Boston, MA -- (SBWIRE) -- 03/12/2014 -- Mexico's telecoms market is underdeveloped in relation to many of its regional peers. Low penetration rates, high tariffs and a lack of competition afflict the market as America Movil remains dominant in the market through its Telmex and Telcel subsidiaries. BMI has high hopes for reforms signed into law in July 2013, which are aimed at introducing a higher level of competition. Nevertheless, we are only cautiously optimistic, given the attempts at reforming the sector previously and noteit will be some time before the full effects of these reforms materialise. This has not prevented alternative players from indicating their plans for a more competitive market, with Iusacell revealing plans to triple its market share over three years.

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Key Data

- Net additions were at their lowest rate in Q313, adding just 257,000 new connections in the quarter. For a market with continued growth potential, this was a marked slowdown.
- The fixed-line market continues to decline, with little to stop it falling to just 15% penetration by the end of our new five-year forecast period in 2018.
- Double digit growth is expected across the broadband sector with dedicated mobile broadband subscriptions increasing as mobile operators offer greater alternatives to fixed networks. The market will reach almost 29mn by 2018.

Risk/Reward Ratings

Mexico held on to the top spot in our ratings this quarter, having risen to the top in our previous quarter's update. With low penetration, it is one of the few telecoms markets demonstrating a strong growth potential over BMI's five-year forecast period, helping keep the market above others in the region. BMI also notes there is upside potential for regulatory scores used in our ratings as reforms begin to filter through into the market.

Key Trends & Developments

Mexico's new regulator Ifetel announced in November 2013 that it would consider plans to create an independent wholesale services operator using 700MHz spectrum for wireless broadband. In addition, dark fibre owned by the state power company Comision Federal de Electricidad (CFE) could be used. The creation of a single network that sells capacity wholesale to operators is being considered in several markets and has a number of advantages. However, BMI cautions that the structure of any such plan would need to consider long-term investment needs for the telecoms market.

Nextel believes there are increased commercial opportunities arising from the new regulator's reform plans and, in December 2013, outlined ambitious 4G LTE roll-out plans for 2014. The move will generate increased consumer choice. Nevertheless, Nextel's rivals are also pursuing similar strategies and are well placed to monetise the opportunities from increased commercial manoeuvrability.

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