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Should America Móvil and Telefónica be wary of a quad-play entrant in Mexico?

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Opinion by Daniel Jones, Partner, Onda Analytics Mexico's current spectrum auction has set off a change in the industry dynamics that could well have a big impact on major industry players, including Grupo Televisa, Telef nica and Carlos Slim's soon to be merged entities, Telmex and America M vil. Televisa's cable ARPU is over three times Telef nica's mobile ARPU for 2009, according to numbers announced on Friday, and it will aim to use mobile as a means of attracting current mobile operators' customers to its cable packages.

Grupo Televisa has announced its intention to enter the spectrum auction, which will see frequencies suitable for 3G networks becoming available, as explained in Onda Analytics' report, Mexico spectrum licensing. Further, Televisa has agreed a deal to acquire a 30% stake in existing business focussed operator Nextel, should it be successful in the auction process. The addition of mobile services to Televisa's portfolio could be both lucrative for Televisa and worrying for current mobile operators.

For Televisa, the deal with Nextel has a number of advantages. Though Nextel operates an iDEN network, aimed squarely at business users looking for push to talk services, Nextel's significant existing passive infrastructure covering over 100 cities would provide both a cost and speed benefit when rolling out a 3G network, as many sites will be able to be quickly shared.

In the mainstream mobile market, entering at a late stage with a 3G-only network will be difficult. The difficulty Hutchison Whampoa has had in turning a profit in similar operations in many countries is a testament to this. However, Televisa's existing cable subscribers provide a strong starting point to build mobile market share by using existing marketing communications to sell both mobile voice and broadband services through bundling.

While there is potential for providing mobile services to existing subscribers, the major opportunity is really outside of Televisa's subscriber base. Entering the mobile market providing service bundles not only allows a unique proposition but also a higher ARPU than a new mobile-only operator would be able to attain. It can also afford to offer mobile as a very competitively priced add-on to attract new cable customers, given the higher revenue levels associated with cable customers.

The major loser in this scenario would be Carlos Slim's combined America Móvil and Telmex with both losing customers to Televisa. Telefónica also lacks the capacity to offer bundled products and would lose some mobile subscribers to the cableco. Both entities would lose from a mobile price war. Of course, while Televisa may lose out at the auction, spectrum is available in many national and regional blocks, making it likely that even if they don't face competition from Televisa, other local cable operators have similar plans. While the segment attracted by bundles is limited, it is a lucrative segment Telefónica and America Móvil may struggle to keep after the auction.

On the web: Onda Analytics.

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Tags: grupo televisa  telefonica  telmex  america movil.   televisa  auction  Mexico