AT&T creates a golden opportunity for small operators to buy spectrum in Mexico

Local and regional telecommunications service providers will observe that new methodologies used by the Federal Institute of Telecommunications (IFT) in the bidding for frequencies could favor their possibilities in obtaining frequencies of Radioelectric spectrum in the short term, after the operator AT&T created a new price benchmark with the frequencies it acquired in 2021 through bidding in the 800 MHz bands.

In that year, the IFT put out to tender a portfolio of different blocks of spectrum in terms of size and coverage, and also belonging to radioelectric bands with different technical nature. For example, at 800 and 850 MHz; at 1.9 GHz, at 1.7/2.1 GHz and at 2.5 Gigahertz.

Two participants participated in the so-called IFT-10 Spectrum Bid: Telcel and AT&T, and the latter bidder bought two frequency packages. One of the spectrum lots enabled AT&T to provide services in various municipalities in the states of Tamaulipas, Nuevo León, Coahuila, Chihuahua, Durango, Sonora, Sinaloa and Baja Californias. The other package allowed AT&T to strengthen its cellular coverage in Mexico City and in 56 municipalities in the State of Mexico.

It is that AT&T had acquired spectrum frequencies located between 814 and 824 MHz and between 859 and 869 MHz to improve the quality of its services from those bands, but that the IFT identified as spectrum blocks “A1″ and ” A9.01”, and which, due to their size, defined them with an assessment of the scope of the basic service area or ABS, a different geographical dimension from criteria that in previous spectrum tenders measured everything at the national level and, where appropriate, at the regional level; but even so, they were still too expensive for local operators who wanted to have their own frequencies to carry telephone and Internet connectivity.

In Mexico, 71% of the inhabitants had an Internet connection in 2021 and cell phones closed 2022 with a penetration of 98%, but the remaining 2% is the population that is located in populations that are difficult to access or that are economically unprofitable for operators, large or small, to invest in and service networks, because spectrum is unaffordable to buy and annual royalty payments alone account for 92% of all the money that a concessionaire pays the State while holding the concession for the frequencies.

With the ABS, the sectoral authority also took into account criteria such as the size of the population of the municipalities, their connectivity and their economic performance, in order to thus enable a spectrum appraisal that is closer to the reality of the market experienced by the telecommunications industry at a national level. of municipalities.

AT&T, an operator that made sense to buy this type of frequency to improve the quality of its services in municipalities of all those states, offered 1,080 million 852,000 pesos, about 56.9 million dollars in 2021, for the two frequency packages by allowing each one the opportunity to exploit 20 MHz of frequencies for twenty years in services such as mobile Internet and cellular voice with greater coverage.

By accepting AT&T the criteria set by the IFT in the 2021 tender and after crediting the Federal Treasury with the consideration of 1,080.5 million pesos promised for its frequencies, the operator created a benchmark that the Federal Telecommunications Institute recently used in December of 2022 along with other parameters to redefine the economic criteria that it sets for the renewal of concession titles of operators that already have frequencies in 800 MHz and that it will also use now for those local and regional operators with less financial muscle that are interested to buy radio bands in forthcoming frequency tenders, after the ill-fated IFT-10 was only able to place three of 41 available frequency packages on the market, due to the heavy tax burden imposed by the Ministry of Finance and the Chamber of Deputies for use spectrum in Mexico.

The Federal Telecommunications Institute plans to compete for spectrum frequencies in 2023 for the first 5G tender in Mexico. The frequency basket that the IFT will offer to the market contains 600 MHz, 3.5 GHz and 1.5 GHz signals; and the regulator also plans to tender bands of 1.9 GHz, 1.7/2.1 GHz, 800/850 MHz and 2.5 GHz that could be tendered under the basic service area or ABS model, so that in this way a greater number of interested parties participate in what would be the IFT-12 Tender, mainly regional and local participants.

The IFT Radio Spectrum Unit is confident that using ABS-based bidding mechanisms would cause the IFT-12 to be born with a star and a greater number of small operators buy bands, since AT&T itself recently benefited from this type of criteria by obtaining the renewal of other concession titles that it already had in the 800 and 850 MHz bands, and with coverage in locations in Nuevo León, Michoacán, Coahuila, Tamaulipas, Hidalgo, Edomex, Veracruz, Querétaro, CDMX, Jalisco, Nayarit, Colima and some highway routes that connect the country’s capital with the Gulf and the Mexican Pacific.

(What AT&T bought in 2021) served to set the value of the 800 and 850 MHz bands, because it was the result of a public bidding process, open to anyone,” said Alejandro Navarrete, director of the Radioelectric Spectrum Unit. of the IFT.

The economic criteria to buy radio bands in Mexico in accordance with previous tenders and which the industry qualifies as “rude”, proposed that the IFT set AT&T a consideration of more than 800 million pesos to retain its 800 and 850 MHz bands for other twenty years, and not yet counting the annual royalty payments here.

But having established AT&T a new price benchmark in the market in 2021 with the IFT-10 tender, the authority wrote a new consideration for the company to maintain its frequencies.

“And the same methodology that was proposed to the Secretary of Finance for AT&T it is the one that was also proposed for Telcel. We are giving the same treatment to all companies,” said Alejandro Navarrete.

“AT&T didn’t win a national band then; The reference that was used was ABS to extend these frequencies, because it was what AT&T won regionally in CDMX (…) The idea is that not only large companies participate, but also to seek that in the upcoming bidding bases they promote large and small companies, and look for all the alternatives that make the bidding for the blocks to be assigned more attractive, since there are many small operators that express their intention to have their own spectrum to bring services to smaller populations”.