Background on Telcel and its Market Dominance
Telcel, a subsidiary of América Móvil, holds significant market power in the Mexican telecommunications sector. With 110 million access points (fixed and mobile subscriptions) and quarterly revenues of approximately $6 billion in 2024, Telcel’s influence is substantial. As a result, the Mexican regulatory body, the Instituto Federal de Telecomunicaciones (IFT), implemented a special regulatory framework to ensure fair competition.
IFT’s Replicability Economic Tests: Purpose and Importance
The IFT introduced updates to its methodology for conducting replicability economic tests on Telcel’s mobile services. These tests aim to evaluate whether other mobile service providers can purchase wholesale capacity from Telcel, repackage it for retail, and offer similar services to end-users while maintaining financial profitability comparable to Telcel.
By ensuring that no undue narrowing of profit margins occurs, the IFT intends to bolster effective competition across the entire mobile market, particularly among mobile virtual network operators (MVNOs).
Why the Update is Necessary
Given Telcel’s dominant position in terms of revenue and market share, the IFT recognized that Telcel could potentially control essential resources for mobile service delivery. This situation might negatively impact market competition and rivalry. Therefore, updating the replicability economic test methodology became crucial.
The IFT announced that the new methodology will incorporate more granular testing, as part of its regulatory measures following a third biannual review of the effectiveness of its policies for Telcel.
“In the third biannual review, it was suggested that replicability measures could include individual economic replicability tests for any service offering,” said the IFT.
The regulator further explained that the updated methodology would strengthen post-implementation economic replicability tests for mobile services by increasing the granularity of evaluated offers in the prepaid segment, including three recharge amounts and/or packages with the highest user numbers and income belonging to this payment scheme. Additionally, there will be greater granularity in postpaid segment offers, considering the top ten retail packages generating the most income.
IFT’s Special Regulatory Policy for América Móvil
In November 2024, the IFT issued a new regulatory policy subjecting América Móvil’s companies, including Telcel, to a special compliance regime for at least two years. This move aims to address the excessive market power these companies still hold concerning revenue and users in Mexico.
Replicability economic tests, as part of this policy, will prevent potential strategies that might hinder competitors from contracting Telcel’s wholesale services or profitably replicating Telmex or Telcel’s retail tariffs.
Key Questions and Answers
- What are replicability economic tests? These tests evaluate whether other mobile service providers can purchase wholesale capacity from Telcel, repackage it for retail, and offer similar services to end-users while maintaining financial profitability comparable to Telcel.
- Why did the IFT update its replicability economic test methodology? The IFT updated the methodology to prevent undue narrowing of profit margins and foster effective competition across the entire mobile market, particularly among MVNOs.
- What is the significance of América Móvil’s market dominance? With 110 million access points and quarterly revenues of approximately $6 billion in 2024, América Móvil’s substantial market power necessitated a special regulatory framework to ensure fair competition.
- What are the key aspects of the IFT’s new regulatory policy for América Móvil? The policy includes subjecting América Móvil’s companies to a special compliance regime for at least two years and implementing replicability economic tests to prevent potential strategies that might hinder competitors from contracting Telcel’s wholesale services or profitably replicating Telmex or Telcel’s retail tariffs.
