The Internet Market Impact of Mexico Telecom Reform Capacity North America October 23 rd, 2013 Speaker: Michael J. Miller, CISSP mjmiller@renesys.com Office: +1 603 643-9300 x125 1
May was one of the worst months for Mexican telecom mogul Carlos Slim. For the first time in four years, Slim was bumped from his perch as world s richest person by Microsoft co-founder Bill Gates, a position Slim had held since 2010 when the value of his mobile phone carrier América Móvil (NYSE:AMX) soared. May 20th Source: Yahoo Finance 2
Mexico Telecom Reform 3
Reformer President Enrique Peña Nieto 57th president of Mexico Six year term began on Dec. 1 st, 2012 Member of the Institutional Revolutionary Party (PRI) Former governor of the State of Mexico from 2005 to 2011 Law degree from Universidad Panamericana, and Master's degree from the Monterrey Institute of Technology and Higher Education Born July 20 th 1966 (age 47) 4
Mexico Telecommunication Reform - Timeline 1 st Dec. 2012 Enrique Peña Nieto Takes office 21 st March 2013 Lower House passes Telecom Reform 30 th April 2013 Senate passes Telecom Reform 12 th June 2013 Telecom Reform becomes Law Within 6 months Federal Institute of Telecommunications (IFETEL) to identify dominant provider recommendations 5
Mexico Telecommunications Reform 2013 On June 10 th, 2013, President Enrique Peña Nieto signed the Telecommunications Reform act into law. Main goal: To increase competition in the Mexico telecommunication market in order to increase the number of people and businesses that have access to the Internet and reduce the cost. Key Elements: Elimination of the cap on foreign ownership in telecom services No provider can have more than 50% of the market share New regulatory authority to identify dominant providers Federal Institute of Telecommunications (IFETEL) New broadband infrastructure open to competition Effective dispute resolution and enforcement 6
Six Precepts of Telecommunications Reform 1. Strengthening fundamental rights 2. Updating the legal framework 3. Strengthening the institutional framework 4. Promoting competition 5. Establishing a Universal Digital Inclusion Policy and a National Digital Agenda 6. Promoting greater coverage in infrastructure 7
Internet Analysis of Mexico 8
Mexico Internet Market Privatized in 1990 Telmex / Uninet is the primary Mexico Internet provider The gap in the market is expansive Too early to see a change in the Internet market 9
Overall Telecommunications Market OECD (2012), OECD Review of Telecommunication Policy and Regulation in Mexico, OECD Publishing. http://dx.doi.org/10.1787/9789264060111-en 10
Market Comparison Mexico Brazil said Clinton Carter, director of research at Frontier Strategy Group, in an interview "A lot of funds are looking into Latin America as sort of a portfolio of opportunities. Brazil became a lot less attractive in the last year and a half, Mexico has definitely come up as a priority. Source: Anna Andrianova, CNBC.com 11
Provider Profiles 12
Telmex / Uninet (AS 8151) Prior to 1990, the Mexican telecommunications market was a monopoly served solely by state-owned Teléfonos de México (Telmex). In 1990, Telmex was privatized and sold to Grupo Carso, a conglomerate company owned by Carlos Slim Helú, the world s second richest man. It is estimated that Telmex serves anywhere from 80% to 95% of all fixed lines in Mexico 13
GrupoTelevisa (Multiple Networks) Televisa is the largest mass media company in Latin America and the Spanish speaking world. Televisa is Mexico s second largest Internet provider based on the aggregate number of IP addresses. Televisa has two cable TV providers, Cablemás and Cablevisión, which together give it a 45% pay-tv market share. Televisa IP Addresses % of Total Bestal (AS 18734) Cablemás (Multiple ASNs) Cablevisión (Multiple ASNs) Iusecell (AS 17072) 2,485,504 9.2% 669,184 2.5% 316,672 1.2% 11,520 0.0% Total 3,482,880 12.9% 14
Axtel (AS 6503) Axtel is Mexico s second largest fixed line operator after Telmex and serves about 5% of the fixed-line market. BBVA Research recently stated Axtel s weak competitive position and its limited infrastructure require strong investment in Capex to increase their core business 15
Megacable (AS 13999) Megacable is the largest cable television operator in Mexico, offering service in 48 major cities. With Televisa and Movistar/ Telefonica, Megacable is a member of the Grupo de Telecomunicaciones de Alta Capacidad or GTAC 16
Competitive Analysis 17
Changes in the Market The Mexico market has remained relatively unchanged throughout the year. Real change is going to take investment and time before you see any significant shift in the market. 18
Recent News 19
Will Investment Outpace Regulation? América Móvil is planned to complete the construction of the largest 100G submarine cable, late in 2013. América Móvil-1 (AMX-1), connecting 11 landing stations in 7 countries AMX-1 Submarine Cable Profile - TeleGeography Global Bandwidth Research Service 20
Looking forward Mexico will benefit from foreign investment to compete against the domestic incumbent providers As competition increase the cost of services should decline making Mexico more attractive to outside investment Open access to the domestic infrastructure will increase competition in advance of additional investment Investors are looking at Mexico over rival Brazil for new investments This is the start of a long 5-6 year process to balance out the telecommunications market 21
Questions 22
The Internet Market Impact of Mexico Telecom Reform Thank you 23