Photo credit: EPROM CLCC-44 Devices by yellowcloud

This is part 1 of 3-part post on the recently published Mexican Telecom Reform. Follow me to explore the great opportunities to come.

What ever happened to the Telecom Market.

Mexican Telecom Reform is now on effects. It is the end of the industry, as we all knew it. Frankly, I feel fine and exited about the new regulation.

We need to double-check landmark case law on interconnection, spectrum assignment and antitrust to connect the dots backwards. All those years in court made telecom law history, though.

This Reform offers a fresh start for entrants and opens a wide range of opportunities, as now investors have less barriers for mobile, data and TV.

Telecom regulation is moving in gigaflops. Just now, COFETEL (telecom body) has concentrated all operators annual report formats into one single document. Also, has reduced the local service areas from 397 to 172. Satellite services, fixed-mobile cost models, standards for DTV decoders (NOM-192) and mobile antennas installation are under review. Other issues like passive infrastructure interconnection and white spaces are between the lines on the debate.

Now, foreign companies and individuals can invest in telecom companies up to 100%, and 49% in TV/radio companies (the latter subject to country reciprocity to Mexicans in those sectors). Previously, some investors invested only in no-voting shares with the obvious consequences.

From recent data of COFETEL, telecom services increased an aggregate of 12.5% during first quarter of 2013, comprising broadband connections up to 12 million, CATV up to 13 million, DTH up to 7 million, mobile users up to 101 million and fixed lines up to 20 million. Satellite and trunking decreased.

After the transition, the new IFETEL (succeeding to COFETEL) will review and simplify telecom licenses in one single type, and hopefully will reduce red tape to obtain it.

While the reforms encourage and support free competition on these telecom services, it is also true that incumbents have been preparing for this face-off for years. Yes, it is great for telecom lawyers, but paradise for antitrust telecom lawyers.

However, the less explored side of the Reforms is niches, trends and side markets that could generate businesses while the telecom industry grows in the years to come. Also, the Public Private Associations Law grants rights to private companies or individuals to pitch projects on all levels of Government, so the sky is the limit.

A sweet spot is in cameo here. The Reform is a game changer and abilities of the entrants and possibilities created could generate business, and hopefully profit will come along. Where to start digging?

Project Finance, Convertible Debentures, Secured Loans and other Financial Operations.

Telecom is a money consuming business with small incremental profits. It requires big amounts to acquire infrastructure and clients, as well as to run and expand the business. Now that foreign investment caps have disappeared for telecom and have risen for TV/radio, loans secured with shares can be fully executed in an event of default, as transfer of property is no longer restricted to Mexicans-only. Also, foreign VCs can acquire voting shares without restrictions on caps (except TV/radio).

TelecomMexico will become a market incubator.

Telecommuncaciones de México (TelecomMexico), is a state-owned company operates satellite services, money wires and telegraphy in Mexico. Along with the Telecom Reform, TelecomMexico is in the process of getting a telecom license for SMS, voice and data, fixed and mobile through cellular technology and satellite backbone. TelecomMexico will target low-income communities to reduce the digital divide. This strategy is expected to be in the digital agenda, which could include universal broadband. As TelecomMexico is paying for sunk costs of bringing on telecom services to low-income users, operators could ask for interconnection whether for transporting throughout that area or providing low-income niches services.

Second installment is coming in a couple of days …

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