Introduction
Mexico, with its unique spectrum allocation and pricing structure, has experienced a significant financial impact due to resignations from telecommunications companies. The Mexican government has forgone approximately 23,281 million pesos in revenue from spectrum rights between 2019 and 2024, equivalent to over 1.17 billion US dollars.
The Financial Impact
This amount is substantial when compared to the annual investments of major telecom players in Mexico and other countries. For instance, this sum is equivalent to nearly three years of América Móvil’s investments in Argentina and one year of Telcel’s operations in Mexico. It also represents the annual revenue of Telefónica in Mexico and a single quarter’s earnings for AT&T in the country.
Spectrum Allocation and Pricing
Mexico currently holds 427.92 MHz across various radiofrequency bands, which are priced higher than in any other Latin American country or global regions. Only 48.43 MHz are priced relatively lower compared to international market data.
- The 1900 MHz and 1.7/2.1 GHz (AWS and PCS) bands are priced 93% higher than the international average.
- The 2500 MHz (2.5 GHz) band is 83% more expensive than the international average.
- The 3.5 GHz band is priced 24% higher than the international average, despite government interest in charging more for this band.
- The PCS band, previously popular for 3G services, is held by Telcel (54%) and AT&T (46%). The 2.5 GHz band, used for 5G services, is operated by AT&T (57%) and Telcel (43%). The 3.5 GHz band, suitable for combined 5G and IoT applications, is split equally between Telcel and AT&T.
Implications of High Spectrum Costs
According to the Mexican Federal Telecommunications Institute (IFT), high spectrum costs in Mexico negatively affect business and individual connectivity, national competitiveness, and population welfare. These costs discourage investments, limit market competition, potentially strengthen Telcel’s market position, and restrict 5G service offerings in Mexico without ensuring increased state revenue from spectrum rights.
IFT’s Proposed Solutions
- Maintain the current levels of spectrum rights for undervalued bands (600 MHz, 800 MHz, and 850 MHz).
- Set a goal to decrease the spectrum rights quotas for overvalued bands (AWS, PCS, 1.5 GHz, 2.5 GHz, and L) until they reach the benchmark level while maintaining or increasing revenue.
- Allocating spectrum in any frequency band would reduce the overvalued bands’ rights quotas while increasing revenue.
- Each frequency band has a different cost, so their impact cannot be uniform. Failure to consider this may result in lower revenue than currently expected in a given year, depending on the assigned bands.
The IFT emphasized that, regardless of the chosen proposal for the next fiscal year, it’s crucial to maintain temporary dispositions not to increase spectrum usage fees according to inflation, as stated in Article One, Paragraph Four of the Federal Rights Law.
Government Response and Future Spectrum Auctions
It remains unclear whether the federal government has reviewed the IFT’s report or disregarded its proposal. The federal executive recently decided to maintain the spectrum exploitation fiscal policy for 2026, leaving uncertain the success of the upcoming 5G spectrum auction promised to start in the coming months.
The IFT proposed a scheme where allocations of other frequency bands would also contribute to reducing quotas, according to its latest report on band pricing sent to the executive.
