Background on Key Players and Relevance
This article discusses a significant decision by the Mexican telecommunications regulator, the Instituto Federal de Telecomunicaciones (IFT), which imposed a fine of 1.782.6 million pesos on Telcel for preventing AT&T from selling its SIM cards in Oxxo stores. This coordination between Telcel and FEMSA’s companies, including Oxxo, had a substantial economic impact of 95 million dollars and left 18 million Mexicans without a cellular option other than Telcel for 36.39 months.
Telcel, a subsidiary of America Movil and Mexico’s leading cellular network provider, holds considerable market power in the SIM card sales business. Oxxo, a prominent convenience store chain owned by FEMSA, and IMMEX, an import-export company, collaborated to block AT&T’s access to Oxxo stores for SIM card sales. This collaboration is considered anti-competitive and violates Mexico’s Federal Economic Competition Law.
IFT’s Investigation and Findings
On June 29, 2021, AT&T reported anti-competitive strategies by Telcel and Oxxo to the IFT’s Authority for Investigation (AI). The AI, supported by the Compliance Unit (UC) and the Economic Competition Unit (UCE), found that Telcel had substantial market power in SIM card sales, influencing the market negatively. The investigation uncovered a “concerted” strategy between Telcel, Oxxo, and IMMEX, where Oxxo shared competitors’ information with Telcel in exchange for incentives and benefits to the FEMSA group.
Oxxo’s Reasons for Refusing AT&T
Oxxo provided several reasons for not selling AT&T SIM cards, including:
- The need to build a new logistics network and face associated costs.
- AT&T SIM cards were not attractive to consumers due to their price.
- There was a structural cost for allocating space to AT&T SIM cards and removing other products.
- There was a risk associated with AT&T’s proposal.
However, the IFT dismissed these arguments, stating that Oxxo could sell SIM cards at 29 pesos while AT&T’s were priced at 30 pesos, with an average ticket of 33 pesos in Oxxo stores. Moreover, Oxxo sold Telcel SIM cards at 50, 100, and 150 pesos, contradicting their claim that AT&T SIM cards were unattractive and expensive.
Impact on Consumers and Market
The IFT determined that Oxxo’s refusal to sell AT&T SIM cards significantly limited consumers’ access to alternative cellular options, negatively affecting their well-being. Users were restricted to Telcel SIM cards, limiting their choices and impacting the mobile service market. Oxxo Cel, a mobile virtual network operator using Telcel’s network, was not considered a strong competitor to Telcel.
The IFT emphasized that Oxxo Cel’s SIM cards were not substitutes for other operators’ SIM cards since high-end devices primarily supported eSIM functionality during the 2021-2024 period. The regulator also highlighted that Oxxo was the only option for 40% of the population within a 600-meter radius, making it challenging for users to find alternative SIM cards outside Oxxo’s influence.
Conclusion
The IFT’s decision underscores the importance of fair competition in Mexico’s telecommunications market. By limiting consumers’ access to various SIM card options, Telcel and Oxxo’s collaboration hindered market growth and consumer choice. This case serves as a reminder of the need for regulators to protect consumers and promote a competitive telecommunications landscape.
