Synergies for Effective Competition in Telecommunications

At a time of inability, contradiction and even regulatory capture to balance market conditions among competing operators, izzi’s intention to integrate its operation with Megacable was announced, based on identifying potential synergies to compete in a strengthened manner in the market. cable segment and convergent services in Mexico.

This proposal, although surprising, stands out due to the fact that both companies would strengthen their investment capacities, lighten their cost structure, as well as expand the availability of their networks. The integration of telecommunications operators or economic groups has emerged as a strategic way to strengthen and expand the presence and market footprint of the companies involved. This, derived from the generation of efficiencies in the provision of services, the release of resources to invest in the availability and quality of telecommunications networks and, consequently, the gestation of better supply conditions for end users.

International Experience of Strategic Integrations. In the Latin American region, strategic integrations have taken place in recent years for the convergent offer of services that affect the competitive dynamics of the different telecommunications markets. For example, in the cases of the integration of Cablevisión (Grupo Clarín) and Telecom Argentina, of Movistar Costa Rica and Cabletica under the Liberty brand, Euskaltel and MásMóvil in Spain and the ‘joint-venture’ of VTR and Claro (América Móvil) in Chile.

In all of these, the operational and competitive strengthening of the resulting joint venture stands out in the different market segments and in a convergent manner, a circumstance that has the potential to boost the availability, quality and affordability of services for end users, through trigger effective competition between competitors.

Perspectives for the Mexican Market. In the case of the Mexican market, when analyzing the proposal made known in the media about the intention of Grupo Televisa to unite its telephony, broadband and pay TV operations with Megacable, a competitive strengthening in the convergent telecommunications market would be anticipated, as in the country and market examples referenced above.

The synergies obtained from this strategic and timely integration imply that the resulting entity would have a better position to compete in the audiovisual content market, increasingly contested with the entry of digital platforms, and also in the intensive fixed broadband market. in investments in infrastructure. Likewise, the financial position of the companies would be strengthened and would make it possible to leverage the scope and adequacy of infrastructure investments by avoiding redundancies and reducing deployment costs.

In the analysis of information published by the Federal Telecommunications Institute (IFT) as of December 2021, a great complementarity of the Megacable and izzi fixed networks is identified, as there is little duplication in the presence of each of them in the municipalities of the country. Among all those that provide telephony, broadband and pay TV services, there are only coincidences in their market footprint in less than 6%.

Therefore, the union of these operators would represent an unparalleled opportunity to complement their fixed networks and be able to compete in better operating conditions, investment robustness, coverage, capacity and quality of the networks, given the strengthening registered by competing operators as is the case of Totalplay and the persistent market concentration registered by the preponderant economic agent in telecommunications (AEP-T, América Móvil).

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