Background on Spectrum Pricing in Mexico
The Mexican government, led by President Claudia Sheinbaum, has decided not to lower the prices of spectrum for 2026. This decision makes it unlikely that the upcoming 5G auction by the Agency for Digital Transformation and Telecommunications (ATDT) will attract new international players or secure the interest of Telcel and AT&T. The high cost of spectrum in Mexico has resulted in the loss of $738 million in tax revenue from telecom companies relinquishing their spectrum rights between 2020 and 2024.
Mexico’s Spectrum Pricing Compared to Latin America
Mexico’s spectrum pricing remains among the highest in international measurements, with annual payments set by the Mexican government accounting for 85% of the total cost to exploit a radio frequency band during a concession’s validity period. This is significantly higher than the Latin American average of 20%, as estimated by organizations like the OECD and GSMA. These institutions also estimate that 5 million Mexicans would join the 4G-LTE network if spectrum prices were more affordable.
Government Incentives for Nearshoring and Digital Inclusion
Despite not lowering spectrum prices, President Sheinbaum proposed two significant initiatives to support the Mexican telecommunications industry:
- Tax incentives for operators: Companies that commit to and build “smart networks,” such as private telecommunications networks enhancing Mexico’s industrial parks in the context of nearshoring, will receive tax benefits.
- Digital inclusion: Incentives will also be given to operators that ensure coverage for underserved digital communities.
These proposals could boost the first 5G spectrum auction for services, currently being designed by the federal government through ATDT. The auction aims to address previous failed attempts since 2019, where spectrum was consistently offered at high prices despite the availability of numerous national and regional blocks for coverage and capacity.
Tax Incentive Norma Proposal
President Sheinbaum proposed to Congress the creation of a regulatory framework supporting the new tax incentive policy. This would allow for the granting of discounts to frequency band concessionaires who commit to coverage obligations in specific geographical areas, roads, and other designated regions determined by the Telecommunications Regulatory Commission (CRT).
The extent of these discounts will be determined jointly by the Ministry of Finance and ATDT, following guidelines from the CRT. Once Congress approves this new regulation, federal agencies will decide the discount level for private and public operators to make the upcoming 5G auction more appealing.
Unresolved Details and Potential Impact
The proposed tax incentive regulation aims to encourage commercial and social operators, both large and small, to compete for radio frequency bands to provide coverage in underserved areas, primarily through private investments. However, it remains unclear how a hypothetical operator like Altán would participate in acquiring capacity bands for 5G in unserved regions, where the state is the primary shareholder.
President Sheinbaum also requested that Congress consider a new figure for smart network concessions to boost investments in this field among numerous companies. However, this proposal might also raise concerns among major operators like Telcel and AT&T, who have experienced lean income years due to the high spectrum pricing policy. Encouraging companies like these to develop private networks could be a positive outcome.
Key Questions and Answers
- What is the main issue? The high cost of spectrum in Mexico, which discourages investment and connectivity for the population.
- Why aren’t spectrum prices being lowered? The Mexican government, under President Claudia Sheinbaum, aims to maintain current prices due to fiscal constraints and the need to increase government spending.
- What incentives are being proposed? Tax benefits for operators who commit to smart networks and coverage for underserved communities.
- How will these incentives be implemented? A new regulatory framework will be proposed, allowing for discounts on spectrum based on coverage commitments in specific regions.
