectrum auction in Mexico, conducted in 2021, saw only about 10% of the available spectrum being purchased. Notably, Telefonica (NYSE:) returned all of its spectrum to the state, while AT&T (NYSE:) reduced its holdings.

Analysts from Jefferies commented on the cancellation, noting that it was not entirely surprising given the ongoing regulatory reforms. They pointed out that the absence of the auction is likely to negatively impact the development of the sector and investment in network coverage.

Furthermore, Jefferies anticipates that this development will solidify the market position of America Movil (NYSE:)’s Telcel, which already has a significant lead in network coverage over its competitors.

Telcel, which has already rolled out 5G in its primary markets, has limited need for additional spectrum in the near term, with only minor requirements in countries like Ecuador and Costa Rica, and some additional spectrum needed in Argentina.

Given its low debt levels and lack of mergers and acquisitions on the horizon, Jefferies projects that America Movil will likely ramp up its share buyback program.

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