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Mexico Q3 Market Update - Telcel reigns supreme

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The total mobile market in Mexico grew to 64.57m customers at the end of Q3, with total net additions of 11.64m in the year. This is equivalent to an annual growth rate of 22.0%, an improvement on the 21.1% recorded in Q3 06. Penetration stood at 59.2%, up from 49.1% a year previously. In quarterly terms, net additions were at the lowest level of the calendar year so far, although the figure of 2.48m was still higher than the 2.28m recorded in Q3 06.

America Movil's Telcel is the dominant player in Mexico, with 73.6% of the market at the end of Q3 07. This is down from 76.9% at the end of Q3 06, with second-placed Movistar (Telefonica) taking up most of the slack; however, despite improving by 3.0pp year on year, it still only had 17.1% of Mexico's mobile customers at the end of the quarter. Moreover, in real terms Telcel's lead of 36.4m customers is unassailable in the foreseeable future. With net additions of 6.80m in the year, Telcel reached 47.52m customers at the end of Q3 compared to Movistar's 11.07m, while Iusacell/Unefon had 4.00m and Nextel brought up the rear on 1.99m. Although Telcel inevitably led the market for quarterly net additions with a figure of 1.40m, Movistar grabbed top spot in terms of proportionate growth with a quarterly increase in its subscriber base of 8.2%.

Meanwhile, Iusacell/Unefon slipped from 1st place in Q2 to last place in Q3, its quarterly growth rate sliding from 10.8% to 2.6%. However, these figures come with the caveat that Iusacell only quoted its third quarter customer total to the nearest million, which obviously impedes any detailed analysis. Having said that, experience tells us that reduced disclosure generally does not herald glad tidings, and so we can surmise that the combined Iusacell/Unefon operation has indeed had a poor quarter.

On an annual basis, Movistar was the fastest growing operator with an impressive 48.7% growth rate, although in real terms it had almost half the number of new connections recorded by Telcel with a figure of 3.63m. Telcel's customer base increased by 16.7% over the year, and although this was the slowest rate in the market, it is a respectable result given the size of the operation. On a pro forma basis the merged Iusacell/ Unefon network grew by 19.9% with total net additions of 0.66m, while Nextel was not far behind on 0.56m, a proportionate growth rate of 38.8%.

What is most remarkable about Telcel's performance, apart from the sheer scale of its customer base, is that it has managed to maintain a monthly ARPU of around Mex$185 for the past six quarters. This compares to Movistar's third quarter figure of Mex$141, an increase of Mex$18 compared to Q3 06 but still well short of Telcel's figure. No doubt Telcel's ARPU figures have been assisted by a gradual improvement in customer quality from 7.1% contract at the end of Q3 06 to 7.5% at the end of Q3 07. In the same period, Movistar's contract base has declined from 6.6% of the total to 5.6%, and in this light the increase in ARPU is even more impressive. However, it still has a long way to go before it matches Telcel's ARPU figure, and even if it does, its revenue-generating power will continue to be dwarfed by the titanic market leader.

Telcel vs Movistar, Customers and ARPU, Q3 06 - Q3 07

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Tags: avea  arpu  movistar  telcel  iusacell  nextel  Mexico