Telefónica México has been operating in the Mexican market for over 20 years, where it has fostered competition in mobile telephony and evolved to provide services to virtual mobile operators and companies interested in their digital transformation. Currently, Mexico represents 14% of the company's operations in Spanish-speaking America. In an interview with Telecom Review Americas, Miguel Calderón, Director of Strategy and Public Policy at Telefónica Hispam, talks about the company's journey in the country.
- Why has Telefónica decided to continue betting on the Mexican market for more than 20 years?
Telefónica Movistar's commitment to increasing digitalization in Latin America has advanced steadily; the operation in Mexico has become a benchmark for the region thanks to our sustainable, innovative, and solid business model, based on a network of alliances and a long-term vision. As a result, our business model has served as an example in the region, and countries like Colombia have already started similar infrastructure sharing projects in 2024.
- How has the brand transformed in the country?
Telefónica Movistar has strengthened its position as a challenger to the status quo in the Mexican mobile market, being the agent of change, democratization, and market dynamism to bring competitive benefits that result in better offers and quality conditions for all Mexicans.
At Telefónica Movistar, we innovate and promote strategies that not only benefit our customers but all Mexicans by democratizing next-generation services. Some of the main milestones benefiting the sector and users are:
- In 2001: Bringing a disruptive per-second billing model to Mexico, which no other company had implemented at that time.
- In 2011: Introducing low-cost recharges.
- In 2012: Eliminating national and international roaming, which later became a mandatory action for operators.
- In 2013: Being the first to launch plans with unlimited voice and SMS.
- In 2014: Being the first to open the door to MVNOs.
- In 2017: Being the first to provide wireless Home Internet service.
- In 2018: Being the first in the sector to introduce renewable energy to power our operations.
- In 2019: Being the first to launch an unlimited data plan.
- In 2019: Being the first in Mexico and the region to have a business model based on alliances that ensure the sustainability of the mobile market by making investments profitable.
- In 2020: Being the first operator to provide 24/7 support on WhatsApp.
- In 2021: Being the first to launch a 100% customizable and self-manageable service with Movistar Libre.
- In 2022: Becoming the first operator to launch 5G service to prepaid and postpaid customers regardless of their consumption level.
- What do you consider your greatest achievement?
In addition to the milestones mentioned, which have positioned us as pioneers in the sector, in recent years we have consolidated important alliances such as Starlink, sponsorships focused on connecting people, positioning as opinion leaders on safe internet and cybersecurity issues, campaigns against the risks of the digital world, programs like Conecta Empleo, infrastructure sharing agreements, and one of the most important, the launch of 5G for all users, ceasing to be exclusive to high ARPU postpaid users and opening the power of use and choice to the majority of users (more than 80% of users in Mexico are prepaid).
- What is the main differentiator of Telefónica México compared to its competitors?
We are characterized by being a company close to our users, understanding their needs, and constantly working to provide self-manageable services tailored to users' needs, with the power of choice and affordability, bringing technology to all users equitably, sustainably, and without leaving anyone behind.
- Why do you remain in Mexico in a business dominated by one company?
Mexico is a benchmark for the region. The commitment to connect the country is strong, and we work together with other industry and sector players to shape conditions that reduce market concentration and allow current and future deployments, technologies, and services to be sustainable in competition to continue driving connectivity and digital inclusion in Mexico.
- What is your offer for the business market?
Movistar Empresas' value proposition is based on the knowledge and understanding of SMEs' needs. It offers comprehensive services and digital solutions to the business sector, becoming a strategic ally and expert in the digital transformation of SMEs, companies, and corporations.
The solutions we offer to digitize businesses are focused on services: - Mobile: With plans to give companies the connectivity they need with GB for browsing, unlimited apps, 5G service, unlimited calls, and text messages.
- Fixed: Fixed services and solutions protect and are an important part of digital businesses with the best user experience. Solutions include:
- Connection: Satellite connection in areas where there is no coverage from traditional links.
- National and International MPLS: Connectivity in all establishments as if they were on the same local data network.
- Business Internet: High-quality, high-speed internet for your company.
- Intégrame: Voice and internet services over the same access.
- Cloud 4 Business: Provides the ability to use innovation, digital infrastructure, optimization, and information management, based on the cloud, to adapt to the circumstances a company faces, allowing it to optimize its operations and respond agilely to its business needs.
- CyberSecurity: Offers products and services to prevent, detect, and respond to attacks or threats, thus ensuring the cyber-resilience of businesses.
- Internet of Things: Smart IoT solutions are the support that companies need to optimize and digitize their resources, from employee management to customer experience. They also allow controlling and managing assets in real-time from anywhere in the world.
- Big Data: Allows obtaining valuable insights for business project planning. Through data and in conjunction with cutting-edge Big Data technology, we can help public and private organizations make better business decisions based on real behaviors.
- Advertising: Allows companies to connect with their customers quickly and effectively through omnichannel communication to generate trust and loyalty towards their businesses.
- Compared to other Spanish-speaking countries in Latin America, where does Mexico stand in terms of market and operations for Telefónica?
We remain a relevant company, with 23 million customers, representing 14% of Telefónica Hispanoamérica's revenues (8 operations in the region). We were the first to bet on a disruptive and innovative formula to achieve more efficient network deployment through alliances and new operational models.
We have strengthened the sustainability of the Mexican operation. In the first quarter of 2024, we had a 10.2% increase in revenues, and EBITDA grew by 13.9% compared to the first quarter of 2023. These results were driven by the performance of the postpaid segment, whose ARPU (average revenue per user) grew by 4.5%.
- What is needed for Mexican users and companies to have better telecommunications services?
To expand connectivity and accelerate digital transformation and inclusion, regulation and public policies must be enablers. They must be designed to expand telecommunications, improve the competitive environment, and attract private investment.
Telefónica has proposed the development of telecommunications centered on public policies focused on innovation, cooperation, and sustainability, as shown by the "Rural Manifesto." This model has already been implemented in some countries, such as Peru, through "Internet for All" (IpT), which after 5 years since the start of its operations has brought 4G mobile internet to more than 18,000 communities on the coast, highlands, and jungle of Peru.
On the other hand, the vision must be to conceive the spectrum as a public good and a key element to develop connectivity, not just as a revenue opportunity, a model that is proving unsustainable in several countries. Without spectrum, there is no connectivity, and without connectivity, we move away from opportunities and, consequently, from development and prosperity. The spectrum is a resource that we must put at the service of users, customers, and citizens. Therefore, it must be at market price, adjusted to the economic reality.
- What is required for a country like Mexico to attract more investments and grow the sector with a focus on business?
The telecommunications industry, not only in Mexico but throughout Latin America, is at a crucial moment for its sustainability. The growing demand for connectivity, the deployment of new technologies such as 5G and fiber optics, and the need to reach rural and remote areas require significant investments. However, the industry's ability to finance these investments is threatened by several factors.
The financial situation of the industry is a significant challenge. Revenues have decreased while the costs of radio spectrum, infrastructure, and the deployment of new technologies have increased considerably. This situation has led to a decrease in profitability and has put the financial sustainability of many operators at risk.
To ensure the industry's sustainability and its ability to continue investing in infrastructure and new technologies, it is essential to have legal certainty for the return on investments, a strong and autonomous regulator, healthy market structures (i.e., a reasonable number of players, but also with non-concentrated market shares), and last but not least, a change in regulatory approach. Current regulation, in many cases, does not adapt to market realities and the challenges faced by the industry. A more flexible, modern, and adaptable regulatory framework is needed to encourage investment, innovation, and competition.
Another fundamental aspect is the importance of the contribution of Over the Top (OTT) companies as actors in the digital ecosystem. According to a study by the consultancy NERA, between 2016 and 2022, internet traffic multiplied by five, largely due to OTTs. According to a GSMA study, in Latin America, 85% of mobile network data traffic is generated by only three economic groups. Given the high concentration of traffic, each of the major OTTs has a great capacity to influence the growth rate of internet traffic. An individual decision by one of these OTTs can significantly multiply the traffic that flows through the broadband connections of their end users.
All of us who are part of the digital ecosystem, including telecommunications companies and OTTs, must contribute to covering the costs of the networks that enable these services. Due to the importance of OTTs for the population and their relevance in data consumption over telecommunications operators' networks, fair compensation for telecommunications investments and balanced competition among digital ecosystem, players must be ensured to eliminate market distortions. The intensive use by OTTs increases network costs, which are financed by telecommunications operators, so they do not bear a fair share of the burden.
Collaboration among the different industry players, including operators, regulators, and governments, is essential to find solutions that ensure the industry's financial sustainability. An open and constructive dialogue is necessary to identify challenges and opportunities and work together to find solutions that benefit everyone.
