The government of Mexico recently slashed its planned expenditure from $10 billion to $7 billion for the proposed deployment of nationwide wholesale mobile network over the next 10 years. In 2014, the government had undertaken this massive project to instil competition in the highly monopolistic telecom industry. In Mar 2015, the ministry of communications of Mexico had opened tender to take part in this project. 

Small-scale telecom operators can use this state-owned network for their wireless coverage instead of installing their own network which is highly capital intensive. The Mexican government will allocate 90 MHz of spectrum in the 700 MHz band for the creation of a wholesale mobile network. The primary reason for the cut in planned expenditure is that the government now believes that 12,000 mobile towers will be sufficient for installing this network instead of 20,000 cell towers as estimated earlier.

Importantly, last year, the Mexican government reformed its telecommunications sector to curb the monopolistic power enjoyed by the incumbent America Movil SAB (AMX - Analyst Report). The company currently controls nearly 80% and 70% share of the Mexican wireline and wireless market, respectively. The Mexican regulator is aiming to restrict America Movil’s market share within 50%. America Movil is complying with the government law and is currently considering disinvestment of several fixed and mobile assets.

The situation in the Mexican telecom industry has changed drastically over the last two years. Following America Movil, Telefonica SA (TEF - Analyst Report) is the second largest wireless service provider in Mexico with an estimated market share of 23-25%. Meanwhile, U.S. telecom behemoth AT&T Inc. (T - Analyst Report) has entered Mexico with the acquisition of Grupo Iusacell and the wireless assets of currently bankrupt NII Holding Inc. The government of Mexico is considering whether to allow Telefonica and AT&T to take part in the proposed wholesale shared mobile network project.

In the meantime, various leading telecom infrastructure equipment developers, with global operational experience are offering bids for the upcoming state-owned mobile network project in Mexico. Notable among them are Ericsson AB (ERIC - Analyst Report), Nokia Corp. (NOK - Analyst Report), Cisco Systems Inc. (CSCO - Analyst Report) and Huawei Technologies Co. Ltd. In Jan 2015, Reuters reported that China Telecom Corp. Ltd. (CHA - Snapshot Report) is seeking a Mexican partner to form a consortium in order to take part in the mobile broadband project.

Mexico is the largest economy in the Latin American region with a growing middle class population eager to spend more on high-speed wireless networks for facilitating the use of smartphones and tablets. Also the wireless penetration rate is relatively lower in this country. Thus, weighing such positives, an investment in the nation may bode well for telecom operators and network equipment manufacturers.