America Movil Faces Objections For 2.5 GHz Airwave Auction

Mexican telecom behemoth America Movil SAB (NYSE:AMX) is aggressively being resisted by its rivals from taking part in the upcoming 2.5 GHz wireless spectrum auction in the country.

Last month, Mexico’s telecom regulatory authority, the Federal Telecommunications Institute (IFT), had started public consultations for the upcoming auction of wireless spectrum (airwave) in the 2.5GHz (2500-2690MHz) frequency band. The auction process was deferred twice to the third quarter of 2017 due to the bidding schedule for 4G LTE shared wireless network, using 90 MHz of spectrum within the 700 MHz-band.

The IFT has decided to auction a total of 120MHz spectrums on the 2.5GHz band in six blocks of 20MHz each. This will include four for FDD-LTE services and two for TDD-LTE. The concessions will be for 20 years and the minimum value of each block will be MXN 350 million. Wireless spectrums of 2.5 GHz band are highly suitable for deployment of 4G LTE networks.

Notably, in July 2017, America Movil, the undisputed leader of the Mexican telecom market, purchased 60 MHz of wireless spectrum in the 2.5 GHz band from Grupo MVS. For the last couple of years, America Movil has been systematically enriching its spectrum portfolio.

In June 2016, the IFT granted concessions for the 1710-1780 MHz/2110-2180 MHz AWS frequency bands to America Movil and AT&T Inc. (NYSE:T) . On Feb 15, 2016, the IFT opened an auction for 80 MHz of wireless spectrum across various Advanced Wireless Services (AWS) bands. America Movil and AT&T emerged as the two winners of the spectrum auction.

Given this scenario, America Movil’s rivals, namely, Telefonica SA (NYSE:T) , AT&T, Totalplay, Cablevision (NYSE:CVC) and Axtel has pointed out to the IFT that the company should be banned from taking part in the 2.5 GHz spectrum auction, or this will lead to excessive spectrum going into the hands of a particular wireless operator which controls nearly 68% of the Mexican wireless space.

In 2014, the government of Mexico introduced some major reforms within its telecom sector. Per the IFT norms, the maximum hold of a company in any specific market has been restricted to 50%. However, about 68% and 70% of telecom space is controlled by America Movil’s wireline and wireless divisions, respectively. This has induced IFT to identify the company as a dominant market player and has imposed stringent regulations on it.

Another incumbent telecom operator — Telefonica — holds nearly 20% market share. In 2015, U.S. telecom behemoth AT&T entered the Mexican telecom industry after acquiring Grupo Iusacell and Nextel de Mexico. Additionally, Mexican cable MSO (multi service operator) Grupo Televisa S.A. (NYSE:T) , has also received a go-ahead from the IFT to enter the wireless space. However, the company is yet to take any decision in this regard.

Price Performance of America Movil

America Movil has been one of the strongest performers in 2017. In the last 90 days, shares of the company have rallied 15.97% compared with the industry’s decline of 1.46%. The stock currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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