Telecoms sector soars in 2004

3 Mar 2005

Last year was the best year for the Mexican telecoms sector since 2000, with growth of 22.6% across the industry as a whole. Figures from the country’s telecoms regulator Cofetel show that mobile telephony continues to be at the heart of the growth, with the number of minutes used up 41% in the fourth quarter of 2004 compared to the same period a year earlier. Over the whole year mobile traffic was up 44.4%, although it is still below levels experienced in 2000, before the country’s economy began to falter.

The five main cellular operators – Telcel, Telefónica, Unefon, Iusacell and Nextel – had a combined base of 38.5 million subscribers at the end of December, up 27.9% on the end-2003 figure, with Telcel claiming around three-quarters of the mobile market. Mobile penetration stands at around 36.4%, impressive when compared with most of its Latin American neighbours.

There was also growth in the wireline sector, with the number of main lines increasing 10.6% in 2004 to 18.73 million. Mexico now has a fixed line penetration of 17.1%, with over 55% of homes having a fixed connection, already beating the government’s end-2006 target of 52.6%. The vast majority of customers are still served by the former monopoly operator Telmex. A recent report from the Organisation for Economic Cooperation and Development (OECD) has criticised the Mexican government for failing to ensure effective competition against Telmex. It suggests that restrictions on foreign ownership of companies should be eased to encourage international investment in the wireline sector.

Telmex’s closest competitor in terms of main lines in service is Axtel, which had 453,519 lines active at the end of 2004, up from 349,144 a year before. The company registered net losses of MXP77.1 million (USD6.9 million) last year as it rolled out its services to new markets. The increased coverage did help to boost sales, however, with revenues rising 25.4% in 2004 to MXP3.86 billion. Local telephony accounted for just over 70% of sales in 2004, down from almost 75% a year before, while the contribution from long-distance services was stable at around 10%.