Mexican regulator kicks off spectrum auction

Mexican telecommunications regulator, IFT, has initiated a bidding process by approving the call and terms for the allocation of radio spectrum across six frequency bands.

This process is set to begin next year, when the IFT itself is expected to be dissolved, following congressional approval of a proposal to streamline the government by eliminating several autonomous agencies, including the watchdog.

Although the official call for the spectrum auction will be published in January, the IFT has already made the terms of the auction available for consultation. These documents can be downloaded from the regulator’s website.

The period for expressing interest in the auction will begin on January 27, with the presentation of offers scheduled for August. 

Auction mechanism and limits

The auction will follow a simultaneous ascending multiple-round format, with a maximum of three rounds.

In the first round, participants may acquire up to 20% of the spectrum in the low bands and up to 20% in all bands for mobile telecommunications services, either regionally or nationally.

In the second round, if spectrum remains available, the limit will be raised to 30%, with an additional cap of 35% per band regionally and nationally.

In the third round, all limits will be increased to 35%.

“These limits are intended to prevent spectrum accumulation levels that could harm free competition and economic efficiency, as well as to avoid creating barriers to market entry,” the regulator stated in a release.

Frequency bands for auction

The frequency bands being auctioned include:

• 600MHz band: Three blocks of 10+10MHz with national coverage.
• L band: Six blocks of 10MHz with national coverage.
• 800MHz band: 630 blocks of 5+5MHz with coverage by partial service area (APS).
• AWS band: 320 blocks of 5+5MHz with APS coverage.
• PCS band:
  • 27 blocks of 5+5MHz (three blocks per cellular region).
  • Six blocks of 0.8+0.8MHz in cellular regions 1, 2, 3, 4, 5 and 8.
  • 320 blocks of 5+5MHz (one block per APS).
  • 907 blocks of 5+5MHz with APS coverage in various segments.
• 2.5GHz band: Four blocks of 10MHz with national coverage.

Reference values and coverage commitments

The IFT has set the following minimum reference values and spectrum usage fees for the auction:

• 600MHz band: Minimum value of 1.78bn pesos (US$88mn) per block, with annual usage fees of around 540mn pesos.
• L band: Minimum price of 197mn pesos per block, with usage fees of 202mn pesos.
• 2.5GHz band: Minimum price of 118mn pesos per block, with usage fees of approximately 221mn pesos.
• AWS, PCS and 800MHz bands: Values vary depending on the specific APS.

The high cost of spectrum usage fees has been a significant barrier for operators in acquiring spectrum.

As part of the auction, the winners of the 600MHz and 2.5GHz bands meet fulfill specific coverage commitments:

• 600MHz band: Deployment of 4G services in at least 200 localities with populations exceeding 300 inhabitants that currently lack mobile internet access. At least 50 of these must be located in Chiapas, Oaxaca, Guerrero or Veracruz states.
• 2.5GHz band: Coverage in at least 25 localities with similar characteristics.
• Road coverage: Additional commitments for coverage along highways.

To encourage participation, the IFT has incorporated incentives ranging from 25% to 40% reductions in the conversion formula used to determine compensation amounts. These reductions will depend on the amount of spectrum assigned and the market share of the interested participants.