Telefรณnica โคto Exit Mexican Market After Years of Challenges
Telefรณnica, a Spanish multinational telecommunications company, is preparing to โleave the Mexicanโค market, marking a โฃsignificant shift in the country’s mobile landscape. The decisionโข follows a strategic pivotโฃ in recent years, where the company increasingly relied on AT&T’s mobile network for its “last mile” connectivity – an agreement renewed last yearโ – in an effort to reduce costs and boost profitability. This move effectively transformed Telefรณnica’s Mexican subsidiary into a virtual โmobile operator (OMV), a model also utilized by companiesโ like Virgin Mobile and Walmart’s Bait.
The decline comes despite initial success for Telefรณnica in Mexico, where it once amassed over 24 million customers by consolidating regional โnetworks in the early 2000s. However, according to Ernesto Piedras, director of The Competitive Intelligence Unit (The CIU), unfavorableโ regulatory changes ultimately undermined the company’s businessโฃ model and โขhindered its potential to foster competitionโข within the Mexican telecommunications sector.
A keyโข weakness identified by The CIU was Telefรณnica’s focus onโค customers wiht low data consumption, primarily using their services for receiving calls rather โฃthan generating โrevenue through data usage. The firm’s data indicates that a Movistar customer (Telefรณnica’s brand in Mexico) spends an average of 74 pesos per month,โ substantiallyโ less than the 146 pesos spentโฃ by an AT&T user.This lack of profitability led Telefรณnica to sell itsโ infrastructure and concessions five years ago, leavingโฃ its customer base as its primaryโ remaining asset.
Former Telefรณnica Mexico โขPresident Francisco Gil Dรญaz publicly criticized the handling of telecommunications regulation, attributing the โcompany’s financial losses to poor management by competition and regulatory bodies like COFETEL and the IFT. He lamented the loss of billions ofโข euros invested due to these issues, and the broader damage toโ Mexico’sโข competitiveness.
Telefรณnica’s diminishing market shareโ coincides withโ the growth of competitors like AT&T,โ Bait, and Virgin โMobile. As of June of this year, โฃTelcel leadsโข the Mexican mobile market with โ66%โ ofโ revenues, followed by AT&T with 22%. Telefรณnica holds aโ distant third place with โ6.7%, with โขthe remaining market share distributedโค among other OMVs. Piedras suggests Telefรณnica’s exit โขhighlights failures in regulatory efforts to effectively promote competition.
The company currently holds over 23 million customersโ in Mexico, and the sale process is underway.Beyond One, the owner ofโค Virgin Mobile Mexico, has been identified as a potential bidder, with the transaction reportedly valued at 500 million euros (approximately 575โฃ million dollars). โOnce aiming to lead mexico’s mobile boom in the early 2000s,Telefรณnica is now seeking โขa favorable offer to finalize its departure from the Mexican market.
