Mexican Telecommunications Industry Propels Economic Growth in Mexico

Between 1990 and 2007, the telecommunications sector grew almost five times faster than the economy in Mexico and has gone a long way in reducing the economic and social difficulties in this country. Buoyed by dynamic technological progress in recent years, the telecommunications sector has attracted increased investment and productivity, providing further momentum to the economy.

New analysis from Frost & Sullivan finds that the market earned revenues of $28,994 million in 2007 and estimates this to reach $36,399 million in 2013.

"The wireless telephony traffic's growth rate was 60.5 percent in Q1 2008, an increase of more than 20 percent over Q1 2007, meaning that this is the most dynamic sector of the telecommunications industry," says Frost & Sullivan Consulting Analyst Jose Manuel Mercado. "In 2007, it contributed 6 percent to the gross domestic product (GDP); in 1990 the contribution was around the 1.1 percent."

This growth was possible due to the considerable advances in infrastructure, service quality, and coverage. For example, between 1990 and 2007, the investment in infrastructure was nearly $30,000 million, the whole network was digitalized, and populations with access to telephone service increased as did the number of public telephone lines. In fact, the telephone density in the country rose from 6 to 19 lines per 100 inhabitants, while mobile lines increased from 0 to 65 lines per 100 inhabitants.

Telecommunications' predominant role in the economy will be reinforced with the entry of fresh competition caused by the introduction of new regulations included in the Convergence Agreement. The pace at which operators will grow in the telecommunications sector in Mexico and the way they position themselves in their respective markets will depend on the regulator's consistency in ensuring companies' adherence to the new rules.

Number portability, interconnection agreements, and interoperability will foster an environment where emerging companies will be able to compete fiercely with the incumbents. These new rules will encourage growth as well as benefit end users. They will achieve this dual benefit not only due to the competition-induced lower tariffs, but also because of better customer and value-added services, as triple and quadruple play solutions will make telecommunications simpler and more manageable.

"Incumbent companies may try to interfere with these new norms, creating contracts that prohibit end users from changing from one company to another within a certain timeframe, thereby causing the number portability agreement to fail," notes Mercado. "The regulator's attitude and empowerment will be crucial to eliminate this legal bias."

For instance, Telmex is starting to offer bundled services with the condition that the subscriber signs a contract that is binding for a minimum of 12 months. This contract clearly violates the number portability idea of free movement from one company to another with the same number. Once the violation by the operator is reported to the regulator, it will be stripped of its TV-Pay concession or any other concession title for triple play solutions.

Posted to the site on 18th December 2008