Spotlight: How much and where leading Mexican telcos are investing

Most Mexican telcos, especially fixed broadband providers, have reduced capex and operational costs amid liquidity issues, stiff competition and inflation and FX pressures.

According to Fitch, the four main companies in the fixed segment are experiencing aggressive competition, which is allowing smaller players to increase market share and impacting average revenue per user (ARPU).

On the mobile side, macro uncertainties could also slow the expansion of 5G networks, as América Móvil continues to dominate. 

Among all the main LatAm markets, Mexico is the one expected to see the lowest mobile base growth this year at 1.1%.

BNamericas looks at where leading players are allocating their investments in the country.

AMÉRICA MÓVIL

Worldwide, América Móvil invested 56.2bn pesos (US$2.97bn) in the first half of the year, down from 64.4bn pesos in the same period 2023. 

The Carlos Slim-controlled group is looking to invest up to US$7bn in full 2024 versus US$8.5bn last year.

Specific Mexican investment figures are not detailed, but the local market leader is concentrating its capex on upgrading broadband connections from copper and HFC to fiber and on advancing 5G activations.

The group grew its Telcel mobile subscriber base by just 0.2% during Q2 to over 84.1mn and by 1.1% from the end of June 2023. 

In 5G, the company ended June with 12.8mn subscribers, comfortably ahead of its main competitors. 

In the fixed-line segment, Telmex’s base grew by 148,000 accesses in Q2, up 0.6% from end-March and 3.1% over the same time last year. Broadband accesses rose 1.4% and 6.4%, respectively.

Telmex has not raised its prices so far this year, “aiming to remain competitive so clients can continue to benefit from its technology and commercial offers,” the company said. 

This tends to put pressure on players that have tighter margins and cash flow and with reduced ability to absorb cost and inflation pressures.

AT&T

On a group-wide basis, the US telecoms company invested U$4.4bn in Q2, up from US$4.3bn in the year-ago quarter. 

AT&T does not usually break down investments for Mexico, its sole LatAm business, but resources in the country have been directed mostly to the expansion of 5G and commercial initiatives. 

This month, for example, the group announced it opened more than 37 stores in northwest Mexico during the first half of 2024 and increased its capacity in Monterrey and surrounding areas to provide services.

AT&T Mexico’s operating expenses neared US$1.1bn in Q2, up 9% on an annual basis due to higher equipment and selling costs attributable to subscriber growth and the unfavorable impact of the Mexican peso’s depreciation.

The carrier continues to grow, reporting an increase in its overall mobile base of 177,000 net additions in the second quarter to 22.6mn.

“Despite the challenges that the market continues to face, AT&T Mexico is growing because we are the best value option for our customers and we have achieved the lowest deactivation rate in our history,” Mónica Aspe, CEO of AT&T Mexico, said in a statement.

TELEFÓNICA

Global capex was down nearly 9% year-on-year for Telefónica to 1.24bn euros (US$1.37bn) in Q2. In the first half of the year, capex reached 11.3% of sales, in line with the group's full-year outlook of 13% of revenues.

The Spanish group is taming capex on a global basis, including in Mexico, where investments are being prioritized for systems, fiber broadband and the selling of commercial 5G plans and services. 

On an operational front, Telefónica Mexico renewed a contract with AT&T for access network capacity until 2030, which tends to alleviate direct network costs.

The agreement, signed in 2019, allows Telefónica to use AT&T's 3G, 4G and 5G networks for mobile services.

Yet, both players continue to operate independently, maintaining respective control over their transportation and core networks, as well as their assets, management platforms, strategy, commercial offerings and users.

TELEVISA

Mexican company Televisa invested US$102mn in Q2 in property, plant and equipment, down by half in dollar terms compared to the same period last year. 

Of the total spent in the quarter, around 74% went to cable operations and the rest to Sky.

In April, Grupo Televisa announced that it reached an agreement with AT&T to acquire the latter’s share in satellite TV provider Sky México, increasing its interest to 100% from 58.7%.

Televisa added 71,000 residences to its fiber to the home (FTTH) network during the quarter, reaching 19.8mn homes passed at end-June. 

It also added 10,700 broadband subscribers in April-June for a total of 5.7mn, but its base of revenue-generating units (RGUs) shrank 5% following a clean-up carried out in 2023 and the cancellation of its Afizzionados video package, which contributed to the 65,600 net video disconnections in the quarter. 

TOTALPLAY

Fixed broadband and converged services company Totalplay invested 2.67bn pesos (US$144mn) in the second quarter of this year, down from 3.90bn pesos in the same period 2023, as it doubles down on curbing expenditures to improve liquidity.

The capex for Q2 represented 23.9% of revenues compared to 40.3% in the same three months of 2023.

The company said it completed its investment cycle in fiber in 2023 and at the end of June reported 17.5mn homes passed, similar to the figure at end-June 2023. The focus now is on converting homes passed into customers while moderating client base expansion.

Totalplay had 5mn fixed broadband users at end-Q2, very close to the 5.1mn reported by Megacable and behind Televisa, which had 5.7mn. Market leader Telmex had more than 10.9mn.

Compared to the previous quarter, the number of net additions grew by 101,702, in line with Totalplay's strategy of moderating its subscriber base growth.

MEGACABLE

Coming close to its main competitor Totalplay in capex, Megacable invested 2.75bn pesos (US$150mn) during the second quarter, down 6.2% year-on-year.

Like Totalplay, Megacable is seeking to reduce capex pressures while having a slightly better capital structure than its rival. Over the past two years, Megacable has modernized and largely expanded its network infrastructure, but that momentum has now lost some steam.

“The number of kilometers and additional homes passed for the quarter reflects a slower pace in the execution of the expansion project,” the company said in its latest results report.

The group ended the quarter with 16.5mn homes passed, up 22.7%, whereas the overall network expanded 13.7% to 98,068km. The expectation is for it to surpass 17mn homes passed at the end of the year.

Megacable's growth in recent years leveraged on the demand for broadband, driven by a greater dependence of consumers on the service, as well as by the increase in the supply of digital content via the internet.

As of June, the company registered 5.18mn unique subscribers, up 10.4% compared to end-2Q23. 

The company increased its internet subscribers by 11.6% to 4.96mn, 71% of whom receive the service through fiber optics, up 16 percentage points on a year before.