Will Mexico Restrict AT&T's Bid for AWS Spectrum Auction?

According to a recent report by El Economista, Mexican telecom regulator, the Federal Telecommunications Institute (IFT), is considering to restrict the U.S. telecom behemoth AT&T Inc.T from bidding for all of the 80 MHz of wireless spectrum across various Advanced Wireless Services (AWS) bands, scheduled to be auctioned in Jan 2016.

The IFT has decided to sell 30 MHz of AWS-1 bands (1710-1725 MHz/2110-2125 MHz) and 50 MHz of AWS-3 bands (1755-1780 MHz/2155-2180 MHz). The regulator has called for public comments regarding the documentation of the proposed auction and plans to release the final documents for the spectrum auction in Nov 2015. Notably, AWS spectrums are highly coveted for the deployment of 4G LTE networks.

Earlier this year, AT&T entered the Mexican telecom industry with the acquisition of Gurpo Iusacell and Nextel de Mexico. With these acquisitions, AT&T currently possesses more spectrums in AWS bands than any other wireless operator in Mexico. Therefore, the regulator may block AT&T to bid for only 5 blocks of spectrums to be auctioned instead of bidding a total of 8 or 9 blocks.

The imposition of a cap on spectrum holding is designed to ensure that small-sized operators can also get a level playing field which will help instil competition in this highly monopolistic Mexican wireless market.

In 2014, the government of Mexico introduced reforms within its telecommunications sector which led to intensifying competition. The undisputed leader in the Mexican wireless market is America Movil SAB AMX , which enjoys a market share of nearly 70%. Importantly, the IFT seeks to restrict the maximum hold of a company in the market to 50%. Another existing operator Telefonica S.A. TEF holds a nearly 20% market share.

Notably, Mexican cable MSO (multi service operator) Grupo Televisa S.A. TV has also received a go-ahead from the IFT to enter the wireless space. However, the company is yet to take any decision in this regard.

AT&T has decided to invest $3 billion to expand high-speed mobile Internet network in Mexico. The service is likely to cover 40 million people within the next six months and will be available to 75 million people by the end of 2016. The company aims to provide 4G LTE mobile Internet service to 100 million Mexican customers by the end of 2018. As the new reforms open up considerable scope for investment in Mexico, AT&T is striving to capitalize on the opportunity.

AT&T currently carries a Zack Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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