Telecoms & IT

2024: Mexico’s Telecommunications Transformation

What's new in Mexican telecommunications?

Image credit: Shutterstock / Kyle J Little

Mexico’s evolving telecommunications sector is driving transformative change, delivering cloud services at scale and consequently boosting general economic productivity.

In line with its strategic role in bridging the US and Latin America, Mexico’s IT industry spans mobile telephony, 5G, fiber internet, data centers, and telecom towers.

Together, these technologies form a dynamic ecosystem, collectively propelling Mexico toward greater connectivity.

The telecommunications and broadcasting sector comprised 1.7% of Mexico’s GDP by the end of 3Q2023, as per the latest data from the sector regulator the Instituto Federal de Telecomunicaciones (IFT).

However, the sector employs only 309,000 people in a country of approximately 120 million, a fact that underscores both the sector’s potential for further development.

Elsewhere, the Global System for Mobile Communications (GSMA) anticipates significant growth in 5G deployment by 2025, with an estimated 16.9 million connected mobile devices, or 13% of total connectivity.

By 2030, this figure is projected to soar to 87 million, with a 62% adoption rate. If realized, the economic impact of 5G is expected to increase from 0.2% in 2025 to 0.8% in 2030.

The GSMA also highlights a key obstacle hindering the expansion of 5G in Mexico: the annual spectrum usage rights fees.

These fees, comprising 85% of the total spectrum cost, are set by the legislature each year.

Between 2019 and 2023, two operators relinquished their spectrum blocks due to these financial burdens. This highlights the need for regulatory reform to alleviate financial barriers and accelerate the deployment of 5G infrastructure in the country.

Meanwhile, telecom operators have commenced offering commercial 5G services utilizing their current spectrum allocations. Telcel initiated its 5G mobile services in February 2021, extending coverage to approximately 100 cities by the end of 2022.

Additionally, AT&T and Movistar have introduced their own commercial 5G services, albeit with a more restricted geographical reach.

The lack of competition remains a challenge in the telephony sector, with Telcel dominating nearly 60% of the mobile market, followed by Movistar with 16.9% and AT&T with 15.5%. While Telcel previously held up to 70% of the market a decade ago, government reforms and investments from foreign firms like Movistar and AT&T have contributed to reducing this disparity.

Meanwhile, smartphone usage remains prevalent among Mexicans, accounting for 68% of total connections in 2022, with an anticipated increase to 74% by 2025. Internet accessibility stands at 66.5%, equivalent to approximately 88 million individuals, yet trails behind other Latin American nations like Chile (97.2%), Uruguay (93.2%), Argentina (91.1%), and Colombia (83.2%), according to Internet World Stats.

To bolster these figures, the government initiated the “Internet para Todos” or “Internet for All” program via the state-owned Comisión Federal de Electricidad (CFE), aiming to extend internet access to rural and underserved regions, home to approximately 25 million people. This initiative is complemented by private sector investments from companies like Izzi Telecom, Megacable, Telmex, and Totalplay, collectively working towards improving internet accessibility across Mexico.

These companies are set to collectively invest MXN39.2 billion (USD2.3 billion) by 2022 in constructing and maintaining fiber optic, telecommunications, and broadcasting infrastructure.

Meanwhile, Mexico’s emergence as a prominent data center hub is bolstering its capabilities as well as positioning it to support the US market. Lower construction and operational expenses make Mexico an attractive destination for US companies seeking to expand their data center infrastructure in the region, facilitating enhanced connectivity and services.

MCM Telecom, a firm that focuses on connecting businesses with their suppliers, clients, and the authorities, are at the forefront of this segment. Its CEO, Alejandro Hernández Bringas, told TBY that the company recognizes “the growing trend of public cloud investment in Mexico and accordingly provide[s] direct, secure, and low-latency connectivity between companies and data centers, facilitating seamless and efficient use of cloud services.”

They currently connect more than 40 different cloud providers, offering clients a wide range of options and choice.

Mexico currently hosts 38 data centers, with the majority concentrated in Querétaro (14) and Mexico City (12), as reported by Data Center Map. Despite Brazil’s larger population, Mexico’s count is approximately half of that of Brazil, which is home to 70 data centers.

Key players in the sector include Kio Networks and Odata. These developments are complemented by ongoing investments in telecommunications infrastructure, including the installation of new towers and submarine cables.

In Mexico, the majority of cables originate from Tulum and Cancún in the east, traversing the Gulf of Mexico to connect with Florida and other Central and South American nations. Meanwhile, on the west coast, Tijuana and Mazatlán link to a cable managed by multinational firm Level 3, spanning from California to Costa Rica and Panama.

Similarly, Telxius revealed its plan in late 2023 to extend the Tikal submarine cable to Cancun. This expansion aims to establish a connection between Puertos Barrios in Guatemala and Boca Raton in the United States by 2025. Additionally, Telmex is strategizing to construct a submarine fiber optic cable in Mexico, linking Mazatlán in Sinaloa to San José del Cabo in Baja California Sur.

As Mexico continues to invest in the development of telecommunications and digital infrastructure, it is poised to enhance its connectivity with the United States and the broader Latin American region.

From the expansion of data centers to the deployment of 5G networks and submarine cables, these efforts are laying the foundation for increased productivity, innovation, and economic growth.

By leveraging its unique strengths and embracing technological advancements, Mexico is well-positioned to capitalize on the opportunities of the digital age and emerge as a key player in the global telecommunications landscape.