Mexico’s 5G Spectrum Auction Hampered by High Fees

Mexico’s upcoming 5G spectrum auction is facing challenges as high spectrum fees are deterring operator interest, according to GlobalData.
Mexico 5G spectrum auctionThe Federal Telecommunications Institute (IFT) announced the Licitacion IFT-12 with the goal of accelerating 5G expansion, but the prohibitive costs are causing hesitation among potential bidders.

The auction, set for 2025, will offer sought-after 600 MHz and L-Band (1427-1518 MHz) blocks, crucial for 5G technology, which is expected to comprise 53 percent of Mexico’s mobile subscriptions by 2028. However, previous instances of operators returning spectrum licenses due to financial burdens cast doubt on the auction’s success.

IFT initiated a public consultation on May 7, 2024, to discuss the auction, which will feature both new spectrum in the L-Band and 600 MHz and leftover spectrum in the 800 MHz, 1.7/2.1 GHz, 1.9 GHz, and 2.5 GHz bands. Notably, some of this spectrum was previously returned by Telefonica and AT&T due to high fees. While the 3.5 GHz band is not included in this auction, Telcel and AT&T Mexico already hold licenses in that range.

In a strategic move, IFT decided to offer most of the spectrum in local blocks, excluding the L-Band and a single 10 MHz block of the 600 MHz band. This approach could lower spectrum fees for winners, as fees are determined by bandwidth and coverage area. High fees were a major factor in Telefonica’s decision to return its mobile spectrum in Mexico, and these fees, set by the Mexican Legislative Branch with executive input, are unlikely to be reduced in the short term, particularly in an election year.

IFT’s proposed spectrum caps consider holdings in sub 1 GHz bands and aggregate spectrum holdings per operator, aligning with the current market structure. This design might allow AT&T and Telcel to secure low-band spectrum to enhance 5G coverage.

Additionally, the auction could enable Altan Redes to expand its “Red Compartida” spectrum portfolio. Altan Redes, a pure wireless wholesaler, currently holds the entirety of the 700 MHz band and is the main host for mobile network operators (MVNOs), a segment that has grown significantly and now holds 11.8 percent of Mexico’s mobile subscriptions.

The 2.5 GHz band might be attractive for Altan Redes as a capacity band. However, given Altan’s federal bailout in 2023, its ability to afford the spectrum at current market prices without subsidies remains uncertain. For AT&T and Telcel, high fees for the 600 MHz spectrum are likely to limit their interest, as fees for sub 1 GHz bands are higher and would add to their annual costs.