Market Overview

The Mexican ICT industry grew to an estimated value of US$39 billion in 2008, with telecommunications equipment representing about 20% of this industry.  In Mexico there is a diminishing trend, however, in organic growth. As the fixed and mobile service markets tend to mature, the growth rate will decrease over the next three years. Today, Mexico has about 72 million wireless subscribers and over 20 million fixed lines. It is expected that mobile lines will reach their maximum at 85 million subscribers, and fixed lines will tend to grow marginally thereafter.

Growth for telecom equipment vendors resides more in niche markets such as VoIP for telecom carriers and CATV operators. Additionally, equipment vendors are seeking new and untapped markets in Mexico, such as communications solutions for transportation:  subway, railroads, light rail, airports and marine ports.

The Under Ministry of Communications of the SCT and the regulator, Cofetel, have announced that they will hold spectrum auctions in the beginning of 2009. The main services to be promoted in this auction will be for the following bands: 1.9 megahertz (PCS) for wireless services and 3G Internet access; 3.4 – 3.7 gigahertz for WiMAX; and 1.7 – 2.1 gigahertz for broadband wireless services.  

The current financial crisis will definitely impact the sector. 2008 was the year that equipment manufacturers were refocusing their corporate strategy and developing new marketing to attract medium size companies. 2009 will be a year that will see a decrease in growth after more than 5 years. Both telecom services and telecom equipment will show small. Integrators are expected to work with equipment manufacturers in order to have better financing terms for large users. Medium size companies will have a more strict policy for loans/credits to purchase new equipment, which will decrease their spending on their current infrastructure.

Internet and IT Services

Mexico was a late adopter of IT and Internet services as a whole. The main users in the last 5 years have been large and multi-national companies based in the 50 largest cities of the country. Nevertheless, in the last three years, individual and residential Internet services have been on a steady growth trend. According to the Internet Association of Mexico (AMIPCI), there are approximately 25 million Internet users with a national penetration rate of 26%, an urban penetration rate of 36.6%, and a 17.5% growth rate in 2008. Additionally, AMIPCI estimates that out of the 15 million PCs 59% are Internet connected and 78% of those connections have broadband access. 

A full report on Internet infrastructure and user habits is available at the Mexican Internet Association’s website (in Spanish only).  Please visit: http://www.ampici.org

Despite the fact that IT Services in Mexico are usually outsourced, there are companies from different countries participating in this market. Foreign firms that participate in the IT Services segments are originally from the US, India, China, and South America, but given that they are all incorporated in Mexico they are considered Mexican for this report. There are however, some users that contract their IT Services from outside of Mexico, particularly transnational firms, but this represents only about 5% of the market.

The current financial crisis will definitely impact the sector, in both residential and business accounts. Residential Internet services will most likely see very little growth. Individuals may tend to review more seriously the Triple Play Service packaged offered by TV companies in order to reduce communications cost (telephone, Internet and pay TV). This may also apply for micro and small businesses due to their size and usage. Medium and large companies will most likely maintain their current infrastructure, and will invest only in high priority solutions such as information security.

Best Products/Services

Best products will remain in the convergence area. Following are the main sub-sectors where a majority of new acquisitions will be focused. Each offers great opportunities for American companies to participate in the Mexican IT & Telecom market during 2008:

Wireless: Wireless technologies and applications for corporate and personal uses are the hot topics today. WiFi, and the future WiMAX, will provide flexibility and lower cost for connectivity. It is expected that in 2008 the government will set out a bid for the different spectrum allocation in the following bands: 1.9 megahertz (PCS) for wireless services and 3G Internet access; 3.4 – 3.7 gigahertz for WiMAX; and 1.7 – 2.1 gigahertz for broadband wireless services.

Mobile Services: Mobile communications will still be the main growth industry in Mexico. Mobile operators are experiencing strong growth but are looking for new technologies to generate additional revenue. It is expected that in 2008 the government will set out a bid for the different spectrum allocation in the following bands: 800 megahertz for trunking services; 2.5 megahertz for high-speed Internet services.

Market Opportunities

The greatest opportunities for 2008 in the Telecom Equipment Sector are in:

• Security appliances

• ERP and CRM software for Small and Medium Enterprises

• Mobile applications

• Broadband applications

• Power Line Communications

• ·VoIP applications

• IPTV applications

• WiMAX equipment

Resources

Mexican Association of the Cable TV Industry

The CIU, Telecom Consulting Firm

Ministry of Communications & Transport (SCT)

National Telecom Association - ANATEL

Mexican IT Association - AMITI

Electronic Normalization and Certification (NOMs) - NYCE

Select, IT & Telecom consultancy firm

Comisión Federal de Telecomunicaciones – Telecom Regulator

Cámara Nacional de la Industria Electrónica de Telecomunicaciones e Informática

Telecom Research Consortium

US Census Bureau statistics

Mexico Census Bureau of Statistics

AMIPCI – Asociacion Mexicana de Internet (Mexican Association of Internet)

Market Research

Mexico: Telecommunications Fixed, Mobile and VoIP Telecommunications

The telecommunications industry in Mexico, considering all its sub-sectors: fixed, mobile and Triple Play services, is registering a constant and dynamic growth. The most dynamic sector in the industry is clearly mobile (or wireless) telephony services. The number of lines has grown dramatically in the past 3 years, and 2009 is expected to close with 86 million users. The success of this sector is mainly due to increased coverage, cheaper rates, and cannibalization of fixed lines. Today Mexico has under 20 million fixed lines and it is not expected to grow; in fact, revenues in voice only services are decreasing and operators are focusing their efforts in Triple or Quadruple Play services by offering voice, data, video and wireless all under one network and charged under one bill with a set fee. Bundled services are a trend by fixed, mobile and Cable TV companies in Mexico. There are, however, still some regulatory and financial challenges that have to be surpassed before real technological convergence can take off in Mexico.

PC and Internet Use in Mexico

Internet usage in Mexico has been steadily growing. There were 14.8 million PCs registered during 2007; 59% of these computers have Internet access. The Internet is also accessed through cellular phones- 63.2 million of these phones are in use in Mexico. Out of the 8.7 million PCs with Internet access, 55% are dedicated for home use, and only 45% are registered for business use. Of the 22.7 Internet users, 21 million are 13 years old or older, and 1.6 are between 6 - 12 years old. 

Pay-TV in Mexico 2008

The Pay-TV industry in Mexico is experiencing strong growth with large untapped potential. Over 90% of Mexican households have at least one TV set, and Pay-TV penetration of TV households is only about 18.5% with a total of 11 million of homes passed by cable; clearly a good opportunity for industry players. The market has 3 technologies: Direct To Home (DTH) with Sky as the only operator, MMDS with MVS Multivision as its only service provider, and Cable which a large number of operators. A total of 802 operational networks exist in the country with 15 companies offering Triple Play services in 2008.

Internet Services Rates in Mexico

Due to the fact that providers in Mexico pay high rates for interconnections to provide Internet services, Mexican end users are footing the bill for the world’s most expensive Internet service. 

Audio Visual Technology

For 2007, it is expected that the Mexican market in the ICT sector will generate over US$38 million dollars, which means an increase of 10.9% from 2006. Although there are no available statistics on the AV industry in Mexico, evidence reveals that the market for AV products and services has experienced good growth in recent years. Technological developments being adopted in the market include: conference equipment, plasma screens, home cinema systems, wireless applications, sound & acoustics appliances, streaming media, boards, screens & projectors. The markets in which AV systems have shown a growth in the last years are: education, government, healthcare, retail and entertainment (museums).  

Fixed and Mobile Telecommunications Market in Mexico

The fixed and mobile markets in Mexico have enjoyed constant growth over the years, even surpassing by a factor of at least 2, the growth of the economy for many of those years. Fixed lines have reached over 20 million users, and mobile communications today have over 56.5 million subscribers. Telecommunications services are becoming more readily available due to the increased penetration of fixed lines, lower rates and an explosive growth in the wireless subscriber base. Cable TV and wireless industries will be more aggressive and will show strong innovations in the near future. Technologies such as PLC, WiMAX, WiFi, and cable will be the tools for increasing penetration and offering newer services. The industry sees the coming of more mobility in the country along with smarter devices. 

Telecom Services

In telecom services, there are 20 million fixed lines (approx. 20% penetration) with Telmex as the dominant carrier with about 93% of market share. In the mobile arena, the sector registered approximately 53 million mobile subscribers. Telcel is the leading provider with nearly 77% of market share followed by Movistar at 14%. At the end of 2006, Grupo Salinas, the controlling interest of rival Iusacell, acquired 100% of Unefon. By the end of 2007, Unefon and Iusacell will be completely merged in branding and marketing, becoming one single company. Currently Iusacell has close to 4% of market share and Unefon has a bit over 2.4%. 

Mobile Telephony Market

The Mexican Mobile Market continues to grow, reaching almost 50 million users in the 1Q06. Telcel the Mexican branch of América Móvil, led the way with 77% of market share, followed by Telefónica Móviles with 13.5%. A similar growth trend is seen in the rest of the Latin American region, where the total number of subscribers has surpassed 256 million, of which over 100 million are America Móvil subscribers. Competition by suppliers of equipment, services and software to sell to the 5 operators in the country is fierce, and suppliers are pressured to offer products and/or services with attractive guarantees, payment terms, financial stability and industry experience. Suppliers need to focus on users and operator productivity in order to have a real value proposition to wireless operators.  

Consumer Electronics and Video Games

One of the main drivers for the growth of Consumer Electronics and Video Games in Mexico, as well as other countries in Latin America has been the surge and expansion of consumer credit by banks and other financial institutions, as well as retail consumer financing.  CE manufactures have to address this by considering large multi-store retailers to adjust to the needs of the market. Focusing on the retailer’s financing offer will be a key strategic aspect to penetrate and gain market share.  The strongest markets for Consumer Electronics and Video Games are Brazil, Mexico and Argentina. It’s important to note that conversely these countries are at the bottom of the pyramid for computer penetration with less than 30% of households. 

Media Services: Radio & TV

The Mexican TV & Media Services market in Mexico has been steadily growing and has received much attention in the last few months both as a market force and for legal/judiciary initiatives that will affect its growth.   Given technological convergence between broadcast, voice, cellular and data, it seems that we cannot speak of the TV & Media or Broadcasting industries without also addressing communications. The emergence and coverage of the Internet, IP networks, cellular networks and fixed voice lines will be crucial as different industries intersect. This has given the ability for new players, new technologies and new businesses to develop in each of the different broadcasting, media and telecommunications segments. 

Broadband and Content 2007

Mexico has been a late adopter of IT and Internet services as a whole. The main users in the last 5 years have been large and multi-national companies based in the 50 largest cities of the country. Nevertheless, in the last three years, Internet services have been on a steady growth trend. According to the Internet Association of Mexico, there are almost 13 million PCs in Mexico, of which, approximately 60% are installed in the home. We attribute this growth to a wide variety of reasons, some being economic, social, educational, and infrastructure based. In the last two years Mexican users have seen prices go down for Internet connectivity and also the market has shifted from offering dial-up to broadband. As convergence gets hold, operators quickly adapt and offer bundled Triple Play services, all based on broadband. People are becoming more familiar with technology and are becoming more knowledgeable on the attributes and benefits from being “connected”, particularly the population between 15 and 24 years old. Adoption by younger generations promises growth for the technology and communication markets overall.  

Upcoming Trade Events in Mexico

Expo Comm Mexico 2009: February 24 – 26, 2009 – Mexico City

EXPO COMM MEXICO 2009 is the most important and relevant IT and Telecom trade show in the region. It draws thousands of visitors from throughout Mexico and Central America. The U.S. Commercial Service Mexico will host its 7th annual USA Pavilion at ExpoComm Mexico 2009. Exhibiting U.S. companies receive on-site support and counseling from CS Mexico Trade Specialists; are invited to a briefing on the regional ICT market by local experts; and participate in an evening matchmaking reception. For more please visit www.expocomm.com.mx  and www.ejkrause.com 

Upcoming Mexican Delegations

INTERNATIONAL CES 2009: January 8-11 - Las Vegas NV

The World's Largest Tradeshow for Consumer Technology! The International CES is the world's largest annual tradeshow for consumer technology and America's largest annual tradeshow of any kind.  Attendees will discover the newest trends, strategies and profit opportunities in the consumer technology industry. Today's world is a digital one, where content progressively drives consumer technology sales. Music, movies, games. Text, audio files, pictures. Content is any sound or image delivered to an audience through a CE product. It's at the heart of consumer technology, and CES is at the heart of it all. If you are a Mexican buyer interested in forming part of our Commercial Delegation please contact us.  

CTIA Wireless 2009: April 1-3, 2009. Las Vegas Convention Center

Testimonials

LATAM and Caribbean Testimonial

“The assistance received from Juan Carlos Prieto and Maria Luisa Lobo was not limited to only open doors or coordinate meetings with key individuals on our target accounts, our commercial specialists leverage on a strong local network, vast experience and vocation to service providing the best advice and complementary local needs from our prospects to ensure that the outcome of our commercial efforts were a success”  
Pedro Yarahuan,  
LATAM and Caribbean from Ida Tech

MobiTV Testimonial

"Juan Carlos Prieto was able to give us a really solid understanding of the Mexican marketplace--who the players are and the dynamics involved. He put us in touch with several of his colleagues with the US Commercial Service around Latin America who have also been very helpful in providing contact names and lay of the land."
Joanne Waage,
MobiTV

Propel Software Testimonial

"Juan Carlos, I wanted to thank you for the great work you are doing! We are in the process of closing large sales with Telmex, Avantel, Alestra and Maxcom. These four companies represent a large percentage of our potential user base in Mexico. The potential annual revenue will range from 0.5 to 1.5 million $US. We look forward to continuing our success in your country!"
Denny Mayer,
Propel Software Corporation

Further Information, Commments, and Questions:

If you wish to write us regarding these reports, please contact Juan Carlos Prieto, Trade Specialist on the IT and Telecom sector for the U.S. Commercial Service Mexico City Office.