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Mexico Q1 '08 - Telefonica Gains Ground, but Telcel Maintains Dominance

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The Mexican mobile market closed the quarter with 71.041m customers, up 2.345m on the quarter and 11.55m on the year. A majority of the new customers connected to Telcel, the America Movil subsidiary, taking its total base to 51.5m, or 72.5% of the total. This dominance is quite unprecedented and no other operator in any competitive market comes close to matching Telcel's dominance. That the market has been competitive or supposedly competitive ever since mobile communications were first introduced nearly 20 years ago makes the situation all the more extraordinary.

However, there are signs that Telefonica is beginning to have an impact in the market. Over the past two years, Telefonica has increased its market share quarter on quarter, ending this latest period with 18.7% of the total. In absolute terms, that equates to 13.26m customers, far below the 51.5m that Telcel has, but nonetheless, a decent number. The improvement in market share has been reflected in improved profitability, with EBITDA margins edging towards 20%. This is again far below the mid-40s enjoyed by the market leader, but is a marked improvement on the losses of two years ago. In fact, Telefonica is not alone in its attempts to chip away at Telcel. Iusacell, Telcel's original competitor (and one time market leader) ended the quarter with 5.6% of the market, down from 5.8% at the end of Q4 after a 38k reduction in its base, to 3.97m. Despite its acquisition of Unefon, it remains sub-scale, unprofitable and ultimately unconvincing.

The fourth operator is Nextel Mexico, a subsidiary of Nextel International. This is the smallest of the four, as far as customer numbers are concerned, but it is a high quality business, generating roughly double Iusacell's revenues with just 2.27m customers on its iDEN network. Nextel's customers spend far more than the rest of the market. Last quarter, ARPUs dropped from US$71 to US$68, but this is still more than four times the M$174 reported by Telcel, the company with the second highest ARPU. Nextel has been increasing its share of the market and achieved the fastest growth rate in the country in this latest quarter. After adding 130k new connections in Q1, it now has 3.2% of the total.


Proportionate Growth by Operator, Q1 2008

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Tags: arpu  telefonica  iden  america movil  nextel  Mexico