Mexican Telecom Industry Enjoys Bull Run

In 2014, the government of Mexico initiated major reforms within its telecommunications sector. Mexico’s telecom regulatory authority, the Federal Telecommunications Institute (IFT), had taken several steps to instil competition in the highly monopolistic industry. Those reform initiatives have started bearing the desired results.

Recently, the IFT announced that the country’s telecom sector has witnessed a 13.3% growth in revenues year-over-year in the third quarter of 2016. This growth rate is highest among all the other sectors of the economy. Remarkably, the telecom sector’s growth rate is more than six times higher than the 2.04% overall growth rate of Mexico’s GDP in the same time frame. In the third quarter of 2016, the broader telecom sector of Mexico generated total revenue of approximately MXN 513 billion.

Mexico has been witnessing massive investment in its telecom sector. In Jun 2016, the country’s Secretariat of Communications and Transport (SCT) declared that a total of more than $6.5 billion has been invested in the last three years. Additionally, around $13.5 billion has been invested recently in the telecom sector. Furthermore, the upcoming nationwide shared broadband network will further attract around $7 billion worth of investment.

At present, there are three nationwide telecom operators in Mexico. Mexican telecom behemoth America Movil SAB (NYSE:AMX) and Spanish telecom giant Telefonica SA (NYSE:T) were the two incumbents. Last year, the U.S. telecom behemoth AT&T Inc. (NYSE:T) entered the fray with the acquisition of Grupo Iusacell and Nextel de Mexico. All three stocks mentioned above currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Furthermore, AT&T acquired U.S. satellite TV giant DIRECTV, which had a strong Latin American presence including Mexico. Moreover, the IFT has permitted the Mexican TV broadcasting giant Grupo Televisa SA (NYSE:T) to enter the country’s telecom market. However, the company is yet to take any decision in this regard.

In Mar 2016, Mexico established the Telecommunications Investment Promotion Agency through a presidential decree. The agency is responsible for the installation of the government’s proposed 4G LTE shared network and provision of telecommunications services. The federal government will provide the resources to the agency that will be managed by a board of directors, headed by the Minister of Communications and Transport while the IFT will regulate it.

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