According to media reports, Spanish telecom incumbent,
), plans to share its network with various Mobile Virtual Network
Operators (MVNO's) in Mexico. In this regard, Telefonica will
also host U.K.-based cellular company Virgin Mobile, which is
expected to start operations in the country in second quarter of
Several other telecom companies have also shown interest in
using Telefonica's network. The company wants to end 2014 with 5
to 10 MVNO's in Mexico. Apart from its tie-up with Virgin Mobile
also wants to continue with its organic growth.
Technically an MVNO does not require huge start-up investments
in spectrum acquisition and installation of cell towers. Instead,
an MVNO leases tower space from existing service providers and
offers communication services.
Telefonica already has a network sharing deal with Mexican
Operator Iusacell. By hosting various virtual operators, the
company is trying to optimize its network capacity in Mexico,
where the company has 20 million customers and is a distant
second to market leader
America Movil S.A.B de C.V.
). Carlos Slim-owned America Movil controls the majority of the
Mexican telecom market with 70 million customers.
Mexican telecom regulator is trying to identify the dominant
companies and prepare laws to curb the power of dominant market
leaders like America Movil. This will open up space for the entry
of some new companies in the country.
It could be part of Telefonica's plan to partner the new
companies, which could enter into the country's telecom scene as
and when the market opens up for them. This will allow the
Madrid-based company to close the gap on leader America
Apart from customer additions, Telefonica could also leverage
financially. The telecom behemoth has one of the highest debt
burdens within the industry. Sharing its network will reduce
investments on towers and technologies as the expenses will be
shared with the MVNO.
Telefonica currently carries a Zacks Rank #4 (Sell). However,
some better-ranked stocks within the sector are
Shenandoah Telecommunication Co.
Chunghwa Telecom Company Limited
). Both SHEN and CHT hold a Zacks Rank #2 (Buy).
AMER MOVIL-ADR (AMX): Free Stock Analysis
CHUNGHWA TELECM (CHT): Free Stock Analysis
SHENANDOAH TELE (SHEN): Free Stock Analysis
TELEFONICA S.A. (TEF): Free Stock Analysis
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