The Telmex WiMAX Strategy

ARTICLE

The Telmex WiMAX Strategy

By Cintia Garza, Market Analyst
Contact the author at cintia@maravedis-bwa.com

Telmex, the telecommunications incumbent in Mexico, has been pursuing an aggressive expansion strategy. Since 2004, the telco has expanded its operations throughout several Latin American with strategic investments in high-growth markets including Argentina, Brazil, Chile, Colombia, Ecuador, Peru and Uruguay. In all of these markets, Telmex acquired 3.5GHz WiMAX spectrum either by direct allocation from the telecom regulators or by acquisition from license holders in each country.

Much has been said about the fact that Telmex seems to be deploying WiMAX services everywhere in Latin America except Mexico. This is mainly because, since its inception, the incumbent has serviced Mexico primarily through a wireline infrastructure, thus limiting its ability to implement a wireless network that would directly compete with its own strength in Mexico: namely DSL and Cable. However, the reality is Telmex has already deployed commercial WiMAX services in Mexico in areas where copper and DSL are not feasible. During an interview with Maravedis, a spokesman at Telmex Mexico said that the company already has a customer base of over 5,000 WiMAX subscribers in Mexico, and the number is growing considerably. The spokesman further confirmed that Telmex has recently placed an order for additional CPEs with Motorola and Alvarion. For more detailed information, please see the “Telmex WiMAX Plans in Mexico” interview available in WiMAXCounts (registration required).

If Telmex reaches their stated objective of CPE installations by the end of 2008, their WIMAX deployment could be one of the largest, if not the largest in Mexico. “Initially our objective is to launch in areas not served by the copper infrastructure, where the business case for copper is not good enough,” stated the Telmex spokesman.“So we are going to cover these many areas; it is going to be a huge deployment! It is not going to be a nationwide network in the sense that we are not going to cover cities already covered by copper or WiMAX.”

In Mexico, Telmex has 50MHz spectrum nationwide in the 3.5GHz band, which the operator acquired 6 years ago for $US 45 million in addition to 60MHz of spectrum in the 10.5GHz band. COFETEL, the telecom regulator, is planning to allocate two nationwide WiMAX licenses of 25MHz spectrum each in the 3.4-3.7GHz bands, and two regional WiMAX licenses of 50MHz spectrum each in the 3.6-3.7GHz bands by the end of 2008. The Competence Commission, however, is not allowing incumbent participation in these auctions, but Telmex is still hopeful. “They are saying that they won’t allow incumbents to participate in the auction. However, with the current law, they will have to demonstrate to us that we are not able to participate,” said the Telmex spokesman.

Moving to the South of the continent, Telmex’s expansion strategy in Latin American countries has been mainly through acquisitions. Chile was the first Latin American market where Telmex deployed WiMAX. The company acquired Chilesat in 2004 and one year later the telco was awarded nationwide spectrum in the 3.5GHz band. Telmex has been successful in deploying WiMAX “d” using Alvarion gear, making services available to 98% of the Chilean population. In addition to Chile, Telmex has international WiMAX operations in Argentina, where they acquired Ertach; in Brazil, where they acquired Embratel; as well as in Peru, Ecuador and Venezuela. They are also looking at expanding their operations through an undisclosed acquisition in Paraguay. Telmex has not yet announced any plans in Columbia as they do not own any WiMAX spectrum licenses in this country but they could follow the same acquisition strategy and compete against the Colombian telecom operator Orbitel, which currently has the largest WiMAX deployment in south America in terms of subscribers. Further details on Orbitel are available to registers WiMAXCounts users. .

A favorable regulatory environment in most Latin American countries, the high cost of broadband in many of these markets, and a growing demand for high speed Internet services have presented Telmex with attractive opportunities to develop new business models and offer less expensive solutions such as WiMAX to satisfy increasing broadband needs in these markets. Through its numerous acquisitions, Telmex has gained global competitiveness and a strong position in Mexico and Latin America.

Telmex’s thinking on LTE…

“We are following different partnerships. This is going to be an interesting technology. In the next frequency auction some frequencies will be available that will be usable for LTE, including 1.7GHz. We have not yet figured out what we are going to do. We think we are going to let our sister company “America Móvil” play with LTE. We think LTE will be a key growth area for the broadband market in Mexico, especially for some mobile companies and TELCOS in Mexico that will find LTE to be a very economic, efficient way to compete in the broadband market.”

Maravedis has seen a growing interest in LTE among incumbent operators but few plans for deployments due to lack of current availability. “Growing convergence between the two efforts shows both promise and potential conflicts between operators and within units within single companies. As WiMAX and LTE move forward, the increased overlap between broadband and mobile capabilities and service platforms will inevitably lead to cross purposes between Telmex broadband operations and their America Móvil subsidiary” commented Robert Syputa, Senior Analyst, IPR & Technical, Maravedis.

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For more information you can contact the author: cintia@maravedis-bwa.com