Mexico publishes bidding rules for wireless auction

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Cofetel to auction nine blocks of spectrum in 1850 MHz-1990 MHz bands, plus additional seven blocks in separate sale.

Mexico's telecommunications regulator Cofetel published bidding rules Monday for wireless spectrum auctions that could bring more competition to the country's mobile telephony industry.

Cofetel will auction nine blocks of spectrum in the 1850MHz-1990MHz band in eight of the country's nine mobile telephony operating regions, including the capital Mexico City, the regulator said in a document published in the Official Gazette.

Cofetel said it will also offer in a separate auction seven blocks of spectrum between 1710MHz and 2170MHz in all nine operating regions, which could give auction winners a nationwide presence with spectrum capable of supporting third-generation wireless services such as high-speed Internet.

Click here to find out more!Cofetel said it will offer sufficient bandwidth to allow existing operators to meet their spectrum needs as well as open the door to new investors.

Bidders will have to be cleared by the Federal Competition Commission, or CFC as the antitrust agency is known, in order to participate.

The technical specifications of the two auctions will be made available to investors between Jan. 6 and Jan. 8 next year, Cofetel said. An auction date wasn't specified.

Cofetel first announced an ambitious spectrum auction program in late 2007, but the process was delayed amid negotiations between the CFC, Cofetel, and the Communications and Transportation Ministry, which has the final say in the sale of spectrum and issuance of telecommunications licenses.

A successful auction could turn up the heat on market leader Telcel, a unit of Latin America's largest mobile operator America Movil SAB, which is controlled by Mexican billionaire Carlos Slim. Telcel had nearly 72% of the market, with 58.4 million subscribers, at the end of September.

Televisa SAB, Mexico's biggest television broadcaster with equity stakes in three large cable-TV companies, is looking for partners to participate in the spectrum auctions with a view to adding wireless broadband to its current offering of phone, Internet and pay-TV services.

"We are looking to do this with a large company or a group of companies that have experience internationally and that have gone into situations where they are competing with incumbents," Alfonso de Angoitia, Televisa's executive vice president, said last month in a conference call.

America Movil's L shares traded on the Mexican Stock Exchange were recently up 1.4% at MXN31.18 ($4.17), while Televisa's CPO shares were trading 0.4% lower at MXN54.08.

A winning bid by the country's No. 2 wireless carrier Movistar, a unit of Spain's Telefonica SA, would allow it to obtain badly needed spectrum in Mexico City. The lack of spectrum in that key market has hindered Movistar's deployment of 3G services to better compete with Telcel, which has been selling those services for about two years.

Other potential bidders include the country's smallest mobile operators Grupo Iusacell SA, which is currently in talks with creditors to restructure its debt, and Nextel Mexico, a unit of Latin American wireless carrier NII Holdings Inc. The two companies had market share by subscribers of 4.4% and 3.6%, respectively, as of Sept. 30.

BBVA Bancomer telecom analyst Andres Coello said in a recent note that the abundance of spectrum and favorable payment terms for winners in the 1710MHz-2170MHz band should allow local companies to find international partners to launch their own mobile networks in Mexico.

"In our opinion, the company that has the best chance to develop a successful mobile product is Televisa, not just because it already offers triple-play services in more than 50 cities, but because it has its own television channels to promote an advertising-intensive service like telephony," Coello wrote.

Mexico's wireless industry had a penetration rate of about 74% at the end of the third quarter, according to Telefonica, suggesting mobile operators still have room to grow in Latin America's second-largest economy given other markets in the region like Chile and Argentina have penetration rates at or above 100%.

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